We learn from the averments of the petition filed in the lower court by plaintiff in error, that at some date prior to the appointment of a receiver for the firm of J. ■ Esterly & Co., it had become liable to the plaintiff bank as in-dorsers upon two promissory notes mentioned in the foregoing statement of this case, and that the liability of the firm had become fixed when the notes Avere properly presented to the makers thereof and protested for nonpayment. It also appears that to secure the bank in accepting the notes bearing such indorsements, J. Esterly [601]*601& Co., at the time of their transfer, delivered to it certain valuable collaterals as security for their contracts of in-dorsement, and from which collaterals, after the receiver was appointed, the bank realized from time to time in substantial sums, which, if applied as credits on the obligations of indorsement when collected, would materially reduce the obligations before the receiver was ready to pay a dividend.
The receiver was appointed on the eighth day of December, 1896, about the time the larger of the two notes became due. On or about the eleventh day of May, 1898, the bank presented its claims to receiver for alloAvance, and they were allowed “subject to distribution.” The amounts which the bank realized on the collaterals were collected at different times after the appointment of the receiver.
On' or about the thirtieth of May, 1901, the receiver notified the bank that he was ready to make a dividend to the various creditors, and that he would compute such dividend upon the balance then owing, exclusive of interest, and not upon the full amount of the indorsements of the insolvent firm. On refusal to accept a dividend on the proposed basis, the bank brought its action in the court below to have its rights determined. It failed in its contention in the lower courts, and its counsel thus formulates the inquiry in this court: “Shall dividends be computed: (1) Upon the .amount due at the date of the appointment of' receiver? or, (2) Upon the amount due at the time the claim is presented and allowed ? or, (3) Upon the balance unpaid at the time of settlement?”
This case has been considered with two others involving similar questions, which cases will be stated at the close of this opinion. Learned counsel representing the. parties in each case have been heard orally, and they have submitted briefs containing careful discussions of the points involved, wherein are cited a long array of cases adjudicated in the English and American courts, the latter embracing both state and federal. Numerous text- • writers have been drawn upon by each side of the con[602]*602troversy, until we are constrained to agree with counsel that the authorities are about equally divided, both as to numbers and their apparent weight. Their reconciliation is impossible, and a careful review of them here would be fruitless labor.
Counsel for plaintiff in error in this case, and to some extent, counsel in the other cases herewith decided, argue their causes as if the dispute arose in the settlement of an estate under a deed of assignment for the benefit of creditors, and lay down the proposition to govern this case, that: “By the deed of assignment, the equitable ownership of all the assigned property passed to the creditors. They became joint proprietors and each creditor owned such a proportion or part of the whole as the debt due him was of the aggregate of the debts. The extent of this interest was fixed by the deed of trust * * This proposition is found in many of the authorities cited in behalf of the bank, and indeed it seems to be the favorite reason for the holdings made. Notably this is true in Miller’s Appeal, 35 Pa. St., 481; Merrill v. Bank, 173 U. S., 131; and Bank v. Armstrong, 59 Fed. Rep., 372, cited for plaintiff in error.
If, for any reason, we are required to consider this and its kindred cases, under the law governing the mode of administering estates under our assignment laws — which we do not concede — we are of opinion the proposition is entirely too broad, and is subject to important limitations. In cases of assignment under our insolvent laws, the legal title of the property of the assignor passes to the assignee, in trust for the benefit of not some, but all creditors of the assignor. The unsecured creditor is as fully represented by that title as is he who holds collateral security for his claims, and if he becomes the equitable owner of such “a proportional part of the whole as the debt due him is of the aggregate of the debts,” his equitable title is not weakened nor his equitable joint share decreased by the fact that another creditor has security for all or part of his claim. But to allow a divi-' dend to the secured creditor on the basis of his entire [603]*603claim 'unreduced by collected collaterals, would diminish the share of the general or unsecured creditor in the estate of the insolvent debtor. In other words, to pay a dividend on more than is actually due on a secured claim will unjustly reduce the general fund in which the unsecured creditor is entitled to share.
But we do not think the interest or title of creditors in the assigned property is the determining factor, if even they have an equitable ownership. The deed of assignment, under our statute, must be general and inure to the benefit of all creditors, and their rights are to be worked out through the assignee as they appear from time to time during the administration of the trust. In such case the creditors are not purchasers of the estate in proportion to their claims, for investigation and proper defense against the claims of one or more, may modify or extinguish their interest in the estate, so that whatever title, equitable or otherwise, a creditor may have in the assigned property, it is at- best but contingent, and subject to adjudication with other .demands held against the debtor.
As said by Owen, C. J., in Mannix, Assignee, v. Purcell et al, 46 Ohio St., 135:
“No higher or better right or title to any of this property passed to the assignee than the assignor held. His creditors acquired no new rights or remedies in or against it by force of the assignment. The assignee simply represents them and their rights, which he has undertaken to enforce by the plain processes appointed by statute. They do not in any sense stand to the assigned property in the relation of purchasers. The beneficiaries of the property which the assignee is now seeking to subject to the payment of the assignor’s debts, are free to assert against the latter every right and claim which, before the assignment, they could have asserted against the assignor.”
The equitable ownership of a creditor in the assigned property, if any there be, is contingent merely, because its force and validity depend upon the subsequent events. Such creditor must present his claim to the assignee for allowance within a certain time; if rejected, he must sue [604]*604within a specified time. Default in either loses his right to share in the estate unless saved by other provisions of our law. If he presents his claim, before' it is allowed, or any payments made thereon, “he must make and file an affidavit setting forth that the said claim is just and lawful, and the consideration thereof, and what, if any, set-offs or counter-claims exist thereto; what collateral or personal security, if any, the claimant holds for the same, or that he has no security whatever; and the assignee or trustee, or any creditor
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We learn from the averments of the petition filed in the lower court by plaintiff in error, that at some date prior to the appointment of a receiver for the firm of J. ■ Esterly & Co., it had become liable to the plaintiff bank as in-dorsers upon two promissory notes mentioned in the foregoing statement of this case, and that the liability of the firm had become fixed when the notes Avere properly presented to the makers thereof and protested for nonpayment. It also appears that to secure the bank in accepting the notes bearing such indorsements, J. Esterly [601]*601& Co., at the time of their transfer, delivered to it certain valuable collaterals as security for their contracts of in-dorsement, and from which collaterals, after the receiver was appointed, the bank realized from time to time in substantial sums, which, if applied as credits on the obligations of indorsement when collected, would materially reduce the obligations before the receiver was ready to pay a dividend.
The receiver was appointed on the eighth day of December, 1896, about the time the larger of the two notes became due. On or about the eleventh day of May, 1898, the bank presented its claims to receiver for alloAvance, and they were allowed “subject to distribution.” The amounts which the bank realized on the collaterals were collected at different times after the appointment of the receiver.
On' or about the thirtieth of May, 1901, the receiver notified the bank that he was ready to make a dividend to the various creditors, and that he would compute such dividend upon the balance then owing, exclusive of interest, and not upon the full amount of the indorsements of the insolvent firm. On refusal to accept a dividend on the proposed basis, the bank brought its action in the court below to have its rights determined. It failed in its contention in the lower courts, and its counsel thus formulates the inquiry in this court: “Shall dividends be computed: (1) Upon the .amount due at the date of the appointment of' receiver? or, (2) Upon the amount due at the time the claim is presented and allowed ? or, (3) Upon the balance unpaid at the time of settlement?”
This case has been considered with two others involving similar questions, which cases will be stated at the close of this opinion. Learned counsel representing the. parties in each case have been heard orally, and they have submitted briefs containing careful discussions of the points involved, wherein are cited a long array of cases adjudicated in the English and American courts, the latter embracing both state and federal. Numerous text- • writers have been drawn upon by each side of the con[602]*602troversy, until we are constrained to agree with counsel that the authorities are about equally divided, both as to numbers and their apparent weight. Their reconciliation is impossible, and a careful review of them here would be fruitless labor.
Counsel for plaintiff in error in this case, and to some extent, counsel in the other cases herewith decided, argue their causes as if the dispute arose in the settlement of an estate under a deed of assignment for the benefit of creditors, and lay down the proposition to govern this case, that: “By the deed of assignment, the equitable ownership of all the assigned property passed to the creditors. They became joint proprietors and each creditor owned such a proportion or part of the whole as the debt due him was of the aggregate of the debts. The extent of this interest was fixed by the deed of trust * * This proposition is found in many of the authorities cited in behalf of the bank, and indeed it seems to be the favorite reason for the holdings made. Notably this is true in Miller’s Appeal, 35 Pa. St., 481; Merrill v. Bank, 173 U. S., 131; and Bank v. Armstrong, 59 Fed. Rep., 372, cited for plaintiff in error.
If, for any reason, we are required to consider this and its kindred cases, under the law governing the mode of administering estates under our assignment laws — which we do not concede — we are of opinion the proposition is entirely too broad, and is subject to important limitations. In cases of assignment under our insolvent laws, the legal title of the property of the assignor passes to the assignee, in trust for the benefit of not some, but all creditors of the assignor. The unsecured creditor is as fully represented by that title as is he who holds collateral security for his claims, and if he becomes the equitable owner of such “a proportional part of the whole as the debt due him is of the aggregate of the debts,” his equitable title is not weakened nor his equitable joint share decreased by the fact that another creditor has security for all or part of his claim. But to allow a divi-' dend to the secured creditor on the basis of his entire [603]*603claim 'unreduced by collected collaterals, would diminish the share of the general or unsecured creditor in the estate of the insolvent debtor. In other words, to pay a dividend on more than is actually due on a secured claim will unjustly reduce the general fund in which the unsecured creditor is entitled to share.
But we do not think the interest or title of creditors in the assigned property is the determining factor, if even they have an equitable ownership. The deed of assignment, under our statute, must be general and inure to the benefit of all creditors, and their rights are to be worked out through the assignee as they appear from time to time during the administration of the trust. In such case the creditors are not purchasers of the estate in proportion to their claims, for investigation and proper defense against the claims of one or more, may modify or extinguish their interest in the estate, so that whatever title, equitable or otherwise, a creditor may have in the assigned property, it is at- best but contingent, and subject to adjudication with other .demands held against the debtor.
As said by Owen, C. J., in Mannix, Assignee, v. Purcell et al, 46 Ohio St., 135:
“No higher or better right or title to any of this property passed to the assignee than the assignor held. His creditors acquired no new rights or remedies in or against it by force of the assignment. The assignee simply represents them and their rights, which he has undertaken to enforce by the plain processes appointed by statute. They do not in any sense stand to the assigned property in the relation of purchasers. The beneficiaries of the property which the assignee is now seeking to subject to the payment of the assignor’s debts, are free to assert against the latter every right and claim which, before the assignment, they could have asserted against the assignor.”
The equitable ownership of a creditor in the assigned property, if any there be, is contingent merely, because its force and validity depend upon the subsequent events. Such creditor must present his claim to the assignee for allowance within a certain time; if rejected, he must sue [604]*604within a specified time. Default in either loses his right to share in the estate unless saved by other provisions of our law. If he presents his claim, before' it is allowed, or any payments made thereon, “he must make and file an affidavit setting forth that the said claim is just and lawful, and the consideration thereof, and what, if any, set-offs or counter-claims exist thereto; what collateral or personal security, if any, the claimant holds for the same, or that he has no security whatever; and the assignee or trustee, or any creditor shall have the right to examine the claimant under oath touching any such collateral or other security, or any other matter relating to said claim within such time and under such regulations as shall be prescribed by the probate judge * * See Section 6354, Revised Statutes of Ohio.
The making and filing of this affidavit is not optional with the creditor, but it is essential to the proper allowance of his claim, and it proceeds upon the evident policy of the law that the affidavit will truthfully disclose both the nature of the claim and its condition with reference not only to payments made, but as to what admitted set-offs or counter-claims exist whereby the creditor’s demand may be in part or wholly satisfied. This procedure is against a theory, that by assignment, a creditor acquires a definite equitable ownership in the assigned property that shall measure his rights to dividends in the further administration of the estate. It further argues that its purpose is to give the assignee, and the probate court, on the report of the assignee, full knowledge of the condition of each claim, in order that rights of the general, as well as the secured, creditors may be determined. If valid off-sets then exist, if good collaterals are held from which collections are being made, they are to be so applied that the general creditors may receive their equitable portion of the estate. And we think that this information as to the condition of the claims is to be furnished so that a dividend may be made on equitable principles, because whatever amount a secured creditor receives beyond what is actually due him after application of money realized from collaterals, or after allowance of [605]*605admitted off-sets, must be taken from tbe general fund and therefore from the general creditor. Therefore, it seems to us that we should hold and answer the third inquiry of counsel by saying that the dividend should be computed “upon the balance unpaid at the time of the settlement.”
The result to be thus reached is the result that would be reached in an action at law between the creditor and the debtor, because the latter could have the court or jury fix the true amount he owes the creditor, after deducting valid set-offs and counter-claims, and the balance would be the real debt.
We do not now see why the standing in the probate court in an assignment case should be better than in the action at law, because the rights of the creditors in reference to such claims as are here involved can be fully worked out in administration of the assigned estate. When the estate is ready to warrant a dividend and it is known from the proof of claim that off-sets or collaterals existed when the claim was allowed, the amount of the admitted set-off, or what has been paid from the collat-erals, should be deducted, and the balance due is the true basis for a dividend.
We have devoted time to this extent in discussing the rule in assignment cases, because its discussion pervades so largely the briefs of counsel wherein they liken the cases at bar to assignment cases. But the analogy is not complete. In cases under review, receivers were appointed, and it is not open to debate, that title to the debtor’s property does not vest in the receiver, but remains in the debtor, subject to the possession and control of such receiver, until he sells the same under the direction of the court, when the title passes to the purchaser. Creditors who had no lien or title prior to the appointment of the receiver gained neither in any sense or degree through the receivership. Hence it is that property in the hands of a receiver is considered as in the court and under its control to be administered so as best to subserve the ends of equity; and when the debtor’s estate becomes assets in his hands, the general creditors acquire rights [606]*606which the court will protect by placing all tlie creditors on an equality as far as possible. This is the rule stated in Bank v. Bank, 33 N. J. Eq., 266, and many other cases.
Therefore the argument of an equitable ownership by the creditor in assigned property can have ho application whatever here. But if we are right in our views as to the rights of creditors in assigned property, it seems quite clear that the same rule should be enforced in settlements of estates placed in the hands of a receiver.
All sums realized on the collaterals in this case were collected after the appointment of the receiver. Part was collected by the bank before, and the remainder after, the proving and allowance of its claims; but whether before or after allowance we think is immaterial.
When the debtor’s property has been reduced to money and under the direction of the court the receiver is ready to make a dividend, there is nothing inequitable in crediting these amounts as payments pro tanto. The law would compel such an application if it was resisted, because the amount due the creditor is his claim less what bas been paid for its liquidation, either directly or indirectly. When this is done, and not until then, do the secured and unsecured creditors stand on an equal footing. When that is done the secured creditor has received the benefit of his security and is ready to claim a share in the general estate with the general creditors. Otherwise, as before stated, the secured creditor would hold the avails of his securities actually reducing his demand, and would also take from the' general estate a portion which belongs to the unsecured creditors.
This latter would be inequitable, while the former rule would do even and exact justice between all parties.
To elaborate this doctrine, or quote from cases in which it is found, is not necessary. We think the principle is right and approve it as has been done in a long line of cases, and by the best of modern text-writers.
We therefore hold the circuit court did not err in its judgment, and the same is affirmed.
Judgment affirmed.