
    William Dunbar v. Richard D. Harrison and others.
    Where a railroad company assigns unpaid subscriptions to its stock to its president, in trust for certain definite purposes which have been fulfilled, and the company being insolvent, one of its judgment creditors brings an action, under the 458th section of the code, to subject the amount due on such unpaid subscriptions to the payment of his judgment,: Held, that as to the amount due on such subscriptions, after the fulfillment of the trust and the payment of all costs and expenses of its administration, the trustee is not entitled to retain from such fund the amount of indebtedness of the company to him for his salary as president thereof, the plaintiff, by his action,, having established a specific lien on the fund as against less diligent creditors, and being entitled, in equity, to a preference over them in its distribution.
    *Error to the court of common pleas of Clark county. Re- [2fr served in the district court.
    On May 8, 1860, Richard D. Harrison, Richard Rodgers, Robert Rodgers, and others, instituted an action in the court of common, pleas of Clark county against the Springfield, Mount Yernon and Pittsburg Railroad Company, "William Dunbar, the present plain tiff in error, and numerous other parties, alleged to be subscribers to-the stock of said company. On May 16, 1860, they amended their petition and brought in additional defendants. ,
    The proceeding so commenced was, in substance, a creditor’s bill, although denominated by the code “a proceeding in aid of execution.” The petition set forth the recovery of judgment in favor of the plaintiffs therein against the railroad company; averred that it was still in full force and unpaid; that the company was insolvent, and had no property liable to levy and sale, from which any part of the judgment could be made on execution ; showed that certain stock subscribers of the company had not paid their subscriptions, but were still indebted to the company thereon; and prayed that so much of said unpaid subscriptions as might be necessary to satisfy the judgment of the plaintiffs should be ordered to be paid and applied thereon.
    Against William Dunbar, the present plaintiff in error, a party to this proceeding, it was alleged that he had or claimed some interest in the stock subscriptions, or some part thereof, thus sought to be appropriated; and he was called upon to make known the extent of that' interest.
    In his answer Dunbar set forth the act of incorporation of the railroad company, and the several amendatory acts, and, in the manner pointed out in the code (section 123), made them part of his answer; showed the organization of the company thereunder, the location of the road, and the steps taken by the company in the prosecution of its construction and equipment; set out some part of the action of the company in regard to the procurement of stock subscriptions, more particularly in the county of Knox; that, for the purpose of aiding in that pai't of the road which passed through 28] that county, *the legislature, on March 19, 1851, passed a law, .given in full in the answer and made part thereof, under which a vote of the electors of Knox county was had, in October, 1851, which resulted in favor of the issue of the bonds of the county, in the manner, upon the terms, and for the purposes therein specified; that the proper and necessary stops were taken by the company to ■enable its stock subscribers to call for the issue of said bonds; that divers stock subscriptions, payable in the bonds of the county, were ■obtained by the company; that these subscriptions were made upon certain conditions expressed in writing and forming part of the contract of each of the subscribers. He also set out a large number of the stock subscriptions of the character referred to, giving, in detail, the names of the subscribers, the dates and amounts of their several subscriptions, the manner and conditions of payment, and showing the extent to which payments had been made. He also .averred that the proper steps had been taken to fix the liability of the subscribers who had made default, and the amount due from ■each of them respectively.
    Dunbar further showed that he had been acting in an official •capacity for the company for a series of years, and that he had ■devoted much of his time to the business and interests of the company; that prior to his election to the office of president of the company, and on the 23d of October, 1856, the company assigned .and transferred to him the several subscriptions specifically set out in his answer, upon cei'tain trusts expressed in the deed of assignment ; that he was authorized to collect the subscriptions thus made •over to him and ajjply them as follows : 1. To the payment of all expenses incurred in the execution of the trust; 2. To all expenses that had accrued since February 1, 1855, or should thereafter accrue, on that portion of the work east of Mount Yernon, in its prosecution or completion; 3. To pay all balances due orto become due to contractors on said portion of the work since the date last .above mentioned. A copy of the assignment is attached to the answer.
    Dunbar then proceeds to show the inducement moving the company to make this assignment: 1. That the law of March, 1851, 27] forbade the company from expending any part of the ^proceeds arising from the sale of bonds of the county, without its limits; 2. That one of the conditions of the several contracts of subserip-fcion was that the money subscribed should be expended on the road within Knox county or upon its eastern terminus; 3. That in many instances the company had disregarded this stipulation, and violated the provisions of the law above referred to, by expending moneys subscribed and paid upon the above terms, elsewhere than within the county of Knox, or upon the eastern terminus of the road; 4. In consequence of this bad faith of the company, dissatisfaction had arisen, to allay which a resolution was passed by the board of directors pledging to the completion of the road east of Mount Vernon three hundred and twenty-five thousand dollars of the solvent and collectible subscriptions to the company’s stock. But of the sum so appropriated, a small proportion only had been ■actually applied upon the work; whereupon, to redeem, to some ■extent, this pledge, and to satisfy the subscribers that the original eontractbetween them and the company would be faithfully executed on the part of the company, and to induce them to pay their subscriptions without litigation, the assignment above mentioned was executed in the form already stated.
    He also shows that he accepted the trust, and entered upon the ■discharge of the duties created thereby. That from the date of the assignment he acted as the assignee, in trust, of said assets; that he proceeded in the work of constructing the road; that he collected •a portion of the subscriptions, and disbursed the moneys as directed by the assignment; that in proceeding with the work and discharging the duties of the trust, he expended large sums of money in excess of his receipts; that he had incurred liabilities to ■a large amount, which were still outstanding; that, in attempting to collect the subscriptions assigned to him, ho had been compelled to institute many troublesome and expensive' suits at law, in the prosecution of which heavy expenses were incurred, and that these expenditures were made and liabilities incurred on the faith and ■security of the trust assignment. That an account of all these transactions, a copy of which is annexed to the answer, shows a lai’ge balance in his (Dunbar’s) favor, and *he insists that no [28 part of the subscriptions assigned to him could be appropriated to the payment of the judgment of the plaintiffs until the balance so due him was fully satisfied or provided for. That, in addition to the account for expenditures under the trust, the company was indebted to him in a large sum for his salary as vice-president and president, and for moneys paid by him for the use and purposes of tbe company, in transacting its general business, the balance due-him, exclusive of interest, being over $8,000. An account of the items is attached to the answer. It is upon this part of the account that the questions in this proceeding arise. Dunbar made his answer a cross-petition, and prayed an account and judgment. He also added a prayer for general relief.
    On February 27, 1861, James Nicholson, who is also a defendant in error, filed another creditor’s bill in the same court, similar to that of the plaintiffs below in this case. July 12, 1862, an order was made consolidating the two actions.
    At the November term, 1862, the court adjudged as follows :
    1. That the trust assignment of stock subscriptions to Dunbar,, set forth in his answer, was valid in law, and passed to him the-equitable title to the subscriptions therein named, for the jrarposesexpressed in the deed of trust, and that, by virtue thereof, he, to-the extent of disbursements made and liabilities incurred in the-due execution of the trust, had a lien upon the funds arising from the subscriptions prior to the lien of the plaintiffs, and that he might assert such lion unless it should thereafter be found that he-was estopped thereupon, or that, as to the plaintiffs, he had waived his lien.
    2. That under the trust Dunbar was authorized to pay all the legitimate and proper expenses incurred in the execution thereof, including reasonable counsel fees for counsel employed in the fair discharge of his duty in legal proceedings instituted by him for the collection of the subscriptions or any part thereof, also for costs adjudged against him in the proper discharge of his duty; and also that he was entitled to a reasonable compensation for his 29] services in tho administration *of the trust, and also reasonable counsel fees for the defense and maintenance of the trust.
    3. That he was further authorized to pay all expenses that had accrued since February 1,1855, or should thereafter accrue on that portion of the work east of Mount Ternon, in its prosecution or completion ; that if at any time after the making of the assignment, the railroad company had entirely abandoned its purpose to complete said road, and the fact of such abandonment was made known to him, then, and from the date of such abandonment and knowledge thereof, Dunbar’s authority to incur further expenses in the prosecution of the work ceased; but that, as to all other expenses incurred, or indebtedness made, in the prosecution of the work under the trust and in execution thereof, he, as trustee, was authorized to make payment.
    4. That he was further authorized to pay all balances due, or to-become due to contractors on said portions of the work since February 1, 1855; but whether this authority should be limited to-work done, or to be done, under contracts then and theretofore made, or should be extended to work, if any thereafter had been done under new contracts made subsequently to the date of the-assignment, by the ■ company, the court did not then determine, but upon that point awaited the report of a master as to whether' any new contracts had been made or work done thereunder.
    5. That as to all the debts of the company coming within the-scope of the trust, upon the principles above stated, and which Dunbar, as trustee, was authorized or required to pay out of the trust fund when collected, for which he had made himself personally responsible, and for all money borrowed by him to prosecute said work, and faithfully expended in the mode and manner required by the trust, upon the principles above stated, he was-entitled to be allowed in his account.
    6. That he was not entitled to credit on his account for services-rendered by him as president or as director of the railroad company, but for such services only as he rendered in his capacity as trustee. To this ruling Dunbar excepted.
    The ease was thereupon referred to a special master to take proof *and state an account with Dunbar upon the principles thus [30-‘ settled. A report was subsequently filed by the master, disallowing, in conformity with the ruling of the court, all the claims of Dunbar upon the assets and funds in his hands, except those created in the prosecution' of the trust. To this ruling of the master Dunbar filed exceptions which were heard and overruled by the court,, and judgment rendered confirming the report, in December, 1864.. An exception was also taken to this decision overruling the exceptions to the report.
    An exception was also taken to an order subsequently made by the court, allowing to*the attorneys of plaintiffs below, a counsel fee of 83,000 from the trust fund; but this exception is not now insisted upon.
    To reverse the rulings and judgment of the common pleas, Dunbar filed his petition in error in the district court, wherein the case was reserved to this court for decision.
    
      It is assigned for error that the court below erred in holding that the plaintiff in error, Dunbar, was not entitled to credit on his -account for services rendered by him as president or as a director of the railroad company.
    
      Curtis & Scribner, and Samuel Israel, for plaintiff in error:
    I. The court erred in compelling the plaintiff in error to surren-der the moneys and assets of tbe railroad company in his hands, to the plaintiffs below, while his own individual demands against “the company were unsatisfied.
    It is not claimed by us that Mr. Dunbar could retain and apply -upon his individual claims the assets assigned to him, to the prejudice of the beneficiaries under the trust; but what we do claim is 'this: that after the beneficiaries under the trust had been provided for, the assignee could retain the surplus, as against the company, •or other general creditors, for the satisfaction of his individual demand.
    The plaintiffs below were general creditors of the company for moneys loaned and advanced. The plaintiff in error, in addition do his expenditures under the trust, was, in like manner, a general ■creditor of the company for moneys paid out to its use and for per-sonal services rendered. As such general creditors, both parties 31] stood upon the same footing, ^having equal equities for the payment of their several demands from the general assets of the ■company.
    The assets in question were lawfully in the hands of the plaintiff in error. It was contrary to the rules of equity to take that fund •from him and give it to other creditors who had no better right to it than the creditor from whom it was taken.
    The beneficial interest, it should be remembered, notwithstanding •the assignment, remained in the company. The trust required the fund to be expended for the benefit of the company, in the construction of its road. When, therefore, the work was abandoned, and •the debts provided for, or arising under the trust were satisfied, the -balance remaining in the hands of the assignee belonged, in equity, to the company, and was properly applicable to the payment of its general creditors. Mr. Dunbar stood in the position of a general ■creditor of the company which was confessedly insolvent. He had ?a fund, assets of that corporation, in his hands, placed there by the corporation itself. To withdraw that fund from him, was to compel him to lose his debt. Could this be lawfully done ?
    1. It is a well settled doctrine in equity, that “ he who is prior in time, other things being equal, hath the better right.” Burchard v. Hubbard, 11 Ohio, 316-333 ; Willies v. Harper, 2 Barb. Ch. 338--354; Cherry v. Monroe, Ib. 618, 619; Weavers. Toogood, 1 Barb. 238-241; 6 Ohio, 156-163 ; 11 Ohio, 192-195 ; 13 Ohio, 197, 198 ; 1 Ohio St. 478-505 ; 2 Lead. Eq. Cas. (pt. 1, p. 49), notes to Basser v. Norworth, “ Qui prior est tempore, portior est jure." Embree v. Hanna, 5 Johns. 101-103; Lynch v. Utica Ins. Co., 48 Wend. 236, 253, 256; Muri v. Schenck, 3 Hill, 228-230; Berry v. Mutual Ins. Co., 2 Johns. Ch. 603-608; Hertel v. Bogert, 10 Paige, 52-60 ; Paillon v. Martin, 1 Sandf. Ch. 569-578; Watson v. Le Row, 6 Barb. 481-485.
    2. If, upon demand made by the company, Mr. Dunbar had refused to pay over all the funds, and had insisted on retaining an amount sufficient to satisfy his claim, he could have enforced his-right of set-off in an action by the company. And the plaintiffs below, who, as creditors of the company, were ^endeavoring [82-to work out its legal rights against him, stood in no better position than the company itself.
    Had the company brought suit, the doctrine of set-off would have* applied independently of the principle of equitable set-off arising in. cases of insolvencey.
    Except where the rule of the common law is changed by statute,, the executor may retain from the assets of the estate, a sum sufficient to satisfy his private debt. Loomes v. Stotherd, 1 Sim. & S. 458 ; Langton v. Higgs, 5 Simons, 228 ; Hosack & Blunt v. Rogers, 6 Paige, 415.
    So, “a trustee of real estates, for payment of the testator’s debts,, is entitled to retain a debt due him from the testator, out of the-proceeds; and his right is not prejudiced by the proceeds having been paid into court.” Hall v. Macdonald, 14 Simons, 1.
    “ When an action is brought by or against a trustee, in that capacity, money due to or from the cestui que trust, may be set off.” 2 Parsons on Contracts (3 ed.), 251; Cochrane v. Green, 9 Com. Bench (N. S.), 448.
    The judgment of the court below places the trustee in a worse position than if he had been an executor; for, so far from allowing’ him to come in equally with other creditors (Hill on Trustees, *359;; Child v. Stephens, 1 Vern. 102), it takes the whole fund from him.
    For other .instances in which a party acting in a fiduciary capacity is permitted to retain assets received in that capacity, see Hamilton v. Mohnn, 1 P. Wms., 118, 122; Mathes v. Bennett, 1 Foster (N. H.), 204; Graham v. Graham, 1 Ves. Sen., 262.
    3. Under the doctrine of equitable set-off, the insolvency of the ¡railroad company materially strengthens the position of the plaintiff in error. See the opinion in Lindsay v. Jackson, 2 Paige, 581, and the authorities therein reviewed; also, Gay v. Gay, 18 Paige, 369; Steedman v. Pickney, 42 Maine, 122.
    As between the plaintiffs below and Mr. Dunbar, leaving the .assignment out of the question, the equities are equal. Mr. Dunbar has as much right, in equity, to the payment of his debt, as have the plaintiffs. The equities in this respect being equal, the plaintiffs .33] below should no more be permitted *to take the fund from Ms Rand for the payment of their debt than he should be allowed to -deprive them of securities under their control, were the circum¡stances of the case reversed.
    We submit that the authorities clearly establish the right of Mr. Dunbar to his set-off in equity. And this right exists as well against a creditor of the company as against the- company itself. “The creditor pursues the fund as the fund of the debtor, and he can have no higher or better right to it than the debtor himself. “ In .a creditor’s action against a judgment debtor and his debtor,” say the authorities, “to reach securities held by the former, the plaintiff ,is in no better position than an assignee of the judgment debtor.” McGay v. Keilback, 14 Abb. Pr. 142.
    II. The master, under the direction of the court below, disallowed all items in the account of Mr. Dunbar, except for moneys •expended, or liabilities incurred, specifically, under the trust. And the court expressly decreed that no part of the services rendered by Mr. Dunbar, as president or vice-president of the company, "fcame within the trust. In this particular, we maintain that the ’■court erred.
    s
    >| The trust fund, after payment of the expenses of the trust, was pledged to the following purposes :
    " 1. To all expenses that had accrued since February 1,1855, or ¡should thereafter accrue on that poi’tion of the work east of Mount Vernon in its prosecution or completion.
    
    
      2. To all balances due or to become due to contractors on said portion of the work since the date last above mentioned.
    It will be seen, therefore, that the trust not only provided for the payment of contractors, but also for all other expenses accruing in the prosecution of the work east of Mount Vernon.
    The question arises whether a fair proportion of the salary of the ■executive officer of the company is not embraced in this provision of the trust assignment. It is true that the salary is allowed, not for services rendered on any particular part of the road, but for the management of the entire line. But it would be as easy to ascertain and detezmine the proportion of the salazy fairly chargeable to any given number of miles of the work, as it would be to apportion the expenses of construction to the contractor. We insist that the expense incurred *in the employment of an executive offi- [34 ■cer to manage, direct, and superintend the work east of Mount Vernon comes within and is provided for by the trust. We submit therefore that the judgment, in the particular complained of, is ■erroneous, and should be corrected.
    
      S. Shellabarger, and Cochrane & Brother, for defendants in error:
    Our inquiries are narrowed to this only question raised upon this record, namely: whether a trustee, holding by an assignment for a well-defined purpose and trust, certain choses in action, can hold them, as against a creditor’s bill filed against the owner and assignor of the choses in action for the payment of the trustee’s personal claims, these being wholly foreign to the objects and terms of the assignment.
    Most obviously the real question before the court is, which of two creditors of this insolvent company shows by this record the prior lien or equity in the dues of the company owed it by, not Mr. Dunbar, but by third persons? We show our creditor’s bill with its lien. Mr. Dunbar shows, as he claims, that the company owes him, and that had he collected these subscz’iptions., and did the company sue him for these collections, then he could defeat the company’s recovery by a right to set-off. How far this is from the question in court. To make out any right of set-off which will affect us, Mr. Dunbar must show that his holding a claim against the company gives him a lien on all that third persons owe the company, so strong that by it he can prevent any one, besides himself, from taking these assets. Does the fact that the company owes him, and that he held a trust, which is completely executed, in certain assets, create such lien or right of set-off?
    We think nothing is plainer than that a right of set-off, legal or equitable, gives to the person holding the right of set-off no lien upon or equity in the debt against which he could set it off; neither does the right to set-off operate as a payment of the debt against which it may be set off. Such results do not arise till some action in court has had the effect of making the one pay the other. The truth is, as laid down in Miers et al. v. Zanesville Turnpike Co., 13 35] Ohio, 197, that a “ creditor, *on filing his bill to reach assets, acquires a preferable equity over other creditors, which attaches- and becomes a specific lien by the filing of the bill.” Now, by the code the lien is from service of process. A creditor who happens-to have a claim against a judgment debtor, and also owes that debtor, can not say I hold a prior lien on what I owe the debtor by virtue of my right of set-off. His right of set-off gives him no-such lien. ' ,
    If the doctrine of equitable set-off did exist in Ohio, as claimed,, it has no application to our case. Equitable set-of is merely the right of one sued for moneys owing to one who is also his debtor, to have his claim set off against what he owes the plaintiff suing him, and this where the set-off could not be made under, the-statutes or at law. Here is no case for the application of such doctrine, because:
    1. We do not sue Mr. Dunbar for any money, nor ask him to pay over anything whatever.
    2. The railroad company (his alleged debtor) does not sue him-
    3. It is not pretended, nor in the suit claimed, that Mr. Dunbar owes the railroad company, nor that he holds any of its moneys or funds.
    4. We sue third persons, who owe the railroad company, for moneys they owe. If they held claims against the railroad company that they sought to have set off in equity, it might present, a - claim within the principle of equitable set-off maintained in plaintiff’s brief.
    5. Mr. Dunbar not having in his hands the railroad company’s moneys, and it therefore not being necessary or proper in law or equity to sue him,, he is not prior in time nor right — is not in that status where, his equities being equal to ours, his possession of the-fund prior to us protects him. He is not in possession more than we are.
    6. It presents no other case than that of two creditors of an insolvent demanding moneys a third person owes to the insolvent. One relies on the clear statutory and legal right and lien given by the creditor’s bill. The other sets up the claim, that if he had got the money from the third person into his hands, and then if the insolvent railroad company *had sued him for it, then he [36 would have a right of set-off; and because he would have it if these things had happened, therefore he has it now, though he has not the funds’, is not sued for any by anybody, and is himself only plaintiff suing to collect by cross-bill from third persons what another creditor of an insolvent has already obtained a lien upon by a creditor’s bill.
    7. This answers all that is or can be said about what would be Mr. Dunbar’s right against the railroad company were it suing for money in his hands. There can be no answer to this unless, it is to be found in the claim that the trust assignment put Mr. Dunbar in the same status as if he held, not as trustee, but generally, the 'railroad company’s moneys, and we were seeking to make him pay them over.
    8. We say, as the court says in the case of Follett v. Reese, 20 Ohio, 546,etc., that “all the right or interest, therefore, that he [Dunbar] now has in orto the property is derived under and by virtue of the trust deed.” “ The title was conveyed to him in pursuance of a clear and defined contract to which he was a party,” etc. “He now seeks to add to those specified trusts the payment of a debt to himself not mentioned in the trust deed by which he obtained the title to the property, and which [debt] was never a lien upon it.” Mr. Dunbar has no “ specific ” equity or lien on the subscriptions independent of the trust deed. That deed gives him no such equity. See Follett v. Reese, 554. The legal title to the choses in action, as claimed by this trust assignment, can not then be converted into what it is not — an assignment to pay Mr. Dunbar’s individual debts due to him from the company.
    What is said about the words, “all other expenses’’ as used in this trust deed, we need not argue. To hold that the president’s duties done at large for the company are services done on that portion of the work east of Mount Vernon, is obviously doing violence the whole and effect of the instrument. Besides, Mr. Dunbar has rendered no service in the-construction of the road east of Mount Yernon, except such as he rendered in his character as trustee. For these services he has been paid.
    
    
      * Curtis & Scribner, in reply:
    The fact that Mr. Dunbar has not completed the collection of the claims assigned to him, can make no difference in the principle involved. By the assignment, as the law now stands, Mr. Dunbar became invested with the legal as well as the equitable title to the obligations transferred (Allen v. Miller, 11 Ohio St. 377), and with full power to enforce payment and to disburse the funds when collected. Mr. Dunbar’s equity is just as strong before the collection is made as it is afterward.
    The question would be the same in principle if the claims had been assigned to him as collateral security, and a creditor were to come in and seek to appropriate the collaterals, upon the ground that until the money had been actually received no specific right had attached to retain it.
    The case of Follett v. Reese, 20 Ohio, referred to upon the other side, has no application to. the question here presented.
    We insist, with confidence, that the president’s salary is within the trust.
   Brinkerhoff, J.

In order to a correct decision of the single question made in this case, it is necessary that we should carefully notice not only what the case is, but also what it is not. The proceeding which we are called on by the petition in error to review, is an action in the nature of a creditor’s bill, brought under section 458 of the code of civil procedure, to subject the choses in action of an insolvent railroad corporation to the payment of a judgment which the plaintiffs below hold against it. These choses in action consist not of negotiable paper transferable in law, but of unpaid subscriptions to the capital stock of the company, and on their face payable to it alone. It is not a case to subject money in the hands of the defendant, Dunbar, and belonging to the company, to the payment of the judgment. With such a case as the latter, we have now and here nothing to do.

Mr. D unbar’s office and functions as a trustee have ceased; they are dead; all just allowances to him for advances made by him, and as compensation for his services while acting in the capacity of trustee, have heen made. He never had any title to these stock subscriptions except as a trustee *for certain strictly defined trusts. These [88 trusts being ended his titled ceased, and such being the case we see no reason why the company might not itself have brought and maintained suit directly against the subscribers to the stock on their subscriptions respectively, without regard to Mr. Dunbar or its former assignment in trust to him. The company is indebted to him for his salary as its president; and as to that claim upon the company, he occupies simply the relation of an ordinary creditor of the company, having no judgment in his favor against it. He has none of the company’s money in his hands, but only happens to be the temporary custodian of evidences of indebtedness by third parties in its favor. In this state of case the plaintiffs, having a judgment against the company, file their creditor’s bill to subject the amount due on the stock subscriptions to the payment of their judgment. This establishes a specific lien in favor of the plaintiffs upon the amount due on the stock subscriptions after all the ends of the trust have been fulfilled, and gives them a preference in equity over other less diligent general creditors in the distribution of the avails of the proceeding. Miers and Coulson v. The Zanesville and Maysville Turnpike Company, 13 Ohio, 197.

Judgment affirmed.

Day, C. J., and Scott and Welch, JJ., concurred.

White, J., did not sit in this case.  