Brown v. Merch.'s & Farmers Nat. Bank

• Decision Date: 30 June 1878
• Citation: Brown v. Merch.'s & Farmers Nat. Bank, 79 N.C. 244 (N.C. 1878)
• Court: North Carolina Supreme Court
• Parties: JOHN L. BROWN, Trustee, v. MERCHANT'S & FARMERS NAT. BANK, and others.

79 N.C. 244

JOHN L. BROWN, Trustee,

v.MERCHANT'S & FARMERS NAT. BANK, and others.

Supreme Court of North Carolina.

June Term, 1878.

CIVIL ACTION, tried at Fall Term, 1877, of MECKLENBURG Superior Court, before Kerr, J.

This action was brought by the plaintiff as trustee of McMurray & Davis against the Merchants & Farmers, the Traders, and the First National banks of Charlotte, asking the Court to direct the proper distribution of funds in his hands among the trustors' creditors.

The complaint sets out in substance that on the 7th of June, 1875, McMurray & Davis being unable to meet their liabilities made a conveyance of all their partnership effects to the plaintiff in trust for the benefit of all their creditors who should prove their debts and accept the provisions of the trust, and in pursuance thereof, debts were proved to the amount of about $150,000.

Among the creditors who proved their debts, was the defendant, the Merchants & Farmers bank, to which the trustors had on the 28th of December, 1874, executed a note for $3,000 at sixty days, with Grier & Alexander as sureties, which note was discounted by the bank and became its property. On the 8th of March, 1875, Grier & Alexander made an assignment for the benefit of their creditors, pro rata, which was accepted by said bank, with the understanding that the bank was not to release McMurray & Davis from liability upon said debt, or Grier & Alexander from the liability growing out of their relation as sureties on the same, and was not to look to any subsequently acquired property for payment. In pursuance of said agreement the assignee of Grier & Alexander paid to said bank forty-five and a quarter per cent of said debt, amounting in the aggregate to $1,357.50.

The facts in reference to the Traders bank, also creditors of said trustors, were, that Grier & Alexander executed three notes amounting to $8,000 which were endorsed by McMurray & Davis and discounted by said bank and became its property. And the assignees of Grier & Alexander under the assignment aforesaid paid on said debt the said percentage, amounting in the aggregate to $3,620, which was accepted by the bank with the understanding and agreement between it and Grier & Alexander and McMurray & Davis, that said payment was to operate as a discharge of the debt so far as Grier & Alexander were concerned, but should not in any way affect the liability of McMurray & Davis on the same.

The trustee has received about $65,000 of the trust fund, of which he has paid to all the creditors proving claims a dividend of forty-five per cent, except the defendants, the Merchants & Farmers and the Traders' banks, who now set up their claim against the plaintiff for the payment of a like dividend on the total amount of their debts, regardless of the payment by the assignee of Grier & Alexander as aforesaid. The assertion of said claim was resisted by the defendant, the First National bank, (upon proof of whose claim, it was recognized by the plaintiff as one of the trustors' creditors) and all the other creditors of the firm of McMurray & Davis in like interest with it.

By reason of these conflicting interests and complications growing out of the same, the plaintiff submits to the direction of the Court, and asks for such order as may enable him to disburse the trust funds according to law.

His Honor held that the Merchants & Farmers, and the Traders bank were entitled to a pro rata distribution of the fund on the whole amount of their respective claims against McMurray & Davis, and directed the plaintiff to disburse accordingly, from which ruling the First National bank appealed.

Mr. A. Burwell, for plaintiff .

Messrs. Wilson & Son, Shipp & Bailey, C. Dowd, J. E. Brown, and R. Barringer, for defendants .

SMITH, C. J.

On the 8th day of March, 1875, Grier & Alexander made an assignment of their property in trust to secure pro rata all their creditors. The deed contains a provision that the creditors thus secured should accept the appropriation and not look to any future acquisitions of the firm for further payments, but their liability should remain unimpaired for the enforcement of a debt due by McMurray & Davis on which they were bound as sureties. On the 7th day of June following, McMurray & Davis becoming insolvent also conveyed their partnership effects to the plaintiff for the benefit of such of their creditors as should prove their debts, and accept the provisions made in their behalf. Both assignments were accepted by the creditors on the terms set out in the respective deeds. There are two debts secured in both assignments, in one of which one firm is principal and the other endorser, and in the other their relations are reversed. The debts are: 1 A note executed December the 28th, 1874, at sixty days, for three thousand dollars by McMurray & Davis, and endorsed by Grier & Alexander to the defendant, the Merchant's & Farmer's National Bank of Charlotte. (2) Three notes in the aggregate sum of eight thousand dollars made by Grier & Alexander, and endorsed by McMurray & Davis to the defendant, the Trader's National Bank of Charlotte. The assignees of Grier & Alexander in distributing the trust funds have paid to the Trader's National Bank the sum of three thousand, six hundred and twenty dollars, a dividend of forty-five and a quarter per centum on the debt, and this money was received with the express understanding that the bank should not thereby be prejudiced in its claim against McMurray & Davis, nor in any remedy it might pursue against them. No payments were made from any source upon the debts provided for in the assignment of March the 8th, 1875, before the assignment of McMurray & Davis was made, and the dividend was long afterwards.

The question upon which the advice and direction of the Court are asked is this: Shall the two debts secured in both deeds share for their full amount in the distribution of the trust funds of McMurray & Davis, or shall they be reduced by the sums received from the assignees of Grier & Alexander, and the residue only draw its ratable part?

The complication which might grow out of the peculiar and exceptional provisions contained in the deeds are waived by the parties and need not enter into our consideration. We have been aided by the arguments and researches of counsel to the results of which our own investigations have contributed but little, and cases cited are mostly to be found in the reports of our sister State of Pennsylvania. With the instruction furnished by them, and under the guidance of acknowledged principles of equity, we proceed to examine the question.

Divested of unnecessary surroundings the case is simply this: Debts are secured by separate assignments made by different persons liable for them. The trust funds together are sufficient to pay a...