Citizens' Bank v. Kendrick
| Decision Date | 23 March 1893 |
| Citation | 21 S.W. 1070 |
| Parties | CITIZENS' BANK v. KENDRICK et al. DORITY v. FRANKLIN BANK et al. |
| Court | Tennessee Supreme Court |
Appeal from chancery court, Montgomery county; Geo. E. Seay, Chancellor.
Bills by the Citizens' Bank against Kendrick, Pettus & Co. and by William Dority, assignee of Kendrick, Pettus & Co., against the Franklin Bank and others, for a settlement of the insolvent estates of the two defendants. From a decree for the Citizens' Bank, the Franklin Bank appeals. Decree modified.
House & Merritt and R. H. Burney, for complainants. Leech & Savage, W. M. Daniel, T. J. Bailey, A. E. Garner, and John L. Stark, for defendants.
On the 10th of December, 1890, Kendrick, Pettus & Co. made a general assignment for the benefit of creditors. The indebtedness aggregated about $250,000, and the assets were worth about one fourth that amount. On the same day, a few hours later, the Franklin Bank also made a general assignment for the benefit of creditors. Its liabilities were over $900,00, and assets about one fourth as much. These bills were filed for the settlement of the two trusts.
Without going much into detail, the legal questions presented on appeal will be considered in order.
1. The Franklin Bank was bound as indorser on the paper of Kendrick, Pettus & Co. to the amount of about $75,000, and that paper was secured in both assignments alike, and in common with the other debts of the assignors, respectively. Each holder of the separate pieces of paper making up that $75,000 claimed the right to prove his debt in full against both debtors, and to receive from each fund a full pro rata of his whole debt. The Franklin Bank and its assignees denied that right in the full sense claimed, and contended that the holders of such indorsed paper should first credit their debts by pro rata of the fund provided by the principal debtor, and then receive pro rata on balance only from the fund of the indorser. The chancellor was right in sustaining the former contention. Kendrick, Pettus & Co., the maker of the indorsed paper, secured that paper as it did its other liabilities, giving preference to none. The Franklin Bank, the indorser, did the same. That paper, as it then existed, and to its full amount, was provided for in both conveyances; in each as if the other had not been made. Two securities were provided for the holders of that paper, while only one was provided for the other creditors of the respective assignors. Each assignment made equal provision for each beneficiary therein named, without reference to any other security that he might have. Two trust funds were created, and those entitled to participate in the one or the other were named and placed upon an equal footing. It was not provided, nor contemplated, that any beneficiary of the one fund should receive a greater or less per centum of his whole debt from that fund than every other beneficiary thereof should receive. Those who were creditors of both assignors became entitled to share in both funds. Having two debtors they received two securities, one of which they are to share equally with the other creditors of the debtor providing it, and the other of which they are to share equally with the other creditors of the debtor providing it. In such cases each trust should be administered separately, and each fund distributed as if the other had not been created, at least up to the point of making full payment of debts entitled to participate in both. Less than that would be unjust to those having two debtors and two securities. In the present case the most that such creditors can hope for is one half of their debts,—one fourth under each assignment,—while others will receive just half as much on the dollar. It seems to be well settled that if both maker and indorser of negotiable paper become insolvent, and voluntarily assign their property for the benefit of creditors, as in this case, the holder may prove the full amount of his debt against both estates at the...
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