German Security Bank v. Columbia Finance & Trust Co.

• Decision Date: 21 March 1905
• Citation: 85 S.W. 761
• Parties: GERMAN SECURITY BANK v. COLUMBIA FINANCE & TRUST CO.
• Court: Kentucky Court of Appeals

85 S.W. 761

GERMAN SECURITY BANK v. COLUMBIA FINANCE & TRUST CO.

Court of Appeals of Kentucky.

March 21, 1905

Appeal from Circuit Court, Jefferson County, Chancery Division.

"Not to be officially reported."

Agreed case between the Columbia Finance & Trust Company and the German Security Bank. From a judgment for the former, the latter appeals. Reversed.

Gibson Marshall & Gibson, for appellant.

Helm Bruce & Helm, for appellee.

HOBSON C.J.

The Columbia Finance & Trust Company and the German Security Bank of Louisville filed in the Jefferson circuit court the following agreed case on April 10, 1901:

"The parties hereto state that the controversy between them hereinafter set out, is real, and these proceedings are entered upon in good faith to determine the rights of the parties.

"(1) On the 30th day of August, 1893, Samuel Russell, at Louisville, Kentucky, executed and delivered to Clinton McClarty his promissory note of that date in words and figures following:

"'$600.00. Louisville, Ky. August 30, 1893. Four months after date I promise to pay to the order of Clinton McClarty, six hundred dollars; value received, with interest at the rate of six per cent per annum, from maturity until paid. Negotiable and payable at the Bank of Louisville. Samuel Russell.'

"(2) Clinton McClarty indorsed the note and delivered it to James A. Kerr, who, before maturity, indorsed and sold it to the German Security Bank, which, for full value, discounted it in the regular course of its business, and paid the proceeds to Kerr. The note was placed on the footing of a foreign bill of exchange.

"(3) The note was not paid at maturity (January 2, 1894). It was legally protested, and due notice given the indorsers.

"(4) On the 9th day of February, 1894, the indorsers, McClarty and Kerr, at the request of Russell, made the following agreement with the bank, which was indorsed on a copy of the note:

"'We, Clinton McClarty and James A. Kerr, indorsers on the original note of which the above is a copy, and which is held by the German Security Bank, under protest, hereby agree and bind ourselves to hold ourselves responsible to the holders of the original note until the 2nd day of May, 1894, provided the discount and protest fee amounting to $18.55 is prepaid. Witness our hands this 9th day of February, 1894. Clinton McClarty. James A. Kerr.'

"Russell then paid the discount and protest fee, and the above agreement became valid and binding, extending the time of payment as provided.

"(5) On December 30, 1893, Russell, believing himself insolvent, made an assignment for the benefit of his creditors to the Columbia Finance & Trust Company, which accepted the assignment, qualified as assignee at once, and notified creditors to produce their claims. The bank being so notified promptly produced the note properly proven against Russell's estate.

"(6) On the 2d day of May, 1894, the assignee, believing Russell's estate to be solvent, but without taking any steps to judicially ascertain the fact, paid the bank the amount of the note, which was surrendered to it.

"(7) After the note was paid, a number of claims were presented against Russell's estate, which were unknown to the assignee when it paid the note. The assignee proceeded to wind up the estate, reducing it to cash, and instituting a regular settlement suit in equity in the Jefferson circuit court. The bank was not a party to the suit, did not appear to it in any way, and had no notice of it. The assignee did not reduce the estate to cash until about February, 1899. The settlement suit was referred to the commissioner, and his report, filed June 29, 1899, showed the estate to be insolvent, and that, in order to equalize the various creditors, it was necessary that certain creditors who had been paid in full should refund. It was reported and was true that the amount paid to the bank was $404.30 in excess of what would have been its proper share of Russell's estate on final settlement. Some of the claims presented were controverted, and their validity was not determined until the report was confirmed, which, on account of the summer vacation intervening, was not done until October, 1899, and shortly afterward the assignee for the first time notified the bank that it had been overpaid, and demanded that it refund the excess paid to it.

"(8) The bank claims that Russell and Kerr were solvent, of good credit, and that it could have easily collected the note from them. The assignee denies this. If the court considers the question of their solvency material, both parties may take proof. McClarty has since died, and his estate is insolvent. Kerr is now insolvent.

"(9) The bank is a regularly incorporated bank, organized and doing business as such in Louisville for more than twenty years.

"The assignee contends that it paid the note by mistake, believing Russell's estate to be solvent, and has the right to reclaim the excess so paid by mistake.

"The bank claims that, the payment having been voluntarily made to it, it ought not now to be required to pay back any part of the sum paid to it, because to require it to do so would work a great hardship on the bank."

No proof being taken on the question...