Grand Lodge of Ky. v. 1ST Nat. Bk. of Ky.
| Decision Date | 28 November 1933 |
| Citation | 251 Ky. 189 |
| Parties | Grand Lodge of Kentucky et al. v. First National Bank of Kentucky et al. |
| Court | United States State Supreme Court — District of Kentucky |
3. Fraudulent Conveyances. — To state cause of action against purchaser or pledgee on account of fraudulent conveyance, plaintiff must plead facts showing transfer by debtor with intent to defraud creditors and knowledge by purchaser or pledgee or acquisition of property under circumstances tantamount to actual fraud with knowledge thereof (Ky. Stats., sec. 1906).
4. Fraudulent Conveyances. — To state cause of action against voluntary transferee, plaintiff must definitely allege that conveyance was without consideration (Ky. Stats., sec. 1907).
5. Fraudulent Conveyances. — Only creditors may set aside voluntary transfer (Ky. Stats., sec. 1907).
6. Fraudulent Conveyances. — To state cause of action against preferential transferee, plaintiff must allege that debtor was insolvent at time of conveyance or transaction complained of, and that it was made or entered into in contemplation of insolvency with intent to prefer one or more creditors (Ky. Stats., sec. 1910).
7. Fraudulent Conveyances. — Allegation and proof of transfer to defraud creditors or of voluntary transfer, or both, will not warrant relief under statute relating to preferential transfers (Ky. Stats., secs. 1906, 1907, 1910).
8. Fraudulent Conveyances. — Answer and cross-petition attacking pledge to banks of bonds and property held in trust by title company for bondholders held insufficient, where neither source of petitioners' rights as bondholders nor failure of banks to advance money at time of pledge, nor purpose of pledge, nor knowledge of or participation in pledgor's fraud by banks, was alleged (Ky. Stats., secs. 1906, 1907, 1910).
9. Pleading. — Failure to allege date of transaction attacked as preferential conveyance raised presumption against pleader as regards statute of limitations (Ky. Stats., secs. 1910, 1911).
10. Fraudulent Conveyances. — Six-month limitation on creditor's right to have transfers declared general assignments applies only to original action, and not to claims which may be filed later in the action (Ky. Stats. secs. 1910, 1911).
11. Fraudulent Conveyances. — Distinction between actions for actual or constructive fraud and actions to set aside preferential conveyance extends also to limitations applicable to such actions (Ky. Stats., secs. 1906, 1907, 1910, 1911).
12. Fraudulent Conveyances. — Petition of party attacking alleged preferential conveyance must show that it was filed before bar of statute (Ky. Stats., secs. 1910, 1911).
13. Fraudulent Conveyances. — Where answer and cross-petition of bondholders attacking transaction as preferential did not show that it was filed within six months after transaction complained of, right of action was barred (Ky. Stats., secs. 1910, 1911).
14. Limitation of Actions. — Mere pendency of action in which interveners filed petition did not suspend six month limitation statute applicable to interveners' action to set aside preferential transaction (Ky. Stats., secs. 1910, 1911).
Appeal from Jefferson Circuit Court
R.F. PEAK and HITE H. HUFFAKER for appellants.
W.W. CRAWFORD, H.H. NETTELROTH, FARNSLEY & FARNSLEY and J.W. HOTTELL for appellees.
Affirming.
The Grand Lodge of Kentucky, William Allen, Vernice R. Young, and the executors of W.O. Head filed an answer, counterclaim, and an intervening and cross-petition in the action of Lee Cralle v. Louisville Title Company et al., pending in the Jefferson circuit court. In it they charge that the Fidelity & Columbia Trust Company was a receiver of the Louisville Title Company and acting as such; that the Louisville Title Company had theretofore been designated as trustee in certain mortgage deeds of trust, and that it had also organized as a subsidiary corporation, the Title Guarantee Trust Company, with a capital stock of $300,000; and that, after its organization, the books of the two corporations were so kept that the interveners were unable to ascertain the real facts, because the two corporations were one. The interveners listed a number of mortgage bonds secured by certain mortgages to which they asserted title. They charge that the Louisville Title Company, Citizens' National Bank, First National Bank, Liberty Bank & Trust Company, and the Lincoln Bank & Trust Company entered into a written agreement which is set out haec verba in the pleading, by which a pool was formed and certain notes were pooled and placed as security to indebtedness of these banks; that, at the time it was entered into, the Louisville Title Company was insolvent, and the pledge of notes as set out in the written contract was and is a fraud on the bondholders, whose bonds had been guaranteed by the Louisville Title Company, and a fraud upon its creditors generally; that a pledge of the notes under the written contract was made and guaranteed by the Louisville Title Company, and that at the time the agreement was made the Louisville Title Company was insolvent and unable to carry out its agreement on the bonds which it had sold to the public. They aver that the Fidelity & Columbia Trust Company was receiving $100 per month for its services as trustee under the pool agreement, and that the pool agreement was for the use and benefit of the Louisville Title Company, individually, and not as trustee for the bondholders; that many of the properties on which the Louisville Title Company had loaned money and sold mortgage bonds which were guaranteed by it were not worth the value of the bonds outstanding against the property. It is charged that the Fidelity & Columbia Trust Company was trustee under the pool agreement, and that it was thereafter appointed and qualified as receiver of the Louisville Title Company, and had been continuously acting in such inconsistent dual capacity. The transactions between the Fidelity & Columbia Trust Company and the banks are set out in detail. Certain transactions between the Ventura Hotel, Ashland, Ky., the Louisville Title Company, and the Chemical Bank & Trust Company of New York are also set forth. An amended pleading was filed, reaffirming the allegations of the original, and further alleging that the Louisville Title Company was insolvent at the time it became the beneficiary under the pool agreement, and that it entered into the agreement in contemplation of insolvency and without consideration; that the agreement was ultra vires, null and void, designed to prefer one or more creditors to the exclusion of the intervening petitioners. It charges that the notes and bonds transferred by the Louisville Title Company to the Fidelity & Columbia Trust Company were held by the Louisville Title Company as trustee for the benefit of the outstanding real estate bonds in the hands of the public which had been guaranteed by it; that the Fidelity & Columbia Trust Company accepted the bonds with full knowledge of all the equities connected therewith, and with notice that they were subject to the claims of the outstanding bondholders. It is charged that the transaction between the Louisville Title Company and the Ventura Hotel Company (Tri-State Hotel Company), by virtue of which the Chemical Bank & Trust Company accepted the new issue of bonds amounting to $150,000 in lieu of the $150,000 of the original $450,000 bonds on the same property, was without consideration, and that the surrender of the latter and the issuance of the former was without consideration, ultra vires, null and void, and that the cancellation of the original bonds on the hotel property "was in violation of the Statutes of Kentucky." They further allege that the reorganization agreement made no provision to protect the rights or secure the interests of certain $5,000,000 of nondeposited bonds, and that same were turned over to the new trustee of the bondholders, and it assumed control of the property, free, to make such charges as it "sees fit" without regard to the interest and rights of the nondepositing bondholders or the supervision of the court. It charges that the depositing bondholders financed the new trustee and made the reorganization possible, and that they are the principal stockholders in the new corporatoin and dominate it; that the Fidelity & Columbia Trust Company as receiver is antagonistic and adverse to the nondepositing bondholders, and they are without representation or counsel. It also charges that the Fidelity & Columbia Trust Company and the Louisville Title Company had brought various suits to test various questions, concerning the rights of the holders of the bonds, and had made defendants to the suits bondholders who had already deposited their bonds under the reorganization agreement or such similar interests; that they were not making substantial efforts in establishing their rights. Numerous parties were made defendants to the original and amended pleading, who filed their several demurrers thereto, which were sustained by the court. The interveners declined to plead further, and the pleading as amended was dismissed. The foregoing is a fair summation of the pleading, and fairly states its averments. It should be...
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