Kennard v. Adams

• Decision Date: 27 December 1850
• Citation: 50 Ky. 102
• Parties: Kennard, etc. v. Adams, etc.
• Court: Kentucky Court of Appeals

50 Ky. 102

Kennard, etc. v. Adams, etc.

Court of Appeals of Kentucky.

December 27, 1850

Attachment lien. Fraud. Proceedings " in rem. "

ERROR TO THE MADISON CIRCUIT.

Turner, for plaintiffs.

Burdett and Harlan, for defendants.

OPINION

SIMPSON JUDGE.

The case stated.

ADAMS exhibited a bill in chancery, in which he alleged that James McKee was largely indebted to him, on account of a partnership transaction in the purchase and sale of hogs, in which they, together with a certain Fleming George, had been previously concerned; that there still existed outstanding debts due by them to a very considerable amount, the payment of which he was apprehensive would devolve exclusively on him and the said Fleming George, and that McKee refused to secure him from ultimate loss. He also alleged that he knew of no available means belonging to McKee, out of which he could pay him the money he owed him or indemnify him for that which he would be compelled in a short time to pay on account of the firm, except three slaves and some household furniture; and that he believed McKee intended fraudulently to sell and convey or otherwise dispose of said property, for the purpose of cheating, hindering, and delaying the complainant, and his other creditors, in the collection of their debts. He prayed for and obtained an attachment and had it levied upon the slaves and the household furniture of the defendant, James McKee.

After the attachment had been issued, and McKee had information that it had been done, but before it was levied, he executed a mortgage on the same property to Green, to indemnify him as his surety in a guardian's bond, and also to Kennard, one of his creditors, to secure the payment of a debt which he owed him. Neither Green nor Kennard was present when the mortgage was executed.

Mortgage by McKee to Green & Kennard.

The mortgagees were subsequently made parties, and denied that the mortgagor intended to make, or had made a fraudulent disposition of his property, and claimed a right to hold it under the mortgage, and have it applied to the payment of the liabilities therein mentioned.

James McKee was the guardian of one of the heirs of Polly McKee who were made parties for the purpose of adjusting the extent of the liability of Green as surety in the guardian's bond. The heirs of Polly McKee after they were made parties, filed a cross bill against James McKee and his sureties, and against Hugh W. McKee who had also been appointed their guardian, and his sureties in the bonds executed by him as such, and claimed that the latter owed them a large sum of money, being the proceeds of land belonging to them, which had been sold under a decree of the Court obtained at his instance as their guardian.

Heirs of Polly McKee made parties and their cross bill.

The Court below rendered a decree sustaining Adams' attachment on the ground that the execution of the mortgage under the circumstances proved the alleged fraud, but whether it did or not a Court of Chancery had jurisdiction to adjust the partnership accounts, and that the commencement of the suit in chancery and the levy of the attachment upon the property, created a lien in favor of Adams, and gave him a right to have it appropriated to the payment of the demand set up in his bill, independent of any intention upon the part of the defendant McKee to make a fraudulent disposition of his property. The right thus acquired by him was decreed to be superior to that claimed by the mortgagees.

The decree of the Circuit Court.

The cross bill filed by the heirs of Polly McKee was dismissed as to a considerable part of the claim asserted by them, and they, together with the mortgagees, Green and Kennard, have prosecuted a writ of error to reverse the decree.

As Adams' demand against McKee arose out of a partnership transaction between them, a Court of Equity had jurisdiction to settle the partnership dealings, and decree the payment of the balance due. It does not follow however, because the Court had jurisdiction for this purpose, that it could issue an attachment against the estate of McKee and render a decree in rem for the payment of the balance due to Adams. In this case the jurisdiction in rem was not incident to that which the Court acquired from the equitable nature of the demand asserted, but had to be sustained upon the assumed fraudulent intention of McKee and the power of the chancellor, to arrest the execution of that intention by securing and applying the property to the payment of the complainant's demand.

Though the chancellor has jurisdiction to adjust and settle partnership, it does not follow that when a partner sues for that purpose the Court may, in the exercise of that jurisdiction, award an attachment against and thereby secure a lien upon the individual property of the other partners. The ground for attachment must be alleged and proved independently of the jurisdiction to settle the partnership.

The cases to which we have been referred in support of the jurisdiction in rem do not apply. In all the cases, the complainant had a lien upon the property, or the jurisdiction of the Court was based upon a state of fact, which authorized the chancellor to render a direct decree for the sale of the defendant's property. Although the Court might, in settling a partnership concern, decree a sale of partnership effects for the purpose of paying a balance due to either one of the partners on account of the lien which the partners have on such effects, yet no decree can be rendered by the Court in favor of one partner for the sale of the individual estate of the other, unless upon such a state of case as would authorize a similar decree in case where the Court had jurisdiction alone in rem and not in personam.

The execution of this deed or mortgage, however, is relied upon as proving a previous fraudulent intention upon the part of McKee.

We can not perceive the process of reasoning which authorizes such a deduction. Before the suit was commenced the execution of the deed would have been legal and valid. An act lawful in itself certainly does not create a presumption of fraud. If such an effect would not have been produced, nor such an inference justified by the execution of the deed before suit, neither can it be by its execution afterward. The levy of an attachment upon property does not preclude the owner from mortgaging it to other creditors; the mortgagees however in that case, would hold it subject to the final disposition of the suit. If the attachment were sustained, the complainant's lien would be superior to the mortgage, and his demand would have to be first satisfied. But if he failed to sustain his lien upon the property, the mortgagees would hold it as if no such suit had been pending when the deed was executed.

A debtor may mortgage his property even after suit for its attachment, subject however to the attachment lien, if any is created.

McKee denies the fraudulent intent charged by Adams in his bill. The only proof relied upon to sustain it is the execution of the deed of mortgage already referred to, and a statement made by the mortgagor at the time of its execution, that Adams had treated him badly. The bad treatment complained of, was no doubt the issuing of the attachment, and that may have been the reason why he did not include Adams in the mortgage. But that declaration does not conduce to prove a fraudulent intent upon the part of McKee before the suit was commenced, nor even that had he then executed a mortgage on his property, he would have given other creditors the preference over Adams.

No proof that McKee acted fraudulently in making the mortgage to Green & Kennard.

There is an entire failure to produce any testimony tending to show an intention upon the part of McKee to dispose of his property with a view to evade the payment of his debts. The strongest presumption warranted by the evidence is, that he had it in contemplation before Adams filed his bill and sued out his attachment, to mortgage his property to his creditors to the exclusion of Adams. But as the law permitted him to prefer one creditor to another, even this design if it were actually entertained by him, was neither fraudulent nor illegal, although it may have operated to the prejudice of Adams, if the property of McKee was inadequate to the payment of all his debts. The presence of the mortgagees when the mortgage was executed is not essential to its validity, their assent to it and acceptance of its provisions will be presumed, as it was executed for their benefit.

The assent of mortgagees to a mortgage made for their benefit will be presumed.

Adams having failed to sustain his attachment, the result is that the mortgagees are entitled to the property mortgaged, and have a right to have it applied according to the provisions of the deed, whether it was executed before or after the levy of the...