Mayfield Water & Light Co. v. Graves County Banking & Trust Co.

• Decision Date: 09 May 1916
• Citation: 185 S.W. 485,170 Ky. 56
• Parties: MAYFIELD WATER & LIGHT CO. ET AL. v. GRAVES COUNTY BANKING & TRUST CO.
• Court: Kentucky Court of Appeals

185 S.W. 485

170 Ky. 56

MAYFIELD WATER & LIGHT CO. ET AL. v. GRAVES COUNTY BANKING & TRUST CO.

Court of Appeals of Kentucky.

May 9, 1916

Appeal from Circuit Court, Graves County.

Suit by the Graves County Banking & Trust Company against Lester Gillum, in which J. C. Dean, receiver of the Mayfield Water &amp Light Company, on his petition was allowed to become a party defendant. Judgment for plaintiff against defendant Gillum and the receiver appeals. Reversed.

Robbins & Robbins and J. C. Speight, all of Mayfield, for appellant.

W. J Webb, of Mayfield, for appellee.

CLARKE J.

On May 1, 1914, Lester Gillum executed and delivered to appellee his note due in six months thereafter for $2,000, and to secure the payment of which he pledged as collateral security three $1,000 second mortgage bonds of the appellant, Mayfield Water & Light Company.

On February 5, 1915, appellee filed suit against Gillum seeking judgment against him upon said note and an enforcement of its lien upon the mortgage bonds. Upon the third day of the next ensuing term of the Graves circuit court appellant, J. C Dean, receiver of Mayfield Water & Light Company, filed a petition in this action seeking to be made a party defendant thereto, the material parts of which are as follows:

"He says that bonds sought to be sold in this action against the defendant, Lester Gillum, are the property of the Mayfield Water & Light Company, and as such are legally in his possession as receiver; that said bonds have never been negotiated or sold, but that they were placed by the officers and directors of the company and loaned by them to Gillum, the defendant herein, to be used by him as collateral on the note sued on by plaintiff. He says that said bonds are a part of the assets of the Mayfield Water & Light Company, and as such they can be subjected to the payment of plaintiff's debt only through and by this court in the management of the property of said company by the receiver.

Petitioner further says that the bonds placed with the defendant, Gillum, as collateral, and which are now held by the plaintiff, Graves County Banking & Trust Company, and which they seek herein to sell, in amount exceed the debt for which they are placed as collateral; that the note sued on is for the sum of $2,000, and the amount of the bonds attached as collateral is $3,000, and the petitioner says that the plaintiff, under the law made and provided by the statutes of Kentucky governing corporations, cannot sell these bonds in any amount in excess of the amount of the note sued on, to wit, $2,000.

Petitioner further says that at the time said bonds were used by the defendant, Gillum, as collateral, the plaintiff bank knew they were not the property of the defendant, Gillum, but were the property of the Mayfield Water & Light Company, and the legal title thereto is and has been in the Mayfield Water & Light Company since the time said bonds were placed by the defendant, Gillum, with said bank as collateral for the note herein sued on. He says that said bonds are a part of the assets, and were a part of the assets of the Mayfield Water & Light Company at the time he was appointed receiver of said company, and that a sale of such bonds pending the receivership in this court would materially damage the right of other creditors of the Mayfield Water & Light Company, and would prevent the proper management and application of said company's assets for the benefit of all the creditors of said company."

The filing of this petition was objected to by the appellee, which objections were overruled, the petition filed, appellant made a party defendant, and his petition taken as his answer. Upon the next day thereafter appellee moved to submit the cause for judgment, to which appellant objected and excepted, but the court overruled appellant's objection, sustained the motion to submit, and upon submission rendered judgment in favor of appellee against Gillum for the amount of his debt, interest, and costs, and ordered a sale of the three mortgage bonds to satisfy said judgment, to so much of which as adjudged a lien upon and ordered sale of the bonds appellant excepted and prayed an appeal to this court.

The first error complained of by appellant is that this action was prematurely submitted by the court for trial over his objections and exceptions. This is an equitable proceeding and was submitted at the first term of the court ensuing after the filing of the petition and upon the next day after appellant had filed his intervening petition. Under section 364 of the Civil Code of Practice, this being an equitable action, it would not stand for trial until a term commencing 60 days after the pleadings had been or should have been completed, unless the appellee had consented of record that the statements of the answer should be taken as true as provided in section 366 of the Civil Code. This consent of record was not given, and the submission was forced over the objection of appellant. Therefore, if appellant's petition, which was taken as his answer, raised an issue of fact, it was reversible error to have submitted the case at the appearance term as was done. Gruell v. Smalley, 1 Duval, 359, and Board of...