McAfee v. Bland

• Decision Date: 23 April 1889
• Citation: 11 S.W. 439
• Parties: MCAFEE v. BLAND et al.
• Court: Kentucky Court of Appeals

11 S.W. 439

MCAFEE v. BLAND et al.

Court of Appeals of Kentucky.

April 23, 1889

Appeal from circuit court, Hardin county; T. R. MCBEATH, Judge.

Not to be officially reported.

Suit by George H. McAfee against J. H. Bland and others. McAfee appeals from a judgment for defendants.

J. P Hobson, for appellant.

Montgomery & Poston, for appellees.

HOLT J.

The appellee, J. H. Bland, qualified as the assignee of one Richardson in May, 1885, with the appellant, G. H. McAfee, as his surety. He deposited funds of the trust-estate to the amount of $3,293.15 with Harris, Polk & Co., a banking firm composed of E. S. Harris, John M. Polk, E. U. Bland, and himself. The deposit was a general one, made in May, 1885 and the bank used the fund in its business, as is customary in case of general deposits. November 23, 1885, it, owing to financial embarrassment, closed its doors; and on January 8 1886, the firm, and each member thereof, made an assignment for the benefit of their creditors. It is not attacked; but the appellant brought this action, claiming that certain payments made by the firm and its members to certain of their creditors, prior to the assignment, were within the act of 1856 to prevent fraudulent preferences in contemplation of insolvency, and operated as a transfer of all their property for the benefit of their creditors; and that the liability for the Richardson trust fund was a preferred one under the statute. Two things must concur to bring a transaction within it, towit, it must be done or resorted to by the debtor "in contemplation of insolvency, and with the design to prefer one or more creditors to the exclusion in whole or part of others;" and although the promotion of equality among creditors led to the enactment of the law, yet the legislature thought proper to provide: "In the distribution of the assets of any debtor, as provided, debts due as guardian, or administrator, or executor, shall have priority; as also debts due as trustee, if the trust be created by deed or will duly recorded in the proper clerk's office." Gen. St. c. 44, art. 2, § 7. Under the assignment made by the firm its liability for this fund is not a preferred one; and the object of this suit was to show some act of insolvency prior thereto, within the statute, upon the idea that thereby this claim would be entitled to payment in full out of the firm assets. The appellees assert at the threshold that the appellant had no right to bring the suit, inasmuch as the petition does not aver, nor does it appear, that he as surety has as yet been compelled to pay anything; and also that the petition fails to aver that the alleged act of insolvency occurred within six months next prior to the bringing of the action, and was therefore open to demurrer. The statute, however, provides: "All such transfers as are herein declared to inure to the benefit of creditors generally shall be subject to the control of courts of equity, upon the petition of any person interested, filed within six months after the mortgage or transfer is legally lodged for record, or the delivery of the property or effects transferred." Gen. St. c. 44, art. 2, § 2. The right of the creditor or "person interested" to treat the act of the debtor as an equitable assignment of his property for the benefit of his creditors generally, is made to depend upon the filing of a petition for such purpose within the time named. This being necessary to the existence of the right, the petition must show it. Wintersmith v. Pointer, 2 Metc. (Ky.) 457. It is substantially done, however, in this instance. It is averred that Harris, Polk & Co. continued to do business until about December 1, 1885, and that the acts complained of were done after they suspended. The record shows that this action was instituted in February, 1886. These two objections to affording the appellant relief are not, therefore, valid.

It is urged that, independent of the statute, the claim is at common law entitled to priority of payment out of the assets of the banking firm. This is upon the idea that, inasmuch as it knew it was a trust fund, a trust arose as to it between the depositor and the bank; and the use of it by the bank under such...