Nisbit v. Macon Bank & Trust Co.

• Decision Date: 17 June 1882
• Citation: 12 F. 686
• Parties: NISBIT, Assignee, etc., v. MACON BANK & TRUST CO. and others. [1]
• Court: U.S. District Court — Southern District of Georgia

12 F. 686

NISBIT, Assignee, etc., v. MACON BANK & TRUST CO. and others. ^[1]

United States Circuit Court, S.D. Georgia, Western Division.

June 17, 1882

Hill &amp Harris, for complainant.

Bacon &amp Rutherford, contra.

PARDEE C.J.

For several years prior to June 6, 1878, R. W. Cubbedge, William Hazlehurst, and J. W. Lockett, under the firm name of Cubbedge, Hazlehurst & Co., were engaged in the city of Macon in carrying on a general banking and brokerage business. On the said sixth day of June, 1878, the said firm failed in business and made a general assignment of their assets then on hand to W. W.

Carnes for the benefit of their creditors. On or about the twenty-fifth of August, 1878, the members of said firm were on their own petition adjudicated bankrupts, and thereupon the complainant was appointed as assignee of said firm. On the twenty-third day of April, 1880, the assignee filed his bill in the United States court against the same firm, and against the members of the same in certain representative capacities, and against certain other parties, including the Macon Bank & Trust Company, the object of said bill being to set aside certain mortgages and transfers of property alleged to have been made by said firm prior to said assignment in fraud of the bankrupt act and in violation of its provisions. As to the other parties in the case, a decree has been had in this court affirming the validity of said mortgages and conveyances, and the case is now against the Macon Bank &amp Trust Company to set aside the transfer to it of 212 shares of the capital stock of the said Macon Bank & Trust Company by the said Cubbedge, Hazlehurst & Co.

Complainant in his bill alleges that the transfer of said 212 shares of stock to the Macon Bank & Trust Company by Cubbedge, Hazlehurst & Co. but a few days prior to said assignment was fraudulent; that said firm of Cubbedge, Hazlehurst & Co. and the said Macon Bank & Trust Company were practically one organization; that the said transfer was made by Cubbedge, Hazlehurst & Co. when they were bankrupts and insolvent, and when they were in contemplation of bankruptcy and insolvency, and with the intent to work a fraud on the bankrupt act, and to defeat and delay the operation of said act; and that such intent was known to the Macon Bank & Trust Company at the time of receiving said transfer. The complainant also alleges that Cubbedge, Hazlehurst & Co. were stockholders to the extent of the 212 shares of stock in the Macon Bank & Trust Company, and that said transfer was made for their personal benefit as such stockholders; and that said transfer was made within four months prior to the bankruptcy of said firm; also that said Macon Bank & Trust Company had cause to know that said Cubbedge, Hazlehurst & Co. were insolvent at the time, and that such transfer was made to prevent the property of Cubbedge, Hazlehurst & Co. from being distributed under the bankrupt act, and to impair, hinder, impede, and delay the operation of said act, and was made within less than six months prior to the filing of the petition in bankruptcy.

The answer of the Macon Bank & Trust Company, as stated by its counsel, presents substantially the following case: It is admitted that the final transfer of the 212 shares was made by Cubbedge, Hazlehurst & Co. to the Macon Bank & Trust Company on the date charged in the bill, but it is also averred that said transfer was simply a hypothecation of said shares of stock made more than six months prior to the time of the said transfer, which hypothecation was made in good faith to secure a bona fide indebtedness of Cubbedge, Hazlehurst & Co. to the Macon Bank & Trust Company. The history of this hypothecation and subsequent transfer, as alleged in the answer, is, in brief, as follows: The capital stock of this bank was accumulated by the payment periodically of small instalments by the stockholders. Shortly after the bank began to run it was so crippled, by bad loans to a large amount, that the business of the bank could only be carried on by making some economical arrangement for its ordinary expenses. Accordingly, Cubbedge was elected president and Lockett cashier, on small salaries, with an arrangement that the business of the bank should be carried on in the banking office of Cubbedge, Hazlehurst & Co., thus saving bank rent. After this arrangement the Macon Bank & Trust Company received no deposits, and its own money, as it came in, was, when not otherwise loaned out, kept on deposit with Cubbedge, Hazlehurst & Co. The books of the Macon Bank & Trust Company showed what money was received for it, and the books of Cubbedge, Hazlehurst & Co. showed how much money they had on deposit of the funds of the Macon Bank & Trust Company. This amount naturally varied. As the money thus on deposit was loaned out for the Macon Bank & Trust Company, the amount of such deposit decreased; and, on the other hand, as money was paid in and not loaned out the deposit increased.

The amount of these deposits was regarded by Cubbedge, Hazelhurst & Co. as a loan, as it indeed was. As this amount was constantly varying, and subject to call whenever needed in the business of the bank, and was being in fact daily called in part to meet the demands required in the business of the bank, no paper was made by Cubbedge, Hazlehurst & Co. to represent this indebtedness to the Macon Bank & Trust Company. It would have been impracticable to have made papers that would have corresponded to the continual changes in the amount of such indebtedness. It would have been necessary not only to cancel the paper and make another each day, but a dozen or twenty times a day, as the balance to the credit of the Macon Bank & Trust...