Pearson v. T. Rockhill & Co.
| Decision Date | 31 October 1843 |
| Parties | Pearson & Anderson, & c. v. T. Rockhill & Co.; Pearson & Anderson, & c. v. Tiffany, Ward & Co.; Pearson & Anderson, & c. v. Nelson, Holbrook & Co. |
| Court | Kentucky Court of Appeals |
Fraudulent conveyances. Trustees and Trusts
APPEAL FROM THE LOUISVILLE CHANCERY COURT.
Duncan, Fry & Page and Pirtle for appellants.
Loughborough for appellees.
THIS is an appeal from a decree rendered in four consolidated suits (one of which has been compromised,) whereby a deed of trust from Pearson & Anderson to J. Anderson, J. Marshall and E. M. Taylor, dated 25th of September, 1838, was set aside as fraudulent and void against creditors, and the Trustees, jointly, with Pearson & Anderson, the debtors, were decreed to pay to the creditors who assailed the deed, the full amount of their debts, making a sum in the aggregate exceeding $10,000.
Without stopping to inquire what circumstances might or might not justify such a decree against persons who were no otherwise concerned with the affairs of the real creditors and debtors than by having become Trustees in a deed professing to secure all debts due by the grantors, we shall proceed, very briefly, to consider the question, whether this deed should be regarded as fraudulent either in fact or in law.
The deed is, in substance, similar to that which is sustained in the case of Vernon, & c. vs Morton & Smith, (8 Dana, 247,) except, 1st, that it divides the debts into two classes, giving preference to the first class. 2nd. It puts the debts of the second class, whether due by note or account, on the same footing, and directs the principal of the notes to be paid before any interest is paid thereon; and, 3rd. That the debts to be secured are all stated in two schedules appended to the deed, the first containing the preferred debts, and the other the remaining debts, for payment of which, so far as the holders of them should accept the deed within the ninety days, the funds remaining after payment of the first class are directed to be rateably appropriated. A third schedule annexed to the deed contains a list of the notes and accounts transferred to the Trustees. The debts in schedule No. 1, amount, in the aggregate, to $40,333 93, of which about $30,000 were debts to the Banks in Louisville. Those in schedule No. 2, amount to $36,778 62, held by about twenty-five individuals. The assets listed in schedule No. 3, consisting of notes and accounts, settled and unsettled, and one horse, saddle and bridle, amount to something over $112,000. The deed conveys the whole property of the firm which included also the entire property of each partner except a small quantity of household furniture in the use of one of them, of which he exhibits a schedule in response to a call of the bill, and declares his readiness to give it up to his creditors if required. It conveys all of their assets for the purpose of paying all their debts. It makes it the duty of the Trustees to collect and apply the assets with all speed, and gives them the necessary powers of receiving, arranging, securing and compounding, and of appointing Attorneys, Agents, & c., providing of course, for the expense thereof, and requires them to give timely notice to the creditors, among such of whom as signify, within ninety days, their acceptance of the provisions of the deed, the distribution is to be made.
The deed of trust contrasted with the deed in the case of Vernon vs Morton & Smith, (8 Dana, 247.)
The principal distinction between this deed and that which was before the Court in Vernon, & c. vs Morton, & c. is, that on the face of this deed a preference is given to some over others of the debts intended to be secured. But the right of a debtor to prefer some of his creditors, even by subjecting his whole property to their debt, without providing at all for others, if he do it in good faith, and not with a fraudulent view unjustly to hinder other creditors, and if the property thus conveyed be not disproportioned to the debts preferred is undoubted, and is recognized in the case of Byrd vs Bradley, (2 B. Monroe, 239,) much more can he make such a preference among his creditors when he conveys all of his property for the security and payment of all his debts; and there is no obstruction to this right, if it be exercised in good faith for the payment of all his debts without delay, unless by reason of an actual lien his absolute dominion over his property is restricted: (8 Dana, 251.) The validity of such an arrangement, properly executed in point of form, and intended really to secure all the debts, cannot, as we think, be questioned on the mere ground of the preference given to some of the debts, even if that preference were not accounted for. But the schedule No. 1, annexed to this deed, containing a list of the preferred debts, states, that they are preferred, " being such as J. & J. W. Anderson are bound to pay; " among these debts are those owing to the three Banks in Louisville, to the amount of upwards of $29,000, on all of which the defendants, in their answers to the bill, say J. & J. W. Anderson were securities or indorsers; and as to a large part of which there is proof that they were securities or indorsers; and as to the whole, they are proved to have been so by the answers of Pearson and J. Anderson, the Trustee, taken on interrogatories before the Master; and there is nothing in the record to cast a doubt either upon this fact, or upon the fact that they were also bound for the debt to De Wolf, amounting to over $6,000, contained in schedule No. 1, and for which they are, in the caption thereof, stated to be bound. Nor is there any thing in the record to render it doubtful, that the debts stated in that schedule to be payable to J. & J. W. Anderson, amounting to over $4,000, were in fact so payable, subject to a set-off in the larger debt from them to Pearson & Anderson, mentioned in schedule No. 3. As J. & J. W. Anderson were entitled, against any general creditor, to set-off their claim of over $4,000 against as much of their notes for over $19,000, held by Pearson & Anderson, there was an evident propriety, as the credit was not actually given, that their right should be preserved and made manifest by giving their claim the preference; and the fact of the set-off not having been actually made, but the two items being both preserved in their original form of debt and credit, speaks rather for than against the deed. Then as to the other debts in schedule No. 1, there was an apparent propriety, which a Court of Equity will be very far from discountenancing, in preferring those debts in which Pearson & Anderson had securities bound with them, who had favored them in that way without prospect of gain,...
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