Wimberley v. Bank of Portia
| Decision Date | 23 April 1923 |
| Docket Number | 326 |
| Citation | 250 S.W. 334,158 Ark. 413 |
| Parties | WIMBERLEY v. BANK OF PORTIA |
| Court | Arkansas Supreme Court |
Appeal from Lawrence Chancery Court, Eastern District; Lyman F Reeder, Chancellor; reversed.
STATEMENT OF FACTS.
Z. C Wimberley, as trustee in bankruptcy for the estate of A. L Pickens, bankrupt, brought this suit in equity against the Bank of Portia to recover the sum of $ 1,245 alleged to be due the bankrupt. The complaint and proof show that, at the time Z. C. Wimberley was appointed trustee in bankruptcy of the estate of A. L. Pickens, the Bank of Portia had on deposit $ 1,245 belonging to said A. L. Pickens.
It appears from the record that A. L. Pickens was engaged in the general mercantile business at Portia, Ark., and did business with the Bank of Portia, which was running a bank there. In December, 1920, A. L. Pickens discovered that he was insolvent, and, after talking with the cashier of the Bank of Portia, he went to Jonesboro and consulted Z. C. Wimberley of the Wimberley Grocer Co., which was engaged in the wholesale grocery business, and was one of the creditors of A. L Pickens in the sum of $ 900. A. L. Pickens went to Jonesboro on the 23rd day of December, 1920, and at the time intended to file a voluntary petition in bankruptcy. After consulting with Z. C. Wimberley, who called other creditors over the long distance telephone, it was agreed that a contract should be drawn up providing for the continuance of the business by A. L. Pickens under the direction of Z. C. Wimberley as trustee for all the creditors. The contract provided that Wimberley, as trustee, should assume the responsibility for the control and management of the business, and should pay all the creditors pro rata from the amount which should be realized therefrom. The agreement contemplated that the business should be wound up in this way and the proceeds divided ratably among the creditors, in order to avoid the expenses of bankruptcy proceedings. The agreement was conditioned upon the acceptance of the other creditors or of a sufficient majority thereof in point of numbers and amount of indebtedness, to prevent the said A. L. Pickens from being forced into bankruptcy. The sum in controversy was realized from the conduct of the business of A. L. Pickens under this agreement, and the deposit of it by him in the Bank of Portia.
According to the testimony of Z. C. Wimberley and A. L. Pickens Wimberley called up the Bank of Portia, before the agreement in question was entered into, and the cashier of the bank understood the purport of the agreement, and said that he thought that it was the best way to wind up the business. A. L. Pickens then started a new account with the bank, and the sum in controversy in this case was deposited by him under the agreement above referred to.
Mrs. A. L. Pickens worked in the store for her husband, and testified that she obtained a new bank book from the bank, which was labeled "New Account."
According to the testimony of all these witnesses, it was understood by the bank that the amounts deposited there on the new account should constitute a trust fund to be used by Wimberley in paying the creditors of A. L. Pickens pro rata.
The cashier of the Bank of Portia was a witness for it. He denied that the Bank of Portia was a party to the agreement that Wimberley should act as trustee for all the creditors, and that the amounts deposited in the bank by A. L. Pickens should be treated as a trust fund to be paid ratably to all the creditors of A. L. Pickens. He stated positively that the money was deposited by A. L. Pickens thereafter in the ordinary course of business. He admitted that he gave Mrs. A. L. Pickens a new bank book, and that it might have been marked "New Account." He stated, however, that he gave her the new book because the old one was about filled up, or practically worn out. On the 5th day of January, 1921, the president of the Bank of Portia suggested that the balance of A. L. Pickens in the bank should be charged off the books and the amount entered as credit on the note which Pickens owed the bank. The witness then credited the note of A. L. Pickens to the Bank of Portia with the $ 1,245 which A. L. Pickens had deposited there since the 23rd day of December, 1920. A. L. Pickens then filed a petition in bankruptcy, because, as he expressed it, there was nothing else to do. He stated that he, in good faith, had endeavored to carry out his agreement with his creditors, but had been prevented from doing so by the bank's applying the money which he derived from the conduct of his business to the payment of its own note, to the exclusion of his other creditors.
The trustee in bankruptcy filed a petition with the referee in bankruptcy to require the Bank of Portia to pay over the money in controversy to the trustee as the property of the bankrupt estate. This summary proceeding was denied by the referee, on the ground that the bank had an adverse claim to the fund, and that it could only be prosecuted in a plenary proceeding. Upon review the judge of the bankruptcy court sustained the conclusion of the referee in bankruptcy.
The chancellor found that A. L. Pickens owed the Bank of Portia a note which was due it, and that it had the right to credit the amount he had on deposit in the bank on that note.
A decree was entered dismissing the complaint of the trustee for want of equity, and the case is here on appeal.
Decree reversed, and cause remanded.
A. A. Patton, for appellant.
The assignment made by the insolvent debtor for the benefit of his creditors was valid, and the money realized thereafter was put in the bank as a trust fund, and could not be applied in payment of the bank's claims against the debtor, and the chancellor erred in holding otherwise. 52 Ark. 30; 80 Ark. 182; § 489, C. & M. Digest; 122 Ark. 40; 6 Ark. 161; 104 Ark. 222; 60 Ark. 1; 58 Ark. 556. Trust fund could not be applied by bank to payment of its claims against the creditor. 69 Ark. 47; 68 Ark. 71; 28 L. R. A. (N. S.) 484; 104 U.S. 54; 34 U.S. L.Ed. 724; 136 Ark. 441; 104 Ark. 558.
Ponder & Gibson, for appellee.
There was no valid assignment or agreement appointing trustee, and cases...
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