191 Ky. 202 | Ky. Ct. App. | 1921
Opinion of the Court by
Affirming.
The above contract was made July 5, 1912, at which time Tally executed to appellant his note, payable one year after date, for the $4,000.00, to be thereafter advanced him by appellant in the manner stated, and to secure its payment gave him a mortgage 'upon his (Tally’s) mules, implements and machinery used' by him in the work of levee construction. For some reason unexplained the mortgage, though written July 5, 1912, was not acknowledged by Tally until October 10, nor put to record until October 23, 1912. On November 22, 1912, it became apparent to appellant and Tally that the $4,000.-00 note and mortgage previously executed by the latter did not or would not include the entire amount of money received by him and to be advanced by appellant to enable him to do the work required of him, so it was then agreed between them that to cover such additional advancements, not exceeding in the aggregate $2,000.00, as might be required by Tally he would execute to appellant a note of that amount payable eight months after date, to be secured by a second mortgage on the same property covered by the first mortgage; this note, like the one of $4,000.00, was to be credited by such amounts as might be due Tally from time to time on his work until fully paid. Pursuant to this agreement the note and mortgage • last mentioned were on November 22,1912, duly executed and the mortgage put to record January 4, 1913.
. Before this adjustment was effected, however, suit had been brought by the Farmers and Merchants Bank of Hickman in the court below upon the notes of $4,000.00 and $2,000.00, respectively, executed by Tally to appellant and assigned it by the latter, seeking an enforcement of the mortgage liens for their payment, to which the appellant and W. E. Bondurant were made defendants; and the appellee, as the trustee in bankruptcy of Tally, by interpleader and cross petition against the bank and. appel
In the meantime the appellee as trustee in bankruptcy of Tally sued the appellant and W. E. Bondurant in the same court, seeking to recover of them the amount of the note or bond of $3,000.00 they executed to him for the property upon which they were claiming preferred liens by virtue of the mortgages from Tally to C. T. Bondurant. By answer the latter and W. E. Bondurant resisted the recovery sought and substantially set up their alleged liens upon the property for which the note to appellee was given, their alleged preferential character and that they should be credited on the note with the amount of Tally’s indebtedness to G. T. Bondurant which would more than discharge it. After the filing of a reply by appellee controverting the affirmative matter of the answer and attacking appellant’s alleged debts and liens as preferential and fraudulent, the action was transferred to the equity docket and consolidated with the one previously brought by the bank.
Following the taking of proof by the parties and submission of the consolidated causes, the circuit court rendered judgment, the essential parts of which are as follows :
*205 “And now upon the whole case the court finds that the obligation sued on by the plaintiff J. Greer Rogers, trustee in bankruptcy of Ben Tally, should be credited, as of the date of its execution, by the sum of $434.93, that being the difference as shown by the deposition of G. T. Bondurant -and the 'statement of accounts filed herewith between the charges of O. T. Bondurant against Ben Tally and the credits given to said Tally on said accounts at the date when said Tally became a bankrupt, as shown by the proof; then leaving a balance due upon said obligation of $2,565.07, with interest thereon from October 28, 1913.
It can not be questioned that a mortgage given in good faith for a specific sum, as security for future advancements, is valid to the extent of the debt specified, as against the mortgagor’s general creditors. Martin v. Jones, 136 Ky. 797; Lou. Banking Co. v. Leonard, 90 Ky. 106; Jarboe v. Shively, 109 Ky. 402; Straeffer v. Rodman, 146 Ky. 1. It is patent that the preference claimed by appellant in this case existed only as to the aggregate of the two notes secured by the two mortgages, viz: $6,000.00, as shown by them; and as appellant’s statement of the accounts between himself and Tally shows credits on this amount before the latter’s bankruptcy that paid and even more than paid it and thereby discharged the two notes and mortgage liens, his right' to any further preference as against other creditors ceased. In other words the accounts show that between the date of the first mortgage and Tally’s bankruptcy appellant advanced him altogether $9,542.22, and during the same time credited him with the various sums to which he was entitled as the levee work progressed aggregating $9,107.29, which overpaid the two notes of $6,000.00 secured by the mortgages, $3,107.29.
The .mortgages do not as claimed by appellant, in terms or by implication, secure him in any and all advancements he might have made Tally until the latter’s work for him was completed. On the contrary by their express statements the only security they afford is limited and confined to the two notes of $4,000.00 and $2,000.-00, named therein, respectively, and they expressly provide that the notes were to be paid with such sums as he would be entitled to from time to time for work done, to be credited on the notes as of the dates they were due or received. This, being true the appellant should have been allowed no preference over other creditors of Tally be
As the mortgages were valid as security for the two notes therein named, the amounts thereof constituted preferred debts that could have been claimed by appellant and as they were paid by the bankrupt, he was entitled to no other preference.
For the reasons indicated the judgment is affirmed.