41 Ark. 418 | Ark. | 1883
Calloway, receiver in chancery, in a suit which had been instituted to subject the effects of the firm of Scarborough & Co., of which Sophia Reading was a member, to distribution amongst its creditors, came into possession of a promissory note for $500, executed by J. T. Brown, Jr., to Sophia Reading, This note had been endorsed and placed in the hands of the Merchants National Bank as collateral security for a loan of $250, made by the bank to said firm. The bank was a party to the creditors’ suit in chancery, and was allowed to come in and participate-in the general distribution of the effects, upon condition that it should bring into court its collateral security for the benefit of the fund. To these terms it acceded, and received somero rata dividends derived from other sources. The receiver afterwards, by order of the chancery court,, brought this suit.
The defences were : First, that the note to Sophia Reading was without consideration. This was shown to the court, sitting both upon the facts and the law, by the record of a previous case between the maker and payee, in which it had been held that the same contract of sale upon which this note was founded was without consideration. Of this ruling the appellant cannot complain.
It was contended that the dividends received by the bank, after the note passed to the receiver, should have been credited on the note. This cannot on principle be maintained. The note was in the control of a court of equity for the distribution of its proceeds. It had decided to marshal it. That is to say, to let in the bank upon the general fund, and subrogate the other creditors pro rata to the proceeds of the note. The note was in the hands of the receiver for that purpose, and the law court was bound in comity to lend its aid in the collection. It would defeat the object and purposes of the chancery court to allow a credit on the note of dividends paid to the bank out of the general fund. The note, no longer, after it went into the hands of the receiver,belonged to the bank. It belonged to the creditors as it was when the receiver took it, and should be collected to the full amount then due the bank, for distribution amongst all.
There is no error in the judgment. Affirm.