73 Ky. 326 | Ky. Ct. App. | 1874
delivered the opinion oe the court.
H. G. and Fred "Vanseggern failed in business, and pursuant to an agreement with their creditors they each made a deed of assignment to Henry T. Jefferson. These conveyances were made for the benefit of all their creditors “pro rata, or according to the rights of each creditor, no priorities or liens . . . existing to be . . . disturbed, nor any preference or advantage to any creditor to be created to the prejudice of other creditors.”
The objects of the assignments are further explained in this language: “ But the conveyance to said Henry T. Jefferson is in trust for the full, equal, and just payment of all debts and legal liabilities of H. G. (and Fred) Vanseggern, but not to create any preference or advantage to any creditor to the prejudice of other creditors; and if the property herein conveyed shall not raise a fund sufficient to pay all in full, then they áre to be paid pro rata, according to the rights of each, it not being designed by these presents to destroy or disturb any priorities or liens now existing;” and further, that said trustee “shall first pay all taxes, liens, and encumbrances on the assigned property where the value of the property exceeds such lien or encumbrance.”
The question presented by this agreed case is whether, after applying the proceeds of the sales of these shares of stock to the payment of their respective demands, the banks shall for the satisfaction of the balances due them be allowed to share the general fund with the creditors having no such legal advantages.
The court below held that until the general creditors had been made proportionately equal out of the general assets in the hands of the assignee the banks should be allowed nothing further on their claims.
The deeds of assignment were not intended to change the relative rights of the various creditors. The stock of each of the two debtors was transferred to Jefferson, to be distributed among the creditors in accordance with the principles of equity recognized and acted upon by the courts of this state. It is evident that none of the parties in interest desired that their debtors should be thrown into bankruptcy, and there is nothing in the record conducing to show that any creditor expected that the estates in the hands of the assignee should be distributed in accordance with the statutory rule by which courts having jurisdiction in cases of bankruptcy are neces
The assignments which were accepted by the creditors deprived them all of the right to proceed at law to collect their debts. It is not necessary therefore that we shall attempt to adjust their rights under the deeds of assignments upon the basis of the legal advantages and preferences they or either of them might have secured by superior energy and vigilance in proceedings at law.
The opportunity to secure such advantages were voluntarily surrendered by the acceptance of the deeds of assignment, and the rights of the beneficiaries must now be determined by the rules of equity prevailing in this state, unless there is some provision in the deeds inconsistent with these rules.
The preservation of existing priorities and liens is not inconsistent with these rules, nor is the requirement that the assignee shall first pay all taxes, liens, and encumbrances on the assigned property. This was to be done only in event the encumbered property exceeded in value the lien or encumbrance, and in all such cases the preservation of the liens would have rendered that course necessary and proper, independent of this special requisition.
As the debtor has the undoubted right to pay any particular debt he may select, even though he is unable to pay all his debts in full, subject only to the right of the creditors not preferred to take advantage of the act of 1856, and have his estate seized by the chancellor and settled and distributed as an insolvent estate, so may he mortgage or pledge a portion
They insist upon this legal advantage; and having been allowed its full benefit, they deny to the unsecured creditors the right to be made equal out of the general and. unencumbered assets in the hands of the assignee. The legal advantage or preference claimed by the banks is similar to the preference allowed to partnership creditors of having their debts paid out of the partnership fund before the private creditors of either of the partners can assert their claims. In the one case the preference is given by a,statutory provision, and in the other it grows out of a well-established and inexorable rule of equity practice. It does not matter that the preference of the partnership creditors has to be worked out through the lien of one or more of the partners. It can be so worked out, and is as effectual as though it existed by virtue of posi
The judgment before us for revision conforms to the principles herein indicated, and it is therefore affirmed.