77 S.W.2d 50 | Ky. Ct. App. | 1934
Affirming.
On April 7, 1930, the People's Bank of Mt. Vernon (Kentucky) was clearly insolvent. Some two or three weeks thereafter its doors were closed and the liquidation of its assets and affairs was assumed by the State Banking Commissioner and his local deputy banking commissioner; the latter taking personal custody of its office and assets. On the date mentioned (April 7, 1930), the appellee, one of the defendants below, A.J. Ball, had a deposit account with the bank amounting to about $1,000, and his wife also had one amounting to about $3,000. In liquidation of those two accounts the bank on that day transferred to either A.J. Ball himself, or to his wife (the record not disclosing), notes that it held amounting to practically the aggregate sum of the deposits of both Ball and wife. Among the notes so transferred were two for which the original plaintiff, N.J. Tipton, was bound as surety; the principals in both being insolvent.
On August 11, 1930, more than three months after the Banking Commissioner took charge, Tipton filed this equity action in the Rockcastle circuit court against appellee and defendant A.J. Ball and others (but not against Mrs. Ball) seeking to have the assignment of the two notes upon which he was obligated to the bank as surety (one for $400 and the other for $500) declared *818 as a fraudulent preference, and to have that transaction operate as an assignment for the benefit of creditors, which is authorized by sections 1910, 1911 of our present Statutes, commonly known as the "Act of 1856." The petition set out none of the other notes that were transferred to Ball, nor did it seek to have the transfer of them molested in any manner. It alleged that plaintiff was a depositor in the bank when it closed its doors to the amount of something more than $4,600, and that but for the transfer of the two notes upon which he was so obligated he would have the right in the liquidation of its affairs to have those notes paid by crediting their amounts on his impaired deposit account, whereby he would be individually benefited to that extent; the prayer being in these words: "Wherefore, the plaintiff prays that the two notes of $500.00 each ($100.00 having been paid on one of them) set out in the petition, be adjudged as a credit on the amount the defendant bank owes the plaintiff, and prays that said notes be cancelled and adjudged to be settled; and that the defendant Ball be required to deliver said notes to the defendant, Hiatt, and that the defendant Hiatt be required to deliver the same to the plaintiff herein, and that the said transfer and assignment be adjudged as a preference, and operate as an assignment of all of the property of the said bank, and for cost herein expended, and for all relief to which the plaintiff may show himself entitled."
It is, therefore, clear that such personal and individual relief was sought to be obtained through the avenue of the statute supra, although it expressly declares that the remedy and relief for which it provides "shall inure to the benefit of all his [transferer's] creditors in proportion to the amount of their respective demands." It is therefore extremely doubtful whether the terms of the statute are broad enough to provide for the specific individual relief sought by plaintiff in his petition; but because of our conclusions hereinafter stated, it will be unnecessary to determine that question in this case, and for which reason it will not be done. The appellee and defendant, Ball filed a special demurrer to the petition expressly based upon the ground that the banking commissioner was a necessary party, and without waiving it he filed a general demurrer to the petition. Before the special demurrer was acted on, the petition was amended by making the then Banking Commissioner a party defendant, but no summons was served upon him. Thereafter *819 both the special and general demurrers to the petition were overruled, and defendant declining to plead further, the court rendered judgment sustaining the prayer of the petition by granting plaintiff the individual relief for which he prayed.
That judgment on appeal here was reversed in the case of Ball v. Tipton,
Prior to the creation of our State Banking Department by statute in 1912 (Acts 1912, c. 4), insolvent banking corporations, as well as all others, could be liquidated through the provisions of chapter 7 of our Statutes, being section 74 to and including section 96, relating to "voluntary assignments" for the benefit of creditors, including such as might be declared so under the provisions of the sections supra of the Statutes. Such process of liquidation was commenced by the execution of a voluntary deed by the insolvent conveying all his property to a selected assignee in trust for his creditors with the authority in the assignee to collect and distribute such assets ratably between the creditors after defraying the cost of the liquidation. One section of that statute (section 84) expressly authorized such voluntary assignees to attack the fraudulent preferences described in section 1910 of the Statutes, and expressly withheld the right of the creditor to do so without first requesting the assignee (or trustee) to file it, followed by his refusal to do so. But, in either event the section said: "And property so recovered shall become a part of the estate and be distributed as other assets." That *820 excerpt fortifies the statement hereinbefore made that the relief provided by sections supra of our statute was exclusively for the ratable benefit of all creditors of the preferential transferor.
In denying the right of the creditor to maintain an action like this without first requesting the assignee to bring it, we said in the case of Hall's Assignees v. Rothchild Son,
Our present statute, first enacted in 1912, and now sections 165a-1 to and including 165a-22, provides for a special procedure whereby insolvent banks may be liquidated, and creates the office of State Banking Commissioner as a statutory assignee or trustee with the powers of an assignee of insolvent estate under our "voluntary assignments" statute supra, and which is clearly deducible, not only from the terms of the statute creating the Banking Department, but also from our interpretations thereof in the cases of American Southern National Bank v. Smith, Banking Commissioner,
But few states have statutes similar to our one as embodied in sections 1910, 1911 et seq., and prior to their enactment in jurisdictions adopting them, and in all other jurisdictions not adopting them, it was and is lawful for a debtor to prefer his creditor, and it was only for the providing for a pro rata benefit to be reaped by all of his creditors that such statutes were enacted. The only vice of which the defendant Ball was guilty was the alleged fraudulent transaction in which he participated and by which he took from the bank a certain amount of its assets which depleted the sum for *822 ratable distribution among its creditors upon final liquidation. But at the time of the attacked transaction there was no statute, nor any rule of law so far as we are aware, which denied him the right to purchase from the bank, and credit his deposit account by the amount thereof, a note of another one of its creditors, so as to deprive the latter of the right to satisfy his transferred note out of his deposit claim against the bank. Such, we repeat, would seem to be the correct conclusion, but which, for the reasons stated, it is not now necessary to determine.
Since, however, the action could not be maintained in the manner attempted, the court properly dismissed the petition, and its judgment is affirmed.