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FISHER V. BANK.
last mentioned action was filed on October 25, 1897. Said complaint alleged the insolvency of the bank and its indebtedness to the plaintiffs and demanded judgment for the recovery of its debt and such other relief as it might be entitled to in the premises. The summonses in both actions were returnable to the December term, 1897, of the Superior Court of Buncombe County and were duly served and so returned. At said December term, 1897, an order was made whereby said actions were consolidated, "without prejudice to the rights of any of said suitors to establish a prior lien on the assets of the said bank in the hands of said receivers, if by law they have acquired such preference by such independent suits or by claimants of the bank having become parties thereto. At the September term, 1902, of the said court this action was brought to trial and a verdict was rendered establishing the indebtedness of the said defendant bank to the plaintiffs and others and also finding that said deed of assignment was made with intent and for the purpose of hindering, delaying and defrauding the plaintiffs and other creditors of the Western Carolina Bank. Upon the coming in of this verdict the plaintiffs appellant and others then acting with them, moved the court for a judgment for the amounts so found due them from the defendant bank and for judgment that said deed of assignment was fraudulent and void as against the plaintiff and said other creditors. Plaintiff appellants also moved the court, upon said verdict, for judgment declaring a lien in their favor upon the assets of the bank in the hands of the receivers to the amount of their indebtedness. This last motion was denied and the court adjudged that the plaintiffs recover of the defendant bank the amounts of their several debts as fixed by the verdict of the jury and further considered and adjudged "That the deed of assignment mentioned in the complaint, dated October 12, 1897, be and the same is hereby declared and decreed fraudulent and void as against the plain
FISHER v. Bank.
tiffs creditors of the Western Carolina Bank," to which the plaintiffs excepted and appealed, assigning as error the refusal of the court to render judgment that the plaintiffs are entitled to a lien to the extent of the amount of their recoveries against the defendant bank.
From a judgment denying plaintiffs a prior lien on the assets of the defendant, the plaintiffs appealed.
F. A. Sondley, Whitson & Keith, Haywood Parker, Frank Carter and Tucker & Murphy, for the plaintiffs.
Charles E. Jones, Merrimon & Merrimon and Merrick & Barnard, for the defendants.
CONNOR, J., after stating the facts. Plaintiffs, relying upon the doctrine announced by this court in Hancock v. Wooten, 107 N. C., 9; 11 L. R. A., 466, contends that the action brought by them for the purpose of attacking and avoiding the deed of assignment made by the defendant bank and subjecting the property to the payment of the debts of the bank, acquired a lien or preference in respect to the property and the assets of the bank over other creditors. The distinction between a general creditor's bill brought in behalf of all the creditors of an insolvent corporation or the estate of a deceased person or to enforce the execution of a trust and administer the fund, and a "judgment creditor's bill" brought "for the purpose of subjecting equitable and other interests which could not be reached and sold under execution, and also for the purpose of removing obstructions to legal remedies, as by setting aside fraudulent conveyances and the like," is discussed and pointed out by Mr. Justice Shepherd in Hancock's case. It having been held in Bank v. Harris, 84 N. C., 206, that under our judicial system, by which legal and equitable remedies are administered by the same court and in one form of action, there was no longer any necessity for the creditor to obtain a judgment before bringing his action
FISHER . BANK.
in the nature of a bill in equity to invalidate fraudulent assignments, etc., the term "judgment creditor's bill" is not strictly accurate as applied to our system of procedure. Formerly the judgment creditor having, either by docketing his judgment or running out his execution, acquired a lien or legal preference in respect to lands or other legal assets became entitled upon final decree to the preservation and enforcement of such liens as he had acquired. By filing his bill for the purpose of reaching and bringing within the jurisdiction of the court equitable or non-leviable assets he acquired an equitable lien or, as sometimes said, his bill was treated as an equitable fi fa. Shepherd, J., referring to the effect of the change in the procedure, says: "The result of the decision is to render the proceeding still more efficacious, as we think that by its institution it creates a preference by way of an equitable lien whether the interest sought to be subjected be legal or equitable." By reason of this decision of our court much of the very interesting discussion and learning found in the works on equity jurisprudence and the English and American Chancery Reports is of but little practical value in the decision of this case. When the plaintiffs issued the summons in this action they had no lien or rights other than general creditors, nor did the plaintiffs in the case of Battery Park Bank against defendant bank have any such lien. The record presents the question, therefore, whether the plaintiffs' claim for a preference or equitable lien comes within the principle of Hancock v. Wooten, 107 N. C., 9.
The assignment was made on the 12th day of October, 1897, and recorded at 9:30 o'clock a. m. on the same day. The summons in the action of Fisher and others (who were named) "and all other creditors of the Western Carolina Bank who may choose to come in and make themselves parties to this action" against the Western Carolina Bank, Lewis
FISHER V. BANK.
Maddux and L. P. McLeod, was issued and received by the sheriff on the same day and served on October 16, 1897. The complaint was filed October 13, 1897, at 11:50 a. m. The complaint sets out the material allegations in regard to the incorporation, etc., and the indebtedness of the bank to the plaintiffs. The 19th allegation avers "That, as the plaintiffs are informed and believe, said deed of trust or voluntary assignment is fraudulent and void in law as to these plaintiffs, and was executed by defendant with the intent to hinder, delay and defraud the plaintiffs and other creditors of the defendant bank." They demand judgment that they recover the amounts of their debts; that a receiver be appointed; that the deed of trust be declared void, etc. On the same day, October 12, the Battery Park Bank in its own behalf and all other creditors," issued summons against the Western Carolina Bank. This summons was served October 12, 1897. On the same day the plaintiff Battery Park Bank by its cashier, filed an affidavit setting forth the indebtedness of the defendant bank, its insolvency, etc., and stating that it was entitled to have a receiver appointed pursuant to Section 668 of The Code. On the 13th day of October, 1897, at 11:30 p. m., Norwood, J., made an order in said case appointing temporary receivers. Thereafter permanent receivers were appointed. The complaint in the action brought by the Battery Park Bank was filed October 25, 1897, alleging the insolvency of the bank and its indebtedness to the plaintiff and demanding judgment for its debt and such other and further relief in the premises as it may be entitled to. In this action an order was made at the return term consolidating all of the actions brought against the defendant bank without prejudice to the rights of any of said suitors to estab lish a prior lien on the assets of the defendant bank in the hands of said receivers if by law they have acquired such preference by such independent suits or by claimants of the
FISHER V. BANK.
bank having become parties thereto. The defendant bank filed its answer denying any fraudulent purpose or intent in the execution of the deed of assignment. The cause was brought to trial at the September term of court. The verdict of the jury fixed the indebtedness of the several plaintiffs and found that the deed of assignment was made with intent to hinder, delay and defraud plaintiffs and other creditors of the defendant bank.
The general principle governing the rights of creditors. in the distribution of assets, set forth in Hancock v. Wooten, 107 N. C., 9, gives us but little aid in the decision of this case, by reason of the provisions of our statute, The Code, Sec. 685. The authorities all concur in holding that unless prevented by some statute a corporation as a natural person may convey its property for the benefit of its creditors giving preference, and the creditors may by reducing their claims to judgments acquire liens which will be preserved and protected in proceedings instituted for winding up its affairs in case of insolvency. Cotton Mills v. Cotton Mills, 116 N. C., 647; Clark & Marshall on Private Corporations, Sec. 768, Vol. 3, p. 2331. "The appointment of a receiver does not divest the property of prior existing liens, but affects only the manner and time of their enforcement. While the property is in the possession of receivers the right to enforce the liens is suspended because the property is in the custody and control of the court." Beach on Receivers, 194. In this case the two actions were commenced by the issuing of the summons simultaneously. The order appointing the receiver was made subsequent by about twelve hours to the filing of the complaint in the action of Fisher and others, but prior by three days to the service of the summons on the defendant bank in that action. The title of the receiver relates to the date of his appointment. "The courts have now, as a rule, come to the conclusion that the title of the receiver