Forepaugh v. Appold & Sons , 56 Ky. 625 ( 1856 )

Judge Simpson

delivered the opinion of the court:

The assignment made by Forepaugh to his creditors, transfers, in express terms, ‘‘all his estate of whatever kind or nature soever,” to the trustee. If his dioses in action constituted a part of his estate, they were embraced by the deed. The word estate was not used in this instrument, in its technical sense, to denote the quantity of interest which the grantor had in the property conveyed, but it was used according to its popular signification, to describe the property and things which were intended to be transferred by the deed. All the grantor’s estate of every description, most clearly included the debts due to him, and every thing else in the form of property that belonged to him. Such is the undoubted meaning of this expression according to its general acceptation. Consequently the debt on Bishop passed to the trustee by the deed of assignment.

2. An assignment of a debt due by account does not pass the legal right to the debt, but only an equitable right.

It does not appear by anything contained in the record, whether a debt due by account, according to the laws of Pennsylvania, where the parties resided, and the deed of trust was executed, is or not assignable so as to vest the legal title to it in the assignee. Under our laws, only an equitable right to the debt, in such a case, passes to the assignee. And as it has not been shown that any other right to it was transferred by the deed under the operation of the law of Pennsylvania, the trustee will be regarded as being only invested with an equitable right to it.

The deed of assignment, although regularly recorded in the city of Philadelphia, where the parties resided, does not appear to have been recorded in this state. If, under such circumstances, it should be regarded as a valid recorded instrument, as to the debts due to the grantor in this state, then there could be no contest in this case with respect to the rights of the parties as to the debt due from Bishop. But if it can have no other effect here than an unrecorded deed, then the question arises, is the equity of the trustee valid against an attaching creditor, who has notice of it, before he recovers a judgment for the money, and thus acquires a legal right to the thing in contest.

3. In a contest between, equitable rights, the elder will prevail. 4. An unrecorded deed of trust, or mortgage, will prevail against a creditor who has notice thereof, before he acquires a legal right. 5. A garnishee, who is adjudged to pay a debt to an attaching creditor, has the right to appeal from such judgment.

The doctrine is well settled, that in a contest between equities merely, that which is prior in time must prevail. An attaching creditor only acquires a lien upon, or an equitable right to, the money in the hands of a garnishee, by bringing his action, and delivering the order of attachment to the sheriff. The right he thus acquires is subordinate to that of an assignee of the debt, whose right was created before the commencement of the action, and oí the existence of which the attaching creditor shall be apprised before he obtains a judgment for the money. In this case, although the claim of the creditors, under the assignment, was not asserted by the trustee before the plaintiffs obtained a judgment against Bishop, yet they were fully informed of their right to the debt by the affidavit which the garnishee filed in the cause.

An unrecorded deed of trust, or mortgage, will, in equity, prevail even against a creditor who has notice of it, before he acquires a legal right to the property or estate embraced by it. (Swigert vs. Bank of Kentucky and others, ante, page 268.)

The trustee, therefore, was entitled to the debt due by Bishop, whether the deed of trust should or not, so far as the debts in this state were concerned, be regarded as a recorded instrument.

But it is contended that the trustee was not made a party to the action in the court below, although he filed a petition for that purpose, and cannot, therefore, prosecute an appeal; and as the grantor in the deed of assignment is not prejudiced by the judgment, that it cannot be reversed at his instance.

The garnishee, however, is an appellant, and, being prejudiced by the judgment, has a right to complain of it. The non-resident defendant having appeared and filed an answer, by which it appeared that the debt on Bishop did not belong to him when, the plaintiffs commenced their action, but had been assigned away for the benefit of his creditors, it was the duty of the court, upon the facts alledged and proved, to have set aside the former judgment against Bishop, upon the re-trial, and to have adjudged the repayment of the money by the plaintiffs in the action, if it had been collected by them. As, however, the pleadings did not show that it had been paid, the court could only have set aside the previous judgment.

6. Where the affidavit of a garnishee, and that of his creditor, shows that the money sought to be re«overed of the garnishee belongs to one not party to the suit, it is notice to the plaintiff, and the eourt should require such owner to be brought before the court. {Code of Practice, sec. 40.)

As Bishop would be responsible to the trustee for the debt, notwithstanding he had paid it to the plaintiffs in pursuance of the judgment of the court, inasmuch as he had knowledge of the assignment before the judgment was rendered against him, he has a clear right to prosecute an appeal to have the judgment reversed, and such a judgment rendered as will relieve him from this double liability for the same debt.

The court below should have made an order requiring the trustee to be made a party to the action, not only because he had filed a petition for that purpose, but also because the controversy between the parties before the court could not be properly determined without he was made a party. (Code of Practice, sec. 40.)

Wherefore, the judgment is reversed, and cause remanded for further proceedings not inconsistent with this opinion.