Case Name: Bank of Kentucky vs. Herndon, &c.
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1866-02-26
Citations: 1 Bush 359
Docket Number: 
Parties: Bank of Kentucky vs. Herndon, &c.
Judges: 
Reporter: Kentucky Reports
Volume: 64
Pages: 359–360

Head Matter:
CASE 88 — PETITION EQUITY
FEBRUARY 26.
Bank of Kentucky vs. Herndon, &c.
APPEAL FROM CLARK CIRCUIT COURT.
1. A conveyance by one partner of his interest in the partner&ip property ' to a trustee to pay all his individual and partnership debts, does not divest or defeat the implied lien of the other partner and partnership creditors upon the partnership property; but this implied lien has priority until all the partnership debts have been paid.
2, The lien of the partner is subrogated to the benefit of the partnership creditors.
Simpson, For Appellant.
B. F. Buckner, For Appellee,
CITED—
19 Vermont, 288; Washburn vs. Bk. of Bellows Fall.
46 Maine, 258; Croolcer vs. Crooker.
7 B. Mon., 210; Black vs. Bush.
1 Parsons on Contracts, p. 20á, fifth edition.

Opinion:
JUDGE ROBERTSON
delivered the opinion of the court:
John Stubblefield and William Stubblefield, partners in a drug store in Winchester, Kentucky, becoming insolvent, and owing both individual and partnership debts, John, owning no other than partnership property, conveyed it to J. P. Herndon in trust, for paying all his debts, including a debt to the Bank of Kentucky, due by him as principal, and William Stubble-field as his surety; and another debt due to the same bank by William as principal, and himself as surety, each for money borrowed for their individual use before they became partners.
The partnership debts greatly exceeding the value of the partnership property, this suit was brought for distribution according to the respective rights of all the creditors.
William Stubblefield, in his answer, renounced the deed of trust as unauthorized by him, and insisted on the application of the entire fund to payment pro tanto of the partnership creditors. And the circuit court having so adjudged, the bank appealed.
Although the bank was expressly included in the deed of trust as one of the beneficiaries, yet, as it does not appear that William Stubblefield was either a party to the conveyance or in any way bound by it, he retained for his own partial security his implied lien on the partnership fund, which, on the principal of subrogation, inured to the benefit of the partnership creditors. And as that lien was prior to and unaifected by the deed of trust, the same priority of partnership over individual creditors continued, notwithstanding the conveyance by the other partner of his interest for the benefit of all creditors equally. And consequently the bank, though included in the deed as a co-equal beneficiary, must give way to the substituted priority of the partnership creditors, as adjudged by the circuit court.
. Wherefore, the judgment is affirmed.