since which time it had been the sole owner of them and had duly assessed them for taxation as of September 1st, 1909.

There is no dispute about the facts, but the revenue agent insists that because the record book in which the conveyance retaining the liens was recorded did not show any assignment of the notes before September 1st, 1909, that appellee who on that date appeared of record as the owner of the notes should be required to assess them for taxation although they had been assessed as of that date by the assignee.

The contention of the revenue agent is based on section 4051a of the Kentucky Statutes providing in part that the county clerk of each county shall on or before the first day of September of each year make and certify to the various county assessors a statement of all purchase money, notes, mortgage notes and other obligations for money due or to be paid as shown by the records in his office, and "should there be an assignment of such note or other evidence of indebtedness, of record in the clerk's office, the assignment shall state the county and state of the residence and postoffice address of the assignee; unless any assignment is made of record, the original holder or owner shall be liable for taxes as though no assignment had been made."

The argument is that this statute is mandatory and puts peremptorily upon any person appearing of record to be the owner of a mortgage or lien note the duty of listing the same for taxation and paying the taxes thereon unless the record also shows in conformity with the statute an assignment of the note or obligation. And so it is said the fact that the appellee before September 1st, 1909, assigned and sold the lien notes to an assignee who had assessed them for taxation as of that date, did not relieve her of the obligation to assess and pay the taxes on them.

With this construction of the statute we cannot agree. The intention of its enactment was to secure the payment of taxes upon all lien obligations that appeared of record. It is not a matter of much importance who pays the tax upon such property, so that it is paid. The purpose of the law is satisfied when the property is assessed for taxation and the taxes are paid. The statute was not enacted to enable taxing officers to collect double taxes on the same property for the same year. If the assignee of a note lists the same for assessment and pays the tax

on it, the assignor should not be required to list and pay taxes on the same note for the same year. The statute reads if the assignment is not made, "the original holder or owner shall be liable for taxes as though no assessment had been made." The meaning of this is that if the assignment is not made as required by law, the record owner or holder shall be liable for the taxes, unless it satisfactorily appears that the assignee has paid the tax for the year in which it is sought to collect them from the assignor. There is nothing in the statute that would warrant us in holding that both the assignor and assignee should be required to list and pay the taxes, nor is it necessary that the assignor should be penalized in this manner to effectively secure the purpose of this law, We therefore hold, as did the lower court, that the person who appears of record to be the owner or holder of any lien note or obligation at any assessing period must list the same and pay the taxes thereon, although the note was in good faith sold and assigned before such date, unless it satisfactorily appears that the assignee has listed it for taxation and has paid or will in due course pay the taxes thereon.

Nor does this construction of the statute conflict with the case of Shrader v. Semonin, 123 Ky., 605. The question here presented was not before the court in that case.

Complaint is also made of so much of the judgment as directed that the cost should be paid by the revenue agent. Section 4260 of the Kentucky Statutes provides that if the property sought to be assessed by a revenue agent is not liable for taxation, the court "shall make an order to that effect, and the officer instituting said proceedings shall be liable on his official bond to the defendant for all costs incurred by him in defending said proceeding; and this shall apply to all courts to which said proceedings are taken." Under this statute there was nothing else for the court to do wher it dismissed the proceedings, except to enter a judgment against the revenue agent for the costs.

Wherefore the judgment of the lower court is af

firmd.

1.

Union Trust and Savings Co. of Maysville, Ky., v.

Taylor, et. al.

(Decided February 10, 1911.)

Appeal from the Mason Circuit Court.

Mortgage Insolvency-Preference of Creditors. A mortgage will be held within the act of 1856 where the mortgagor knew what he owed and what property he had, and a man of ordinary pru dence situated as he was would have known he was insolvent, and would have contemplated that the transaction would prefer some of his creditors to the others.

2. Same. Where a debt is secured by a mortgage not within the statute which had not been recorded, a subsequent mortgage is good as to this debt, although within the statute as to other debts.

3.

4.

Same. Where a debtor made a mortgage for $40,000, executing mortgage bonds to a trust company which furnished the money with which he paid certain of his creditors, preferring these credi tors to others, the creditors may be required to pay back th money they received, and when this is done the mortgage bonds should be enforced.

Same.-Where creditors have received money from the debtor, the payment of which is held within the statute, instead of their paying the whole amount into court they may be required to give bond to pay any sum in their hands over and above their pro rata of the estate on a distribution.

WORTHINGTON & COCHRAN for appellants, Union Trust & Savings Co., First National Bank of Maysville, Ky., Mary R. Wells, Martha Bramel and W. F. Taylor.

GARRETT S. WALL, of counsell.

POWER & BABBITT and HEFLIN & GRANNIS for appellees.

RESPONSE TO PETITION FOR REHEARING AND EXTENDED OPINION OF THE COURT BY CHIEF JUSTICE HOBSON.

It is insisted by counsel in the petition for rehearing that the opinion is in conflict with a number of previous decisions of the court. Counsel quote the following sentence from the opinion:

"The letters of Marshall, his will and the other proof in the record, leave no doubt in our minds that he did not in fact contemplate being insolvent, or in fact intend to prefer the creditors whom he paid off on May 6th, to his other creditors." (See Union Trust Co. Etc. v. Taylor, 139 Ky. 283.)

They insist that under all the prior decisions of the court, this effectually settles the question that the mortgage of May 4th was not such a transfer as operated as an assignment under the act of 1856. But this sentence is not to be dissociated from the remainder of the paragraph of the opinion in which it occurs. Counsel close their quotation in the middle of a sentence, when the next sentence and those that follow it were plainly written to qualify the words which counsel quote. What we tried to say was that a man could not prevent the application of the statute by shutting his eyes to the truth, and refusing to see what was patent. The operation of the statute does not depend upon what is the secret working of the assignor's mind. His mental processes do not control the statute. When a man knows what he owes, and knows what property he has, and a man of ordinary prudence situated as he is would know that he is insolvent, then in the contemplation of the statute, he knows that he is insolvent. In other words he is charged with knowing what a man of ordinary prudence, situated as he is, would know. In like manner, when he makes a transfer when he is insolvent and when a man of ordinary prudence situated as he is would know that the necessary effect of the transfer is to prefer one creditor to another, he will be presumed to intend that which a man of ordinary prudence would have contemplated under like circumstances, or to put it in other words, if a man of ordinary prudence under like circumstances would know that the transfer would prefer one creditor to the exclusion of others, then the debtor is held to know that the transfer would so operate, and knowing that this would be the operation of the transaction, he is held to have intended the natural and necessary effects of his own acts. Counsel quote from Terrill v. Jennings, 1 Met. 445; Millet v. Potiinger, 4 Met. 213; Hampton v. Morris, 2 Met. 336; Heidrich v. Silva, 89 Ky. 427, and insist that these cases hold that the debtor must actually know that he is insolvent, and actually design to prefer one creditor over another. But no such inference may fairly be drawn from these opinions. On the contrary, the court has in a number of cases laid down the standard that he must know what he has reason to know, and must contemplate what he has reason to contemplate. Thus in Thompson v. Heffner, 11 Bush, 360, it was contended that the debtor did not know that he was insolvent because he did not know that

he would have to pay certain debts on which he was surety. After discussing the matter the court said:

"We therefore conclude that he did not know he was insolvent, unless the circumstances were such that he ought to have regarded it as reasonably certain that he would be called upon to pay the debts on which he was surety for his son, William."

Again in McKee v. Scobee, 80 Ky. 128, where it was insisted that the grantor did not know he was insolvent, the court said:

"Whether he knew at the time of the sale he was insolvent must be determined by the facts and circumstaces as they are presented.”

In Allen v. Dillingham, 104 Ky. 808, it also said:

"Now it is contended for the defendants that Mr. Dillingham did not make the conveyance in contemplation of insolvency, nor with the design to prefer Allen's Sons to the exclusion either in whole or in part of his other creditors. That Mr. Dillingham did not believe at the time of the conveyance that he was then insolvent is in no sense decisive of this point.

In Walker v. Davis, 19 R. 1314, the court said:

"There is but one conclusion to be reached from this record, and that is that Davis was insolvent when he executed the mortgage to Walker & Sengstak; and, crediting Davis as being a man of fair judgment, he could not have failed to know at that time that he was insolvent."

"In Northern Bank vs. Farmers Bank, 111 Ky. 350, the debtor Moore had made a deposit in bank of $4,557.75, as stated in the opinion, "in the usual course of business without actual intention on the part of Moore to give it a preference over his other creditors." Holding this transaction within the statute the court said:

"It has been held that where a debtor makes a transfer or payment to one of his creditors with the knowledge that he is insolvent, the design to prefer will be presumed, unless the accompanying circumstances show plainly that there was no such intention. This rests upon the presumption that one designs the usual result of his act. But the presumption is not absolute. The intent of the debtor is the essence of the statute. Still the purpose of the statute would be defeated if it were denied application simply because the debtor did not in fact contemplate the necessary effect of his act. If Moore had handed the check for $4,557.75 to the bank, and directed