Byrd v. Perry Maxwell , 7 Tex. Civ. App. 378 ( 1894 )

Appellees brought this suit against appellant Byrd, the sureties on his official bond as sheriff of Hamilton County, J. Shapera Co., and the sureties on an indemnity bond executed by them, to recover the value of certain goods and merchandise seized and levied upon by Byrd under a writ of attachment in favor of said Shapera Co. against S.R. Scogin. Appellees claim title to the property under an alleged mortgage or trust deed executed by S.R. Scogin prior to the levy of the attachment.

Appellants charged, that the alleged mortgage was made in fraud of S.R. Scogin's creditors; that it was not a mortgage, but a partial assignment, and void; and that the parties to said instrument contemplated that the grantor should remain in possession and control of the property in violation of the statute regulating assignments.

A trial before the court without a jury resulted in a judgment for appellees.

The court below filed the following conclusions of fact:

1. That on and prior to the 16th day of October, 1891, the firm of M.J. Hearne Co. were engaged in and carrying on a general merchandise business in the town of Hamilton, Hamilton County, Texas.

2. That said firm of M.J. Hearne Co. was composed of S.R. Scogin and John L Spurlin, the said Spurlin having the sole and exclusive management and control of the same.

3. That on the 16th day of October, 1891, the said firm of J.M. Hearne Co. and the individual members thereof were insolvent.

4. That on the said 16th day of October, 1891, the said S.R. Scogin executed a deed of trust in the nature of a mortgage to plaintiffs, George F. Perry and William Maxwell, as trustees, conveying the property in controversy in this suit to them to secure John D. Rogers Co., of Galveston, Texas, and other creditors of said firm of M.J. Hearne Co., therein mentioned, in the payment of certain debts described in said deed of trust owed by said M.J. Hearne Co. to said John D. Rogers Co., and said other creditors. Said deed of trust reciting, that said S.R. Scogin was doing business in Hamilton, Texas, under the name and style of M.J. Hearne Co., and that she was the sole owner and constituent of said styled business, and that she executed said instrument for herself and for her said business operated under said business style; and reciting also, that the indebtedness listed therein and due by her, and that said accounts and notes were incurred by her and made by her in the style name of M.J. Hearne Co., except the A.H. Watson note, which is in the name of S.R. Scogin, and reciting that said deed of trust is executed for the purpose of assuring, securing, and paying of said indebtedness described therein. The trustees are authorized to take immediate possession of the property and sell the same for cash, and pay off said indebtedness in the order provided therein, as fast as sales can be made, from the proceeds of said sales; and it is further provided, that said instrument is intended as a mortgage to secure the payment of the claims and debts as therein named in the order and manner as named, and to indemnify said above named creditors, and for the purpose as a mortgage to as fully protect, secure, and indemnify each and every one of the sureties therein named on each and every note therein set out, and save them entirely harmless against loss or damage on account of their liability thereon, as the same is made to the payee of each and every one note, and is fully intended as such mortgage to assure, secure, provide, and furnish a fund for the benefit of all said sureties out of which debts may be paid, and shall in all respects for said purposes inure to their benefit as before stated, without reference to the acceptance of said instrument as security by any payee of any of said notes. And lastly, it is provided that when a sufficient quantity of said goods and property to pay off and fully discharge the debts therein secured, and also the expenses of executing the mortgage, the remainder shall be the property of said S.R. Scogin, and shall be returned to her. The said instrument was signed by John L. Spurlin and C.E. Horton, as witnesses. Besides the property conveyed, the firm owned at the time a large amount of property in cotton, sheep, and lands. And S.R. Scogin owned considerable in money, and J.L. Spurlin $1000 in bank stock.

5. That on the day before the execution of said deed of trust by said S.R. Scogin, the said trustees therein, George F. Perry and William Maxwell, were requested by the attorney of Mrs. S.R. Scogin, who prepared the same, to act as such trustees in said instrument, and agreed to do so; that said deed of trust was prepared and submitted to said trustees on the afternoon of October 16, 1891, and that it was signed by said Mrs. S.R. Scogin in the afternoon of said day and delivered to her attorney, G.H. Goodson, who filed same for registration at eight minutes after 4 o'clock in the afternoon of October 16, 1891, in the office of the clerk of the County Court of Hamilton County, and that said G.H. Goodson, shortly after said instrument was so filed, notified said trustees, George F. Perry and William Maxwell, and that said trustees immediately thereafter took possession of the property described in said deed of trust and conveyed thereby, and that said possession was so taken about sundown on said day. And that between the time of filing said deed of trust and the taking possession by the trustees, said S.R. Scogin and J.L. Spurlin remained in complete possession and control of the business and goods of M.J. Hearne Co. conveyed by the deed of trust, and sold some of said goods in course of business, and collected the proceeds of said sale, and did not deliver the same to the trustees, but converted them to their own use.

6. That the said above described deed of trust was executed by said S.R. Scogin in fraud of her creditors. But neither the accepting creditors provided for therein nor said trustees had notice thereof, and did not participate in the same.

7. That the debts secured by said deed of trust and described therein are and were all actual, valid, and bona fide debts of the said S.R. Scogin and the said firm of M.J. Hearne Co., except the said debt of A.H. Watson, which was due by said S.R. Scogin alone.

8. That all the creditors mentioned in said deed of trust accepted the same before the levy of the writ of attachment under which the goods described in plaintiffs' petition were seized by defendant W.R. Byrd, sheriff, under writ of attachment.

9. That when S.R. Scogin executed said deed of trust, she, J.L. Spurlin, and the firm of M.J. Hearne Co. were insolvent, and neither she nor said Spurlin hoped, expected, or intended to redeem said goods and property conveyed by said deed of trust.

10. I find that the defendant, W.R. Byrd, as sheriff of Hamilton County, acting under a writ of attachment issued out of the District Court of Hamilton County against S.R. Scogin in favor of the defendants J. Shapera Co., did, at the request and instance of said defendants J. Shapera Co., seize and convert said goods, taking the same out of plaintiffs' possession without their consent, on the 18th day of October, 1891, and that the said goods were of value of $1030 in Hamilton, Texas, the place where they were so seized, at the date of said seizure.

11. I find that the official bondsmen of said sheriff, on the date of said seizure, were A.L. Phillips, R.Y. Cox, T.J. Hubbert, and Joel Fisher, and that said defendants J. Shapera Co., before the levy of said writ of attachment, executed to said sheriff, W.R. Byrd, on indemnifying bond, with sureties as set out in plaintiffs' petition.

We do not find in the statement of facts any evidence supporting that part of the foregoing findings which states that one of the debts secured by the conveyance executed by Mrs. S.R. Scogin, October 16, 1891, was her individual debt, and not a partnership liability. Said conveyance is not copied in either the court's finding or the statement of facts, and the statement of the findings, that one of the debts secured was Mrs. Scogin's individual note to A.H. Watson, does not correspond with the recitals of the substance of said conveyance embraced in the statement of facts. With this qualification, the foregoing findings are supported by the evidence and adopted by this court.

The testimony shows the following, which we add as supplemental findings of fact:

1. J.L. Spurlin, found by the court to be a member of the firm of M.J. Hearne Co., procured, advised, and consented to the execution of the trust conveyance executed by Mrs. S.R. Scogin, October 16, 1891.

2. Said conveyance is described in the statement of facts as follows: It recites that S.R. Scogin, doing business under the name and style of M.J. Hearne Co., and being sole owner and constituent of said business, and executing said instrument for herself and her said business, in consideration of $10, conveys to Geo. F. Perry and William Maxwell, all her stock of general merchandise, consisting of dry goods, groceries, hardware, farming implements, agricultural machinery, barbed fencing wire, wagons, etc., owned and controlled by her under said style name, and situated in the two adjoining and consolidated storehouses in which said business is conducted, in Hamilton, Texas, fully describing the conveyed property; also certain notes and accounts owing to her arising out of said business, described in two schedules attached. It states, that whereas S.R. Scogin is indebted on matters arising out of said business to John D. Rogers Co. in the sum of $10,737.60, and to other parties, fully specifying them and their debts, in the sum of about $17,000, for some of which other parties are sureties, evidenced part by notes, part on open account, of which amount about $11.000 was past due, and about $16,830 was to become due, and desiring, for the purpose of assuring, securing, and paying the above described notes and evidences of indebtedness to the above named creditors, first to pay off John D. Rogers Co., and second, the remaining creditors pro rata, until all are fully paid, it authorizes the trustees to take immediate possession of the property, and the same is delivered contemporaneously with the delivery of the instrument, and to at once collect the accounts and sell all the property for cash, and out of the proceeds of collections and sales to pay all the debts in the order above named, and said debts shall be paid off as fast as sales can be made and funds can be obtained from sales of said goods and from the collection of said debts due her. The trustees are to pay all necessary expenses incurred by them, not to exceed $300 per month, and may sell the goods in bulk or in parcel, or partly in both ways, as to them may seem best, providing for ten days' advertisement in case of sales in bulk, and the goods shall be sold and the accounts collected, or, if not collected, sold for cash within ninety days. It further recites, this conveyance and the delivery of said property and indebtedness due me as herein set forth and enumerated is intended as a mortgage to secure the payment of the claims and debts as herein named in the order and manner as named, and to indemnify our said creditors as named; and it is also expressly for the purpose as a mortgage to as fully protect, secure, and indemnify each and every one of the sureties herein before named on each and every note as herein before set out, and save them entirely harmless against loss or damage on account of their liability thereon, as the same is made to the payee of each and every one of said notes, and is fully intended as such mortgage to assure, secure, provide, and furnish a fund for the benefit of all said sureties, out of which debts may be paid, and shall in all respects for said purpose inure to their benefit as before stated, without reference to the acceptance of this instrument as security by any payee of any of said notes, and after the debts and expenses are paid, then the remainder of the goods and accounts or the proceeds thereof shall be her property and be returned to her. [Signed] S.R. Scogin, M.J. Hearne Co., and witnessed by C.E. Horton and J.L. Spurlin.

3. The property conveyed was not equal in value to the debts it was intended to pay or secure; at least, as against appellants, we so consider the case, as they have stated such to be the fact in their brief.

4. Of the property not covered by the trust deed in question, it was shown that the land was mortgaged; the sheep had been shipped to Chicago for sale; and Spurlin was making arrangements to, and did, sell the cotton in fraud of creditors. The mortgage in question covered substantially all the unincumbered assets of the firm and both partners, except some notes and accounts and bank stock worth $6000 or $7000.

Opinion. — 1. It is contended by appellants, that the conveyance from S.R. Scogin to appellees, and under which the latter claim title to the property involved, is not a mortgage, but a partial assignment made by an insolvent debtor; and that, inasmuch as it does not convey all the debtor's property, it is void.

Inasmuch as said instrument recites on its face that it is intended as a mortgage to secure certain debts, and as it reserves to the grantor whatever surplus may remain after said debts are paid, and as it does not convey all the grantor's property, a majority of the court holds that it is a trust deed in the nature of a mortgage, and not an assignment for the benefit of creditors; and in support of this ruling they cite the following authorities: Stiles v. Hill,62 Tex. 429; Watterman v. Silberberg, 67 Tex. 100 [67 Tex. 100]; Hudson v. Milling Co., 79 Tex. 401 [79 Tex. 401]; Laird v. Weiss, 85 Tex. 93.

In view of all the terms of the instrument, the circumstances under which it was executed, as shown in the statement of facts, the recitals therein, that it is intended for the purpose of paying as well as securing the debts referred to, and the further recital, that it is intended to provide and furnish a fund with which to pay said debts; and of the testimony of Mrs. S.R. Scogin, the grantor, that the goods were transferred as a fund for the purpose of paying the debts, and that her intention was that the property should pass absolutely for the payment of the debts mentioned in the instrument, the writer doubts the correctness of the construction placed upon said conveyance by the majority of the court; and he cites the following authorities: 1 Am. and Eng. Encyc. of Law, 845; White v. Cotzhausen, 129 U.S. 329; Burrows v. Lehndorff, 8 Iowa 96; Richmond v. Mississippi Mills, 11 S.W. Rep., 960; The State v. Dupy, 11 S.W. Rep., 964; Box v. Goodbar, 14 S.W. Rep., 925; Robinson v. Tomlinson, 15 S.W. Rep., 456; Penzel v. Jett, 26 S.W. Rep., 120; Foreman v. Burnette, 83 Tex. 396.

But even if said instrument should be construed as an assignment by an insolvent debtor for the benefit of creditors, in so far as the writer has been able to find, it is not conclusively settled by our Supreme Court that it would be void.

It is true that it does not purport to, and in fact does not, convey all the debtor's property; and such assignments, with clauses exacting releases for any unsatisfied balances from accepting creditors, have repeatedly been declared void. Donoho v. Fish, 58 Tex. 164; Coffin v. Douglass,61 Tex. 406; Still v. Focke, 66 Tex. 717 [66 Tex. 717]; Shoe Co. v. Ferrell, 68 Tex. 638 [68 Tex. 638]; Baylor County v. Craig, 69 Tex. 330 [69 Tex. 330]; Turner v. Douglass, 77 Tex. 619.

But in the conveyance under consideration there is no clause exacting releases from accepting creditors; and it may be that this difference calls for a distinction as to the validity of the two classes of instruments. That the law ought not to allow an insolvent debtor to exact a discharge of the unpaid residue of his debt, when he has not surrendered all of his property subject to execution, is apparent. But it is well settled in this State that an assignment made by an insolvent debtor for the benefit of creditors, even though it may attempt to create preferences and to entirely exclude some creditors, will, by force of the statute and contrary to the assignor's purpose, inure alike to the benefit of all. Fant v. Elsbury, 68 Tex. 1.

Therefore, as all creditors can equally participate in the benefits of a partial assignment, when such an instrument does not exact releases from accepting creditors, the same reasons do not exist for declaring it void.

These are the individual suggestions of the writer, for which the other members of the court are in nowise responsible; and it must be conceded that expressions in Donoho v. Fish, 58 Tex. 164 [58 Tex. 164], indicate a disposition to hold, that every assignment by an insolvent debtor which does not attempt to convey all the assignor's property is violative of the statute and void.

2. The evidence does not show, as contended by appellants, that at the time the mortgage was executed it was contemplated by the parties that the mortgagors should remain in possession and control and dispose of the property. The fact that Spurlin remained in possession of the store and sold goods in the usual course of trade for a short while after the delivery of the mortgage, and did not account to the trustees for the proceeds of such sales, it not appearing that he knew the exact time when the mortgage was delivered, nor that the trustees authorized him to sell the goods as he did, does not show that, at the time the mortgage was executed, it was contemplated that Spurlin should remain in possession and control and dispose of the property.

3. The court found that the mortgage was executed by Mrs. Scogin with intent to defraud her creditors; but that neither the beneficiaries nor the trustees participated in the fraud or had notice of it. On these facts appellants submit the following proposition:

"A chattel mortgage given as mere security for antecedent debts is void if made by the mortgagor with intent to defraud his creditors without reference to the bona fides of the trustee or beneficiaries. It is different in this respect from a sale made in discharge of debts where the creditors cancel their indebtedness in consideration of the sale."

To this doctrine we can not assent. A creditor who in good faith, and for the sole purpose of protecting himself, purchases property from a failing or insolvent debtor, and takes no more than is reasonably sufficient to pay his claim, will be protected, although he may have notice that it is the purpose of the debtor in making the sale to defraud other creditors. Allen v. Carpenter, 66 Tex. 138; Edwards v. Dickson,66 Tex. 613, and cases there cited.

A mortgage or deed of trust is a contract between the debtor and the creditor, and it is not binding upon any one until accepted by the beneficiary; and if a creditor, while acting in good faith, can protect himself by a contract which results in a purchase, we see no reason why, when actuated by a similar motive, and especially when the mortgaged property is of less value than the secured debt, he can not protect himself by a contract creating a lien, although the effect in each instance may be to delay, or even defeat, other creditors in the collection of their demands.

But in the present case the court found, that neither the secured creditors nor the trustees had notice of the fraud; and we are satisfied that the fraudulent purpose of the grantor will not defeat the instrument. Shoe Co. v. Mars, 82 Tex. 493 [82 Tex. 493]; Kirby v. Moody, 84 Tex. 201; Bank v. Marshall, 1 Texas Civ. App. 704[1 Tex. Civ. App. 704].

4. Even if Mrs. Scogin, the signing partner, did not have authority to mortgage the firm property to secure copartnership indebtedness, J.L. Spurlin, the other partner, having consented to, and in fact procured the execution of the mortgage, it is binding upon him. Having procured its execution by the other partner, for the purpose of conveying partnership property, it is binding as an act of the firm.

5. In a brief filed in this record in behalf of the Bradford-Boogher Hat Company, who claim to be interested in the result of this suit, it is urged that the mortgage is fraudulent upon its face, and therefore all persons were charged with notice of the fraud. This proposition appears to be founded upon the assumption that the mortgage shows on its face that one of the secured debts is an individual liability of Mrs. S.R. Scogin, one of the partners. Upon this assumption of fact, it is argued that a mortgage upon partnership assets to secure an individual liability of one of the partners is fraudulent as to the creditors of the partnership, and that, if the mortgage in question is fraudulent as to one of the debts attempted to be secured, it is not only void and inoperative as to such debt, but also as to all others.

It is true that the court found that one of the secured debts — the amount of which is not shown — was Mrs. Scogin's individual liability, but the statement of facts does not sustain this finding; and, although appellees did not except to this finding, it is not binding upon them, and they are entitled to have the correctness of the judgment determined by an application of the law to the facts as disclosed by the statement of facts. Tudor v. Hodges, 71 Tex. 392.

Besides, the mortgage not being fraudulent as to the other member of the firm, but having in fact been advised and consented to by him, under the case of Wiggins v. Blackshear, recently decided by our Supreme Court, even if it secured an individual debt of Mrs. Scogin, that fact would not render it fraudulent as to partnership creditors, although all the property mortgaged was partnership assets.

But even if one of the debts was such as could not be secured, over the objection of partnership creditors, by mortgage upon partnership assets, we are not prepared to hold that the attempt to secure it by the mortgage in question would vitiate the entire instrument.

Such appears to have been the ruling by the Court of Civil Appeals for the First District in Simon v. Ash, 1 Texas Civil Appeals, 202. The contrary, and in our opinion the better, rule has recently been announced by the Courts of Civil Appeals for the Fourth and Fifth Districts. Rider v. Hunt, 25 S.W. Rep., 314; Kraus v. Haas, 25 S.W. Rep., 1025.

After carefully considering all the questions presented by appellants' brief, this court has reached the conclusion that no grounds for reversal have been pointed out; therefore the judgment appealed from will be affirmed.

Affirmed.