*1 Appeals pril, Civi;l Reports, 39. [A Yol. Receiver, Peck, et al. B. Brenton & v. Chas. April 1905.
Decided Appointment—Insolvency. Corporation—Grounds of 1. —Receiver to meet its debts corporation failure of a will The mere shown; ability its mere to do so is will insolvency present when for the of a receiver for even ground appointment be pay refusal debts with its consent. Execution Sale. 2.—Same—Threatened corporation property in excess improvement lot and owned Where a town on its entire going concern and an execution was levied of its debts and ivas steps it which it had taken no judgment satisfy real for it at the ground appointment receiver pay, this afforded no prob- apprehended, but not prevent instance another creditor order able, pur- appearing of its at the execution sacrifice corporation was pose prevent execution an'd that was to the sale under and it making low prevailing prices sales expected for an advance. 3.—Same—lack Cash. not, judgment creditor could suit Under the conditions shown the lien, merely stayed proceeding from to execution of another without be creditor which to at command with corporation had the cash because the debtor meet obligation. Fund Doctrine—Creditor Without Lien—Statute. Í.—Same—Trust granted receivership corporation properly can not he at the instance insolvency in its until has been reached aof invoked, may and then the statute the trust fund doctrine be affairs at which Stats., (3). art. 1465 applies. Rev. Insolvency. Develop Facts as to Canse 5.—Same—Remand trial a receiver for a appointment court of Where or imminent of in- unauthorized because appeal oil held conduct, shown, as to but the made cor- solvency was not taxes, past officers’ salaries and due its failure to poration’s affairs and debts, conclusively things which evidence did not ex- to a state of pointed facts cause should be remanded is held that the plain, it developed. fully Fact—Exceptions Below. —Conclusions to, judgment excepted jury trial is without Where facts, appellant statement of can assail appeal contains the record the pre- although exception thereto conclusions trial court’s required except to them where in no event served. He would Appellate has reached the Court. the case until after not filed Hon. of Harris. Tried below before Court the District from Appeal Kittrell. Norman G. Hamblen, Hamblen, for appellants. & Scott Garwood, for Baker, Botts, appellees. Parker & to reach the hands of in this case counsel failed briefs of reporter. McKay y. Brenton Peck.
1905.] GILL, January Justice. Chas. B.Peck filed this suit Associate *2 2, 1905, alleging that he had been receiver of the La Porte appointed Wharf and Channel an order of Circuit- the United States Company at Houston 22, Court 1904. That about December sitting August 20, 1904, the made and Improvement Company, delivered corporation, him, as such receiver, for due obligation $46,386.01, the sum of - and payable thereafter, due days and that obligation past That on the 19th unpaid. 1904, Brenton day of September, recovered McKay in judgment against the Improvement Company th§ District Court of Harris for County $10,977, an execution and caused to be issued thereon and levied Im all of the of the upon provement That the Company. sheriff had for advertised the property if such sale sacrificed, should occur the would be loss and detriment of great plaintiff. That Com the Improvement insolvent, in pany He therefore prayed sale be enjoined; to take receiver be appointed of the affairs and charge properties Improvement Company, that, on hearing, plaintiff for his judgment debt, and of the impounded and sold for of his the payment debt. bill The was to the presented district and a re- judge temporary straining issued. The application a re- appointment ceiver set down for hearing 5, chambers for 1905. January 1Brenton & answered, to the bill excepting showed which would equity justify the relief for, and that prayed it showed on its face plaintiff’s debt was unsecured and had not been reduced judgment. was also objected upon other The grounds. truth allegations controverted. The Improvement Company, cited, failed to appear resist the application. 5, 1905, On January court overruled the exceptions, and, after evidence, hearing A. appointed O. Blackwell receiver of the La Porte Brenton Improvement Company. order. Plaintiff withdrew his & McKay have appealed from the application injunction, and the re- order was straining dissolved January 1905. facts "weredisclosed following upon hearing: La Porte of Texas ivas Improvement Company of this duly under incorporated the laws for the State purpose land and “purchasing real property, off, survey or subdivide the plat same into town lots or sub- acreage divisions, streets, to lay out and grade alleys and thoroughfares adja- such cent to and to construct drainage, sidewalks, etc., to residence, make such desirable business or manufacturing sell and purposes; improve, same, and dispose to do nec- essary thing aiding purpose platting, subdividing and selling such property.” The company of which plaintiff receiver, as alleged, was also purpose being dredge ship channel and construct and maintain a wharf at the present site of the of La city Porte, on Galveston Bay. corporations The two were formed purpose with each other in cooperating building up and developing a town and seaport site La present Porte. The two corpora- XXXIX.
Vol. Civil—15. Appeals Reports, Texas Civil "Vol. individuals, same interests were formed the same having tions harbor, and the offi- said town and developing common building cers' of the are identical. companies two two companies for which the purpose pursuance of its wharves formed, the Channel the construction Company began Porte, of La the construction and docks at town undertook Channel, in the bay, channel from what is known as ship Galveston its securi- wharves at La Porte. The Channel issued as al- thereon, receiver, ties, defaulted appointed leged. of its corporate purposes, The Improvement Company, pursuance town La various and tracts land which the sundry acquired established, and immediately surrounding adjoining is now Porte ten has been subdivided into about thousand such town. *3 is also about six hundred of land in the town lots, and there acres town of out and some the alleys Streets and have been undivided. laid yet improved. have been lots December, 1904, had be- Company the La Porte Improvement in the sum sued Channel and its receiver Company indebted the come December, 1904, note for the day on the- of executed its for, and alleged due date thereof was the petition. as alleged. sum lien, not, had at time the receiver was and the unsecured by It was to judgment. been reduced appointed, were encumbered Improvement Company lands the Most the $70,000, about but the in order Compaq, liens amounting by vendor’s offered, secured from the title when had opportunity sales and make each lot releasing upon payment specified the privilege vendor lots on named certain sum, testimony amount named lot, as to lots these testimony showing $25 per streets had of the lots been and rented improved nominal. Some was the sum unin- from the vendor’s lien and were had been released These out. the lots on which the offices of the com- these were Among cumbered. The value these lots not unincumbered were situated. pany Blackwell, of its value estimated total shown, officer of the company, except by executive and manager exceeds Com- largely Improvment the witness statement indebtedness. pany’s. exceeded value its in Company of the Improvement The property had taken toward debtedness, and, management steps pay its and about two McICay jrears made judgment, Brenton & ing the cash, on its indebtedness want of it was sales, nothing and paid Porte, at- La offices officer in concern, having charge a going still at said town a hotel conducting and affairs, actively bath its its furniture and owning There park, equipment. establishment ing was sold under execution, if the it would no proof outstanding all the indebtedness. discharge enough bring admitted there no reason to hope who testified witness more receiver’s sale than at bring would execution that the induce someone to put up funds, could the receiver unless more, until operation for a year the property hold Brentok Peck. 1905.'] event, ran up Dock and some uncertain Company, Channel value the property. real estate upon The reason why pressing improvements the market was because was that certain public hoped and then in enhance the affecting largely port, prospect, and the wish to sell at pre- value property, concern, who vailing prices. Those own a interest each controlling direct the each are desirous of policies holding least, of the Improvement advance, or, until property until prices shall whether time will materialize from prove expected causes to which prospectively ascribed. Brenton & McKay, execution, now, virtue of the of their levy all the real es- upon concern, lien, subject tate of vendor’s lien above mentioned. made Pretermitting by the questions exceptions, especially, whether one an unsecured claim can place in the hands of a receiver upon allegation proof one or more of the grounds, we shall statutory this appeal determine upon assignment assailing sufficiency of the evidence. grounds Neither which the prayer is predicated es- Blackwell, tablished. The the general of the Im- manager officer in the provement Company, familiar with its financial highest and presumably condition, no such state of affairs discloses as is It is true the states alleged. that there has been witness no meet- of the directors in Texas two ing years; two years’ taxes are due on the and have not been paid lack of funds; cash indebtedness floating amounting about two dollars is outstanding unpaid thousand for the same reason. But *4 it a concern under is still the active going management witness. hotel and park, bathing is operating pavilion, collecting rents after and improved looking preserving whole. It did, in a small all way, is still that it ever but is not doing, selling any it does wish so not to do property not prevailing It is prices. that the unincumbered will pretended not sufficient the Brenton & or to that discharge judgment, the remainder to all of enough satisfy will not sell for the remaining outstanding in- in lots could not The be sold bulk under debtedness. the execution, If the lots are worth separately. but must be sold more than the re- are so under the (and lease price each adduced), collection the receiver plaintiff’s the ultimate claim is not even en- dangered. a sale until delay things purpose yet come may enhance is holdings the Improvement Company’s practically admitted, and the not invoked, upon a court a equity powers factory showing satis- reasonably will otherwise lose his debt, but in Improvement Company the defendant order that have its prop- sacrifice sale danger public erty subjected when it prefers for higher prices. to hold adduced, is not evidence surprising Under the the defendant to a complacency with such proceeding submits company which is usu- drastic, which is generally harsh and allv termed denied except a clear trial court necessity. seems upon felt Appeals Reports,- Civil Yol.
228 constrained, statute, grant plaintiff’s under the provisions all under the execution would because the sale of the property prayer, render the follow, would, course, insolvent. result Such threatens, and if no bidders at the but no such prospect there were is not shown to be more than baseless appre- the fear a sacrifice liabilities, with assets in excess of its with hension. greatly value, in likely permit ap- enhancement is great prospects sacrifice. prehended debtors, or else suffer must their debts as other Corporations of a as And to sol- diligent others do. command execution until of some stay concern to his hand going happening vent and shall from loss would be inex- save the hoped-for contingency cusable. the appointment, Because reason shown requiring justifying dismissed, annulled, is ordered to bill possession company. returned
Reversed and dismissed. ON MOTION REHEARING. EOR rehearing is, motion for which Counsel have filed a of this court main, upon attack the judgment dignified ^ble are: it is based. The First.— objections and the reasons upon trial court That the evidence sustain the ample either insolvent Improvement Company Second.—That, true, even if this this court those issues erred in because the evidence rendering judgment, sense conclusive. In the reversal the view entirely upon the main we opinion rested motion, of the facts. deem it this proper, disposing we took offered a basis for minutely ap- to enter into evidence as receiver, reaching will do further on. and this we pointment our unmindful of tests of laid conclusion we were not rule had in mind that mere excess down books. We concern over liabilities would not assets liabilities which was unable outstanding if solvent Mich., Ellis, (Munson in the usual course of business. meet rule, 331; Cal., overlooked Ellis, Bell v. Mor had we if it made to a concern’s hand, that, even should be appear if liabilities, than its business should be assets in value were less *5 market, if it assets was placed yet, and its suddenly interrupted out its and concern, carrying corporate purposes meeting a going of not be due, justi- fell would finding insolvency as liabilities cited.) arid We understood that Ellis, v. authorities fied. (Bell supra, the is the exclusive test. nor neither the one to his debts he is insolvent. (Cunning is unable pay When person Ellis, in 77; Munson v. As said S., supra.) Norton, ham 125 U. individual, an “a like Y., 594), Brown Harbeck N. (9 Insolvency its debts. pay not able to is to be insolvent when is said in the course of business debts to answer inability a general means all the cases which we enforced.” existing capable McKay Brenton & v. Peck. 1905.1 to had examine finding occasion inability has been but in has obligations upheld, meet none it been declared that failure them justified a mere to meet has where finding present to do so shown. ability law, In this view of the which is view, and about which appellee’s is we will further made, examine the We found that question facts. Improvement the assets liabilities. This Company exceeded its assailed as vigorously without the evi- utterly support Yet dence. so and the sole adduced appellees alleged witness testified. not be fair to say that either the or allegation statement the witness is unqualified. modifying allegation as follows: “Plaintiff belief, alleges, upon information and levied on the sheriff ... $50,000 is worth approximately more, that, if to be sold permitted pay- ment of the debt of Brenton & sacrificed, it will- be McKay, ruthlessly loss and great detriment and other creditors Company.” Improvement who only witness testified A. He 0. Blackwell. had been connected with the two from companies their He had inception. been manager time, each at the same and at the date of these proceedings, and for long time had been man- previous, ager chief executive officer the Improvement Company. stated, He in-substance, that the liabilities the company were about as stated the main opinion, that all the indebtedness was past due. He stated that the assets were than sufficient debts. There is intimation that the holders of the vendor’s-lien notes were doubtful of their security, or taken steps press their debts. More than dozen lots from had been released city this lien. They were improved and unincumbered save for the Brenton execution. The value of this released even property is not intimated; nor does witness value estimate the of the ten thousand lots and 600 city acres He acreage is silent as to what property. proportion the purchase money cash as to paid whether has increased diminished in value since the company’s purchase. He does not to have pretend tried sell a foot of the property with- in the twelve months preceding application receivership, states the to sell at unwilling but was prevailing prices, business, open sell now at a suitable price. That that, therefore, was thus left without cash is undisputed, and is, current and other debts neither expenses reduced paid course, value true. The treated as acreage property, company’s is not the total of the shown given, 1,700 acres, 1,100 about of which has been subdivided into lots city of it and some improved. true, the witness stated there was small demand lots them retail, advantage and that it would take effort sell time and He at forced the sheriff could way. admitted procure He good as the receiver. also stated that price hope for a for the receiver or fair someone selling price was to believe find some means of prospects inducing purchasers *6 Appeals Bepokts, Civil Yol. 39. as a and that this He city, La Porte would take considerable time. at also that the a better in bulk than bring price stated retail. whole, not We that the witness’s as a shows opinion testimony, could a and paid that the not have of its company part sold indebtedness, no its current but that officials chose to make effort its could sell to sell As whether the prevailing prices. company is silent. There an utter absence of evidence the evidence is pay enough not sell Improvement of the could the officials McKay judgment. their real estate to the Brenton & discharge merely than effect. record contains an intimation to that not, true, did not they try. shows y execution, that, their under if all .the propert witness states sold on, will, there left for the do business company be nothing in imminent therefore, Therefore, will be insolvent. shown, and that We main this was opinion stated sacrificed, debt charge plaintiff’s would be a baseless apprehension. shown be other than left unpaid, of. do not to say This We mean expression complained especially is that plaintiff, real. What we still think very apprehension with stand, honesty on his unques- manager knowledge and his to state the truth tioned, willingness apparent his in any from him so, has to elicit equally of the actual situation failed fact their any allegations. affirmative form sustains that unless a change counsel' claim the witness states Appellees’ will be about the way brought is in some conditions local lands, and intimates that grazing farming valuable court value as such the should judi- record is silent as their the members reply value is insignificant. know that their cially is a and it subject, subject have no information of this court witness than expert within the province rather
that comes knowledge. judicial bus suspended is that the company But the further contention think propo We do not this concern. longer going iness and was evidence. The corporation any phase can be upheld sition buy, its power purposes substantial company, awas land any to do power real estate with the incidental hold and sell handle, For to the furtherance of those ends. thing appropriate lawful holder was a large this application time long prior it had exercised and in so bought doing It had real estate. lots, it into constructed It subdivided corporate power. of its one phase of it the construc and improved sidewalks streets, alleys and It decided to in this another. refuse way exercising buildings, tion had, collect its rents what preserve prices, sell at prevailing to hold right later time. Thus it exercised hold till to sell solvent, deny one to refuse any right could If handle. debtor It also had right unsatisfactory prices? sell. until forced its creditors to the policy adopting If, receivership. will not authorize a refusal to debts A mere has refused to (which purposely solvent concern then, *7 281 MoKat Brentos & v. Peck. 1905.1 its obligations) its at and thus meet prevailing prices sell property he execution, by judgment certainly ought chooses to proceed of another defend- to be at the suit creditor stayed merely has the cash to meet its If such were the obligations. ant concern millions, with with debts case, a real estate worth corporation, holdings in the in amount as to its could be compared holdings, placed paltry a- and the of creditors arrested becáuse process merely hands of receiver all cash into real to refuse to estate and chose put carry sell sure would not any We feel prevailing prices. case took of the their contention to such a This is the view we length. as made of Blackwell. by of a re Even under the Texas statute authorizing appointment insolvency insolvent, ceiver for imminent a when or in corporation un himself, (Re Stats., art. must applicant place 1465), v. (In der the rules of in an attitude ask the relief. general equity, vestment Crawford, receivership 45 W. Rep., 740.) S. a can creditor of properly general never the instance granted until the in its affairs at which corporation point has been reached creditors, trust may fund doctrine be invoked when by point is reached the statute applies. We that, understand the law to in all cases in which receiver for, made either that the property applied ap must be thereon, has an actual or a lien or else plicant interest in the property constitutes a fund out of which he is entitled to the sat isfaction of his claim. (Beach Rec., sec. This 7.) justifies distinction whereby general creditor under our statute success may for a receiver an fully apply insolvent a lien whereas none but creditor would be to the relief as entitled against Blevins, natural 12 partnership person. (New Brittingham Co. v. 410; Johnson, 308; id., Texas Civ. Cahn v. Carter v. App., Hightower, Texas, 137; Davis, 79 Co. v. 30 W. Railway Rep., S. 693.) doctrine, distinction is fund referable to trust which means that, voluntarily business, whenever a ceases or is corporation other- dissolved, wise either actual or its practically insolvency becomes at trust fund in once a the hands of its pendency, character, officers for the benefit of creditors of as well every as the stockholders of the defunct concern. (Hardware Co. Manufacturing Co., Texas, Thus, when is reached in point 86 the affairs of 156.) creditor maintain general his bill for a private corporation, he able showing, receiver otherwise proper satisfy the he has an actual interest the fund. general requirement also is to that, when that is reached—that when a point say, true corpo- creditor can, has insolvent—no technically by legal ration become proc- contract, any over other creditor which advantage ess or secure an he Co. v. (Hardware Co., not theretofore have. su- Manufacturing left open be ascertained as point Whether the pra.) fixed the date of the arbitrarily or whether it is pro- an open is perhaps question. ceedings purpose, brought in this it is held State with this principle, line assignment, deed of the act itself be- can not make a valid preferential Co., v. Stove Co. of insolvency. one ing (Lyons Texas, Hardware Appeals Reports, Texas Civil Vol. are mentioned in principles These this connection show the in order relief proof to which must here go extent asked. said, in that such a light facts, Can it be justly have been history shown to reached this concern? think follows, therefore, that the not to be affirmed. judgment ought
not. We have overruled assignment involving proposition lien creditor is entitled to a receivership this The reason advanced is that support proposition corporation. itself, has interest gen- *8 eral the the the principles governing proceedings require presence indicated, is, of such The answer as above interest. applicant creditor, of by when a receivership applied thereof, he a situation ground alleges of cited him an in the fund itself. The cases gives by ap- interest not sustain pellants do their proposition. of The case New Iron Co. v. Blevins Texas Civ. Birmingham (12 because, does not the court him, sustain dis- App., 410) page tinctly declares that the case made does not fall within either the statute, the first four cases enumerated the which include case of under principles That case decided the general In all the other cases cited the prayer and the denied. suit was equity by or else applications individuals or partnerships, either hand, the the cases of v. Davis Railway (30 On other S. stockholders. (86 Texas, Co. Co. Lyons Perry Hardware Stove Rep., 693) W. our conclusion. support 143) concluded, our however, dismissing the bill We have the aside. made as conduct of com- be set The to the should its failure year application, the preceding affairs pany’s salaries, debts, to a taxes, its officers’ due state past which the evidence does facts conclusively explain. of affairs order, our former developed. We therefore fully change which, hearing, the cause another if condi- alleged remand exist, it clearly can be made .and actually distinctly appear tions Rec., (Beach sec. requires. the law impression an erroneous under which We desire correct appel- seem to labor as to the of certain meaning portions lant’s counsel We the sale in purpose delay main stated opinion. values adhere to the better admitted. We state- practically hope on oral was admitted counsel and shown argument, by It ment. But it does not follow that the purpose witness. correct, If their concern is in a theory condi- reprehensible. forced and-a sale would sacrifice the insolvency, impending prop- tion of creditors, and, incidental^, to secure But, rights purpose erty, court laudable, and the it. unless decree delay reasonable not in the delay exist in mere apprehension, those conditions latter of the main part paragraph justified. would not facts, occurs .the justified in which expression opinion the motive of the impugn the court receiver purpose was it the true, however, that to grant the relief absence plaintiff. would enable the necessity plaintiff, Improve- in behalf a showing 1905.] Brenton & Peck. ment escape prompt enforcement of the execution what through secure it could not have secured for itself. In this view of the case we we are not repeat the defend- surprised ant not resist application. also to our Appellees object statement the Improvement Com- for'
pany better prices conditions from improved work of the Channel prospective upon We based our Company. statement statement of the witness that negotiations were look- pending, ing reorganization that concern by parties heavily interested in both. We stated in the outset that counsel for filed a motion for rehearing in the main distinguished dignity ability. used the “in qualifying phrase main,” because our comment is not to the entire applicable document. At 46 counsel page have seen fit to in a indulge indictment its people, its offi- public cials and its juries, for their alleged hostility to and for- corporations eign capital. purports part to a reply appellant’s brief, but, however mistaken may have been either the premises con- clusions of appellant, they contained nothing language used. It is without basis the record and without excuse in the his- tory of the case.
The cause has not come within the province of any other officials of
except
State
members of this court, and counsel seem to have
*9
careful,
been
least,
inference at
not to include us in the sweeping
charge. We were first inclined
let
the matter pass unnoticed, but we
to allow it
unwilling
go
into the
records
this court unrebuked.
pass with this
of our
expression
disapproval. However clearly
it may
the sentiment of
express
counsel, the
had no
language
proper
place
argument.
For the reasons
given
motion is granted to the extent indicated,
and the cause remanded to the trial court.
In connection with the motion for rehearing, counsel for prayed for certiorari to
to this
bring
court the trial court’s conclusions
of fact and law. The
reason
offered for incorporating the con
clusions in the record is
they
contain a specific
finding
insol
vency,
court,
appellant
did not except to them in the trial
can not
question
here. The judgment
been ex
having
to, and the
cepted
record
containing
statement of facts, appellant
could assail them
no other
exception had been preserved.
(Wil
Burns,
kins v.
Motion cause remanded. Overruled as to certiorari.