Compton, Ault & Co. v. Marshall, 27 S.W. 121

Bepobts. Supbeme M. R. H. Taylor Taylor to subsequent Taylor, from H. E. and J. deeds dis her, Mrs. E. showed title Taylor, and the to D. devise in put a prudent to man no fact which was calculated closed recov plaintiffs relied for a a trust. The quiry as to the existence of upon the that the burden is the rule ery upon equity; is, a secret to equity upon legal title, engraft to party who seeks McAlpine Burnett, title had notice. purchaser legal that the a lien acquired case mortgagee 649. The this principle ap and the same legal equitable, both title to the land, prevail against for the plies. order claim had mortgagee them to show that it was incumbent mortgage, constructive, title. of their either actual notice, Ap- of Civil Court and of the Court of the District judgments The and the defendants Mrs. D. peals affirmed as between but Taylor, Hofmaster, T. and Toodles E. B. Taylor, Jay Taylor, Loan the cause Agency, the Texas are reversed as de- to notice to the last named the issue as' in order that remanded, principles announced in may tried accordance fendant equities in order that the between opinion, and this determined favor that such shall be the event issue adjusted, and the Mrs. D. below defendants defendant. Taylor, joined Toodles Taylor, Hofmaster, E. B. T. Taylor, Jay pay appeal one-half costs by her will each husband, will Agency Texas Loan recover Appeals. Court of Civil this all costs of court. This plaintiffs below, defendants of the court does not affect so much below reversal & Burom. of defendants Cobb rendered favor February 1895. Delivered did not case. Justice, Associate this sit

Brown, T. Ault & Co. v. Marshall. John No. 185. Adhered to. Case Marshall, Appeals, approval by Texas Civil Bank California refusing unpublished opinion, application for error in court writ of on reproduced opinion (The to. entire writ adhered refusal opinion)....................................................... Mortgage of Goods a Debtor. goods, mortgage, transferring of a executed deed nature preferred creditors—the a trustee the benefit insolvent debtor business, carry trust exe- but the stock he cashed trustee being value goods less in three months—the so transferred cuted within creditors, other held valid attack of than the amount of attaching creditors.....................'.............................. Ault & Co. Comptoh, v. Conveyance—Burden Fraudulent Proof. attacking mortgage preferring A creditor a chattel alleging other mortgage, fraud either the claims secured were or the ' property secured, transferred was in value in excess of the claims must allegations. such alleging The burden of the creditor fraud..................................;.......................... 53 Exchange by 4. Surrender or of Sureties Creditor. That a in a creditor deed of mortgagor trust surrendered to the security overdue claims held as did not invalidate the transfer. The claims being overdue, beyond withdrawn by the reach of other creditors garnishment........................................................ 54

ON REHEARING. Mortgage by 5. Insolvent Debtor. debtor, though insolvent, right has the good under our law to execute mortgage faith a thereby to secure one or more of creditors, give and preference. Such an therefore, by which does not its terms intent, disclose a legal held, fraudulent face, and should contrary, the absence of purports to confer the it confer............................................................. 57 Burden of 6. Proof of Fraud. attaching levying upon property An creditor transferred to trustee for bene- creditors, fit of named ownership property, in a contest as to the can not, by alleging fraud, disproving charge upon cast burden of possession trustee from goods whose the attached were taken under the writ of attachment............................................... 59 to Court of Civil for Third District, appeal an Error from County. McLennan H. C. for Lindsay, —Appellants having shown error.

antecedent Co., debt & and having alleged Guinan Eaton, the deed delay trust was made with intent to hinder and the cred itors of Co., said especially appellants, Guinan & and it was Eaton, incumbent on defendant to show the genuineness debts secured genuineness said deed trust. The debt to Bank, the Waco if large State the said bank at the time surrendered a Co., lot collaterals to at the time of Eaton, knowing Guinan & their embarrassed condition or not make the would trust deed insolvency, Texas, valid. Tillman v. 69 Heller, 78 Elser v. 597; Graber, Texas, Wallis v. 222; Adoue, Con., 76 Wait. on Fraud. secs. Texas, 118; Bump on Fraud. 415. 271; Con., Dyer Bolinger &

Clark, error. Evans, W. W. did The court not err for the defendant in rendering judgment this cause, competent they, because it if Eaton, Co., was Guinan persons were indebted to in this cause, named the deed trust to make a chattel securing deed of trust provided said security securing chattel was Intended as a said that the trustee take the imme- creditors; providing further, conveyed diate, and exclusive sole, Eeports. Supreme [March,. 52 fur creditors; provided to secure said under said deed trust acknowledged was and recorded re ther, deed of trust that said Baton, it Guinan & Go. to quired competent for said by law; was irrespective securing make said creditors, said deed trust time executing insolvent at the whether were solvent or Co. v. Hardware Kauf Milling Co., Texas, 401; same. Hudson v. 79 Hill, Texas, Styles Texas, 430; man & v. Jackson Runge, 131; Texas, 100; v. v. Waterman Harby, Silberberg, v. 138 U. Dupuy Reagan Aiken, S., Burkitt, Texas, 338; Peet, Bump on Fraud. Baldwin court having alleged appellants, below, the deed of Co., indebtedness of Guinan & fictitious defendant, them to the made fact, devolved on them said defendant, The said trustee, disprove acknowledgment mere it. of Eaton, in in trust, Gui nan of deed of the absence & Co. such indebtedness said fictitious, was fraudulent established showing that the same and the burden genuineness prima facie, the of such indebtedness was fide that debt not bona plaintiffs to show said was of the acknowledgment under The same pleading. was fictitious & Co. the by of trust as made Guinan Baton, said deed defendant, the genuineness least facie said indebtedness. prima at established proceeding —This was the trial Justice. Associate GAINES, goods upon which by in certain were levied property plaintiffs in error virtue of a writ of attachment favor of property latter, & the and which were Co., Guinan as in error. at time of the by goods claimed the defendant the seiz He title to ure in the of the claimant. asserted the were Co., & by Eaton, under a deed in trust executed Guinan the attachment, trustee, purpose to him the as for the defendants securing certain creditors therein named. Marshall, In of the Bank of California v. Texas Civil the case the of this identical instrument was called in

Appeals, upon not void its judgment and it was held face; question, that favor the trustee was affirmed. From affirmance to this court writ appellant application made for a rehearing application for a which was refused. motion was appears also thus that the filed, ruling which was overruled. that upon trust was void its face was affirmed the deed of ruling. we adhere to that The Court of Civil now by opinion upon ground rested that the Appeals having unse- goods clearly were in- delayed, were not because creditors cured were it was preferred, insisted, those who mo- pay sufficient upon did not justify the facts rehearing, agreed tion that goods relative and the amount as to the value court’s conclusion motion, a writ- disposing that this court of the-seeured debts. Co. Ault 1895.1 opinion say: “The deed not void by justice

ten the chief was upon appear agreed and if it does not from the case that the face, its worth much than the intended to be property conveyed was less debts now by plaintiff, the burden of was who is it, and the same result in the absence of would follow, applicant; by Appeals the fact assumed the Court of Civil was shown though (This opinion to have existed.” filed April was and seems 17,1893, not to officially have been published.) in their tender of issues the trial court

averred, among other that the deed of things, fraudulent, trust was the trustee had notice of the and that the fact; debts secured by grounds application it were fictitious. As one for the writ of error, insisted, exception it is that there with the being, claim, no evidence as to the existence of the by debts secured the trust deed save the recitals in the instrument as found itself, the Court of Civil court erred in Appeals, finding that the debts existed. It is also Court of insisted, Civil erred holding that burden was to show the nonexistence of the clearly debts. The court was correct the latter ruling. The deed of trust void being was incumbent face, alleged that it was If fraud. intended plaintiffs be secured it were the burden error to If show fact. the goods were worth more than the terms of the deed other creditors delayed surplus subjecting payment of their demands, in error should have alleged proved these facts. In the absence of testimony extrinsic sufficient to show the trust deed fraudulent in fact, the trustee had the right to hold property, and was therefore entitled to a judgment his favor in this proceeding. appears that at the time the deed of trust was executed, Waco one Bank,

State held creditors, notes, accounts, and acceptances belonging to Guinan & Eaton, Co., as collaterals secure the debt due them by firm; part that as a that, agreement between the bank and the mortgagors, these collaterals were to be re turned to the latter, and that this accordingly was done. It shown that of the collaterals were unmatured negotiable paper.

The Waco State Bank had the right, with the assent of the mortgagors, to hold collaterals and to accept a mortgage as additional security. They had the right accept security consideration the re provided lease another, other creditors were not delayed transaction. The attaching not having creditors shown in this case any of the that collaterals were negotiable, and therefore not subject can not garnishment, justly complain of their surrender. The reach, collaterals not appearing to have been such beyond as were creditors Guinan & Co. while in the hands of the lat- Supreme Reports.

54 Texas Court to the ter, pledgors we can see that their restoration exe- instrument fraudulent cution of the deed of trust rendered n n n law. the Court that of the District of Civil affirmed. Affirmed. Delivered June 21, IN MOTION POR REHEARING. question of law error, urged: H. C. Lindsay, and determination of the court presented is for the consideration is and is a clear one. It is this: When an directly raised, of all property, securing makes a deed of trust insolvent debtor between an persons alleges whom he be his a contest of such insolvent and trustee beneficiaries attaching creditor claiming trust on whom lies the burden of deed, under said attempted of the debts to be secured? but one' Counsel contends that there can be answer such question, trustee, or under the deed. is, on the beneficiaries point question The above involved the case the court thereon. error, and the decision of their favor they ask this: As between one Another statement same equities who claims a bona fide equities, who has shown his and one whom to show the purchaser value, on lies equities the latter? many point great decided a times be

This has been decisions, very reporting running first volume ginning time the has been present every decision con time; down now error. urged with the views counsel for sonance counsel, the court is cited to follow support of this assertion 1 v. 1 Crosby Huston, Bronaugh, v. Briscoe ing Texas, 203; cases: Texas, v. 15 Cox v. Edrington Rogers, 188; Shropshire, Texas, 325; Texas, Texas, Hawley v. 29 Brown v. Bullock, 216; 113; Till Co., 64 Wallis v. Hedge Texas, Adoue, Texas, 118; 396; Cactus App., 1 Texas Civ. Ashe, Simon 597; man Heller, Wait Fraud. Edwards, sec. 443; Watkins v. 202; Ev., 1 Greenl. on Law of secs. 220, p. Whart. Mort., Hardware Co. Ev., Cobby p. on Chat. sec. sec. 72; Davis, 72; Rep., 27 W. Lott v. 27 W. Rep., Achilles, 587; v. S. S. v. McDonnell, Rep., Bank v. 18 Am. St. Strom Savings 137; Hayes; 602; 10 Ill., Haynes Leffing, Mich., High 40 Yer 111; Battle, Palmer, Ch., 65; Hollings Jewett v. 7 Johns. Williams v. ger, Rep., E. Eq. Childs v. 9 S. worth, Hord, Rep., 362; Strobh. Am. child, Bolton v. Rep., 162; Johns, Pa., Weber v. Roth St. Hancock v. Horan, Ault & Co. v. APPLICATION FOR REHEARING.

ON for rehear of the motion —In support Justice. GAINES, Chief case, formid in presented for error has counsel ing this the proposition that the array able of authorities sustain which validity of the debts in error the to show defendant our ruling with are not satisfied purported secure. We rehearing granted, for a Accordingly the motion point. request counsel aside, with and the of the case is set submission with a citation of authorities for in error furnish the court defendant The cause will be set support counter-proposition. down January, and will heard day on the 10th resubmission that day day counsel. agreed unless another Delivered December —In response request of in error. defendant

John L. Dyer,, cause,, in its in this court, granting rehearing contained order ab following counsel error leave to submit the begs for defendant in support stract of points and authorities decision in the (25 Civil-Appeals opinion 441), Southwestern Eeporter, Court of Civil of this court said affirming 121). And defendant in (27 Eeporter, Southwestern following counter-propositions: submits the defend- not, The burden was in. this character case, .the mort- validity

ant error to show the of the debts which the chattel herein, gage express for the following secured reasons: First. was an under the for the trial action, Because this statute trustee, right of as a naked property, by error, mere holding for the benefit of the beneficiaries whose were and as the or tender pleadings secured, affirmatively that the debts the bur- issues, charged issue, den on on the imposed this character should be case, (1) and for the error; reasons: beneficiaries than trustee, were not before the other presumed their in this (2) case, because it must be indebtedness; passed absence of such raised to be that the upon, had duly accepted creditors as secured same mortgage, such, containing secure (3) trust, mortgage the deed of debts; .and debts, owed admission such mortgagors acceptance presumption mortgage by the beneficiaries investigation the trustee from further con- therein, making relieved cerning validity of such so far he stood reía- knowl- having superior tion to (4) no trust; trustee, such he, position trustee) mere edge (occupying indebtedness of a plaintiffs, or means of knowledge respecting the secured averment that same, certainly plaintiffs’ would cause Reports. Supreme Court true, taken as therefore be “fictitious,” were debts the rule in error. However plaintiffs counsel as contended the court when before mortgagee in be a direct contest might in such certainly the rule is otherwise assailed, thus his debt might the Court of And for reason this court and a case as this. in had plaintiffs error, that the burden was held rightly were fictitious, that the debts secured fact, the affirmative alleged Bump Montgomery Texas, Culton, such fact. p. on Fraud and p. Mistakes, Kerr Fraud. ed., sec. Cobbey Mort., Chat. in cited of the authorities

2. An examination bar, in dissimilar to the case at arose cases will disclose knowledge peculiarly the evidence was cases where fraud, Shrop- the case of Cox v. generally, party charged with pur- up the defendant had set that he was a shire, 25 where where he had for a consideration, faith or valuable good chaser deed, failed to make in his and had his case on the recitals rested And further- so made. etc., allegations sustain consideration, out there had been made by counsel, in all the cases cited more, as to call for some suspicion the title to be fraudulent alleged etc. case was party showing good faith, the adverse Such proof by in the case at bar. not made out Co., mortgagors, insolvent, if Guinan &

Even preferred cred- property to a trustee to secure conveyed all their authorized an overthrow these facts would have itors, from the trustee deed, or or demanded evidence suspicion. Hudson v. Eisenmayer, to overthrow such ON REHEARING. —The motion for a rehearing Chief Justice. GAINES, ques examination to thorough in order to a more give was granted their .proof. error, through The tion burden incumbent the defendant insist that it was counsel, claims, which he the deed trust under order to establish subsisting by it were liabilities secured Adalid that the debts was executed. The at the time the instrument mortgagors in error at the and the defendant attaching creditors, in error were possession property attached. time of the seizure He possession. filed a right if valid, gave into court for a trial which were returned oath and bond, claimant’s 4838 of the Re the statute. Article property under “ arising In all cases under this title, as follows: Statutes reads vised claimant, from the if the was taken ” plaintiff; is, shall Rev. case be. execution, the writ of attachment art. Stats., Ault Co. v. Maeshall. plaintiffs alleged pleadings no to tending but introduced evidence fictitious,

the deed in trust of genuineness as to the one prove testimony There was that fact. some other debt was proof the absence of that and of proved knew the that creditor whose debt was fictitious, and this to sustain the mortgage, it seem that was sufficient fraud, would upon to it be held that the burden was although should But do not desire prove Kraus, the we debts. Haas v. proposition. of that upon to rest the decision of that their contended, It broadly is behalf that the debts were fraud, the plea attacking alleging upon the of made incumbent proof, shifted burden the in order to the the to the of sustain claimant authority support is not without it. proposition instrument. conflicting. the are numerous and bearing upon The decisions are of that the doctrine can maintained opinion, however, We be presumed in of upon Fraud never the absence principle. sound is upon party who asserts it to it. evidence. It incumbent the is Supreme Court of Simpson, States, In Jones v. United by quote following utterances approval the United States of further made Supreme objection “A is Court Kansas: by direction ‘fraud is never but must given presumed, by proposition Of of be evidence.’ the correctness this established the burden argue no but seem to there should be counsel question; did participate he proof upon to show that by to have Howard Bros. the fraud now conceded been intended circumstances will lightly imputed. Fraud is not While certain so presumes it. rise the law never yet to an inference give fraud, by satisfactory show the same alleges devolves on who fraud to rested the creditors Howard upon Bros., the burden proof; show, by good transaction, who faith Penn assailed was fraud- evidence, that the transaction either direct or circumstantial stated, presumes, ‘The law ulent as to Penn. As the trial court transactions of the business contrary, absence man done faith and for an honest every good purpose; are or for a dishonest faith, who that such acts are done bad alleges showing himself upon fraudulent takes the business purpose, ” the same.’ Steele, 28 said: “The rule is court Giddings 758, this pre- without that all contracts exception, to be almost believed and the fair and not unlawful or prima facie sumed attack them as tainted with fraud has person or positive of the fraud proving him of existence evidence.” circumstantial insolvent, under our to execute though right, law, has debtor, to secure one more a

in good faith which. therefore, preference. Such thereby give Supreme Reports. does not its terms disclose fraudulent intent, is legal its face, think, held, we should, the absence of to the con- trary, to confer the which it purports to confer.

In Wait on Fraudulent Conveyances, section rule is thus possible exception stated: husband, “With conveyances to a wife burden of proof, cases where the instrument valid generally face, rests the creditor to show- a fraudulent intent or absence consideration.” Bump

Mr. lays down the rule: following presumption “As always in favor of the statement of fairness, payment of the con- sideration in prima an instrument is facie evidence of the fact. It is, evidence, species prima however, lowest facie inasmuch- as the same motives which induce to make and execute a fraudulent conveyance -would induce them to insert an acknowledgment payment receipt consideration; therefore, where there - is evidence of fraud, proof there must be other of the considera- ed., Bump tion.” on Fraud.

The learned author would part seem to rest the doctrine in at least upon the proposition that the recital in the deed is some evidence the fact. however, presumption We think, fairness the con- veyance ground is the safer upon which to base it. The authorities lay which down the contrary that a rule—-namely, allegation mere at- tacking conveyance a or upon fraud is sufficient to cast the party under the claiming instrument the burden of proving the payment of the consideration or the existence of as the case may be—place upon it grounds: two that the recitals in a first, deed are not evidence as to third parties; that the fact of the second, peculiarly consideration is one within- the knowledge to the instrument. Should it be conceded that the -recitals are not evi- it does dence, not follow that the instrument presumptively is not fair. While it is true that a upon debtor execute a mortgage prop- his erty nominally to secure a debt, yet fictitious when a mortgage has been and there is executed,- nothing to show a want of good faith transaction, it presume is far more reasonable to that the debts genuine, are than that are simulated. As to the second ground, it is true that the fact to the as consideration or the existence of the debts is best known to him who under instrument, claims and may not be known to his do adversary. think, however, We not that in such a case this is sufficient to shift burden of from him who makes the attack conveyance to who stands his contrary defense. principles proced- is to the essential of judicial permit ure-to bring a to his adversary before a court, alleg- fraud, ing he has been guilty evidence, without demand, that he charge. exonerate himself from the grantee The fact that the in a conveyance claimed to be fraudulent knows the true considera- tion, important in proper has effect a party case. When the attack- conveyance proved has ing a though slight circumstance, itself, Compton. & Co. v. Ault is false either the recited consideration to show which tends if the grantee, transac- for the reason that then, whole or in part, true, is recital in his show that power it tion be has fair, strong a circumstance only is not failure to such make upon the effect controlling have a in most cases him, but should also executed, has been if it be that a deed issue. So shown part of the maker of the fraudulent intent on the a or mort- part grantee knowledge such intent without the payment upon the latter then it is incumbent gagee, of mortgage, debt case a existing or an deed, value case want notice. ground of his himself order shield Bailey fol S., 5 M. Mr. used In Rex v. Justice Turner, it always general rule, to be “I have understood lowing language: peculiarly which party, be made if a negative averment knowledge within other, party whose knowledge within the and not is to he affirmative, it, it and who asserts lies, Al these Baron commenting remarks, the negative.” avers rule are expressions “I whether those general said: doubt derson They weight but strong. evidence, too it some in order to cast the onus there should be evidence start Janson, W., 13 M. & another the other side.” Elkin So case, said, supply the want of rule, “is allowed to English * * * * *' * defendant; but when necessary proof against a considering been it is rule given, applied has or presumptive, whether direct against him, the evidence weight unrebutted, by contrary or not weakened evi unopposed, when it is produce, if power be in the dence, which would defendant’s ’’' v. Burdett, not true. Bex presumptively proved fact directly 4 B. A.,& lay opinion, down the reasonable quoted,

The utterances here our the rule so limited applying limitations proper rule; in- should have think that the present case, we “to before the defendant it,” evidence of fraud start troduced some of the debts. could called the many detail purpose no discuss It would useful subserve sup- leading cases question. on the main Most bearing cases it, well Mr. as those port Bump, the rule laid down have text, note to his which we in the foot are cited that author heretofore referred. and affirm to our former ruling, we adhere given,

For reasons the judgment. Affirmed. March

Delivered

Case Details

Case Name: Compton, Ault & Co. v. Marshall

Court Name: Texas Supreme Court

Date Published: Jun 21, 1895

Citations: 27 S.W. 121; 88 Tex. 50; No. 185.

Docket Number: No. 185.

Court Abbreviation: Tex.