210 S.W. 976 | Tex. App. | 1919
Lead Opinion
Appellant, H. M. Houston, as purchaser under a judgment against the Farmers’ &.Ginners’ Cotton Oil Company, Incorporated, and J. L. Hunter, jointly, brought suit in the district court of Travis county against appellees, H. H. Shear, the Austin National Bank, the Boatmen’s Bank, D. T. Bomar, E. P. Wilmot, and C. R. Laws, as grantees and assignees of such judgment debtors, to redeem certain properties claimed to have been purchased by him at execution sale. From a judgment denying the right of redemption and the cancellation of the several sheriff’s deeds under which he claims title, appellant prosecutes this appeal.
The trial court’s findings of fact are both lengthy and elaborate. For'a consideration of the merit of the several questions raised we do not deem it necessary that there be a reiteration of these findings. Such findings as we conceive to be controlling of the substantive rights involved, supplemented by such as are particularly referred to in the body of the opinion, may be summarized in the following:
Findings of Fact.
(1) On February 17, 1914, J. L. Hunter conveyed to the Farmers’ & dinners’ Cotton Oil Company, a corporation, designated real estate in Travis county, for which it executed, in part consideration therefor, its certain vendor’s lien note for $15,000, which, of contemporaneous date, was transferred by the grantor, J. L. Hunter, to D. T. Bomar.
(2) Subsequent to this transaction, and at various times prior to November 19, 1915, the date upon which certain creditors brought a bankruptcy proceeding against the Farmers’ & dinners’ Cotton Oil Company, said company had executed to the several appellees notes secured by deeds of trust in various amounts on which there was due and owing at the time of trial approximately the sum of $95,000. The parties agreed that at the date,of trial the properties had a value of $85,000.
(3) In addition to the secured indebtedness against the properties, appellees, or certain of them, had paid out, or caused to be paid out, for the protection and preservation of the properties, at the date of trial some $4,396.28.
(4) On November 19,1915, as previously recited, certain creditors filed a petition in involuntary bankruptcy against the Farmers’ ⅜ Ginners’ Cotton Oil Company, alleging as grounds therefor acts of bankruptcy and insolvency. The corporation answered under oath, denying such acts and the fact of its insolvency. Subsequent to the filing of the petition no further action was taken in the proceeding until a composition was- effected with its general creditors, as hereinafter stated, it being agreed that there had been no adjudication of the alleged bankrupt in the proceeding referred .to, that no trustee was ' ever appointed, and that at no time were the : properties of the Farmers’ & Ginners’ Cotton Oil Company ever placed in the actual possession of a bankruptcy court through the agency of a receiver or otherwise.
(5) February 8, 1916,- and subsequent to the institution of the- bankruptcy proceeding, one M. M. Graves obtained judgment in Harris county, Tex., against the Farmers’ & Ginners’ Cotton Oil Company and J. L. Hunter, jointly, for the sum of $273. Execution issued thereon, and the properties in controversy were sold by the sheriff of Travis county, Tex., to appellant on July 4,1916, for the aggregate sum of $85, and properly executed deeds, pursuant to sheriff’s sale, were placed of record in the deed records of Travis county on July 6, 1916. The state court rendering the judgment against th'e Farmers’ & Ginners’ Cotton Oil Company and its code-fendant, J. L. Hunter, had no actual notice of the proceeding in bankruptcy against the former, and it is admitted that no action was taken to stay the proceedings in the state court subsequent to the filing of the petition in involuntary bankruptcy. It appears that appellant was notified of the pendency of the bankruptcy proceedings on the day of sale and shortly prior to his purchase at execution sale.
(6) July 10, 1916, the Farmers’ & Ginners’ Cotton Oil Company, in consideration of the cancellation and discharge of the lien indebtedness against the properties, executed its deed of conveyance to appellees, C. R. Laws, E. P. Wilmot, and B. T. Bom-ar. Subsequently, and prior to February 15, 1917, appellees Laws, Wilmot, and Bomar conveyed the properties which they had acquired to the appel-lee H. H. Shear, who is the real contestant of appellant herein. On the date last mentioned the Farmers’ & Ginners’ Cotton Oil Company filed in the court of bankruptcy an offer of composition with its general and unsecured creditors, which, after appropriate notice and a compliance with other prerequisites, was in all things confirmed by the court, and on March 20,1917, the proceeding against the corporation was in all things dismissed.
Opinion.
We shall review the availability and the validity of these contentions in the order out-: lined.
Statutes governing executions are, for the most part, directory' in their nature. Pearson v. Flanagan, 52 Tex. 266; Odie v. Frost, 59 Tex. 684. And, as stated in Allen v. Pearson, 60 Tex. 607:
“ * * * It is apprehended that under no system would a-more irregularity, when taken in connection with gross inadequacy of consideration, be held sufficient ground for vacating a judicial sale, unless that irregularity in some way conduced to that inadequacy.”
The principle is again reiterated in House v. Robertson, 89 Tex. 687, 36 S. W. 252, in which the Supreme Court says:'
“It is true that inadequacy of price alone is not as a rule a sufficient reason for avoiding a sheriff’s sale * * * under a valid judgment and execution, but, when the price paid for the land at such sale is enormously inadequate and disproportioned to the value of the land sold, slight irregularities will be sufficient to justify setting the sale aside by a direct proceeding for that purpose. Allen v. Stephens, 18 Tex. 672; Taul v. Wright, 45 Tex. 395.”
If this view is tenable, the authority for the exertion of exclusive and summary jurisdiction by the court of bankruptcy must find enumeration in the Acts of Congress prescribing a “uniform system of bankruptcy of the United States and Territories” (U. 'S. Comp. St. §§ 9585-9656), since it is fundamental that such tribunals are creations of statute, and can-exercise no jurisdictional powers other than those authorized.
“It is the purpose of the bankruptcy law, passed in pursuance of the power of Congress, to establish a uniform system of bankruptcy throughout the United States, to place the property of the bankrupt under the control of the court, -wherever it is found, with the view to its equal distribution among the creditors. The filing of the petition is an assertion of jurisdiction with a view to the determination of the status of the bankrupt and a settlement and distribution of his estate. The exclusive jurisdiction of the bankruptcy court is so far in rem that the estate is regarded as in custodia legis from the filing of the petition. It is true that under section 70a of the Act of 1898 [U. S. Comp. St. § 9654], the trustee of the estate, on his appointment and qualification, is vested by operation of law with the title of the bank; rupt as of the date he was adjudicated a bankrupt, but-there are many provisions of the law which show its purpose to hold the propérty of*980 the bankrupt intact from the time of the filing of the'petition, in order that it may he administered under the law if an adjudication in bankruptcy shall follow the beginning of the proceedings. * * * ”
The question, therefore, is, Did the admitted failure hy the court of bankruptcy to exercise ¿my of the powers which would have withdrawn the estate of the bankrupt from interference on the part of other courts leave the latter free to entertain suits against the bankrupt, and' the corresponding power to reach the properties of the bankrupt, title to which was in it at the time a sale was had pursuant to the judgment of the state court? To hold negatively would be to announce that state courts, or any other court than the initial court of bankruptcy, must take judicial cognizance of the proceedings in that court, contrary to well-settled judicial announcements. Conner v. Long, 104 U. S. 228, 26 L. Ed. 726; Bank v. Bray, 132 S. W. 968.
“If the commencement of bankruptcy proceedings without more, without any act of the bankruptcy court, or any of its officers, to give notice to. adverse claimants, or to reduce the property claimed to belong to the bankrupt to the possession of the officers of that court as his property, gives it constructive possession, and hence a legal custody that enables it to determine by summary proceedings the merits, of adverse claims to liens and titles to such property in the actual possession of others, then no case could ever arise iu which any other court could have jurisdiction by plenary suit to determine the merits of such claims; for in every case a bankruptcy proceeding is commenced, and the only ground on which the jurisdiction to determine summarily the merits of such claims is sustained is that the bankruptcy court’s legal custody of the property excludes the jurisdiction of every,other court, and gives it the power to détermine summarily all claims to liens upon, or interests in, the property in such custody. But this theory flies in the face of the settled rule, repeatedly announced by the Supreme Court, that the actual possession by the bankruptcy court is the indispensable condition of its exclusive and of its summary jurisdiction. here.”
“Upon the confirmation of a composition offered by a bankrupt, the title to his property shall thereupon reinvest in him.”
. It requires no extended comment to show that the provisions cannot be properly invoked here to defeat the rights acquired by appellant as purchaser at execution sale. For the bankrupt to be reinvested with title means, if the word “reinvest” is to be given the meaning and application apparently intended, that the owner of the title is to receive it anew. This necessarily implies that, before there could be any reinvestment, there must have been a divestment of the title. If, as undisputed, there was no divestment of title because of no adjudication and no appointment of a trustee in whom the title, under operation of the act, vests, how could the bankrupt, appellees’ assignor, be reinvestéd with title to the estate upon the confirmation of the composition, when none of the conditions which would, have divested it of title were ever called into operation? The bankrupt was never divested of title to his estate in contemplation of the section relied upon, and since, prior to a confirmation, appellant purchased such title as the defendant in execution then had, his rights as purchaser could not be affected by a composition proceeding to which he was not a party.
It was held by this court' in Harrigan v. Quay, 27 S. W. 897, that “the fact that a corporation may be insolvent does not deprive the creditor of his right to sue it and to levy upon its property to satisfy his judgment.” To the same effect is Moon v. Grain Co., 13 Tex. Civ. App. 103, 35 S. W. 339, by
It will he observed that in the first case above cited nothing is said about the corporation having ceased to do business. In the second case the defendant's alleged that the Grain Company had not ceased to do business when the attachment was levied; and the findings of fact show that this was true, though the Grain Company was then insolvent.
In Wright v. Euless, 12 Tex. Civ. App. 136, 34 S. W. 302, it was held by the Court of Civil Appeals for the Second District that a creditor who attaches the property of an insolvent corporation, which has ceased to be a going concern, acquires no right thereby as against other creditors of such corporation. To the same effect is Rogers v. Lumber Co., 11 Tex. Civ. App. 108, 33 S. W. 312.
These decisions are based upon the doctrine announced by our Supreme Court in Lyons Thomas Hardware Co. v. Perry Stove Co., 86 Tex. 143, 24 S. W. 16, 22 L. R. A. 802, and Orr Shoe Co. v. Thompson, 89 Tex. 502, 35 S. W. 473. In the latter case Mr. Justice Brown, speaking for the court, said:
“In the ease of Lyons Thomas Hardware Co. v. Perry Stove Mfg. Co., 86 Tex. 143 [24 S. W. 16, 22 L. R, A. 802], this court held that when a corporation becomes insolvent and has ceased to do business, or, by the act of making a deed of trust, mortgage, or conveyance of its property, terminates its business with no intention or ability to resume it, it has no power to give preference to one or more of its creditors over others; but its assets become a trust fund in the hands of its directors, to be distributed pro rata among its creditors to the extent that such assets are not incumbered by valid prior liens. The rights of all creditors in the fund are by law fixed so soon as the conditions arise out of which the trust relation springs. After the trust attaches, neither the corporation nor the trustees can by any act of theirs affect the rights of the creditors, and we think that it necessarily follows that no i creditor can, by any act of diligence on his part, accomplish that which neither the corporation nor trustees could do by agreement with him. In such case the trust attaches in favor of creditors without acceptance by them. If one could secure an advantage by garnishment or attachment over other creditors, the equality of right created by law would be destroyed. Indeed, it would be a remarkable proposition to say that one by legal process may appropriate to ■himself that which belongs equally to him and to others.”
It being admitted by the parties hereto that the Gin Company was insolvent, and bad ceased to do business wllen the execution was levied on its property, the sale under such execution conveyed no title, as against the rights of other creditors of said corporation. But no such creditors are asserting any rights to such property in this suit. No such creditors are parties to this suit. In this respect this ease is similar to the case of Florsheim v. Wettermark, 10 Tex. Civ. App. 102, 30 S. W. 506. The attempt to have such distribution made by the bankruptcy court was abandoned when the proceedings therein were dismissed under the composition proceedings.
As stated in Lyons v. Perry and in Orr v. Thompson, supra, upon the Gin Company becoming insolvent and ceasing to do business, title to its property was vested in its officers; but such title was a special title, held in trust for the benefit of creditors. This title ceased when the debts of the creditors, the beneficiaries in such trust, were discharged. There can be no trust estate without a cestui que trust.
For the reasons hereinbefore stated in our discussion of the effect of the bankruptcy proceedings, we hold that title to its property remained in the Gin Company, notwithstanding that it became insolvent and ceased to do business, subordinate only to the special title vested by law in its officers in trust for the creditors of such corporation. Such trust estate having ceased, its former existence presents no impediment to the title acquired by appellant under the sheriff’s sale.
The finding is, in essence, a deduction from the facts testified to by appellant alone. The evidence on the issue, so far as material, is as follows:
“I did not at any time prior to the filing of the petition in this case know the exact amount of money that was due on the various liens, principal, interest, and attorneys’ fees, machinery liens, insurance charges, and other matters that constituted charges against these properties. I am now ready and able and have the ability to pay such amount as may be found to be due on such items against this property if it is given to me by way of redemption. * * *
“With regard to my statement that I had the ability and the readiness to redeem this property, I have not the money arranged and in bank to pay for this property if it should be adjudged to me, but it will be there within forty-eight hours. I have in my pocket a contract that I think would satisfy the court. That contract is not yet executed and put in the shape of money. My estimate is that it would take for*982 ty-eight hours to- get that money up. 1 am contributing to the extent of twenty-five thousand dollars to buy the property. That amount of money is all provided for; I can borrow it. All of the remainder is provided for. 1 have made provision for and can borrow twenty-five thousand dollars as my part of it. As to the remainder, I have a contract in relation to it; it is executed, but not converted into money. That contract is executed by thoroughly substantial persons. My interest in the redemption of this property that I am seeking in this suit is limited to twenty-five thousand dollars. If this property should be redeemed, there are other parties that will furnish the principal part of the money. As to my not being interested in it further than I have stated, I have a contract with those parties for the control and operation of the business. I have an arrangement with reference to operating it and controlling it for the several owners of the property. I have made provision for a sum of money which, in the opinion of my attorneys, is in excess of any possible decree of the court, and to provide for any additional expense connected with acquiring the property and putting it in running condition and doing business and for paying attorneys’ fees. That sum is §140,000. That includes the payment of attorneys’ fees and necessary expenses to put the mill in proper running order. The amount allowed for those expenses is what is left over and above the decree of the court. I have figured on an amount that will bo left over, but have not arrived at it. I have figured on an amount of about $126,-000, and the other $14,000 would be expended in the manner I have indicated. I do not say that $120,000 is the maximum amount that would be available to redeem the property. I have already stated that whatever amount would be needed to redeem the property up to $140,000 was available for that purpose. In other words, I figure that $140,000 would cover whatever might be necessary for me to pay to redeem the property, pay my attorneys’ fees-, and put the mill in proper running order. None of the parties who are to bo interested in this property, if it is redeemed, are parties to this suit except myself. * * *
“The arrangement referred to is to become effective after I secure the property in this proceeding, if I do secure it. It is tentative, and depends upon the recovery by me of the property in this suit. My arrangement is to raise as much as $140,000, and to use such portion of it as may be necessary to redeem these properties, the balance, if any, to be used for the other purposes I have mentioned.”
Appellees seek to defend the correctness of the court’s finding upon the grounds, generally, (1) that, no offer of redemption having been made prior to the filing of the bill, the right to redeem, was lost; (2) that there was no or insufficient evidence which would have justified the court in finding that appellant was either ready, able, or willing to make good his tender by paying off the liens and charges against the properties; and (3) that he was not seeking to redeem the properties for himself, but for the use and benefit of others. ;
It being undisputed that no tender was made by appellant to appellees or their predecessors in interest prior to the filing of the bill, did this failure cut off the equity of redemption where it is both alleged and shown that, prior to the institution of suit, he did not know the exact amount of lien indebtedness against the property, nor with certainty of the distributive interests of the several appellees? That appellant might have made the ascertainment with certainty is strongly suggested. Still we do not understand, nor have we found any well-considered adjudication announcing the requirement, that the redemption must, as an indispensable condition to the exercise of the right of redemption, make his tender prior to the filing of suit. An offer to pay what is due, if incorporated in the bill, is sufficient. Spann v. Sterns, 18 Tex. 563; Ward v. Worsham, 78 Tex. 180, 14 S. W. 453; Perego v. White, 77 Tex. 106, 13 S. W. 974; Maloney v. Ealieart, 81 Tex. 283, 16 S. W. 1030; 27 Cyc. title Mortgages, p. 1845. Appellant met this requirement, specifically alleging:
“ * ⅜ * Plaintiff further avers that, through the public records, or any other means at his hands, he is not able to determine with any degree of accuracy the total amount of money which is required to be paid by him for the purpose of having the title to all of the above-described property vested in him; but plaintiff further avers that he is ready, able, and willing, and hereby offers, to pay such of said defendants, or their assigns, as upon trial of this cause may be found to be entitled to receive same, the full amount of money which the court may decree that be should be required to pay in order to redeem all of said property from said liens and to have the title thereto vested in Mm.”
For reasons stated the cause is reversed and remanded for a new trial in accordance with the principles herein announced. Reversed and remanded.
<g^;For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes
@=>Eor other cases see same topic and KEY-NUMBER in all Key-Numbered'Digests and Indexes
Rehearing
On Motions for Rehearing.
Upon grounds and for reasons assigned in an opinion, rendered herein on January 15, 1919, we reversed and remanded this cause. In this disposition we still adhere. We find, however, upon an examination of the pending motions for rehearing, that we failed to make a specific disposition of certain of the issues which, in two inspects at least, we conceive to be material to the rights of the parties.
The first is whether appellant, as purchaser of the properties of the Farmers’ & Ginnners’ Cotton Oil Company and one of the gin properties, would, upon payment of all the primary liens resting against the mill properties which would operate as a discharge of the secondary liens against the gin properties, be entitled, under the doctrine of subrogation, to assert title to such unacquired gin properties.
The second is whether the moneys derived by the appellee Shear, or his predecessors in intei-est, from the sale and rental of designated gin properties, and the collections realized on account of the destruction of certain gin properties by fire, and employed by ap-pellee in effecting the composition with the general creditors of the Farmers’ & Ginners’ Cotton Oil Company, should be deducted from the amount to be paid by appellant by way of redemption, where it appears that the property sold, as well as the property destroyed, was incumbered to secure liens which must must be discharged by appellee as a condition to his exercise of the right of redemption.
Our additional findings of fact upon these respective contentions may be summarized as follows:
1. The Farmers’ & Ginners’ Cotton Oil Company, at various dates prior to November 19, 1915, the date upon which certain of its general creditors filed a petition in involuntary bankruptcy against it, had borrowed on its promissory obligations sums which, with interest and attorney’s fees computed to the date of judgment rendered herein, aggregated some $137,000. This indebtedness was secured, or sought to be secured, by a pledge or hypothecation of all of its assets, consisting of certain acreage, mill sites, improvements, etc., located in the city of Austin. J. L. Hunter, who, as found in the original opinion, was a joint judgment debtor with the Farmers’ & Ginners’ Cotton Oil Company, under which appellant, Houston,
First. Two acres, constituting the Eel Valle gin.
Second. One and three-tenths acres, constituting the Creedmoor gin.
Third. Lots 6, 7, 8, 9, 10, 11, 12, and 13, block 2, town of Sprinkle.
Fourth. Lots 19 and 20, block 2, town of Sprinkle.
Fifth. Lots 5 and 14, block 2, town of Sprinkle.
Sixth. Lots 19 and 20, block 2, town of Spriukle.
Seventh. Two acres, more or less, constituting the El Roy gin.
Eighth. Lot No. S, known as “gin lot.”
Ninth. Leasehold interest in outlot No. 2, block No. 7, covering all gin stands, gin machinery, etc., located thereon.
At execution sale appellant purchased of the gin properties only the third and fourth items of the foregoing schedules, the property so acquired being commonly known as the “Sprinkle gin property.”
2. From the stipulations and agreements of the parties we adopt the following:
“20. It was further agreed and admitted by the parties that, subsequent to the execution and delivery of the deeds of trust of the Austin National Bank and the Boatman’s Bank, here-inbefore referred to, certain gin property located on said lots in the town of Sprinkle was destroyed by fire, and the sum of $3,306.48 was collected by the owners of the notes secured by liens on said property, as they were entitled to under the provisions of the deeds of trust; also that the sum of $180 was received by G. R. Laws, as rentals from the gin properties here-inbefore referred to, for the ginning season of 1916-1917, and the further sum of $75 was refunded to said C. R. Laws on account of insurance paid on said El Roy gin at the time same was sold to A. W. Johnson.”
It was' further agreed and admitted by the parties that—
“in the purchase of said property by the defendant H. H. Shear it was a part of said trade that he ,was to offer the composition in bankruptcy which was offered, and that $10,000 was deposited by him for said purpose in accordance with said agreement; that the amount of the proceeds of the sale of the El Roy gin, to wit, $S,500, and the $3,306.48 insurance money collected' on the Sprinkle gin, less the amount set out in Exhibit B, aggregating $4,-046.61, was paid to the defendant Shear, as alleged in his first supplemental answer in this cause, akh ¿hat said'net amount, being $7,759.-' 77, constituted a part of the $10,000, and was deposited by the defendant Shear for said composition ; that of the said $10,000 the sum of $9,776.49 was used in effecting said composition, and the balance thereof, to wit, $223.51, is to be returned by the bankruptcy court to the defendant Shear.”
The respective motions are overruled.
Motions overruled.
Rehearing
On Appellees’ Second Motion for Eehearing.
In the concluding paragraph of an opinion rendered herein April 16, 1019, upon rehearing, we held that so much of the fund as was employed by the appellee IT. H. Shear in effecting a composition with the general creditors of the Farmers’ & Ginners’ Cotton Oil Company, which was immediately derived from the sale of the Elroy gin, the rental upon the gin properties for the season of 1916-1917, and the insurance money collected on account of the destruction of what is referred to in the record as the “Sprinkle gin property,” should be deducted from the amount to be paid by appellant in redemption of the several properties to which we have held his right of redemption extended.
To the extent that this opinion modifies the opinions heretofore filed, the motion is sustained, and in all other respects it is overruled.