Blackwell v. Farmers & Merchants National Bank , 97 Tex. 445 ( 1904 )

J.E. Blackwell and B.L. Durham were partners in the drug business with a stock of goods which, for convenience, is called the "Laclede stock." Desiring to purchase another stock called the "Overton stock," they borrowed from the Farmers and Merchants National Bank $2819 with which to pay for it, and executed six promissory notes payable at different dates, five for $500 each and the sixth for $319. The purchase of the Overton stock was consummated, and, for a while thereafter, Blackwell and Durham, as partners, conducted two businesses in separate buildings. They soon agreed upon a dissolution, in which the Laclede stock, against which there was an indebtedness, was assigned to Blackwell, and the Overton stock was assigned to Durham. Durham claims that in this settlement Blackwell agreed to pay the notes given to the bank while Blackwell asserts that he agreed to pay only the note first to fall due, and that Durham assumed the others. Blackwell having paid the first note, and the second and third becoming due, the bank sued Blackwell and Durham upon them. Durham also instituted a suit against Blackwell, of which it needs only to be stated that it involved the controversy between them, as to the assumption of the notes held by the bank. Before the trial the two cases were consolidated, over the objection of the bank, and were tried together, resulting in the judgment now before us for revision. In the consolidated causes, neither of the defendants denied liability to the bank or claimed that at the inception of this indebtedness either was surety for the other; but each asserted that by the subsequent arrangement between themselves alone, the other assumed this obligation; and Durham also claimed that Blackwell's assumption was secured by a lien on the Laclede stock. The jury, in the District Court, found in favor of Durham that he was only a surety for Blackwell and that he had a lien on the property mentioned to secure Blackwell's obligation. Judgment was rendered in favor of the bank for the amount of the notes sued on against both defendants, but adjudging Blackwell to be principal and Durham a surety, and ordering execution to be first levied on the property of the former. It also declared and foreclosed a lien on the Laclede stock of goods and ordered the same to be sold and the proceeds applied to the payment of the judgment and the other notes held by the bank as they should mature. Blackwell alone appealed, making his supersedeas bond payable to both the bank and Durham.

In the Court of Civil Appeals the bank urged a cross-assignment of error complaining of the feature of the judgment which made Durham a surety and required the levy of the execution first upon the property of Blackwell. The court held that the bank, which had not appealed, could not, upon Blackwell's appeal, assign errors committed in favor of its coappellee Durham, and declined to consider this assignment. This ruling is sustained by the decision in Anderson v. Silliman, 92 Tex. 560. The bank also suggested that Blackwell's appeal as against it was for delay only and asked for judgment for the statutory damages, which was granted by the court upon its affirmance of the judgment below. This action is assigned as error here, but it will aid in the determination of the point to first pass upon the other assignments.

The Court of Civil Appeals correctly disposed of the point made as to the disqualification of the trial judge, and we need add nothing upon that subject. We think, however, there was error in adjudging a lien to exist upon the property of plaintiff in error. During the existence of a partnership each partner has a lien upon the partnership assets to secure the payment of the partnership debts, and this lien continues to exist after dissolution unless it is waived. But it is generally, though not universally, held that if one partner sells out to the other, the latter assuming payment of the debts, or if there is a division of the partnership property accompanied by a mere assumption of debts, the acceptance of the agreement to pay the debts is a waiver of the lien. This doctrine has been clearly announced in the decisions of this court. White v. Parrish, 20 Tex. 689; Rogers v. Nichols, 20 Tex. 724. But in such a sale, or division, the lien may be retained; and it is claimed by counsel for Durham that the facts show that it was retained in this instance. It is said that "if the purchasing partner agrees to pay the debts with or out of the assets, or to apply the assets or the profits to the debts, a trust fund is created, or, rather, the retiring partner has preserved his equity to insist upon an application of the assets to the debts and the courts will enforce it." 1 Bates on Part., sec. 552. It is unnecessary to determine whether this is the law in this State or not, for, if it be conceded that the rule thus is correctly stated, we are of the opinion that this case is not brought within it. The only evidence upon the subject is the following taken from the testimony of Durham:

"He, Blackwell, was to pay off these notes sued upon here. All those notes at the bank with and through his stock of goods at the Laclede building which he got in the division. We figured on how it could be done. He had a lot of accounts, I think some $1500 or $1600 worth, and he was to collect some of them if he could and then reduce his stock to pay off these notes. He had nothing else except this stock that he got to pay with that I know of, except the iron building down here, that he owns and has rented. I considered the property Blackwell got in the dissolution as security for these notes; that is, the stock that Blackwell has situated in the Laclede building. The only thing that was said about that we figured together how he was to pay off this indebtedness. We figured that he ought to be able to collect $1000 or $1200 out of the accounts and reduce the stock on hand by selling out and not replenishing and make the payments easy."

The principle relied on gives to a partner a general lien upon the partnership assets to secure payment of all the partnership debts, and this is the character of lien spoken of in the quotation which may be retained or preserved by one in a sale to another. It is this which is "waived" by a sale or division, without reservation, but which is held to be "preserved" when an intention to preserve it appears from the transaction. But this is not the kind of lien that Durham claims. He asserts a specific lien growing out of the agreement to secure this particular debt, a lien which is the creature of contract. In order to continue in existence the lien created by law it is only necessary, according to the authority relied on, that facts appear to overcome the inference of a waiver which would arise from a sale or division in consideration of a mere assumption of debts. But it is evident that facts which might justify an inference of the retention of this lien would not necessarily be sufficient to show the creation of a lien of a different character. There is no pretense of an agreement that the assets assigned to Blackwell should be devoted to the payment of partnership debts generally, and we are of the opinion that the evidence stated does not show an agreement to pay the particular debt with the property. If the first part of the statement stood alone it might possibly be held to mean that Blackwell made such an agreement; but that which the witness says is all that was said conveys no such meaning. It shows nothing but a discussion concerning Blackwell's probable ability to pay the debts, which might naturally arise in considering the feasibility of the proposed settlement. It evidences no purpose on the part of Durham to make, or of Blackwell to accept, a condition that the property should be applied to the payment of the debt or should be burdened with a lien. Besides what is stated as having been said, the evidence consists wholly of Durham's construction of or conclusion from the discussion. We think, therefore, the charge of the court submitting the question of lien, as well as the verdict and judgment declaring it, are without support in the evidence. Counsel for Durham have stated that no other evidence upon the subject can be had and ask that, if the judgment be held erroneous in this respect, it be reformed and final judgment be entered here, which we think can be done.

We think the Court of Civil Appeals also erred in allowing damages against Blackwell. We are not to be understood as holding that Blackwell and Durham, both of whom incurred this debt as principals, had the right to delay and complicate plaintiff's action by their controversy between themselves, arising out of their subsequent transactions. Such questions are not now of practical concern in the case. The cases were, in fact, consolidated and a judgment was rendered which gave a lien for Durham's benefit upon Blackwell's property to secure the bank's debt. To secure substantial relief from this Blackwell had to appeal and to suspend the judgment pending the appeal and therefore to make the bank a party. The assignments of error which questioned the correctness of this part of the judgment necessarily affected the attitude of the bank under it; and as this complaint is held to be sound we think the statutory penalty as for an appeal prosecuted for delay only should not have been imposed. It is true, however, that no action of the bank occasioned the errors of the District Court, and the judgment of that court is not reversed for any error in its favor. The erroneous features of the judgment arose wholly from the contentions of the other parties. We think, therefore, the bank should not be taxed with any costs of the appeal, but only with those of the writ of error to this court.

The judgment of the Court of Civil Appeals will therefore be reversed and judgment will be rendered here which that court should have rendered; affirming the judgment of the District Court in favor of the bank for the amount of that judgment with interest from its date and all costs incurred by the bank in the District Court and in the appeal to the Court of Civil Appeals, against Durham, Blackwell and the sureties on the appeal bond of the latter; reversing the judgment of the District Court as between Blackwell and Durham, in so far as it adjudges a lien in Durham's favor and reforming it so as to omit such adjudication; but to otherwise remain as rendered, and adjudging in Blackwell's favor against Durham all costs incurred by him in the appeal to the Court of Civil Appeals, and against both Durham and the bank all costs of writ of error to this court.

Affirmed in part; reversed and reformed in part.