Weis Bros. v. Dittman , 4 Tex. Civ. App. 35 ( 1893 )

WILLIAMS, Associate Justice.

This suit was brought by appellants, as accepting creditors under a statutory assignment made by H. Amthor for the benefit of creditors, the assignee having declined to bring it, to set aside certain conveyances of property made by the assignor to the appellee previous to the assignment, and to reduce such property to the possession and control of the assignee, to be applied to the payment of creditors. The petition charged, that the conveyances were made in contemplation of the assignment, and with intent to defeat, delay, and defraud creditors, and with intent to give preference to one creditor over others. It was further alleged, that the conveyances were made to appellee as mortgages to secure debts claimed by him against the assignor; and a prayer in the alternative was made, that if this.should be found to be the case, and the transactions held to be valid as mortgages, the property be sold and the excess, after satisfying appellee’s claims thus secured, which were alleged to be much less than the value of such property, be declared assets in the hands of the assignee.

Appellee denied all the material allegations, and the case was tried before a jury and a verdict was rendered for defendant.

At the request of the plaintiff, the court gave certain instructions to the jury upon the law of the case, and submitted special issues intended to obtain findings of fact from which the court could determine whether or not the conveyances were fraudulent; and also whether they were absolute or were intended as mortgages. The judge also prepared and gave other instructions upon the law of the case, among which were the following:

“ If you find that the sale and conveyance to Dittman was fraudulent and void, under the two preceding sections of the charge, then you will proceed to find from the evidence the true answers to the special issues or questions propounded you in the charges asked by plaintiff, which are given as a whole, both issues and law, as contained therein, with this charge as the law of the case, which you are to consider in connection with this charge.” “Unless you find from the evidence that Amthor conveyed said property, contemplating an assignment and for the purpose of hindering, delaying, and defrauding his creditors, and that Dittman knew that was his intention at the time he purchased it, or could have known it by the use of ordinary diligence and inquiry, then you must find for the defendant, Dittman.”

The jury made no finding in answer to the special issues, but returned a general verdict in behalf of defendant.

Both of these instructions are assigned as error; and concerning them, it is claimed by appellants that they were injurious to them in relieving the jury from the duty of passing upon the special issues, except in the event they determined that the deeds were made with the fraudulent intent specified.

The method of submitting the case to the jury, whether upon the general issue or upon the special issues, was largely discretionary with the court below. Having the right to refuse to submit special issues, it was not necessarily a reversible error to withdraw them after they were submitted. To make it such, some injury must have resulted to the party complaining. Here, however, the facts especially called to the attention of the jury by the special issues were those upon the existence or nonexistence of which the question, whether or not the deeds were fraudulent in law, depended.

There was evidence tending to prove the honesty of Amthor in these transactions, and the absence of any intent actually corrupt on his part. But there was also evidence which tended to show a state of facts which deprived him of the right to make the conveyances, and to constitute them fraudulent in the sense of the law, because of their effect upon the rights of other creditors. The finding of these facts was sought by the special issues. The charge, which, in effect, informed the jury that unless they found a fraudulent purpose on Amthor’s part,they need not consider the questions presented in the special issues, was very well calculated to impress them with the belief that they must first find a fraudulent purpose on Amthor’s part before the other facts sought to be elicited could have any effect; in other words, that the fraud charged might not result from the effect of the conveyances upon the rights of creditors as well as from an established purpose in Amthor’s mind to defraud them.

Facts were charged which, if established, would avoid the conveyance under the statute of frauds, without reference to the assignment law. Those transactions were attacked on both grounds. Though the deeds may not have been made in contemplation of the assignment and with the specific intent charged, they may still have been fraudulent as against creditors under the general rules of law upon that subject. The plaintiffs having requested charges submitting issues intended to ascertain the facts upon which the latter question would depend, were entitled to have the jury pass upon the issue in some form, and of this right we think the charges quoted, in effect, deprive them.

Another objection to these charges, which we think is well taken, is, that they withdrew from the jury the issue submitted in the charges requested by appellants as to whether or not the deeds were given as absolute sales or as security for debts. There was some evidence that the deed and bill of sale of December 6, 1887, were intended merely as securities for a debt due from Amthor to Dittman, and that the property was worth much more than the debt, though as to both facts there was a conflict of testimony.

For these errors the judgment must be reversed. It is unnecessary to enter upon a discussion of the rules of law by which the validity of the deeds is to be determined, as they are well settled and understood.

In connection with the deed of December 12, 1887, a question is presented which, in view of another trial, it is proper for us to decide. In that transaction, appellee bought from Amthor the land conveyed by that deed, paying him §3900 in cash. It was stated at the time by Amthor that he wanted the money to pay some debts. He was insolvent, and the next day made the assignment. He did, according to his testimony, pay one debt out of the money received from this sale before he assigned, and paid out the whole of the remainder of the consideration upon other debts after the assignment was complete. It is now well settled by the decisions in this State, that a purchaser who knows or has just reason to believe his vendor to be insolvent, and who pays cash for the property bought under such circumstances, must see that it is applied to the discharge of debts of the vendor, in order to make valid the conveyance. The debtor having the right to prefer his creditors, the law does not ordinarily concern itself with the application of the consideration, further than to require that it be made to the discharge of just and valid debts. But the debtor has not the right to make an assignment and retain the money in his hands for the purpose of preferring certain of his creditors above the others. With the making of the assignment his right to prefer comes to an end, and the money in his hands passes with his other assets to his assignee for the benefit of all his creditors. The principle which requires the purchaser from a debtor known to be insolvent to see to the application of the purchase money, exacts of him that he see to the lawful application of it. It is because the application is lawful that his conveyance is upheld, the law permitting him to aid the debtor in doing that which it permits the latter to do.

It does not permit him, however, by his improvident action to place it in the power of the debtor to practice a fraud upon his creditors. That is just what appellee by this purchase did, if he knew or ought to have known that Amthor was insolvent.

Delivered September 14, 1893.

It' is urged by appellee, that the deed was complete and valid when made, and was not affected by the subsequent action of Amthor. But such is not the law. Such a conveyance by a debtor known to be insolvent is permitted by law upon condition that the consideration is lawfully applied.

That Amthor thought the debts which he paid after he had assigned, and which he had individually contracted, were superior to those incurred in the mercantile business conducted by Braden, for which Amthor was liable, can not affect the question. After the assignment all creditors had the right to an equal participation in the money. The proper application for Amthor to have made of it was to turn it over to his assignee. In not doing so he practiced a legal fraud upon those of his creditors who were excluded from the benefit of it.

Our conclusion is, that Amthor being insolvent when this deed was made, it can not be upheld if appellee knew of such insolvency, or knew of circumstances which should have put him on inquiry.

As to whether the conveyances were made in contemplation of the assignment, and with the intent charged, and as to other questions of fact upon which the case depends, we express no opinion, as they should be submitted to the jury upon the evidence. The other objections to the charge are not well taken.

Reversed and remanded.