Carlton, Clark & Co. v. Baldwin , 22 Tex. 724 ( 1859 )

Roberts, J.

The appellants having recovered a judgment in June, 1854, against Louis E. Salles, and an execution having been levied upon goods, wares and merchandise in possession of the appellee, the same was claimed by him, and bond was given to try the right of property.

The evidence, issues, and charge of the court, in this case, were substantially the same as they were in the case of Baldwin v. Peet, Sims & Co., (supra 708,) just decided in this court, and the verdict and judgment were rendered in favor of the appellee, which is exactly the reverse of that in the other case. A motion for a new trial was made by the appellants, on the ground that the verdict was contrary to the law and evidence; which was overruled by the court. This ruling being assigned as error, constitutes the only question in the case.

The case being before us now upon the facts, it is to be determined, whether they show the deed to have been made with a fraudulent intent as to purchasers. In this we may be much aided by the opinions delivered in courts of equity, where this subject is most usually adjudicated, and where the court determined the facts as well as the law of the case. General assign-merits in trust, for the benefit of creditors, with the rules pertaining to them, apart from statutory regulations, may be said to be the creatures of courts of equity. In reviewing a case of this sort, the principles which have directed courts of equity in relation" to the subject, are peculiarly applicable, notwithstanding it has happened, from our judicial organization and mode of procedure, that a jury has passed upon the facts of the case.

However single and definite the question usually to be determined,—was the assignment made with a fraudulent intent to hinder and delay creditors ?—the commercial transactions, from which the answer must be deduced, as exhibited both in the stipulations of the deed, and in extrinsic evidence, often involve the most complicated considerations. And the considerations are still much more complicated, when it becomes necessary for the jury to solve the question, whether or not the terms of the assignment,- in connection with the other facts, lead to the conclusion, that the assignment is a device contrived for the purpose of indirectly retaining such control, advantage or benefit, as will render the deed void.

As these are questions of fact, to be submitted to the jury, there are no means of sustaining the principles of equity, which originated, uphold, and control assignments, but by setting aside verdicts, ifhen they are found contrary to them.

A general assignment, by a failing debtor, of his effects, to be distributed pro rata amongst his creditors, almost necessarily delays some of the creditors, especially as in this case, where judgments are obtained in a few months after the assignment is executed. This produces an injury as to such creditors. How far this delay may be necessary, in order to accomplish the honest object of an equal distribution, must depend upon the character and condition of the property assigned, and of the debts to be secured and paid. (Hardy v. Skinner, 9 Ired. Law Rep. 191; Mitchell v. Beal, 8 Yerg. Rep. 134; Farmers’Bank v. Douglass, 11 Sm. & Marsh. Rep. 469; Ward v. Trotter, 3 Monr. Rep. 1; Hindman v. Dill, 11 Ala. Rep. 689.)

Any special provisions, liable to produce unnecessary delay, or to complicate tbe transaction, or subject tbe property to loss, must be regarded as raising a strong presumption of a fraudulent intent, or covert advantage reserved, which should annul the deed, unless satisfactorily explained by other facts.

One of the prominent badges of fraud, is the provision in the deed, which gives the trustee the discretion to sell the goods on a credit. This is held, in some States, to be fraud per se. (Burrill on Assignments, 197-8, note 1.) It is so held, because its tendency to hinder and delay creditors is so forcible and certain, as to raise a conclusive presumption that such effect was intended. (Barney v. Griffin, 2 Comst. Rep. 365.) And where it has not been held conclusive, it has been regarded as a circumstance to be well considered. (Abercrombie v. Bradford, 16 Ala. Rep. 560.)

As the trustee is usually the friend, and may be appointed because he is under the influence, of the assignor, this unlimited discretion of selling on a credit, especially when coupled with the further discretion to dispose of the goods at private sale, may be used as an indirect means of control, for the assignor’s benefit, to the injury of the creditors. The reason why it was given in this case, is not explained by the facts. It is not shown that some of the debts were not due for some considerable time, or that the goods were not in condition to be immediately put in the market. (Cunningham v. Freeborn, 11 Wend. Rep. 240.)

The limitation of the responsibility of the trustee, so as to excuse him from being answerable for the “negligence and misdoings” of others, is a badge of fraud. (Burrill on Assignments, 208-9.) And where it has been sustained, it has been construed, not to exempt him from the exercise of proper prudence in the selection of agents in the business, and a due supervision of their acts. (Ashurst v. Martin, 9 Port. Ala. Rep. 576.)

But this becomes still more forcible, when taken in connection with the appointment of attorneys by the assignor. Why thrust upon the assignee particular attorneys, either to advise or assist him in the business ? There is no explanation, either of the limitation of the responsibility of the trustee, or of the selection of attorneys.

The reservation of over eleven hundred dollars, only a small part of which was the proceeds of the sale of articles exempt by law, done secretly as it was, is a badge of fraud. And the manner in which most of it has been spent, tends to show that it was not reserved to be appropriated to the wife, in payment of a debt due her, if her claim was such as to be recognized as a valid debt. (Burrill on Assignments, 168, 175, 225.)

A very important part of the letter given in evidence, is that which asks the interposition of one of the creditors to procure the rest to release the debtor from his liabilities; and this may furnish an explanation of the reason, why so many special provisions were placed in the deed of assignment; and such unlimited discretiongiventothe trustee, and attorneys were selected; so that the uncertainty and remoteness of realizing anything, and the possible power indirectly retained over the funds, might force the creditors into a consent to the assignment, and a release of the surplus of their claims. Such control, covertly devised, (under provisions not in themselves necessarily fraudulent,) for such a purpose, would render the deed fraudulent as to creditors. (Grazzam v. Poyntz, 4 Ala. Rep. 374.)

We see no reason in the facts of the case, as now presented, why the assignment should not have been a plain, direct and immediate application of the effects of the debtor to the payment of his creditors; and the terms of the assignment, variant from this, being badges of fraud, not being explained, but their force being rather increased by extrinsic facts, we are of opinion, that the deed cannot be sustained as a valid assignment, but that it was made in fraud of creditors, and should certainly have been so found by the jury. Another trial possibly may present it in a different light. The judgment is reversed and the cause remanded.

Reversed and remanded.