Raymond v. Cook , 31 Tex. 373 ( 1868 )

Lindsay, J.

—Although there were many points raised by the pleadings, and on the trial of the cause in the court below, there is but one properly before this court for its revision, and that is, did the court err in deciding that the property of the husband conveyed to his wife, after his liability had accrued as a surety, was subject to the payment of that liability.

The facts presented in the record show that T. W. House had recovered two judgments against S. G-. Haynie, A. H. Cook, the appellee, and ET. C. Raymond, the husband of the appellant; that executions were issued upon these judgments, and were levied upon certain property supposed to be the property of the defendant, ET. C. Raymond; that the appellant, the wife of said Raymond, claimed the property as her separate property, made her affidavit, and executed and delivered a bond, in conformity with the provisions of the statute, to the sheriff, who made the levy. The sheriff, in compliance with the requirements of the statute, made the proper indorsements upon the bond and returned it, with the affidavit, to the clerk of the court, from which the execution issued, by whom it was duly docketed, and thus became a suit in court. Subsequently, but before the trial of an issue as to the right of property, the appellant and her husband filed their petition in court, alleging a fraudulent combination between the creditor, T.

"W. House, and A. H. Cook, a co-defendant in the judgments and a co-surety, (as is alleged in the obligations upon which the judgments were obtained,) for the purpose and with the design and intent of making Raymond, who was but a surety, pay the whole indebtedness to the ereditor, and charging that the co-surety, A. H. Cook, had received from S. GL Haynie, the principal debtor, but who was insolvent, a sufficiency of means or assets to discharge the whole liability, reaffirming the claim to the right of property in the wife, and praying an injunction and other relief against the creditor, T. W. House, and the co-defendant and co-surety, A. H. Cook.

Cook answered, denying the allegations of the petition, and alleging that since the commencement of the litigation he had paid largely more than his pro rata of the indebtedness as a co-surety, and seeking substitution to all the liens of the creditor for the enforcement of his claim, for the purpose of compelling contribution of his co-surety, Raymond, who had become insolvent by the alienation of all his property.

At a subsequent term of the court, upon the motion of the creditor, House, and the co-defendant and co-surety, Cook, the two causes, the claim of property case and the injunction case, were consolidated, and the ruling of the writ thereupon excepted to by Raymond and wife. At a, still later term, but .before the trial term, Raymond and wife, without opposition from the creditor, House, or the co-surety, Cook, dismissed the claim suit, which had been instituted by affidavit and bond, leaving nothing for trial and adjudication by the court but the issues formed by the pleadings and the facts proved in the injunction suit. Such seems to have been the state of the record, in its legal aspects, at the time of the trial.

It is altogether unnecessary, from the view we take of this case, to go into a critical analysis of the various legal questions incidentally raised upon the trial of the cause, suggested by the record, and so ably and ingeniously argued by counsel, both orally and by brief. Some of the questions are exceedingly interesting, and involve principles more than ordinarily abstruse. We do not think, however, this case imperatively requires an attempt at their elucidation. If we regarded the necessity as existing, however conscious we might be of its intrinsic difficulties, we would not shrink from essaying the task of expounding them. But we do not consider it necessary to discuss them, in the attitude of the case presented for our consideration by the record.

The consolidation of the two suits in the district court was clearly an error. They were not in the condition contemplated by the statute to warrant the consolidation. They were not in the name of the same plaintiffs against the same defendants, nor was the nature of the causes of action the same in each, nor were they causes of action which might be joined, as the statute demands. The consolidation was therefore clearly erroneous, and the motion ought not to have been granted. But this error was cured before the trial. The plaintiff, by her counsel or attorney, dismissed her claim suit by the tacit consent of both the creditor and the co-surety, and that case was no longer sub judice. So far as the creditor was concerned, perhaps he could have made no valid objection to the dismissal, as the effect, as to him, would ordinarily be to -remit him to the enforcement of his execution lien against the specific property which had been impounded by the institution of the proceedings. But as to the co-surety, if it was his purpose» and he had a right to (which we do not now propose to decide) substitution to the rights and liens of the creditor upon the payment of the debt, he certainly would have lost that right by his silent acquiescence in, and his tacit consent to, the dismissal of the case by the plaintiff at the time the dismissal took place.

We do not, however, regard this as a case in which the doctrine of subrogation can with propriety be invoked. By the provisions of our statute of the 5th of February, 1858, passed subsequently to the institution of this suit, it would now certainly be a legitimate remedy. That statute, by the generality of its provisions, (Paschal’s Dig., Art. 4783, et seq.,) has provided, in effect, not only for the substitution of the surety to all the judgment liens of the creditor against the principal debtor, but by clear and explicit terms for the substitution of one surety, who shall have paid the debt, to his judgment lien against a co.-sure1y; thus relieving the question in future from much of its complication when to be determined alone by the rules of equity.

From the facts of this case, although there is a special prayer in the cross-petition of A. H. Cook for substitution, yet, under the general prayer for relief, it falls more properly under the head of the equitable doctrine of contribution among sureties rather than that of substitution of the surety to the rights of the creditor against the debtor. This is the aspect in which the facts present the case in the light of the principles of equity.

The court below was warranted by the evidence in coming to the conclusion that the deed from FT. C. Raymond to the appellant was fraudulent and void as to the creditor, House, who justly treated it as a nullity, and was seeking to enforce his judgments by levying his executions upon the property. Such was the state of things when the appellant and her husband, by their petition, arrested his action by injunction; and, placing the whole matter under the control of a court of equity, they ought to abide the settlement upon the principles of equity. While thus under the control of the court, by the action of the appellant and her husband, the co-surety, Cook, paid off and discharged the entire indebtedness to the creditor, by which his equity to contribution from his co-surety, Raymond, was created. The conveyance of Raymond to his wife was voluntary, which falls expressly under the denunciations of the statute as to creditors and subsequent purchasers without notice; and particularly is it fraudulent as to existing creditors when the conveyance is made by one in failing circumstances. In this contest, then, between the claimant under the deed and an existing creditor, at the time of its execution and delivery, and a co-surety with the maker of the deed, the court w-as hound to pronounce it fraudulent and void.

It is upon a broader principle of equity than that of substitution that the property in this case is held subject to the claim of the co-surety, and is brought within the rule of contribution between sureties. In law, sureties are equally bound for the debt due the creditor. Hatural justice demands, when the principal debtor fails, that each should contribute equally to the satisfaction of the demand. Any attempt at an evasion of this liability by either of the sureties is a fraud upon the others, which no court of administrative justice ought to tolerate. The facts in this case warranted the court in exercising its corrective powers in the dispensation óf equal justice. The claim of the appellant is not within the protection of the statute. She is a volunteer grantee. The conveyance of the co-surety was a voluntary conveyance; and, from the circumstances under which it was made, it was neither valid against the existing creditor, T. W. House, nor against the subsequent creditor, A. H. Cook. As against the existing creditor, it was fraudulent; because the law raised the presumption of fraud, under the statute in favor of the creditor, and superseded the necessity of any proof of actual fraud. The conveyance itself operated as constructive fraud against a prior creditor. To counteract this presumption of fraud, the burden of proof is thrown upon the grantor. Cases might exist in which even this presumption of law might be rebutted. But the rule is universal that, as to existing creditors, a voluntary conveyance is fraudulent and void. This is an inference and presumption of law. It may also be fraudulent and void as to subsequent creditors. Justice Story, in his Commentaries upon Equity Jurisprudence, vol. 1, page 400, says that where the “voluntary conveyance is intentionally made to defraud creditors, it seems perfectly reasonable that it should be held void as to all subsequent as well as to all prior creditors, on account of ill faith.”

This doctrine we regard as founded upon a just conception of the obligations of social duty, and is well calculated to restrain the too-common propensity to act in bad faith in the business relations of life. Chancellor Kent, in an opinion reported in 3 Johnson’s Chancery, lays down the doctrine, “that fraud in a voluntary settlement was an inference of law, and ought to be so, so far as it concerned existing debts; but that, as to subsequent debts, there is no such necessary legal presumption; and there must be-proof of fraud in fact; and the indebtment at the time, though not amounting to insolvency, must be such as to warrant that conclusion.”

While this is the general doctrine, the principle is everywhere distinctly recognized that where the voluntary conveyance is made in contemplation of future debts, and the facts and circumstances of the case evince that intention, it is equitable and just to declare such conveyance fraudulent and void as to subsequent creditors; and to “let in” such subsequent creditors to a participation of the property for the satisfaction of their demands. In this case the co-surety, Cook, during the pendency of the controversy, paid off the entire debt for which he was legally bound, and thus became the creditor of the other surety, who was equally bound with him, and, upon the principles of equity,, was also bound to make contribution whenever that payment should be made by a co-surety. Of his indebtedness to the original creditor, as well as of his future liability to his co-surety, who would be compelled to make the payment because of the insolvency of the principal debtor, he was fully aware. In this condition of things, and looking to all these contingencies, the co-surety, R. C. Raymond, makes a voluntary conveyance of his property, which reduces him to absolute insolvency. Can it be doubted that the deed was made in contemplation of future as well as of existing debts ? The supreme court of the United States has held, in the case of Sexton v. Wheaton, 8 Wheat., 229, that subsequent creditors may successfully attack a voluntary conveyance, by proving that it was fraudulent, or by showing that it was made with a view to shield the property against future debts. Voluntary conveyances stand upon a very different footing from conveyances made for a valuable consideration. This case was brought to the consideration of the court by the appellant before the debt of the original creditor was paid off and discharged, and while under review by the district court the debt was extinguished as to that creditor by one of the sureties, and the liability for contribution by the other surety accrued; and in equity, when it was decreed by the court that the conveyance to the appellant was fraudulent as to the creditor, the surety who paid the debt ought to have been “let in” to subject the property to the payment of the pro rata contribution of the defaulting surety. These being, as we conceive, just and well-grounded principles of equity, when the parties to the deed, by their own acts, threw their cause into a court of equity, to be tested in the crucible of morality and natural justice, it must abide the results of the most rigorous scrutiny.

The only objection to the decree of the court below is to be found in that clause of it in which A. H. Cook is

attempted to be “ subrogated to all the rights, securities, and liens of T. W. House, had under and by virtue of his judgments, &e., against ST. C. Raymond;” and especially “to the rights of said House under and by virtue of the claim bond,” &e. The claim bond was no longer a matter under adjudication at the pronouncing of the decree. ' It had been discharged before trial, with the assent of all parties. Technically, it was de hors the record. In giving a contingent judgment, therefore, against the sureties on the claim bond, the court committed error. In all other respects the decree of the court dispensed substantial justice between the parties. Wherefore the judgment is in all things else affirmed, with the modification that the judgment is annulled and held for naught against R. M. Johnson, Josiah Fisk, and John Horan, the sureties in the claim bond, in relation to whom it is dismissed.

Decreed accordingly.

[Morrill, O. J., and Hamilton, having been of counsel, did not sit in this case.]