Lipsitz v. First Nat. Bank of Gordon , 288 S.W. 609 ( 1926 )

PANNILL, C. J.

This litigation grows out of the judgment rendered in the case of the Rice Heirs v. Louis Lipsitz et al., reported in (Tex. Civ. App.) 211 S. W. 293, and (Tex. Civ. App.) 233 S. W. 594. In addition to the statements made in the reports cited, it is necessary to show that the deed of trust, canceled in the judgment referred to, directed the trustee Lipsitz to divide the proceeds of the property conveyed to him ratably among all of the creditors of J. R. Rice. Appellees and Mrs. Anderson were the only creditors of the community estate of J. R. Rice and his deceased wife, Lois E. Rice, mother of the Rice heirs above referred to. All of Rice’s creditors, including appellees, joined in a confirmation of the trust deed and agreed therein that all the creditors should share pro rata thereunder. The other beneficiaries under the trust deed were individual creditors of J. R. Rice and became such after the death of Mrs. Lois E. Rice. The judgment affirmed in 233 S. W. 594, in addition to canceling the trust deed, awarded to the Rice heirs a recovery of one-half of the lands attempted to be conveyed to the trustee and charged said property with the debts of appellees, First National Bank of Gordon, in the sum of $704.90, and James Gox, in the sum of $291.50, also, in favor of Mrs. Anderson for $29.15, the amounts named being 53 per. cent, of one-half of the community indebtedness of J. R. Rice and Lois E. Rice, with interest from April 5, 1915.

A lien was established on the property for said sums. The Rice heirs having failed to redeem the property, order of sale issu.ed, the property was sold to the highest and best bidder, and the net sum of $1,832.90 was realized by the trustee., This suit was then brought by the appellees named to recover from the trustee the amount provided for in the judgment, and, in addition thereto, to recover the remaining 47 per cent, of one-half of their claims, based on allegations of fraud and negligence on the part of the trustee in permitting such claims to be reduced by said per cent, after' the deed of trust containing such reduction had been canceled, and to cancel the trust deed as to appellees for want and failure of consideration.

The petition fully presented the grounds relied on for recovery, except there was no charge that the land, when sold, brought less than its value, and no complaint that the trustee was in any manner guilty of negligence in respect to the sale. All persons interested in the subject-matter were made parties, except the Rice heirs.

On a trial before the court without the aid of a jury, judgment was in appellees’ favor for the sums charged as a lien against the Rice heirs in the former suit, as stated above. The judgment recited that the sums awarded on that account were the several sums realized on the community claims of the plaintiffs, by the sheriff of Palo Pinto county, from the sale of the property of Lee Rice et al., and by the sheriff paid to the said defendant Louis Lipsitz. In a separate paragraph, a further recovery was awarded the appellees First National Bank and James Cox of $930.30 and $384.80, respectively, it being recited in the judgment that said sums were awarded as being the additional sums due on one-half of the community claims, which the court finds the defendant Louis Lipsitz should and could have recovered out of the property awarded the Lois E. Rice heirs.

The separate paragraphs of the judgment above referred to are assailed by separate assignments, and the complaints against the separate recoveries will be considered in their order.

Appellants assert error on the recovery awarded appellees in the first paragraph of the judgment on the ground that appellees were not parties to the suit of the Rice heirs, and are in no manner bound thereby, and therefore cannot assert any supposed right based thereon. If this contention is correct, the judgment would be without support and the case should be reversed, as it seems to be well settled that a judgment in favor of or against one not a party thereto is void, and no right in such a decree can be asserted by one not a party thereto. Dunlap v. Southerlin, 63 Tex. 38; Patton v. Collier, 90 Tex. 115, 37 S. W. 413; Railway v. Skeeter Brothers, 44 Tex. Civ. App. 105, 98 S. W. 1064; Moore v. Perry (Tex. Civ. App.) 56 S. W. 120. But these are cases in which the doctrine of virtual representation was not applicable, as was the case of McDonald v. Ayres (Tex. Com. App.) 242 S. W. 192, relied on by appellants.

There is another well-established rule in respect to the conclusiveness of judgments, to the effect that, where one person is authorized to represent another and with his knowledge and consent prosecutes or defends a suit for the benefit of such person, the beneficiary will be concluded thereby. Smith’s Adm’rs v. De la Garza, 15 Tex. 150, 65 Am. Dec. 147; Jackson v. West, 22 Tex. Civ. App. 483, 54 S. W. 297. This rule applies with peculiar force to cestuis que trustent, when represented by the trustee, in suits in hostility to the trust. Freeman on Judgments (5th Ed.) p. 1076. Where such beneficiaries are so represented in a suit and judgment rendered for or against them, it will be presumed that the trustee had authority to represent them, and such beneficiaries will be concluded. Houston Oil Co. v. Village Mills Co. (Tex. Com. App.) 241 S. W. 122; Ash v. Akin, 2 Tex. Civ. App. 83, 21 S. W. 618. The petition of appellees, taken as a whole, should be construed as not denying the trustees authority to represent them, as the petition abounds -with statements recognizing the binding effect of the judgment, in so far as the Rice heirs are concerned. There are some general statements as to want of authority on the part of the trustee, but these relate to the matter of reducing the amount charged against the Rice heirs by 47 per cent. The record as made supports the conclusion that appellant Lipsitz had authority to bind all the beneficiaries, and that they are bound by the decree as between them and the heirs of Lois E. Rice.

The judgment in the first suit, while binding as between the Rice heirs and their adversaries, does not bind appellants and appellees in this controversy. A judgment as to several defendants is not conclusive as between themselves, in respect to their’rights and liabilities toward each other, unless the defendants contest an issue with each other upon pleadings between themselves. R. C. L. p. 1013; Sandoval v. Rosser (Tex. Civ. App.) 26 S. W. 930; Hoxie v. F. & M. Bank, 20 Tex. Civ. App. 462, 49 S. W. 637; James v. James (Tex. Civ. App.) 164 S. W. 47. No such issues between the defendants in the first suit were therein tendered by pleadings between themselves. So that appellees had the right, after the judgment was rendered, to bring this suit to cancel the deed of trust and to recover from their cobeneficiaries the amount recovered from the Rice Heirs.

It is true that the judgment in favor of the heirs.of Lois E. Rice, canceling the trust deed as to one-half of the land conveyed thereby, did not .cancel said instrument as' between the remaining parties thereto, but, when it was canceled as to one-half the lands, this would give rise to the cause of action ■ asserted by appellees of failure and want of consideration. If there was any consideration for the agreement by appellees to prorate with the individual creditors of Rice; it was the agreement by such individual ' creditors to- prorate, with appellees ■ and to have the services of Lipsitz in disposing of the property. These mutual agreements were destroyed by decree in the first suit. Appellees and Mrs. Anderson had 'the right to have at least half of their claims paid out of the Lois E. Rice share of the community estate, to the exclusion of the remaining creditors. When the advantages they contracted to receive from appellants were destroyed by the suit of the Rice heirs, appellees were entitled to have their agreement rescinded.

That part of the judgment awarding to appellees the amounts recovered from the Rice heirs on account of their claims is correct, except as to the interest allowed from June 5, 1923. As stated, when the judgment in the first suit was entered. Lipsitz was acting under an agreement requiring him to prorate among all creditors. This agreement was not attacked nor affected by the first judgment and continued in force until the decree in the present suit. Until that judgment was entered, Lipsitz was bound by the trust agreement and confirmation thereof under which be was acting, and they could not be repudiated by him. If he had done so, he would have been liable to the other creditors. So interest on the sums awarded to appellees should begin at the date of- the instant judgment.

The remaining question relates to that part of the present judgment awarding appellees the remaining 47 per cent, of one-half of their claims, on account of the negligence of the trustee in not recovering said, 47 per cent, against the Rice heirs and in permitting the community indebtedness owing by the estate of Lois E. Rice to be reduced'by said per cent. It is true that Lipsitz was under no duty to obtain such recovery for appellees individually, but, as heretofore stated, he was at said times acting for all the creditors. He was a trustee under an express trust and undertook to represent the beneficiaries in the litigation, and it was his duty to insist upon and obtain, if he could, a recovery for the full amount due by the estate of Lois E. Rice.

Equity holds a trustee liable for every violation of a duty laid upon him, though such violation arises through oversight or forgetfulness. Pomeroy’s Equity Jurisprudence (4th Ed.) § 1079.

This record shows that in the first suit the jury determined the claims of appellees in the amounts of. $2,660 and $1,100, respectively, and that they were community debts of J. R. and Lois E. Rice. In the decree the deed of trust was canceled at the instance of the Rice heirs, and they could not therefore rely on it to reduce the amounts for which they were Rabie. Thq present suit was tried before the same judge who tried the first case, and his testimony shows that the matter of the amount to be charged against the Rice heirs was not presented to him, nor was any contention as to such amount presented, but that the judgment was drawn by counsel and submitted to and approved by him without any indication that it was not correct under the special verdict in the former suit; while Lipsitz appealed from the judgment, the report of the cáse does not indicate that this question was presented to the appellate court. The pleading in the first suit authorized a judgment to be entered for a less sum than.thait actually owing by the Rice heirs. The finding in the instant judgment that the trustee should and could have recovered thb additional 47 per cent, is a sufficient showing that, if the matter had been presented to the trial judge, he would have allowed as a charge against the property of the Rice heirs at least one-half of the community debts of J. R. Rice and their deceased mother. These matters are deemed to be sufficient to sustain the judgment as to the negligence of the trustee. One intrusted with the conduct of litigation, who, by negligence, causes a beneficiary to lose a cause of action, is liable for the damages such beneficiary might reasonably have recovered in an action therefor. Patterson v. Frazer (Tex. Civ. App.) 79 S. W. 1077.

The obligation thus laid on a trustee is, perhaps, a harsh one. This court acquits Mr. Lipsitz of any imputation of fraud in this connection. We realize it is much easier to look backwards, than forwards, in a lawsuit, and in such a proceeding it is easier to discover mistakes than to avoid them, but-we cannot say that the trial court was not warranted in finding, as he did; that the failure to recover the full one-half of the community claims constituted negligence on the part of the trustee. However, sanction cannot be given to the amount awarded for the omission under discussion. As stated, there was no pleading that the land brought less than its value or that the trustee was negligent in respect to the sale, therefore the recovery by appellees should not exceed their pro rata of the amount realized from the sale, in the proportion that their part of the community debts bears to the amount reaUzed from the sale of the property. If the land brought its value, and there is no complaint that it did not, then a recovery for more than its value would not have benefited appellees.

Appellees are not entitled to the proportion represented by the claim of Mrs. Anderson.

The conclusion is that of the net amount realized appellee bank is entitled to 266/387, appellee Cox, 110/387, and Mrs. Anderson, 11/387.

The judgment of the trial court is therefore reformed so as to allow appellee bank a recovery of $1,259.76, and appellee Cox, $520.-96, with 6 per cent..interest from November 12, 1925.

As so reformed, the judgment will be affirmed, with costs of the appeal taxed against appellee.

Reformed and affirmed.