Bank of California v. Marshall , 1 Tex. Civ. App. 704 ( 1892 )

The appellant has a single assignment of error, which is as follows:

"The court erred in holding that the property in issue, and claimed by the defendant in this case, was not subject to plaintiffs' writ of attachment, and in rendering judgment for the defendant; because it appears from the agreed case, that the plaintiffs were creditors of Eaton, Guinan Co., who made the deed of trust to Marshall, under which he claims, before the execution and delivery of the deed of trust by them to him; that the property was seized under an attachment regularly sued out and issued upon plaintiffs' debt, being a stock of merchandise theretofore held by said Eaton, Guinan Co., and being disposed of by them as wholesale and jobbing merchants; that the firm of Eaton, Guinan Co., and each and all the members thereof, were, at the time of making said deed of trust, wholly insolvent, and had no other property than that levied upon; that said debt and judgment rendered thereon is still in full force and effect; that the deed of trust exhibited with the agreement, together with the property, was delivered to the trustee, and the deed was immediately registered as a chattel mortgage; and it appearing from the deed of trust that the trustee was authorized to sell the merchandise so conveyed in the usual course of trade to pay off the debts scheduled therein, provided that if at the expiration of three months a sufficiency of the property was not sold to pay the debts, that the trustee, after having been requested by a majority in interest of the secured creditors, might advertise said property and effects for sale at auction; it appearing also that the most of said debts were already due, and it not appearing that any of the creditors named have accepted said deed."

Under this assignment, appellant makes the proposition, "that as Eaton, Guinan Co., having made a deed of trust, to secure certain preferred creditors named therein, to the claimant, John F. Marshall, on a stock of goods, wares, and merchandise, and said firm and its members being at the time of the execution and delivery of said deed wholly insolvent, and having no other property out of which plaintiffs could make their debts, and said deed of trust providing that said Marshall should sell said goods in the usual course of trade for three months, and until requested in writing by a majority in interest of the creditors secured by the deed of trust, and it not appearing that said creditors or any of them ever accepted said deed of trust, the same was void, because, in connection with the uncontroverted facts, the effect of the same was to hinder, delay, and defraud their creditors."

It is apparent that John F. Marshall, the trustee, accepted the terms of the trust, and in the absence of a repudiation of its terms by the beneficiaries, his acceptance will enure to their benefit. Bew. on Assign., 5 ed., 400, 401, 402; 1 Jones on Mort., 4 ed., sec. 88; Wallis v. Beauchamp, 15 Tex. 305.

The main question in the case presented by appellant is, that as the deed of trust requires the trustee to sell the merchandise in the usual course of trade, its effect is to hinder, delay, and defraud other creditors, and for this reason the instrument, upon its face, should be held void, taken in connection with the fact that Eaton, Guinan Co. were insolvent at the time of its execution.

It is a well established principle of law that a debtor in failing circumstances may secure and prefer a bona fide debt of his creditors, although the effect of such preference would be to hinder and delay other creditors. The limitation imposed by law upon this right prevents the debtor from transferring to the creditor more property than is reasonably sufficient to satisfy the debt, and denies the creditor the right to give the debtor a moneyed consideration for the property in addition to his debt. In such cases, and in others that may be mentioned, the effect of such transactions would be to give the creditor the right to control and dispose of property not necessary to the payment of his debt, and to place the debtor in a position to hinder, delay, and defraud his creditors.

The court can not determine from the face of the instrument that it will have the effect of defrauding other creditors. That can only be ascertained from the facts of the case.

If it be true that the debtor has transferred to the trustee all of his property for the benefit of the preferred creditors, and the property is less in value than the debts secured, and the instrument permits a sale in due course of trade or otherwise, we fail to see how such fact is calculated to hinder and delay and defraud other creditors. It is true that the effect of such a transaction would be to hinder and delay, and possibly defeat, the claims of the unsecured creditors; but this is successfully answered by the law permitting an insolvent debtor to prefer a creditor when no advantage or benefit results to the debtor by such transaction, or the creditor gets no more than his debt.

In appellant's assignment of error it is admitted that "Eaton, Guinan Co., and each and all the members thereof, were at the time of making said deed of trust wholly insolvent, and had no other property than that levied upon."

It is seen from the facts that the value of the property as levied upon by the writs of attachment in the several cases mentioned in the findings of fact is much less than the amount of the debts secured by the terms of the deed of trust. Under the facts, we do not see how the fact that the trustee can sell in the usual course of trade operates as a fraud upon the appellant, as it is apparent that a disposition of all of the goods is not sufficient to satisfy the claims of the preferred creditors.

We find no error in the record, and affirm the judgment of the court below.

Affirmed.

Motion for rehearing refused.