Sutton v. H. T. Simon, Gregory & Co.

The Court of Civil Appeals have certified to this court the following explanatory statement and questions:

"On the 16th day of December, 1891, R.E. Gray, J.M. Gray and P.P. Vaughan, partners under the firm name of Gray Bros. Vaughan, who were merchants doing business in the town of Moody, in McLennan County, Texas, executed their deed of trust or chattel mortgage upon their stock of merchandise and store, situated in the town of Moody, conveying said merchandise and fixtures and certain lands to appellant, J.R. Sutton, as trustee, to secure the Temple National Bank, H.C. Conley, J.R. Sutton, the trustee, and certain other creditors, in the payment of certain debts, owing by Gray Bros. Vaughan. And on the same day the same grantors executed a second deed of trust, conveying the same property to the same trustee, but in all things subject to the lien created by the first deed of trust; said second deed of trust securing H.T. Simon, Gregory Co. and certain other creditors, none of whom were secured by the first deed of trust.

"The trustee took possession of the merchandise and fixtures, and a few days thereafter, H.T. Simon, Gregory Co. and the other appellees herein, all of whom were creditors of Gray Bros. Vaughan, sued out attachments and caused them to be levied upon the stock of merchandise. Thereupon, Sutton, the trustee, instituted this suit, which is a statutory proceeding to try the rights of property, he claiming title and the right of possession through and under the two deeds of trust above mentioned.

"Appellees charged in their pleadings that said trust deeds were executed with intent to hinder, delay and defraud the creditors of Gray Bros. Vaughan, and that the trustee and accepting creditors had notice of and participated in such fraudulent intent.

"The testimony shows that the trust deeds were duly recorded in McLennan County prior to the levy of appellee's attachments. It was also shown that all the debts secured by both instruments were bona fide debts, and that three of the creditors secured by said first instrument, viz: the Temple National Bank, H.C. Conley, and Sutton, the trustee, had accepted under said trust conveyance, prior to the time of the levy of appellee's attachments.

"There was testimony tending to show that Gray Bros. Vaugahn were insolvent at the time they executed the two trust deeds. The sheriff levied appellees' attachments upon the property by seizing it, taking it from the possession of Sutton, the trustee, and holding it in his own exclusive possession, and not by giving notice to the trustee.

"The court below rendered judgment for appellees for $5,925 with six per cent interest from January 6, 1892. This judgment was rendered upon the theory that the first trust deed was executed with intent to defraud creditors, and that the Temple National Bank, and Sutton the trustee, participated in the fraud, — the court holding that as Conley did not participate in the fraud, Sutton was entitled to retain $575 worth of the property with which to satisfy Conley's debt. It is contended in this court, on behalf of appellants, that the testimony did not warrant the findings that the instrument was executed with intent to defraud creditors, and that the Temple National Bank and Sutton participated in such fraud. These are questions of fact to be decided by this court, and their decision is reserved until after the questions of law herein certified have been decided.

"With this preliminary statement, the Court of Civil Appeals for the Third Supreme Judicial District of Texas, and the Chief Justice of said court, certifies to the Supreme Court of the State for decision, the following questions, which are material to the final disposition of this case:

"1. If it be shown by the testimony that the grantors, Gray Bros. Vaughan, by the execution of the trust deeds under which Sutton claims the property, intended to hinder, delay and defraud their creditors, and Sutton, the trustee, participated in such fraudulent intent, but either of the other accepting creditors did not, did the levy of appellees' attachments by seizure of the property and not by giving notice, as prescribed in article 2292 of the Revised Statutes of 1879, create liens in favor of appellees? and if they did, were such liens superior to the liens created by the first trust deed in favor of such accepting creditors as did not participate in the fraud?

"2. If the facts be as submitted in the first question, was the trustee, Sutton, who had participated in the fraud, entitled to retain possession of the property, as against the claims of appellees, the attaching creditors?"

Upon the acceptance of the instrument by a creditor who did not participate in the fraudulent intent it became a valid lien upon the property to secure his claim (Milling Co. v. Eaton,86 Tex. 401; Haas v. Kraus, 86 Tex. 687 [86 Tex. 687], 25 S.W. Rep., 1025), and a court of equity would at his instance have compelled the guilty trustee to execute the trust or have appointed another to do so. Marbury v. Brooks, 7 Wheat.; Brooks v. Marbury, 11 Wheat.; Converse v. Davis, 90 Tex. 462, and cases cited. From this it results that the trustee was "entitled to the possession" and the defendant in the attachment was "not entitled to the possession" of the personal property within the meaning of said statute and the levy made by seizure instead of by giving the notice prescribed thereby was void and created no lien.

We therefore answer the first question certified in the negative and the last in the affirmative.

A different case would have been presented if the fraud of the trustee were imputable to the creditor; but we are of opinion it is not, since the above statement of the facts does not show that the trustee was or acted as the agent of the creditor in procuring the execution of the instrument. Marbury v. Brooks, 7 Wheat.; Brooks v. Marbury, 11 Wheat.; Bank v. Cruger, 91 Tex. 446.