Adams v. Williams

• Decision Date: 28 February 1923
• Docket Number: (No. 391-3591.)
• Citation: 248 S.W. 673
• Parties: ADAMS v. WILLIAMS et al.
• Court: Texas Supreme Court

248 S.W. 673

ADAMS v. WILLIAMS et al.

(No. 391-3591.)

Commission of Appeals of Texas, Section A.

February 28, 1923.

Certified Questions from Court of Civil Appeals of Second Supreme Judicial District.

Action by J. Q. Adams against W. N. Williams and others. From a judgment for plaintiff, but denying the right to subject the proceeds of notes to the judgment, plaintiff appealed to the Court of Civil Appeals, which certified questions to the Supreme Court. Questions answered.

Sam J. Hunter, of Fort Worth, for appellant.

Penry & Penry, of Fort Worth, for appellees.

GALLAGHER, P. J.

This case is before us on questions certified to the Supreme Court by the Honorable Court of Civil Appeals for the Second District. The parties are designated as in the trial court. The certificate sets out the facts hereinafter recited.

J. Q. Adams, on the 15th day of April, 1918, instituted suit in the district court of Tarrant county against W. N. Williams and his wife, M. E. Williams, to recover on a judgment in the sum of $2,242.50, with interest and costs, which judgment he had theretofore recovered against them in the state of Oklahoma. He alleged that during the pendency of said suit in the state of Oklahoma the defendants sold certain lands in Tarrant county, Tex., and received as a part of the consideration therefor two certain promissory vendor's lien notes for the sum of $800 each, executed by their vendee and payable to the order of W. N. Williams; that their said vendee resold the property to one Renick, who assumed the payment of said notes, and that both said Renick and said original vendee were entitled to protection as innocent purchasers for value without notice; that defendants transferred said two notes to Mrs. Sarah E. Cooper; and that she took said notes as assignee thereof without paying any valuable consideration therefor and with notice that defendants intended, in transferring the same, to defraud plaintiff and other creditors, and that she joined in said intent.

Mrs. Cooper was a widow. She was made a party defendant. Writs of garnishment were sued out by plaintiff and served on her and on said Renick to subject the money due on said notes to plaintiff's debt. Said Renick deposited the amount due on said notes with the clerk of the court to abide the final disposition of the case.

The defendants denied said allegations of fraud and alleged that said notes were transferred to Mrs. Cooper for a valuable consideration without notice on her part of any fraudulent purpose therein. Mrs. Cooper died before the trial, leaving a will which was duly probated, in which W. N. Williams was named as executor and trustee, and in which said Mrs. M. E. Williams was made principal beneficiary with devise over to others of any of the estate of testatrix which might be on hand at her death. The provisions of this will will be set out more fully hereafter. Both plaintiff and defendants amended their pleadings after the death of Mrs. Cooper and asked for relief appropriate to the changed situation resulting from her death. Other facts contained in said certificate will be set out hereafter.

The case was submitted to a jury on special issues, in response to which they found in substance that said transfer of said notes was an actual bona fide transaction and that Mrs. Cooper parted with a valuable consideration therefor; that said transfer was not made for the purpose of placing the same in Mrs. Cooper's name and hands to cover the same up, or to defraud creditors; that defendant Williams did not make said transfer with intent to beat or defraud his creditors; and that Mrs. Cooper did not know of any fraudulent intent on his part at the time.

Judgment was rendered on the verdict in favor of plaintiff against both Williams and his wife for the debt sued for, but denying plaintiff the right to subject the proceeds of said notes, or any other property belonging to Mrs. Cooper's estate, to the payment of said judgment.

Plaintiff appealed. Pending consideration of said appeal, said court certified to the Supreme Court for determination the following questions:

"1. Did the testimony of W. N. Williams and Mrs. Sarah E. Cooper, to the effect that the notes in controversy had been transferred by the former to the latter, constitute prima facie proof of such transfer as a matter of law, in the absence of the introduction by the defendants of the notes themselves? Neither of said witnesses testified how the transfer was made, whether by written indorsement or by delivery only, and all parties alleged that said transfer was in fact made. This question is certified at the special request of counsel for appellant.

"2. Did the surrender by Mrs. Cooper of two unsecured notes held by her against W. N. Williams, in consideration of the transfer to her of the two notes in controversy, constitute a consideration deemed valuable in law within the meaning of article 3967?

"3. Would the surrender of those two notes be a sufficient consideration to vest title to the two notes in controversy in Sarah E. Cooper under the registration statute, article 6824, as against the lien fixed by service of the writ of garnishment mentioned?

"4. Did the will of Mrs. Sarah E. Cooper have the effect to vest title to the property therein devised in such a manner as to render it, or any part of it, subject to execution for the payment of plaintiff's former judgment against either W. N. Williams or Mrs. M. E. Williams?"

The two vendor's lien notes above referred to were not put in evidence. It does not appear whether they were indorsed by the payee at or prior to the time of transfer or not. The testimony showed that they were placed in the hands of an attorney for collection by Williams before Mrs. Cooper's death. Both plaintiff and defendants alleged affirmatively in their pleadings that said notes were transferred by Williams to Mrs. Cooper.

In the state of the pleadings it was not necessary for either party to prove the transfer of said notes. While the consideration for such transfer and the purpose which actuated the parties in making the same were in issue, both parties to the suit admitted in their pleadings that a transfer was in fact made. Both parties to the transaction testified that a transfer was in fact made. Ogden v. Bosse, 86 Tex. 336, 344, 24 S. W. 798; Railway v. De Walt, 96 Tex. 121, 134, 70 S. W. 531, 97 Am. St. Rep. 877. It was not necessary to show that the notes were regularly indorsed by the payee to sustain defendants' plea of innocent purchaser. This transaction occurred before the passage of the Negotiable Instruments Act by the Legislature in 1919 (Vernon's Ann. Civ. St. Supp. 1922, arts. 6001-1 to 6001-197). Under the law as it existed at that time, the form of the transfer, and whether written or verbal, was immaterial. A parol transfer was sufficient, other necessary conditions existing, to entitle the transferee to protection as an innocent holder. Word v. Elwood, 90 Tex. 130, 131, 37 S. W. 414; Bank v. Kenney, 98 Tex. 293, 299, 83 S. W. 368.

We answer the first question certified as follows:

1. In the state of the record as above shown, the testimony of said witnesses to the effect that the notes in controversy had been transferred from Williams to Mrs. Cooper constituted prima facie proof of said transfer, notwithstanding said notes were not introduced in evidence.

After the sale of the land above referred to, neither Williams nor his wife had any property in this state subject to execution, nor, so far as the record shows, any credits subject to garnishment. Williams was indebted to Mrs. Cooper at the time in the principal sum of $1,650 exclusive of interest, and such indebtedness was evidenced by two unsecured promissory notes. While collection of said notes could not have been enforced by law, it seems Williams was abundantly able to pay the same. It also appears that Williams did not intend to pay plaintiff's debt unless he was forced to do so. The consideration for the transfer by Williams to Mrs. Cooper of the two vendor's lien notes was the surrender by her to him of his said two notes to her and the extinguishment of the debt evidenced thereby.

The substance of article 3966 of the Revised Statutes, so far as applicable to the facts under consideration in this case, is that every assignment or transfer of personal estate with intent to hinder, delay, or defraud creditors from what they are or might be lawfully entitled to, shall as to such creditors be void. Said article further provides that the title of a purchaser for a valuable consideration without notice of a fraudulent intent on the part of his grantor shall not be affected thereby.

Article 3967 of said statutes, so far as applicable, provides in substance that every assignment or transfer made by a debtor which is not upon consideration deemed valuable in law shall be void as to prior creditors unless it appears that such debtor was then possessed of property within this state subject to execution sufficient to pay his existing debts.

It is settled law in this state that a creditor may receive payment of an honest debt in property of his debtor, though he may know at the time that the debtor's intent in making the payment is to prefer him and to place the property beyond the reach of other creditors, provided that no more property is taken than is reasonably necessary to pay his debt. Every payment of a debt by an insolvent, whether the payment be made in money or property, tends in a popular sense to hinder, delay, or defraud other creditors in the collection of their respective debts. In the absence of a law declaring preferences invalid, every debtor has the legal right to pay one or more of his just debts with any money or property he has. The intent to hinder, delay, or defraud creditors in the sense inhibited by above statutes cannot exist when the purpose and effect of the transfer of property is to apply it at its fair value to the...