Baldwin v. Peet, Sims & Co.

• Decision Date: 01 January 1859
• Court: Texas Supreme Court
• Parties: JOHN H. BALDWIN v. PEET, SIMS & CO.

22 Tex. 708

JOHN H. BALDWIN

v.PEET, SIMS & CO.

Supreme Court of Texas.

1859.

The statute of frauds presents two distinct motives or intentions with which a deed may be made; the one vitiating, and the other sustaining it. A failing debtor has not a right maliciously, covinously, etc., to execute a deed with intent to hinder, delay, or defraud his creditors; but he has the right, upon good consideration, and bona fide, lawfully to convey his property in trust to pay his creditors, with or without preference.

When a debtor makes a deed disposing of his property, under the influence of the special intention of delaying, hindering or defrauding his creditor, in enforcing the payment of his debt, his act is said to be contrived in malice, covin, fraud, etc., which is designated in the statute as a guileful and covinous device and practice that renders the conveyance void.

To hinder and delay creditors is the usual and necessary effect of every general assignment, and being so, it must be presumed to have been contemplated as a consequence of the act, however honest the intention of the debtor may have been. If such intention, however, be not only present in the mind, but is the object, and constitutes a part of the cause for the execution of the deed, it will render it void.

On the other hand, if the purpose, in executing a deed, be to pay honest debts, either by general distribution, or by exercising a preference among creditors, although it has, and must be foreseen to have necessarily a tendency to defeat or hinder the other creditors, it will be valid.

Where a deed is a mere pretense, collusively devised, founded on a pretended consideration, and the parties do not intend the property to pass otherwise than ostensibly, there is a trust that the grantee will hold for the grantor's benefit. As to the creditors, the property has not passed, and the grantor's reservation inures to their benefit. The deed is void, not only because of the specific fraudulent intent, but also, because of the reservation of a benefit to the grantor in the thing conveyed, inconsistent with the terms and ostensible object of the transfer.

Where there is a consideration, and it is the intention of the parties that the title to the property shall pass to the grantee, irrevocably, but the influencing motive in making the transfer, is the malicious intention to defeat entirely or to hinder and delay the collection of honest debts, it is made void by reason of the fraudulent intent with which it is executed.

The specific malicious, covinous, guileful intention to hinder, delay, or defraud creditors, is a question of fact, to be ascertained upon evidence submitted to a jury.

The effect of a reservation of an interest in the thing conveyed, depends upon the character of the conveyance. In a mortgage, such reservation, whether expressed in the deed or not, is of itself harmless, because it is consistent with the object of the conveyance. And where a failing debtor assigns a specific article of property to particular creditors, with a reservation to himself of any balance that may accrue, although it be in the shape of a special assignment, it is in effect a mortgage; and the reserved balance does not vest, and is subject to be reached, according to its nature, either by execution or bill in equity.

In case of a general assignment by a failing debtor, it has generally been held, that a reservation of any interest whatever, in the thing conveyed, will avoid the instrument.

This is to be distinguished from a case where the reservation extends only to property exempt from forced sale. And also from an assignment excepting from the operation of the conveyance, a certain portion of property which, not being conveyed is still subject to be seized by creditors, and which makes it really a partial assignment, though it be in form, general.

An assignment may also be held invalid, by the court, under the third section of the statute of frauds, by reason of the inherent defects of the deed, as a transfer of property. For instance, where it does not vest in any creditor a certain, direct, or absolute interest in the property; or where there is no such description of the property, by schedule or otherwise, that it can be identified or ascertained.

The court may also declare a general assignment void, as to creditors, where the fraudulent intent is expressed or admitted; where it contains a reservation of an interest, advantage, or benefit to the assignor, inconsistent with the object of the conveyance; and where the deed is wanting in some of the qualities, which, when wanting in a deed, render it inoperative as a conveyance of property.

But the court cannot declare the deed void, as a matter of law, without the aid of a jury, because it authorizes the trustee to sell the property, within his discretion, for cash or upon a credit, at public or private sale, names the attorneys to be employed in executing the trust, and provides that the trustee shall not be answerable for the negligence or misdoings of other persons.

These are facts which may tend to establish the fraudulent intent. They are badges of fraud, rather than fraud per se; and a court of equity, having a right to find the facts from the evidence, may well infer, from these established facts, the additional and important fact of fraudulent intent, and having found it, declare the legal consequence, by setting aside the deed as void. But this power of a court of equity, of finding one material fact which is not admitted, by inference and deduction from those that are admitted, does not pertain to our courts. 28 Tex. 71.

In none of these provisions, is there anything to be found, which may not be proper under certain circumstances, and therefore, they are the subject of explanation by other facts.

The fraudulent intent, by which a deed is rendered void, is not necessarily involved in the mere intention on the part of the assignor “to protect his goods from legal process.”

The assent of creditors to a general assignment will be presumed, so as to give it effect, although they may know nothing of it when it is made; but when the assignment is made with a fraudulent intent, the assent of the creditors will not be presumed; and such deed is inoperative and void as to creditors, although the fraudulent intent was unknown to the trustee.

A reservation of property not conveyed, does not necessarily vitiate the assignment. It is but a badge of fraud, subject to be explained or accounted for, and is important or unimportant evidence, tending to establish fraud or not, according to the circumstances of the case.

Where an erroneous charge has been given by the court below, upon an isolated question, about which there could be no doubt as to the facts, and it is not certain that the minds of the jury passed upon the main facts of the case, upon which the verdict would be sustained, if sustained at all, and the error may have influenced their finding, the cause will be remanded.

APPEAL from Calhoun. Tried below before the Hon. Fielding Jones. The facts are stated in the opinion of the court.

Baldwin and Seawell, for appellant.

F. S. Stockdale, for appellees.

ROBERTS, J.

This case involves the question of the validity of an assignment in trust for the benefit of creditors.

The petition of Baldwin, the trustee, represents that Peet, Sims & Co. have recovered a judgment against Louis E. Salles, which they are endeavoring to satisfy, by causing their execution to be levied, on the 6th day of May, 1854, upon certain property, being goods, wares and merchandise, transferred to him by Salles, in trust, for the benefit of creditors, in February, 1854; that Salles, from misfortune, not having sufficient means to pay his debts, made this deed of assignment in trust to pay all his debts, equally and among the rest, the one to Peet, Sims & Co., upon which this judgment is rendered. The deed is made a part of the petition, and recites that Salles has not sufficient means probably to pay his debts, which also appeared in the estimate made in the schedule, attached to the deed; also that he is desirous of making “such a disposition of his property as that sacrifices may be avoided, and that may produce the most that can be realized therefrom, to be promptly and justly distributed among his creditors.”

It purports to be a general assignment of all his effects, to pay equally all his debts, with schedules of each annexed. It directs that the trustee “shall proceed in the manner that he shall deem best for the interest of all my (his) creditors, to sell and dispose of, etc., all the estates, stocks, goods, wares, merchandise, bills, bonds, notes of hand, accounts, and other things hereby conveyed, or intended to be conveyed, to such persons, for such prices, and upon such terms and conditions, for cash or customary credits, at private sale or public auction, as in his judgment may appear best, and most for the interest of all concerned; to collect the proceeds of such sales, and also to collect and realize in money, the most that may be practicable, from the bills, bonds, notes of hand, accounts, claims, demands hereby conveyed,” etc. Also, it directs that the trustees shall discharge all reasonable expenses, commissions, attorneys' fees of Simpson & Woodward, whom he is directed to employ, and divide the balance among the creditors, pro rata, should there not be enough to pay them in full. It also contains a stipulation that Baldwin accepts the trust, and obligates himself to execute it “with diligence and fidelity,” but that “he shall not be answerable for the negligence or misdoings of any other person.” The deed was signed by Salles and Baldwin. The petition further alleges, that the trustee, upon the execution of the deed, took possession of the property, and was proceeding to execute and perform his duties under the trust, when the execution was levied upon the goods, etc., in his possession; and...