Chandler v. Welborn

• Citation: 294 S.W.2d 801,156 Tex. 312
• Decision Date: 10 October 1956
• Docket Number: No. A-5540,A-5540
• Parties: Myrtle Mae CHANDLER et al., Petitioners, v. R. C. WELBORN et al., Respondents.
• Court: Supreme Court of Texas

Page 801

294 S.W.2d 801

156 Tex. 312

Myrtle Mae CHANDLER et al., Petitioners, v. R. C. WELBORN et al., Respondents.

No. A-5540.

Supreme Court of Texas.

Oct. 10, 1956.

Rehearing Denied Nov. 28, 1956.

Hawkins & Dean, Breckenridge, for petitioners.

Bradbury, Tippen & Brown, Abilene, for respondents.

WALKER, Justice.

On the principal question involved in this case, we hold that creditors of a decedent may maintain an action for the benefit of the estate to set aside a deed executed by the decedent while insane if: (1) the other nonexempt assets of the estate are not sufficient to pay the claims of creditors, (2) the property conveyed by such deed would be subject to the payment of such claims if owned by the decedent at the time of his death, and (3) the heirs and personal representative of the decedent are adversely interested and attempt to uphold the deed.

Senator and Mrs. W. J. Cunningham owned as their community homestead two lots in the City of Abilene. When Mrs. Cunningham died intestate in 1947, her one-half interest in the property passed to her three children, Myrtle Mae Chandler, Florence Irion, and W. J. Cunningham, Jr., who are the petitioners in this case. Senator Cunningham continued to make his home on the property, but was a patient in the hospital from 1950 until his death in 1952. On April 5, 1951, he executed a deed conveying his interest in the property to petitioners in equal shares, and this is the instrument which is under attack in the present case.

About a month after the deed was executed, petitioners instituted suit in trespass to try title against their father and his sister, Mrs. R. C. Welborn, who is one of the respondents, for the recovery of title to and possession of the property. The defendants answered with a general denial. Another respondent, Hendrick Memorial Hospital, intervened in the suit, claiming to be a creditor of Senator Cunningham and alleging that the property had been abandoned as his homestead and that the conveyance to petitioners was in fraud of creditors, and prayed that the deed be set aside. This was the status of the case at the time of Senator Cunningham's death.

After the Senator's death, petitions in intervention were filed by the other respondents, who are also creditors of his estate. Mrs. Welborn filed an amended answer in which she claimed as a creditor of the estate and asserted a cross-action against petitioners to set aside the deed on the ground that the grantor was of unsound mind at the time it was made. Myrtle Mae Chandler, petitioner, having been appointed administratrix of her father's estate, respondents filed amended petitions in intervention, making her a party to the suit in that capacity and adopting the cross-action alleged in Mrs. Welborn's amended answer.

The suit then became a controversy between respondents on the one hand and petitioners on the other, the former seeking to set aside the deed and the latter attempting to uphold it. The jury found, in response to the single special issue submitted, that Senator Cunningham was of unsound mind at the time he executed the deed to petitioners, and the trial court entered judgment that the deed be set aside and cancelled. This judgment has been affirmed by the Court of Civil Appeals. 282 S.W.2d 940. We have concluded that the judgment of the Court of Civil Appeals should be affirmed. The case was tried before the effective date of the Texas Probate Code, V.A.T.S. Probate Code, § 1 et seq., and we refer in this opinion to the statutes as they existed prior to January 1, 1956.

Petitioners advance a number of arguments in support of their contention that respondents are not entitled to maintain this suit. The parties stipulated that the property was Senator Cunningham's homestead at the time he made the deed. Petitioners argue that the deed cannot be set aside at the instance of creditors, because the property was exempt from their claims when the conveyance was made. It is well settled that a conveyance of exempt property may not be attacked on the ground that it was made in fraud of creditors. Sorenson v. City Nat. Bank, 121 Tex. 478, 49 S.W.2d 718; Crow v. First Nat. Bank of Whitney, Tex.Civ.App., 64 S.W.2d 377 (wr. ref.); Johnson v. Echols, Tex.Civ.App., 21 S.W.2d 382 (wr. ref.). See also 20 Tex.Jur. 381, sec. 18. The judgment setting aside the deed in the present case, however, is based on a jury finding that the grantor was of unsound mind.

A deed executed by a person of unsound mind may be set aside during the lifetime of the grantor at the instance of his guardian or in an action instituted by the grantor after he recovers his sanity. This cause of action survives the death of the grantor, and ordinarily passes to his heirs, devisees or personal representatives. See 12 C.J.S., Cancellation of Instruments, § 45, p. 1016; 9 Am.Jur., Cancel. of Inst., p. 357, sec. 10. As pointed out by the Court of Civil Appeals, no constituent member of Senator Cunningham's family survived him, and if the conveyance is set aside, his interest in the property will be subject to the payment of respondents' claim. Under these circumstances the statutes and rules relating to exempt property and the right to attack conveyances made in fraud of creditors simply have no application.

Petitioners also contend that creditors do not have such an interest in the estate of their deceased debtor as will enable them to maintain a suit of this character, and cite Logan v. Thomason, 146 Tex. 37, 202 S.W.2d 212; Daniels v. Jones, Tex.Civ.App., 224 S.W. 476 (wr. ref.); and Pena y. Vidaurri's Estate v. Bruni, Tex.Civ.App., 156 S.W. 315 (wr. ref.). These cases hold that a creditor of, or person claiming to have purchased property from, a decedent is not a 'person interested' in the estate within the meaning of arts. 3315 and 3339, and hence has no standing in court either as proponent or contestant of a purported will left by the decedent. Creditors clearly have no interest in the probate of their debtor's will, because the payment af their claims will not be affected thereby. It is immaterial to them by whom their claims are paid, or whether the assets of the estate are administered under the will or as in the case of intestacy. See Daniels v. Jones, supra.

It is very material to respondents, however, whether Senator Cunningham's deed to his children is set aside or permitted to remain in effect. The grantor owned no other property at the time of his death. If the conveyance stands, respondents will receive nothing on their claims. If the deed is set aside, the grantor's one-half interest in the property can be used to pay their claims. When the other assets of the estate liable for the payment of claims are not sufficient to pay the same, the creditors have a direct and substantial interest in the recovery by the estate of property which can be used to pay such claims.

Under the provisions of art. 3314, the property of a person who dies intestate passes to his heirs at law, but the administrator has the right to possession of the estate, except property exempted by law, as it existed at the death of the intestate. Creditors of the decedent do not own a direct interest in the property as such, but their situation is somewhat analogous to that of stockholders of a corporation whose directors refuse to institute suit to enforce corporate rights or redress a wrong done the corporation. Although the stockholders own no direct interest in the assets of the corporation, equity recognizes their right under certain circumstances to institute suit for the benefit of the corporation.

Article 1981 of our statutes provides that suits for the recovery of real and personal property belonging to the estate of a decedent may be instituted by the executor or administrator, and judgment in such cases is conclusive in the absence of fraud or collusion on the part of the representative. This statute states a general rule of procedure, and in the absence of circumstances requiring the intervention of equity vests in the personal representative the prior and exclusive right to bring such suits. It is clear, however, that the statute does not operate to deny in all cases the right of persons other than the executor or administrator to institute an action for the benefit of the estate. When administration is pending, the heirs are generally not entitled to maintain a suit for the recovery of property belonging to the estate, but in Barrera v. Gannaway, 130 Tex. 142, 105 S.W.2d 876, we observed that there are exceptions to this rule as pointed out in the opinion of the Court of Civil Appeals in that case. The last mentioned opinion, which is found in 74 S.W.2d 717, 718, after stating the general rule governing the maintenance of suits by heirs, declares that:

"Other exceptions to the general rule exist in cases where, there being an administration, it appears that the administrator will not or cannot act, or that his interest is antagonistic to that of the heirs desiring to sue. Rogers v. Kennard (54 Tex. 30, 37); Lee v. Turner, 71 Tex. (264), 266, 9 S.W. (149), 150; Modern Woodmen of America v. Yanowsky (Tex.Civ.App.) 187 S.W. 728."

If art. 1981 does not preclude the maintenance of suit by heirs under these circumstances, it is no obstacle to a suit by creditors in a similar case.

Many years ago this Court recognized that under certain circumstances creditors of a decedent must be permitted to bring suit for the protection of their interest in the estate. The opinion in Crain v. Crain, 17 Tex. 80, states:

'* * * that the administratrix is a trustee, acting for the benefit of creditors and distributees, and that in cases where she will not or cannot act for the protection and preservation of the estate, the cestui que trusts have a right to act in the behalf and for the protection of their eventual interests, and that such rights are the proper subjects of judicial cognizance.'

Equity will not suffer a right to be...