Davis v. Sittig

• Decision Date: 16 February 1886
• Docket Number: Case No. 2179
• Citation: 65 Tex. 497
• Parties: A. F. DAVIS ET AL. v. A. F. SITTIG
• Court: Texas Supreme Court

65 Tex. 497

A. F. DAVIS ET AL.

v.A. F. SITTIG

Case No. 2179

Supreme Court of Texas.

Feb. 16, 1886.

ERROR from Galveston. Tried below before the Hon. W. H. Stewart.

The court, to whom the cause on the trial thereof was submitted without a jury, rendered judgment in favor of the plaintiff for the amount of the note and interest, less certain sums advanced the payee by the executor. The defendants excepted, and have brought the case to this court by writ of error.

The trial court's conclusions of law, which form a part of the record, are as follows:

1. A negotiable note, when lost before endorsement and never found, although it be afterwards transferred before its maturity, is, in the hands of the transferee, subject to every defense which the maker could urge against the payee; so that the $1,000 advanced by Davis, the maker, to Lewis, the payee, entitles the defendants in this case to a credit of the $1,000 against the lost note; and, by reason of the fact that before the plaintiff acquired the right to the lost note, the title to the property, of the value of $2,000, the consideration of the note has failed, by reason of the property having been sold to pay Lewis' debt, the defendants are entitled to an additional credit of the $2,000, which two credits amount to $3,000.

2. Bevin R. Davis, having given the note and received the deed, in confederation with Lewis, to hinder and delay the creditor, Walthew, and other creditors of Lewis, is estopped to set up such fraudulent intent to defeat the enforcement of the collection of the balance due on the note, which I find, together with the interest thereon, less the credits, to be $3,175, for which I hold that the plaintiff is entitled to his judgments as heretofore rendered on March 9, 1885.”

The syllabus states the facts.

C. L. Cleveland and Ballinger, Mott & Terry, for plaintiffs in error, on the proposition that the court erred in its conclusions of law, to the effect that Bevin R. Davis, having given the note and received the deed, in confederation with Lewis, to hinder and delay the creditors of Lewis, is estopped to set up such fraudulent intent to defeat the enforcement of the balance due on the note, cited: 1 Story Eq. Jur., secs. 378, 379; 2 Pothier on Obligations, 5; Bigelow on Fraud, 342; Kerr on Fraud, 214; 1 Addison on Cont., sec. 264; 2 Chitty on Cont., 11 Am. ed. 1050; 1 Parsons on Notes and Bills, 216; Willis & Bro. v. Morris, 63 Tex. 458; Gilmour v. Thompson, 49 Howard Pr. 198; Feldman v. Gamble, 26 N. J. Eq. 494;Harvey v. Hunt, 119 Mass. 283;Winn v. Thomas, 55 N. H. 294; s. c. 14 Am. Law Reg. N. S. 702;Lawrence v. Clark, 36 N. Y. 128;Howe v. Litchfield, 3 Allen 443.

That the secret agreement between Alfred N. Lewis and Bevin R. Davis, at the time of the execution of the note and the deed of assignment, in pursuance of their fraudulent intent, was illegal, and Davis could have pleaded such fraudulent agreement as against Alfred N. Lewis, they being in pari delicto, they cited: 1 Daniel on Neg. Insts., sec. 194; Bigelow on Fraud, 343; 1 Story Eq., sec. 379; Kerr on Fraud, 374; 7 Wait's Acts. and Def., p. 66, sec. 2, p. 69, sec. 5; 4 Ib., p. 280, sec. 7; Willis & Bro. v. Morris, 63 Tex. 458;Howe v. Litchfield, 3 Allen 443; Solinger v. Earle, 45 N. Y. 80, 604; Dougherty v. Savage, 28 Conn. 248.

That the note having been assigned without endorsement, the holder was in no better position than the original payee, they cited: Story on Prom. Notes, sec. 120; 1 Daniel on Neg. Insts., sec. 741; 2 Parsons on Notes and Bills, 46.

E. P. Turner, for defendant in error, on the question of estoppel, and that a conveyance, though fraudulent and void as to creditors, is, nevertheless, binding as between the parties, cited: 3 Wait's Acts. and Def., 469, 478; Fowler v. Stoneum, 11 Tex. 478;Epperson v. Young, 8 Tex. 135;O'Neal v. Chandler, 42 Ind. 471;Springer v. Drosch, 32 Ind. 486, and cases cited; Starke v. Littlepage, 4 Rand. (Va.) 368;Shaw v. Millsaps, 50 Miss. 380; Anderson v. Bradford, 5 J. J. Marsh (Ky.) 69; Woodman v. Bodfish, 25 Me. 317; Kerr on Fraud, 373, et seq.

That a promissory note given for property transferred with intent to hinder and delay creditors, though void as to such creditors, is valid as between maker and payee, he cited: 1 Daniel on Neg. Insts., 142, sec. 194; Hoeser v. Kraeka, 29 Tex. 452;Lewis v. Castleman, 27 Tex. 417;Carpenter v. McClure, 39 Vt. 13;Dyer v. Horner, 22 Pick. 253;Sherk v. Endress, 3 W. & S. 255;Stanton v. Green, 34 Miss. 582.

STAYTON, ASSOCIATE JUSTICE.

The findings of fact by the judge who tried this cause show that the lost note sued upon was executed by B. R. Davis to Alfred N. Lewis, in consideration of property conveyed by the latter to the former with intent to defraud his creditors, and that this intent was known to all parties. They further show that Alfred N. Lewis, after the note was lost, but before its maturity, transferred his interest therein to Charles A. Lewis, who is not shown to have paid value therefor, and that he, after the maturity of the lost note, transferred it to the appellee.

The court below properly held that, under the existing facts, the note was subject to any defense which could have been urged against it in the hands of the person to whom it was originally made payable. The note was negotiable in form, but was not transferred by endorsement, as is necessary to pass the legal title to such paper. It was not in the possession of the party to whom it was made payable, nor is it shown that the person to whom it was assigned before maturity ever paid value for it.

It is well settled that, under such facts, it came into the ownership of the plaintiff subject to all defenses which the maker of it could urge against it, were it yet in the hands of Alfred N. Lewis, and that he stands charged with notice of the facts which attended its execution. Daniel on Neg. Insts., 741; Trust Co. v. National Bank, 101 U. S. 71; Allum v. Perry, 68 Me. 232; Bank v. Taylor, 100 Mass. 22;Foreman v. Beckwith, 73 Ind. 517;Beard v. Bedolph, 29 Wis. 142;Matteson v. Morris, 40 Mich. 55; Simpson v. Hall, 47 Conn. 417; Terry v. Allis, 16 Wis. 504; Boeka v. Nuella, 28 Mo. 180; Haskell v. Mitchell, 53 Me. 468; Hedges v. Sealy, 9 Barb. 214; Bissell v. Gowdy, 31 Conn. 49; Barlow v. Scott, 12 Ia. 65.

Such being the position of the plaintiffs, the court below held that those who represent the maker cannot now assert the illegality of the transaction. That as to them the note is to be deemed a valid instrument, and subject only to such defenses as could be urged against such an instrument in the hands of one holding only the equitable title thereto.

There are cases which hold that the maker of a note, given for the purchase money of property, which he knew the payee conveyed to him for the purpose of defrauding his creditors, cannot set up the fraudulent character of the transaction as a defense to the note. Amongst them are Carpenter v. McClure, 39 Vt. 9;Davis v. Mitchell, 34 Cal. 81;Dyer v. Horner, 39 Mass. 260;Sherk v. Endress, 3 W. & S. 255;Springer v. Drosch, 32 Ind. 486.

These decisions do not recognize any difference between contracts executed and executory, and are based on the language of the statutes...