G. H. & San Antonio R. R. Co. v. McDonald

• Decision Date: 22 June 1880
• Docket Number: Case No. 4050.
• Citation: 53 Tex. 510
• Parties: G. H. & SAN ANTONIO R. R. CO. v. LOUISA MCDONALD.
• Court: Texas Supreme Court

53 Tex. 510

G. H. & SAN ANTONIO R. R. CO.

v.LOUISA MCDONALD.

Case No. 4050.

Supreme Court of Texas.

Jun. 22, 1880.

APPEAL from Harris. Tried below before the Hon. James Masterson.

Suit brought by Louisa McDonald, whose petition contained the following allegations of fact, substantially:

1. That the Buffalo Bayou, Brazos & Colorado Railway was, prior to the 11th day of June, 1868, indebted to the estate which appellee represents.

2. That the company, its road-bed, track, franchises and chartered powers and privileges, were sold in July, 1868, under an execution, and in July, 1870, under deed of trust.

3. That on the 2d of December, 1870, appellee obtained judgment on said indebtedness in the district court of Harris county, Texas, against the trustees of the creditors and stockholders of the sold out Buffalo Bayou, Brazos & Colorado Railway in their capacity as such.

4. That execution issued within a year on that judgment, and was returned no property found to satisfy the same, and that there is no property subject to levy and sale under execution to satisfy the judgment.

5. That the defendant, Galveston, Harrisburg & San Antonio Railway Company, holds the legal title to certain lands in Harris county, wherein said trustees, in their capacity as such, have an interest of one-half, and that the company is indebted to said trustees in their trust capacity, under an agreement in a trust conveyance executed by the Buffalo Bayou, Brazos & Colorado Railway Company on the 11th day of June, 1868, which agreement was attached to plaintiff's pleadings and made a part thereof.

6. That her judgment is a lien on the land; and that the land is in law and equity liable to the payment of the judgment, and prays that said land be subjected and sold to the payment of said judgment, and that the indebtedness of the Galveston, Harrisburg & San Antonio Railway Company be also subjected to the payment of her judgment, and for general relief, etc.

The trustees of the sold out company were also made parties defendant.

The defendants answered separately by general demurrer and general denial and made no other defense.

The court overruled the general demurrer, and on the trial the defendant, appellant, admitted that there was due from it, under the agreement of the 11th of June, 1868, to the trustees of the creditors and stockholders of the sold out company, an amount equal to the principal and interest of plaintiff's judgment sued on in this suit. There was a verdict for plaintiff, and judgment that plaintiff recover of appellant and the trustees, in their capacity as such, $10,976.45--the amount of judgment and interest; that said judgment was a lien on one-half of the described property in plaintiff's pleadings, that an order of sale issue to sell the same, and that execution issue against appellant for any unpaid balance.

Appellant filed a motion for a new trial:

1. Because the court erred in overruling the demurrer of defendant.

2. Because verdict and judgment are contrary to the law and the evidence.

This motion was overruled by the court.

The errors assigned were as follows:

1. Because the court erred in overruling the demurrer of defendant.

2. The verdict and judgment are contrary to the law and the evidence; because both upon the petition and the evidence it appears that the plaintiff has no cause of action against defendant, and the court should have dismissed the same at plaintiff's cost.

3. The court erred in overruling defendant's motion for a new trial.

E. P. Hill for appellant.

I. Upon the sale of the property and franchises of the Buffalo Bayou, Brazos & Colorado Railroad Company, under executions and deed of trust, the assets of said sold out company passed by virtue of the statute in such cases made and provided to trustees of creditors and stockholders of said sold out company, “with full power to settle the affairs of the sold out company, collect and pay the outstanding debts, and divide among the stockholders the assets remaining after payment of the debts and expenses.” Any lien acquired upon such assets before the dissolution of the corporation by the sales remained good, of course, against the property in the hands of the trustees; but as to general creditors, the trust estate is to be administered for the equal benefit of all, and no one of such creditors could acquire a lien or preference over another, upon the trust estate, by suing and obtaining a judgment against the trustees in their capacity as such. This is an elementary principle applicable to trust estates. Again, the statute concerning judgment liens in force at the date of plaintiff's judgment (Pasch. Dig., art. 7005), provided that judgments should be “a lien on all the real estate of the judgment debtor,” etc.; and the trustees against whom, in their capacity as such, the judgment was rendered, had no interest in the land, but the interest therein was in the cestui que trusts, the creditors and stockholders of the sold out company.

II. It is equally clear that the appellee cannot maintain the suit against appellant, claiming a personal judgment, or to subject indebtedness of appellant to the said trustees to the satisfaction of her debt, because the appellant is under no obligation, arising either out of duty or contract, to appellee, and there is therefore no privity between them. The liability of appellant is to the trustees, in whom the power and authority is vested to settle the affairs of the sold out company, collect and pay the outstanding debts, etc., for the benefit of their cestui que trusts, the creditors and stockholders of said sold out company, of whom appellee is one. To allow such creditors to sue the debtors and appropriate the assets would consume the trust estate in costs, embarrass and confuse its administration, and defeat the object and purposes of the statute to secure a fair distribution of the assets among all the creditors, and the balance, if any, among the stockholders.

John T. Brady for appellee.

I. When a judgment debtor has no property subject to levy and sale under execution, but has property in the hands of a third party, the judgment creditor can by suit subject such property to the payment of the judgment. The allegations contained in plaintiff's pleading fully come within this rule, and therefore show a good cause of action. If there is any merit in the objections used by appellee, they certainly could not be considered on general demurrer. The question as to whether the judgment sued on was a lien on the land, as well as the other question (if it can be so regarded) contained in appellant's second proposition, should have been made by ??pecial exception; otherwise are considered waived. See Supreme Court Rules, pp. 24, 25 and 26; Pearson v. Flanagan, 52 Tex., 266.

II. The trustees of a sold out railway company, under art. 4264 of the code, are but a continuation of the corporation for the purpose of managing and settling the affairs of the old company for its creditors and stockholders. The trustees are authorized to sue and be sued, and the remedies of creditors are in no way changed. Judgment can be obtained and property in their hands can be levied on and sold under execution. This suit subjects property in the hands of third parties to the payment of a judgment, which is only a process of equitable execution. Good v. Sherman, 37 Tex., 660; Freeman on Executions, secs. 424, 425, p. 704; Herman on Executions, sec. 138, p. 185.

III. As the judgment rendered in this case subjects to its payment only property belonging to the trustees of the sold out company, no one but the trustees, creditors or stockholders has a right to complain. The defense in the court below does not show that there is any other creditor, nor do the trustees complain of this judgment. The judgment itself expressly protects defendant from any future liability for whatever it pays out in satisfaction of this judgment in favor of plaintiffs. All parties who can be affected are before the court, and defendant cannot be again sued for the amount required by this judgment to be paid to plaintiffs; but whatever it pays out goes as a credit on its, defendant's, indebtedness to the sold out company.

IV. The statute of 1866, Pasch. Dig., art. 7005, declaring that judgments shall be a lien on real estate of the judgment debtor, means that it shall be a lien on any interest which the judgment...