Harvey Company Limited v. Braden

• Decision Date: 23 January 1924
• Docket Number: (No. 2247.)
• Citation: 260 S.W. 655
• Parties: HARVEY COMPANY, Limited, et al. v. BRADEN.
• Court: Texas Court of Appeals

Page 655

260 S.W. 655

HARVEY COMPANY, Limited, et al. v. BRADEN.

(No. 2247.)

Court of Civil Appeals of Texas. Amarillo.

January 23, 1924.

Rehearing Denied March 19, 1924.

Appeal from District Court, Potter County; Henry S. Bishop, Judge.

Action by Fred W. Braden against the Harvey Company, Limited, and others. Judgment for plaintiff, and defendants appeal. Affirmed.

Veale & Lumpkin, of Amarillo, for appellant Read.

Reeder & Reeder, of Amarillo, for appellant Hedrick.

Coffee & Holmes, of Miami, for appellant Osborne.

Turner & Dooley, of Amarillo, for appellee.

HALL, C. J.

The appellee, Braden, sued the appellant company, J. I. Harvey, L. C. Morgan, H. C. Wright, S. L. Jones, A. R. Calloway, Arnold Steeger, Mrs. M. E. Harvey, N. H. Read, E. B. Hedrick, and J. R. Osborne to recover the sum of $1,761, and to foreclose laborer's liens on property belonging to the company. The material allegations in his petition are that the defendants were partners, operating under the name of the Harvey Company, Ltd., engaged in drilling a well for oil and gas in Gray county, Tex.; that a joint-stock company was formed under a trust agreement recorded in the deed records of Gray county; that J. I. Harvey and L. C. Morgan were the trustees of said common-law trust, but that all of the defendants, operating under the name of the Harvey Company, Ltd., were partners, and as such are jointly and severally liable to him for the amount claimed; that he was employed by the company acting through its trustee, J. I. Harvey, to work as a tool dresser at $10 per day for such work; that he worked 241 days and had been paid $1,125, leaving a balance of $1,285 still due him and unpaid; that one A. D. Tucker commenced to work for said company in July, 1922, and worked until in October of that year at the rate of $4 per day for a part of the time, and $5 per day for the remainder, for which services the company owed him $476; that the said Tucker had duly made and filed his laborer's lien in Gray county, and for a valuable consideration had conveyed to plaintiff his claim and lien. The Harvey Company, Ltd., and J. I. Harvey answered by general denial, and at the April term, 1923, J. I. Harvey amended, alleging that on April 20, 1923, he filed a voluntary petition in bankruptcy in the District Court of the United States for the Northern District of Texas, and suggested to the court by reason thereof that it did not have jurisdiction to try the cause, and that the trustee in bankruptcy should be made a party. The defendants Jones, Calloway, Steeger, and Wright were duly served with process, but made default. Defendant Morgan was served with notice to serve nonresident defendants, and defaulted. No process was served upon Mrs. Harvey, and no personal judgment was rendered against her. The defendants Read, Hedrick, and Osborne answered separately, denying the allegation of partnership under oath.

The first proposition is to the effect that, when it is made known to a state court upon call of a suit pending therein that one of the defendants in the action has filed a voluntary petition in bankruptcy, it is the duty of the state court to stay proceedings where there is an effort to foreclose a lien upon property then in custody of the bankrupt court. The amended pleading filed by J. I. Harvey, suggesting to the court that he had filed his voluntary petition in bankruptcy, was not verified, nor was any proof offered to sustain the allegation. It was not shown by the pleadings that Harvey had been discharged by the bankrupt court; that any receiver had been appointed for his property, or that he had even been adjudged a bankrupt. The pleading was therefore wholly insufficient to authorize the trial judge to stay proceedings. Bowman v. Strother, 144 Mo. App. 100, 128 S. W. 848; Morgan Bros. v. Dayton Coal & Iron Co., 134 Tenn. 228, 183 S. W. 1019, Ann. Cas. 1917E, 42; Texas F. & B. Co. v. First State Bank of Channing (Tex. Civ. App.) 149 S. W. 779; Rennebaum v. Atkinson (Ky.) 52 S. W. 828. Merely the beginning of bankruptcy proceedings will not defeat the jurisdiction of a state court previously set in motion. Texas Fidelity & Bonding Co. v. First State Bank of Channing, supra; Lydick v. Neville (C. C. A.) 287 Fed. 479. The doctrine has been frequently announced that a mere suggestion made in an action pending in a state court by a defendant therein that he has became bankrupt will not prevent the state court from proceeding to judgment but that it is the attempt to enforce the judgment which will be restrained by the federal court. Chase v. F. & M. National Bank, 202 Fed. 904, 121 C. C. A. 262; Eyster v. Gaff, 91 U. S. 521, 23 L. Ed. 403; Pickens v. Roy, 187 U.S. 177, 23 Sup. Ct. 78, 47 L. Ed. 128; In re McBryde (D. C.) 99 Fed. 686; Frazier v. So. L. & T. Co., 99 Fed. 707, 40 C. C. A. 76. It is further held that, until it is shown that a trustee has been appointed and until he has intervened in the suit, a judgment of foreclosure may be taken by the state court. Miller v. Clements, 54 Tex. 351; In re New England Breeder's Club (D. C.) 175 Fed. 504; In re Rathman, 183 Fed. 923, 106 C. C. A. 253. Numerous federal authorities bearing upon this question are reviewed in a well-considered opinion by Judge Sanford, in Re Dayton Coal & Iron Co. (D. C.) 291 Fed. 390. Like the instant case, the right of the creditors of the insolvent to foreclose their mortgage liens was there involved. Certain other creditors filed a creditor's bill in the chancery court of Rhea county, Tenn., in which the mortgage foreclosure was sought. Five days after the appointment of the receiver by the chancery court of Tennessee other creditors filed in the federal court an involuntary petition in bankruptcy against the Dayton Company. In the course of the discussion it is said:

"By the filing of the original and amended creditors' bills in the chancery court, seeking the administration of all of the assets of the Dayton Company, to which the Trust Company was a party defendant, and by the appointment of a receiver who took possession of the company's property, including that covered by the mortgage, the chancery court necessarily acquired the jurisdiction to administer such property, which continued, through the actual possession of its receivers, to the time of the Supreme Court decree, unless terminated, as the trustee in bankruptcy insists, as of the date when the first petition in bankruptcy was filed, by the retroactive effect of the adjudication in bankruptcy made thereafter."

Citing the authorities to sustain his statements, Judge Sanford says:

"The custody, or constructive possession, of the debtor's property which is vested in the bankruptcy court by the filing of the petition, ex propria vigore, extends, however, only to the property then held by or for him, of which the court might summarily take possession. * * * And it does not extend to property otherwise held as to which an adverse claimant has a substantial pre-existing claim of lien or title, whose validity, in the absence of actual possession by the bankruptcy court can only be determined in a plenary suit by the trustee in bankruptcy. * * * Nor does the filing of a petition in bankruptcy oust the possession of the debtor's property that has been previously acquired by a state court in the suit of an adverse claimant or terminate the jurisdiction of such court. * * * Thus it does not terminate the prior jurisdiction of a state court in a suit to foreclose a mortgage, * * * or, in a suit to enforce a pre-existing lien. * * * A more difficult question arises where the possession of the state court was obtained in a proceeding to acquire a lien by attachment or otherwise commenced, within four months before the filing of the petition in bankruptcy and invalidated by the provisions of section 67 of the Bankruptcy Act. * * * However, even in such case, it seems clear, upon principle, that the bankruptcy court cannot be vested by the filing of the petition with a constructive possession of the property which can operate of its own force — contrary to every analogy of the law — to oust the actual possession of the state court, and that it acquires, at the most, a right to the custody and control of the property which entitles it to obtain possession in an appropriate manner from the state court, and, if necessary. to stay further proceedings in the state court in regard thereto."

A review of the authorities cited by Judge Sanford convinces us that the trial court did not err in refusing to grant the stay. The rule is further announced that a suit against partners, as such, will not abate by reason of the bankruptcy of one partner, and that the rule applies in cases of voluntary bankruptcy as well as to involuntary bankruptcy proceedings. 7 C. J. 349; In re Geister (D. C.) 97 Fed. 322. The record does not bring this case within the provisions of U. S. Comp. Stat. § 9595.

The appellant Read's next contention is that the court erred in overruling the application for a continuance or postponement. Under district and county court rules 55 and 70 alleged error in overruling an application for continuance must be preserved and presented in this court by proper bill of exceptions, or the assignment will be disregarded. There are two applications for continuance in the record, but the orders of the court overruling them do not make the applications themselves part of the record. There is no bill of exceptions incorporating either of the applications to be found in the transcript. It is uniformly held that under such conditions the error, if any, could not be considered. Anderson v. Rich (Tex. Civ. App.) 223 S. W. 540; Darby v. White (Tex. Civ. App.) 165 S. W. 481; Texas City Terminal Co. v. Thomas (Tex. Civ. App.) 178 S. W. 707.

The appellant insists under the third proposition that the court erred in permitting the witness Tucker to answer the following question propounded by plaintiff's attorney: "Who was...