Holloway Seed Co. v. City Nat. Bank

• Decision Date: 19 March 1898
• Citation: 47 S.W. 77
• Court: Texas Court of Appeals
• Parties: HOLLOWAY SEED CO. v. CITY NAT. BANK.<SMALL><SUP>1</SUP></SMALL>

47 S.W. 77

HOLLOWAY SEED CO. v. CITY NAT. BANK.¹

Court of Civil Appeals of Texas.

March 19, 1898.

Appeal from district court, Dallas county.

Action by the City National Bank against the Holloway Seed Company. There was a judgment for plaintiff, and defendant appeals. Affirmed.

This suit was commenced May 7, 1896, in the district court of Dallas county, Tex., by appellee, a national banking corporation, against appellant, a private corporation organized under the laws of Texas. On said date, appellee sued G. R. Holloway, and sued out an original attachment, and based thereon, and on the same day, sued out a writ of garnishment against appellant, alleging as grounds for the writ that George R. Holloway owned shares of stock in appellant company, and that the appellant was indebted to George R. Holloway, and served the same on appellant May 7, 1896. Appellant filed its answer to said writ on July 3, 1896, in which it denied all indebtedness to George R. Holloway, and denied that it held effects belonging to him, and admitted that he owned one share of stock in said company, and denied all the other statutory questions. On February 8, 1897, appellee recovered judgment against George R. Holloway in the original suit for $4,971.58 and costs, which judgment is still in force. On May 12, 1897, appellee filed a contest of appellant's answer, alleging that George R. Holloway had on May 2, 1896, sold to appellant a stock of merchandise consisting of farm and garden seeds and grains, situated at No. 292 Elm street, city of Dallas, which was all the property he then owned subject to execution; that said sale was fraudulent as to appellee, and that no title passed to appellant by said sale; that said goods were of the value of $5,000; and prayed for a judgment against appellant for said stock of seeds, and, in the event they are not forthcoming for their value, to be made as under execution. On May 14, 1897, the appellant filed its tender of issues, denying all fraud or knowledge of fraud in said sale, and alleging that it was a purchaser in good faith for full value. This paper was filed under protest, and over the appellant's objection and exception. Said cause was tried on May 14, 1897, before the court, and resulted in judgment in favor of appellee against appellant; the court, in its judgment, finding that said sale was fraudulent and void as against appellee, foreclosing appellee's garnishment lien thereon, and in the alternative, in case said identical goods sold by George R. Holloway could not be found, gave judgment against appellant for $5,000, which it found was the value of said seeds, to be made as under execution. Appellant's motion for new trial being overruled, it has duly perfected its appeal to this court. The case was tried before the court, without the intervention of a jury; and, upon request, the trial judge filed his conclusions upon the facts and law. The facts will appear in the opinion.

Hudson & Woody and Crawford & Crawford, for appellant. McCormick & Spence and Morris & Crow, for appellee.

BOOKHOUT, J.

Appellant's first assignment of error complains of the court's finding of fact that the sale made by George R. Holloway to appellant was made with the intent to delay and defraud the creditors of George R. Holloway, because it is insisted the undisputed evidence shows that Holloway disposed of the same to pay his debts, and believing the appellee's debt had been extended. The cashier of the bank denies that there had been an extension of appellee's debt; that, upon a request being made for an extension of the same, he absolutely declined to grant it. There is evidence supporting the court's conclusion that the sale was made to the appellant with the intent to delay and defraud the creditors of Holloway, and we cannot say that the conclusion of the trial court in this respect is error.

Appellant also complains of the finding of the trial court that the Holloway Seed Company, through George R. Holloway, its chief promoter and only stockholder at the time it purchased said stock of seeds, knew of the fraudulent intent, and became a party to the fraud. It is claimed that George R. Holloway did not own all the stock at the time of the transfer, and that, in making the sale, he acted for himself, and adversely to the interests of the company, and therefore the company is not bound by the knowledge of his fraud in said transaction. The Holloway Seed Company was incorporated on May 2, 1896, with a capital stock of $5,000, divided into 50 shares, of the face value of $100 each. The incorporators were George R. Holloway, Thomas James, and William Shuttles. Holloway owned 48 shares, and James and Shuttles owned 1 each. Holloway was the president and general manager of the company. On May 2, 1896, George R. Holloway sold and conveyed to the Holloway Seed Company his entire stock of seeds, taking in payment stock in said company. On May 4, 1896, he sold the shares of stock to different parties, mainly the members of his family,—5 to his wife, 10 to one of his daughters, 15 to another, 5 to his son, 1 to his attorney, and retained 1 himself. He says: "I sold said stock of seeds to the Holloway Seed Co., May 2, 1896. I represented both sides, and made the sale for myself, and accepted it for the company; and, after the sale, I sold the shares of stock as above stated." At the time of this transfer, Holloway owed appellee about $4,500, for which appellee held security of the value of $1,000; and Holloway also owed one Finley a debt, which went to judgment on May 1, 1896, and which he compromised in September, 1896, by paying $800 out of the money he received from the sale of the stock in the corporation. Of the money received from the stock in the corporation, he paid commercial debts of the said company, amounting to $2,000. After selling the stock of seeds, he owned no property subject to execution, except the shares of stock in the corporation, which he sold on May 4, 1896, and excepting 15 acres of land upon which appellee held a deed of trust to secure its debt. The evidence was sufficient to support the finding of the court complained of in the second assignment of error.

There was evidence that the stock of seeds was worth $5,000 at the time of the service of the writ of garnishment, and we therefore overrule appellant's third and fourth assignments of error.

Appellant's fifth assignment of error complains of the action of the court in requiring appellant to file its tender of issues, for the reason that the court had no jurisdiction to determine the title to the stock of seeds, because this issue was not raised by the affidavit for garnishment, said affidavit not charging the garnishee with the possession of any effects belonging to George R. Holloway. After the garnishee was served, he filed an answer, making full answer to all the questions contained in the writ. The plaintiff in garnishment filed an affidavit under the statute controverting the garnishee's answer, and thereafter, under the statute, tendered issues under which it sought to hold the garnishee liable. The garnishee orally objected to the tendering of issues for the reasons above stated. The court overruled the objection, and the garnishee took a bill of exceptions. This assignment, as well as the sixth and seventh assignments of error, raises the question of the sufficiency of the affidavit for garnishment to support the judgment in this case. Without holding that a defect in the affidavit could be reached in this manner, we shall proceed to consider these assignments.

The contention of appellant is that the affidavit having alleged that the Holloway Seed Company is indebted to George R. Holloway, and that the garnishee is a private corporation, and that the defendant George R. Holloway is the owner of shares of stock in said corporation, the plaintiff is confined to the grounds set up in said affidavit as a basis for charging the garnishee, and therefore the garnishee cannot be charged for any effects which it may have in its possession belonging to the defendant Holloway. This requires a construction of the statutes of this state in reference to garnishment proceedings. The plaintiff, desiring a writ of garnishment under the laws of Texas, must make an application therefor in writing, under oath, signed by him, stating the facts prescribed by Rev. St. 1895, art. 217, authorizing the issuance of the writ; and, further, that the plaintiff has reason to believe, and does believe, that the garnishee, stating his name and residence, is indebted to the defendant, or that he has in his hands effects belonging to the defendant, or that the garnishee is an incorporated or joint-stock company; and that the defendant is the owner of shares in such company, or has an interest therein. Id. art. 219. It will be seen that the statute specifies three grounds upon which a writ of garnishment may issue, and upon which a party may be charged as garnishee, namely: (1) When the garnishee is indebted to the defendant; (2) when he has in his hands effects belonging to the defendant; (3) when the garnishee is an incorporated or joint-stock company, and the defendant is the owner of shares in such company, or has an interest therein. The writ requires the garnishee to appear and...