Huntley v. Kingman Co

• Decision Date: 02 April 1894
• Docket Number: No. 256,256
• Citation: 152 U.S. 527,38 L.Ed. 540,14 S.Ct. 688
• Parties: HUNTLEY et al. v. KINGMAN & CO
• Court: U.S. Supreme Court

152 U.S. 527

14 S.Ct. 688

38 L.Ed. 540

HUNTLEY et al.

v KINGMAN & CO.

No. 256.

April 2, 1894.

This action was originally begun September 28, 1889, by Kingman & Co., a corporation organized under the laws of Illinois, against one Duncan (whose Christian name is not given, and whose surname is sometimes spelled 'Duncum,' and sometimes 'Duncan'), a white man, a citizen of the United States, and a resident of the Indian Territory, to recover the sum of $1,994.42, with interest and exchange, being the amount of two promissory notes made by Duncan, payable to the order of the plaintiff, but not then due. The complaint contained an allegation that Duncan, the defendant, had disposed of his property, and had suffered it to be sold, with intent to defraud his creditors, and to hinder and delay them in collection of their debts, and also that he was about to remove his property, or a material part thereof, out of the Indian Territory, with fraudulent intent, etc., and prayed for an attachment and for judgment. On the same day a formal affidavit for an attachment was filed, and a writ issued.

Pursuant to the attachment, the marshal seized a stock of goods as the property of Duncan, and plaintiffs in error filed an interplea setting up that the interpleaders were sureties for the defendant, Duncan, upon certain promissory notes, two of which were then overdue, and that on July 27, 1889, Duncan, for the purpose of saving his sureties harmless, executed and delivered to one Salters (whose Christian name is not given), as trustee, a deed of trust of his stock of goods; that, immediately after the execution of such deed, Salters, at the instance of the beneficiaries, took absolute possession of the property named in the deed of trust, and began the discharge of his duties as trustee, advertised the property for sale, and had procured a buyer for the same, at its full cash value, at the time the levy was made which stopped the sale; that, at the time of such levy the trustee was in actual possession of the property; that the plaintiffs and the officers making the levy were notified of the fact; and that the notes to secure which the deed of trust was given were still unpaid, and valid claims against Duncan and his sureties; that the deed of trust is a valid lien upon the property; that the property is not worth the amount of the lien, nor more than the sum of $2,500; that a sale by the marshal would necessarily be attended with great loss; and that the trustee could sell the property at a much better advantage than the marshal. Wherefore, the trustee and sureties prayed for an order restoring the property to the trustee, and for the execution of the trust.

The so-called 'deed of trust' was as follows:

'State of Texas, County of Cooke. Know all men by these presents, that I, W. H. Duncan, a resident of the Indian Territory, for and in consideration of the sum of ten dollars paid by J. J. Salters, the receipt of which is hereby acknowledged, have sold, and by these presents do sell, transfer, convey, and confirm, unto the said J. J. Salters, and to his successors in this trust, the following described property, to wit: The storehouse now owned and occupied by the said W. H. Duncan, at Beef Creek, in the Indian Territory, the fixtures therein, and all goods, wares, and merchandise contained in said house, and the books, notes, and accounts of said W. H. Duncan in said business; it being intended hereby to include all stock owned by said W. H. Duncan in his business as a general merchant at Beef Creek, I. T., also all cattle and horses owned by him at said Beef Creek, together with, all and singular, the right and appurtenances to the same in any manner belonging or appertaining; to have and to hold, all and singular, the property above described, unto the said J. J. Salters, or substitute, forever. This conveyance is, however, intended as a trust for the better securing of S. M. Huntley, Samuel Paul, S. M. White, and James Rennie against the payment of three promissory notes on which I am principal, and which, as hereafter shown, they signed as sureties, which said notes are as follows.'

Here follow copies of three notes,—one by Duncan, White, and Rennie, for $1,550; one by Duncan, Paul, and Rennie, for $2,500; and one by Duncan and Huntley, for $5,165; The first two were due August 1, 1889; the last, June 1, 1890.

'Upon payment of which said promissory notes, according to their face and tenor, being well and truly made, then, in such case, this conveyance is to become null and void, and shall be released at cost of said W. H. Duncan. But in case of failure or default of payment of said notes when they shall, respectively, become due, or of either of them, then the other of said notes shall be deemed due and payable; and in such event the said J. J. Salters is, by these presents, fully authorized and empowered, and it is made his special duty, upon request of either or all the aforesaid beneficiaries herein, at any time made after default as aforesaid, to sell the above-described property to the highest bidder for cash in hand,—selling at public or private sale, in bulk or retail, with or without advertisement, as may seem to said trustee or his substitute best,—and after said sale shall make the necessary conveyance of the property so sold, and the proceeds of said sale shall pay to the aforesaid beneficiaries herein, in proportion to the respective amounts for which each may be surety at the time of said sale, as evidenced by the above notes, and the payments that may be made thereon, in which notes all signing are sureties, except W. H. Duncan, and shall pay the expenses of this trust, including a commission of 5% to the trustee acting hereunder, holding the remainder subject to the order of the said W. H. Duncan. It is hereby especially provided that should the trustee named herein, from any cause whatever, fail or refuse to act, or become disqualified from acting, as such trustee, then the beneficaries aforesaid, S. M. Huntley, S. M. White, Samuel Paul, and James Rennie, shall have full power to appoint a substitute, in writing, who shall have the same power as trustee hereinbefore named; and I, by these presents, ratify and confirm any and all acts which said trustee or substitute may do hereunder.

'Witness my hand this 27th of July, 1889. W. H. Duncan.'

Kingman & Co. subsequently filed an answer to this interplea, averring that the notes secured by the deed of trust were void for usury, and for want of consideration; denied that the interpleaders were accommodation indorsers or sureties, or that the trust deed was valid, or gave to the interpleaders any right of property, and alleged that the instrument was made by Duncan for the purpose of placing his property beyond the reach of his creditors, and for the purpose of hindering and delaying them in the collection of their debts; denied that Salters was acting for the beneficiaries named, and averred that he was a clerk of Duncan's, and was assisting him in fraudulently disposing of his property, and that he took possession for the purpose of protecting the property from Duncan's creditors.

The case was tried upon the issues joined between Kingman & Co. and the interpleaders. Upon the trial the court instructed the jury that the deed of trust under which the interpleaders claimed the property was fraudulent on its face, that the same was sufficient for plaintiff's attachment, and that the jury should return a verdict in its favor, which was accordingly done. The defendants in the proceeding sued out this writ of error.

John J. Weed, for plaintiffs in error.

Mr. Justice BROWN, after stating the facts in the foregoing language, delivered the opinion of the court.

This case turns upon the validity of the so-called 'deed of trust' executed by Duncan to Salters to indemnify the plaintiffs in error for their signatures upon Duncan's notes.

The property conveyed consisted of a storehouse and its fixtures, together with all the goods, wares, and merchandise contained therein, and the books, notes, and accounts of Duncan in his business as a general merchant, as well as all cattle and horses owned by him at Beef Creek. The testimony indicated that the deed did not include all the property of Duncan, but that he also had a farm near Beef Creek, although the proof was not clear as to its size or value.

No brief was filed by the defendant in error, but in the court below the following clauses appear to have been relied upon as invalidating the deed:

(1) The deed was to become null and void upon the payment of the notes secured by it, and there is an inference, though no express provision, that Duncan was to remain in possession until default.

(2) Upon default in the payment of either of the notes, it was made the duty of the trustee, upon the request of the beneficiaries, or either of them, to sell the property to the highest bidder for cash, either at public or private sale, with or without advertisement.

(3) Upon such sale being made, the trustee was to pay to the beneficiaries in proportion to the amounts for which each might be surety at the time of the sale, holding the remainder subject to Duncan's orders.

The court instructed the jury that, by the reservation of the surplus, the deed was fraudulent upon its face, and was sufficient ground for the plaintiffs' attachment, and the jury were accordingly instructed to return a verdict for the plaintiffs.

The case must be determined by the application of the general principles of the common law to the questions involved. It is true that by act of congress of May 2, 1890 (26 Stat. 81), certain general laws of the state of Arkansas, among which was a chapter relating to assignments for the benefit of creditors, were extended and put in force in the Indian Territory until congress should further provide. But the instrument in question in this case was made July 27, 1889,—before this statute was enacted,—so that...