Keller v. Harris

• Decision Date: 17 March 1885
• Docket Number: Case No. 2022.
• Citation: 63 Tex. 512
• Court: Texas Supreme Court
• Parties: THEODORE KELLER v. SMALLEY & HARRIS ET AL.

63 Tex. 512

THEODORE KELLER

v.SMALLEY & HARRIS ET AL.

Case No. 2022.

Supreme Court of Texas.

Mar. 17, 1885.

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

Suit filed on the 3d day of October, 1884, by the appellants against B. Smalley and R. F. Harris, composing the firm of Smalley & Harris, on two promissory notes, executed by Smalley & Harris on the 11th day of June, 1884, one for the sum of $1,162.35, due and payable at Houston, Harris county, sixty days after date, to order of appellant, and one for $1,162.34, due and payable ninety days after date, and to foreclose a mortgage on personal property, consisting of mill fixtures, machinery, etc., executed by said Smalley & Harris on the 11th day of June, 1884, to secure the prompt payment of the notes, and making the defendant Wm. Kennedy a party defendant as assignee of the other defendants, with alleged notice of appellant's rights.

Upon affidavit of appellant, a writ of sequestration was issued, by virtue of which the property was seized.

After service the defendants filed a demurrer and special exceptions, which were overruled by the court, October 30, 1884, and a sworn plea, setting forth that on the 29th day of September, 1884, Smalley & Harris, being unable to pay their debts as they became due, executed an assignment to defendant Wm. Kennedy, for the benefit of their creditors consenting to accept their proportional share of their estate, and discharge them from their proportional claims; that on September 30, 1884, defendant Wm. Kennedy executed a bond with security, in the sum of $12,000, for the faithful performance of his duty, which was approved by the judge and was deposited with the clerk of the county court and filed by him where the assigned property was situated, and where the assignors and assignee resided; that it showed by proper schedules the assigned estate and liabilities of assignors, which, after its acknowledgment, was duly recorded in the county clerk's office of Polk county; that after the assignee qualified, he took possession of the assigned property on the 16th day of October, 1884; that plaintiff brought suit to sequester a portion of the assigned property and subject it to his pretended lien, and alleged that if plaintiff had any remedy against them, or any of them, it was in the district court of Polk county, under the assignment laws of the state, and not in the district court of Harris county; that if plaintiff had a valid mortgage, that then the assignee alone had power to sell the property embraced in the mortgage and apply the proceeds to the claim.

There was much other pleading, which, in view of the opinion, it is not important to state.

W. P. Hamblen, for appellant, that the clause in the assignment to sell on a credit rendered it void, cited: R. S., art. 2465; Bailey v. Mills, 27 Tex., 437;Carlton v. Baldwin, 22 Tex., 731; Burrill on Assignments, 197, 198, 199; Baldwin v. Peet, 22 Tex., 713, 714;Barney v. Griffen, 2 Comst., 365, 371; Porter v. Williams, 5 Seld., 510; Burrill on Assignments, 211 et seq.;Hutchison v. Lord, 1 Wis., 286;Keep v. Sanderson, 2 Wis., 42;Keep v. Sanderson, 12 Wis., 362; Benz v. Shaughnesy, 2 Utah, 500; Campbell v. Woodworth, 2 Am. L. Reg. (N. S.), 695.

That the assignment could not affect the rights of the mortgagee, he cited: Porter v. Williams, 5 Seld., 142; Burrill on Assignments, p. 303; Whitaker v. Williams, 20 Conn., 98.

That the judgment should have foreclosed the mortgage, he cited: Frow v. Downman, 11 Ala., 880;Pierson v. Manning, 2 Mich., 445; Burrill on Assignments, pp. 484, 485; Ray v. Birdseys, 5 Denio, 626;Wood v. Robinson, 22 N. Y., 567.Hill & Corry, for appellees, that the deed of assigment was not void by reason of the powers conferred, cited: Acts 18th Leg., April 7, 1883, ch. 56, last clause of sec. 6, p. 47; Keating v. Vaughn, 61 Tex., 519et seq.; McLendon v. King, McRae & Co., Court of App., Tyler, 1884, 4th Law Rev., pp. 251, 252; Burrill on Assignments (4th ed.), pp. 328, 691; Id., ch. 43.

That the property passed to the assignee for the benefit of creditors, they cited: Acts 16th Leg., Reg. Sess., p. 57, sec. 1; Acts 18th Leg., Reg. Sess., p. 47, sec. 2; Brothers v. Mundell, 60 Tex., 246; Burrill on Assignments, 4th ed., pp. 431, 432, 433, 596; Baldwin v. Peet, 22 Tex., 715, 716; Burrill on Assignments, 4th ed., secs. 336, 337, 338.

That the property assigned vested in the creditors, and their assent was not necessary, they cited on motion for rehearing: R. S., Appendix, p. 16, sec. 9; Burrill on Assignments, 4th ed., pp. 432, 433; 1 Smith's Leading Cases, Ed. of 1853, pp. 70, 71; Id., of 1855, p. 75; Tennant v. Stoney, 1 Rich. Eq. (S. C.), p. 222.

That a mortgage void as to creditors is void as against an assignee for their benefit, they cited: R. S., Appendix, p. 16, sec. 9; Hanes v. Tiffany, 25 Ohio St., 549; Killborne v. Fay, and Kellar v. Shoeffman, 29 Id., 275-281;Allen v. Massey, 17 Wall., 351; Burrill on Assignments, p. 596; Sixth Ward Build. Ass'n v. Wilson, 41 Md., 506; Blandy v. Hall, Supreme Court Ohio, October, 1884, 6 Ohio L. J., 105.

STAYTON, ASSOCIATE JUSTICE.

The deed of assignment made by Smalley & Harris to Kennedy for the benefit of their consenting creditors is claimed by the appellant to be void, because it contains the following clause:

“The said assignee is empowered to sell the lumber assigned for cash or on a credit; but if sold on time, good security is to be given by purchaser. The said assignee is empowered to sell the property other than said lumber for one-third or one-half cash, and balance on a credit for twelve months, securing deferred payments by good personal security and deed of trust on property sold, all deferred payments to bear ten per cent. interest from day of sale; provided, however, the assignee is empowered to sell the live stock for cash or on credit, with restrictions aforesaid.”

If this be true, it is because of fraud thereby perpetrated upon the creditors of the assignors by them, or by the assignee in accepting the trust with this provision in it.

This objection is met by the statute itself.

The latter part of the sixth section, as amended by the act of April 7, 1883, declares: “And it is further enacted that no fraudulent act, intent or purpose of the assignor or assignee shall have the effect to defeat the assignment, or to deprive the creditors consenting thereto from the benefits thereof, but any such fraudulent act, intent or purpose on the part of the assignee shall be sufficient cause for his removal, as being an unsuitable person to perform the trust, and any consenting creditor may be or become a party to prosecute or defend in any suit or proceeding necessary or proper for the enforcement of his rights under such assignment, or for the protection of his interest in the assigned property.” Gen. Laws 1873, p. 47.

Under this, whatever may be the direction of the assignor in regard to the disposition of the trust property which passes by an assignment under the statute, the beneficiaries can cause the trust to be so executed that the estate may be administered for the best interest of all.

Cases may arise in which, for many reasons, sales on credit would best subserve the interest of all, and in such cases creditors could compel the assignee so to sell; and on the other hand, cases may arise in which it would be to the advantage of creditors that the property should be sold for cash, and in such cases the assignee who might desire or intend to sell on a credit could be compelled to sell for cash.

The rules by which the validity of assignments, not statutory, are to be determined have not conclusive application to assignments made under statutes.

In the one case, the assignee has only such power, and the creditors such rights, as the instrument gives through which the assignment is made; while on the other hand the powers of the assignee and rights of creditors are largely dependent on the law under which the assignment is made; and creditors are given power to compel the faithful and proper administration of the assigned estate.

The facts proved in this case give no ground for belief that the clause, in the assignment objected to, was inserted through any improper motive, or for a purpose not tending to the best interest of creditors.

It is claimed that a person holding a lien on property, assigned under the statute, cannot enforce his claim through a suit to foreclose, and that he must enforce his right through the assignee.

Upon this subject the statute is by no means full or clear, but for the proper determination of the question we must look to its provisions,and may look to the rules governing other cases in which the property of an insolvent debtor, under statutory authorization, is placed in the hands of an assignee for the benefit of creditors.

The first section of the act of March 24, 1879, requires the assignment to provide “for a distribution of all his real and personal estate, other than that which is by law exempt from execution, among all his creditors in proportion to their respective claims, and, however made or expressed, shall have the effect aforesaid.”

The second, after requiring a statement of debts, provides that the debtor shall make “a statement of any existing judgment, mortgage, collateral or other security for the payment of any such debt.”

The third declares that “Any debtor desiring so to do may make an assignment for the benefit of such of his creditors only as will consent to accept their proportional share of his estate, and discharge him from their respective claims.”

The sixth requires the assignee to execute a bond, among other things, conditioned “that he will make proportional distribution of the net proceeds of said estate among the creditors entitled thereto.”

The twelfth provides that each creditor who has established his claim shall “be entitled to his proportional share of the debtor's estate.”

The fifteenth declares that, ...