Orr & Lindsley Shoe Co. v. Thompson

• Decision Date: 11 May 1896
• Citation: 35 S.W. 473
• Court: Texas Supreme Court
• Parties: ORR & LINDSLEY SHOE CO. v. THOMPSON.

Page 473

35 S.W. 473

ORR & LINDSLEY SHOE CO. v. THOMPSON.

Supreme Court of Texas.

May 11, 1896.

Certified questions from court of civil appeals of First supreme judicial district.

Action by the Orr & Lindsley Shoe Company against the Farmers' Alliance Co-Operative Association and R. H. Thompson, garnishee. From the judgment, plaintiff appealed to the court of civil appeals, which certifies two questions.

W. C. Buford and I. H. Turner, for appellant. John R. Arnold, for appellee.

BROWN, J.

The court of civil appeals for the First supreme judicial district certified to this court the following statement and questions: "The Farmers' Alliance Co-operative Association of Rusk county, Tex., an incorporated association under the general laws of the state of Texas, having become insolvent, undertook to execute a deed of trust to the appellee, R. H. Thompson, to secure certain preferred creditors. The appellant, the Orr & Lindsley Shoe Company, brought suit against the association, and garnished the appellee, who had the property of the association in his possession, holding it for administration in accordance with the deed of trust. The following questions, arising from the record, are certified to the supreme court: (1) Can a diligent creditor subject the assets of an insolvent corporation to his own claim against such corporation, to the exclusion of other creditors? (2) Can a pro rata distribution of such assets be effected by garnishment, and in a proceeding to which the other creditors are not parties?"

Answer to first question: The statement which accompanies the question certified in this case is not very full, but from it we understand that the Farmers' Alliance Co-operative Association of Rusk county, Tex., being insolvent, and having ceased to do business, with no expectation of resuming such business, made the preference deed of trust in question; and, upon that understanding of the facts stated, we answer as follows: In the case of Lyons-Thomas Hardware Co. v. Perry Stove Manuf'g Co., 86 Tex. 143, 24 S. W. 16, this court held that when a corporation becomes insolvent, and has ceased to do business, or, by the act of making a deed of trust, mortgage, or conveyance of its property, terminates its business, with no intention or ability to resume it, it has no power to give preference to one or more of its creditors over others, but its assets become a trust fund in the hands of its directors, to be distributed pro rata among its creditors, to...