Paggi v. Rose Mfg. Co.

• Decision Date: 16 February 1924
• Docket Number: (No. 8962.)
• Parties: PAGGI et al. v. ROSE MFG. CO. et al.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

Page 962

259 S.W. 962

PAGGI et al. v. ROSE MFG. CO. et al.^*

(No. 8962.)

Court of Civil Appeals of Texas. Dallas.

February 16, 1924.

Rehearing Denied March 15, 1924.

Appeal from Dallas County Court; T. A. Work, Judge.

Action by Charles Paggi and another against the Rose Manufacturing Company and another. Judgment for defendants, and plaintiffs appeal. Reversed and remanded, with instructions.

Edwin M. Fulton, of Pilot Point, and J. L. Zumwalt, of Dallas, for appellants.

Leake & Henry, of Dallas, for appellees.

LOONEY, J.

Charles Paggi, a resident of Jefferson county, Tex., and Theo Ledel, a resident of Denton county, Tex., on October 4, 1922, filed in the county court of Dallas county at law a petition against Rose Manufacturing Company, a corporation, and its attorneys, Leake & Henry, of Dallas county, a bill to review a judgment rendered against them in said court in favor of Rose Manufacturing Company, and for injunction to restrain the execution of the judgment. On hearing the court sustained a general demurrer to the petition and dismissed the case, from which order of dismissal Paggi and Ledel appealed and have assigned errors.

The material allegations of appellants are: That on January 25, 1922, Rose Manufacturing Company filed suit in the county court of Dallas county at law against Ledel Dry Goods Company on certain notes aggregating $686.80, and on an open account for $80, alleging that Ledel and Paggi were partners composing the firm of Ledel Dry Goods Company; that through their attorney, Edwin M. Fulton, the appellants, on March 2, 1922, filed separate answers in said suit; that Paggi in due order, as a part of his answer, denied under oath the alleged partnership, denied specifically that he was ever at any time a partner with Ledel in the firm of Ledel Dry Goods Company; that he had no dealing with Rose Manufacturing Company; denied under oath the execution of the note sued upon, or that his name was signed to the notes, etc. They further allege that this case was tried on June 2, 1922, in the absence of appellants and their attorney; that neither knew the case had been set for trial, or that it would be tried at the time; that the first knowledge either had that the case had progressed to judgment against them was when the sheriff of Jefferson county, Tex., appeared before Charles Paggi with an execution issued on the judgment and demanded a levy; thereupon, this suit was immediately instituted to review and set aside the judgment, and for injunction restraining the execution of the same.

Appellants allege further that on May 20, 1922, Theo Ledel was on his petition adjudicated a bankrupt in the United States District Court for the Eastern District of Texas, at Sherman, and that Rose Manufacturing Company, appellee, was scheduled as one of his creditors; that in the petition filed in bankruptcy Ledel alleged that he was the sole owner of Ledel Dry Goods Company. Later, he offered in settlement to his unsecured creditors, including Rose Manufacturing Company, a composition of 21 per cent.; that notices were sent to each of his creditors in the bankrupt proceedings of the creditors' meetings and in regard to the composition offered; that the offer of composition was duly accepted by a majority in number and amount of his creditors at a meeting in Sherman, held for that purpose on June 14, 1922, and that the same was on June 23, 1922, confirmed by Hon. W. L. Estes, judge of said court, and the bankrupt proceedings dismissed. The proceedings, with reference to the composition, the confirmation thereof, and the dismissal of the proceedings, are shown by certified copy of the proceedings in bankruptcy attached to and forming a part of appellants' petition.

Appellants account for the absence of themselves and their attorney from court, when the case was tried, substantially as follows: That their attorney, Edwin M. Fulton, who resided at Pilot Point, Denton county, Tex., at the time the answers were filed with the clerk of the court on March 2, 1922, requested the clerk to notify him when the case was set; receiving no answer from the clerk, later, in the same month, he wrote the clerk again for information in regard to the setting of the case. Receiving no answer, in the early part of the month of May, 1922, he made a special trip to Dallas for the purpose of getting this information; but at this time the case had not been set, and the attorney received no information in regard to the setting. It was further alleged that their attorney, prior thereto, had cases in said court and the clerk had previously notified him of the setting of cases, and he presumed the clerk would in a like manner notify him as to the setting of this case, and relied upon him to do so; that the adjudication on May 20, 1922, of Theo Ledel, on his voluntary petition as the sole owner of Ledel Dry Goods Company, suspended said suit and any action against him by the state court, and that the composition offered by Ledel, and its acceptance by his creditors and confirmation by the court, discharged him from liability for the debts; that the verdict and judgment against Charles Paggi is false and fraudulent and procured through fraud, in that it is based upon an alleged default as to him and is a judgment by default; whereas his answer, including a sworn plea denying partnership and the execution of notes, had been on file among the papers in the case for two months, and "that the court and jury were led to believe that the said Paggi had not filed his answer in said case." Appellants further alleged, on information and belief, that the only evidence introduced by appellee to prove that he, Paggi, was a partner with Theo Ledel in said firm, were two mercantile reports, the same being hearsay, incompetent, and not binding upon appellant, and that they have good reason to believe that a different result will be reached by a new trial.

It was further shown that appellant Ledel has a meritorious defense, in that he was discharged from said debt in bankruptcy, and that Charles Paggi has a meritorious defense to said suit, in that he was never a partner with Ledel as alleged by Rose Manufacturing Company, never contracted any of the debts sued upon, or executed the notes.

Appellants' contentions on this appeal are. That the court below erred in sustaining the general demurrer to their petition and in dismissing their cause, and for this they show that their absence and the absence of their attorney from court on the day of trial was not due to the lack of diligence on their part, under all the facts and circumstances; that the judgment rendered against them was the result of fraud, in this that it was based, as to appellant Paggi, on a recital that he had made default and that the court and jury were led to believe that he had not filed an answer; that the sworn plea denying partnership cast the burden of proof upon appellee, and that the only proof offered by it on the issue of partnership was hearsay and incompetent; that they have meritorious defenses to the suit, and expect a different result if the case is retried.

Appellees answered this contention by urging the propositions that the relief prayed for will not be granted appellants (a) simply because the judgment against them was erroneous; (b) that the failure of appellants to make a valid defense to the suit was due to their own fault or negligence; and (c) that the voluntary proceedings in bankruptcy by Theo Ledel did not, of itself, suspend or stay the suit in the state court.

These different contentions will be discussed.

The question for our decision is whether or not appellants' petition or bill of review was sufficient as against a general demurrer. It was said in an early case in this state that —

"The legal effect of a general demurrer is to admit the facts pleaded to be true, but to deny that they constitute a cause of action or ground of defense. * * * And the only question which will be considered under it is, whether any cause of action or ground of defense is disclosed in the pleadings demurred to. * * * Consequently, if sufficient be stated to enable the court to see that a good cause of action or ground of defense exists, however defectively stated, the insufficiency or defectiveness of the averments cannot be taken advantage of on general demurrer." Williams v. Warnell, 28 Tex. 612; Jefferson v. Scott (Tex. Civ. App.) 135 S. W. 706.

A general demurrer also admits all reasonable deductions or inferences from the facts alleged and all allegations of fact based on information and belief.

Tested by these rules, was the petition for review good as against a general demurrer?

That appellants had meritorious defenses to the suit is evident. The confirmation of the composition offered by Ledel to his creditors entered by the court on May 23, 1922, discharged him from the debt on which he was sued by Rose Manufacturing Company.

The law on this point is announced by Collier (12th Ed.) vol. 1, p. 314, as follows:

"The effect of the composition is to supersede the bankruptcy proceedings and reinvest the bankrupt with all his property free from the claims of creditors. It either extinguishes the legal liability or is a bar to the remedy, and, in either event, the bankrupt can no longer be compelled to pay; * * * provable claims are discharged though the holder thereof did not actually prove the same or participate with the other creditors in taking action upon the composition."

Ledel was entitled to a perpetual injunction against Rose Manufacturing Company restraining the execution of the judgment.

A case directly in point, decided by the Supreme Court of the United States under the Bankruptcy Act of 1867 (14 Stat. 517), is Boynton v. Ball, 121 U. S. 457-467, 7 Sup. Ct. 981, 984, 30 L. Ed. 985, 987. In that case the court said:

"If for any of these reasons, or for others, he permits the case to proceed to judgment in the state court, by failing to...