Patty-Joiner Co. v. City Bank

• Decision Date: 20 February 1897
• Citation: 41 S.W. 173
• Court: Texas Court of Appeals
• Parties: PATTY-JOINER CO. et al. v. CITY BANK OF SHERMAN et al.<SMALL><SUP>1</SUP></SMALL>

41 S.W. 173

PATTY-JOINER CO. et al. v. CITY BANK OF SHERMAN et al.¹

Court of Civil Appeals of Texas.

February 20, 1897.

Appeal from district court, Grayson county; D. A. Bliss, Judge.

Action by Patty-Joiner Company and others against the City Bank of Sherman and others, with which was consolidated a garnishment suit by said plaintiffs against J. R. McMahan, assignee of J. F. Fuller, for the benefit of creditors. There was a judgment establishing the rights and priorities of the parties in the assigned fund, and plaintiffs appeal. Reversed in part on appellees' cross assignments.

E. F. Brown, for appellants. Wolfe & Hare, Beaty & Culver, and Hazlewood & Smith, for appellees.

LIGHTFOOT, C. J.

On December 13, 1893, J. F. Fuller, a merchant at Howe, Tex., executed to J. R. McMahan a deed of assignment conveying to him all of his property subject to forced sale for the benefit of such of his creditors as would accept under it and release him. The assignee immediately accepted the trust, qualified according to law, and took possession of the property. At the date of the assignment Fuller was insolvent. He was indebted to appellants, all of whom refused to accept under the assignment, and who brought suits upon their claims, and recovered judgments against Fuller. They also sued out writs of garnishment, which they caused to be served on J. R. McMahan, as assignee. The City Bank of Sherman held a claim against J. F. Fuller for $2,500, which was secured in the deed of assignment, and was scheduled as a claim which had been previously secured by a lien upon a certain lot in the town of Howe, which the assignor claimed to be exempt under the laws of Texas. At the time of the assignment, and previous thereto, J. F. Fuller was in partnership with J. W. Simpson in the purchase of cotton at Howe, and said firm had on hand about 150 bales of cotton, and owed an amount of money equal to or in excess of the assets. On the day of the assignment, and with the full knowledge of the assignee, J. R. McMahan, J. F. Fuller transferred to his partner, J. W. Simpson, all of his interest in the partnership cotton. Simpson immediately took charge of the cotton, sold it, and applied the proceeds to the payment of the firm debts. In answer to the writ of garnishment which had been served upon him, J. R. McMahan, the garnishee, set up the deed of assignment, his qualification, that he had given notice as required by law, the names of the accepting creditors and the amounts of their claims, the expenses which he had incurred, showing the amount in his hands, which was not enough to pay the accepting creditors if the claim of the City Bank of Sherman should be allowed. He answered specially, with reference to that claim, that after the execution of the assignment, and with notice thereof, the City Bank of Sherman instituted suit in the district court of Grayson county against J. F. Fuller and wife for the amount of its debt, and caused a writ of attachment to issue and be levied upon the town lot in Howe, which was exempt to Fuller and wife, and stated that such suit was still pending. The answer of the garnishee was controverted by the appellants on the grounds: (1) That the assignee failed to account for one-half interest in 150 bales of cotton claimed to be worth $3,000, and which it was claimed Fuller had fraudulently transferred to J. W. Simpson to defraud his creditors, and that the garnishee knew of this conveyance, and failed to take any steps to recover the cotton. (2) That at the date of the acceptance of the City Bank of Sherman on its note for $2,500 suit was pending on the same, and that a writ of attachment had been levied therein on a certain lot in the town of Howe, which suit was filed with full knowledge of all the facts; that the note was not due, and was secured by a lien on said lot, which was reasonably worth the amount of said debt. On August 14, 1894, appellants, who were nonaccepting creditors, filed a suit in the district court of Grayson county to set aside the acceptance of the City Bank of Sherman, and to cancel the conveyance of the one-half interest in the 150 bales of cotton from Fuller to Simpson, and to recover the same or its value. On February 20, 1896, the garnishment suit was consolidated with the cause last above mentioned, and, in addition to the allegations formerly made, plaintiffs set out the amount of funds collected by the assignee, the amount of the debts of the accepting creditors, and attacked the claim of $2,500 of the City Bank of Sherman upon the grounds mentioned, and prayed that the allowance of the claim of said City Bank be set aside; asked for judgment against J. F. Fuller, J. W. Simpson, and the City Bank of Sherman for the value of the cotton to be brought into the assignment fund, and for judgment debarring the City Bank from participating in the proceeds of the cotton, for judgment against the assignee and the sureties on his bond for the value of the cotton, and that the priorities of the garnishments be established, etc. The defendant City Bank of Sherman, after general answer, set out that the note for $2,500 for which it accepted was unsecured; that the purported builder's lien executed by Fuller and wife on the lot was for money loaned to Fuller to erect a storehouse on the lot, and that it was executed after the building was completed; that it was known to be a part of the homestead of Fuller and wife, and the lien was worthless; that it gave notice in writing of its acceptance after the assignment, within four months after publication by the assignee, and filed its claim within the time prescribed by law; that the suit instituted and the attachment therein levied was an effort to realize a portion of its indebtedness out of exempt property, and was not an attack upon the assignment; that on the day notice was given to the assignee of its acceptance, it ordered the clerk to dismiss the suit, and has not since attempted to force payment of the note or to recover judgment. Defendant Simpson answered, setting up the partnership between himself and Fuller and the ownership by the firm of the 150 bales of cotton; that prior to the execution of the deed of assignment by Fuller the firm of Simpson & Fuller was, by mutual consent, dissolved, and that he (Simpson) became the owner of the assets of the firm, which consisted wholly of said cotton; and that he (Simpson) assumed the payment of all the debts due by said firm of Simpson & Fuller; that he paid Fuller nothing on the cotton, but paid all of the proceeds of the cotton on debts of the firm of Simpson & Fuller, as defendant agreed to do when he took the bill of sale from Fuller for his one-half interest in the cotton; that he was ignorant of any intention on the part of Fuller, if such he had, to delay or hinder creditors in the collection of their debts; that the cotton was sold for the full amount of its value, and the proceeds paid out on the firm debts. J. R. McMahan, assignee, answered, setting out substantially the same answer that he made to the writ of garnishment, asked for $50 as attorney's fees for answering the writ of garnishment, and prayed for judgment against Simpson and the City Bank of Sherman for the value of the cotton if fraudulently transferred. The cause was submitted by the court to the jury on special issues, upon which the court rendered judgment, holding: That the one-half interest of J. F. Fuller in the 150 bales of cotton passed to the assignee, and judgment was rendered in favor of such assignee against J. W. Simpson for $3,141.57, with interest at 6 per cent., and costs. That out of the $2,156.75 already in the hands of the assignee he pay the expenses of the assignment, attorney's fees, costs of this suit, and then claims of creditors who have accepted under the assignment. If not enough to pay them in full, then in proportion to their claims,—giving the amounts and names of the accepting creditors each. Appellants' judgment and garnishments are established as claims prior to the claim of the City Bank of Sherman in the sum of $3,141.57, the value of the cotton recovered against J. W. Simpson; and the City Bank is debarred from participation in the distribution of said last-named sum. If anything remains due on the claims of accepting creditors under the assignment after the funds now on hand shall be exhausted, such assignee shall pay the accepting creditors, excluding the City Bank of Sherman, in full out of the above $3,141.57 recovered for said cotton. After such payments, then the judgments of plaintiffs shall be paid in full. If not sufficient to pay all in full, to be paid pro rata, giving to neither priority. That plaintiffs recover of J. W. Simpson, J. F. Fuller, City Bank of Sherman, J. R. McMahan, assignee and garnishee, all costs. That plaintiffs take nothing in their suit against W. D. Fuller, J. R. Jackson, G. B. R. Smith, D. B. Harrell, G. T. Duke, and B. H. Zauk, and that they recover their costs against plaintiffs. That the builder's lien on lot 19 in block 3 in the town of Howe is declared invalid, and J. F. Fuller and wife recover their costs against the City Bank of Sherman on their cross action. That the acceptance of the City Bank and B. H. Zauk take precedence of the garnishment of plaintiffs in so far as the fund on hand is to be paid out, and in no other fund. All parties excepted in open court, gave notice of appeal, and the case is now before us on appeal. On motion of the assignee, the judgment was reformed as to costs incurred in seeking to subject the cotton transferred to Simpson, and it was directed that such costs should be paid out of the funds on hand, and that McMahan, City Bank of Sherman, and B. H. Zauk recover of plaintiffs their costs. We have purposely left out a statement of the pleadings of such parties as are not involved on this appeal. For the convenience of all parties, we refer to the special verdict of the jury set out in full in the...