Watts v. Dubois

• Decision Date: 08 January 1902
• Parties: WATTS v. DUBOIS et al.
• Court: Texas Court of Appeals

66 S.W. 698

WATTS v. DUBOIS et al.

Court of Civil Appeals of Texas.

January 8, 1902.

Error from district court, Brewster county; J. M. Goggin, Judge.

Action by John Watts, as receiver, against Dubois & Wentworth and others. Judgment for defendants, and plaintiff brings error. Reversed.

W. Van Sickle and Ball & Fuller, for plaintiff in error. Falvey & Davis, Patterson & Buckler, and Turney & Burges, for defendants in error.

FLY, J.

This suit was instituted by appellant to recover of Dubois & Wentworth a certain debt, and to obtain a foreclosure of a mortgage on certain cattle as against all of the defendants, and to recover for the value of cattle alleged to have been converted as against all the defendants except Dubois & Wentworth. A trial by jury resulted in a verdict in favor of appellant for the amount sued for as against Dubois & Wentworth and in favor of the defendants C. H. Larkin, D. W. Gourley, A. B. Paschal, E. A. Kelley, L. B. Caruthers, S. R. Guthrie, J. D. Jackson, John Rooney, and S. D. Harman. The suit was dismissed by appellant as to the other two defendants, T. F. Swan and P W. Farrington. The cattle were claimed by appellees by virtue of an execution sale of the cattle under a judgment against Dubois & Wentworth.

The first and second assignments of error complain of the action of the court in permitting the defendants, except Dubois & Wentworth, who made no defense, to have more than six peremptory challenges in the selection of a jury. These assignments, we think, are well taken. Appellees were making common cause against appellant, as shown by the pleadings and facts, and they were, to all intents and purposes, one party. Raby v. Frank (Tex. Civ. App.) 34 S. W. 777; Jones v. Ford, 60 Tex. 127; Railway Co. v. Terrell, 69 Tex. 650, 7 S. W. 670; Wolf v. Perryman (Tex. Sup.) 17 S. W. 772. This error would not necessarily cause a reversal, unless appellant had been injured by the action of the court, and it is referred to merely in view of another trial.

The third assignment presents as error the action of the court in excluding a written document, in which Dubois & Wentworth attempted to give to Hatch, receiver, of whom appellant was the successor, possession of the cattle on which the mortgage had been executed. The document had never been recorded, and appellees were not shown to have had any notice of it, and as to them it was properly excluded. It did not tend to establish that appellant was in possession of the cattle when they were seized under execution by appellees. If the cattle were delivered to appellant by Dubois & Wentworth, his possession was not strengthened by the contents of the rejected instrument. It added nothing to the terms of the mortgage, which authorized Hatch "to take possession of and convey for each in our names sufficient of said cattle to pay any and all of said notes now due and held by said American National Bank."

It was alleged in the answer of C. H. Larkin that, if the bank was the bona fide holder of the notes given by Dubois & Wentworth, the bank had been fully paid more in money and property than was sufficient to pay off and discharge said indebtedness, and this allegation rendered permissible the bill of sale given to Hatch, receiver, by A. A. Chapman, conveying certain cattle and horses, the proceeds of which were to be credited, by the terms of the bill of sale, on notes of Dubois & Wentworth, held by the American National Bank. For like reasons it was admissible to show by the witness Thwing that he had paid the receiver $2,800 for 700 head of horses, which were worth largely in excess of that amount.

The court permitted W. W. Turney to testify to conversations had with Dubois in the presence of Thwing, the former president of the bank, after the execution of the notes sued on, and after the appointment of the receiver, to the effect that the debts evidenced by the notes were fictitious, and that the notes were given to the bank. This testimony was objected to on the ground that the declarations took place after the execution of the notes, and that Dubois could not thus impeach the consideration of the notes, and because it was immaterial and prejudicial. After the bank had failed, and had been placed in the hands of a receiver, Thwing was sent to Texas as the agent and representative of the receiver to get Dubois & Wentworth to execute a mortgage to secure their indebtedness to the bank. While endeavoring to obtain this mortgage, the conversation to which the objections are urged took place, and, we think, it was properly admitted in evidence. The receiver was present in the person of Thwing, who was his agent, and the conversation as though addressed to him. The doctrine, as announced in the cases cited by appellant, that the declarations of a vendor made after a sale, and without the knowledge or presence of the vendee, cannot be received in evidence to defeat the vendee's title to the property, has no application to the facts of this case. During the conversation between Thwing and Dubois, A. A. Chapman, who had accompanied Thwing from Erath county to San Antonio, at the solicitation of Thwing, to persuade this relative Dubois to execute the mortgage, stated to Dubois that, if his firm executed an assignment, all their property would go to their creditors, but if they gave the mortgage they might pull through, the bank resume business, and they be enabled to sell their property. This conversation upon the part of one acting for Thwing was admissible as tending to show the fraudulent purpose in executing the mortgage, and its knowledge by the representative of the receiver.

The following charge was given by the trial court: "If you believe from a preponderance of the evidence that at the time of the execution of the mortgage by Dubois & Wentworth to Hatch, as trustee of the American National Bank of Arkansas City, the said Dubois & Wentworth were insolvent, and that the said Hatch, or his agent, H. H. Thwing, had notice of such insolvency, and that the purpose of the said Dubois & Wentworth in executing said mortgage was to hinder, delay, or defraud their creditors in the collection of their debts against them, and that the said Hatch or his agent, Thwing, knew of such purpose on the part of said Dubois & Wentworth, if such there was at the time of the execution of the said mortgage; and further believe from a preponderance of the evidence that any portion of the debts described in said mortgage as owing to said bank by Dubois & Wentworth, or as being the obligations of the said Dubois & Wentworth upon which said bank was liable as an indorser, was fictitious, and did not exist as a subsisting debt or obligation against said Dubois & Wentworth at the time of the execution of said mortgage,—then you are instructed that in that event said mortgage would be fraudulent and void against the prior creditors of the said Dubois & Wentworth, and as against the debt of the said Dubois & Wentworth to the said Larkin upon which his execution issued; and if you so believe, you should find in favor of all the defendants except said Dubois & Wentworth, unless you should further believe from the evidence that such fictitious obligation or indebtedness (if any there was) was placed in the said mortgage by mistake of said receiver, Hatch, or his agent, Thwing." The charge is objected to on the ground that there was error in imputing to the receiver the knowledge of his agent, Thwing, and also in charging that the mortgage was void if a fictitious debt was included therein without reference to the intention of the parties in placing it there. The charge declares that the mortgage was void if three facts were established: First, if the mortgagors were insolvent, and the receiver, or his agent, Thwing, knew it; second, if the purpose of the mortgagors was to hinder or delay creditors, and the receiver or agent knew it; and, third, if any part of the debts described in the mortgage was fictitious, and did not exist. The law is well settled that an insolvent debtor may prefer creditors, and although, in giving a preference, he may have the intent to defraud other creditors, and such intent may be known to the preferred creditor, yet, if a sale is made or mortgage is given to him by the debtor, and the property is not more than reasonably sufficient in value to pay or secure the debt, the conveyance would not be fraudulent in case the sale was effected or the mortgage executed for the sole purpose on the part of the vendee or mortgagee of securing the debt. Greenleve v. Blum, 59 Tex. 124; Schneider v. Sansom, 62 Tex. 201, 50 Am. Rep. 521; Haas v. Kraus, 86 Tex. 687, 27 S. W. 256. In the last case cited it was said: "To have made the mortgage in question fraudulent, the secured creditor must have had some purpose other than the security and payment of the sum due. He may have known that the debtor would not have given him the security but for a desire even to defeat some other creditor in the collection of a sum due him, but this would not render it unlawful for him to take security for payment of a sum due." From this well-settled doctrine it follows that, although Dubois & Wentworth were insolvent when the mortgage was executed, and executed the same with the intent to hinder and delay other creditors, and these two facts were known to the receiver, the mortgage would not be void, unless no more property was conveyed than was necessary to pay the debt, unless he participated in the fraudulent intent, and the charge of the court declaring otherwise was erroneous. The foregoing details of what constitutes fraud being copulatively conjoined with the necessity of finding that a fictitious debt was included in the mortgage,...