Rainwater-Boogher Hat Co. v. Weaver

FINLEY, Associate Justice. This is an agreed case under article 1414 of the Revised Statutes, and the question presented for decision is as to the validity of a conveyance, commonly called deed of trust, executed by Steinlein & Co. to John H. Weaver, trustee, for the benefit of certain creditors. It is admitted that at the time the instrument was executed Steinlein & Co. were largely indebted and insolvent, and that all their property was covered by the conveyance. It is contended by appellants that the instrument contains certain provisions which render it void upon its face. One of the provisions complained of is as follows: “ The said John H. Weaver to take immediate possession and control of the said property, and after an inventory thereof shall have been taken, the said Weaver is to proceed to sell said property for cash, and reduce into money the dioses of action and all evidences of debt hereby conveyed and turned over to him. The goods to be sold at retail, or in such other manner as will realize the largest amount of mó’ney, and the proceeds received from both sales and collections to be deposited daily with the Red River County Bank, subject to be distributed as herein after directed; and after the stock shall have been so reduced that it will not justify selling at retail, the said Weaver is hereby authorized and empowered to sell the remainder of the goods on hand, either in bulk or in lots, at public auction for cash, to the highest bidder.” It is asserted by appellants, that this provision directs the trustee to sell the goods at retail in the regular course of business, and in effect prohibits an immediate sale, and contemplates the carrying on of a retail merchandise business for an indefinite period of time; and therefore, by *598 its terms, it hinders and delays appellants (creditors) in the collection of their debts, and that the conveyance is thereby rendered void. We think the construction of the provision contended for is reasonable and correct; but does the legal consequence claimed by appellants necessarily follow ? Appellants were not included among the fortunate creditors for whose benefit the conveyance was made; and it does not appear from the instrument itself, or otherwise, that the property conveyed exceeded in value the amount of the debts intended to be satisfied out of the proceeds from the sale of the property. It does not appear that any of the debts attempted to be secured by the conveyance were fictitious or invalid for any reason; and the only facts presented for consideration in connection with the recitals in the instrument, which, it is insisted, tend to support the proposition that the instrument is void, are, that Steinlein & Co. were insolvent, and that all their property was embraced in the conveyance. The proposition, that an insolvent debtor may convey all his property to satisfy a preferred creditor, is so well settled that it needs no argument or citation of authority to support its announcement. These facts alone, then, can not render fraudulent and void a provision which would be legal in their absence. The instrument under consideration was a mortgage executed to secure the debts of certain creditors of Steinlein & Co. Laird v. Weis Bros., 85 Texas, 95. The trust was accepted by Weaver, the trustee, and the creditors who were beneficiaries under it; and the parties attacking the validity of thq mortgage are strangers to it, and could have no possible interest to be affected by the terms of sale provided in the mortgage, unless the property conveyed exceeded in value the valid debts intended to be secured. Marshall v. Bank of California, 1 Texas Civ. App., 704. Same case on writ of error to Sup. Ct., 22 S. W. Rep., 6. This provision in the mortgage is, to say the most of it, but a badge or circumstance of fraud, and does not of itself render the instrument void. In all the cases in our State in which it has been held that similar provisions as to the terms of sale render the mortgage void, these additional facts were made to appear, which we think are necessary to the conclusion reached, namely: that the mortgagor was insolvent; that all his property was conveyed; and that the value of the property conveyed was in excess of the amount of the valid debts intended to be secured. Gallagher v. Goldfrank, 75 Texas, 562; Gregg v. Cleveland, 82 Texas, 187; Puckett v. Richardson Drug Co., 20 S. W. Rep., 1127. The burden is on the party attacking the legality of the conveyance to establish the facts which render it void; and in the absence of proof as to such facts, the court will presume in favor of the validity of the instrument. The other provision in the mortgage attacked by appellants is as follows: In naming the debts to be paid out of the proceeds of the property, it provides, “the sum of $1000 due by us to Sims & Wright, as *599 evidenced by our note of even date herewith, and in the event of litigation, an additional 10 per cent on the amount involved.” It was admitted that the 81000 was due for “attorney fees,” in what matter it is not stated; but appellants contend that it may fairly be inferred that it was attorney fees for preparing the mortgage. Delivered October 25, 1893. It is claimed by appellants that this provision renders the mortgage void, for the reason that it provides a fund for the payment of attorneys, selected by the failing debtors and for their benefit, to deter creditors not provided for from questioning the validity of the instrument. Assuming that the 81000 to be paid Sims & Wright was due for attorney fees for services rendered in preparing the mortgage, we see no reason why the debt should not be secured by the conveyance. Steinlein &'Co. had the right to employ counsel for the purpose, and the only questions that could be raised are the bona fides of the debt and the reasonableness of the amount. As to the additional 10 per cent to be paid them in case of litigation, we do not see that a fraudulent intent is necessarily implied. The trustee, in the absence of this provision, would have had the legal right to employ counsel to defend the trust, and to pay for such services out of the trust fund; indeed, it would have been his duty to have done so, and we can not say, as a matter of law, that because the mortgage made provision for it, that it is therefore void. Such provision might have some significance as a circumstance upon an issue of fact as to the fraudulent intent of the morgagor, but it is not in itself a fraud rendering the instrument void. Baldwin v. Peet, 22 Texas, 720; Simon, Gregory & Co. v. Ashe, 1 Texas Civ. App., 202; Mills v. Pessels, 55 Fed. Rep., 588. We are of opinion that there is no error in the judgment of the court below, and it is therefore affirmed. Affirmed.