Thaxton v. Smith

DENMAN, Associate Justice. C. Crosby, being insolvent, on the 19th day of March, 1892, duly executed an instrument in writing in substance as follows: “State of Texas, “County of Mason. “I, C. Crosby, have this day and do by these presents grant, bargain,, sell and convey unto J. A. Gamel, his heirs and assigns forever all the following real and personal property, to-wit:” (Here follows specific and general description sufficient to include all property owned by C. Crosby wherever situated, except property exempt from forced sale under the laws of this State.) “This conveyance, however, in trust for the following purposes—that is to say, the said C. Crosby is justly indebted to the-following named persons in the sums and amounts named:” (Here follows a long list of creditors and amounts due each.) “The said J. A. Gamel is hereby authorized and empowered to take immediate possession of every and all of the property herein conveyed, both real and personal, and the title and possession of all of such property is hereby fully vested in him, the said J. A. Gamel, and the said J. A. Gamel is hereby authorized to sell and dispose of all of said property. The said J. A. Gamel shall pay or cause to be paid to the person or persons owning and holding the claims against me in the manner and in the order as follows:” (Here follows list of creditors classified as first, second and third class, with provisions as to the order in which each should be paid out of the proceeds of the sale of the property, said three classes being preferred over all other creditors.) “The said J. A. Gamel shall then with *593 the proceeds of the sale and disposal of said property here conveyed remaining in his hands after the payment of all the foregoing claims in said class 1, 2 and 3 mentioned pay off and satisfy each and all other and further of my just debts, and in the event there shall not be sufficient remaining in his hands to pay all such debts remaining, then he shall pay the same pro rata, and the property remaining in the hands of the said Gamel shall then be returned to me or my order. C. Crosby.” On the 18th day of May, 1892, defendant in error, Temple D. Smith, one of the preferred creditors in said instrument, having one claim in the first and two in the third class, sued said Crosby and another in the District Court of Gillespie County and caused an attachment to be issued and levied June 13, 1892, on the lands involved in this suit. On November 4, 1892, an order of sale was issued on a judgment rendered in that suit, foreclosing the attachment lien, and executed December 6, 1892, by selling said lands, among others, to said Smith for $1033.95, which was credited on said judgment, and thereupon the sheriff executing the order of sale conveyed the lands so sold to Smith by deed dated December 6, 1892. At some time prior to September 10, 1892, the exact date not being shown by the record, J. A. Gamel instituted a suit in the District Court of Mason County “against C. Crosby, Temple D. Smith, L. Kneese, Louis Priess, and practically all the creditors named in the trust deed of C. Crosby to J. A. Gamel made March 19, 1892, and other creditors not named in the trust deed * * * wherein the trustee asked for judgment determining the rights of all of the defendants as creditors of said Crosby and in what order they should be paid, and the duties and powers of the trustee.” C. Crosby having died about March or April, 1893, insolvent, leaving no property subject to debts other than that conveyed to Gamel, a decree was rendered in said cause on October 8, 1893, dismissing the suit as to C. Crosby, and then, after reciting that the cause came on to be heard on the petition alleging the executing of said instrument from Crosby to Gamel and the answer of Temple D. Smith alleging that the same was fraudulent and void, and the answer of the First National Bank of Beeville alleging that same was a general assignment, adjudging and decreeing that the instrument was not fraudulent, but was a “valid conveyance of the property therein mentioned to said J. A. Gamel as trustee for the benefit of the creditors therein mentioned, and the trust therein created is a valid and existing trust to be carried out according to the tenor and effect of said instrument, and the same is here decreed and declared to be a deed of trust conveying the property therein named to said Gamel in trust, the proceeds of the sale of which to be applied to the payment of debts owing by said C. Crosby therein mentioned, in the order and with the preferences therein set forth, and the further hearing of this cause is set for a future day in this court.” In the same cause, on the 12th of October, 1893, a decree was entered reciting the resignation of the trustee J. A. Gamel and appointing plaintiff in error Calvin Thaxton trustee, in lieu and place of J. A. Gamel, to *594 carry out said trust in accordance with the terms of said trust deed made by C. Crosby to J. A. Gamel March 19th, 1892, and the decree of the court in this case construing the same. On the first day of November, 1895, Calvin Thaxton, claiming under said instrument from Crosby to Gamel and the decree appointing him substitute trustee, brought this suit against Temple D. Smith, in the District Court of McCulloch Comedy, to recover possession of certain lands included in said instrument from Crosby to Gamel and in said sheriff’s deed to Smith, and asking a cancellation of the sheriff’s deed as a cloud upon his title as trustee. On the trial defendant answered by general denial, plea of not guilty, and certain special answers not necessary to notice. On the trial, upon proof of the facts above stated and that all' the claims secured by said instrument from Crosby to Gamel had not been paid, judgment was rendered that plaintiff take nothing by his suit. Thaxton having appealed to the Court of Civil Appeals, assigning as error the action of the trial court “in adjudging that plaintiff Thaxton as trustee take nothing by this suit, and in not decreeing that said Thaxton as trustee was entitled to possession of the land described in plaintiff’s petition,” and the Court of Civil Appeals having affirmed the judgment of the court below, he has brought the case to this court upon writ of error, assigning as error the action of the Court of Civil Appeals in overruling his assignment. It appears from the opinion of the Court of Civil Appeals, which sets out the facts more fully than we have deemed necessary to an understanding of the questions we shall discuss, that they affirmed the judgment upon the theory that when Crosby died insolvent the authority of the trustee terminated and the jurisdiction of the District Court of Mason County was at an end, and therefore its subsequent decrees above set out were void, and the creditors had no means of subjecting the trust property to their claims other than through an administration upon Crosby’s estate in the Probate Court. Thaxton v. Smith, 38 S. W. Rep., 820. The first question presented for our consideration is whether the instrument executed by Crosby Avas a mortgage or trust deed in the nature of a mortgage, or an assignment. Any one reasonably familiar with the decisions can easily draft an instrument in such unambiguous terms that no doubt could arise as to which of the two classes it belongs. But it often happens that, by the use of language inaptly chosen to express the intent, or by the insertion of numerous ill considered provisions intended to control the disposition of the fund, serious difficulty is encountered in determining the true character of the instrument. In Tittle v. Vanleer, ' 34 S. W. Rep., 715, 89 Texas, 174, after a careful consideration of the subject with a view of ascertaining the correct rule of law whereby it may be determined to which class a given instrument belongs, we said: “We conclude, from the above authorities, that, in determining the question as to whether a given instrument belongs to one class or the other, the court will be governed by the legal intent of the grantor, as expressed in *595 the language used therein, when read, in a proper case, in the light of the circumstances surrounding its execution; and where it appears from the face of the instrument, so read, that the intention of the grantor, therein expressed, was merely to charge the property therein described with a preference lien, either as a security or as a means of immediate payment of certain debt or debts therein specified, such instrument must be held a mortgage or deed of trust in the nature of a mortgage; but where, in addition to such intention, there also appears, from the face thereof, an intent to thereby divest the grantor of, and vest in the grantee, all title and interest in the property for the purpose of providing for the immediate payment of such debt or debts, the instrument must be held an assignment. If only the first intention appears, a condition of defeasance will, as a matter of law, be implied, and the instrument read as if such condition were written therein; but, if the second intent also so appears, no such condition will be implied.” ' Tested by this rule, we are of the opinion that the instrument before us is an assignment. By it the insolvent transferred all of his property, except such as was exempt from forced sale under the laws of this State, to be sold and the proceeds to be applied to the payment of all his debts; the title thereto was expressly vested in the trustee, upon whom was also conferred the power of distributing the surplus of the proceeds of sale, remaining after paying off classes 1, 2 and 3, among such persons as he in the first instance might determine to be holders of just claims against Crosby, a doubt is expressed as to there being funds sufficient to pay this latter class in full, with which is coupled a direction, in such event, to pay to them such surplus pro rata; and there is no condition of defeasance. From all these we think it clearly appears that there was “an intent to thereby divest the grantor of, and vest in the grantee, all title and interest in the property, for the purpose of providing for the immediate payment of” the insolvent’s debts, notwithstanding the fact that there . appears on -the face of the instrument some circumstances indicative of a contrary intent, such as the attempt to create preferences and the provision for the return of surplus. The instrument being an assignment, the title was thereby divested out of Crosby and vested in Camel, and therefore Smith acquired no title as against Camel by virtue of his subsequent execution sale. As to whether he acquired any as against Crosby we need not determine. Chase v. York Co. Sav. Bank, 36 S. W. Rep., 406. The assignment having effectuated the lawful intent of the assignor of divesting himself of and vesting in the assignee “all title and interest in the property for the purpose of providing for the immediate payment of” the debts, Crosby thereafter had only the right to insist upon the due execution of the trust and to have the trustee account and reconve)r any possible surplus, the creditors were compelled to look to the assignee and not to Crosby for the appropriation of the property to the satisfaction of their claims, and any legal proceeding to bring about that result must have been against the former. The death of Crosby, in *596 whom there was no title, could not have made it necessary to proceed against his estate, for he had, by his voluntary lawful act, placed the-property beyond his own reach and that of all claiming under him, whether as representatives or heirs, in trust for the payment of his debts,, and an administration on his estate would not have reached the title vested in the trustee. Caton v. Mosely, 25 Texas, 375; Dwight v. Overton, 35 Texas, 390; Gurley v. Ward, 37 Texas, 21; Tittle v. Vanleer, supra, and authorities cited, and same case, 29 S. W. Rep., 1065. It re-suits that Gamel, had he not resigned vand had the suit in Mason County not been brought, could have maintained this action against Smith for a recovery of the land and cancellation of the cloud cast upon his title asassignee by the sheriff’s deed. We must now determine the effect of said decrees of the District Court of Mason County in so far as they bear upon the right of Thaxton to maintain this action. The object of the suit was merely to determine-whether Gamel in the distribution of the fund should observe the provisions of the instrument creating preferences. The fact that the court erroneously determined that question, while it may be a complete protection to the assignee who has distributed according, to such unreversed decree, did not in any way change the character of title vested in the assignee or reinvest Crosby with any interest parted with by him by the execution of the instrument. In fact, if that had been one of the objects of the suit it co-uld not have been accomplished by the decree, for it was-dismissed as to Crosby before the decree was entered, leaving only the assignee and the creditors to determine the question of preferences. Since-the decree of October 8, 1893, did not affect the character of title vested in Gamel by the assignment, we are of opinion that it did not in the least impair his right to- have maintained this action against Smith, though in determining the question of preferences the court erroneously considered the instrument as a trust deed and not as an assignment. Gamel having resigned his trust before the decree of October 12, 1893, and the court having thereby appointed Thaxton in his place, the latter by virtue of' art. 84, Rev. Stats., was invested with “the same powers” as the former had been, and therefore could institute' and maintain this action. It results from the above, that the judgments of the Court of Civil Appeals and District Court must be reversed and judgment here rendered for Thaxton for the title and possession of tire land in controversy and for cancellation of said sheriff’s deed as a cloud on the title and for-all costs. Reversed and rendered.