Compton, Ault & Co. v. Marshall

This was a proceeding for the trial of the right of property in certain goods which were levied upon by virtue of a writ of attachment in favor of plaintiffs in error against Eaton, Guinan Co., as the property of the latter, and which were claimed by the defendant in error. The good at the time of the seizure were in the possession of the claimant. He asserted title to the property under a deed in trust executed by Eaton, Guinan Co., the defendants in the attachment, to him as trustee, for the purpose of securing certain creditors therein named. In the case of the Bank of California v. Marshall, 1 Texas Civil Appeals, 704, the validity of this identical instrument was called in question, and it was held not void upon its face; and the judgment in favor of the trustee was affirmed. From that judgment of affirmance the appellant made an application to this court for a writ of error, which was refused. A motion for a rehearing of the application was filed, which was also overruled. It thus appears that the ruling that the deed of trust in question was not void upon its face was affirmed by this court, and we now adhere to that ruling. The Court of Civil Appeals having rested their opinion upon the ground that the unsecured creditors were not delayed, because the goods were clearly insufficient to pay those who were preferred, it was insisted, in the motion for a rehearing, that the facts as agreed upon did not justify the court's conclusion as to the relative value of the goods and the amount of the secured debts. In disposing of that motion, this court in a written *Page 53 opinion by the chief justice say: "The trust deed was not void upon its face, and if it does not appear from the agreed case that the property conveyed was worth much less than the debts intended to be secured by it, the burden of proof was on the plaintiff, who is now the applicant; and the same result in the absence of proof would follow, as though the fact assumed by the Court of Civil Appeals was shown to have existed." (This opinion was filed April 17, 1893, and seems not to have been officially published.) The plaintiffs in error in their tender of issues in the trial court averred, among other things, that the deed of trust was fraudulent, and that the trustee had notice of the fact; and that the debts secured by it were fictitious. As one of the grounds of the application for the writ of error, it is insisted, that there being, with the exception of one claim, no evidence as to the existence of the debts secured by the trust deed save the recitals in the instrument itself, as found by the Court of Civil Appeals, that court erred in finding that the debts existed. It is also insisted, that the Court of Civil Appeals erred in holding that the burden was upon the plaintiffs to show the nonexistence of the debts. The court was clearly correct in the latter ruling. The deed of trust not being void upon its face, it was incumbent upon the parties who alleged that it was fraudulent, to prove the fraud. If the debts intended to be secured by it were fictitious, the burden was upon the plaintiffs in error to show the fact. If the goods were worth more than the preferred debts, and by the terms of the deed other creditors were delayed in subjecting the surplus to the payment of their demands, the plaintiffs in error should have alleged and proved these facts. In the absence of extrinsic testimony sufficient to show the trust deed fraudulent in fact, the trustee had the right to hold possession of the property, and was therefore entitled to a judgment in his favor in this proceeding. It appears that at the time the deed of trust was executed, the Waco State Bank, one of the preferred creditors, held notes, accounts, and acceptances belonging to Eaton, Guinan Co., as collaterals to secure the debt due them by that firm; and that, as a part of the agreement between the bank and the mortgagors, these collaterals were to be returned to the latter, and that this was accordingly done. It was not shown that any of the collaterals were unmatured negotiable paper. The Waco State Bank had the right, with the assent of the mortgagors, to hold the collaterals and to accept a mortgage as additional security. They had the right to accept one security in consideration of the release of another, provided other creditors were not delayed by the transaction. The attaching creditors not having shown in this case that any of the collaterals were negotiable, and therefore not subject to garnishment, they can not justly complain of their surrender. The collaterals not appearing to have been such as were beyond the reach of the creditors of Eaton, Guinan Co. while in the hands of the latter, *Page 54 we can not see that their restoration to the pledgors upon the execution of the deed of trust rendered that instrument fraudulent in law. The judgment of the Court of Civil Appeals and that of the District Court are affirmed. Affirmed. Delivered June 21, 1894. IN MOTION FOR REHEARING. H.C. Lindsay, for plaintiffs in error, urged: The question of law that is presented for the consideration and determination of the court in this case is directly raised, and is a clear one. It is this: When an insolvent debtor makes a deed of trust of all his property, securing persons whom he alleges to be his creditors, in a contest between an attaching creditor of such insolvent and the trustee or beneficiaries claiming under said trust deed, on whom lies the burden of proof as to the validity of the debts attempted to be secured? Counsel contends that there can be but one answer to such question, and that is, on the trustee, or beneficiaries under the trust deed. The above question is the point involved in the case of plaintiffs in error, and they ask the decision of the court in their favor thereon. Another statement of the same question is this: As between one who has shown his equities, and one who claims equities as a bona fide purchaser for value, on whom lies the burden of proof to show the equities of the latter? This point has been decided a great many times by this court, beginning in the very first volume reporting its decisions, and running down to the present time; and every time the decision has been in consonance with the views now urged by counsel for plaintiffs in error. In support of this assertion of counsel, the court is cited to the following cases: Crosby v. Huston,1 Tex. 203; Briscoe v. Bronaugh, 1 Tex. 325 [1 Tex. 325]; Edrington v. Rogers, 15 Tex. 188 [15 Tex. 188]; Cox v. Shropshire, 25 Tex. 113 [25 Tex. 113]; Hawley v. Bullock, 29 Tex. 216 [29 Tex. 216]; Brown v. Texas Cactus Hedge Co., 64 Tex. 396 [64 Tex. 396]; Wallis v. Adoue, 76 Tex. 118; Tillman v. Heller, 78 Tex. 597; Simon v. Ashe, 1 Texas Civ. App. 202[1 Tex. Civ. App. 202]; Watkins v. Edwards,23 Tex. 443; Wait on Fraud. Con., sec. 220, p. 311; 2 Whart. on Law of Ev., secs. 1041, 1042; 1 Greenl. on Ev., sec. 72; 2 Cobby on Chat. Mort., sec. 756, p. 967; Hardware Co. v. Davis, 27 S.W. Rep., 72; Lott v. Achilles, 27 S.W. Rep., 587; Savings Bank v. McDonnell, 18 Am. St. Rep., 137; Strom v. Hayes, 70 Ill. 111; Haynes v. Leffing,40 Mich. 602; High v. Battle, 10 Yerger, 333; Jewett v. Palmer, 7 Johns. Ch., 65; Williams v. Hollingsworth, 9 Strobh. Eq. Rep., 103; Childs v. Hord, 9 S.E. Rep., 362; Weber v. Rothchild, 3 Am. St. Rep., 162; Bolton v. Johns, 5 Pa., 151; Hancock v. Horan, 15 Tex. 512. *Page 55 ON APPLICATION FOR REHEARING.