Jackson v. Harby

Robertson, Associate Justice. The defendants attacked the instrument which constituted the foundation of the plaintiffs’ claim, [714] on the charge that it was made by the grantors to defraud their creditors. This was the issue in the suit, and upon it the court so charged the jury as to prevent a verdict for the defendants, unless there was a combination or conspiracy to defraud, between the grantors and either the plaintiffs or the creditors provided for in the trust. The appellees attempt no defense of this charge as correct, but insist that the evidence establishes a conspiracy or the perfect innocence of the transaction. We do not so understand the evidence. There was testimony from which the jury may have believed that the grantors were actuated by a fraudulent motive, and that the plaintiffs had notice of it, and yet they may have considered that the plaintiffs were not imbued with the ranker guilt—the active or zealous co-operation in the unlawful design—usually attached to the word combination or conspiracy. The instrument through which the plaintiffs claimed, is peculiarly formed. For the recited consideration of a sum of money, identical with the aggregate of their indebtedness to Weisenfield & Co. and Levi Whatley, the receipt of which, not stating from whom, is acknowledged, Edmison & Whatley convey to these two creditors their stock of merchandise, attaching an inventory, “in trust, nevertheless, to J. D. Harby and J. J. Whatley” (the plaintiffs) “as co-trustees,” tobe sold in the regular course of business, or otherwise, as the discretion of the trustees may dictate. The trustees are authorized to apply the proceeds to the payment of the expenses of the trust, fixed at two and one-half per cent, on the amount of sales, and, next, to the debt due Weisenfield & Co., and, lastly, to Levi Whatley’s demand. The trustees were authorized to take immediate possession, and to exercise all the power and control possessed by the grantors; and they were also authorized to collect any debts due the grantors, and apply the proceeds as if arising from sales. The paper concludes with a provision that when the debts named and expenses are “well and truly paid, then this instrument to be of none effect; otherwise, to remain in full force.” The trustees, the plaintiffs, immediately entered into possession under this document, and held under it until the bulk of the assets was taken from them by process at the suit of creditors of the grantors. It is to be observed that the instrument' vests the title in the preferred creditors, and not in the trustees. When this is done, the conveyance is held to be a mortgage, and not an assignment. Leitch v. Hollister, 4 Comst. 211. The plaintiffs had no estate in the goods— [715] they were the donees of powers, and entitled to the possession, to enable them to execute the trusts. They are not assignees. Deeds of trust conveying property directly to trustees, made to secure and pay particular creditors, though expressed in terms sufficient to pass title, if made for creditors generally, are construed to be mortgages, “ with some of the qualities of an assignment superadded.” Baldwin v. Peet, 22 Tex. 718; Burrill on Assignments, 3d ed., secs. 6, 7, 8. The- instrument under which the plaintiffs claimed, was of this character. Edmison & Whatley continued to be the owners of the property, subject to the trust. Their interest was subject to legal process, at the suit of other creditors, to be executed in the manner pointed out in the statute. R. S., arts. 2292, 2296. If the grantors were insolvent at the date of the execution of this document, and if more property was conveyed than was required to pay the secured debts, the validity of the transaction would depend, nevertheless, on the good or bad faith of Edmison & Whatley in instituting it. The plaintiffs’ petition did not show the insolvency of the makers at the date of the paper, but the averment of that fact was in the present tense, in a pleading filed some twenty months after the conveyance was made. The demurrer, based upon the proposition that the plaintiffs’ title, derived through this intrument, was fraudulent on the face of the plaintiffs’ pleading, was, therefore, properly overruled. That Edmison & Whatley were insolvent when the deed was made, that they conferred upon trustees, of their own selection, wide discretionary powers, and put them in possession of more than three times as much property, substantially all they owned, as was necessary for the ostensible aim of the conveyance, are not themselves fraud, but strong badges of fraud. Burrill, secs. 99, 220 and 221; Baldwin v. Peet, supra. In interpreting to the jury the legal effect of such an instrument, the charge should be so framed as not to deprive the jury of the consideration of these signs in determining the bona fldes of the transaction. The second direct interrogatory to J. D. Harby, and his answer, should have been excluded. They were susceptible of the construction given them by the court below; but, in that meaning, they were of no use. The answer may also have been construed to mean that the intent of the parties to the impeached transaction, was not the fraudulent one imputed by defendants, but only the legitimate one stated by the witness. In this sense, the question and answer were improper. Purnell v. Gandy, 46 Tex. 190. [716] Other questions raised are not likely to arise upon another trial, and are not now considered. For the errors indicated, the judgment is reversed and the cause remanded. Reversed and Remanded. [Opinion delivered March 21, 1886.]