Case ID: sw_132/html/0862-01.html
Source: Caselaw Access Project
Author: {"author": "CONNER, O. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

STONE et al. v. STITT.
    (Court of Civil Appeals of Texas.
    Oct. 29, 1910.
    Rehearing Denied Dec. 3, 1910.)
    1. Fraudulent Conveyances (§ 49) — Conveyance oe Property Held Under Secret Trust — Fraud—Evidence.
    Where a mother furnished the money for the purchase of real estate, the legal title to which was taken in the name of her son, a conveyance by him to his mother before any creditor of the son had attached the property would not be set aside as against creditors, unless it appeared that the mother knowingly permitted the son to represent that he was the owner of the property, and thereby caused creditors to extend credit to him on the faith of his ownership.
    [Ed. Note.' — For other cases, see Fraudulent Conveyances, Cent Dig. § 105; Dec. Dig. § 49.]
    2. Evidence (§ 578) — Admissibility.
    In a suit by a trustee in bankruptcy to set aside a conveyance by the bankrupt on the ground that it was fraudulent as against his creditors, ex parte testimony of the bankrupt taken before a referee in bankruptcy was inadmissible as against the grantee.
    [Ed. Note. — For other cases, see Evidence. Dec. Dig. § 578.]
    Appeal from District Court, Deaf Smith County ; D. B. Hill, Judge.
    Action by J. W. Stitt, trustee in bankruptcy of Will H. Stone, against Sallie Stone and another. From a judgment for plaintiff, defendants appeal.
    Reversed and remanded.
    Bareus & North and W. R. McGill, for appellants. J. W. Stitt, trustee.
    
      
       For other eases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep’r Indexes
    
   CONNER, O. J.

This suit was instituted by J. W. Stitt, as trustee in bankruptcy of Will H. Stone, to set aside a deed made by the latter to his mother, Mrs. Sallie Stone, on the 14th day of March, 1903, conveying certain lots in the town of Hereford. Ap-pellee alleged that the transfer was fraudulent, in that it had been made with intent to defraud the creditors of the said Will H. Stone, and he prayed for cancellation of the conveyance. A more complete statement may be found in the opinions on two former appeals in this case. See 47 Tex. Civ. App. 93, 103 S. W. 1192, and 121 S. W. 187.

On the last trial Mrs. Sallie Stone pleaded, among other things, that the lots-in controversy had been purchased with her separate money; that they were and ever had been of right her property, although the deeds had been taken in the name of Will H. Stone; that, as soon as she ascertained the fact that the title stood in the name of Will H. Stone, she procured the execution of the conveyance in controversy in discharge of the trust under which Will H. Stone had held the legal title. By a second trial amendment filed after the case had gone to trial, appellee specially pleaded that “during the time the title was still in the name of Will H. Stone the said Will H. Stone was engaged in the mercantile business in the city of Hereford, and the claims of creditors rexiresented by plaintiff were contracted on the credit and financial standing of the said Will H. Stone; that the said Sallie Stone should not be heard on her plea of resulting trust, because plaintiff says that if, as alleged by her, the said lots were purchased and paid for by her out of her separate means, that she had full knowledge and notice of the record and legal title standing in the name of said Will H. Stone and suffered and permitted this condition of the title to remain unchanged; that said W. H. Stone was thereby permitted and enabled to represent to his creditors, and did represent to them, that the said property is owned by him, whereby he obtained large sums of credit, and the defendant Sallie Stone is now estopped from asserting in her said second amended answer her claims of resulting trust.” The case was tried before a jury and resulted in a verdict and judgment in appel-lee’s favor canceling the deed mentioned, and investing the title to the property in ap-pellee.

We regret that we have found ourselves unable to terminate the long-continued litigation between the parties to this suit, but, as desirable as it may be that this shall he done, we think we must again reverse the judgment. On the issue of estoppel above noted, the court permitted appellee over the objection of appellants to read in evidence a written statement made by Will H. Stone on November 6, 1902, to the Tootle, Wheeler & Hotter 'Mercantile Company. The statement was made as a basis of credit and included'references relating to the lots in controversy in this suit, and the court thus submitted the issue: “(12) If you find and believe from the evidence that if Sallie Stone furnished the money to purchase the lots in question in this case, and that the conveyances were made to Will H. Stone, he would >e deemed in law to hold said property in trust for said Sallie Stone, but, if Sallie Stone knew that said property had been conveyed to W. H. Stone, and if while said property was in the name of W. H. Stone he used said property as a basis of credit and represented to his creditors, who are represented by the plaintiff in this case, that he was the owner of said property, and that the same was liable for his debts, and by such representations and means the said Will H. Stone did so use said property and so obtained credit, and if his said creditors relied upon said representations so made, and were induced by said representations to extend credit to said W. H. Stone and to sell and furnish him merchandise on credit, and if you further find and believe from the evidence that Sallie Stone knew that W. H. Stone was so using said property as a basis of credit, and that he was inducing said creditors to sell him goods on a credit, then she would be estopped from and precluded thereby from asserting her claim to said property as against such creditors above mentioned, and, if you so find and believe, your verdict should be for the plaintiff, and, if you fail to so find and believe from the evidence, you will return a verdict for the defendant.” Appellee refers us to no other evidence in support of the plea or that contradicts appellant’s statement, as it appears in the brief that no credit in fact had ever been extended by reason of the statement of Will H. Stone above mentioned. Nor is any evidence pointed out tending to show that Mrs. Sallie Stone either directed or knew of the making of the statement, or that at the time of its making knew that the title to the property in question stood in the name of Will I-I. Stone, in view of all which it was certainly erroneous to either admit the statement or to submit the issue of estoppel. The case of Bicocchi v. Casey-Swasey Co., 91. Tex. 259, 42 S. W. 963, 66 Am. St. Rep. 875, presents a similar question. The Casey-Swa-sey Company and others sold certain goods to one Mazza upon the faith of representations made by Mazza that he owned certain real property in fact held by him in trust for Bicocchi. Later Mazza conveyed the property, as he had theretofore agreed to do, to Bicocchi, after which the Casey-Swasey Company and another creditor of Mazza instituted suits and recovered judgments among other things foreclosing attachment liens levied upon the property. In a suit by Bicocchi to remove the cloud cast upon his title by the judgments, our Supreme Court, after a review of the authorities, said: “We conclude that the correct rule, and that which is supported by authority and sound reasoning, is that, when the fraudulent grantee has in compliance with his verbal agreement made a reconveyance of the property to the fraudulent grantor, the moral obligation under which he placed himself to make this reconveyance is a valuable and sufficient consideration to support the deed of reconveyance. While the legal title to the property remained in Mazza, his creditors might have subjected it to the payment of their debts, and, if they had taken proceedings by which they fixed a lien upon the property before the conveyance was made, their rights would be superior to those of Bicocchi, but, having failed to secure any right in the property itself before the conveyance was made, they cannot now reach it in the hands of Bicocchi, because his right to have the property reconveyed was equally binding as were the rights of the creditors of Mazza to have their debts paid; and, Mazza having conveyed the property in satisfaction of a promise to do so, that conveyance must be held to be good against the debts of the defendants in error.” See, also, Matador Land & Cattle Company, Limited, v. Annie B. Cooper et al., 39 Tex. Civ. App. 99, 87 S. W. 235.

Appellant Sallie Stone’s testimony tended to support her plea that the property in question had been purchased with her separate money, and that the title was held by her son, Will H. Stone, in trust. Its recon-veyance to her occurred before any right to the property on the part of appellee, or of any creditor represented by him, had attached, and, to now divest her of the title on the ground of the estoppel pleaded, it must certainly at least appear that she knew of Will H. Stone’s representations of ownership; that she knew Will H. Stone’s assertions of ownership had been made for the purpose of securing credit; and that, in fact, credit had been extended by reason of such representations. In other words, it should appear that Sallie Stone was either guilty of, or knowingly permitted, some representation or concealment in relation to the title of the property which was intended to cause another to alter his position or condition and which actually had such effect.

We conclude that for the error of the court above discussed the judgment must be reversed and the cause remanded. In view of another trial, however, we wish to say that we fail to find any supporting reason for the introduction in evidence, which was permitted over the objection of appellants, of the testimony of Will H. Stone taken before the referee in bankruptcy in Et. Worth, Tex., on January 25, 1904. We will not undertake to set out this testimony, but it contained numerous statements prejudicial to Sallie Stone. The testimony of witness, duly sworn, may be heard either orally or by the familiar way of deposition after opportunity has been afforded parties to cross-examine, but we know of no precedent for the admission of this ex parte deposition of the bankrupt, unless, indeed, by way of impeachment, which is not pretended here.

Other assignments of error are presented, but the questions are not likely to arise upon another trial, and we forbear discussion.

Judgment reversed and the cause remanded.