Case Name: P. Garahy v. G. M. Bayley & Co.
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1860-10
Citations: 25 Supp. Tex. 294
Docket Number: 
Parties: P. Garahy v. G. M. Bayley & Co.
Judges: 
Reporter: Texas Reports
Volume: 25 Supp.
Pages: 294–303

Head Matter:
P. Garahy v. G. M. Bayley & Co.
Where the suit was to test the question of a fraudulent conveyance, as defined in the first clause of the 2d section of the act of 18th January, 1840, to prevent frauds and fraudulent conveyances, (Paschal's Dig., Art. 3876, Note 906,) the question of good faith in making the purchase is the essential issue.
He is not a purchaser in good faith who knows and assents to the design to defraud creditors, or who might have known by the exercise of ordinary diligence.
To use the word “necessary” diligence in the instruction is not error.
In a trial as to a fraudulent conveyance, if the vendee use the vendor as a witness to prove good faith, the plaintiff may prove subsequent admissions by such a witness to contradict his evidence.
■ Appeal from Bexar. The ease was tried before Hon. Thomas J. Devine, one of the district judges.
Bayley & Co. sued Garahy, and alleged that, at the spring term, 1859, of the District Court of Bexar county, they obtained judgment against Patrick Coffee, and sought to levy execution on merchandise which Garahy claimed under the attachment originally sued out under the law to try the right of property, &c. The petition averred a long-series of facts, to charge that the sale of the goods by Coffee to Garahy was made to hinder and delay the creditors of Coffee. (Paschal’s Dig., Art. 5310.) Garahy set up the claim suits then pending as a bar. There was -also a general denial of the long petition and a plea of his right to the goods; but the real issue was a fraudulent sale vel non.
The defendant, Garahy, put in a bill of exceptions to a letter of Coffee, and to sundry statements of Coffee to witnesses, which explained the character and object of the sale. The objection was, that they were statements made after the sale, and they could not be used against the vendee. The court admitted the evidence as far as it went to contradict Coffee’s evidence, given as a witness for his vendee on the stand, but for no other purpose.
The facts are long and tedious, and are pretty faithfully given in an argumentative way in the written review of Mr. Wade, counsel for the appellee. They were—
1. The judgment of Bayley & Co. v. Coffee, rendered “at the spring term, 1859, of Bexar District Court, for $423 82.”
2. The attachment in the same case issued on the 17th Hovember, 1858, and which was levied on the property in question.
3. Garahy’s claim, affidavit, and bond, under the act of 1848. (Paschal’s Dig., Arts. 5310 to 5319.)
4. The deed of Coffee to Garahy, dated 20th October, 1856.
5. The deed to lots and bill of sale of merchandise between the same parties of the same date.
6. The voluminous evidence to prove the fraud, given in the strongest light against the good faith of the sale in Mr. Wade’s brief.
The court instructed the jury as set out in the opinion. The other instructions were warranted by the statute, and by the decisions noted in Paschal’s Dig., Art. 3876, ¡Note 906.
The jury found against the good faith of the sale, and against the claimant. A judgment was rendered, decreeing the sale to be void, and ordering a sale of the property attached.
S. G. Newton, for appellant.
—This was an action brought by appellees against appellant to try the right to property.
The evidence shows, that in 1857, one P. Coffee was the owner of a stock of goods in San Antonio, and that he sold them to defendant, Garahy, in October of that year.
It is contended by plaintiff that this sale was fraudulent, and made for the purpose of hindering and delaying creditors.
The evidence of sale to Garahy, and for a valuable consideration, is ample. This is sought to be rebutted by declarations of Coffee, made after the sale, and without the knowledge of defendant. •
We also complain of the 7th and 9th instructions, as being unwarranted by the evidence, and calculated to mislead the jury.
There is no evidence implicating Garahy in a fraud, or with a knowledge of a fraud, or with the means of obtain ing that knowledge, as Coffee was in Hew Orleans and Garahy in San Antonio at the time he made his purchase-
We therefore contend, that the court erred in admitting the testimony of plaintiffj and in its 7th. and 9th instructions to the jury, and that the verdict of the jury was contrary to law and evidence.
J. D. Wade, for appellees.
—This is an action for the trial of the right of property. P. Garahy, the claimant below, and appellant here, asserts that the property in controversy, which was attached as the property of P. Coffee by G. M. Bayley & Co., does not belong to P. Coffee, but that said Coffee conveyed it to him, the said Garahy, long before the said attachment was levied. G. M. Bayley & Co. allege, that if there ever was such a conveyance, it was made to hinder, delay, and defraud Coffee’s creditors.
The burden of proof being upon G. M. Bayley & Co., to establish the fraud, they introduced a bill of sale of the property in controversy, from Coffee to Garahy, dated October, 1856, and filed for record in January, 1858. It was then proved that Coffee was a citizen of the State of Louisiana, and Garahy a citizen of San Antonio, Texas, and that Garahy was the clerk and confidential agent of Coffee in the city of San Antonio, and as such had possession of Coffee’s store in San Antonio, and superintended Coffee’s mercantile business in said city; that Garahy retained possession of said property in controversy, and conveyed to him by said bill of sale, as the agent of Coffee, and carried on the business in Coffee’s name from the date of the conveyance, in 1856, until the latter part of October, 1857, when Garahy took possession in his own name. That Bayley & Co. were citizens of the State of Louisiana, and that they had the attachment levied upon the goods in 1858. It was proven that Coffee was largely indebted in the State of Louisiana, and had not property to satisfy the executions held against him there; that there were executions against Mm in the hands of the sheriff of Bexar county, and that he had no property in said county to satisfy his debts. It is in testimony that Garahy was a carpenter, and worked at his trade in the city of Hew Orleans, Louisiana, in 1853 or 1854, and acted after that as clerk for Coffee until he came to San Antonio, in 1855, where he continued to act as clerk until Coffee conveyed to him all of his (Coffee’s) property in the State of Texas. It was proved that the goods in the store conveyed to Garahy, and part of which was levied upon in this case, were worth from eight to twelve thousand dollars; and that other property, consisting of lands and real estate, was conveyed to Garahy by Coffee; that Garahy was unable to prove that he had paid any consideration for said property, save by Coffee, the vendor, who stated that he owed Garahy on account of an old estate of their family which he, Coffee, had administered upon; and there was no other proof but his assertion that there ever was such an administration; and Coffee’s credibility was successfully impeached.
Garahy denied, by his answer, claiming under the bill of sale that was recorded by Coffee, the vendor, in 1858, and then introduced Coffee, who had filed the bill of sale for record, to prove that this bill of sale was not the true one, but that Coffee had made a conveyance by letter to Garahy in the summer of 1857. The letters were not introduced, but their contents were permitted to be proved without first laying a foundation for it. Garahy denies all knowledge of the bill of sale executed on the 20th of ‘October, 1856, and recorded in January, 1858.
It was proved that several contracts were entered into between Coffee and Garahy and Coffee and Deitler on the same day that this bill of sale was made; that Garahy was the witness to some of them, and proved them up, when filed for record, in January or February, 1858, about the time that the bill of sale for the property in controversy was filed for record; that a deed from Coffee to Garahy, under which the latter at present owns and claims a great many lands, was executed the same day that this hill of sale was, and filed for record and proved up in 1858, about the same time that this bill of sale was filed; that Garahy, in 1856, told Coffee that, if he did not pay him what he owed him, he, Garahy, would stop clerking for him and go to work at his trade.
It was proved that goods continued to he shipped from New Orleans to P. Coffee, at San Antonio, up to the latter part of the summer of 1857. It was proved that the goods levied upon in this case had not been previously levied upon. Garahy introduced no testimony to rebut the presumptions raised by these facts hut the testimony of P. Coffee, whose credibility was successfully impeached.
These* facts so conclusively establish a fraudulent design on the part of Coffee and Garahy, that the jury could not do otherwise than give a verdict in favor of the appellee. The intimate relations existing between Coffee and .Garahy, the latter being the clerk, confidential agent, and brother-in-law of the former, placed Garahy in a position where, by the exercise of the least diligence, he might have ascertained (if he did not already know) the pecuniary embarrassment under which Coffee labored, by which he might have known the use that Coffee was making of him. It is impossible that Garahy could have made sufficient money, at $2 50 per day, at his trade, or from $30 to $40 per month clerking, and out of that to pay his expenses, in three or four years to buy a stock of goods in San Antonio worth $8',500 at cost price, and also lands, city property, and judgment claims, worth $5,000 or $6,000; property amounting in its aggregate value to $15,000 or $20,000.
It is a significant fact, that Coffee conveyed to Garahy all the property the former had'in the State of Texas, the sheriff not being able to find any property upon which he could levy executions he held against Coffee. The fact that Coffee made several distinct conveyances to Garahy, on and about the 20th day of October, 1856, the date of the bill of sale conveying the property in controversy; and the fact that not one of these conveyances was filed for record until January or February, 1858, the time that the bill of sale of the property in controversy was filed for record; ■and the fact that Garahy claims all the properly conveyed to him by the other conveyance, and in virtue of these conveyances, but denies, by his answer, holding the property in controversy under the bill' of sale of the date of 20th October, 1856, which Coffee, the vendor, filed for record in 1858, thereby recognizing its binding efficacy upon himself; and the fact that Garahy was a witness to the lease to the store-room then occupied by Coffee, from F. Deitler (one of the appellants) to P. Coffee, executed on the 20th day of October, 1856, and transferred the same day by P. Coffee to Garahy, the same date of the bill of sale of the goods in the store-room leased, and the said lease from Deitler to Coffee was filed for record in January, 1858, about the time the bill of sale was filed, and proved up by P. G&rahy, all present a chain of facts that irresistibly prove that Garahy knew of the execution of this bill of sale on the 20th October, 1856, and that he was a party to the contract, and joined in with Coffee with'his whole soul to aid Coffee in defrauding innocent persons. That the reason why he denied claiming under the bill of sale was the fact, that his permitting Coffee to remain in possession, through himself, as agent, for a long time after the sale, raised a presumption of fraud that he knew he could not rebut; therefore, he determined to cut, as he could not untie, this gordian knot. Garahy has neither proved a valuable consideration nor good faith, save by Coffee, his vendor, to whom the jury rightfully refused to give credence. The fact that Garahy retained possession of the goods, as the agent of Coffee, for more than twelve months after the sale, raises a sufficient presumption of fraud to give the case to the appellee. The judge below did not call the attention of the jury to this evidence of fraud, one of the strongest, I think, in the case.
The fact that the possession of the property had been passed to Garahy after the fraud had been committed, but before a creditor residing in the city of ÍTew Orleans, State of Louisiana, could ascertain the fact that Coffee, to whom he had given credit, intended to practice a fraud upon him, and before he could have the goods attached, while in the possession of Coffee, does not destroy the presumption of fraud already raised by the possession remaining with the vendor for a long time after the sale. If the vendor remained in possession of the goods a sufficient length of time after the sale to perpetrate a fraud upon an innocent party, and could then, by passing the possession to the vendee before the property could be levied, remove all the presumptions of fraud raised by the vendor’s subsequent possession, all the laws against frauds would be virtually annulled. Because, in the majority of cases, the first indication of fraud on the part of the vendor is the giving of the possession of his goods to some one else, and an investigation proves that the sale had been made for a long time, and the vendor had remained in possession for the purpose of committing a fraud upon an innocent person. The letter of Coffee, and his declarations, were clearly admissible, for the purpose of destroying his credibility, after the proper foundation had been laid, and they were admitted for no other purpose, because they were expressly excluded when it was proposed to introduce them to establish fraud. I think that they should have been admitted to establish fraud after it was shown that the possession of the goods remained with Coffee for a long time after the sale; this raised a presumption of fraud against Garahy, and laid the foundation for the introduction of the declaration of the party with whom he was conspiring to defraud honest men. According to the principle enunciated in the case of Bryant v. Kelton, reported in 1 Tex., 428, I fcthink that they were clearly inadmissible. I think that the charge of the court below was against appellee and in favor of the appellants, and therefore they have no right to complain of it. IJpon an examination of the appellants’ testimony, it will be seen that a part of it was clearly inadmissible, and was admitted against the objections of the appellee, but failed to save his exception, because the jury gave him a verdict. The testimony so conclusively establishes fraud, that I am forced to the conclusion that the case is brought up for delay, and will therefore ask for damages. .

Opinion:
Bell, J.
—We are of opinion that there is no error in the judgment for which it ought to be reversed. The 7th and 9th clauses of the instructions of the court below to the jury are complained of. The 7th clause of the instruction reads as follows: "The defendant is a purchaser in good faith, if you believe that the sale was not made for the purpose of hindering, delaying, or defrauding Coffee's creditors, or, if fraudulently made, that Garahy was ignorant of Coffee's intentions, or could not have known them by the exercise of reasonable diligence." The 9th clause of the instruction is as follows: "If you believe, from the evidence, that Coffee made the sale or transferred the goods to Garahy for the purpose of delaying or defrauding his creditors, and that Garahy knew and assented to that design, or that Garahy might have known, by the exercise of necessary diligence, the intentions of Coffee, you will find for the plaintiff."
The 7th clause of the ' instructions is correct as a general proposition, and the 9th clause is equally so, unless it be supposed that the jury might have been misled by the expression "necessary diligence," instead of the expression "reasonable diligence," used by the judge in the 7th clause of the instruction. By the words "necessary diligence," the judge doubtless meant that degree of diligence which the law requires a purchaser to exercise in order to he entitled to protection ás a purchaser in good faith. If the defendant had wished a more particular instruction to the jury on the subject of "reasonable" or "necessary" diligence, such an instruction should have been asked.
We are of opinion that the court below did not err in permitting the letter written by Coffee on the 13th November, 1857, to be read to the jury; nor in permitting the declarations of Coffee, made subsequent to the time of the sale or pretended sale to G-arahy, to go to the jury. The witness, Coffee, was introduced by the defendant, Garahy, and his testimony was relied on to establish a sale by himself to Garahy in October, 1857. The letter of the 13th November, and the subsequent declarations of Coffee were admissible to contradict the statements made by him on his direct examination.
We think the whole case was fairly left to the jury, that they were not misled by the charge of the court, and that their verdict is fully sustained by competent evidence.
The judgment of the court below is therefore
Affirmed.