Case Name: COUGHRAN et al. v. EDMONDSON
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1915-01-27
Citations: 172 S.W. 1106
Docket Number: No. 2325
Parties: COUGHRAN et al. v. EDMONDSON.
Judges: 
Reporter: South Western Reporter
Volume: 172
Pages: 1106–1108

Head Matter:
COUGHRAN et al. v. EDMONDSON.
(No. 2325.)
(Supreme Court of Texas.
Jan. 27, 1915.)
1. Fraudulent Conveyances (§ 181 ) — Gifts by Insolvent Debtor.
A pretended gift of a half interest in land by an insolvent debtor was void as to his creditors ; and, where the land was subsequently ex changed for a stock of goods, the donee acquired no interest in the goods on account of liis pretended interest in the land.
[Ed. Note. — For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 554-559, 561-507; Dec. Dig. § 181. ]
2. Fraudulent Conveyances (§ 87 ) — Transfer to Creditor in Payment of Debt.
A creditor of an insolvent debtor may receive property for his debt if not more than reasonably sufficient in value to discharge it; but, where the value of the property materially exceeds the debt, the transaction is fraudulent in law, since its necessary effect is to place the surplus beyond the reach of creditors.
[Ed. Note. — For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 221-229; Dec. Dig. § 87. ]
3. Fraudulent Conveyances (§ 87 ) — Transfer to Creditor in Payment of Debt.
An insolvent debtor was indebted to E. for $200 advanced by him to pay interest upon a lien indebtedness against land owned by the debtor. He negotiated for an exchange of the land for a stock of goods worth $1,000 or $1,200, but, according to E.’s testimony, was unable to complete the trade because R., the owner of the stock of goods, demanded $350 in' addition to the land. E. claimed that the debtor thereupon turned the trade over to him; that he closed the transaction, paying $150, and giving a $200 note signed by himself and the debtor, the debtor also conveying the land. R., however, claimed that, though the bill of sale of the goods was made to E., the trade was negotiated and closed with the debt- or. Held, that the cash paid R. and the note given him, as well as the expense incurred by E. in perfecting the title, etc., was a new debt incurred as a part of the trade, and could not be reckoned as an indebtedness which, as against the debtor’s creditors, it was not competent to discharge by a conveyance of the goods.
[Ed. Note. — For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 221-229; Dec. Dig. § 87. ]
4. Fraudulent Conveyances (§ 87 ) — Transfer to Creditor in Payment of Debt.
The value of the goods being substantially in excess of the indebtedness to E., the transaction was void if its design was, not only to secure E. in the repayment of the indebtedness, but to enable him to obtain the balance of the proceeds realized from the sale of the goods.
[Ed. Note. — For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 221-229; Dec. Dig. § 87. ]
5. Fraudulent Conveyances (§ 87 ) — ' Transfer to Creditor in Payment of Debt.
If it was the intention that E. should sell the stock of goods at retail, repaying himself the amounts due him. and paying over the surplus to the debtor, the transaction was void, since its effect was to remove the debtor’s property beyond the reach of other creditors for an indefinite time.
[Ed. Note. — For other cases, see Fraudulent Conveyances, Cent. Dig. §§ 221-229; Dec. Dig. § 87. ]
Error to Court of Civil Appeals of Second Supreme Judicial District.
Action by W. L. Edmondson against G. B. Coughran and another. A judgment for defendants was reversed by the Court of Civil
Appeals, Second District (138 S. W. 435), and defendants bring error.
Reversed, and judgment of the'district court affirmed.
Royall G. Smith, of Colorado, Tex., for plaintiffs in error. Beall & Beall, of Sweet-water, and W. B. Crockett, of Colorado, Tex., for defendant in error.
For other cases see same topic and section NUMBER in Deo. Dig. & Am. Dig. Key-No. Series & Rep’r Indexes

Opinion:
PHILEIPS, J.
The suit was instituted by W. L. Edmondson against G. B. Coughran, sheriff of Mitchell county, and the City National Bank of Colorado, for damages for the conversion of a stock of goods, attached by the sheriff as the property of J. A. Henderson at the suit of the bank against the latter. Edmondson claimed that the goods were his property at the time of the seizure. The defendants contended that the goods belonged to Henderson and were properly subject to the levy, and that the transaction whereby Edmondson was clothed with the apparent title to them was fraudulent and but a device for placing the goods beyond the reach of Henderson's creditors. A jury trial resulted in a verdict and judgment for the defendants, reversed by the honorable Court of Civil Appeals because of errors, according to its view, in the court's charge. The writ of error was granted upon the petition of the defendants because the holding of the Court of Civil Appeals was regarded as in conflict with Gallagher v. Goldfrank, 75 Tex. 562, 12 S. W. 964, and other cases.
The stock of goods was originally owned by M. C. Ratliff. Henderson negotiated a trade with Ratliff, according to the latter's testimony, wherein he agreed to exchange the stock of goods for 240 acres of land in New Mexico, belonging to I-Ienderson, $150 in money, and a note for $200, to be also signed by Edmondson. The trade was thus made, except that the goods, instead of being conveyed to Henderson, were, according to the bill of sale, conveyed to Edmondson. Henderson was then insolvent. At the time of the transaction Edmondson held Henderson's note for $200 for money advanced the latter to pay interest upon a lien indebtedness against Henderson's New Mexico land, secured by personal property which realized $135, leaving the principal of the note, $65, though it does not appear from the record whether it had been thus credited at the time of the transaction with Ratliff. There is testimony by Ed-mondson that Henderson stated to him that he would give the latter a half interest in the land in consideration for his advancing the $200, and later o'ffered to deed him the entire tract, but that he declined it, not desiring to assume the existing indebtedness of $200 against the land. Thereupon Henderson gave Edmondson a note for $1,000 secured by a deed of trust lien upon the land, as collateral security for the $200 note; the deed of trust, however, not being recorded. In the negotiation between Henderson and Ratliff, the latter demanded that he be paid as much as $350. This Henderson was unable to pay, stating to Edmondson, according to the testimony of Edmondson, that the trade was off, so far as he was concerned; that he would turn it over to him; and that whatever deal Edmondson could make with Ratliff would he satisfactory to him. According to Edmondson's statement he then took up the matter with Ratliff and closed the transaction with him, paying, himself, to Ratliff, the $150, and giving him a $200 note, signed also by Henderson, however; Henderson and wife delivering their deed to Ratliff to the New Mexico land. The stock of goods exchanged by Ratliff invoiced about $2,300 at the time of the attachment, and was worth, in hulk, approximately $1,000 or $1,200. According to Ratliff's testimony while he discussed the terms of the trade over the telephone with Edmondson, the trade with him was negotiated and closed by Henderson, and a written contract embodying the terms upon which it was consummated, as above stated, was entered into between them; and he was not aware, until the end of it and the delivery of the goods, that they were to be conveyed to Edmondson instead of Henderson. It is undisputed that Edmondson furnished the $150 paid to Ratliff, but the result of the transaction in itself was that, for this amount and the delivery of a $200 note signed by Henderson and himself, he got the entire stock of goods worth $1,000 or $1,200, though Henderson's land constituted necessarily the substantial part of the consideration for them; Henderson being insolvent at the time. There is testimony in the record sufficient to support the conclusion that the understanding between Edmondson and Henderson was that Edmondson should take the stock of goods and with it conduct an ordinary retail business in his own name, selling it out in the usual course, reimburse himself for the indebtedness due him by Henderson, and defray all expenses out of one-half the proceeds, paying any surplus of such half to Henderson, and retaining the other half for himself as representing the half interest in the land claimed to have been given him by Henderson.
At the time of this transaction, Edmondson had no title to any interest in the New Mexico land. Henderson being insolvent, any pretended gift to Edmondson of a half interest in the land was void as to Henderson's creditors. Edmondson acquired, therefore, no interest in, the goods on account of the transfer of the land to Ratliff as a part of the consideration for them.
A creditor of an insolvent debtor may receive property for his debt if not more than reasonably sufficient in value to discharge it; but, where the value of the property materially exceeds the debt, the transaction is deemed fraudulent in law, since its necessary effect is to place the surplus beyond the reach of creditors.
Edmondson was Henderson's creditor to the extent of the amount due upon the $200 note representing the amount advanced by the former to pay the interest upon the indebtedness against the land; but, if it be conceded that no part of this note had been paid at the time of 'the acquisition of the stock of goods, it is manifest that the value of the stock ($1,000 or $1,200) was altogether disproportionate to the amount of the debt. The $350, representing the $150 paid by Edmondson in cash to Ratliff and the $200 note given to Ratliff in the trade, as well as the expense incurred by Edmondson in perfecting the title, etc., so that the trade might be made, was a new debt, incurred as a part of the transaction of the conveyance of the goods to Edmondson, and so that he might acquire them,' and could not be reckoned as an indebtedness, which, as against Henderson's creditors, it was not competent to discharge by a conveyance of the goods. Gallagher v. Goldfrank, 75 Tex. 562, 12 S. W. 964. The value of the goods being admittedly substantially in excess of Henderson's indebtedness to Edmondson, it was plainly not erroneous for the court to charge that the transaction was void if the jury found that its design was not only to secure Edmondson in the repayment of the indebtedness owing him by Henderson, hut to enable the latter to obtain the balance of the proceeds realized from the sale of the goods. It was as clearly not improper to instruct, as was done in the succeeding paragraph of the charge, that the verdict should be for the defendants, if it were found that it was the intention of Edmondson and Henderson that the former should take the stock and sell it at retail, repaying himself the amounts due him by Henderson and paying over the surplus to the latter. Such a transaction is void, since its effect is to remove the debtor's property, subject to the claims of other creditors, beyond their reach for an indefinite time. Gallagher v. Goldfrank.
The instructions of the court were in accord with the repeated adjudications of this court. The issues were resolved against the defendant in error by the jury upon evidence which supports the verdict.
The judgment of the Court of Civil Appeals is reversed, and that of the district court is affirmed.