Case Name: Alexander S. Johnston vs. John P. Loop, Edwin McKinstry and Reuben H. Roberts - Appeal from Fannin County
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1847-12
Citations: 2 Tex. 331
Docket Number: 
Parties: Alexander S. Johnston vs. John P. Loop, Edwin McKinstry and Reuben H. Roberts — Appeal from Fannin County.
Judges: 
Reporter: Texas Reports
Volume: 2
Pages: 330-331–339

Head Matter:
Alexander S. Johnston vs. John P. Loop, Edwin McKinstry and Reuben H. Roberts — Appeal from Fannin County.
Where a letter of attorney was fraudulently obtained, authorizing a confession of judgment in favor of the assignee of certain notes executed by the persons granting the power: Held, that the letter of attorney and judgment rendered in pursuance thereof was null and void.
The following are the material facts of this case, as disclosed by the record:
At the fall term of the district court of Eannin county, 1846,. Palmer J. Pillans, on the third day of the term of said court,, appeared in open court and filed a power of attorney, made by said A. S. Johnston and Beuben EL Boberts, to confess a judgment in favor of John P. Loop, on two notes payable to E. McKinstry or order, one for the sum of $533.34, and the other for the sum of $533.52, with interest. Petition had been •filed in the suit, and service had on Johnston, but none on Roberts; that afterwards, on the 27th day. of November, 1846, Alexander S. Johnston filed his bill in chancery against said ■John P. Loop, Edwin McKinstry and Reuben Ii. Roberts, as ■defendants, and obtained an injunction, by order of John T. Mills, judge of said court.
The bill charges that Johnston and Roberts formed a co-partnership for the sale of goods, etc., for one year, in the ■month of December, 1845, and that, on the 13th day of December of the same year, they gave four several promissory notes to said McKinstry for store goods then bought of him, ■one for $533.54, due ninety days after date, one for $533.52, ■due in six months, and two for $533.52, due in nine and twelve months. And, after giving of said notes, the said Roberts and Johnston paid to said McKinstry the sum ■of $1,165.92, in cash, store goods and horses, all of which will appear by bill of items in this bill exhibited. Said bill states that Johnston and Roberts made their power of attorney to Palmer J. Pillans, to confess a judgment in favor of Loop, on the two first notes above mentioned; and that at the time of giving the power of attorney, Johnston and Roberts had dissolved partnership; and that at the same time, it was agreed by said Johnston, Roberts and McKinstry, that all the credits that they were entitled to, and all the credits which might accrue after giving said power, should be fully and fairly made ■on said first two notes, and that the overplus should be given ■on the other two of nine and twelve months. It charges that McKinstry was to give a bond that all the credits should be given on said notes, and that he had them in possession and had full control over the notes mentioned in the power of attorney; and that reposing confidence in the statements and inducements held out by McKinstry, said Johnston signed the power of attorney, believing that a full settlement could be ■made as well as if the said power had not been given, and that such was the representation of McKinstry. The bill further ■charges that Johnston and Roberts gave up to McKinstry, as collateral security on the two last notes, $900 in soldiers’ discharges, which, when • collected, were to be credited on their notes; that the power was obtained by fraud, and with a view to prevent the payments and accounts of McKinstry to be credited on the two first notes. It charges that Loop is a fictitious person. It charges that McKinstry is wholly insolvent, and unable to pay his debts. It also charges combination with Roberts, etc. The bill prays that all the just credits above alluded to may be given on the two notes mentioned in the power of attorney. The answer of Reuben Roberts confesses the partnership, etc., and refuses to join in the bill with Johnston, confesses the purchases of the goods, and giving the four notes to McKinstry as charged in the bill, but does not state the exact sum which had been paid to McKinstry since giving the notes; that they gave the power as stated in the bill to confess a judgment to Loop, but denies the agreement, as stated in the bill, as to the credits; that three of the notes given to McKinstry were due at the time the power was made; that there was no agreement on the part of McKinstry to give a bond to apply credits, etc.; admits the $900 as collateral security on the two last notes; denies the fictitious character of Loop, and enters into a long argument to show that Johnston knew that there was such a person in existence as John P. Loop; admits the confederation with McKinstry, but denies all contrivance, etc, for the purposes charged in the bill.
The answer of McKinstry admits the partnership of Johnston & Roberts, etc., and also the sale of goods and the giving of the four notes specified in the bill; denies the payment of $1,165.92 to be applied as stated in the bill, but to be applied as a credit to Roberts for his share of stock brought into the concern, and sold to Johnston at the dissolution; admits the balance of credits to be correct; denies that the credits were to be given on the two first notes mentioned in the power of attorney, but were to be settled with Roberts on a settlement between Johnston and Roberts; denies that there was any bond to be given, etc.; states that he was indebted to Loop, etc., and that there is such a person as Loop.
The defendant,.Loop, answers by attorney, Palmer J. Lil-ians, not under oath; he excepts to the sufficiency of plaintiff’s petition in six exceptions, and rests his defense upon the valid ity and irrevocability of the power of attorney and tbe confession of judgment.
On the 24th day of April, 1847, this cause came on upon bill, answers and exhibits, and the testimony of witnesses,, when the judge submitted the following facts to be found by the jury:
“ 1st. Did or did not McKinstry enter into an agreement with Johnston and Roberts to credit their notes with $1,165.92 previous to giving the power of attorney?”
The jury find, “he did not.”
“ 2d. Does or does not the evidence sustain the charge in complainant’s bill, that an agreement was made between McK- and J. and R., that the credits should be placed on the notes-assigned to Loop?”
Jury answer, “ it does not.”
“ 3d. Did or did not McKinstry agree to secure Johnston by bond, as charged in the bill, as to the performance of said agreement to make the credits alluded to?”
Jury answer, “he did not.”
“ 4th. What amount has been proved to be paid by Johnston to McKinstry since the giving of the power of attorney?”
Jury answer, “ nine hundred dollars.”
“5th. Does the jury believe that McKinstry held out any misrepresentations or made use of any fraudulent practices in the matter of power of attorney.”
Jury answer, “wedo.”
“ 6th. Has there been any testimony as to the insolvency of McKinstry? If so, is he insolvent from such testimony?”
Jury answer, “ he is insolvent from such testimony.”
“7th. Do the jury believe that John P. Loop, at the rendition of the judgment, was a living person? ”
Jury answer, “ we do.”
Upon which verdict of the jury the court rendered the following decree: Injunction dissolved, and that execution issue in favor of Loop for the amount of judgment confessed, with interest and ten per cent, damages, and that McKinstry deliver the notes he holds against J. and R. to the cleric, and to be credited with the nine hundred dollars; providedj said notes equal or exceed that sum, and in case they do not, judgment shall be rendered for the excess of said nine hundred dollars against said McKinstry, and that execution issue, •etc. From which judgment and decree the complainant, Johnston, appealed to this court.
Everts, for appellant,
contended that as the hill charged fraud against McKinstry and Roberts in obtaining the power ■of attorney, and as this fact was expressly found by the jury, it was error in the court to dissolve the injunction and render .a decree in favor of Loop. That if the power was obtained by fraud, it followed, as a necessary consequence, that the judgment based upon it was fraudulent and void, and should have been so adjudged. He cited 2 Starkie, 340; 1 Madd. Ch. 298 to 300.
Morrill, for appellees,
argued that Loop was really the party •defendant in the court below; that from the testimony, admissions made, and verdict of the jury, he was clearly a Iona fide ■creditor, and entirely free from fraud; that no matter how fraudulent the conduct of others may have been, his rights could not be affected thereby.

Opinion:
Mr. Justice Lipscomb,
after stating the facts of the case, delivered the opinion of the court.
Fraud in obtaining the power of attorney on the part of McKinstry is distinctly and expressly charged, and this charge is verified by the verdict of the jury. It would seem if the power was fraudulently obtained it would vitiate it, and the confession of judgment entered up under and by virtue of the power so fraudulently obtained. And consequently the de-ci'ee should have annulled both the power of attorney and the judgment. This is certainly the effect of fraud, unless .some innocent party would be placed in a worse condition than they were in before, who had acquired rights under the fraudulent act. , As a general proposition, both at law and in equity, it is certainly true that fraud vitiates instruments most solemnly executed, and even vitiates judgments of a court.
If any person had acquired rights, it was Loop, to whom the notes had been assigned. The evidence does not show that he participated in the transaction, but leaves the inference that if he had acquired any right under it, he was not apprised of it. In an affidavit filed when the judgment was confessed by Pillans, to whom the letter of attorney had been addressed, he makes no reference at all to any knowledge he has, personally or derived from Loop, in relation to the transaction. Pie only swears that he believes the debt just, because of the power of attorney given to confess judgment. This does not give any explanation of the particular object of' the power, and the assignment of the notes, by what means or for what object obtained. That the assignment of the notes to Loop by kfcKinstry was a part of the same transaction with the procurement of the letter of attorney to Pillans to confess the judgment, derives additional strength from further considerations arising from the record. It is alleged distinctly in the complainant's bill that McKinstry had the control and possession of these two notes assigned to Loop, down to the time of the exeention of the letter of attorney, on which the judgment was confessed. This averment is not traversed, and it must therefore be considered in proof. This, taken in connection with the fact admitted, that the account of payment by money, goods and other evidences of advances by the firm of Johnston & Huberts, amounting to more than the two notes then due, was created before the power of attorney to confess judgment was procured; and one of those items, a receipt for about one hundred and twenty dollars, expressing on its face that it was to be credited on the notes of Johnston & Roberts, and the receipt bearing date some time previous to the maturity of either of the two last notes, can there be any other construction given to this receipt than that it was to be credited on one of the notes then due? klcKinstry admits the correctness of this account, but denies that it was created as a credit on the two first notes, and says that it was to be applied to the payment of the debt of Roberts to hipa for an advance of that amount to Roberts on his entering into the business, and that Roberts was to retire from the firm; that this was agreed on between the parties when the power was executed. This explanation of the manner in which the amount of the account was to be applied is not responsive to-the charge, and should have been proven. [Roberts in his. answer does not sustain him; he says nothing about paying. McKinstry for advances to him, nor anything about his going out of the firm as a part of the arrangement. So far from sustaining, he rather contradicts him, in this, that he avers in his-answer that he did not know the amount that the firm had paid on the notes, because he had not access to the books. The receipt contradicts him, because it is expressed that the money received is to be credited on the notes he held. The whole of the case, as presented by the record, leads to no other reasonable conclusion than that the assignment of the notes was only part and parcel of the other, and if that was procured by fraud, the fraud would extend to the whole transaction. Again, if McKinstry had the control of the two notes assigned to Loop, he was, in the most favorable aspect in which his conduct can he viewed, the agent of Loop; and if there was any fraud, the act done for the benefit of his principal was not unaffected by such fraud. Loop will not be placed in a worse condition than he was in before. If it should be found that the two notes assigned have not been paid by the admitted account of Johnston & Huberts against McKinstry, there will be nothing to prevent their being so applied. But that the account should be applied to the extinguishment of the notes, there can be no doubt, unless it is proven that by contract it was to be applied as McKinstry has stated in his answer. But the fact whether the payments made were to be credited on. the first two notes, or were to go in payment of Roberts' debt to McKinstry, was not tried by the jury. That is an important issue to the final decree and disposition of the case. Without fully imderstanding how the payments have been disposed of, there can be no final decree doing justice between the parties. The case ought to be remanded for the purpose of trying the fa<?t as to that agreement.
The decree is satisfactory as to the last two notes on the finding that nine hundred dollars had been paid, which was-applied to them. It must be reversed as to the judgment in favor of Loop, and a decree entered in the court below annul ling and setting aside the letter of attorney and the confession •of judgment; and the court below is further directed to cause an issue to be tried by the jury to determine whether it was agreed between the parties that the account of Johnston & Roberts, shown in the bill and admitted by McKinstry, was or was not to be applied to the payment of the debt of Roberts to McKinstry.