Court Opinion

ID: 4893375
Source: CourtListenerOpinion
Date Created: 2021-09-02 23:53:31.534334+00
Date Added: 2024-06-11T08:09:49.394727
License: Public Domain

Moore, Chief Justice.
The correctness of the verdict of the jury upon the evidence submitted to them, is not controverted. The errors assigned relate solely to the action of the court in overruling an exception of appellant to the admission in evidence of the deed of trust given by Huffman, Musick & Co. to secure the payment of the notes to Alford, upon which the suit is founded, and to the refusal of the court to give certain charges requested. by appellant as to the effect of said *91deed. These errors are substantially exhibited in the following summary, to wit:
*90Note.—Moody v. Wright, 13 Met. (54 Mass.), 17, cited by plaintiff in error in support of his last, or sixth, proposition, is expressly overruled in Brett v. Carter, 2 Lowell’s Decisions, 458, supra.
*911st. It appearing upon the face of the deed that the grantors were authorized to retain possession of the stock of goods, wares and merchandise covered by it, and to continue selling in their usual course of business until default in the payment of the notes for security of which it was given, the deed was fraudulent and void.
2d. If the deed was given upon the understanding with Huffman, Musick & Co., or with any member of the firm, that it was not to be recorded until it should become necessary to use it, the jury should find for appellant, the defendant in the court below.
3d. If the stock of goods upon which the deed was given constituted the entire capital of the firm of Huffman, Musick & Co., as it was given within six months prior to their adjudication in bankruptcy, it necessarily operated as a preference and in contemplation of insolvency, and the jury should find in favor of the defendant.
4th. If the giving of the deed was out of the usual course of business of Huffman, Musick & Co., this was sufficient to put Alford upon inquiry as to their solvency, and if they were in fact insolvent at the time, Alford was charged with notice of it.
No complaint is made by appellant of the instruction given the jury by the court, or, as we have said, to their finding on the evidence submitted to them. It would seem that the theory upon which appellants counsel sought to have the case tried in the court below, and asks that it shall be determined in this court, is, that the facts exhibited by the deed, or the finding by the jury of either of those referred to in the charges asked, is conclusive evidence, of fraud, irrespective of the purpose and intent of the parties executing the deed. In other words, the retention of possession and power to sell in the ordinary course of trade, by the mortgagors, the failure to record the deed, the giving of a deed upon the entire capital Stock of *92a firm within six months prior to its adjudication in bankruptcy, or the giving a deed of trust on their entire stock, the bankrupts, in conformity to the agreement upon which they purchased the bulk of it, if not in their usual course of trade, was per se conclusive evidence of fraud sufficient to avoid a deed, though the evidence might be ample to rebut. the presumption of fraud which these matters would warrant, if unexplained.
Such, in our opinion, is not the law as established and maintained by the unbroken current of decisions of this court from its organization down to the present time. (Bryant v. Kelton, 1 Tex., 417; Converse v. McKee, 14 Tex., 20; Earle v. Thomas, Id., 583; Linn v. Wright, 18 Tex., 317; Baldwin v. Peet, 22 Tex., 708; Howerton v. Holt, 23 Tex., 57; Green v. Banks, 24 Tex., 508; Kerr v. Hutchins, 46 Tex., 384.)
It is only where the fact or intention which avoids the deed is patent upon the face of the instrument, or is a necessary deduction from it, that the court can pronounce it void. Nor is it authorized to tell the jury, upon proof of a given fact, they should find against the instrument, unless fraud is a legal and indisputable deduction from the existence of the fact, or matter in question.
How, although the objections made by appellant to the bona fides of the deed in question in this case, are certainly obvious badges of fraud, and, it may be, would have fully justified the jury, or even, taken in connection with the other testimony, have required them to return a different verdict from that found, as the matters indicated in the instructions asked are neither singly nor collectively such as to warrant a conclusive deduction of fraud, it was not error for the court to decline giving them. To have done otherwise would have been an usurpation by the court of the province of the jury, or rather to have made the decision of the case turn upon proof of a badge of fraud, instead of actual fraud.
• The deed of trust was good as between the parties and those charged with notice of it, whether recorded or not. And it *93seems to be well established, that, as it was recorded before appellant was appointed assignee, he stands in no better position in respect to it than would the grantees, especially as it has not been made to appear that he represents creditors who have been delayed, hindered or defrauded by the deed. (Winsor v. McLellan, 2 Story, 492; In re Dow, 6 N. B. R. Rep., 10; Sawyer v. Turpin, 1 Otto, 114.)
The bankrupt law does not absolutely avoid all transfers by the bankrupt within six months prior to the adjudication, but only where the party to whom the property is conveyed has reasonable cause to believe the conveyance is contrary to, or in fraud of, the law. (Rev. St. U. S., sec. 5120; Craig v. Carmichael, 2 Dill. C. C. Rep., 519.)
Nor does the fact that the deed of trust given by Huffman, Musick & Co. was out of their usual course of business (though there is nothing in the record on which to base such a conclusion), affect Alford with notice of their insolvency, if they were insolvent, but imposes upon him the duty of using due diligence to inform himself upon the subject. (Schulenburg v. Kabureck, 2 Dill. C. C. Rep., 132.)
So obvious is the conclusion from what we regard as the well established law and practice of this court,'that the court did not err in its rulings, that it seems to us unnecessary to add to what has been already said, nor would we do so but for the zeal and learning displayed by appellant’s counsel, and the evident good faith with which they refer to a recent decision of the court (Peiser v. Peticolas, 50 Tex., 638), as supporting their first assignment of error, as well as a fundamental error, which, as they insist, is shown by the record, viz.: That the deed of trust is void, because it purports to convey subsequently acquired property.
It is said in Peiser v. Peticolas, in accordance with previous decisions of the court (Baldwin v. Peet, 22 Tex., 708; Bailey v. Mills, 27 Tex., 434), that “where well defined legal fraud is shown upon the face of the instrument itself, without resort to extrinsic testimony,” it is the duty of the court to declare its *94legal effect and pronounce the instrument void. And if the fact that Huffman, Musick & Co. were to retain the goods conveyed by them, with the right to sell in the usual course of business until they should make default in payment of the notes for security of which the deed was given, “is well defined legal fraud,” it cannot be defined that the court below erred in refusing to exclude the deed from the jury. But while there is no doubt great conflict in the decisions upon the point, we are not prepared to say that such a stipulation in a deed of trust, without reference to the facts, is legal fraud. In our opinion the weight of authority is against it. To hold that authority to sell in his usual course of business invalidates the deed,would virtually deny to a trader the right to give a mortgage 'upon his stock for ever so short a time, however inconsiderable the debt might be in comparison with the mortgaged property, or however clearly the facts might demonstrate that there was no intent or purpose to defraud. (Fletcher v. Morey, 2 Story, 555; Briggs v. Parkman, 2 Met., 258; Jones v. Hoggendon, 3 Met., 507; Hughes v. Craig, 20 Iowa, 399.)
Ordinarily, when possession is held in accordance with the terms of the deed, such possession is not even a badge of fraud; while in other cases its retention by the grantor, and especially with the power of disposition, is the strongest evidence of fraud; and if it appear on the face of the deed that it will operate to an unreasonable advantage of the grantor or to the detriment and injury of his creditors, the deeds will be pronounced fraudulent per se.
The case of Peiser v. Peticolas, evidently, in the opinion of the judge by whom the opinion was prepared, belonged, if the facts before the court and admitted by the grantee were shown by the deed, to the last class of cases. While there are some very strong expressions in the opinion which seem to give countenance to the conclusion that the retention of possession of mortgaged property, coupled with the right to sell, authorizes the court to pronounce a deed fraudulent in law, it must be remembered that the opinion and judgment of a court *95must always be measured and interpreted by the facts and points to be decided, and in this case the court was exercising the blended functions of court and jury.
The deed in that case, it should also be noted, was given to secure a debt past due. The possession and right to sell the existing and subsequently acquired stock was for a period of indefinite duration. The effect of such a transaction, if legal, was to permit an insolvent party to do business under cover of deed of trust in favor of friendly and preferred creditors, in defiance of and at the expense of his other creditors, for an indefinite period of time. It might well be said, when such a case as that is shown on the face of the deed, that the court could only construe it as a fraudulent device to hinder and delay creditors, irrespective of the real intent and purpose of the parties. Such a possession and power of disposition was unreasonable and inconsistent with the bonce fide security of a debt already past due, and a delay and hinderance of the creditor's. The agreement seems evidently to have contemplated a continuance for such a length of time that the entire stock on hand would be disposed of in the ordinary course of business.
The facts of this case are altogether different. Possession was to be retained merely until there was a default or failure to meet the notes, which had but a short time to run. The amount of goods was considerably in excess of the debt with which they were charged. This excess was apparently sufficient to permit of sales in the ordinary course of business by the owner without impairing the security. Under these circumstances we do not think it can be said that the court would have been warranted in holding the deed absolutely void or in instructing the jury that it was their duty to do so.
In response to the objection that the deed is invalid because it attempts to create a lien upon such goods, wares and merchandise as might be subsequently added to their stock by the grantors, it will suffice to say that the record does not show that there were any additions made to the stock after the execution of the deed. Such a stipulation in a deed certainly does *96not affect its provisions, if otherwise valid, in respect to the stock on hand at the date of the deed. There is, therefore, nothing in the record to sustain the objection, even if it had been assigned as error; much less can it be said that the court should reverse the judgment because it goes, as claimed, to the foundation of the action.
There is no error in the judgment of which appellant has complained, and it is therefore affirmed.
Affirmed.