Court Opinion

ID: 3967566
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:26:55.030695+00
Date Added: 2024-06-11T07:43:56.057039
License: Public Domain

The notes in controversy, upon which the trial court gave judgment in appellee's favor mere payable to the order of McCoy, Bonner, and Nixon, "trustees." The trial court found that they were transferred to appellee for a valuable consideration and without notice of any defect in the absolute ownership of McCoy, Bonner, and Nixon.
The writer cannot agree that the term "trustees," without any notice, actual or constructive, except the presence of this term appended to the names of the payees, of itself, gives notice of secret equities or undisclosed interest of a third person. There is no beneficiary designated or purpose of trust indicated, and such term, in my opinion, standing alone, is to be considered surplusage and absolute title passes to the purchaser by the conveyance of such payees in such notes. But especially is this applicable to deeds conveying real estate. Unless there is a named beneficiary and an indicated purpose of trust, a deed to a named party, trustee, conveys an absolute title if it contains words of conveyance, and the purchaser has acted in good faith, paid a valuable consideration, and is without actual knowledge. This, of course, applies only where the records provided for giving constructive notice contain no instrument giving such notice.
Article 1106, Revised Civil Statutes of Texas, is as follows:
"Every estate in lands which shall hereafter be granted, conveyed or devised to one, although other words heretofore necessary at common law to transfer an estate in fee simple be not added, shall be deemed a fee simple, if a less estate be not limited by express words or do not appear to have been granted, conveyed or devised by construction or operation of law."
To my mind there are no such express words limiting the estate to less than a fee-simple estate contained in this expression or term "trustees". This would, undoubtedly, be true, where the instrument is a deed and contains habendum and granting clause.
"A deed to `L. R., etc., Trustees of the Methodist Society, and to their heirs and assigns forever,' was held to convey an absolute title to L. R., etc., named as grantees; and the words `trustees of the Methodist Society' were considered descriptio personæ." 1 Devl. on Real Estate, § 191.
In the case of Gabert v. Olcott, 86 Tex. 121, 23 S.W. 986, and Blanc v. Alsbury, 63 Tex. 490, 51 Am.Rep. 666, the conveyances were to the parties as bishop, for the benefit of the Roman Catholic Church. It was held that, notwithstanding the disclosed trust, that the grantee had the full power of alienation.
It is also stated in 13 Cyc. § 625, that the word "trustee" also may be regarded as mere surplusage, except as descriptio personæ.
In the case of Boyer v. Sims, 61 Kan. 593, 60 P. 309, where a deed was made to Wm. Sims and T. J. Kellum trustees, the *Page 1012 
Supreme Court of Kansas held that the granting and habendum clauses of the instrument vested in the grantees full power of alienation.
In the case of Crawford v. El Paso Land Improvement Co. (Tex.Civ.App.)201 S.W. 237, where land was deeded to Crawford, trustee, and to "his successors and assigns," the El Paso Court of Civil Appeals held that Crawford took a fee-simple title for an undisclosed beneficiary, and was vested with power of sale under the very terms of the deed to him.
The case of Studebaker Bros. Mfg. Co. v. Hunt (Tex.Civ.App.)38 S.W. 1134, is not authority for sustaining the contrary upon the questions here discussed for this reason: In that case Hunt claimed the beneficial title to the land, the legal title to which had been vested in his father. The father had taken the conveyances to himself as trustee. Studebaker Bros. Company levied upon the land and sold it, buying it in at public sale. The company then brought suit against Hunt, the son, to recover the land. The Studebaker Company was not an innocent purchaser for value and without notice of Hunt's title. As a purchaser under the judgment sale, they did not pay value for they surrendered no right by their credit upon the judgment. The ruling of the court in the last-named case that the deed to Hunt, Sr., being a deed to him as "trustee," gave notice of a trust, was based upon the fact that Studebaker Company, was not an innocent purchaser for value, as well as upon the holding that the word "trustee" gave notice. The Supreme Court, in passing upon an application for writ of error, which attacks a judgment of a Court of Civil Appeals, in my opinion will apply the rule: That where the judgment can legally be supported upon any other phase of the case other than the one assigned as error, such judgment will be affirmed, notwithstanding such error, and such judgment will be sustained. Studebaker Bros. Company not being a purchaser for value, the action of the Supreme Court in denying a writ of error could have been based upon the fact that Studebaker Company was not an innocent purchaser for value, and not upon the holding of the El Paso court in holding that the term "trustee" gave notice to the company. That a creditor who buys at his own execution sale and credits the amount of his bid upon his judgment is not a purchaser for a valuable consideration. See Ayres v. Duprey, 27 Tex. 606, 86 Am.Dec. 657; Delespine v. Campbell, 52 Tex. 4; McKamey v. Thorp,61 Tex. 648; Barnett v. Vincent, 69 Tex. 685, 7 S.W. 525, 5 Am. St. Rep. 98. That the judgment of the trial court will be sustained, if it appears that no other judgment could have been rendered. See McClellan v. Haley (Tex.Com.App.) 250 S.W. 413, and authorities therein cited.
I think, therefore, that the rule as applied to a deed conveying real estate is that, where it recites that the consideration named in it was paid by the grantee, and such deed contains the habendum clause, and does not contain express words limiting the estate granted, the deed vests title in the grantee, notwithstanding the use of the word "trustee" after his name.
Returning to the consideration of the fact of the insertion of the word "trustee" after the name of a payee in a note, I cannot think that notice of any requirement for inquiry will follow by the use of that term, unless there is in connection with said term some legal status or fiduciary relationship between the parties that will by the very transaction itself charge the purchaser with such duty of inquiry. Judge Ramsey, in the case of U.S. F.  G. Co. v. Adoue, 104 Tex. 379,137 S.W. 648 (original opinion), and 138 S.W. 383 (opinion on rehearing), 37 L.R.A. (N. S.) 409, Ann.Cas. 1914B, 667, clearly makes the distinction which governs such transactions. Adoue and Lobit were bankers. A. J. Compton, guardian of the estate of Menard James, a lunatic, deposited with the bank the sum of $11,913.83, which constituted all of the cash assets of the said estate, and said bank executed and delivered a certificate of deposit in that amount in favor of A. J. Compton, guardian, and payable to his order. Subsequently Compton
indorsed such certificate of deposit over to the said bankers, and they appropriated same in payment of Compton's personal debts with them. The Supreme Court held that the principal question in the case was, were Adoue and Lobit charged with notice of the trust character of the funds in question, and were their acts and conduct in relation to same such as to render them liable? and answered same in the affirmative Judge Ramsey, in his opinion on rehearing, in that case, gives his reasons at length for so holding (104 Tex. 379, 138 S.W. 383, 37 L.R.A. [N. S.] 409, Ann.Cas. 1914B, 667), citing the case of Coleman v. Bank, 94 Tex. 607,63 S.W. 867, 86 Am. St. Rep. 871, and says:
"From these authorities it is clear that a depositor, although holding money in a fiduciary capacity, may draw it out of the bank ad libitum. The bank is bound to honor the checks and incurs no liability in so doing, as long as it does not participate in any misapplication of funds or breach of trust. The mere payment of the money to, or upon the checks of, the depositor does not constitute a participation in an actual or intended misappropriation by the fiduciary, although his conduct or course of dealing may bring to the notice of the bank circumstances which would enable it to know that he is violating his trust. Such circumstances do not impose upon the bank the duty or give it the right to institute an inquiry into the conduct of its customer in order to protect those for whom it may hold the fund, but between whom and the bank there is no privity. *Page 1013 
This is clearly brought out in the leading case of Gray v. Johnson, L. R. 3 Eng.  Ir. App.Cas. 1, in which an executrix, by a check signed by her, as such, in favor of a mercantile firm of which she was a member, drew out of a bank a fund belonging to the estate. In the opinion of Lord Chancellor Cairns the law is thus stated: `On the one hand, it would be a most serious matter if bankers were to be allowed, on light and trivial grounds — on grounds of mere suspicion or curiosity — to refuse to honor a check drawn by their customer, even although that customer might happen to be an administrator or an executor. On the other hand, it would be equally of serious moment if bankers were to be allowed to shelter themselves under that title, and to say that they were at liberty to become parties or privies to a breach of trust committed with regard to trust property, and, looking to their position as bankers merely, to insist that they were entitled to pay away money which constituted a part of trust property at a time when they knew it was going to be misapplied, and for the purpose of its being so misapplied. I think, fortunately, your lordships will find that the law on that point is clearly laid down, and may be derived without any hesitation from the authorities which have been cited in the argument at your lordships' bar, and I apprehend that you will agree with me when I say that the result of those authorities is clearly this: In order to hold a banker justified in refusing to pay a demand of his customer, the customer being an executor and drawing a check as an executor, there must, in the first place, be some misapplication, some breach of trust, intended by the executor, and there must in the second place, as was said by Sir John Leach in the well-known case of Keane v. Roberts, be proof that the bankers are privy to the intent to make this misapplication of the trust funds. And to that I think I may safely add that, if it be shown that anypersonal benefit to the bankers themselves is designed or stipulated for,that circumstance, above all others, will most readily establish the factthat the bankers are in privity with the breach of trust which is aboutto be committed.'" (Emphasis mine.)
Quoting further from the opinion on rehearing:
"Supposing, therefore, that the banker becomes incidentally aware that the customer, being in a fiduciary or a representative capacity, meditates a breach of trust and draws a check for that purpose, the banker, not being interested in the transaction, has no right to refuse the payment of the check, for if he did so he would be making himself a party to an inquiry as between his customer and third persons. He would be setting up a supposed justertii as a reason why he should not perform his own distinct obligation to his customer but then it has been very well settled that, if an executor or a trustee who is indebted to a banker, or to another person having the legal custody of the assets of a trust estate, applies a portion of them in the payment of his own debt to the individual having that custody, the individual receiving the debt has at once not only abundant proof of the breach of trust, but participates in it for his own personal benefit."
This case does not attempt to pass upon the effect to be given the word "trustee" by the court, in passing upon a case in which parties are charged with notice by the law because the law charged them with knowledge of its requirements in all transactions between guardians and wards and this because of their applying the proceeds to their personal debts.
In each of the cases (Hurst v. Marshall, 75 Tex. 452, 13 S.W. 33, and Bank v. McIntire (Tex.Civ.App.) 142 S.W. 613) the seller in the first case and the purchaser in the other, had actual knowledge of all the facts, in addition to being charged by law with knowledge that the money was the money of an estate and not the money of a guardian, and in each case received personal benefits by personal appropriation of the funds.
In this case the appellee, being a purchaser in good faith for value and without notice, I am of the opinion it should have recovered, and upon this question the case should be affirmed.
I am also of the opinion that the defenses of Long could not be presented in this action. It was never intended to stretch the rule to the extremity of holding that notice of the defenses of the maker was given; hence I concur in that part of Associate Justice Boyce's opinion holding that the fact that the notes were made payable to McCoy Nixon, and Bonner did not give the purchaser constructive notice of any defenses of want of consideration which the maker had against the original payee.