J. S. Thornton v. A. M. Tandy and Henry Smith, 39 Tex. 544

Ogden, P. J. This is a suit for the trial of the right to certain property seized under attachment in favor of appellant, as the property of J. A. Smith. That a party in failing circumstances may prefer one or more creditors by conveying a portion or all of his property to him or them, to the exclusion of other creditors, provided the transaction be bona jfide, is an elementary principle of law, repeatedly recognized by this court.

And the fact that the transferree has knowledge that the debtor is insolvent, and that the assignment to him will delay and even defeat the claim of other creditors, will not affect the legality of the transaction.

A person in failing circumstances may also sell to a stranger his property so as to delay or defeat his creditors, provided the vendee purchases in good faith, without any knowledge, either actual or constructive, of the intent of his vendor to hinder or delay his creditors, but this transaction will be scrutinized very closely by the courts, and any evidence of a fraudulent combination between the vendor and vendee will affect the validity of the sale as against creditors. There is a manifest difference between the principles of law which govern the two transactions.

In both cases the transactions, in order to stand the test of scrutiny, must be bona fide, and not colorable or pretended; but further than that, the law favors a creditor who is attempting to collect or secure a just debt, and the rigid rules in regard to the intent of the debtor, or the knowledge of that intent, which would control a purchase by a stranger, cannot be properly applied to a creditor. In the case at bar the indebtedness of J. A. Smith to the claimants was clearly established, and we discover no evidence to throw any suspicion upon the assignment so far as the claimants are concerned.

The assignment was made and recorded, and possession of the property, so far as was then practicable, was delivered by the assignor, and there is no evidence of his exercising any acts of ownership or control over the property after the assignment. Under the facts, we think the court did not err in excluding from the jury the declarations of the assignor, after the transfer, when not in the presence of either of the assignees. (P. Garrahy v. N. O.

Green, 32 Texas, 202.) The cases referred to as sustaining a contrary ruling are mostly where a pretended sale had been made to a stranger, and where the vendor retained possession and control‘over the property conveyed, and was even permitted by his pretended vendee to resell a portion of the same, and we do not think the. decisions in those cases should govern this.

If it be admitted that the assignor retained possession, or concurrent possession, with one of the assignees, still this would be at most only a badge of fraud, susceptible of explanation, and which we think was fully explained by the testimony in harmony with the claim of a bona fide transaction. This certainly cannot be a parallel case with Gibson v. Hill, where the property pretended to be sold by a father to a son was for a long time left in the actual possession and under the control of the father, who hired out the same, and received the price for the hire.

We have failed to discover the many badges of fraud which are supposed to exist in this case, or which should change the judgment of the lower court, and it is affirmed. Affirmed.