T. F. Hudson v. T. W. Morriss et al., 55 Tex. 595

Walker, P. J. Com. App. The judgment appealed from in effect declares a trust in favor of the plaintiff and the intervenor in the land conveyed by sheriff’s sale deed to the defendant Hudson, and enforces the trust by a judgment in their favor for the recovery of the land,— three-fourths of it to belong to the plaintiff, and the remaining one-fourth to Emma Conner, the intervenor.

The basis, in the pleadings of the plaintiff, on which the existence of such a trust is predicated, consists of allegations which charge two grounds for the creation of such a trust; the first, that the plaintiff being the assignee of the notes and the vendor’s lien which attached to them, and being the owner of both, at and before the rendition of judgment in the name of the payee of said notes, that the defendant Holmes, who was such payee, and plaintiff in the suit on the notes and to foreclose the lien, and who had transferred the notes as above stated during the pend-ency of the suit, became thereby the agent and trustee of the plaintiff to.collect such judgment.

The second ground was, that Holmes assumed to control the judgment, and that the levy, advertisement of sale of the property, and the sale of it, was made under his directions; that at the sale, Holmes colluded and combined with Hudson to prevent competition at the sale, and succeeded in doing so, causing the property to be grossly sacrificed, under an arrangement that Hudson should bid in the land, and they would divide it between them. It will he convenient to dispose at once of the first ground relied on, to fix upon Holmes a trust relation to the plaintiff.

That no such relation is created, nor such obligations imposed upon the assignor of a judgment, or transferer of a chose in action, as a note in suit, as are claimed by the plaintiff under the proposition under consideration, is too manifest to require a discussion of it as a question open to controversy.

If the assignment of a note on which suit is pending makes provision for any ulterior liability of the assignor, as by guaranty or indorsement of the note, or by making provision for collateral undertakings in regard to the subject matter, they would attach to the note thus transferred, and have no relation to the assignor’s obligation to enforce the rights or to collect a debt in which he no longer held or claimed an interest.

The assignee would be entitled to no more than the benefits which would be fairly implied by the law to attach to a change of ownership; and if the suit were pending when the note was assigned, the assignee would be entitled to use the assignor’s name to prosecute the claim to judgment. 2 Story’s Eq. Jur., sec. 1040. And so, too, of the assignment of the judgment itself; the assignee has the right to direct its enforcement. Held, in McClane v.

Rogers, 42 Tex., 214, “ If there was a valid transfer of a judgment, and notice thereof given to the sheriff before its collection, the money when collected on such judgment would belong to the assignee.” And, says Freeman on Judgments, sec. 421, speaking of the doctrine at common law, “the assignee, by virtue of his equitable interest, had the right to control the collection of the judgment, and for that purpose to use the name of the plaintiff, his assignor, and to receive the money collected.” More than this, it is laid down, by the same authority, “that one who makes an assignment of his judgment incurs an obligation to respect his own assignment, and therefore to do no act inconsistent with his changed relation to the judgment.”- Freem. on Judg., 426a; Booth v.

Farmers’ & Mechanics’ Bank, 50 N. Y., 399. The assignor of a judgment is not liable to pay the amount of the judgment in case the judgment debtor proves insolvent. Robinson v. White, 4 Litt., 237. “The assignor having by his assignment parted with his interest in the judgment, is no longer a necessary or proper party to proceedings for the purpose of setting it aside, or for the purpose of enjoining or obtaining other relief from it.” Freem. on Judg., sec. 430. “ It cannot be questioned (remarked Justice Moore in Wimbish v.

Holt, 26 Tex., 675), that a suit might be prosecuted by the parties beneficially interested in them (promissory notes), in his name.” In the case of a party who is the real beneficiary in a judgment recovered in the name of another, the latter cannot refuse to prosecute a suit to revive the judgment, nor can those who represent him after his death make such refusal, nor is there any valid objection in law to the revival of such judgment in the name of the legal representatives of such person in whose name such judgment was obtained. Grayson v. Winnie, 13 Tex., 288; and see Henderson v. Vanhook, 25 Tex.

Sup., 453, S. C., 24 Tex., 358.

In every stage of judicial proceeding in a suit, from its institution on, through every stage, down to the final extinction or satisfaction of the judgment, it is to be seen from the quotations and citations which have been made, that the party who is beneficially interested is permitted to act in his own behalf to enforce his right, although the proceedings may have been had in the name of another party who appears to have the legal right, and to be the ostensible owner of the interest involved; and that, when necessary to the maintenance of the beneficiary’s right, the other party or his legal representatives will be forced to allow the proceedings to be preserved in the name of the original plaintiff.

There exists, therefore, no reason ,upon which the law will charge a duty with its corresponding trust upon another, to perform those acts which may be done by the party to be benefited; for, indeed, they are acts which, after an assignment of his interest, the assignor may not do, unless with the consent of the beneficiary, express or implied. • When the defendant Holmes transferred the notes, he was no longer chargeable with any duty in regard to them; and the transferees had the right to control the judgment that might be rendered upon them, and the transferer, at a sheriff’s sale, under an execution issued upon the judgment, had a right to bid as would any indifferent person.

Upon the second ground relied upon as sufficient to base a trust in favor of the plaintiff, it is necessary to establish a fraud against Hudson, the purchaser; and it must be, besides, a fraud of that character for which, not merely may Hudson be defeated in his title and the sale set aside as a fraudulent one, but it must be associated with such facts as will entitle the plaintiff and the intervenors to succeed to a title valid and uncontaminated by a fraud in its very inception.

A distinction is to be noticed between a fraud committed by bidding at a sale which will afford ground for simply setting aside the sale therefor—a sale that is voidable for fraud at the instance of any of the parties who may be injuriously affected by it (where, for instance, the defendant in the execution whose property was sold might as well complain of fraud as might the plaintiff in execution, as in the case of a fraudulent combination to cause a sacrifice "of the property below its value by preventing a fair sale, or fraudulently preventing competition among bidders), and the case of such a fraud as in which the sale will not be set aside and annulled for the fraud, but will be allowed to stand and the purchaser held as a trustee for the person defrauded.

A trust will not be declared in the case of a fraudulent sale, if thereby the person who is made the beneficiary of such declaration of trust will in effect receive the benefit of the fraud at the expense of some other person who is defrauded in the transaction, and who is equally innocent as the party who is to be benefited by the declaration of the trust.

As, for instance, where a debtor’s property, sold under execution, by fraud which would vitiate the sale, is sacrificed, to the loss of the owner of it, the plaintiff in execution will not be permitted to charge the fraud and appropriate to his benefit the fruits of the wrong by holding the fraudulent purchaser as his trustee, and from the proceeds of the fraud ask to be enriched with the ill-gotten spoils. To" allow such a result would be for the court to sanction the wrong by simply discriminating between the actor in the fraud and a creditor seeking to appropriate its advantages.

In such case, the debtor has been defrauded of his property, and the creditor, by setting aside the sale merely, is no worse off, as regards that property, than before. He will not be heard to allege that the debtor has been defrauded under such circumstances, and ask that the proceeds of the speculation and fraud shall be transferred to himself.

The doctrine, says Perry in his work on Trusts, vol. 1, sec. 172, has been thus broadly stated: “ That where once a fraud has been committed, not only is the person who committed the fraud precluded from deriving any benefit from it, but every innocent person is so likewise, unless he has innocently acquired a subsequent interest; for a third person, by seeking to derive any benefit under such a transaction, or to retain any benefit resulting therefrom, becomes particeps criminis, however innocent of the fraud in the beginning.” The plaintiff and intervenor can obtain through the means of this sheriff’s sale, if their allegations are true, no interest in the land in controversy except through a fraudulent conspiracy which resulted in the rain of the owner of the land.' The petition shows that the land ought to have sold for thousands of dollars but for the fraud; whereas it sold for but a few hundred, leaving the judgment almost intact hanging over the defendant in execution, or his estate.

If the sale was procured by fraud such as is alleged, the transaction does not present a case on which, under any principle of equity jurisdiction, that fraud will be converted to the profit of the plaintiff and intervenor. Such a course is not the remedy which fair and impartial justice prescribes; the law offers one that is wholly adequate and unmixed with oppression, and unpolluted with fraud; which is to place the parties in statu quo, in respect to both title and lien, by setting aside the sale if shown to be fraudulent.

The cause was tried and determined by the district court on a view of the law the reverse of these; and for the error in the judgment, the charges given by the court, both of which assuming that Hudson became and was a trustee for the plaintiff and intervenor by virtue of the uncontested fact that at the sale Hudson knew that Holmes was not the owner of the judgment, it follows that our opinion must be that the judgment ought to be reversed.

The jury were doubtless influenced in their finding under the charge referred to, and the further direct instruction that Hudson, under the evidence, was the trustee of plaintiff and intervenor, and bound to protect their interests at the sale, and that Hudson’s purchase was prima facie fraudulent, etc.; all of which being most material, erroneous and misleading, we not only cannot say but that the jury may have been misled, but that it was a duty on the part of the jury to accept the law as given by the court, and consequently they were, presumably in fact, misled, to the injury of the appellants. Mims v.

Mitchell, 1 Tex., 443; Bailey v. Mills, 27 Tex., 434; Steagall v. McKellar, 20 Tex., 265. The statement of facts was not signed by the counsel for the intervenor, Mrs. Conner, nor is the statement of facts certified by the judge as to the facts so far as the evidence on the trial related to her, as in case of disagreement of counsel concerning the statement. The intervenor is not bound by such statement of facts as this is, and it will not be regarded in passing upon her rights on this writ of error. Blow v. Heirs of De la Garza, 42 Tex., 232.

The application, however, of the above rule cannot result in a discrimination between the plaintiff and' the intervenor in respect to the judgment which shall be rendered by the supreme court.

The pleading filed by the intervenor, in legal effect, was an assertion of her interest of one-fourth in the judgment under which the sale was made, and so far as the remedy sought by her in her intervention was concerned, it was not substantially different, nor placed upon grounds variant from those upon which the plaintiff relied, notwithstanding it was alleged by her that she may have been entitled to one-fourth of the land in right of heirship to her mother; yet, nevertheless, she did not ask any relief in that respect, in case it should be decreed that the sale to Hudson was fraudulent, and for that reason to be set aside.

The plea of intervention repeated by the following language the allegations of the plaintiff’s petition, viz.: “They allege, in addition to facts charged by plaintiff} that said Hudson, before the purchase, . . . etc., knew that she was the owner of said judgment.” The petition of the intervenor concluded with the proposition upon the facts alleged by her, as follows: “That the sale should be set aside, or the said Hudson declared the trustee of intervenor as to one-fourth of said land, and her title thereto established by decree of this court.” She proceeded further to charge that Hudson and Holmes “procured the making of the sale, and are therefore but trustees for the owners of said judgment in the purchase.” There is an alternative prayer by the intervenor, to the effect that, in case the sale cannot be set aside, that she recover her one-fourth interest in the land in right of her ownership as heir to her mother.

It is apparent that it was under the charge given by the court that the jury found a verdict, and that upon that finding the plaintiff and intervenor recovered the judgment that was rendered.

The verdict was in terms expressed “ for plaintiff and intervenor. ” It is evident and incontrovertible, from the charge and verdict, as applied to the pleadings filed both by the plaintiff and the intervenor, that the jury found upon evidence which, at all events, had application to facts essential to set aside the sale for fraud, as the plaintiff had no other claim or case against the defendants than such as arose from a fraudulent sale; and as to the plaintiff, at all events, it is legally certain that the jury found that the sale was fraudulent as to the plaintiff.

If, now, it were true that the intervenor may have introduced ample evidence to have entitled her to recover upon a ground wholly distinct from that of fraud, viz., upon her heirship to her mother, nevertheless the whole charge of the court is before us; and the statement of facts in the record, whilst not binding upon the intervenor, shows the existing fact that there was evidence before the jury relating to the issue of fraud, and which may have influenced their verdict as to both plaintiff and intervenor.

If they found for the intervenor on the same issue as for the plaintiff, the same reasons for reversing the judgment, of course, apply equally to both. We cannot say from the record that they may not have done so. The intervenor’s petition prayed for the same remedies, and adopted the allegations made by the plaintiff’s petition; and unless we are able to say that the jury certainly were not influenced to find for the intervenor under the same evidence as that which is before us, it follows that the erroneous instructions and erroneous judgment in the case must affect both plaintiff and the intervenor.

Under the cause of action set forth by the intervenor, we have determined that under no evidence which could have been offered by her was she entitled to recover the land, unless upon the ground of ownership in the land itself, in her inheritable right from her mother. The record does not enable us to say that the judgment was based upon that part of her case; and the record does show that she'sued upon the same grounds and relied upon the same issues as were presented in the plaintiff’s case, as well as upon her alternative claim to the land as heir.

She also disclaimed relying upon or asking any benefit from said alternative prayer, in case the sale was held to be fraudulent. The sale was held to be fraudulent.

Under facts like these, whatever may have been the evidence, or how satisfactorily soever it might have been to establish her right to recover the fourth of the land as heir, inasmuch as the verdict and judgment clearly held the sale to be fraudulent, and decreed that the purchaser acquired a title to be held in trust only for the plaintiff and the intervenor, it would be only consistent with the prayer of the intervenor in her petition of intervention to construe the verdict and judgment which was rendered in her favor to have been based upon the same issues on the trial that determined the plaintiff’s rights.

Such being the case, the same reasoning applies for a reversal to her as to the plaintiff. Where the action of the court in instructing the jury is clearly erroneous and calculated to mislead the jury to a wrong result to the injury of a party, in order to sustain the judgment which follows it, it ought to be clear that such a consequence did not in fact ensue, from the error. This principle has been often applied by the supreme court in the reversal of judgments. Held, in Williams v.

Conger, 49 Tex., 583, “that a judgment will be reversed where an improper issue has been submitted to the jury, and where it cannot be seen from the record but that the jury may have found a verdict upon such issue, although thez verdict upon the law and testimony was correctly found upon the merits.” We think the rule quoted above has proper application here. “ If the jury may have been misled by an erroneous charge, the judgment will be reversed, although there were other grounds upon which they might have based their verdict.” Ponton v. Ballard, 24 Tex., 619.

We do not think it is necessary to consider the other grounds of error assigned. We conclude, upon the whole case, that there was error for which the judgment ought to be reversed and the cause remanded. Reversed and remanded. [Opinion delivered November 16, 1881.]