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bility for the amount received by them. This ty.' We recognize this as a correct principle, being the only phase of the case considered but the court further says that to this rule by the court, no harm was done appellants there are well-recognized exceptions, one of by the ruling of the court, if erroneous, which it says is the 'case of an assignee in a which we deem unnecessary to determine. deed of assignment made by an insolvent for
"4. The fourth assignment of error com the benefit of his creditors.' The trustee, plains of the court for overruling special ex- | Harrison, in this case, was vested by the ception No. 3, which exception is as follows: terms of the instrument with full power to
Because it appears from plaintiffs' said execute the trust imposed in him; and it amended petition that the Laughlin Nail Co., was his duty, and he had the power to do so, Curtis Bros. & Co., Sargeant & Co., and W. to defend the trust against all assailants. M. Rogers Manufacturing Co. are the only Every defense that could be made by the parties for whose benefit one of the alleged beneficiaries could be made by him, and, haydeeds of trust was executed, who are rely ing accepted the trust, he was interested in ing on their security, and they are not before carrying out its provisions, and in this case the court, nor made parties to this suit.' The he evidently endeavored to uphold the con. petition of plaintiffs shows that the parties veyance. The other case is not analogous to named were creditors, and were named as this. It is true that, in rendering the opinion beneficiaries in the instruments attacked by in that case, Mr. Stayton, C. J., laid down the the bill, but were not made parties, but the general rule that all beneficiaries adversely intrustee was. Appellees contend that, where terested to the plaintiffs are necessary parties, parties seek to set aside a deed of trust and but said, if there were exceptions to the genhave it declared void, the beneficiaries there eral rule, it was not necessary to consider in are necessary parties to the suit. We them in that case. In that case there was think the converse of this proposition is true. no effort to set aside the conveyance as a The rule laid down in Pomeroy on Remedies nullity, but it was sought to defeat the clause is as follows: There is a broad distinction preferring creditors, and to have the conveybetween the case of an action brought in op ance declared a general assignment, and the position to the trust, to set aside the deed or property administered thereunder. In that other instrument by which it was created, case it was held necessary for beneficiand to procure it to be declared a nullity, aries to be made parties; but in the case of and that of an action brought in furtherance Preston v. Carter, 80 Tex. 388, 16 S. W. 17, of the trust to enforce its provisions, to es a contrary rule is enunciated. Which of tablish it as valid, and to procure it to be these two cases is correct we will not underwound up and settled. In the first case, the take to determine, as the principle upon suit may be maintained without the presence which they were decided does not necessarily of the beneficiaries, since the trustees repre apply to the case at bar. Where an effort sent them all, and defend for them. In the is made to entirely set aside a conveyance of second, all the beneficiaries must be joined, this kind, and render it of no force whatever, if not as plaintiffs, then as defendants, so in our opinion, the beneficiaries are not necesthat the whole matter may be adjusted in sary parties. Where an action is brought to one proceeding, and a multiplicity of suits have a conveyance adjudged to be a general avoided. The reason of this distinction is assignment, there seems to be some force in obvious. It is that any one person interested the proposition that beneficiaries should be in opposition to the trust has the right to made parties. In such a case the trustee is test the validity thereof, and his voluntary Lot interested, whether creditors are preferaction cannot be controlled by the will of red or not; but he is interested that the conothers; while the trustees themselves are suf veyance be administered with him as trustee. ficient to represent and defend all the inter- | As to the rights of creditors between themest of those who claim under the trust. But selyes he has no concern. It would seem to when the trust is assented to, and the pur be inconsistent with his duty to espouse the pose is simply to carry out its provisions, all claim of one creditor as against that of an. the beneficiaries are alike interested in that other. When, however, the instrument is atobject, and in reaching that same result, and tacked as a nullity, then he is concerned, and it is just to the trustees that the controversy | should do all in his power legally to maintain should be ended in one proceeding.' The doc- and uphold the conveyance, and can repretrine here enunciated is supported by Rail. sent the beneficiaries in the litigation. road Co. v. Butler, 56 Tex. 511, and by Ker "Complaint is made to the action of the rison v. Stewart, 93 U. S. 155. No case to court in permitting plaintiffs to show that the which we have been referred contravenes the Hardman Company was indebted to them, rule here laid down. Appellants, in support of and the nature of such indebtedness. As betheir contention, cite Ebell v. Bursinger, 70 fore stated in this opinion, the plaintiffs had Tex. 120, 8 S. W. 77, and Hudson v. Elevator alleged they were creditors of said hardware Co., 79 Tex. 401, 15 S. W. 385. In the first company, and, being such, they had a right case the court says that the general rule to sue, and the introduction of the judgments is well established that, in suits by or against to show that they were creditors was permisthe trustee for the recovery of the trust sible under their pleadings. It was not property, the beneficiary is a necessary par- | necessary to allege the nature and character of their claims in order to permit proof of , to those to determine the authority of said such indebtedness.
court. When in session, it has general equity “The action of the court in permitting Har- powers, when not limited by statute; but in rison, trustee, to testify, over objections, that vacation the judge thereof has no power he paid the proceeds of the property to the to do or perform any judicial act, except two banks, is challenged by appellants, on such as is definitely and specifically enumerthe ground that the allegations of plaintiffs' ated by statute. Mr. Black, in his work on petition did not warrant it. The second Judgments (volume 1, § 179), in treating of amended petition alleged the insolvency of judgments rendered in vacation, says: 'But, the hardware company; that it had transfer- | in general, all judicial functions are susred its property to Harrison, in trust for the pended during that interval. Hence, unless preferred creditors named; that Harrison had under statutory authority, a judgment canmisapplied the proceeds of the property; and not be pronounced in vacation. The rendi. if any had been paid to said preferred cred tion of judgment in a court of record is esitors, of which plaintiffs were not advised, sentially a judicial act; and, if performed said creditors received same with full knowl. when the court is not in session,--that is, edge of this litigation, and, if it was paid, 'it out of term,-it is open to a fatal jurisdicwas paid to a person or persons then defend tional objection. The judgment is absolutely ant, defendants, intervener, or interveners in void, creates or effects no rights, and will this bill;' and the prayer was that said banks even be disregarded on appeal.' The same 'be required to bring into court all money, principle is enunciated by Mr. Freeman in his if any, paid to them, or either of them, by work on Judgments (section 121). Under our the said Harrison.' We think, considering statutes, district judges have power in vacathe nature of this suit, that the allegations tion to grant writs of injunction and appoint of the petition were sufficient, and there was receivers, but no power is given them to no error in admitting the testimony. Be take charge of property and administer it, sides, Harrison had made a report showing the except as may be incident to the power condisposition he had made of the property, and ferred in the appointment of a receiver. the amount he had paid to these parties. In this case the judge refused the applica
"5. The fourteenth general assignment of tion for the appointment of a receiver, and error and the seventh assignment of error for a writ of injunction, but, at the instance by Harrison, trustee, are in effect the same, of the defendants and interveners, adjudged and will be considered together. The four | the conveyance to be valid, appointed Har. teenth is as follows: "The court erred in rison trustee, a relation he already sustainrendering judgment against L. P. Harrison ed to the property,-required him to return for $57,529.44, or for any amount at all, be an inventory and execute a bond for the cause the evidence shows that said Harri faithful performance of his duties, and orson was a trustee, and the pleadings of the dered the property sold in accordance with plaintiffs claimed judgment against him for the notice theretofore given by Harrison, as waste and devastavit, and the court allowed required in the conveyances, and directed him and approved his accounts, and found there to pay the proceeds to the creditors prewas no devastavit, and the record shows ferred, less expenses. Plaintiffs duly exceptthat the money which came into his hands ed to this proceeding, and had their bill propwas paid out by him, under the orders, judg erly signed by the judge and filed. Subsement, and decree of the court.' The follow quently the judge ordered taxes to be paid ing proposition is advanced by appellants on application of the trustee. Under these thereunder: 'Where a court of equity ob. orders the said Harrison sold the property, tains jurisdiction of the parties and of the paid the preferred creditors, taxes, and exsubject-matter, and renders its decree, ap. penses. These proceedings were entered on pointing a trustee, in the nature of a receiver, the minutes of said court. All these proceedand places him under bond, and orders such ings were had in vacation. No other orders trustee to sell property in the custody of were made; nor is there any evidence to the court, and to apply the proceeds to the show that any order was made, or any recpayment of certain debts and claims, such ognition of said proceedings had, during decree is a full protection to the trustee, and term time. These proceedings, in our opina judgment against him for the money so ion, are absolutely void. Having refused to paid under the orders of the court is erro appoint a receiver or grant the writ of inneous.' This assignment and proposition junction, the judge was without jurisdiction raise the question whether the order made of the property or the trustee. The entering by the district judge in vacation in refer of the order on the minutes of the district ence to the property transferred to Harrison court did not breathe vitality into the void by the hardware company was void. If that proceedings. If, during term time, the court order is void, then the trustee is not pro had taken jurisdiction of the matter, and tected thereby, and cannot shield himself made orders pertaining to the disposition of from liability to the creditors of the hard the property or the actions of the trustee, ware company. As the district court is the a state of case might have arisen in whicb creature of the constitution of the state and the trustee could shield himself from liabili. the statutes passed thereunder, we must look | ty. But, no such action having been taken, the trustee is not protected by the orders | The judgment of the court below is correct of the judge made in vacation; nor are the in holding the conveyances made by said plaintiffs bound by not raising any further hardware company to said Harrison void, objection thereto, as they could do nothing and in rendering judgment against said Haruntil the case was reached for trial. The rison for the amount of the assets that went orders of the court were consummated by into his hands and against the banks, for the trustee before plaintiffs had an oppor the amounts received by them respectively, tunity to be heard in term time. They had and that said amounts be paid into court filed their suit seeking relief, of which Har for distribution, as all the creditors of said rison and the other defendants and interven hardware company were entitled to particers had knowledge. Harrison knowing this, ipate in the distribution of the funds of said and the orders being void, he should not hardware company, whether parties to this have acted thereunder, but should have proceeding or not, and the court below should songbt relief by appealing therefrom.
have rendered judgment for all creditors "The appellants contend, and cite many who desired to share in the distribution. authorities to the effect, that 'a judgment In failing to do so, there was error. The ean be considered void in no case except judgment will be here reformed as indicated, where it appears from the judgment itself and the judgment affirmed. that the court had no jurisdiction. It may be voidable, but not void, if rendered by a
On Rehearing. court of competent jurisdiction; and, until “Appellees insist that this court erred in it is set aside and vacated, it forms a good | its judgment in permitting appellants, credjustification for the proceedings had to en itors of the Lyons-Thomas Hardware Comforce it.' No principle of law is better set pany, to share in the distribution of the tled than this. But the judgment relied on assets of said hardware company; contendin this case was not rendered by a courting that they are not entitled to participate of competent jurisdiction. Had it been ren. | in the distribution of said funds, because dered in term time, no question could have they attempted to appropriate said assets arisen as to its validity. But such is not to the payment of their debts, to the exthe case. The judge, in vacation, rendered clusion of the other creditors, whom they the judgment in which the validity of the compelled to litigate with them in order conveyances made by the hardware company to have said assets declared trust funds for to Harrison, as trustee, was recognized, and the benefit of all the creditors of said hardall the rights of the parties were adjudi- ware company. Many authorities are cited cated. Such proceedings, so far as we are by appellees to support their contention, but advised, have never been sanctioned by any none, in our opinion, are in point. The jurisdiction. We are aware that trustees, most of them are to the effect that when when in doubt about their duties under the property is conveyed in trust for the benefit deed, have the right to decline to act with of creditors, and one or more of the beneout the sanction of the court. "The trustee ficiaries attack the conveyance, and attempt will be protected by the decree of any court to have it declared a nullity, and failing therehaving jurisdiction, and exercising the juris- in, they will not then be permitted to share diction regularly, upon proper notice given.' in the property conveyed; and others, to the Perry, Trusts, $ 928. But this principle does effect that a creditor's bill gives a prefernot apply to this case, as the judge who ren- ence lien on the property to those institutdered the decree had no power to act in ing the action. This we recognize to be vacation; consequently such proceedings are the law, and it is not our intention to conof no force or effect. Freem. Judgm. (4th trovert it. This case, as we understand it, Ed.) $ 39a; 12 Am. & Eng. Enc. Law, p. 14, does not fall within the puryiew of these and notes.
decisions, but stands upon an entirely dif“Appellants complain that the court erred | ferent footing. When property is conveyed in rendering judgment against Harrison and in trust, the beneficiary acquires no interest the two banks, and not permitting them to in the same until he accepts and agrees to participate in the distribution of the assets the provisions of the conveyance. The law of the hardware company. The court ren makes the assets of an insolvent corporation dered judgment in favor of plaintiffs, against trust funds in the hands of the directors, Harrison and the said banks, but directed for the benefit of its creditors. The apthe money to be paid into the hands of the pellants, creditors of said hardware comclerk, and be held by him until further or pany, were entitled to their distributive ders of the court. If it was intended by the share of the assets of said hardware comcourt, which is not clear, that the judgment pany at its insolvency; and, having come should preclude the said Harrison and the into possession of the assets of said comsaid banks from sharing in the distribution pany, believing they had the right to apof said funds, then it is erroneous, as they ply the same on their respective debts, their were entitled to their pro rata share. The resisting the efforts of appellees to parassets of said hardware company were trust | ticipate in the distribution of the same was funds for the benefit of all its creditors, and not such an act as to preclude them from all such are entitled to their respective shares. I participating in the distribution. The bringing of the suit by appellees did not give , Company and other simple contract creditors them a lien upon the assets of said hard filed suit in the district court of Lamar ware company, and gave them no greater county against the Lyons-Thomas Hardware right in the fund than other creditors. The Company, L. P. Harrison, Baker Wire Comeffect of their recovery is merely to adjudi pany, and the officers and stockholders of cate the said assets to be a trust fund for the corporation the Lyons-Thomas Hardware the benefit of all creditors of said hard- Company, seeking to set aside the deeds of ware company, of which all are entitled trust, and have the property distributed to share. The motion for rehearing is over to pay all the debts of the corporation, to ruled.
recover of the stockholders the amounts un"On Rehearing.
paid on their stock, and praying an injunc"(Feb. 28, 1894.)
tion against the trustee to prevent and en
join the sale and disposition of the property "FINLEY, J. The motion for rehearing is under the deeds of trust. The petition also based upon grounds which were carefully asked the court to appoint a receiver for considered by us in the original hearing, the corporation. The district judge granted and we see no reason to change our views, a temporary writ of injunction, and set the as expressed in the opinion rendered. Upon hearing of the application for a receiver the proposition urged,-that the action of for the 29th day of November, 1889, in the court below in permitting the Baker chambers. The creditors secured by the Wire Company to withdraw from the suit first mortgage or deed of trust filed a plea may subject L. P. Harrison to double liabili of intervention, setting up their debts, and ty for the goods sequestered by the Baker
they and the Baker Wire Company filed Wire Company, and replevied by him,-it answers under oath. The latter joined in may be proper for us to add: The funds
the prayer for receiver. The Baker Wire covered by the judgment are yet within the Company subsequently, by leave of the court, control and subject to the orders of the withdrew its answer, and was dismissed court, and, in the exercise of its equity juris from the suit. Upon hearing in vacation, the diction, it has ample power to protect Har judge refused to appoint a receiver, but derison from such a result. Upon appropriate clared that the deeds of trust were valid, application, the court below should reserve and, upon the prayer of the trustee and a portion of the fund from distribution, or creditors ordered that the trustee, Harrison, otherwise so control it as to prevent Har proceed to administer the trust under the rison having to pay for the goods in this
deeds of trust; that he give bond in the sum suit, and also in the sequestration suit of of $85,000, conditioned that he would faiththe Baker Wire Company pending against fully execute the trust, and pay over to the him. The motion for rehearing is over secured creditors the money as in the deeds ruled."
of trust directed; appointed appraisers to Maxey, Lightfoot & Denton and Dudley &
inventory the property; and directed the Moore, for plaintiffs in error. Hale & Hale,
trustee to make report at the next regular T. S. Hill, H. D. McDonald, and A. P. Park,
term of the court. The clerk was ordered for defendants in error.
to record the decree upon the minutes of the court, which was done. The minutes
were approved by the court at the next term, BROWN, J. The district court found con and signed, embracing the decree made in clusions of fact, which were adopted by the vacation. The trustee gave the bond, which court of civil appeals, and are in substance was approved, the inventory returned, the as follows: The Lyons-Thomas Hardware property sold, and the proceeds applied by Company, a private corporation, organized him to the payment of the secured debts, under the laws of Texas, being insolvent, as directed by the court. He made his reon the 9th day of November, 1889, made port at the following term, and asked that he three deeds of trust, by which it conveyed be discharged. At the time the order was to L. P. Harrison all of its property and made, in vacation, the plaintiffs excepted, assets of every kind, to secure certain named took a bill of exceptions, signed by the judge, creditors, L. P. Harrison, the Farmers' & and filed it among the papers of the case. Merchants' Bank of Paris, the Exchange Nothing further was done by the plaintiffs Bank of Paris, and others, who are defend until in October, 1890, when a first amended ants, being embraced in the deeds, as well original petition was filed, alleging that they as some who are not parties to this suit. and a number of others had recovered judgThe corporation owed more than $100,000, ments against the Lyons-Thomas Hardware and the amount realized from its assets was Company. This petition repeated the alle$60,306.57. There was a large amount of gations of the former petition, and alleged its debts that were not secured by these that the trustee had wasted and mismanaged deeds of trust. The Baker Wire Company the estate, praying judgment for the distri. sued out against the trustee a writ of se- bution of the funds among all the creditors. questration, seizing a part of the property Other pleadings were filed subsequently, transferred. Perry Stove Manufacturing which will be noticed in so far as they attect the questions presented under the dif- | unprovided for? By these acts, which ocferent assignments of error.
curred within a few hours of each other, Upon final trial before the court, the deeds it declared in most unmistakable terins its of trust were held to be void, and judgment inability to pay its debts, terminated its busiwas entered against the trustee, Harrison, ness; and, having not a dollar with which for funds that came into his hands, less his to buy another stock of goods, no hope of commissions and costs of administering the resuming could exist, except upon the bare trust, and against the Farmers' & Merchants' contingency of making a compromise with its Bank and the Paris Exchange Bank, each for creditors. There was not only evidence to the sum paid to it. The judgment of the sustain the conclusion that it was insolvent, district court was reformed, and affirmed and had ceased business, without expectaby the court of civil appeals, and the plain tion of resuming, but the court could not, in tiffs in error present the case to this court, up our judgment, have found otherwise, conon objections to the judgments of the district sistently with the facts. court and court of civil appeals, embracing in This was a suit to restore funds to the substance, these propositions: First. That trust estate, in which the plaintiffs were the court erred in holding that an insolvent beneficiaries, and the making of the deeds corporation could not make a valid mortgage of trust by the insolvent corporation was a with preference to a portion of its creditors. violation of the trust which the law raised Second. That the undisputed evidence shows upon its solvency, and to place the property that the Lyons-Thomas Hardware Company in the control of the court. Plaintiffs had was not insolvent, and the court erred in so a right to maintain the action, whether they finding. Third. That simple contract creditors | had judgments or not. Dimmock v. Bixby, could not maintain this character of suit. | 20 Pick. 377. We do not deem it necessary Fourth. That there was a misjoinder of to discuss this question at length, for the causes of action. Fifth. That all of the reason that the second amended original pebeneficiaries in the deeds of trust were nec tition, upon which the case was tried, alessary parties to this suit. Sixth. That the leged that all of the plaintiffs had recovered court erred in admitting evidence as to the judgments during the pendency of the suit. money paid by Harrison to the Farmers' If there was a defect in this particular in & Merchants' Bank and to the Paris Ex. the original petition, which we do not be change Bank, because there were no allega lieve to be true, the amendment cured it. tions to permit it, and that the court erred in Plaintiffs, in the second amended original entering judgment against said banks. petition, set up that the stockholders owed Seventh. The court erred in entering judg. large amounts for their stock, but did not ment against Harrison, and holding that the pray judgment against them, and no judgorder appointng him was void. Eighth. The ment was entered against them. The peticourt erred in permitting the Baker Wire tion sought to recover for the benefit of all Company to withdraw from the case.
the creditors of the corporation the value of In this case, upon a question certified by the property that went into Harrison's the court of civil appeals, this court held hands, and the amounts paid to himself that an insolvent corporation which had and to the two banks. These rights all grew ceased to do business, or which, by the mak out of the making of the deeds of trust and ing of an instrument conveying all its prop the proceedings thereunder in court. They erty, incapacitates itself for continuing its | were properly joined. business, cannot make a mortgage or deed of When the Lyons-Thomas dardware Comtrust by which it gives a preference to some pany, being insolvent, ceased to carry on its of its creditors over others. Lyons-Thomas business, the law made its assets a trust Hardware Co. v. Perry Stove Manuf'g Co., fund, to be held and administered by its offi24 S. W. 16. We see no reason to change cers and the courts, for the benefit of all of our opinion on that question.
its creditors. Each creditor became a beneIt is asserted by plaintiffs in error that ficiary in that fund. The distribution was there was no evidence to sustain the conclu to be made under the law, and not under the sion of the court that the Lyons-Thomas deeds of trust that the company executed. Hardware Company was insolvent at the The deeds of trust in this case committed time the deeds of trust were executed. It the fund to the possession and control of is true that some of the officers of the com | Harrison, with full power to sell the proppany stated that it was not insolvent at that erty and distribute the proceeds among the time. But the evidence shows without doubt creditors. The Lyons-Thomas Hardware that the company was largely indebted; that, Company parted with the control of the propto secure a part of its creuitors only, it con erty, and the trustee could maintain suits veyed and delivered to Harrison, trustee, all to recover it, and defend actions brought of its assets, with power to convert them in against him for its possession, or which to money, and to apply the money to the brought in question his right of control. We payment of the debts named. If there was believe that reason and authority sustain more than sufficient to pay all, why convey | the proposition that, in a suit to set aside its entire property to secure the payment of such an instrument, the beneficiaries in the a portion of its debts, leaving a large amount | deeds of trust were not necessary parties,