STAYTOK, Chief Justice.
On February 28, 1884, appellant agreed to sell a printing outfit to L. F. Powell for the'sum of $4253.94, payable in twelve months.
It was further agreed that the purchaser would deposit as collateral security for the payment of the sum named a note for $5000 executed by Powell and the other defendants.
The instrument through which the contract between appellant and Powell was made provided that the machinery should remain the property of appellant until it was paid for, and contemplated that it should be delivered to Powell, but that in default of payment appellant should have the right to demand from the person with whom the collateral was to be deposited that instrument, and to enforce its payment so far as necessary, and that upon payment of the purchase money appellant would make title to the machinery.
The instrument was executed by Powell and by appellant, and Powell executed the following:
[59]*59“$4253.94. Gainesville, Texas, February 28, 1884.
“Twelve months after date I promise to pay to the Campbell Printing Press and Manufacturing Company, of Flew York, or order, the sum of $4253.94, for value received, with interest at the rate of 8 per cent per annum until paid. This note is given for the payment of printing presses, engine, type, and material, and secured by a joint note as collateral at twelve months, dated at Gainesville, Texas, the 28th day of February, 1884, for $5000, and bearing interest at 8 per cent per annum, drawn to the order of L. F. Powell, and signed by John II. Stone, George W. West, G. W. Harper, J. M. Culp, D. D. Swearingen, Richard McCubbin, J. M. Rolls, L. F. Powell, E. T. Morris, H. Hulen, E. 0. Perry, E. L. Morris, and Sandy Horton, the same to be deposited with J. 0. Stanage, of Dallas, Texas, and by him to be held in trust as security for the payment of this note.
“L. F. Powell.”
The note actually deposited as collateral was as follows:
“$5000. Gainesville, Texas, February 28, 1884.
“Twelve months after date we promise to pay to L. F. Powell the sum of five thousand dollars ($5000), for value received, with interest at the rate of 8 per cent per annum from date, interest payable twelve months after date.
“John H. Stone,
L. F. Powell,
“G. W. West,
E. T. Morris,
“W. G. Harper,
H. Helen,
“J. M. Culp,
E. C. Perry,
“D. D. Swearingen, '
E. L. Morris,
“Richard McCubbin,
Sandy Horton/
“ J. M. Rolls,
This paper was endorsed by L. F. Powell.
The contract between appellant and Powell was made for the former by an agent, Tileston, and the evidence leaves it uncertain whether Powell delivered the collateral note directly to Stanage or to Tileston. The machinery and other property was delivered to Powell, but the written contract between the parties was not recorded. The note not being paid this action was brought on May 14,1886, on the two obligations against their makers.
At some time as early as March 3,1884, for the purpose of securing the makers of the collateral obligation, Powell executed to them a trust deed on the property purchased, and perhaps on some other, which empowered them if his note to appellant was not paid to sell the mortgaged property and from the proceeds to satisfy the debt. That* instrument was duly recorded on October 10, 1884; but it seems that some, if not all,.of the makers of the collateral paper were not aware of its execution until after the notes matured.
[60]*60By an amended petition filed on May 20, 1887, appellant alleged the .execution of this mortgage and sought its foreclosure; and therein it was alleged that on March 10, 1885, Powell, for the further security of the makers of the accommodation paper, conveyed to them the mortgaged property.
On February 12, 1888, appellant filed what was termed a supplemental petition, in which, in addition to statement of matters before pleaded, was set up the fact that the title to the property was to remain in it until paid for; and on this ground, as well as by reason of the mortgage, asserted a lien on the property, and no objection seems to have been urged in the court below to the assertion of this right in a supplemental petition.
It seems that after the makers of the accommodation paper knew of the delivery of the note signed by them they released the mortgage executed by Powell for their security. This was done in March, 1886.
It further appears that about June, 1885, Powell to better secure the makers of the accommodation note conveyed to them the property purchased, and that they subsequently reconveyed to him, but it does not appear whether this was before or after they had knowledge of the fact that the note had been delivered with the condition on which it was to be delivered torn off.
The defendants other than Powell denied under oath the execution of the accommodation note, and further pleaded if they signed the paper that when they did so it had attached to it on the same paper and as a part of it words in substance as follows: “The following note shall not be delivered or have effect until ten men of unqualified solvency shall have first signed the same as sureties.” They alleged that this part of the paper was torn off after it came into the possession of appellant’s agent without their knowledge or consent, that there were not ten solvent names on it, and that the agreement was that the name of appellant should be inserted as payee in a blank space left for that purpose, but that the name of Powell was inserted.
It was agreed that the following words were written on the paper just above the note when it was signed by the defendants: “The following note is not to be delivered until signed by ten men of unqualified solvency;” but the evidence is conflicting as to whether this was torn off before the note was delivered to appellant’s agent, and as to whether he ever knew that such a writing was ever attached to the note.
Under the finding of the jury and charge of the court it must be held, however, that the jury found that this part of the paper was removed from the note with the knowledge of appellant’s agent, and that the note was not signed by ten men of unqualified solvency; for the court charged the jury to find in favor of appellant if its agent had no knowledge of the condition on which alone the note was to be delivered, or if with such knowledge he received it with the names of ten solvent persons signed thereto.
[61]*61The verdict was in favor of all the defendants except Powell, save those as to whom a discontinuance had been entered, but the finding was against the existence of any lien.
It is urged that the evidence required a finding that appellant’s agent did not have knowledge of the condition on which Powell was authorized to deliver the note made for his accommodation, but there is direct evidence that he did have such knowledge, and the verdict in this respect must be sustained.
Free access — add to your briefcase to read the full text and ask questions with AI
STAYTOK, Chief Justice.
On February 28, 1884, appellant agreed to sell a printing outfit to L. F. Powell for the'sum of $4253.94, payable in twelve months.
It was further agreed that the purchaser would deposit as collateral security for the payment of the sum named a note for $5000 executed by Powell and the other defendants.
The instrument through which the contract between appellant and Powell was made provided that the machinery should remain the property of appellant until it was paid for, and contemplated that it should be delivered to Powell, but that in default of payment appellant should have the right to demand from the person with whom the collateral was to be deposited that instrument, and to enforce its payment so far as necessary, and that upon payment of the purchase money appellant would make title to the machinery.
The instrument was executed by Powell and by appellant, and Powell executed the following:
[59]*59“$4253.94. Gainesville, Texas, February 28, 1884.
“Twelve months after date I promise to pay to the Campbell Printing Press and Manufacturing Company, of Flew York, or order, the sum of $4253.94, for value received, with interest at the rate of 8 per cent per annum until paid. This note is given for the payment of printing presses, engine, type, and material, and secured by a joint note as collateral at twelve months, dated at Gainesville, Texas, the 28th day of February, 1884, for $5000, and bearing interest at 8 per cent per annum, drawn to the order of L. F. Powell, and signed by John II. Stone, George W. West, G. W. Harper, J. M. Culp, D. D. Swearingen, Richard McCubbin, J. M. Rolls, L. F. Powell, E. T. Morris, H. Hulen, E. 0. Perry, E. L. Morris, and Sandy Horton, the same to be deposited with J. 0. Stanage, of Dallas, Texas, and by him to be held in trust as security for the payment of this note.
“L. F. Powell.”
The note actually deposited as collateral was as follows:
“$5000. Gainesville, Texas, February 28, 1884.
“Twelve months after date we promise to pay to L. F. Powell the sum of five thousand dollars ($5000), for value received, with interest at the rate of 8 per cent per annum from date, interest payable twelve months after date.
“John H. Stone,
L. F. Powell,
“G. W. West,
E. T. Morris,
“W. G. Harper,
H. Helen,
“J. M. Culp,
E. C. Perry,
“D. D. Swearingen, '
E. L. Morris,
“Richard McCubbin,
Sandy Horton/
“ J. M. Rolls,
This paper was endorsed by L. F. Powell.
The contract between appellant and Powell was made for the former by an agent, Tileston, and the evidence leaves it uncertain whether Powell delivered the collateral note directly to Stanage or to Tileston. The machinery and other property was delivered to Powell, but the written contract between the parties was not recorded. The note not being paid this action was brought on May 14,1886, on the two obligations against their makers.
At some time as early as March 3,1884, for the purpose of securing the makers of the collateral obligation, Powell executed to them a trust deed on the property purchased, and perhaps on some other, which empowered them if his note to appellant was not paid to sell the mortgaged property and from the proceeds to satisfy the debt. That* instrument was duly recorded on October 10, 1884; but it seems that some, if not all,.of the makers of the collateral paper were not aware of its execution until after the notes matured.
[60]*60By an amended petition filed on May 20, 1887, appellant alleged the .execution of this mortgage and sought its foreclosure; and therein it was alleged that on March 10, 1885, Powell, for the further security of the makers of the accommodation paper, conveyed to them the mortgaged property.
On February 12, 1888, appellant filed what was termed a supplemental petition, in which, in addition to statement of matters before pleaded, was set up the fact that the title to the property was to remain in it until paid for; and on this ground, as well as by reason of the mortgage, asserted a lien on the property, and no objection seems to have been urged in the court below to the assertion of this right in a supplemental petition.
It seems that after the makers of the accommodation paper knew of the delivery of the note signed by them they released the mortgage executed by Powell for their security. This was done in March, 1886.
It further appears that about June, 1885, Powell to better secure the makers of the accommodation note conveyed to them the property purchased, and that they subsequently reconveyed to him, but it does not appear whether this was before or after they had knowledge of the fact that the note had been delivered with the condition on which it was to be delivered torn off.
The defendants other than Powell denied under oath the execution of the accommodation note, and further pleaded if they signed the paper that when they did so it had attached to it on the same paper and as a part of it words in substance as follows: “The following note shall not be delivered or have effect until ten men of unqualified solvency shall have first signed the same as sureties.” They alleged that this part of the paper was torn off after it came into the possession of appellant’s agent without their knowledge or consent, that there were not ten solvent names on it, and that the agreement was that the name of appellant should be inserted as payee in a blank space left for that purpose, but that the name of Powell was inserted.
It was agreed that the following words were written on the paper just above the note when it was signed by the defendants: “The following note is not to be delivered until signed by ten men of unqualified solvency;” but the evidence is conflicting as to whether this was torn off before the note was delivered to appellant’s agent, and as to whether he ever knew that such a writing was ever attached to the note.
Under the finding of the jury and charge of the court it must be held, however, that the jury found that this part of the paper was removed from the note with the knowledge of appellant’s agent, and that the note was not signed by ten men of unqualified solvency; for the court charged the jury to find in favor of appellant if its agent had no knowledge of the condition on which alone the note was to be delivered, or if with such knowledge he received it with the names of ten solvent persons signed thereto.
[61]*61The verdict was in favor of all the defendants except Powell, save those as to whom a discontinuance had been entered, but the finding was against the existence of any lien.
It is urged that the evidence required a finding that appellant’s agent did not have knowledge of the condition on which Powell was authorized to deliver the note made for his accommodation, but there is direct evidence that he did have such knowledge, and the verdict in this respect must be sustained.
There was also evidence showing that the note was not signed by ten solvent men, and without that Powell had no right to deliver it.
The agent of appellant having knowledge that Powell had no right to deliver the note unless signed by ten solvent men, in receiving it took the risk of its being signed by such persons.
The evidence shows that Powell was expected to submit the note after it was signed to one of the persons who had signed it, in order that he might pass on the solvency of the others before its delivery, but that this was not done for fear that he would declare some of the persons whose names were signed to it not solvent men.
The note was not negotiable, went into and remains in the hands of appellant, who is charged with knowledge of Powell’s want of authority to deliver it; and that its agent may have acted in good faith, believing that the persons who signed it were solvent, is a matter which does not protect appellant.
The makers of the accommodation paper had consented to its delivery only on condition that it should be signed by ten solvent men, and if it was not so signed they were not bound by the unauthorized delivery.
The charges of the court bearing on this question were as favorable to . appellant as they ought to have been, and those requested and refused ought not to have been given.
The deposition of Powell was taken and a part of it read by appellant after he had been examined as a witness on the stand, and after this appellees were permitted to read other parts of the deposition.
It is urged that the court erred in permitting this to be done. Such a course may often be necessary to the ends of justice where one party has read a part of a deposition or other paper, and there is nothing in the bill of exceptions tending to show that this was not the case in the present instance.
It is not claimed that improper testimony was thus introduced nor shown that any injury could have resulted to appellant from the admission of the entire deposition.
It appeared on the trial, but not in any pleading, that in the spring of 1886 Powell sold to the “Dallas Times Company” on credit the property for which the note sued on was given, and this action was brought on May 14, 1886.
[62]*62Appellant, as before stated, sues seeking to enforce the mortgage given to secure the makers of the accommodation note, and also to subject the property for which the note to it was given to sale in satisfaction of that note, and the court gave the following charges:
“If you find that the property described in the mortgage given by L. F. Powell to the signers of said S5000-note was not sold and delivered by L. F. Powell to the Times Publishing Company till after the 20th day of May, 1887, then you will find that plaintiff had a lien upon said property. If upon the other, hand you find that said property was sold and delivered to the Times Publishing Company before the 20th day of May, 1887, then you will find that plaintiff has no lien upon said property ”
These charges were probably given on the theory that the doctrine of lis pendens would control the case, and under the belief that if the Times Publishing Company bought before the amendment of petition in which lien was asserted, that sale cut off all right of appellant to have the property sold in satisfaction of its debt. If the doctrine of lis pendens be applicable to the case, facts are not shown that would protect the company purchasing from Powell, and there was no party before the court who could invoke that doctrine.
Appellant insists that it is entitled to enforce the chattel mortgage executed to the makers of the accommodation note, and that they had no right to release it to appellant's, prejudice.
“As a general rule, where the surety or person standing in the situation •of a surety for the payment of a debt receives a security for his indemnity and to discharge such indebtedness, the principal creditor is in equity ■entitled to the full benefit of that security, and it makes no difference that such principal creditor did not act upon the credit of such security in the first instance or even know of its existence. The authorities place the principle upon the ground that as security is a trust created for the better .securing of the debt it attaches to it, and hence it is that it may be made available by the creditor although unknown to him.” Brandt on Surety., 282, and citations.
Appellees who signed the accommodation note contend, however, that they were never bound as sureties and that the mortgage made to them was solely for their indemnity, and that for these reasons appellant is not ■entitled to subrogation to such rights as they once may have had under the mortgage. As a principal only takes such rights though subrogation as a surety between himself and the debtor had, it would seem to follow that if the security to the sureties was given solely for the purpose of indemnifying them, if the sureties were bound, that the principal creditor would not be entitled to subrogation.
In the case of Constant v. Matteson, 22 Illinois, 546, it was held that to give a creditor the right to be substituted in the place of the surety of Ms debtor, the relation of debtor and creditor must exist between the cred[63]*63ifcor and surety, and that the claim on his surety must be valid, binding, and capable of being immediately enforced; but that if the relation of creditor and debtor never existed between the creditor and surety, or having existed has ceased, there can not be any substitution of the creditor to rights of surety. Whether the mortgage was intended to secure anything but indemnity to the makers of the accommodation paper it is not necessary now to inquire.
Under the contract to sell it is clear that the title to the property embraced in it remained in appellant, and Powell had nothing to mortgage except his right to pay for the property and thus acquire right to title to it; from which it follows if appellant was subrogated to every right the sureties would have had if bound for the debt, that it would have no greater right than it has as owner of the property that Powell attempted to mortgage.
If it appeared that the makers of the accommodation note, with knowledge of the facts attending its execution and delivery, had taken the mortgage, subsequent bill of sale, and possession of the property, this would be strong if not conclusive evidence of their intention that the note as executed and delivered should be binding upon them; but it does not appear that they had knowledge of these facts until after these things had been done.
As the case is now presented it does not become necessary or proper to inquire what may be the rights of appellant, in view of all transactions between the parties, as against the Times Publishing Company. The material question further to be considered is, whether the facts shown as against the parties before the court entitled appellant to have the property which it contracted to sell to Powell sold and the proceeds applied to the payment of the note executed by him.
Appellant ivas and still is the legal owner of the property, title thereto never having passed to Powell, though possession did; and as against appellees appellant would be entitled to rescind the sale and to maintain an action for recovery of the property itself. If, learning that Powell had delivered the accommodation note without authority, appellant had not delivered the property, it would have been its right on failure of Powell to comply with his contract to resell the property contracted to be sold and to apply the proceeds to the payment of the sum contracted to be paid, and for any balance to have had a judgment against Powell.
We are of the opinion that the delivery of the property under the circumstances ought not to be held such a delivery as would defeat the right of appellant to have it sold through a decree of court and the proceeds applied to satisfaction, as far as that will go, of the sum due by Powell.
His delivery of the accommodation note when not authorized to deliver it was a fraud upon appellant as well as the makers of that note, and a possession of the property thus obtained can not defeat the right of ap[64]*64pellanfc at its election to recover the property sold or to have it subjected to the payment of sum due.
The general rule in reference to personal property is that when the seller delivers possession of the thing sold he parts with seller’s lien; but the property in this case was not delivered with intent to pass the title, but rather as a bailment, by the express terms of the contract title remaining in appellant, who expressly agreed to make title only when the purchase money was paid.
The seller now elects to have the property sold and proceeds applied to the payment of the debt due it; and against appellees, we are of opinion it is entitled to this relief, which can not be defeated by the fact that such relief may not have been sought until after Powell had sold, as fully as he could, the property.
The contract of sale was made before the passage of the Act of March 31, 1885 (Sayles’ Civ. Stats., art. 3190a), and the rights of any person or corporation holding under conveyance from Powell must be governed by the provisions of the latter part of section 2 of the Act of January 18, 1840. Pasch. Dig., art. 3876.
The judgment of the court below will be reversed and the cause remanded.
Reversed and remanded.
Delivered June 24, 1890.
Justice Henry did not sit in this case.