OPINION ON REHEARING. On a former day of this term of the court the judgment of the court below in this case was affirmed, and the case is now before us on motion for rehearing. In the original opinion the case was disposed of on the ground, as contended by defendant in error, that plaintiff in error was not entitled to maintain this action under the United States Bankruptcy Act of 1898, because the conveyances sought to be set aside for fraud were made prior to said Act going into effect, and not within four months next preceding the filing of the petition by the bankrupt, asking to be adjudged a bankrupt.
We reached this conclusion upon the impression that subdivision e of article 67 of said Act was the only provisions in the Act relating to the right of the trustee to maintain a suit for the property conveyed in this character of cases. In this impression, upon further examination of the Act, we find we were mistaken. Subdivision e of section 70 of the Bankruptcy Act of 1898 reads as follows: *Page 311
"The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred or its value from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value. For the purpose of such recovery any court of bankruptcy as hereinbefore defined, and any State Court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction,"
In our opinion, this provision of the Act authorizes the trustee in bankruptcy to maintain actions based upon transactions of the character pleaded by plaintiff in error in his petition. While it is true that the conveyances made to the wife of the bankrupt were executed prior to the enactment of the Bankruptcy Act of 1898, it is alleged in the petition of plaintiff in error that the property embraced in such conveyances belonged to the community estate of the bankrupt Andrew Jackson Heissner and his wife, Myra Heissner, and that said conveyances were made without any consideration, and for the purpose of placing said property beyond the reach of the bankrupt's creditors; and that the true title to the property was concealed, and continued to be so concealed in this manner up to the death of the bankrupt's wife, Myra Heissner; that the said Myra Heissner on the 22d June, 1899, and while on her death bed, devised the said property to S. F. Nolen, her brother, and one of the defendants in error, and that this was done for the purpose of securing said property to her husband, the said Andrew Jackson Heissner, free from the claims of his creditors; that the will named the said S. F. Nolen as executor thereof, and that it was the understanding and agreement, by and between the said Myra Heissner, S. F. Nolen and Andrew Jackson Heissner that he, the said Nolen, should hold said property for the said Andrew Jackson Heissner until such time as he should demand a conveyance of same to him; that the said Nolen accepted the bequest with said understanding and impressed with said trust, and that after the death of the said Myra Heissner the said will was duly probated and the said Nolen duly qualified as independent executor of said will.
It is further alleged in said petition that the said Andrew Jackson Heissner, Myra Heissner and S. F. Nolen were parties to and acted together in the fraudulent design to place said property beyond the reach of the creditors of the said Andrew Jackson Heissner, and that all the aforesaid acts were done in pursuance to the aforesaid design and intent, and that they constituted, in effect, a single object and conspiracy to defraud the creditors of the said bankrupt, Andrew Jackson Heissner. It was further alleged in said petition that in further pursuance of the said fraudulent design, purpose and conspiracy, the said Andrew Jackson Heissner, subsequent to the death of the said Myra Heissner, and on the 30th day of September, 1899, filed his petition in bankruptcy for the purpose of securing a discharge from his debts, and with the intention, after securing such discharge, of taking a reconveyance of said property to himself from said Nolen, and that thereafter and prior to the granting of such discharge, the said Andrew *Page 312 Jackson Heissner died. And that after the death of the said Myra Heissner and Andrew Jackson Heissner and in further pursuance of said fraudulent scheme and conspiracy, the said S. F. Nolen colluding, conspiring and confederating with Adolph Trautwein, Jr., and H. C. Nolen, the other defendants in error herein, each and all of them having notice of the aforesaid fraudulent scheme and conspiracy to defraud the creditors of Andrew Jackson Heissner, and each and all of the said parties colluding, conniving, confederating and conspiring with one another for the purpose of perpetuating the aforesaid fraud, and for the purpose of placing all of said property described in said petition beyond the reach of the creditors of the said Andrew Jackson Heissner, and for the fraudulent purpose of attempting to place all of said property beyond the reach of said creditors, and beyond the reach of the plaintiff in error as trustee in bankruptcy for said creditors, and for the purpose of fraudulently and falsely claiming and asserting that the said Adolph Trautwein, Jr., and H. C. Nolen were and are innocent purchasers of said property, have entered into a fraudulent conspiracy with one another, in pursuance of which the said S. F. Nolen has conveyed a part of the property herein described to H. C. Nolen fraudulently and without consideration, and has conveyed the other part of said property described in plaintiff in error's petition fraudulently and without consideration to Adolph Trautwein, Jr., and that the said H. C. Nolen and Adolph Trautwein, Jr., each had full knowledge of all the above facts set forth and especially of the fact that said property was the community property of said bankrupt and wife, and not the property of the said S. F. Nolen, and that said S. F. Nolen merely held the same under said will for the purposes aforesaid and impressed with said verbal trust.
We think the above allegations show a conspiracy begun before the enactment of the Bankruptcy Act of 1898, but continuing not only after the Act went into effect, but after Andrew Jackson Heissner was adjudged a bankrupt under said Act, and after his death subsequently thereto, and practically to the date of the institution of this suit. The acts alleged constitute a continuous holding of the property up to the death of the bankrupt in trust for him, and a concealment of same from his creditors, and after the death of the bankrupt, a holding for the benefit of the defendants in error, who paid no consideration therefor, and a concealment of and placing the same beyond the reach of creditors of the bankrupt. These acts and the concealment resulting therefrom having continued long after the enactment of the bankruptcy law, and after the adjudication of Andrew Jackson Heissner as a bankrupt, the plaintiff in error, as trustee, is authorized under the law to maintain this action. The allegations of the petition show that at the time of the institution of this suit, the defendants in error had the property described in plaintiff in error's petition in their possession, and that it belonged to the estate of the bankrupt, and that they had knowledge of this fact, and that notwithstanding this knowledge, they were attempting to conceal it from the trustee of the bankrupt, and avoid its being subjected to the payment of the debts of the bankrupt. (In re Quackenbush, 102 Fed. Rep., 282; Joseph v. Raff, 81 N.Y. Supp., 546; Saxton v. Sebring, 89 N.Y. Supp., 372; In re Shenk, 116 Fed. *Page 313 Rep., 554; Cox v. Wall, 44 S.E. Rep., 635; Hood v. Blair State Bank, 91 N.W. Rep., 701; Hudson v. Bank, 119 Fed. Rep., 346; In re Countryman, 9 A. B. R., 572; In re House, 4 A. B. R., 603; In re Brown, Id., 383.
Plaintiff in error's first assignment of error complains of the action of the court below in refusing to permit the witnesses W. C. Roy, Fred Sevine and George Heissner to testify to conversations had by each of them with Andrew Jackson Heissner, in which the said Andrew Jackson Heissner stated that the property in controversy in this suit was his, and that he had placed it in the name of his wife on account of his insolvency, and in order to prevent his creditors from subjecting it to the payment of their debts. We think this testimony was admissible under the pleadings, and in view of the evidence admitted tending to show the continuous conspiracy, as alleged. (Hudson v. Willis, 65 Tex. 702.)
The testimony, the exclusion of which is complained of in plaintiff in error's second assignment of error, should have been admitted. The witness Sevine was not incompetent to testify to conversations had with Mrs. Myra Heissner under article 2302, Sayles' Revised Statutes. He was not a party to the suit, and the suit was not against S. F. Nolen as executor. (Gilder v. City of Brenham, 67 Tex. 349; Curtis v. Wilson, 2 Civ. App., 649; Newton v. Newton, 77 Tex. 571; Mayfield v. Robinson, 55 S.W. Rep., 399.)
We are of opinion that under the provision of the bankruptcy law authorizing this suit, it is required that the petition should allege the amount of the claims of the creditors who were such at the time the fraudulent conveyances were made, and that the assets of the bankrupt estate in the hands of the trustee were insufficient to pay same, and these allegations should be supported by proof. (In re House, 4 Am. Bankruptcy Reps., 603; Mueller v. Bruss, 8 Am. Bankruptcy Reps., 477.)
We do not hold that the petition was subject to general demurrer on account of this omission, but, conceding that it was, the record shows that the court overruled defendant in error's general demurrer, and therefore, plaintiff in error had no opportunity to amend his petition. If the court had sustained the general demurrer to plaintiff in error's petition, he would have had an opportunity to amend it so as to have cured the omission mentioned; and doubtless he would have done so, as the record shows that proof could have been made of such allegations.
There are other questions raised in plaintiff in error's brief, and not discussed herein, but the matters to which they relate are not likely to arise upon another trial.
The original opinion in this case is withdrawn, the motion for rehearing is granted, and the judgment of the court below is reversed and the cause remanded.
Reversed and remanded. *Page 314