Opinion
No. 4031.
May 14, 1931.
Appeal from District Court, Harrison County; R. T. Wilkinson, Judge.
Suit by Susan E. Anderson against Cain Anderson. Judgment for plaintiff, and defendant appeals.
Affirmed.
By the suit brought by the appellee, she sought relief against the appellant by decree of cancellation of the written release by her of the lien created by deed of trust upon real estate executed in her favor to secure a promissory note owing by appellant, upon the ground that the release and the delivery up of the secured note was obtained by fraud relating to the consideration of such release and the surrender of the note, and for the cancellation for fraud of the written agreement inducing and out of which arose the consideration for the release by her of the lien of the deed of trust and of the surrender of the secured note, and for judgment on the original note secured by the deed of trust for the balance of the $2,000 due on the note with interest and attorney's fees provided for in the note and with foreclosure of the lien and sale of the land. The appellee also asked, in the alternative, for damages for breach of the written agreement in the sum of $2,000 with interest.
The appellant specially denied that there was any fraud practiced in the execution of the release and in the written agreement, and pleaded an agreed extension of fourteen months within which to perform the alleged written agreement for the construction of the house.
The evidence shows that on April 24, 1929, the appellant executed and delivered to the appellee his promissory note for $10,000, payable to her order six months after date with 7 per cent. interest per annum from date and providing for 10 per cent. attorney's fees for collection. The appellant was indebted to appellee and was due her that sum of money. In order to secure the payment of this note, the appellant on April 24, 1929, duly executed and delivered to W. C. Pierce, Jr., as trustee, a deed of trust upon three tracts of land in Harrison county. The deed of trust was duly recorded in the records of the county clerk's office. Thereafter at the maturity of the note the appellee made demand for its payment, and the appellant, on November 2, 1929, paid the appellee $1,000 in money through his check on a bank and executed a warranty deed conveying to her in fee simple certain lots in the city of Marshall of the value of $7,000. The appellee agreed to and accepted the lots at the value stated as part payment on the indebtedness evidenced by the note. The $1,000 cash and the $7,000, as value of the lots, was delivered and accepted as part payment, and was intended to be paid and accepted as credit on the amount of the note, thereby reducing the unpaid balance of the note to the sum of $2,000. There was no dispute between the parties as to the amount of the $10,000 note, nor as to the amount of $2,000 being the balance due and unpaid after crediting the $10,000 note with the $1,000 and the $7,000. On the same date of November 2, 1929, when the above-mentioned $8,000 was paid on the $10,000 note, the appellant and the appellee entered into an agreement respecting the mode of payment of the $2,000 balance remaining unpaid on the note. The agreement was reduced to writing and signed by the appellant, reading:
"State of Texas. County of Harrison.
"Know All Men by These Presents:
"That I, Cain Anderson, of the County of Harrison, State of Texas, do hereby bind and obligate myself to build on a vacant lot located at the corner of Young and West Rusk Street in the City of Marshall, Texas, a four room frame house, with bath and back and front porches, to cost not less than Two Thousand Dollars.
"The consideration of this contract is the balance due which I am indebted to Susan E. Anderson, I having been originally indebted to her in the sum of Ten Thousand Dollars, and having this day paid to her the sum of Eight Thousand Dollars, and the execution of this said contract to build said house for said sum is for the purpose of paying said balance of Two Thousand Dollars on said Ten Thousand Dollar indebtedness, said house to be completed by March 1st, 1930."
The vacant lot referred to belonged to the appellee. It appears that, after the execution and delivery of the above-written agreement, the appellee executed a written release of the lien created by the deed of trust above referred to and delivered up to appellant his $10,000 note above mentioned. The above-stated facts are without dispute, and are admitted by the parties.
The following are the issues submitted to the jury:
"Q. 1. Did the defendant, at the time the contract dated on November 2, 1929, was signed and entered into, intend to build a house on the vacant lot, as shown by the said contract?" Answer of the Jury: "No."
"Q. 2. Do you find from a preponderance of the evidence in the case that the plaintiff entered into a contract with the defendant whereby it was agreed that the time for the construction of the house be extended for a period of 14 months?" Answer of the Jury: "No."
The evidence upon which the issues are based is conflicting and it becomes unnecessary to make an outline thereof, since there is no complaint upon appeal of the jury findings.
In keeping with the verdict of the jury and the pleadings, the court entered judgment setting aside the release of the lien of the deed of trust, and, as remission to his original rights, awarded the plaintiff judgment for $2,000 with interest, as balance owing and unpaid on the $10,000 note, and attorneys' fees, together with the foreclosure of the lien upon the land described in the deed of trust and with order of sale of the land to pay the sum so adjudged.
Caven Caven, of Marshall, for appellant.
Beard Abney, of Marshall, for appellee.
The appellant predicates error in not awarding the appellee a simple judgment for $2,000 with interest, as in the nature of damages only for the breach of the contract to build a house. It is pointed out that the appellee was not entitled to a decree setting aside the release of the lien of the deed of trust without the restoration or offer to restore what she had received for the release by way of money and property. The plaintiff did not restore or offer to restore the $1,000 in money nor offer to reinvest the defendant with the legal title to the city lots. The rule sought to be invoked by the appellant is a general one applicable to a suit for cancellation for fraud of an instrument or a transaction. In order that complete relief may be awarded both the defendant and the plaintiff, it is the prime essential in the remedy of rescission of a contract or a transaction that the plaintiff should restore or offer to restore the money or property received, whenever restoration of what has been received is required. 2 Black on Rescission and Cancellation, § 616; Stewart v. Rwy. Co., 62 Tex. 246; Adams v. Loftin (Tex.Civ.App.) 1 S.W.2d 429; and many similar cases. Ordinarily where the contract or transaction was entire the complainant must restore the whole consideration and not a part only. There is, however, an exception to the aforementioned general rule as to the necessity of restoration on the part of the complainant in order to obtain relief. The exception is founded in the principle that the complainant or one seeking the rescission of a transaction on the ground of fraud is not required to make restoration of that which in any event he would be entitled to retain, either by virtue of the contract sought to be set aside or of the original liability. 9 C.J. § 97, p. 1210; 7 Tex.Jur. § 47, p. 961; 4 R.C.L. § 24, p. 512; 2 Black on Rescission and Cancellation § 621; 5 Pomeroy, Eq. Jur. (2) 2110; Ry. Co. v. Jowers (Tex.Civ.App.) 110 S.W. 946; Oar v. Davis (Tex.Civ.App.) 135 S.W. 710; Chambers v. Wyatt (Tex.Civ.App.) 151 S.W. 864; Cearley v. May, 106 Tex. 442, 167 S.W. 725. Quoting from 2 Black. § 621, supra: "One seeking the rescission of a contract or other transaction is not required to make a tender or offer of restoration of that which he would be entitled in any event to retain, that is, either by virtue of original liability of the other party, if the contract should be rescinded, or under the contract itself, if rescission should be refused."
5 Pomeroy, § 2110, supra: "Neither is a party obligated to return that which he will be entitled to retain, even though a cancellation be decreed."
9 C.J. § 97, supra: "One who seeks to rescind an instrument is not bound to restore that which he would be entitled in any event to retain."
This exception, it is thought, has peculiar application to the facts and governs the present case. As appears, the $1,000 cash and the city lots of the value of $7,000, aggregating $8,000, received by the appellee, was intended and understood by both the appellant and the appellee to be at the time a partial payment on the $10,000 note, which had fallen due. The amount of the indebtedness, evidenced by the note, was, without dispute, just and owing as a valid debt. And the $10,000 indebtedness was intended by the parties at that time to be reduced and discharged by the amount of the partial payment so made and no more. The balance of the $2,000, remaining due on the note at the time, was to be paid merely by another mode of payment; that is, by way of building a house instead of in cash money. In such circumstances a restoration or the offer thereof of the partial payments was unnecessary prior to the commencement of the present action, for such conditions as might be essential for the protection of the appellant could be inserted in the judgment ultimately rendered. The partial payments so made could be and should be taken into account in the award of relief to the appellee. As for instance, if her action for cancellation of the release of the lien should fall, she nevertheless would be entitled to the partial payment received by virtue of the transaction itself, for it was only a part of what should have been paid to her in the first instance. If, on the other hand, she were entitled to have decreed the relief of cancellation asked, the partial payments to her could be and should be credited, as was here done, upon the total liability of the original indebtedness of $10,000, for, as a matter of law, the credits would have to be allowed in estimating the amount of the judgment. Holland v. Cook, 10 Tex. 244; Harland v. Hendricks, 19 Tex. 292.
It is believed that the trial court has correctly ruled on the facts and entered the proper judgment, and that such judgment should be affirmed.