Opinion
No. 3678.
April 23, 1929. Rehearing Denied May 9, 1929.
Appeal from District Court, Grayson County; Silas Hare, Judge.
Suit by Mrs. Addie Whitaker and others against R.S. Fulton and others. From the judgment, plaintiffs appeal. Affirmed.
The suit was by the appellants against R.S. Fulton, Mrs. A. P. Neill and her husband, the Grayson National Farm Loan Association, and the Federal Land Bank of Houston, in the nature of trespass to try title to 166 acres of land of the Samuel Whitaker survey, situated partly in Grayson county and partly in Collin county. The suit is founded substantially upon the allegation that the land was the homestead occupied by J. R. Whitaker and his family, and there was a simulated conveyance of the land, intended to operate as a mortgage of the same, to secure payment of certain notes, and that all the parties so knew; that such pretended liens cast a cloud upon the title and should be canceled and declared void. Mrs. Neill and her husband specially pleaded, besides general denial, that she acquired the note of $2,000 by transfer and indorsement from R.S. Fulton in due course of trade for a valuable consideration before maturity, and without notice; and estoppel by declarations and representations made by appellants. They further, by crossaction, sought a foreclosure of the lien on the land for the unpaid balance of the note.
The Federal Land Bank, besides a general denial, specially pleaded estoppel, in that it took the note of $5.000 and made the loan in that amount in good faith and without notice, relying solely upon the representations made by appellants. The bank further, by crossaction, sought judgment establishing its lien on the land as against all the parties.
The Grayson National Farm Loan Association answered by general denial and adopted the answer of the Federal Land Bank.
R.S. Fulton pleaded, besides general denial, acquisition of the notes for a valuable consideration without notice and in good faith.
After hearing the evidence the court peremptorily instructed a verdict to the effect, namely: That the plaintiffs take nothing by their suit against all the defendants; that Mrs. A. P. Neill have judgment for her debt of $2,000 with interest and with foreclosure of her lien; that the Federal Land Bank have judgment establishing its debt of $5,000 with interest and lien against all of the parties. The plaintiffs have appealed from the judgment.
J. R. Whitaker and Mrs. Addie Whitaker were married in 1897. At the time of the marriage J. R. Whitaker owned as his separate property 146 acres of land. After the marriage J. R. Whitaker acquired 20 acres, as community property. This 166 acres is the land involved in the suit. All of the land was the homestead of J. R. Whitaker and his family. On May 27, 1916, J. R. Whitaker, joined by his wife, executed a deed to Pickens Bowen conveying 60 acres of the land, 40 acres lying in Collin county and 20 acres lying in Grayson county. The consideration is recited as $2,000 cash and five notes, three of the notes being for $300 each, one note for $500, and one note for $600, due, respectively, one, two, three, four, and five years after date of the deed. A vendor's lien was expressly retained in the deed to secure the payment of the notes. The deed was duly recorded on May 31, 1916. The acknowledgment to this deed was taken by R.S. Fulton as notary public. On May 27, 1916, J. R. Whitaker transferred the notes to R.S. Fulton, and this transfer was duly recorded. These notes were further secured by a deed of trust upon the 60 acres of land, dated May 27, 1916, and executed by Pickens Bowen to H. W. Head, trustee for R.S. Fulton. This deed of trust was duly recorded. On November 11, 1921, by an instrument in writing by Pickens Bowen to R.S. Fulton, the lien notes dated in 1916 were renewed and time of payment was extended. The instrument was recorded on November 12, 1921.
On December 21, 1921, the remaining 106 acres of the land was conveyed by deed by J. R. Whitaker and his wife to Pickens Bowen. The consideration is recited of $5,000 cash and note for $5,000 due one year after date. A vendor's lien was retained to secure payment of the note. The deed was recorded on December 27, 1921. J. R. Whitaker and his wife transferred the note to R.S. Fulton by instrument in writing of date December 21, 1921. The instrument of transfer was duly recorded. The note was further secured by a deed of trust, of date December 21, 1921, executed by Pickens Bowen to a trustee for R.S. Fulton. This deed of trust was upon the entire 166 acres of land. On December 26, 1921, Pickens Bowen deeded back to J. R. Whitaker the 166 acres of land, being the whole tract now in litigation. This deed was acknowledged on December 26, 1921, and duly placed of record on December 27, 1921. The deed recited the consideration as $6,000 in cash and the assumption and the agreement of J. R. Whitaker to pay and finally discharge the five notes, of date May 27, 1916, aggregating $2,000, and the note of date December 21, 1921, for $5,000. The deed further recited that all of the notes mentioned, with the lien securing same, had been sold and transferred to R.S. Fulton, and that he was now the holder and owner of the same.
On July 10, 1922, J. R. Whitaker died, leaving surviving him his wife, Mrs. Addie Whitaker, and four daughters, Leona, married to M. B. Parks, Nettie, aged above 21 years, Selma, aged 16 years, and Alma, aged 12 years. Since the institution of this suit, and before the trial in 1928, the two minors, Selma and Alma, have married, and they, joined by their husbands, are parties plaintiff. All of such survivors are appellants in this case. On September 22, 1923, Mrs. Addie Whitaker made application to the probate court of Grayson county to be appointed guardian of the person and estate of her two minor daughters, Selma and Alma. In regular order she was duly appointed as such guardian, and qualified in all formalities of the law. She, as guardian, filled an inventory and appraisement of the estate, which showed the 166 acres in suit, and that the two minors each owned a one-eighth interest therein, and that a lien existed against the land to secure payment of the notes in this suit. Thereafter, on January 19, 1924, Mrs. Whitaker, as guardian, made a sworn application to the probate court, setting up that:
"Your petitioner Mrs. Addie Whitaker, guardian of the estates of Selma Whitaker and Alma Whitaker, minors, respectfully represents that each of the said minors owns an undivided one-eighth interest in and to 166 acres of land described as follows: (Here follows description by metes and bounds.) A vendor's lien exists on said land, securing the payment of notes (here follows description of the notes as set out in deeds of 1916 and of 1921). Your petitioner owns an undivided one-half interest in said land; and Mrs. Leona Parks, wife of M. B. Parks, Nettie Whitaker, and Selma and Alma Whitaker, children and heirs at law of J. R. Whitaker, deceased, each own an undivided one-eighth interest in the land subject to the vendor's lien securing the aforesaid notes, held by R.S. Fulton. The unpaid balance of said notes, with interest computed to January 14, 1924, amounts to the sum of $7,124.68. It will either be necessary to sell the land in order to pay said amount, or renew the vendor's lien thereon. Otherwise the lien will be foreclosed thereon. Petitioner shows that R.S. Fulton, the holder of the notes, is willing to renew and extend the time of payment for one year, the original vendor's lien on the land to be renewed and perpetuated to secure the payment of the notes. Petitioner has reasons to believe, and does believe, that a loan can be secured on said land from the Federal Land Bank, at Houston, Texas, bearing interest at 5 1/2 per cent. per annum, principal and interest payable in semiannual payments on the amortization plan, in an amount sufficient or approximately sufficient to take up said vendor's lien notes. R.S. Fulton, the holder of said notes, is willing to transfer and assign the same, together with the lien securing the same, to said Federal Land Bank, in case a loan can be negotiated for a sufficient amount to take up said notes. Or, if the amount of the loan which can be secured from the Federal Land Bank should be insufficient to take up the entire amount of said indebtedness, then the said R.S. Fulton will consent to accept note secured by second lien on said property for an amount equal to the difference between the lien secured from the Federal Land Bank and the amount of said notes. Petitioner shows to the court that she and her two children, who are adults, to wit. Mrs. Leona Parks, who will be joined by her husband M. B. Parks, and Nettie Whitaker, desire to renew said indebtedness in the manner herein set forth, and that it is to the interest of the said minor children that your petitioner as guardian be authorized and empowered by the court to join in renewing said notes and the lien on the land securing the same. Wherefore, premises considered, petitioner prays that an order be entered by the court authorizing her as guardian of said minors to negotiate a renewal of the said notes, and a loan with the Federal Land Bank of Houston, Texas, as herein set forth, and that she, as guardian of said minors, he authorized on behalf of said minors to make application for said loan, to execute renewal contracts, notes, deeds of trust, and other instruments of writing as may be necessary and proper for the purpose of procuring said loan and renewing said indebtedness, the same to be secured by vendor's lien and deed of trust on the above described real estate, and for such other orders as are proper in the premises."
Upon the hearing of the application the probate court duly made and entered its order in the terms of the application. Thereafter, on February 4, 1924, Mrs. Addie Whitaker, in her individual capacity and as guardian of the estate of the two minors, joined by Mrs. Leona Parks and her husband, and Nettie Whitaker, executed their note for $7,124.68 payable to the order of R.S. Fulton, due one year after date, and secured same by a deed of trust on the 166 acres of land. The deed of trust was placed of record on February 14, 1924. In April, 1924, an application was made to the Federal Land Bank of Houston for a loan of $7,500, to be secured by a mortgage on the 166 acres of land. The application was made "through the Grayson National Farm Loan Association of Van Alstyne, Grayson county, Tex.," and was signed by Mrs. Addie Whitaker, in her individual capacity and as guardian of the two minors, Nettie Whitaker, and Mrs. Leona Parks and her husband. The application, among other things, states:
"State place of actual residence. Answer: On security.
"Do you farm this land, either personally or by hired labor? Answer: Yes.
"If land is farmed wholly or partly by tenants, give general terms of agreement. Answer: Farms it herself in part and partly by tenants.
"State when you intend to move on this land. Answer: Now live on it."
In connection with the application, and on April 19, 1924, Mrs. Addie Whitaker, Mrs. Leona Parks, and Nettie Whitaker made an affidavit before a notary public, which states: "We each know and are well acquainted with that certain tract of land described in deed dated December 26, 1921, recorded in Vol. 236, page 409, Deed Records of Grayson County, containing 166 acres of land of the Samuel Whitaker survey. 60 acres of this land was conveyed by our husband and father, J. R. Whitaker, deceased. and affiant Addie Whitaker, his wife, to Pickens Bowen in 1916, by deed recorded in Vol. 193, page 645, Collin County Deed Records, and the remainder of 106 acres was conveyed by the same grantors to the same grantee by deed dated December 21, 1921, of record in Vol. _____, page _____, Collin County Deed Records, certain notes in said deeds described being then executed by the said Bowen in part payment of the said lands. Later, on December 26, 1921, the same Pickens Bowen, a single man, conveyed said lands back to the said J. R. Whitaker by deed, and in the said last conveyance the said J. R. Whitaker therein assumed the payment of said notes therein also described. We know and further state it to be the fact that the three said sales as described above, and each of them, was a bona fide transaction in all respects, and the first three sales so made were such as vested an absolute title in the said Pickens Bowen, and that the last sale so made vested an absolute title in the said J. R. Whitaker; that the said deeds were in fact deeds and not mortgages, and that the notes in said deeds described were bona fide notes made in good faith, and with the intention of the maker thereof to pay the same, and were afterwards assumed; that said notes having been transferred to R.S. Fulton by said J. R. Whitaker with the full intention to pay same."
The foregoing was also subscribed and sworn to by Pickens Bowen on April 21, 1924 The Federal Land Bank made a loan of $5.000, secured by a deed of trust upon the 166 acres of land, made to a trustee for the Federal Land Bank of Houston, of date May 7, 1924, signed by Mrs. Addie Whitaker in her individual capacity and as guardian of estates of the two minor children, Nettie Whitaker, and Mrs. Leona Parks and her husband. The deed of trust was duly recorded on May 15. 1924. The proceeds of the loan was credited on the note for $7,124.68 held by R.S. Fulton; and on May 7, 1924, by written instrument, he transferred to the Federal Land Bank an interest in the note to the amount of $5,00.0 and agreed to take a second lien to that of the Federal Land Bank. This instrument was filed for record on May 15, 1924. The note was credited in the amount of the $5,000, and, as thus credited, the note was by written instrument signed by R.S. Fulton, of date February 6, 1925, transferred to Mrs. A. P. Neill, she paying to him the unpaid balance of the note amounting to the sum of $2,000.
There was oral evidence offered generally by appellants showing that the 166 acres was, since 1897, the homestead used and occupied by J. It. Whitaker and his family until the death of J. It. Whitaker in 1922; that after the death of J. R. Whitaker all the survivors, except Mrs. Parks, continued to occupy and use the place as their home up to the filing of this suit; that Pickens Bowen was the brother-in-law of J. R. Whitaker, and lived near the Whitaker place.
The evidence affirmatively shows that the Federal Land Bank and Mrs. A. P. Neill had no knowledge of the transactions between J. R. Whitaker and his wife and Pickens Bowen, outside of what the public records and written instruments in evidence show.
There was oral evidence offered by the appellants going to show, in effect, that the conveyances between J. R. Whitaker and wife and Pickens Bowen were not in fact intended by such parties to be an absolute sale of the land, but only a mortgage. Mrs. Whitaker testified, substantially, that in order to borrow money she and her husband conveyed the land by two separate deeds to Pickens Bowen, with the understanding that he would sign the vendor's lien notes and then reconvey the land; that the vendor's lien notes so created were to be transferred to R.S. Fulton; that R.S. Fulton advised that way of doing in order to borrow money on the land. The testimony of Pickens Bowen was substantially the same as that of Mrs. Whitaker. But all this oral evidence bearing upon a simulated sale was, upon objection thereto, expressly restricted, and not admitted except as against R.S. Fulton.
The statement of facts reflects the ruling of the court as follows: "The court stated at the time of the introduction of the above evidence with respect to the execution of the deeds and notes that it was admitted only against the defendant R.S. Fulton." Further: "The court stated to the jury that this testimony was admitted only as against Mr. Fulton, and not as against the other defendants."
The statement of facts does not show that any exception to such ruling was made by the appellants. No bill of exception appears in the record showing exception to the ruling.
Hamp P. Abney, Sr., of Sherman, and Hamp P. Abney, Jr., of Dallas, for appellants.
Freeman, McReynolds Hay, of Sherman, and Lewis Rogers and W. A. Shields, both of Houston, for appellees.
In determining in this case whether there was error in giving the peremptory instruction to the jury, the question becomes that of whether or not the evidence shows facts or circumstances of such character as to raise an issue for the jury to decide, as between the appellants and the Federal Land Bank and Mrs. A. P. Neill. R.S. Fulton and the Grayson National Farm Loan Association are formal parties to the suit of the plaintiffs to cancel the lien in evidence and remove cloud from the title to the land, and they are not the holders or claimants of any interest in the lien or notes, or the land.
The evidence shows that 146 acres of the land was the separate property of J. R. Whitaker, and that 20 acres thereof was community property. J. R. Whitaker and family occupied the land as their homestead. After the death of J. R. Whitaker his wife made application through the Grayson National Farm Loan Association to the Federal Land Bank for a loan to take up and extend certain notes held and owned by R.S. Fulton and purporting to be vendor's lien notes. As it appears, the Federal Land Bank was dealing with Mrs. Whitaker, with the specific purpose in view of taking up the liens shown by the deed records to exist and to lend her money to do so. The loan in the sum of $5,000 was made, and the proceeds of the loan was credited on the note. As thus credited the note was then transferred by R.S. Fulton, the holder and owner, to Mrs. Neill, she paying him the unpaid balance of $2,000. As appears, the three deeds in evidence, of date May 27, 1916, and December 21 and 26, 1921, by their form and phraseology showed deeds absolute on their face. They retained a vendor's lien to secure payment of the purchase money notes. They were duly registered as deeds. Hence such deeds, absolute on their face and duly registered as such, would be legally valid and effectual, unless by extrinsic parol evidence it was made to appear that they were in fact intended by the parties thereto as a mortgage only. There was no such parol evidence offered and admitted as to the Federal Land Bank and Mrs. Neill. As the record shows, evidence was offered concerning a secret agreement of loan upon the homestead, but it was not admitted as evidence against the bank and Mrs. Neill. The court expressly ruled, upon objection made at the time, "that this testimony was admitted only as against Mrs. Fulton, and not as against the other defendants." No exception was taken to the ruling of the court. The appellate court must then take the record as showing no proof that there was any secret agreement of loan, so far as concerns the Federal Land Bank and Mrs. A. P. Neill. There remained no fact or circumstance operating to make an issue for the jury. The occupancy of the land by the Whitakers after the conveyances to Pickens Bowen the deeds appearing absolute conveyances, imposed no duty of inquiry as to their possession. Eylar v. Eylar, 60 Tex. 315. The occupancy of the land by the Whitakers under the deed of December 26, 1921, by Pickens Bowen to J. R. Whitaker was entirely consistent with such registered deed, same being an absolute deed and there being no proof of a sham sale of the homestead. The deed from Pickens Bowen to J. R. Whitaker was not a simultaneous transaction with the deed to him from J. R. Whitaker, but it was a separate and distinct transaction on its face and executed on a different date. The facts are therefore distinguishable from the facts in Sanger Bros. v. Brooks, 101 Tex. 115, 105, S.W. 37. But assuming inquiry was required as to the occupancy of the Whitakers: There was no proof, as to the bank and Mrs. Neill, of any existing secret agreement of a loan. In the absence of such proof the bank and Mrs. Neill could not be presumed to have ascertained any such agreement by Inquiry.
It is claimed by the appellant that the Grayson National Farm Loan Association, through R.S. Fulton, its secretary, had actual information of the simulated sale, and their knowledge was legally imputable to the Federal Land Bank. We hold otherwise. Bjorkstam v. Federal Land Bank, 138 Wn. 456. 244 P. 981.
The judgment of the trial court is affirmed.