M. Kangerga & Bro. v. Willard
191 S.W. 195
Tex. App.
1916
Check Treatment
HODGES, J.

This is a suit by tbe appel-lees, Willard and wife, in which they seek to have two deeds canceled upon the ground that they were executed as a method of creating a mortgage upon their homestead. The facts are substantially! as follows: In October, 1907, G. O. Willard, one of the appellees, purchased a tract of land in Rusk county from D, F. Spivey, and gave in payment six promissory notes aggregating $2,250. Each note contained the usual stipulations for the payment of interest at the rate of 8 per cent, per annum and 10 per cent, attorneys’ fees, and the reservation of a vendor’s lien to secure their payment.. The notes were so arranged as to mature in six. annual- installments, beginning one year after their date. Immediately following the purchase Willard, together with his family,- moved onto the land, and has since occupied it as the family homestead. The appellants at that time were engaged in conducting a mercantile business) in tbe city of Henderson. In 1908 Willard began trading with appellants, and purchased his family supplies from them each year till the latter part of 1915. At the end of each year the parties had some kind óf a, settlement. Some years Willard’s account was paid up in full, and at other times a balance was carried over. In tbe fall Willard usually delivered bis cotton to the appellants, by whom it was purchased and credits upon his account given accordingly. The advances made to Willard were usually secured by a chattel mortgage on the crops to be grown during the current year, and on -his stock. Willard and the appellants also had an agreement by which the latter were to take care of the interest and payments due on the l'and notes given to Spivey. Appellants paid the interest as it accrued, and under an agreement with Willard paid the principal also when Spivey demanded settlement. Spivey was paid something during the year 1913. On December 3, 1913, Willard and- his wife executed and delivered -to the appellants a deed absolute in form conveying tbeir homestead for a recited consideration’ of the cancellation of the Spivey notes. On the fol *197 lowing day the appellants reconveyed the premises to Willard for a recited consideration of $3,000, evidenced by four promissory notes, two for $500 each, and two for $1,000 each, due in one, two, three, and four years from date, each bearing interest at the rate of 10 per cent, per annum from date and providing for the payment of 10 per cent, attorney’s fees in the event they were collected by law. The purpose of the suit filed by the appellees is to cancel those two deeds.

The appellees’ original petition alleges that those deeds were intended as a means of mortgaging the Willard homestead for an indebtedness claimed by the appellants, and “that in making the deed by the defendants to these plaintiffs defendants required the plaintiffs to give a note for $3,000 for a debt claimed to be due by these plaintiffs, and which note pretended to be a lien on the homestead of these plaintiffs purporting to be for the purchase money for said premises, when in truth and in fact the note was given for a pre-existing and pretended debt due by these plaintiffs to defendants.”

The appellants answered by general and special exceptions and a general denial. In addition to these defenses the appellants alleged that they were the owners and holders of the six vendor’s lien promissory notes theretofore executed by Willard to Spivey as the purchase price of the land in controversy ; that these notes bore interest at the rate of 8 per cent, per annum from October 23, 1907, and also provided for 10 per cent, collection fees. The notes are fully described in detail in a manner that is unnecessary to repeat. It is further alleged that all of those notes had matured before December 3, 1913; that Spivey had executed to the appellants a deed conveying his interest in the notes and the lien evidenced thereby, and all right of title reserved by him as the grantor in the deed of conveyance to Willard; that on December 4, 1913, there was due the appellants on the notes the principal and accumulated interest, amounting to $2,587.35, no part of which had ever been paid; that on or about the 4th of December, 1913, the Spiv-ey notes were canceled and the debt renewed by the giving of the four notes mentioned in the deed from defendants to the plaintiff Willard; that the conveyance from Willard to defendants and from defendants to Willard were executed in an effort to renew the past-due notes and to make a record of such renewal in order to prevent the lien and right of recovery from becoming barred. It is further alleged that on December 4, 1913, Willard executed and delivered to the defendants his four promissory notes aggregating $3,000. Then follows a detailed description of the notes, with their dates, terms, and provisions as to interest and attorney’s fees. In that connection it is averred that the notes contained what is called a “default maturity clause,” and that the defendants have de-dared the whole of such notes to be due and unpaid because of the failure to pay the principal and interest on the matured notes. It is also alleged that by reason of the failure to pay the aforesaid notes and the bringing Of this suit the defendants have been compelled to employ attorneys and sue on those notes, by reason of which they are entitled to the attorney’s fees provided for.

Appellants also alleged that they are the legal owners and holders of the premises described in the plaintiffs’ petition, and because of the failure to pay the notes at maturity they are entitled to the possession of the premises. But they say, if it should be determined they are not entitled to recover possession of the land, that they are entitled to the foreclosure of the vendor’s lien and the contract lien which is thereafter set out. In addition to the foregoing as a basis for the-consideration of the notes given by Willard to the appellants, they also plead that at the special instance and request of Willard, and under a valid contract, they furnished money and material to erect improvements on the premises to an amount aggregating in value $413.65. The cross-bill concludes with a prayer for general relief.

The appellees filed supplemental pleadings, which were followed by still other pleadings by the appellants not necessary to notice.

The following are the special issues submitted and the answers returned:

(1) “How much of the Spivey notes was still due and unpaid on December 4, 1913? Ans. $1,600.”
(2) “Did the plaintiff direct that any of the proceeds of cotton sold by them to the defendant be applied to the payment of interest or the principal of the Spivey notes? Ans. Yes.”
(3) “At what time were the improvements on the homestead finished? Ans. Prior to December 4, 1913.”
(4) “Did the defendants, M. Kangerga & Bro., furnish to the plaintiffs any material or furnish any money with which material was bought or paid out for improvements on the homestead? If so, how much and at what time was it furnished? Ans. $413.65, furnished prior to December 4, 1913.”

Upon these findings the court entered a judgment in favor of the appellees canceling the two deeds made in December, 1913, and the notes aggregating $3,000 given as the consideration in one of them. Judgment was then rendered in favor of the appellants for $1,600 as the balance due upon the original purchase-money notes given by Willard to Spivey, and for a foreclosure of a vendor’s lien for that amount. Interest was allowed only from date of the judgment. A personal judgment was also awarded in favor of the appellants against Willard for the sum of $413.65, but no lien for that amount was fpund or foreclosed.

[1, 2] Kangerga & Bro. alone have appealed from that judgment. The failure of the court-to allow interest and attorney’s fee on the judgment for $1,600 and $413.65 and the refusal to find and foreclose a, lien in their favor upon the real estate for the payment of *198 the latter sum are the first errors assigned. There are other assignments, which attack the refusal of the court to sustain exceptions to the appellees’ original petition, which should first be considered. A party who seeks judicial annulment of a contract upon the ground that it is not permitted by law must allege facts which disclose its unlawful character. It is not every mortgage upon the homestead that is void. Valid incumbrances may be created for the purchase money and for improvements made thereon. Const. art. 16, § 50. This being a suit to cancel deeds solely upon the ground that they were-designed to operate as a mortgage upon the homestead, it devolved upon the plaintiffs to allege facts showing that the mortgage was one not permitted by the Constitution. If their petition is not fatally defective in that respect, it is at least lacking in that clearness and certainty required for good pleading. We have concluded, however, that for all practical purposes the original petition of the appellees may be disregarded and this suit treated as one by the appellants to recover upon the notes executed in December, 1913, and shall discuss the issues from that standpoint. The refusal of the court to sustain the exceptions to the plaintiffs’ original petition may be treated as immaterial and harmless.

[3] According to the pleadings of the appellants and the evidence offered.by them, the consideration for the four notes, aggregating $3,000 and executed by Willard on December 4, 1913, was made up of the principal and interest paid to Spivey by the appellants at Willard’s instance on the purchase-money debt and $413.65 for money and material furnished Willard by appellants to make improvements upon his homestead some time prior to the date of the notes and deeds. It is not contended that any portion of those notes has since been paid; neither is there any pleading or evidence which tends to impeach their validity as personal obligations on the part of Willard. It follows, then, that a personal judgment for their full amount, together with interest and the stipulated attorney’s fees, should have been rendered for the appellants against Willard. It is true the appellees pleaded in a general way that a portion, and probably all, of the Spivey debt had been paid, but the transactions relied upon to prove such payments occurred before the four notes above referred to were executed. The principal controversy seems to be about how much of the original purchase money of the homestead was unpaid at the times those notes were given, - and formed a part of their consideration. The action of the court below in canceling those notes and in refusing to consider them as a basis for a personal judgment for any portion of the debt which they evidenced indicates that for some reason he regarded them as invalid personal .obligations. The only argument suggested in the briefs of the appellees as supporting that conclusion is one founded upon the rule which applies to illegal contracts. Appellees insist that, inasmuch as it was shown that a portion of the consideration for the notes held by the appellants was not the original purchase-money debt, such notes were for that reason alone invalid and unenforceable for any amount. While the effort of the parties to create a lien upon the homestead for the entire debt evidenced by the notes was ineffectual because a part of the real consideration was something for which the homestead could not be incumbered, that fact alone did not invalidate the notes or affect the lien for that part of the consideration which represented the original purchase-money debt. Girardeau v. Perkins, 59 Tex. Civ. App. 552, 126 S. W. 634. The rule invoked by the appellees which holds that, if a portion of the consideration of a contract is illegal, the courts will refuse to enforce any part of the agreement, applies to contracts which are contra bonos mores, or which violate some penal statute designed to prevent the making of such agreements. A mortgage upon a homestead is not an immoral contract, nor is it one which violates any penal statute. The constitutional inhibition against mortgaging the homestead was made for the pecuniary benefit of the party who may claim such an exemption. If there were any occasion for a discussion of this proposition, ample authority to support it might be found in that line of cases which enforce liens against the homestead when created under circumstances which conceal from the mortgagee the homestead claim. Moerlein v. Scottish Mortgage Co., 9 Tex. Civ. App. 415, 29 S. W. 162, 948; Steves v. Smith, 49 Tex. Civ. App. 126, 107 S. W. 147; Scottish Co. v. Scripture, 40 S. W. 215.

[4-7] To the extent which the consideration expressed in the notes sued on by the appellants represented the original purchase-money debt due upon the homestead, the notes expressed a valid lien enforceable in this suit. Black v. Rockmore, 50 Tex. 88; National Bank v. Taylor, 91 Tex. 78, 40 S. W. 880, 966; Wasson v. Davis, 34 Tex. 159; Swain v. Cato, 34 Tex. 395; Glaze v. Watson, 55 Tex. 568; Clark v. Burke, 39 S. W. 306. One who pays for the vendee the purchase money due upon the homestead takes by an equitable assignment, if not by an actual transfer, the debt which discharges, and is subrogated to the lien which his vendor held. Flanagan v. Cushman, 48 Tex. 241; Pinchain v. Collard, 13 Tex. 333; Joiner v. Perkins, 59 Tex. 302. If the debt is thereafter extended by the giving of new notes, the old lien may be perpetuated without losing any of its validity. Lippencott v. York, 86 Tex. 283, 24 S. W. 278; Watkins v. Spoull, 8 Tex. Civ. App. 427, 28 S. W. 356. The jury in this instance found that on the 4th day of December, 1914, the date upon which the nptes in *199 controversy were executed, there was still due the appellants the sum of $1,600 for what they had previously paid upon the purchase-money notes to Spivey. Upon that finding the appellants were entitled to have a judgment foreclosing the vendor’s lien for that amount, together with the interest which had accrued up to the date of trial at the rate of 8 per cent, per annum, and 10 per cent, attorney’s fees. Honaker v. Jones, 115 S. W. 650. Counsel for appellees justify the refusal of the court to allow interest and attorney’s fees upon the ground that appellants can claim a lien in this suit only by subro-gation, and that such lien is limited to the sum that will reimburse the appellants for what they actually expended in discharging the original purchase-money debt. As supporting that proposition they refer to Cleveland v. Carr, 40 S. W. 407. In that case it was held that, where guarantors on notes secured by a trust deed paid the notes and took an assignment of them, together with the deed of trust, their rights against the principal debtor were derived from subrogation, and not from the assignment, and their recovery from him was limited to the sum actually paid by them with legal interest, not the rate stipulated in the notes. That rule has no application to cases of this character. The appellants were not sureties or guarantors for Willard, nor parties in any form to his contract with Spivey, and consequently were under no legal obligation to answer for Willard’s default. Their payment to Spivey was the consideration for the purchase of Willard’s debt, not the discharge of a legal obligation. The rights which they acquired were measured not by what they had paid, but by what Spivey might have claimed from Willard had he remained the creditor. They are in the same attitude in which they would have been had Spivey transferred to them the original purchase-money debt by a written indorsement. Their, payment to Spivey did not discharge the debt, but merely changed creditors.

[8] Where the consideration for the debt is the original purchase money, the form in which the lien to secure it is expressed or perpetuated is immaterial. The parties may, without violating any legal or constitutional provision, change the form of the mortgage after the making of the original purchase-money contract. A form which would have been valid in the first instance would not be invalid if thereafter adopted. The parties in this case had the right to agree upon and adopt any form they saw proper for perpetuating the debt and lien acquired by the appellants from Spivey; and the deeds in evidence, even though intended as a form of mortgage, were not for that reason void. They were valid as to what remained of Willard’s original purchase-money obligation, together with the accumulated interest and attorney’s fees thereon. We therefore conclude that the court erred in holding to the contrary.

[9] Under the facts as found the appellants were not entitled to the foreclosure of a lien for the $413.65. This portion of the consideration of the notes held by the appellants is for money and material furnished for improvements put upon the premises after the homestead right had attached. To be valid such liens must be created before the material is furnished. Taylor v. Huck, 65 Tex. 238; Cameron v. Gebhard, 85 Tex. 610, 22 S. W. 1033, 34 Am. St. Rep. 832; Lippencott v. York, supra. It is urged by the appellants that they were the real owners of the property at the time the improvements were made. As supporting that contention, they refer to that portion of the evidence which shows a conveyance made to them by Spivey, in which the latter transferred his lien and all the legal and equitable rights he then held in the property. That, conveyance merely vested in the appellants the lien and the superior legal title remaining in the vendor which enables him to rescind the contract upon default in the payment of the purchase money. Until a rescission occurred the real beneficial ownership of the property was in the vendee, Willard. The court correctly refused to allow a foreclosure for this sum.

The appellants insist that the judgment in this case should be reversed because of the failure of the court to grant a new trial on account of the newly discovered evidence. This evidence consisted substantially of testimony which would tend strongly to impeach or contradict the testimony of the appellee Willard as to payments for which he received credit in the findings of the jury. While the character of this newly discovered evidence and the circumstances surrounding its discovery and subsequent presentation as a basis in the motion for a new trial are not, when standing alone, sufficient to require the granting of a new trial, yet we are inclined to think, upon a review of the entire record, that the ends of justice would be better sub-served by reversing and remanding the cause, in order that it may be tried in accordance with the views herein expressed.

The judgment will therefore be reversed, and the cause remanded for a new trial.

<§=>For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

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