American Exchange Nat. Bank v. Jeffries, 10739.

• Decision Date: 31 January 1931
• Docket Number: No. 10739.,10739.
• Citation: 36 S.W.2d 558
• Parties: AMERICAN EXCHANGE NAT. BANK v. JEFFRIES et ux.
• Court: Texas Court of Appeals

Page 558

36 S.W.2d 558

AMERICAN EXCHANGE NAT. BANK v. JEFFRIES et ux.

No. 10739.

Court of Civil Appeals of Texas. Dallas.

January 31, 1931.

Rehearing Denied February 21, 1931.

Appeal from District Court, Dallas County; F. E. Wilcox, Judge.

Suit by the American Exchange National Bank, trustee, against C. R. Jeffries and wife. From the judgment, plaintiff appeals.

Affirmed.

Thompson, Knight, Baker & Harris and Goggans & Ritchie, all of Dallas, for appellant.

Hare & Batsell and Webb & Webb, all of Sherman, for appellees.

JONES, C. J.

Appellant, American Exchange National Bank of Dallas, trustee, as assignee of the Federal Mortgage Company, instituted this suit in a district court of Dallas county against appellees, C. R. Jeffries and wife, Jewel Jeffries, to recover the balance due with interest and attorney fee on a note in the principal sum of $2,000, and to foreclose a deed of trust lien executed by appellees as security for such indebtedness. A judgment was rendered against appellees for the amount of indebtedness found to be due, with interest and attorney fee, but the right of foreclosure of the alleged deed of trust lien was denied. Appellant has duly perfected an appeal from that part of the judgment refusing the foreclosure of the lien. The following are the undisputed material facts:

Appellees are husband and wife and with their two children on April 13, 1925, moved on the property in question, established a homestead thereon, and have continued to live on such property as their homestead since said date. This property is located on Cherry street in Sherman, Tex. Appellees also owned another piece of resident property in Sherman, situated on Jones street, but never lived thereon and never in any way used such property as their homestead. On May 10, 1927, more than two years after the property was subjected to their homestead use, appellees executed the $2,000 note in question, which provided for its discharge by 120 monthly installments of $25.66 each, the first being due June 1, 1927, and one installment due on the first of each month thereafter until it should be discharged; the note had the usual provisions for attorney fee, and also provided that, if default should be made in the payment, or any part thereof, of a monthly installment, for a period of 20 days after its maturity, then, at the election of the holder of such note, the balance due thereon should become immediately payable. Default had been made in payment and the note declared due by appellant. On the same date of the note appellees executed a deed of trust on this property, in favor of Edward T. Moore, as trustee for the Federal Mortgage Company, for the purpose of creating a lien to secure the payment of the note. The Federal Mortgage Company, on May 14, 1927, by written assignment, duly transferred this note and lien to appellant for a consideration of $2,000 paid in cash. Contemporaneous with the execution of the deed of trust, appellees duly made a written designation of their homestead and described in said designation the lot owned by them on Jones street; this designation was duly acknowledged by appellees and placed of record in the deed records of Grayson county, Tex.

Appellees made a duly verified written application to the Federal Mortgage Company for the loan of $2,000 to be secured by deed of trust on the Cherry street property, in which application they fully described the property and the improvements thereon and represented that such property was leased to a tenant at $40 per month, and that no part of such property was their business or residence homestead, and that they did not intend to make such property a homestead, and further designated and described the Jones street property as their existing homestead. The deed of trust also contained a recitation, to the effect that no part of the Cherry street property, described therein, was the homestead of appellees, and also that their homestead was on the Jones street property. An outstanding vendor's lien existed against the Jones street property, but the Cherry street property was free from any incumbrance at the time of the execution of the deed of trust. No part of the $2,000, borrowed from the Federal Mortgage Company, was used or intended to be used for any of the purposes for which the Constitution permits the family homestead to be encumbered with a lien.

The Jones street property, designated as a homestead in the deed of trust, was occupied by the father of appellee C. R. Jeffries, and no rent was charged him for the use of the premises. An inspector of the Federal Mortgage Company, before the loan was accepted, inspected the premises, knocked at the door of the Cherry street house, but received no response, and concluded that the occupants of the house were absent. He made no inquiry from neighbors or any one else as to who occupied the premises at such time, and did not visit the Jones street property or make any inquiry as to its occupancy. The Federal Mortgage Company relied exclusively upon the homestead designation and the statements, respectively, in the deed of trust and the application for the loan as to the homestead rights of appellees, though the physical facts showed that appellees were residing on the Cherry street property at the time the loan was executed, and were not residing on the Jones street property, designated as their homestead. When appellant purchased the note and lien in question, within four days after its execution, it relied solely on said written representations as to the status of the property with reference to homestead use, and did not investigate to see what the physical facts in this respect would show. Appellee C. R. Jeffries did not testify in the case, though the judgment recites that he was present. Mrs. Jeffries testified by deposition.

Except for a question on the admission of evidence, the sole issue presented by this appeal is whether a husband and wife are estopped, by their statements to the contrary, from pleading and proving a homestead exemption in the property sought to be incumbered with the lien, when the physical facts showed that, at the time the loan was negotiated and the contrary statements were made, and the lien attempted to be created, by the execution of the deed of trust on such property, the borrowers were living upon the property sought to be incumbered, and were not living upon the property which they represented to be, and designated as, their homestead.

Section 50, art. 16, of our Constitution declares that: "No mortgage, trust deed, or other lien on the homestead shall ever be valid, except for the purchase money therefor, or improvements made thereon, as hereinbefore provided, whether such mortgage, or trust deed, or other lien, shall have been created by the husband alone, or together with his wife; and all pretended sales of the homestead involving any condition of defeasance shall be void."

The undisputed evidence is that, for more than two years prior to the execution of this deed of trust and at all times since its execution, appellees with their children have lived upon this property as a homestead. The undisputed evidence also shows that the property on Jones street, designated in the deed of trust as their homestead, was never lived upon by appellees and was never in fact their homestead. Under the plain mandatory terms of ...