Bank of Southwest Nat. Ass'n v. La Gasse, 13364

• Decision Date: 12 February 1959
• Docket Number: No. 13364,13364
• Parties: BANK OF THE SOUTHWEST NATIONAL ASSOCIATION, Appellant, v. Anita J. LA GASSE et vir, Appellees.
• Court: Texas Court of Appeals

Page 101

321 S.W.2d 101

BANK OF THE SOUTHWEST NATIONAL ASSOCIATION, Appellant, v. Anita J. LA GASSE et vir, Appellees.

No. 13364.

Court of Civil Appeals of Texas, Houston.

Feb. 12, 1959.

Rehearing Denied March 5, 1959.

Fulbright, Crooker, Freeman, Bates & Jaworski, Austin, C. Wilson, Houston, for appellant.

Fred W. Moore, Houston, for appellees.

WERLEIN, Justice.

This is an appeal by the Bank of the Southwest National Association, Houston, from an order of the District Court of Harris County, Granting appellees, Anita J. LaGasse and husband, Delphis A. LaGasse, a temporary injunction enjoining appellant from exercising during the pendency of this suit its power of sale under the deed of trust executed by appellees covering Lots 12, 13 and 14, on South Main Street, in Section 1A of Block 9 Braeswood Addition in Houston, Harris County, Texas.

In December of 1954 appellees purchased the property in question from appellant for the sum of $300,000, of which $25,000 was paid in cash and the balance was evidenced by appellees' promissory note in the sum of $275,000, bearing interest at 4% per annum, payable in installments of $1,500 per month and secured by a vendor's lien and deed of trust lien upon said property. At the time appellees filed their suit, the note was delinquent since interest and principal had not been paid beyond April 1, 1957. On July 12, 1958, appellant posted notices of sale.

The present suit was filed by appellees on July 10, 1958, two days before appellant posted its notices of sale under said deed of trust, seeking a rescission of the transaction and cancellation of the note and deed of trust, and, in the alternative, $140,000 damages, and also praying for a temporary injunction. In their first supplemental petition they prayed that the substitute trustee appointed by appellant be restrained from proceeding with the trustee's sale.

Appellees alleged that appellant through its vice president and manager of its Real Estate Department, one Mr. Richards, had made false representations which induced appellees to purchase the property in question. It was alleged, among other things, that Mr. Richards falsely and fraudulently represented to appellee, Mrs. LaGasse, that the property in question had cost the bank $300,000 and the bank would sell it for the exact amount it cost; that the income from the property would be enough to take care of the payments on the note; that the property had been appraised just before the bank bought it, and he had the appraisal showing it was worth $300,000 and that the bank would not have bought the property for that amount if it was not worth it; that it would not be necessary for her to have a title guarantee policy since the bank would guarantee the title; that the could sell the property at a profit; that it was not necessary for her to have an attorney to represent her; and that the buildings on the lots were air conditioned.

On the injunction hearing there was evidence that Mr. LaGasse was about 70 years of age and had no personal contract with the matter but relied upon his wife entirely and upon Richards' statements to her; that Mrs. LaGasse advised Richards that she had never been involved in a deal of that size, and that he told her that the bank paid $300,000 for the property and was selling it at cost. There was also evidence that Mrs. LaGasse asked Richards to recommend an attorney, and he replied that the bank had attorneys and that they would take care of everything; that he advised her when inquiry was made of him, that the bank would guarantee the title, and further that Mr. Richards said it was unnecessary for her to have the property surveyed. Mrs. LaGasse testified that she relied on the representations made by Mr. Richards and otherwise would not have purchased the property.

There was evidence that appellant entered into an agreement on February 18, 1954, to sell its building located at the corner of Main and Rusk, Houston, to South Coast Life Insurance Company for $4,000,000, of which $3,700,000 was paid in cash and $300,000 was represented by conveyance to appellant of the property in question. Mr. Stirton, a well qualified expert on values, testified that at the time of the sale from appellant to appellees the property had a market value of only $180,000. Mrs. LaGasse testified that she had tried to sell the property subsequent to December, 1954, and was never able to get an offer of more than $150,000 for it. There was evidence that the South Coast Life Insurance Company bought the property in 1953 for $157,500 and that Mr. Richards himself, in January of 1954, filed an appraisal showing the value of the property in question to be $226,102.

Appellant asserts in its first Point that the Court erred in granting a temporary injunction for the reason that appellees, by retention of the benefits of the transaction for more than 3 1/2 years, have waived whatever rights, if any, they ever had to rescission and are relegated to an action at law for damages.

It is undisputed that appellees purchased the property in 1954 and the present suit was not filed until July 10, 1958. Appellee, Mrs. LaGasse, testified, however, that she did not come to the conclusion that she had been defrauded until January of 1958. It is further undisputed that the appellees have enjoyed possession, use and occupancy of said premises and revenues therefrom, and that prior to filing suit they had made several efforts to either sell or otherwise deal with the property. Appellant relies on several cases which involve fraud, inducing the purchase of personal property, in which the courts have held that the plaintiff could not obtain rescission after having elected to use the property subsequent to learning of the fraud. Such cases have little bearing upon rescission involving the sale of real property. It also relies on the case of Winters v. Coward, 174 S.W. 940, decided by the San Antonio Court of Civil Appeals, in which case the Court held that the right of rescission can be lost by unreasonable delay in instituting suit, after the discovery of fraud, or it can be lost by exercising acts of ownership over the property, contracting with the vendor in regard to it, or in the use and occupancy of it, after the fraud is known to exist, and that the lapse of time which might destroy the right of rescission may be less than that fixed by statutes of limitation. In the Winters case the parties seeking rescission had for 3 years treated the land as their own, improving, using and enjoying it. The Court stated that the evidence of appellees totally failed to make out a case of rescission, but all of it tended to show that there was no intention or desire on the part of appellees to rescind.

Without undertaking to pass upon the merits of the present case, we think it is distinguishable from the Winters case in that only some six or seven months elapsed between the alleged discovery of the fraud and the filing of suit, and such delay was caused by appellees trying to work out some deal in consultation with appellant. Moreover, appellees' pleadings and evidence clearly show that there is an intention and desire on the part of appellees to rescind.

Appellees contend that their suit for rescission and cancellation is controlled by Article 5529, Revised Civil Statutes of Texas, which provides for a four year period of limitation, so that their action would not be barred by either laches or limitation until December 24, 1958. They also assert that it is a question for the jury to decide whether they were reasonably diligent in discovering the fraud suit whether or not their delay in filing suit was unreasonable, such issues involving questions of fact and not of law. Further, they say that their delay in bringing suit should be excused because of their numerous unsucessful attempts to adjust the differences between the parties and being about a sale of the property in accordance with the representations of appellant's officers.

In Culver v. Pickens, 142 Tex. 87, 176 S.W.2d 167, 170, opinion by Hickman, Commissioner, adopted by the Supreme Court, it is stated:

'It is the general rule that under our blended system, where both law and equity are administered by the same court, statutes of limitation apply to equitable actions the same as to legal actions. Turner v. Hunt, 131 Tex. 492, 116 S.W.2d 688, 117 A.L.R. 1066; Hendricks v. Martin, Tex.Civ.App., 267 S.W. 1047; Huggins v. Johnston, Tex.Civ.App., 3 S.W.2d 937; 27 Tex.Jur. p. 24, Sec. 7. However, it is conceivable that the circumstances of a given case might be so extraordinary that to deny a defendant the defense of laches would work a grave injustice. In that situation it has been held that such defense may not be precluded even though the statutory period has not run. City of Corpus Christi ex rel. Harris v. Flato, Tex.Civ.App., 83 S.W.2d 433, error dismissed; 27 Tex.Jur. p. 25, Sec. 7. Conceding that to be the correct rule, then the question before us is whether or not it affirmatively appears from the allegations or petitioners' second amended original petition that such extraordinary circumstances exist in this case, as a matter of law, as would bar the action notwithstanding the fact that the statutory period of limitation has not run.'

See also Hayward v. City of Corpus Christi, Tex.Civ.App., 195 S.W.2d 995, writ ref., n. r. e.; Ebert v. Smith, Tex.Civ.App., 146 S.W.2d 432, dism., judgment correct.

The general rule with reference to the time within which an action for cancellation or rescission should be filed is stated in 7 Tex.Jur., p. 952, Cancellation of Instruments, Sec. 41, as follows:

'Although a suit for cancellation is not strictly speaking within the provisions of the statute of limitations, it should be governed by the analogies of the law applicable to like cases. A suit to cancel an instrument, such as a deed, for fraud is controlled by the provisions of article 5529, Revised Statutes, 1925,...