Callaway v. Chrestman

• Decision Date: 28 January 1925
• Docket Number: (No. 6812.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 269 S.W. 908
• Parties: CALLAWAY v. CHRESTMAN.
• Court: Texas Court of Appeals

269 S.W. 908

CALLAWAY v. CHRESTMAN.

(No. 6812.)^*

Court of Civil Appeals of Texas. Austin.

January 28, 1925.

Rehearing Denied March 11, 1925.

Appeal from District Court, Comanche County; J. R. McClellan, Judge.

Suit by Oscar Callaway against Joe Chrestman, in which the defendant filed a cross-action. From a judgment against plaintiff, and in favor of defendant in cross-action, plaintiff appeals. Reversed and remanded.

Callaway & Callaway, of Comanche, for appellant.

G. E. Smith and J. P. Kearby, both of Comanche, for appellee.

McCLENDON, C. J.

On October 1, 1921, Oscar Callaway and wife conveyed to Joe Chrestman by general warranty deed a tract of land in Comanche county, containing 457½ acres. The consideration was $11,457, of which $4,057 was recited to be cash and the balance represented by four vendor's lien notes, payable to the order of Oscar Callaway, in amounts and due dates as follows: $1,000, May 1, 1922; $3,400, January 1, 1923; $2,000, January 1, 1924; and $1,000, January 1, 1925 — each note giving the holder the right to declare it due upon default in payment of the interest or principal of any of the notes. At the time the deed was executed there were several undischarged liens against portions of the land conveyed, among them a deed of trust lien for $10,000, in favor of the Federal Land Bank of Houston, which covered 640 acres of land, of which 137½ acres were embraced in the deed from Callaway and wife to Chrestman. With the exception of this deed of trust lien, all of these liens were discharged by Callaway prior to the controversy involved in this litigation.

On October 4, 1922, Callaway, appellant herein, brought this suit against Chrestman, appellee herein, upon the four notes described in the deed, and to foreclose the vendor's lien securing them. On October 9, 1922, Chrestman filed an answer and cross-action, in which he prayed for cancellation of the deed and notes, and recovery of the amount paid upon the land, alleging that he had been defrauded by Callaway in the sale, in that Callaway had represented to him that the land was free from lien. In the alternative, he alleged that Callaway had fraudulently concealed from him the existence of this trust deed.

On November 8, 1922, Callaway filed a supplemental petition, in reply to this cross-action, in which he specially excepted to the prayer for rescission, on the ground that there was no allegation of injury which had accrued to Chrestman by reason of the alleged fraudulent representations. Upon the merits of the cross-action he interposed a general denial and specially pleaded that he had informed Chrestman at the time of the sale of the existence of the deed of trust, and had agreed to remove it as to the 137½ acres whenever Chrestman wanted to sell or incumber the land. He further pleaded that about the 14th of July, 1922, Chrestman began making arrangements to secure a loan on the entire 457½ acres, and took up with Callaway the matter of obtaining such loan from the Federal Land Bank; and that in these negotiations Callaway told Chrestman to make application for the loan, have the land appraised, send in the abstracts, and he (plaintiff) would secure release of the 137½ acres so that Chrestman might get full benefit of the loan on the land; that Chrestman agreed to this; that Callaway secured an agreement with the Land Bank in accordance with this understanding, but Chrestman never sent in the abstracts; and that Callaway procured this release and had it placed of record. There were further pleadings to the effect that the land had been materially damaged while held by defendant, and that rescission would therefore be inequitable.

Chrestman by supplemental answer filed November 8, 1922, replied to this petition by general denial and special pleas. He alleged that he was not apprised of the existence of the lien until about August 1, 1922; that he then promptly notified `Callaway thereof and demanded that he clear the title of the lien; that negotiations were thereupon entered into between Callaway and Chrestman for removal of the incumbrance with the distinct understanding that Chrestman was not and would not waive any of his rights to rescind the contract; that these negotiations were continued until about September 15, 1922, at which time Callaway having failed to remove the incumbrance, Chrestman notified him that negotiations were off. It was further alleged that if Callaway had procured the release as alleged by him, it was after suit was filed and after Chrestman's right of rescission had been exercised. By way of injury he alleged that but for the existence of this lien he could and would have procured a loan on the land and liquidated the indebtedness sued upon. It was further pleaded that it would be inequitable to permit Callaway to declare the unmatured notes due, since he was in default in not removing the incumbrance.

We have not attempted to set out in detail the pleadings, but merely give the substance of the allegations in so far as essential to a clear presentation of the controlling questions upon this appeal. The pleadings were sufficient, we think, to properly present and raise these questions.

Upon the trial Callaway offered in evidence a release of the 137½ acres from the Federal Bank trust deed, executed on October 17, 1922, and recorded in Comanche county deed records. Chrestman objected to the admission of this deed, the ground of objection not being stated in the record; and this objection was sustained. Exception to this ruling properly preserved by bill of exceptions was made by Callaway, and the ruling assigned as error.

The case was tried to a jury upon special issues. The answers of the jury find, in substance, the following:

(1) That plaintiff did not represent to defendant that he had good title to the land, and that it was clear and free from lien, and that there was nothing against it.

(4) That plaintiff fraudulently concealed from defendant the fact that there was a lien against part of the land.

(5) That after defendant discovered the existence of the Federal Bank lien, he did not in any way or by any means agree with plaintiff to waive the fraud and give plaintiff a reasonable time to remove the lien.

(8) That the land had not been so used by defendant that it was then in such condition as to render rescission inequitable.

(9) That the reasonable rental value of the land during defendant's occupancy was $457.50.

(10) That plaintiff did not explain to defendant when he sold him the land that it was part of a larger tract incumbered by a $10,000 lien held by the Federal Bank.

(11) That defendant did not know of the $10,000 lien when he made application to the Federal Bank for a loan.

(12) That defendant would not have purchased the land had he known of the existence of the Federal Bank loan.

(13) That the land was not in as good condition on October 7, 1922, as when plaintiff went into possession.

(14) That it lacked $100 in value of being in such condition.

Upon these answers judgment was awarded denying to Callaway recovery on the notes; canceling the deed and notes; revesting Callaway with title to the land; awarding Chrestman the amount he had paid thereon, less the credits found by the jury; and foreclosing a lien on the land in favor of Chrestman for the net amount of his recovery against Callaway. The appeal is from this judgment.

We have reached the conclusion that the trial court committed reversible error in not admitting in evidence the release from the Land Bank lien. We think the evidence conclusively shows that after defendant discovered the existence of the Land Bank lien he entered info negotiations with the plaintiff for its removal, and thereby, in effect, agreed that plaintiff should have a reasonable time in which to remove the lien; and it was in any event a question of fact for the jury whether the plaintiff had complied with this agreement. In the second place, we think it was essential to defendant's right of rescission, if in fact the lien was removed before the trial of the case, that the defendant should show detriment or damage which he suffered by reason of the existence of the lien, and that the evidence negatives any showing of such injury or detriment.

Defendant's cross-action seeking a rescission of the sale was an action of deceit, and to maintain it a showing of damage was essential. This is a well-established doctrine in this state, and applies where rescission of the contract is sought as well a where the relief asked is damage occasioned by the fraud.

In the recent case of Russell v. Transportation Co., 113 Tex. 441, 251 S. W. 1034, 258 S. W. 462, the Supreme Court, in an opinion by Mr. Justice Pierson, restated the law upon this subject. A very full review of the authorities, including eminent text-writers, is presented in the opinion, and the rule reannounced that injury is essential to support the action whether the relief prayed be damages or rescission. The case under consideration was one in which the remedy of rescission was sought.

It is the contention of the defendant, and this was evidently the theory upon which the trial court proceeded, that the mere existence of the lien upon the land constituted a detriment which would entitle the defendant upon a showing of fraudulent concealment of its existence to a rescission, and that whenever he exercised that power his rights became fixed, and a subsequent removal of the lien could not affect them.

On the contrary, it is contended by appellant...