Citizens' State Bank v. Jeffries

• Decision Date: 29 December 1927
• Docket Number: (No. 3490.)
• Citation: 2 S.W.2d 317
• Parties: CITIZENS' STATE BANK OF LINDALE v. JEFFRIES et ux.
• Court: Texas Court of Appeals

2 S.W.2d 317

CITIZENS' STATE BANK OF LINDALE v. JEFFRIES et ux.

(No. 3490.)

Court of Civil Appeals of Texas. Texarkana.

December 29, 1927.

Rehearing Denied January 12, 1928.

Appeal from District Court, Smith County; J. R. Warren, Judge.

Trespass to try title by Earl Jeffries and wife against the Citizens' State Bank of Lindale. From a judgment for plaintiffs, defendant appeals. Affirmed.

The suit is by appellees, husband and wife, in trespass to try title to lots 1, 2, 3, 4, 5, and 6 in block 5 of Highland Park addition to the town of Lindale. In effect, the petition asserts title in the property as homestead, occupied and continuously used as such, claiming a certain deed to it to be purely a simulated transaction and void operating as a cloud on the title. The appellant answered by general denial, and specially pleaded estoppel by written and recorded homestead designation of lot 1 in block 17 in the town of Lindale, and by scheduling and claiming such lot as exempt as homestead in bankruptcy proceedings.

The facts, briefly stated, are that on February 1, 1923, C. P. O'Neal conveyed by deed to Earl and Lindsay Jeffries lots 1, 2, 3, 4, 5, and 6, in block 5. Lindsay Jeffries, as shown, had no real interest in the property. The lots were vacant and unimproved. Earl Jeffries, when he "acquired" the lots, immediately bought lumber and erected a "house" and "a double garage" thereon. He bought the lots with the view of homestead. Upon the completion of the house in 1923, Earl Jeffries and his wife at once moved into it, and from that date they continually used and occupied it as a homestead until August, 1926. In August, 1926, they, as testified, "temporarily" moved to Plainview. They did not abandon their home, and there is no claim that they did so. It appears that, for eight years previous to acquiring and moving into the home in block 5 in Highland Park addition, Earl Jeffries and his wife owned and resided on lot 1, block 17, in Lindale, using and occupying it as their homestead. When they moved away from the lot, they abandoned it as homestead, and never again used or occupied it as such. On January 21, 1924, Earl Jeffries and his wife executed an instrument in writing, duly acknowledged by them, reciting that they "do hereby set apart and designate as homestead to which the family is entitled under the Constitution and laws of this state, exempt from forced sale, lot No. one (1) in block No. seventeen (17), in the town of Lindale, Smith county, Texas."

There is evidence that the declaration of the homestead in this lot was only a pretense, and not with intention and purpose of acting on it. On the same date of this designation, January 21, 1924, D. B. Hambrick executed and delivered to Earl Jeffries three notes of $850 each, due one, two, and three years after date, respectively. These notes recited that they were given in part payment of the lots in suit. It is a disputed matter as to whether a deed was executed. Mr. Hambrick expressly stated:

"I didn't get a deed to it. I never saw a deed to it. There never was a deed executed conveying that property to me, as far as I know. I have never claimed it. I did not purchase that property from Mr. Jeffries."

The preponderance of the evidence goes to show that a deed was executed, but the delivery of it to Mr. Hambrick or the bank is not shown. It is not in the record or shown to have been registered. On the same date these notes were placed by Earl Jeffries with the appellant bank as collateral in part for a loan of $5,000. The purpose of having Mr. Hambrick execute these notes was, as claimed in appellee's evidence, "as accommodation" to enable Mr. Jeffries to obtain a loan from the bank. There is evidence that the bank knew of the purpose of Mr. Hambrick in signing the notes, and that the declaration of homestead was only a pretense, and not with the intention and purpose of acting on it. The bank denied this in toto. It was admitted on the trial that "there is no record of acknowledgment on the notary record," of "the designation of homestead," and that such designation was not recorded in the county clerk's office until March 23, 1925, the date of the bankruptcy proceedings herein set out.

It further appears that Earl Jeffries, at the time, was doing business in Lindale under the trade-name of Lindale Dry Goods Company. A fire destroyed the property, but the date is not shown. Subsequently, in March, 1925, he was adjudged bankrupt by the bankruptcy court for the eastern district of Texas. He scheduled as "real estate owned by him" "one town lot in the town of Lindale, Tex., being lot 1, block 17," and as "property claimed as exempt" "one town lot in town of Lindale, Tex., being lot 1, block 17." The lots in suit were not scheduled. He owned no other real estate. He owned no personal property subject to execution, and none was scheduled except as shown. In the statement of "creditors holding securities" appears:

"(1) Citizens' Guaranty State Bank, Lindale, Texas, $6,500.00, secured by vendor's liens signed by H. D. Johnson and D. B. Hambrick.

"(2) Mayfield Company $8,200.00, secured by mortgage on notes and accounts and fixtures."

There were no other debts except for taxes and clerk hire.

By order of the bankruptcy court, lot 1, block 17, was set aside as exempt "as used and occupied by bankrupt and his family as their homestead," and the personality was likewise exempted. A further order was made allowing the Citizens' Guaranty State Bank a credit on its claim "of $3,300 and the security delivered to it." Inferably a similar order was made respecting the Mayfield Company's claim and securities. The bankrupt was discharged.

On June 23, 1926, after discharge of the bankrupt, D. B. Hambrick and wife conveyed the property in suit to appellant bank, reciting in the deed that it was made in satisfaction and cancellation of the notes mentioned as having been by him executed to Earl Jeffries and deposited with the bank as collateral. After discharge in bankruptcy, and on October 15, 1925, Earl Jeffries, joined by his wife, conveyed to appellant bank lot 1, block 17, in consideration of a pre-existing debt for lumber sold. The deed has the recitation, "Same being used and enjoyed by Earl and Mary Jeffries as their homestead in Lindale." Mrs. Jeffries testified:

"I didn't see that recitation in the deed. I remember signing the deed. I can't say that I remember reading just what was in it. That was not my homestead on October 15, 1925. I was living at the other place."

Mrs. Jeffries further testified:

"Lots 1, 2, 3, 4, 5, and 6, block 5, Highland Park addition, is my homestead. We lived there continuously from 1923 to the time we went to Plainview. I didn't know of any one ever signing any notes purporting to fix a lien on my homestead. I never agreed for any one to fix a lien on my homestead. I never had any knowledge or knew that other property than my homestead was designated in the bankruptcy proceedings as homestead. I did not know that lot 1, block 17, had been designated as my homestead. Lot 1, block 17, was not my homestead. * * * I did not know anything about the bankruptcy proceedings. * * * I don't remember signing any deed to Mr. Hambrick deeding my home to him."

The president of the bank testified:

"When I took those notes I knew that Mr. and Mrs. Jeffries were living on that property (in suit), and had been living there for two or three years as their homestead. They were living there at the particular time I took this collateral, and continued to live there as long as they stayed in Lindale."

The jury answered the special issues submitted to the effect that (1) Earl Jeffries and wife did execute a deed to D. B. Hambrick to the property in suit, but that it was not intended as a conveyance of the property, and only "to fix a lien to secure a debt"; and (2) the bank knew "the deed was given to secure a debt," and Mrs. Jeffries knew that lot 1, block 17, had been set aside as homestead by the court of bankruptcy, and that her husband practiced no fraud on her in having it done. These findings all have support in the evidence, and are here adopted.

Judgment was entered in favor of the plaintiffs, awarding recovery of the property. The bank appeals, claiming that judgment should have been rendered in its favor on the verdict and the evidence.

J. A. Bulloch, of Tyler, and J. A. Mallory, of Lindale, for appellant.

Lasseter & Simpson, of Tyler, for appellees.

LEVY, J. (after stating the facts as above).

It is believed that the trial court correctly decided the case; and the judgment will be affirmed, in view of the established facts. The conveyance of the lots in suit to D. B. Hambrick was, as found by the jury, merely in order "to fix a lien to secure a debt"; that is, to secure a loan from appellant bank. It is clear that the appellees at the time had a right of homestead and exemption as such in the property. They were actually residing thereon, using and occupying it as homestead. A mortgage upon a homestead "to secure a debt" of the kind in evidence is absolutely void. Article 16, § 50, Const. And the appellant, who was the creditor, knew, as the jury found, that the transaction was purely a mortgage in nature. D. B. Hambrick, too, knew it. D. B. Hambrick and the president of the bank admitted that they knew that the property, at the time of the loan and before, was actually occupied, used, and claimed as homestead by appel...