Continental State Bank of Big Sandy v. Pepper

• Decision Date: 16 June 1937
• Docket Number: No. 6606.,6606.
• Parties: CONTINENTAL STATE BANK OF BIG SANDY et al. v. PEPPER et al.
• Court: Texas Supreme Court

Page 654

106 S.W.2d 654

CONTINENTAL STATE BANK OF BIG SANDY et al. v. PEPPER et al.

No. 6606.

Supreme Court of Texas.

June 16, 1937.

Error to Court of Civil Appeals of Sixth Supreme Judicial District.

Suit by the Continental State Bank of Big. Sandy, Texas, against D. G. Pepper, his wife, and J. T. Eggleston, in which U. S. Joins, the Amerada Petroleum Corporation, and others intervened. A judgment for plaintiff and intervener Petroleum Corporation was reversed as to defendant Eggleston and interveners Joins and others and judgment rendered in their favor by the Court of Civil Appeals , and plaintiff and another bring error.

Judgment of Court of Civil Appeals reversed, and judgment of district court affirmed.

T. B. Stinchcomb and Bramlette & Meredith, all of Longview, Cecil N. Cook, of Houston, Phillips, Trammell, Chizum, Price & Estes and James & Conner, all of Fort Worth, Victor C. Mieher, of Tulsa, Okl., and Black & Graves, of Austin, for plaintiffs in error.

Campbell, Leak, Taylor & Storey and W. Edward Lee, all of Longview, Wm. Hodges, of Texarkana, William G. Davisson, of Ardmore, Okl., and Ben H. Powell and Greenwood, Moody & Robertson, all of Austin, for defendants in error.

SMEDLEY, Commissioner.

Plaintiffs in error after trial before a jury in district court recovered judgment against defendants in error for the title and possession of a tract of 100 acres of land in Gregg county. The Court of Civil Appeals reversed the trial court's judgment in so far as it denied recovery to defendants in error Eggleston, Joins, Anderson, and Kaufman, and rendered judgment in their favor for the mineral interests claimed by them. 60 S.W.(2d) 1089.

Continental State Bank purchased the land at trustee's sale foreclosing a lien, and thereafter leased the land for oil, gas, and other minerals to Amerada Petroleum Corporation. Pepper and wife were the owners of the land encumbered by the deed of trust lien and other liens at the time of the trustee's sale. The other defendants in error have a mineral lease and conveyances of mineral interests from and under Pepper and wife executed after the trustee's sale. The controversy is determined in favor of plaintiffs in error by our conclusion, after careful consideration of the record and the many briefs, that the trustee's sale was valid.

The deed of trust was executed by W. W. Hamilton and wife to secure a promissory note in the sum of $1,400, dated February 22, 1919, and due March 1, 1926. Mrs. Hamilton, after her husband's death, conveyed the land to W. M. Harris, who assumed payment of the $1,400 note, and on February 10, 1923, Harris and wife conveyed the land, subject to the indebtedness evidenced by said note, to plaintiff in error Continental State Bank. W. L. Perdue, cashier of said bank, became the owner of the note and the lien securing it.

On May 15, 1926, the Continental State Bank sold and conveyed the land to defendant in error D. G. Pepper, the deed reciting Pepper's assumption of the $1,400, the payment of $205 in cash, and the execution by Pepper of his note to the bank for $1,640 payable in annual installments of $205 and secured by vendor's lien. The bank in connection with the sale of the land undertook to induce the Federal Land Bank to take up and extend the $1,400 note, entering into negotiations for that purpose before the deed was made to Pepper. The Land Bank, after considering Pepper's formal application for the loan to be secured by a first lien on the land, advised Pepper in writing on June 7, 1926, that it would make him a loan of $1,000 from which would be deducted a stock subscription of $50, and that it would be necessary for him, in order to avail himself of the loan, to pay the remainder of the existing indebtedness or arrange with the holder thereof to carry the balance as a second lien. Pepper on June 12, 1926, sent the Federal Land Bank his written acceptance of the loan as offered.

Pursuant to the foregoing negotiations Perdue, the owner of the $1,400 note, executed to the Federal Land Bank on June 17, 1926, a formal assignment of $950 of the note and a conveyance of the lien securing the indebtedness assigned, the instrument expressly providing that the note or part thereof assigned to the bank and the amortization note in the sum of $1,000 executed by Pepper should be and remain a first and superior lien on the land and that the remainder of the debt represented by the note held by the grantor should be and remain a second and inferior lien. Perdue retained the $1,400 note and it was credited, as the assignment provided, with the $950 paid him by the Federal Land Bank.

On the same date, June 17, 1926, Pepper and wife executed to the Federal Land Bank their promissory note in the principal sum of $1,000 payable on the amortization plan in sixty-nine semiannual payments and their deed of trust conveying the land in controversy to M. H. Gossett, trustee, to secure payment of the said note. The deed of trust recites that the note which it secures was executed in extension of $950 of the $1,400 note and that the balance of $50 is for money advanced by the bank to the mortgagors to pay for stock incidental to the loan, and that the mortgagors agree that the Federal Land Bank is subrogated to all the liens, superior title, etc., held, owned, or possessed by the owner or holder of the note, whether released or transferred.

There was no extension to any definite time of the $450 balance due on the $1,400 note held by Perdue. According to the jury's finding, Perdue agreed to carry this balance temporarily until it could be determined whether the Federal Land Bank would increase the loan, provided Pepper would pay interest on such balance, would move on the place, and pay all installments and interest on the $1,640 note that he had executed to the Continental State Bank. These conditions Pepper did not perform; and Perdue on January 10, 1928, requested F. W. Bartlett, who was named as trustee in the deed of trust executed by Hamilton, to advertise the land for sale under the terms of the deed of trust. Upon Bartlett's refusal to act and resignation, Perdue by written instrument executed March 9, 1928, appointed B. C. Todd substitute trustee to sell the property under the said deed of trust. Todd advertised the land for sale, sold it at public auction to Continental State Bank for $150 on April 3, 1928, and executed his deed conveying the land to the bank. The sale and the conveyance were expressly made subject to the outstanding first lien held by the Federal Land Bank. That bank was not notified of the sale and did not join either in the appointment of the substitute trustee or in the request to make the sale.

Defendants in error attack the trustee's sale on several grounds. They concede that the balance of $450 owned by Perdue after his assignment of $950 of the note to the Federal Land Bank was secured by lien upon the land, but contend that the lien securing such balance could not be foreclosed by trustee's sale; that it was a junior mortgage without power of sale. It is argued that the phrase contained in the assignment, "hereby transferring and assigning unto said bank all the right, title and interest held and owned by grantor in and to the indebtedness above described, together with all and singular all liens, superior title, rights, equities and interest in and to said land now owned or held by the grantor to secure the payment of said indebtedness," had the effect of divesting Perdue of every interest, right, and remedy that the Hamilton deed of trust gave him as the owner of the $1,400 note except the second and inferior lien that a subsequent paragraph of the assignment saved to him. We do not so construe the assignment. The words quoted immediately follow that part of the instrument which assigns to the Federal Land Bank $950 of the $1,400 note. The words "indebtedness above described" and "said indebtedness" have reference to the $950 assigned. The liens and other rights are transferred to the Federal Land Bank in so far as they secure and are incidental to that part of the note assigned; such construction being consistent with, if not required by, the rule that the lien is incidental to the debt and inseparable from it. Pope v. Beauchamp, 110 Tex. 271, 276, 219 S.W. 447; West v. First Baptist Church, 123 Tex. 388, 404, 71 S.W.(2d) 1090. The entire debt was not assigned by Perdue, nor was the entire lien assigned. The lien was incident to the entire debt and the power of sale was incident to the entire lien. It is not to be assumed or implied that the power of sale was destroyed by the assignment or that all of the power passed to the assignee. The assignment read as a whole clearly evidences the intention of the parties that the Land Bank should be the owner of $950 of the $1,400 note and that Perdue should remain the owner of $450 of the note, and that the indebtedness held by each of such owners should be secured by the Hamilton deed of trust, with the rights and remedies afforded by it, except that the lien in so far as it secured the $450 balance retained by Perdue should be second and inferior.

The further argument is made that neither the assignment nor any other instrument contemporaneously or subsequently executed contained an express grant of power to foreclose by trustee's sale the lien securing the $450 debt, and the rule against implied grants of this nature is invoked. There was no necessity for the creation of a new power of sale or for resort to implication. Power to sell was expressly given by the Hamilton deed of trust to the trustee or to a substitute trustee "upon the request of the holder or holders of the indebtedness secured hereby." Perdue was a holder of $450 of the debt secured by the Hamilton deed of trust. He was indeed the actual holder of the $1,400 note with a credit of $950 indorsed upon it. He invoked the power granted by that deed of trust and under it the substitute trustee...