Hester v. Kemper Military School

• Decision Date: 22 March 1940
• Docket Number: No. 14061.,14061.
• Citation: 138 S.W.2d 833
• Parties: HESTER et ux. v. KEMPER MILITARY SCHOOL.
• Court: Texas Court of Appeals

Page 833

138 S.W.2d 833

HESTER et ux. v. KEMPER MILITARY SCHOOL.

No. 14061.

Court of Civil Appeals of Texas. Fort Worth.

March 22, 1940.

Error from District Court, Witchita County; Irvin J. Vogel, Judge.

Foreclosure proceeding by the Kemper Military School, a corporation, against B. M. Hester and wife. To review a judgment for the plaintiff, defendants bring error.

Affirmed.

J. R. Wilson, of Wichita Falls, for plaintiffs in error.

Ewing Clagett, of Wichita Falls, for defendant in error.

DUNKLIN, Chief Justice.

B. M. Hester and wife, Mrs. Mollie M. Hester, while residing in Wichita Falls, Texas, put their son, B. M. Hester, Jr., in the Kemper Military School, in Booneville, Missouri. At the close of the school year of 1931-1932, which was the boy's second year in the school, there was a balance owing to the school of $339.18.

On August 28th, 1932, B. M. Hester addressed a letter to Major A. B. Bates, vice president and superintendent of the school, at Booneville, telling him that he was very anxious for his son to finish another term in the school, and that he would make a sacrifice rather than have him miss another year. In that letter, he said that he was trading off a piece of residence property that cost him $9,125, and was taking, in consideration therefor, two notes, each in the sum of $1,250, due in one and two years after date, bearing interest at the rate of 10 per cent per annum; that the notes were well secured, and the title to the property was good; that the notes would stand the closest inspection, both as to value of the property and to validity of the title; and offering to sell the notes, in order to realize the money necessary to continue the boy in school. Major Bates then wrote Hester, calling his attention to the balance then due of $339.18, for the previous year, and that a charge for another year for the schooling would be $950, making a total of $1,289.18. He then offered to accept Hester's note for $1,289.18, with the two $1,250 vendor's lien notes mentioned in Hester's letter as collateral security, provided those collateral notes were secured by first mortgage on the property mentioned in Hester's letter.

That proposal was accepted by B. M. Hester, and pursuant thereto, he, joined by his wife, Mrs. Mollie M. Hester, executed to E. Cardwell, a resident citizen of Wichita Falls, a deed of conveyance, of date September 1st, 1932, with general warranty of title, to Lot 10, Block 78, Floral Heights Addition to the City of Wichita Falls. The consideration recited in that deed was $10 and other good and valuable considerations paid by E. Cardwell, and the execution and delivery by E. Cardwell of his two promissory vendor's lien notes, of even date with the deed, each in the sum of $1,250, payable to B. M. Hester, or order, at Wichita Falls; note No. 1 being payable one year after date, and note No. 2 payable two years after date, each note bearing 10 per cent interest from date, and containing the customary 10 per cent attorney's fee collection clause. That deed was duly acknowledged by the grantors, in statutory form. At the same time, and as a part of the same transaction, E. Cardwell executed and delivered to B. M. Hester the two vendor's lien notes recited in the deed, and also a deed of trust securing their payment. That deed was filed for record in the Deed Records of Wichita County, on October 11th, 1934.

B. M. Hester then executed his promissory note, of date September 6th, 1932, payable to the order of the Kemper Military School, Booneville, Missouri, for the sum of $1,289.18, payable June 1st, 1933, with interest from date at the rate of eight per cent per annum, reciting the hypothecation of Cardwell's two vendor's lien notes as collateral security therefor. That note, together with Cardwell's two vendor's lien notes, and the deed of trust executed to secure the same, were all mailed to Major Bates on September 9th, 1932, and on September 12th, Major Bates, in a letter to Hester, acknowledged receipt of those instruments, saying that they were received in payment of the balance due of $339.18, for the preceding school year, and a charge of $950 for the next succeeding school year.

The boy then finished his third year in the school.

Nothing was paid on either the principal or the collateral notes.

On September 1st, 1934, E. Cardwell executed his note, payable to B. M. Hester or order, in the sum of $3,000, reciting that it was in renewal of his two original vendor's lien notes for $1,250 each, and secured by a vendor's lien reserved in said deed to him by B. M. Hester and wife, and that the $3,000 renewal note was to cover the principal and interest then owing on those two notes. That note was due and payable September 1st, 1935; and on the back thereof was this endorsement:

"Vendor's Lien Note. For Value Received I hereby sell, transfer and assign to Kemper Military School as Collateral the within note, together with the vendor's lien and deed of trust lien on the property securing same, and as endorser, I guarantee the payment of the within note at maturity, or on demand at any time after maturity, waiving demand, protest and notice of non-payment thereof.

                               "(Signed) B. M. Hester."
                

On the same date E. Cardwell executed a renewal of the former deed of trust theretofore given to secure the two original vendor's lien notes. Those renewals were then delivered to B. M. Hester, who, on September 6th, 1934, executed a renewal of his original note, in the sum of $1,503.66, payable September 6th, 1935, and reciting the hypothecation of the renewal note and deed of trust of E. Cardwell, as collateral security therefor. All those renewals were then mailed to Major Bates.

All of the negotiations heretofore related were by correspondence between B. M. Hester, at his home in Wichita Falls, Texas, and Major Bates, in Booneville, Missouri; the latter having never inspected the property covered by the lien and having no representative in Wichita Falls to act for the school in those negotiations.

Nothing having been paid on any of the renewal notes, the Kemper Military School, a foreign corporation, instituted this suit, on February 17th, 1937, against B. M. Hester and wife, Mollie M. Hester, and E. Cardwell, for personal judgment against B. M. Hester and E. Cardwell, for the amount due on those renewal notes, according to their legal tenor and effect, and against all of the defendants for foreclosure of the vendor's lien and deed of trust lien on the above described property.

Neither B. M. Hester nor E. Cardwell filed any answer to plaintiff's petition, but Mrs. Mollie M. Hester filed her answer, alleging that the property covered by the deed to E. Cardwell has been the homestead and used and occupied as such by her and her husband, B. M. Hester, for approximately 17 years; that said deed was intended as a mortgage, and so understood between all the parties thereto, and that she had never received any consideration therefor, and that said deed was therefore void. And further, that she had never represented to any one that she was making an absolute deed. The answer concluded with a prayer that the purported liens on her said homestead be removed as a cloud upon her title.

In reply thereto, plaintiff filed a first supplemental petition, reciting the negotiations noted above, which culminated in the execution and delivery to it of the original notes and deeds of trust above referred to, and the renewal thereof, all of which were accepted by plaintiff in good faith and without knowledge or notice of the facts relied on by Mrs. Hester to defeat the lien; that plaintiff is an innocent holder of said note and lien securing it, and became the legal and equitable owner and holder thereof for value, without notice of any infirmity in said transaction. It was further alleged that all the defendants knew at the time of said transaction that plaintiff was an out of the state concern and would rely upon the representations of Hester, which induced the acceptance of said instrument; and that if, as alleged by Mrs. Hester, the property was, at the time, the homestead of herself and family and the deed intended merely as a mortgage, then all of said transactions were false and fraudulently made for the purpose of defrauding the plaintiff out of the said sum of $1,289.18, and defendant Mollie M. Hester is estopped from now asserting that the deed was intended only as a mortgage. Plaintiff further alleged that the renewal notes were executed and delivered to plaintiff after the renewal deed of trust had been duly filed in the Deed of Trust Records of Wichita County, Texas.

The trial of the case was to a jury, and upon a hearing it was agreed between the parties that the property in question was used and occupied as and was the homestead of B. M. Hester and wife at the time of their execution of the deed to Cardwell, and that said property is still used and occupied by them as their homestead.

The undisputed testimony of Major A. B. Bates, as shown in his depositions, was that he was vice president and treasurer of the Kemper Military School and, in behalf of that school, conducted all of the negotiations recited above, culminating in the acceptance of the notes; that he, in good faith, believed and relied upon the truth of all the representations made by B. M. Hester, and by E. Cardwell in the instruments they executed; that the collateral notes, both original and renewal, were secured by valid liens upon the property, and he was induced thereby to extend credit for the balance owing by B. M. Hester for the boy's second school year, and to give him the schooling for the third year; that he had accepted the collateral notes before their maturity, without any notice of any vice or infirmity therein. Witness further stated that since the maturity of the original notes, he had written B. M. Hester some eighteen letters, and until Mrs. Hester filed her answer to the suit, on ...