Ingham v. Harrison, A-2323.
| Decision Date | 07 December 1949 |
| Docket Number | No. A-2323.,A-2323. |
| Citation | 224 S.W.2d 1019 |
| Parties | INGHAM et al. v. HARRISON. |
| Court | Texas Supreme Court |
Elmer Ware Stahl, A. R. Sohn, San Antonio, for petitioners.
Ben F. Foster, R. G. Harris, San Antonio, for respondent.
This rather complicated dispute between various parties regarding a builder's lien note and contract comes to us only on the subordinate issues of attorney's fees, interest and court costs allowable against the note makers and property owners, Mesdames Ingham and Chaney, who are the petitioners here. They originally sued the contractor and payee of the note, Van Smith, in damages for failure to complete the dwelling in question according to the contract. Soon thereafter, Smith's assignee, B. S. Harrison, who is respondent here, sued them and sundry alleged material lien claimants seeking: (a) recovery against petitioners for the sum of $9,000 shown on the note as unpaid, with interest according to the terms of the note at 10% per annum from its stipulated maturity date of June 1, 1946, and stipulated attorney's fees of 10%; (b) similar recovery for so-called "extras" and "changes" allegedly chargeable against petitioners over and above the contract price and aggregating about $3,200; (c) foreclosure of the contract lien with priority over the other lien claimants. The two suits were consolidated, and petitioners, Mesdames Ingham and Chaney filed extended pleadings denying respondent Harrison's status as a bona fide purchaser of the note, contesting all except a small fraction of the claim for "extras", asserting a right to damages (as in their original suit) of some $5,000 and set-offs of several thousand dollars more on account of materials furnished to the work by various parties and either paid for by petitioners for account of the contractor, Smith, or not paid for at all; offering to pay Harrison whatever balance might be finally adjudged as due him; contesting his right to attorney's fees or to interest that might accrue prior to final judgment, etc.
In the course of an extended trial there was proof that more or less from the beginning it was understood between the contractor Smith and petitioners, though not stated in the contract documents, that the balance of $9,000 shown on the note as unpaid was to be procured for the benefit of both parties through a loan against the premises and that Smith took an active part in procuring commitments and making arrangements for the loan. In this connection the original arrangement between the parties was a contract for a total consideration of $14,989.44 on which petitioners were to make cash payments as the work progressed, but in April 1946, after some three months of work, this arrangement was changed — apparently to facilitate the loan — by substituting the note (back-dated to January 14, 1946), building contract and a deed of trust in the face amount of $14,989.44, the note showing a credit of $5,989.44 theretofore paid in cash by petitioners, and thus leaving the note balance of $9,000 sued for by Harrison. The contract provided that the dwelling should be completed "in all respects" and delivered to petitioners free of all liens by June 1, 1946, which was also the maturity date stipulated in the note. There was evidence to support a finding that Smith did not substantially complete the dwelling by the agreed date, and evidently neither he nor his assignee Harrison made any effort to collect the note until some eight months later in February 1947. By the 12th of that month a loan from a life insurance company had been arranged for in the sum of $9,000, the loan to be closed through the Texas Title Guaranty Company and to be insured by the latter as a valid first lien on the premises. By that time the facts had come to light that the abovementioned materialmen were unpaid and had filed lien claims of several thousand dollars, while there was a serious question as to whether the house had been properly constructed. There had evidently been considerable discussions between the title company, the petitioners and Smith and Harrison's attorneys with reference to these matters and the intended loan on the premises. On February 8, 1947, Harrison's attorneys demanded that petitioners appear at the title company office to close the loan on February 12th under penalty of foreclosure and being charged with attorney's fees on the note. Petitioners appeared, but the loan papers were not in proper form and had to be redrawn, as was done during the ensuing few days. On February 21st thereafter, before petitioners returned to sign the new loan papers, Smith filed a notice of mechanic's lien with the county clerk for his claimed "extras" in the amount of $3,211.52 and formally assigned such claim to respondent Harrison. On February 24th, when petitioners came back to the office of the title company, the latter had on hand the redrafted loan papers and a check of the lender payable to itself and petitioners for $9,000. As above stated, it was contemplated by all parties that the loan was to replace the obligation of petitioners to Harrison, and in the normal course of events petitioners would have executed the loan documents and, together with the title company, would have endorsed the lender's $9,000 check over to Harrison. The title company, however, in its capacities of insurer of the proposed new lien and agent of the proposed lender, did not intend to close the loan without a previous release of all lien rights of Harrison and the other lien claimants. There was apparently conflicting evidence as to whether Harrison consented that the claims of the unpaid materialmen might be paid from the proceeds of the check as an offset against his rights as note holder — but he refused to forego the claim for "extras" or to allow petitioners an offset of about $1,000 which they had paid to materialmen. Petitioners, like the title company, were unwilling to close in view of such refusal, but were willing to close without receiving any offset on account of their claim of several thousand dollars damages for breach of the construction contract. Under these circumstances petitioners, with Harrison's knowledge, endorsed the lender's check and left it with the title company on February 24th (where it remained for several months) but, for the reasons indicated, the loan was never consummated and this suit followed within about thirty days after February 24th.
The trial court, without independent fact findings, rendered a judgment largely favorable to petitioners, refusing respondent Harrison the status of a bona fide holder of the note,...
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