Mason v. Mid-Continent Supply Co.

• Decision Date: 17 January 1964
• Docket Number: No. 16474,MID-CONTINENT,16474
• Citation: 374 S.W.2d 922
• Parties: James L. MASON, Jr., Appellant, v.SUPPLY COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 922

374 S.W.2d 922

James L. MASON, Jr., Appellant, v. MID-CONTINENT SUPPLY COMPANY, Appellee.

No. 16474.

Court of Civil Appeals of Texas, Fort Worth.

Jan. 17, 1964.

Rehearing Denied Feb. 14, 1964.

Harrison, McKnight & Dean, and Bill M. McKnight, Dallas, for appellant.

Cantey, Hanger, Gooch, Cravens & Scarborough, and Sloan B. Blair, Fort Worth, for appellee.

LANGDON, Justice.

This is a summary judgment case. The appellee Mid-Continent Supply Company sued appellant James L. Mason, Jr., to recover an unpaid balance of $98,000.00 alleged to be past due and owing on a series of 36 promissory notes which originally totalled the sum of $108,000.00, and for foreclosure of its chattel mortgage lien on two drilling rigs which secured the payment of such notes. Appellee's ownership of the notes and chattel mortgage, the execution thereof by appellant, and the balance due according to the face thereof, are all matters which were uncontroverted in the pleadings and appellee was prima facie entitled to judgment unless material fact issues were raised in appellant's pleadings as to any valid defenses. Appellee's motion for summary judgment was granted. Appellant contends the trial court erred because the state of the record on November 1, 1962, clearly showed that genuine issues of fact existed. His second and third points are based on the court's refusal to consider supplemental affidavits filed late and in refusing to consider appellant's first amended original answer filed after the hearing on the motion for summary judgment. We affirm.

A chronological history of events leading up to the suit will more clearly define the issues.

Appellant, a graduate geologist who had been in the oil business for years with experience in drilling, decided to go into the drilling business with Mr. Julian Howell. After looking at several rigs and having no particular type rig in mind he came in contact with a representative of the appellee who showed him rigs available for sale. Appellant decided to buy two rigs. He came to appellee's office in Fort Worth to sign necessary papers covering his purchase. A letter agreement was prepared reciting that appellant agreed to purchase both rigs for $90,000.00. He was to pay $9,000.00 down. The balance of $81,000.00 was scheduled into 32 notes, each in the sum of $2,500.00 and one in the sum of $1,000.00. The agreement provides that the rigs were sold on an 'as is, where is' basis, with no warranty either express or implied as to the operation or condition of the rigs. The agreement further recited that, 'It is agreed there are no representations, agreements or conditions other than specifically stated herein.' Appellant signed the agreement at about the time he took possession of the rigs. Appellant accepted, agreed to and signed the agreement on August 28, 1961. He made no suggestions as to any additions, deletions or revisions thereto although the agreement provides that the instrument might be changed by agreement of the parties to it. Further the record reflects that Julian Howell made an independent examination of the rigs before appellant took possession of them or signed the letter agreement and certainly long before the notes were signed. The notes are dated September 1, 1961. They were actually signed, 'quite some time later,' according to appellant. It is uncontroverted that they were actually signed on October 24, 1961, the date of the acknowledgment on the chattel mortgage.

In considering the issues involved in this case it is important to keep in mind that it is not based upon the letter agreement but is a suit to collect the unpaid balance due and payable on the notes and foreclosure of the chattel mortgage lien. Thus the alleged fraud and misrepresentation concerning the condition of the rigs and the amount of money required to put them in good operative condition which appellant claims to have relied upon in signing the agreement would not effect the validity of the notes or the mortgage lien. They were signed at a later date and at a time when appellant according to his own admissions was fully aware of the facts and circumstances he alleges as fraud and misrepresentation inducing him to sign the letter agreement. Associated Employers Lloyds v. Howard, Sup.Ct., 156 Tex. 277, 294 S.W.2d 706 and authorities cited therein.

There is no valid or controlling evidence or pleadings concerning any fraud inducing the appellant to sign the notes and the mortgage lien. The instruments were clear, plain and unambiguous. The notes were complete and regular upon their face and unconditional. By signing them he became liable for the payment thereof and in effect confirmed the letter agreement clearly indicating that he placed no reliance upon the alleged fraud and misrepresentations which he claimed to have relied upon in executing such agreement. There is no valid evidence indicating that appellant relied upon anything that any of appellee's representatives may have told him when he signed the notes and mortgage lien in October, 1961.

The appellant in substance contends that it was represented to him that $1,500.00 would be the maximum expenditure necessary to correct any defects in the rigs. In the face of this contention he signed notes totaling $108,000.00, some $27,000.00 more than the $81,000.00 representing the balance of the purchase price. The explanation for this contradiction is explained by appellant's own deposition. 'Thus it appears affirmatively that his claim stated on paper became completely disintegrated when exposed to the light of his own deposition.' Bennett v. Flanigon, 7 Cir., 220 F.2d. 799. In his deposition he stated that the additional $27,000.00 was for normal costs of repairs on the two rigs which were unknowns and that when he signed the notes he knew that the $1,500.00 figure was not right and that the cost of repairs would be at least $27,000.00. He stated that at the time he signed the notes he was not relying on any $1,500.00 representation as to what it would take to put the rigs in operating condition. He added, 'It was obvious at that point that it would cost more. That is true.'; and 'I don't know what I was relying on at that point.'

It is fundamental that before fraud can be set up, either as the basis of a claim or defense, it must appear that the claimed representations were relied upon.

As stated in 25 Tex.Jur.2d, Fraud and Deceit, Sec. 27, p. 651, et seq.: 'It is a general rule that where false and fraudulent representations are made concerning the subject matter of a contract, but the person to whom they are made, before closing the contract or before the time for payment arrives, inspects and examines the subject of the contract or conducts an investigation into the matter sufficient to inform him of the truth, it is presumed that he places his reliance on the information acquired by the investigation and on his own judgment based on the facts, rather than on the representations.' Here it is conclusively established by appellant's own admissions that by the time he signed the notes his operator, Mr. Howell, had thoroughly inspected the rigs and that he (appellant) had already run up a $27,000.00 bill for repairs. The same text continues as follows at page 653: 'Inasmuch as a representation that is known to be false cannot deceive, redress will not be awarded to a person who had knowledge of the falsity of the representations when he entered into the transaction. It is imperative that the party claiming to have been defrauded believed the false representations when he acted. * * * Similarly, there can be no legal defense based on fraud if the facts concerning the fraud become fully known before the contract is executed. A person is precluded from recovery on account of his knowledge of the fraud only where the contract was wholly executory at the time of discovery, or, in other words, where he did not change his position for the worse.'

In the case at bar, appellant has expressly admitted that he was no longer relying upon the alleged misrepresentations at the time he signed the notes sued upon, and that he then had as much knowledge as did appellee about what it was going to cost to put the rigs in the condition desired. Such admissions are binding upon him. He cannot avoid summary judgment by broad conclusions of law set forth in his pleadings and affidavits.

The appellant admittedly owed certain money to appellee on open account in addition to the sum owed on the notes. He contends by pleading and affidavit that a representative of appellee fraudulently represented to him, (1) that appellee would not accept payments upon the notes unless he also made payment upon the open account to be credited as appelled might see fit and that said representative refused a tender of a $12,000.00 payment on the notes and that because of such refusal was estopped to accelerate its notes; (2) that appellee's agent told him that if he would apply the $12,000.00 payment to the open account he need not worry about the notes. That further action on the notes would be suspended and (3) that in reliance upon this he changed his position to his detriment by allowing the $12,000.00 payment to be applied to the open account.

Once again in exposing appellant's claims to the light of his deposition they disintegrate. In his deposition the appellant in testimony covering some six pages admits that he not only knew but that he agreed when he tendered the $12,000.00 that it would be applied to the open account, subject to later determination as to which portion of the account it would be applied. At another point in his deposition the appellant admitted that appellee's agent never told him that he would not have to pay the notes.

In our opinion the statement that he would not have to worry about the notes, even if true, would not constitute a defense because there is no contention that appellant did not owe the money on open account and the appellee...