McCrory v. Smeltzer

• Decision Date: 08 February 1939
• Docket Number: No. 2201-7248.,2201-7248.
• Citation: 124 S.W.2d 336
• Parties: McCRORY et al. v. SMELTZER et ux.
• Court: Texas Supreme Court

124 S.W.2d 336

McCRORY et al. v. SMELTZER et ux.

No. 2201-7248.

Commission of Appeals of Texas, Section A.

February 8, 1939.

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

Suit by George E. Smeltzer and wife against Lon C. McCrory and others to cancel two second lien notes together with deeds of trust on certain lands. Judgment for defendants was reversed by the Court of Civil Appeals, 101 S.W.2d 850, and judgment rendered for plaintiffs, and defendants bring error.

Judgments of the Court of Civil Appeals and of the District Court reversed and cause remanded with instructions.

B. N. Richards, of Dalhart, and Adkins, Pipkin, Madden & Keffer and W. L. Darrah, all of Amarillo, for plaintiffs in error.

Art Schlofman, of Dalhart, and Taylor, Muse & Taylor, of Wichita Falls, for defendants in error.

Carl Runge and J. V. Wheat, both of Houston, amici curiae.

GERMAN, Commissioner.

In the year 1929 Lon C. McCrory and W. W. Lathem conveyed certain lands in Dallam County, Texas, to George E. Smeltzer. As consideration for these lands, Smeltzer assumed payment of an indebtedness due the San Antonio Joint Stock Land Bank in the sum of $10,000, and also executed vendor's lien notes to McCrory and Lathem for balance of purchase price. Smeltzer paid only a small amount on the notes due McCrory and Lathem, and in 1933 the whole indebtedness became largely due and was pressing. Apparently at the suggestion of McCrory and Lathem, Smeltzer made application to the Federal Land Bank of Houston for a loan, the purpose being to consolidate all amounts due against the land into one loan. After considerable negotiations, the Federal Land Bank agreed to make a loan of $15,500. Of this amount a sum sufficient to discharge the debt due the San Antonio Joint Stock Land Bank was to be paid by the Federal Land Bank in cash. The amount necessary to discharge the second lien indebtedness owing McCrory and Lathem was to be paid in bonds of the Federal Farm Mortgage Corporation, of which the Federal Land Bank was agent. On the part of the Federal Land Bank and the Land Bank Commissioner there appears to be no doubt that they intended that the loan of $15,500 should discharge all preexisting liens against the land; that is, the liens held by the San Antonio Joint Stock Land Bank and by McCrory and Lathem. Certain judgment liens which had become attached to the land were to be adjusted otherwise, as will hereinafter appear.

In order to obtain the consent of McCrory and Lathem to accept bonds in settlement and satisfaction of their notes secured by vendor's lien on the land, the Federal Land Bank sent them blank forms to be executed evidencing their assent. They did not execute this formal assent but instead wrote the Bank the following letter:

"In connection with application No. 121315, Geo. E. Smeltzer, the undersigned are hereby agreeing to accept bonds of the Federal Farm Mortgage Corporation for such amount of money as would be available out of the proceeds of the $15,500.00 loan to be made by the Federal Land Bank and the Land Bank Commissioner, after paying the San Antonio Joint Stock Land Bank the amount of indebtedness due them; also all taxes against the land; also after deduction of the Stock in amount of five per cent in the local association, and other necessary expenditures in connection with the closing of the loans.

"The amounts due on judgments secured by J. B. Colt Company, also the Allen Tractor Company, now the Caterpillar Company, also the Phillips Petroleum Company, and another judgment for something less than one hundred dollars which I understand to be in favor of some paint company, all these have been arranged for by Mr. Smeltzer. The undersigned Lon C. McCrory and W. H. Lathem will advance the money for payments of these amounts at the time of closing, and will also pay for the abstract and recording and for the fire insurance, if the insurance has not already been paid.

"We are not signing the form which indicates the exact amount we will take in bonds in full satisfaction of the indebtedness due us since we do not know just how this will stand after the necessary expenditures shall have been made, but if you will send to the Secretary-Treasurer the necessary papers for the closing of the deal, giving to the undersigned all available bonds, the above adjustments on payments can be made here as indicated."

Before the loan could be consummated it became necessary for the judgment liens to be satisfied. McCrory and Lathem, by various efforts, were able to get the amount of these judgments reduced to the sum of $714, which amount they paid, and which appears to have been approximately one fourth of the amount of all such judgments.

At the time the loan was closed the Federal Land Bank sent to the local secretary a transfer and assignment to be executed by McCrory and Lathem of their second lien notes. This transfer and assignment was executed February 26, 1934. Among other things it recited that in consideration of the sum of $4,103.58 paid by the Land Bank Commissioner, acting in pursuance to Part 3 of the Emergency Farm Mortgage Act of 1933, 12 U.S.C.A. §§ 1016-1019, they (McCrory and Lathem) sold and conveyed the unpaid balance of $4,103.58, principal and interest owing on the series of vendor's lien notes previously executed by Smeltzer in part payment for the land mentioned. The instrument further transferred and assigned the lien and all right, title and interest which McCrory and Lathem had in and to said land by virtue of said notes. It contained the following paragraph: "Any and all portion of said above described notes which is not hereby assigned has been fully paid and the lien securing payment thereof is hereby released."

Upon execution and delivery of this transfer and assignment and the vendor's lien notes the secretary of the local association delivered to McCrory and Lathem bonds of the Federal Farm Mortgage Corporation in the sum of $3,800 with $18.18 accrued interest. While at the time the assignment was prepared it was thought the available bonds would amount to the sum of $4,103.58, yet when the transaction was actually closed the available bonds amounted to only $3,800. However, McCrory and Lathem accepted the bonds in accordance with the purport of the instrument which they had executed; that is, in full payment of the balance due on the vendor's lien notes and in full satisfaction of the lien previously held by them securing said notes.

On April 24, 1934, just prior to the closing of the loan, Smeltzer executed and delivered to McCrory and Lathem two notes, one in the sum of $1,327.29, with a credit of $431.12 endorsed thereon, and the other in the sum of $1,113.25, with a credit of $361.42 endorsed thereon, and Smeltzer executed deed of trust upon the land mentioned to secure payment of said notes. This deed of trust was not placed of record. The purported credits upon these notes arose in this way: Pending negotiations for the loan, and as a condition precedent to obtaining said loan, Smeltzer was required to file with the Federal Land Bank an affidavit that his total indebtedness did not exceed the sum of $17,000. In order to enable him to make this affidavit McCrory and Lathem agreed to place upon the vendor's lien notes the purported credits of $431.12 and $361.42, with an understanding that after the loan was obtained, and Smeltzer executed notes for the balance due them, these credits would be restored to the principal indebtedness. The sums of $1,327.29 and $1,113.25 represented by the notes of August 24, 1934, included the $714 which McCrory and Lathem had advanced to satisfy judgments, and also included the difference between the face value of the vendor's lien notes, after deducting a large part of the interest, and the amount of bonds, towit, $3,818.18, received by McCrory and Lathem from the Land Bank Commissioner. Sometime in January 1935 the two notes mentioned were renewed by Smeltzer and wife and new deed of trust upon the land was executed. This deed of trust was then placed of record. When these...