Press v. Davis

• Citation: 118 S.W.2d 982
• Decision Date: 03 June 1938
• Docket Number: No. 13723.,13723.
• Parties: PRESS et al. v. DAVIS et al.
• Court: Court of Appeals of Texas

Page 982

118 S.W.2d 982

PRESS et al. v. DAVIS et al.

No. 13723.

Court of Civil Appeals of Texas. Fort Worth.

June 3, 1938.

Rehearing Denied July 1, 1938.

Appeal from District Court, Wichita County; Ernest Robertson, Judge.

Action by Mary Press and her husband against W. F. Davis and another to recover damages for fraud and negligence in inducing the making of a loan, wherein defendants demurred. From a judgment, plaintiffs appeal.

Affirmed in part and reversed in part and rendered.

T. R. Boone and Kearby Peery, both of Wichita Falls, for appellants.

Ray Bland and Kilgore & Rogers, all of Wichita Falls, for appellee J. G. Quinn.

DUNKLIN, Chief Justice.

On June 2nd, 1930, Mary Foley, a feme sole, loaned to W. F. Davis the sum of $5,000, for which Davis executed to her two promissory notes, the first for the sum of $2,000, payable two years after date; the second for $3,000, due five years after date, each of said notes bearing interest at the rate of eight per cent per annum, payable semi-annually, and past due interest to draw interest at the rate of ten per cent per annum. To secure the payment of the notes, Davis executed a deed of trust on three parcels of property, as follows: First, a surface lease on the west 90 feet of lots 5 and 6, Block 33, Floral Heights Addition to Wichita Falls, Texas; second, surface lease on Lot 7, Block 190, O. T. of Wichita Falls, Texas; third, all of the W. F. Davis subdivision of the J. A. Scott Survey No. 17, Abstract 298, except lots 4 and 5 of that addition.

Each of said notes contained the stipulation that the failure to pay either of said notes or any interest thereon would give the right of the holder to mature all of said notes then unpaid and have a foreclosure of the deed of trust lien. Each of said notes further stipulated for ten per cent attorneys' fees if placed in the hands of an attorney for collection.

Davis paid the sum of $200 as interest on the two notes up to December 2nd, 1930, and $100, which was one-half the interest due June 2nd, 1931, and thereafter payments were made on interest as follows: August 26th, 1932, $12.50; September 10th, 1932, $20; September 21st, 1932, $73.27; October 10th, 1932, $15; October 15th, 1932, $12.50; November 23rd, 1932, $11.30.

Davis was engaged in the City of Wichita Falls in the wholesale distribution of gasoline, and on September 21st, 1931, he was sued by the State for delinquent taxes due as such wholesale distributor, arising from sales of gasoline, during the year 1930, the amount of taxes sued for being $5,276.61. On December 18th, 1931, judgment was rendered in favor of the State against the Detroit Fidelity & Surety Company, surety on Davis' bond, for $5,061.70, with judgment over against Davis in favor of the Surety Company for the same amount, with foreclosure of a tax lien against Davis on equipment and stock on hand, used by him in several of his places of business, in different counties of the State, including Wichita County. That foreclosure included the stock and equipment on hand at Wichita Falls, situated on two of the leases that were covered by the deed of trust given Miss Foley, thus leaving nothing but the naked leases themselves. Thereafter, Davis ceased to do any business on those leased premises, and on February 4th, 1934, he was adjudicated a bankrupt.

On February 6th, 1934, Miss Foley bought in the lease described in her deed of trust as the W. F. Davis subdivision, under foreclosure proceedings, instituted by her, for the sum of $1,500. That sum, plus all payments that had been made theretofore by W. F. Davis on the notes executed by him to Miss Foley, aggregated $2,500, leaving a balance unpaid of $2,500.

Mary Foley having married Marvin Press, she, joined with her said husband, instituted this suit on October 14th, 1935, against W. F. Davis and J. G. Quinn, in the District Court of Wichita County, to recover $2,500, the balance unpaid of her said debt, on allegations that she was induced to make the loan by false and fraudulent representations made by defendant, Quinn, that the property covered by the deed of trust given as security for the loan was worth at least $20,000, and that said notes would be amply secured thereby, and that as a part of said fraudulent scheme to induce Miss Foley to part with her money, which represented her earnings from personal labor, defendant, Quinn, represented to her that he would look after her rights therein and would have an attorney examine the title to the property, to make sure of the valid title to the property so offered as collateral security. According to further allegations, Quinn procured the execution of the notes and deed of trust by Davis and brought them to Miss Foley, who, at his request, delivered to him her check for the $5,000, payable to Quinn and Davis, and in furtherance of said fraudulent scheme.

Defendant Quinn, on or about July 1st, 1930, procured from Davis his assignment to Miss Foley, certificate No. 72 for 200 shares of Class A common stock in the Atlantic, Pacific & Gulf Oil Company, and at about the same date delivered same to Miss Foley, together with certain abstracts of title to the property covered by the deed of trust, as additional collateral security to the notes, but at that time Quinn knew that the stock was absolutely worthless, and also knew that the abstracts so delivered did not show good title in W. F. Davis to some of the property covered by the deed of trust.

According to further allegations in the petition, both Quinn and Davis knew at the time the loan was made that Davis' equity in the two leases first described above was worthless, and knew of the tax lien against the same in favor of the State, which resulted in a total loss through foreclosure suit by the State, as noted above, and knew that the third tract described above was not worth more than $1,500, and by reason of the fraud so practiced, plaintiff sustained a loss of $2,500 of the money so loaned, for which Quinn was liable as damages.

In the second count of the petition, it is alleged that J. G. Quinn, learning that Miss Foley had the $5,000 on hand, which she had accumulated from her earnings, solicited plaintiff to employ him to negotiate a loan thereof for her benefit, agreeing in that connection that he would look after her rights therein, and procure as collateral security property worth at least $20,000, and that, relying upon the confidence she had in Quinn, she agreed to that employment; that Quinn, having undertaken to perform that service, owed her the duty to exercise reasonable care to perform that trust; but that he was guilty of negligence, which was a proximate cause of the loss of at least $2,500 of the loan, in the following particulars: (a) In not making a proper investigation of the value of the property taken as security, to determine whether or not it was worth $20,000; (b) in not investigating the financial condition of the Atlantic, Pacific & Gulf Oil Company, to determine the value of the stock certificate for 200 shares, mentioned above; (c) in not, by proper inquiry, discovering that Davis only had a surface lease on the two pieces of property first described in the deed of trust on which he was paying a rental on one tract of $165 per month, and another tract of $200 per month, and not discovering that the same were practically worthless as security; (d) in not looking into the financial condition of W. F. Davis, who was using those two pieces of property as a filling station, to determine whether or not he had paid the gasoline tax due the State on that business; (e) in not looking after and making proper valuation of the property known as the W. F. Davis Subdivision, and discovering its true market value at that time.

Following both counts in the petition, plaintiffs made further allegations as follows:

"Plaintiffs further say that sometime about April, 1933, J. G. Quinn stated to the plaintiff, Mary Foley, in order to keep her from making a thorough investigation of the fact, that the State of Texas had already foreclosed, or was about to foreclose on the two tracts of land in question, a statement in substance as follows:

"`I am keeping a close touch with this matter (referring to the loan hereinabove referred to) and hope to get some money for you by time note is due in June. Conditions have been terrible. No one has any money.

"`I have also looked after renewal of all insurance policies for every one of your loans and I have renewal clauses for all that are due. Will give them to you in a few days. Just be patient about all matters. I am looking after your interest.'

"That this statement was made by the defendant, J. G. Quinn, when there was, at that time, some $300.00 past due interest, and that the first note was about to come due and at that time the State of Texas had obtained judgments against W. F. Davis and against the land owners of the two tracts of land involving the surface rights foreclosing the State of Texas' lien on all the rights of W. F. Davis' interest in and to the two tracts of land under which he only held a surface right lease, all of which facts were known to J. G. Quinn, and the said J. G. Quinn carrying out his method, plan and scheme, was attempting to keep the plaintiff quiet by telling her to please be patient, that he was looking after her interest, all of which was done for the purposes of tolling the statute of limitations and keeping the plaintiff ignorant of the true facts and circumstances existing concerning this loan; and that sometime later, in 1933 or 1934, the said defendants hypothecated as additional security to these loans another certificate of stock in what is known as the `Orient Gas & Oil Company' being certificate No. 4 for 120 shares, which at the time of their hypothecation to this plaintiff was absolutely worthless, and the said W. F. Davis knew that the same was worthless and of no value whatsoever, and the said J. G. Quinn knew that the...