Rabbe v. Federal Land Bank of Houston

• Decision Date: 16 April 1942
• Docket Number: No. 2412.,2412.
• Citation: 161 S.W.2d 1097
• Parties: RABBE et al. v. FEDERAL LAND BANK OF HOUSTON et al.
• Court: Texas Court of Appeals

Page 1097

161 S.W.2d 1097

RABBE et al. v. FEDERAL LAND BANK OF HOUSTON et al.

No. 2412.

Court of Civil Appeals of Texas. Waco.

April 16, 1942.

Rehearing Denied May 21, 1942.

Appeal from District Court, McLennan County; R. B. Stanford, Judge.

Suit by Ella Rabbe and others against the Federal Land Bank of Houston and others, to cancel a warranty deed and a trust deed, wherein the named defendant sought by cross action to foreclose the liens described in the plaintiffs' petition. From an adverse judgment, the plaintiffs appeal.

Judgment affirmed.

Fitzpatrick & Dunnam, of Waco, for appellants.

H. A. Berry, Carl Runge, Barnet B. Skelton, Wm. N. Stokes, Jr., all of Houston, and Scott & Wilson, W. E. Cureton, and John Sheehy, all of Waco, for appellees.

HALE, Justice.

Ella Rabbe and others instituted this suit against the Federal Land Bank of Houston, hereafter referred to as the Bank, and others, seeking to cancel a warranty deed dated July 28, 1925, from Wm. Rabbe and wife, Ottilie Rabbe, to E. L. Rabbe, and a deed of trust dated September 8, 1925, from E. L. Rabbe to the Bank. As grounds for the relief sought, plaintiffs alleged in substance that they were the children and sole surviving heirs at law of Wm. Rabbe and wife, both of whom died intestate; that 200 acres of the land described in said deeds constituted the homestead of their parents at the time when the deeds were executed; that such instruments and the indebtedness evidenced thereby were void because they were the result of a fictitious and pretended sale of the homestead for the purpose of placing a lien thereon in violation of the Constitution and laws of this state; and that the Bank knew, or in the exercise of due diligence should have known, that the purported sale was a simulated transaction entered into for the sole purpose of placing a lien upon said homestead.

The Bank answered with a general denial, a plea of estoppel and sought by cross-action to foreclose the liens described in the petition of plaintiffs. As the basis for its plea of estoppel, the Bank alleged facts showing that Wm. Rabbe and wife and E. L. Rabbe had each represented to it prior to the time when it consummated the loan and acquired the liens sued upon that the conveyance evidenced by the deed dated July 28, 1925, was a bona fide, valid, unconditional sale without restrictions; that Wm. Rabbe and wife had parted with all right, title or interest in and to said land, had vacated and abandoned the premises and were making no claim thereto. The Bank further alleged that it believed such representations to be true; that if such were not true, it had no knowledge or notice of the falsity thereof; that so believing said representations it relied upon the same and upon the recorded deed and but for which it would not have made said loan; that by reason thereof the plaintiffs, who are claiming under Wm. Rabbe and wife as their heirs at law, are estopped to deny the validity of the liens declared upon.

The case was tried before a jury, but upon the conclusion of the testimony the court peremptorily instructed a verdict against plaintiffs and in favor of the Bank on its cross-action. Judgment was thereafter rendered in accordance with the instructed verdict and plaintiffs have appealed. By appropriate assignments, appellants contend that the court erred in instructing the verdict against them because they say the pleadings and evidence tendered issues of fact for the jury as to the validity of the deed from Wm. Rabbe and wife to E. L. Rabbe and the knowledge or notice of the Bank with respect thereto. On the other hand, the Bank contends that its plea of estoppel was established conclusively as a matter of law, thereby rendering all other issues in the case immaterial.

Wm. Rabbe and wife owned 240 acres of land in McLennan County. On December 11, 1922, they borrowed $2,000 from the Bank, securing the payment thereof by a deed of trust on 40 acres of said land, in which they designated the remaining 200 acres as their homestead. On July 28, 1925, they executed and acknowledged a warranty deed, absolute in form, by the terms of which they conveyed the 240 acres to E. L. Rabbe for a recited consideration of $31,135 as follows: $4,500 cash, the assumption of the $2,000 indebtedness to the Bank and the balance of $24,635 evidenced by two vendor's lien notes, the first for $8,500 due September 1, 1925, the second for $16,135 due on or before January 1, 1941. E. L. Rabbe immediately submitted through the McGregor National Farm Loan Association, hereafter referred to as the Association, his sworn application to the Bank for a loan of $8,500 with which to take up the first vendor's lien note referred to in the deed aforesaid. In the application he stated that he was a bachelor twenty-one years of age, the son of Wm. Rabbe; that he had just purchased from his father the 240 acres and certain livestock and machinery; that the value of the land and permanent improvements offered as security for the loan was $28,975 and the value of his livestock and machinery was $2,350, thus making a total of $31,135 as the value of the property so acquired; that he and his sister were the only persons then living on said land.

Attached to the application of E. L. Rabbe was a report of the Loan Committee of the Association dated August 12th, signed by each member thereof and by its investigator, which recited that in their judgment the value of the land and permanent improvements was $19,550, the applicant was a person of good character and habits, prompt in meeting obligations and by virtue of actual farming experience, training and temperament was qualified and capable of making a success in the operation of said farm, and it was therein recommended that the loan applied for be granted for an amount not to exceed $7,775 on the land and $800 on the improvements. On August 18th the Bank notified the Secretary of the Association of its tentative approval of the application to the extent of $7,700, subject to a valid lien, reserving the right, however, to decline the completion of the same at its option.

On August 24th the Secretary of the Association wrote the Bank, enclosing written acceptance of the loan for the sum of $7,700 and copy of the deed from Wm. Rabbe and wife to applicant, calling attention to the fact that the abstract covering the title was already in the possession of the Bank by reason of the prior $2,000 loan and advising that the original deed from Wm. Rabbe and wife to the applicant would be shown in final supplemental abstract. One of the Bank's attorneys wrote the Secretary of the Association under date of August 26th advising that the Bank would require an affidavit signed by the applicant and his father to the effect that the $4,500 cash recited in said deed was actually paid, that Wm. Rabbe and family had vacated the premises, the affidavit to show when they had vacated the same, where they now reside, how far they so reside from said land, with whom the applicant is living and with whom he was living on July 28, 1925, such affidavit to be full, positive and specific.

An affidavit was subscribed and sworn to jointly by Wm. and E. L. Rabbe on August 28th, and a separate affidavit was subscribed and sworn to by Ottilie Rabbe on September 5th, each containing the substance of the information requested in said letter of August 26th, and each was forwarded to the Bank at Houston. Under date of September 8th the general counsel of the Bank forwarded to the Secretary the form of note and deed of trust to be executed by E. L. Rabbe, a transfer of the vendor's lien note to be executed by Wm. Rabbe, an affidavit to be executed by E. L., Wm. and Ottilie Rabbe, and requested the supplemental abstract to "show applicant's deed and where and when recorded." On September 9th the requested instruments were duly executed and returned to the Bank, together...