Rachal v. Smith

• Decision Date: 10 April 1900
• Docket Number: 873.
• Parties: RACHAL, et al v. SMITH et al.
• Court: U.S. Court of Appeals — Fifth Circuit

101 F. 159

RACHAL, et al v. SMITH et al.

No. 873.

United States Court of Appeals, Fifth Circuit.

April 10, 1900

On December 19, 1898, Lula M. Rachal, joined by her husband, E R. Rachal, J. W. Baylor and his wife, Emma F. Baylor, and J D. Willis, filed their ancillary bill against the appellees Francis Smith and S. G. Borden, praying for an injunction to restrain the appellee Smith from executing a judgment at law for lands rendered on December 7, 1898, in the case of Francis Smith against E. R. Rachal et al. On January 28 1899, the plaintiffs, by leave of the court, filed an amended bill in the cause. The plaintiffs obtained from the court on December 21, 1898, a temporary restraining order pending the application for an injunction. On February 13, 1899, the plaintiffs obtained another order, continuing in force the former order until the final determination of the application for the writ of injunction. The subject of the controversy is a tract of land. Francis Smith obtained a judgment at law for the land, and this suit in equity is to obtain relief against the judgment at law. Darius C. Rachal owned in fee simple 16,000 acres of land in San Patricio county, Tex. He owed Shattuck & Hoffman, as trustees of the British & American Mortgage Company, Limited, $20,000, borrowed money, evidenced by a note and secured by a mortgage on the land. The mortgage bore date March 27, 1885. He also owed John Redmond a note for $10,000, borrowed money, secured likewise by a mortgage on the land. On April 12, 1888, Darius C. Rachal sold and conveyed to P. A. Hunter, his son-in-law, and F. S. Rachal, his son, the 16,000 acres, except about 200 acres. The consideration recited in the deed was $48,865.20. The grantees assumed, as a part of the consideration, the payment of the two mortgages on the land. The plaintiffs claimed and alleged in their bill that in the summer or fall of the year 1888 the plaintiff E. R. Rachal, acting for and on behalf of his wife, the plaintiff Lula M. Rachal, made from Darius C. Rachal, F. S. Rachal, and P. A. Hunter a parol purchase for his wife of 1,626 acres (described in the bill) of the aforesaid 16,000-acre tract of land; that this tract was sold to Lula M. Rachal as her separate property and estate, and to her sole and separate use and benefit, and with the distinct understanding that the deed to her should so recite and be made; that the consideration for the 1,616-acre tract was $4 an acre, which was actually paid at the time. A deed was not made at the time, because a prior survey was necessary, and there was no surveyor in the county, and the survey was not made until in the spring of 1889. In 1888 Lula M. Rachal took possession of the 1,626 acres so purchased by her, and began to improve them. She built a house on the land. In 1889 she put a wire fence around the land, excepting about 126 acres, which she sold to Baylor.

The original and amended bills contain the following averments: 'That the plaintiff Baylor and wife purchased in January, 1889, from Lula M. Rachal 126 acres of the 1,626-acre tract, and immediately took possession of them and inclosed them with a wire fence, and made other improvements; and on April 9, 1895, the defendant S. G. Borden purchased of Lula M. Rachal and her husband, by warranty deed, 350 acres of the 1,626-acre tract, for a consideration of $1,800, which was paid in full; and the plaintiff J. D. Willis purchased from D. C. Rachal in the fall of 1888 50 acres of his 16,000-acre tract at $14 an acre, which he paid for, improved, and occupied with his family, but did not obtain his deed until March 26, 1890. That at the time of Lula M. Rachal's purchase it was distinctly understood that her grantors should remove all liens and incumbrances from the tract by the payment of the consideration which P. A. Hunter and F. S. Rachal had agreed to pay for the 16,000-acre tract, and the same agreement was made with J. D. Willis at the time of his purchase, and that the whole of the consideration was fully paid off and extinguished on January 15, 1890. That on January 15, 1890, F. S. Rachal, P. A. Hunter, and Darius C. Rachal and wife executed a deed of trust on the whole of the 16,000-acre tract of land to a trustee to secure the Alliance Trust Company in a loan of $34,000; and on May 27, 1892, the same parties gave to a trustee a deed of trust on the 16,000-acre tract, except the tract owned by Lula M. Rachal, J. W. Baylor, and J. D. Willis, to secure the defendant Francis Smith in a loan of $9,000. The deeds of trust contained powers of sale, and on October 15, 1897, the trustees sold the whole of the 16,000-acre tract under the power in the deed of trust, when the defendant Smith purchased it for $10,000, and received a deed from the trustee and brought his action at law to recover possession and obtained judgment; and S. G. Borden obtained judgment upon his plea in reconvention against E. R. Rachal upon his warranty for $1,800, and Borden refused to join in this bill. That defendant Francis Smith, while acting as agent for the Alliance Trust Company in negotiating the loan of $34,000, and Thompson, the trustee in the deed of trust, did in the latter part of December, 1889, visit and inspect the 16,000-acre tract of land with the view of making the loan, and, while on the premises inspecting them, saw Lula M. Rachal living on and in possession of her 1,500-acre tract, and saw all the improvements made on it by her, including the fence inclosing it, and was notified that she owned it as her separate property, and was a married woman and head of a family, and wife of E. R. Rachal, and in like manner saw the possession and improvements of Baylor and wife and Willis, and before the execution of the two deeds of trust had full notice of the rights of the plaintiffs. That the tracts of land owned by the plaintiffs and S. G. Borden were included in the deed of trust of January, 1890, by mistake; that it was agreed between Darius C. Rachal, acting for himself, F. S. Rachal, and P. A. Hunter, and defendant Smith, as agent of the Alliance Trust Company, that the lands claimed by the plaintiffs and the defendant Borden should not be included in the deed of trust of January 15, 1890, and that they have a complete equitable title thereto, superior to the title of Smith. That pursuant to the agreement of the parties the Shattuck & Hoffman and Redmond notes were, by the procurement of Smith, as the agent of the Alliance Trust Company, paid off, and marked 'Paid' on their face, and canceled and extinguished, and the deeds of trust by which they were secured were, at the request of Smith, released in the manner required by law. That there never was an assignment of the Shattuck & Hoffman and Redmond notes to the Alliance Trust Company or to Smith, or any foreclosure of the deeds of trust securing them or any rights asserted under them, or any claim that they were valid, subsisting debts, until since filing this suit, but that the Alliance Trust Company and Smith have treated the notes as extinguished. That the lands embraced in the deed of trust of January 15, 1890, excluding the tracts claimed by the plaintiffs and the defendant Borden, were then of the value of $90,000; that the plaintiffs have, in good faith, with the understanding that all liens would be removed therefrom, made permanent and valuable improvements on the lands, and have built thereon their homes and reared their families; and Smith, with a knowledge of their rights, is seeking to wrongfully acquire both their lands and the improvements; and that, if the preliminary writ of injunction is not granted, they will be immediately turned out of possession, and the injury to them will be immediate, certain, great, and irreparable. That neither the plaintiffs nor the defendant Borden was a party to any of the deeds of trust on said land mentioned in the pleadings, nor did they, or either of them, derive any benefit from the loans; nor was either of them in any way connected with the sale under the powers of the deeds of trust at which Smith purchased, nor the deeds made thereunder to Smith, but they are a cloud upon their title.'

The issues will be shown by the following condensed statement of the answer filed by defendants, Francis Smith and S. G Borden. The answer alleges: 'That on the 4th of December, 1889, the two mortgage debts-- one for $20,000, and the other for $10,000-- because due; and in order to get money at a cheaper rate of interest, and to extend the above loans, Darius C. Rachal, F. S. Rachal, and P. A. Hunter made an application in writing to Francis Smith & Co., agents of the Alliance Trust Company, to borrow $34,000. In the application they stated that the money was wanted for the purpose of paying the above mortgages, and the Alliance Trust Company was authorized to pay them out of the proceeds of the new loan. In the application they represented that the 16,351 acres of land were owned by the applicants, and were rented to and occupied by various tenants. That on the 15th of January, 1890, the Alliance Trust Company, relying upon the representation of the applicants, believing it to be true, loaned them the sum of $34,000, for the security of which they executed a deed of trust upon the whole property; and the deed of trust was duly recorded on the 15th of January, 1890. In making the mortgages it was agreed and understood that they were made for the purpose of taking up and extending the two previous loans, whereby the Alliance Trust Company should be subrogated to the liens of the two previous deeds of trust. That after the deed of trust was recorded the Alliance Trust Company paid to the British & American Mortgage Company, Limited, and to John Redmond, the principal and interest due upon their several mortgage; and...