Russell v. Lemons

• Decision Date: 22 September 1947
• Docket Number: No. 5807.,5807.
• Citation: Russell v. Lemons, 205 S.W.2d 629 (Tex. App. 1947)
• Parties: RUSSELL v. LEMONS.
• Court: Texas Court of Appeals

Page 629

205 S.W.2d 629

RUSSELL v. LEMONS.

No. 5807.

Court of Civil Appeals of Texas. Amarillo.

September 22, 1947.

Rehearing Denied November 10, 1947.

Appeal from District Court, Potter County; W. E. Gee, Judge.

Suit by M. W. Lemons against Walter G. Russell on a contract of indemnity. Judgment for plaintiff, and defendant appeals.

Affirmed.

Sanders, Scott, Saunders & Smith and W. H. Brian, all of Amarillo, for appellant.

Chas. H. Dean, of Plainview, for appellee.

STOKES, Justice.

On February 15, 1936, Lemons-Thompson Company, a corporation, procured from the Reconstruction Finance Corporation a loan in the sum of $22,500, giving as security therefor a deed of trust and chattel mortgage on certain real and personal property. As further security Walter G Russell, the appellant, and M. W. Lemons, the appellee, executed and delivered to the finance corporation their written guarantee of its payment. On July 1, 1937, Russell purchased the interests of the appellee and others in the Lemons-Thompson Company and as part of the consideration, he assumed the entire indebtedness due the finance corporation and agreed to protect the appellee from liability thereon. On March 15, 1939, a portion of the loan not having been paid, the balance due thereon was renewed and extended by a new note executed by the Lemons-Thompson Company in the sum of $16,793.95. Subsequent to these transactions the Lemons-Thompson Company changed its corporate name to Peerless Milling Company and, at some time prior to December 18, 1940, the exact date not being shown by the record, the Reconstruction Finance Corporation filed suit in the United States District Court at Dallas against the Peerless Milling Company and Russell and Lemons upon the renewal note and, on the date mentioned, appellant executed and delivered to appellee an indemnity contract in which it was recited that:

"In consideration of the agreement of M. W. Lemons not to file a cross-action against the said Walter G. Russell on the contract of the said Walter G. Russell to hold M. W. Lemons harmless on said note, I do hereby contract and agree that in consideration of the said M. W. Lemons in not filing a cross-action against me in the above described suit, I here and now guarantee to hold M. W. Lemons harmless and to protect him against whatever judgment, if any, may be entered against the said M. W. Lemons in said cause number 370."

The record further shows that on March 8, 1941, the Reconstruction Finance Corporation recovered judgment against Peerless Milling Company, Walter G. Russell and M. W. Lemons for the sum of $18,831.36, together with foreclosure of its deed of trust and mortgage liens. The properties covered by the liens were sold under execution on July 1, 1941, and after crediting the judgment with the proceeds of the sale, there was left as a deficiency judgment the sum of $7,831.36.

In compliance with the terms and provisions of the indemnity contract, appellee refrained from filing in the federal court suit a cross-action against appellant upon his assumption and agreement to pay the loan and the record indicates that no special effort was made by the finance corporation to collect the balance of the judgment until the early part of 1945, when Lemons was called upon by the agent of the finance corporation to pay it and threatened to levy an execution upon his stock of merchandise unless he did so. He thereupon took up negotiations with the finance corporation at Dallas, employing an attorney and paying his expenses to go to Dallas and negotiate some kind of settlement and compromise. The negotiations resulted in the agreement of the Reconstruction Finance Corporation to settle and release the deficiency judgment for $1,000, which was paid by appellee on February 9, 1945.

On March 20, 1945, appellee notified appellant of the settlement and called upon him to reimburse appellee the amount he had paid to the corporation, together with the attorney's fee of $200 and the expenses incurred of $85. Appellant did not respond to the request of appellee, and this suit was instituted by the latter on July 31, 1945. In his petition the appellee set up the facts substantially as detailed above and prayed for judgment against appellant in the sum of $1,285 upon his contract of indemnity. Appellant answered by a general denial, a plea of failure of consideration, and that appellee's cause of action was barred by the four year statute of limitation.

The case was submitted to the court without the intervention of a jury and on January 7, 1947, judgment was rendered by the court in favor of the appellee and against appellant for the amount sued for, to which appellant duly excepted and from which he has prosecuted this appeal. He contends the court erred in holding: first, that appellee's cause of action was not barred by the four year statute of limitation; secondly, in holding the indemnity contract was not invalid and void for lack of a consideration to support it; and thirdly, in rendering judgment against him for the attorney's fees and expenses incurred by appellee in negotiating a compromise of the judgment rendered in the federal court.

The principal question in the case is presented by appellant's first contention. He asserts that the indemnity contract was an indemnity against liability rather than against damages arising by virtue of the federal court judgment and that, therefore, appellee's cause of action accrued at the time his personal liability on the judgment became fixed and certain by the sale of the mortgaged property, which was July 8, 1941. The instant suit was instituted on July 31, 1945, which was a few days more than four years after the execution sale. If appellant is correct in his interpretation of the indemnity contract, his contention that the cause of action was barred by limitation must be sustained because, under Article 5527, R.C.S. 1925, all actions for debt, where the indebtedness is evidenced by or founded upon any contract in writing, must be commenced within four years after the cause of action shall have accrued and not afterwards. The obligation assumed by appellant in the indemnity contract was to hold appellee...