Sherk v. First Nat. Bank

• Decision Date: 20 November 1918
• Docket Number: (No. 2560.)
• Citation: 206 S.W. 507
• Parties: SHERK v. FIRST NAT. BANK OF HEREFORD et al.
• Court: Texas Supreme Court

206 S.W. 507

SHERK v. FIRST NAT. BANK OF HEREFORD et al.

(No. 2560.)

Commission of Appeals of Texas, Section B.

November 20, 1918.

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

Action by A. L. Sherk against the First National Bank of Hereford and J. L. Fuqua. From a judgment of the Court of Civil Appeals (152 S. W. 832), affirming judgment that plaintiff take nothing, and decreeing foreclosure prayed by the defendant bank, plaintiff brings error. Reversed in part, and in part affirmed, as recommended by the Commission of Appeals.

G. W. Barcus, of Waco, for plaintiff in error.

Carl Gilliland, of Hereford, for defendant in error.

Statement of the Case.

MONTGOMERY, P. J.

A. L. Sherk, plaintiff in error, sued the First National Bank of Hereford and J. L. Fuqua.

The plaintiff's petition was in two counts; the first in ordinary form of trespass to try title, to recover lots 13, 14, and 15, in block 10, of the town of Hereford. In the second count the plaintiff, Sherk, alleged substantially the following facts:

That in the year 1908 plaintiff and one Stenek, entered into a partnership agreement under the firm name of Sherk & Stenek for the purpose of conducting a livery, feed, and sales stable; it being agreed that each was to furnish one-half the necessary capital. That they purchased the lots in controversy and barn situated thereon for use in said business (the lots were conveyed to A. L. Sherk and James Stenek). That the lots were purchased from J. F. Easterwood; the price being $6,000, of which $1,500 was paid in cash, by plaintiff, Sherk, and a vendor's lien note being dated September 9, 1908, due six months after date, and plaintiff alleged that he thereafter paid the note in full out of his separate means. That the firm borrowed from the First State Bank & Trust Company of Hereford $7,575.80, for which they executed their joint notes, which note matured September 15, 1909. That plaintiff paid, prior to bringing the suit, $2,500 on the note out of his own funds, and has agreed to pay the balance, and that Stenek had paid nothing, and had been released from liability thereon. That plaintiff placed on said lots improvements of the value of $1,000, and paid therefor out of his own funds. That on March 21, 1910, in consideration of plaintiffs having paid the several sums of money above alleged, for and on account of said partnership, James Stenek, his partner, conveyed to plaintiff by warranty deed all said Stenek's interest in the property in controversy, and that the consideration was the reasonable value of such interest.

Plaintiff further alleged that prior to said conveyance, and on February 19, 1910, Stenek executed a deed of trust on said lots to J. L. Fuqua as trustee to secure the First National Bank of Hereford in payment of certain notes executed by said Stenek and by said Stenek and N. E. Rood, and that said secured debt was the individual debt of said Stenek, and that neither plaintiff nor Sherk & Stenek were in any way interested therein; that when the trust deed was given the firm of Sherk & Stenek was insolvent.

The plaintiff prayed that he be quieted in the title to said property as against said deed of trust, and prayed in the alternative "that he have judgment fixing a partner's lien in his favor on Stenek's interest in said property, and declaring his a prior lien to any of the defendants to secure him in the payment of the sum of $7,287.90, together with all interest due thereon, to any that the defendants may have, and for a foreclosure of said lien," and for general relief.

The defendant bank and Fuqua, after a general denial, alleged title in themselves to the lots, and prayed for judgment for title and possession.

The defendants further alleged that Stenek was the owner on February 2, 1910, of an undivided one-half interest in the lots in controversy, and that at said time he executed the deed of trust on said interest, and also on survey 248, block No. 6, Castro county, Tex., to secure the payment of certain notes (fully described) executed by said Stenek and one Rood, and asked for a foreclosure.

The case was tried by a jury and the court gave a peremptory charge to find for the defendants a foreclosure of their deed of trust lien for the amount claimed, $4,739.75.

Judgment was accordingly entered that plaintiff take nothing and that defendant bank have its foreclosure, etc.

The Court of Civil Appeals affirmed this judgment, 152 S. W. 832. The facts are set out in the original opinion and the opinion on rehearing of the Court of Civil Appeals. From these and from the record we find that all the material facts alleged in the petition were either admitted or proven without contradiction, except the allegation that the $4,500 note, executed to Easterwood as part of the purchase money for the lots, was paid by plaintiff. The facts disclose that Stenek, acting for the firm, borrowed the amount of this note and interest from a bank, giving the firm's note, and with the money thus borrowed paid the Easterwood note, and that the plaintiff afterwards, out of his own funds, paid the note given the bank. The evidence further showed that a part of the $2,500 paid on the note to the First State Bank & Trust Company was paid out of partnership funds.

The Court of Civil Appeals finds that the firm of Sherk & Stenek, at the time of the execution of the deed of trust and at the time of the trial, was insolvent. The lots in controversy seem to have been treated by the Court of Civil Appeals as partnership property, and we think the evidence conclusively shows that fact. The undisputed evidence shows that Sherk did not in fact know of the deed of trust to Fuqua as trustee to secure the debt of the First National Bank until after he obtained the deed from Stenek, although the deed of trust was filed for record and duly recorded soon after its execution. The evidence showed the execution and delivery of the deed of trust to Fuqua as trustee to secure the bank in the payment of notes due it by Stenek and Rood as alleged by it.

Opinion.

To recapitulate briefly the essential facts: Sherk and Stenek were partners. Sherk advanced to the firm practically all the capital employed, although the partnership contract contemplated they should furnish the capital in equal portions. The partnership was indebted to various creditors, as well as to Sherk for advancements made to the partnership.

After the partnership became insolvent, Stenek, one of the partners, without the knowledge or consent of Sherk, mortgaged one-half interest in the real estate of the partnership to secure the payment of his individuals debts, and the same was duly recorded. About one month after the execution and recording of said mortgage, Stenek conveyed to his partner, Sherk, who had no actual knowledge of said mortgage, all his interest in the partnership property, and in addition included in the deed a section of land which Stenek owned individually; said land, however, being heavily incumbered. This conveyance recited as a consideration that certain advancements had been made by Sherk to the firm by furnishing funds and the payment of partnership debts, and further that Sherk agreed to pay certain partnership debts still unpaid, and further that Sherk assumed...