Thigpen v. Locke

• Decision Date: 05 December 1962
• Docket Number: No. A-8908,A-8908
• Citation: 363 S.W.2d 247
• Parties: J. W. THIGPEN, Petitioner, v. Robert C. LOCKE et ux., Respondents.
• Court: Texas Supreme Court

Page 247

363 S.W.2d 247

J. W. THIGPEN, Petitioner, v. Robert C. LOCKE et ux., Respondents.

No. A-8908.

Supreme Court of Texas.

Dec. 5, 1962.

Rehearing Denied Jan. 16, 1963.

Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, for petitioner.

Dougal C. Pope, Houston, for respondents.

HAMILTON, Justice.

This is a suit to set aside two deeds executed by Mr. and Mrs. Robert C. Locke (plaintiffs) by which they conveyed title to a Houston lot and grocery store to J. W. Thigpen (defendant). The trial court instructed verdict for Thigpen, and the Court of Civil Appeals has reversed and remanded. 353 S.W.2d 249. Thigpen is petitioner here.

Respondents' theory is that the first deed is void because intended as a mortgage on business homestead property. Since petitioner does not rely on this deed, it need not be considered.

As to the second deed, dated January 2, 1951, respondents also pleaded homestead protection, but this apparently has been waived as it was not argued in the briefs. The other basis of respondents' prayer for cancellation of the second deed is equitable in nature, asserting three separate grounds for the imposition of a constructive trust.

On January 2, 1951, the Lockes executed three instruments: (a) a warranty deed conveying fee simple title to the lot and store to Thigpen; (b) a five-year lease of the premises back to the Lockes; and (c) a bill of sale to Thigpen covering all the fixtures in the grocery store. All of these instruments are acknowledged and otherwise formally in order.

Respondents' version of the facts is as follows:

Since 1947 the Lockes had been in the grocery business, having paid about $2,700 for their lot and building. In 1947 the Lockes met Thigpen, the 'trust officer' of a local bank. According to Locke's testimony, Thigpen helped them to get a loan and after that they became close friends. They saw each other frequently, and Thigpen bought meat from the Lockes' grocery store. Thigpen helped them to get other loans and personally guaranteed one of them.

In 1949 Thigpen himself loaned respondents $5,000 and took a deed (the first deed) to the lot and grocery store as a mortgage. During 1949 Thigpen suggested that the Lockes form a corporation for the purpose of operating the grocery business, and the Lockes agreed. Respondents did not hire their own attorney but left the details of incorporation entirely up to Thigpen, who selected an attorney, signed as incorporator, and advanced $1,000 as capital stock, which was repaid. The lot and store were never conveyed to the corporation, but the Lockes endorsed all their shares of stock back to Thigpen as security for the $5,000 debt.

After the corporation was formed Thigpen's son, and later Thigpen himself, kept the books for the business. Thigpen was a director, vice president, and owner of two shares; Mr. Locke was president and, with his wife, owner of the 58 other shares. Locke testified that Thigpen often acted as business advisor to him in the management of the grocery business.

After the incorporation Thigpen continued to loan the respondents or the corporation money until their indebtedness reached almost $10,000. At this point-around November or December, 1950-Locke spoke to Thigpen about taking bankruptcy, but Thigpen urged him not to do so because he (Thigpen) would lose all of his investment. Locke testified that he then told Thigpen: 'I want to pay everybody, I don't want to lose my property, and if you and I can work out something so you can get your money, I will be glad to do it.' On January 2, 1951, Thigpen presented the instruments in question to respondents for their signatures. The Lockes testified that they did not read the instruments before signing.

According to Locke, he understood their transaction was that respondents would lease the property to Thigpen. Thigpen would sublet to the corporation, collect the rent, pay the expenses on the property, and apply whatever was left over from the rent payments to the indebtedness of the Lockes until the $10,000 was paid off. Respondents testified that Thigpen told them that it would be paid off in five or six years, after which time they could reclaim their property.

The instruments reflect an absolute sale of the land and fixtures and a lease back to the Lockes under which they were to pay rent for the continued use of the property as a grocery business. Thigpen assumed a vendor's lien of about $3,500 on the property.

The only evidence other than Locke's testimony that respondents thought they were signing a lease as lessors rather than a deed is found on the face of the printed lease agreement: the Lockes signed that instrument on the line marked 'Lessor'. The body of the lease agreement identifies Thigpen as lessor and respondents as lessees.

Immediately after signing the papers on January 2, 1951, the Lockes moved to another town and began selling chickens, leaving Locke's brother in charge of the store.

A few months after the execution of the deed, lease, and bill of sale the Lockes executed another instrument which Mr. Locke did not remember reading; this was a bill of sale on the grocery store stock transferred to Thigpen in satisfaction of arrearage in rent payments to Thigpen under the lease of January 2, 1951. This bill of sale describes the property and expressly refers back to the deed and lease of January 2, 1951.

The Court of Civil Appeals has held that it was error for the trial court to instruct verdict because (a) whether or not there was a confidential relationship is a jury question; (b) there was some evidence from which a jury could infer that there was a confidential relationship; and (c) respondents' suit was not as a matter of law barred by the statute of limitations, but that there was a fact issue raised as to the reasonableness of respondents' five or six years' delay in attempting to get back their property. Petitioner Thigpen's application for complaining of these three holdings.

As stated above, respondents have pleaded and argued on appeal three separate grounds for the imposition of a constructive trust; (I) Thigpen was guilty of actual fraud; (II) this was not an absolute conveyance but a mortgage transaction; and (III) there was a relationship of trust and confidence and breach of fiduciary duties constituting constructive fraud and giving rise to a constructive trust.

I.

Under the first ground respondents seek to invoke the rule that equity will impose a constructive trust to prevent one who obtains property by fraudulent means from being unjustly enriched. Scott on Trusts, Vol. I, § 44.1, p. 251. The respondents' pleadings allege, and their reply brief argues, two inconsistent factual theories of actual fraud: (A) that this was an agreement whereby respondents voluntarily deeded the property to Thigpen in return for his oral promise to reconvey when the $10,000 debt had been paid off, which promise Thigpen did not intend to honor at the time he made it; and (B) that Thigpen led respondents to believe that the instrument was not a deed but a lease and that they signed believing it to be a lease.

The first theory of fraud alleged is based on the rule of Turner v. Biscoe, 141 Tex. 197, 171 S.W.2d 118, that when a grantor voluntarily conveys land to a grantee upon the false oral promise that the grantee will reconvey, such is actual fraud justifying the imposition of constructive trust. The requisite fraudulent misrepresentation is as to the grantee's state of mind. Respondents contend that they have met their burden of offering some evidence on both elements of this theory of fraud and that it was therefore error for the trial court to sustain the instructed verdict against them. We do not agree that there is any evidence in the record of the first theory of actual fraud. Instead, we think that on the trial respondents elected between the two theories and offered testimony only on the theory that they did not know what they were signing. The rule of Turner v. Biscoe, supra, is based upon the premise that the grantor consciously deeded his land away on the strength of an oral promise by grantee that he would reconvey, not that he thought he was granting a leasehold.

Mr. Locke's testimony as to what they understood the agreement to be is as follows:

'Q. Would you mind stating in your own words just what that agreement was?

'A. The corporation was going to continue to operate the store; the corporation was going to give Mr. Thigpen the right to collect the rent off of my property and apply such rent that was collected against the indebtedness I owed him or the Bank of the Southwest, whichever it was, and that is what I thought I was executing when I executed * * *--

'Q. Now in that connection, what line does your own signature appear on?

'A. (Locke looking at the instrument) Lessor.

'Q. In connection with your conversation with Mr. Thigpen about him, that he was going to collect the money, collect the rent off of this property and use the money to pay expenses, pay the loan on the property, the expenses on the property and what was left pay himself, pay the rest of it to himself, was anything ever said about how long he thought it would take before he would get his money back?

'A. Between five and six years, that was the reason for the five-year lease.

'Q. As a result of the conversation you had with Mr. Thigpen, in other words at the time you had it before these papers were signed in January of 1951, would you mind stating whether or not it was your understanding that you and Mrs. Locke would lease this property to Mr. Thigpen?

'A. Right, sir.'

This testimony taken most favorably to the respondents does not give rise to the inference that they consciously deeded the property on any oral promise to reconvey. The question of whether or not there was some evidence of fraud under Turner v. Biscoe must be answered in the negative.

As to the contention that there was some evidence on the second theory of...