Wood v. Sparks

• Decision Date: 19 April 1933
• Docket Number: No. 1656-6116.,1656-6116.
• Citation: 59 S.W.2d 361
• Parties: WOOD v. SPARKS et al.
• Court: Texas Supreme Court

Page 361

59 S.W.2d 361

WOOD v. SPARKS et al.

No. 1656-6116.

Commission of Appeals of Texas, Section A.

April 19, 1933.

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

Suit by N. Wood against the Texas Mortgage & Investment Company, T. E. Hubby, W. P. Sparks, and others, in which defendant Hubby filed a cross-petition. A judgment in favor of defendant Hubby against plaintiff and all other defendants for a foreclosure of a mechanic's lien was affirmed by the Court of Civil Appeals [42 S.W.(2d) 142], and plaintiff brings error.

Judgments of the district court and the Court of Civil Appeals reversed, and judgment rendered for plaintiff.

W. L. Eason, of Waco, for plaintiff in error.

Allen V. McDonnell, of Waco, for defendants in error.

CRITZ, Judge.

This suit was instituted in the district court of McLennan county, Tex., by N. Wood against Texas Mortgage & Investment Company, T. E. Hubby, W. P. Sparks, and others. The real controversy is between Wood and Hubby. The case was tried in the district court without a jury and resulted in a judgment for Hubby against the plaintiff Wood and all other defendants for a foreclosure of a mechanic's lien on certain real property in McLennan county, Tex. No personal judgment was rendered, but only a judgment in rem against the real property. The sale of the property under order of sale exhausts Hubby's right to collect the judgment. On appeal by Wood, this judgment was affirmed by the Court of Civil Appeals. 42 S.W.(2d) 142, 144. Wood brings error.

The pertinent facts are undisputed. We are therefore presented with a mere question of law. It is shown by the record that the Texas Mortgage & Investment Company, whom we will hereafter designate the mortgage company, the then owner of the real property here involved, entered into a written mechanic's lien contract with W. P. Sparks, whereby Sparks agreed to erect on the real property in question certain improvements described in the contract. The consideration for such improvements as provided in the contract was for $4,000. The lien contract secured this sum with interest, etc. The lien contract also contained the following express provision: "In any event, the Texas Mortgage & Investment Company shall not be held liable on said note secured hereby, or any renewal thereof; but as far as said company is concerned the payee, or his assigns, agree to look only to the property described herein for payment thereof."

At the same time the lien contract was executed and delivered, and as a part of the same transaction, the mortgage company executed and delivered to Sparks an instrument in writing called in the lien contract a "promissory note." This instrument is in ordinary form of a note, but as a part thereof contains the following provision or stipulation: "This note is given in payment for the construction of certain improvements upon that certain lot or parcel of land situated in McLennan County, Texas, being all that certain lot, tract, piece or parcel of land situated in the County of McLennan, State of Texas, being known and designated as Lot No. 1, Block 30, of Huaco Heights an addition to the City of Waco, McLennan County, Texas, to which reference is here made. The liability on and payment of this note is subject in all things to the terms of mechanic's and material man's lien contract between the parties hereto of even date, to which reference is made as a part hereof, this day contracted to be erected by W. P. Sparks for Texas Mortgage & Investment Company, a joint stock assn., and to secure the payment thereof, an express contract and Mechanic's Lien is given by said contract upon said lands and improvements."

The record shows that the above contract and "promissory note" were executed on March 4, 1929. It is also shown that on April 9, 1929, Sparks conveyed and assigned both the lien contract and the "promissory note" to Davis Lumber Company. On April 11, 1929, the original lien contract and the assignment from Sparks to Davis Lumber Company were duly filed for record in the office of the county clerk.

On the same day the above instruments were filed for record, the Davis Lumber Company, by written instrument in due form, transferred and assigned the above mechanic's lien and "promissory note" to Wood. This assignment was in due form and transferred, assigned, and conveyed to Wood the lien contract and "promissory note." This assignment was also filed for record on April 11, 1929. At the time the assignment was delivered by Davis Lumber Company to Wood, they also purported to deliver to him the "promissory note," but in fact delivered to him a forged instrument in its place. The forged instrument was like the original instrument in form. The lumber company actually retained in its own possession the real instrument. Of course, Wood did not know this, but in good faith believed he was getting the true instrument.

After the above transactions and after the original mechanic's lien contract, the transfer thereof from Sparks to Davis Lumber Company, and the transfer from Davis Lumber Company to Wood, had been duly recorded at the proper place in the office of the county clerk of McLennan county, Tex., and at a time when Hubby had full record notice of all such instruments and their contents, the Davis Lumber Company on June 11, 1929, executed and delivered to Hubby a written assignment of the above mechanic's lien and "promissory note," and at the same time indorsed and delivered to Hubby the true note. This assignment was duly recorded on October 15, 1929. We take it that both Wood and Hubby paid a valuable consideration, and both acted in good faith.

It is also presumed from the record that Wood made no investigation at the time he bought the lien and "promissory note" to ascertain if the instrument delivered to him and purporting to be the true instrument was in fact the true instrument; but nothing occurred to excite his suspicion, and he took it in good faith believing it to be the true instrument.

As above shown, at the time Hubby had his transaction with Davis Lumber Company he had full record notice of the fact that Wood had purchased the lien and "promissory note," but no actual notice thereof. Hubby was familiar with the signature of the maker of the "promissory note," and at the time he purchased it he examined it for the purpose of satisfying himself that it was genuine. On finding that it was genuine he accepted it.

It is evident from the statement we have made that the instrument designated above as a "promissory note" was not a promissory note at all within the meaning of our Negotiable Instruments Statutes (Rev. St. 1925, art. 5932 et seq.). It is further plainly evident that it was not a negotiable instrument at all, but simply and purely a part of a mechanic's lien contract. The legal effect of the lien contract and instrument designated as a "promissory note" was simply and purely to create a lien for $4,000 against the property in question. No one was personally obligated to pay this lien: in case of default the holder simply had an action in rem against the property. These matters are all fully evident on the face of the lien and "promissory note."

We think that it can hardly be controverted that when the Davis Lumber Company executed and delivered to Wood the written transfer and conveyance of the mechanic's lien contract, and at the same time delivered to him the forged "promissory note," as between the lumber company and Wood, Wood took and acquired all the...