Opinion
No. 3581.
November 1, 1928. Rehearing Denied November 22, 1928.
Error from District Court, Franklin County; R. J. Williams, Judge.
Suit by J. L. Rutherford and others against B. B. White. Judgment for plaintiffs, and defendant brings error. Affirmed.
In this suit J. L. Rutherford seeks to have canceled a deed executed by him to B. B. White for 100 acres of land of the Margaret Oliphant survey in Franklin county. The facts were pleaded, and are to the effect that a fraudulent and entirely worthless note was given as the sole consideration in exchange for the land, under circumstances justifying a rescission. The defendant, B. B. White, answered to the effect that the 100 acres of land was deeded to him solely in payment of agreed commissions as agent in bringing about and effecting the trade or exchange of 440 acres of land of the Oliphant survey for the note set out by the plaintiff, and that he had no interest in the note, and knew nothing at the time of the real facts about the note, if invalid, and made no fraudulent representations about the note or the land that the note recited a lien against.
The jury, on special issues, made the findings of fact that B. B. White was not the agent either of J. L. Rutherford or of Lindsay, Rhone Hair in making the sale of the 440 acres of land. There was supplementary findings of fact made and filed, upon request, by the trial court, as follows: (1) That the sole and only consideration for the conveyance of the 100 acres of land by J. L. Rutherford to B. B. White was a certain note purporting to be a vendor's lien against land in El Pasco county of the La Prieta grant; (2) that the La Prieta grant was fictitious, fraudulent, and void, and such grant of land does not exist; (3) that the maker of the note was either a fictitious person or a person residing beyond the limits of the state and having no property in Texas; (4) that both C. C. Hutcherson and C. T. Wright indorsed the note in blank, and that they were wholly insolvent at the time of indorsement, and at all times since; (5) that "the note was indorsed by Lindsay, Rhone Hair `without recourse;' and if indorsed by B. B. White, which was a disputed issue, his indorsement was `without recourse.'"
There was judgment for the plaintiff canceling the deed.
The suit was instituted on original petition on January 22, 1910. The evidence shows that on January 19, 1910, J. L. Rutherford executed a warranty deed to B. B. White conveying 100 acres of the Margaret Oliphant 640-acre survey in Franklin county. The deed was duly registered in the county clerk's office on February 7, 1910. The deed recites the consideration "of the sum of $1,000 to me in hand paid by B. B. White as follows: cash in hand." The evidence is conflicting respecting the real consideration for the conveyance, and the findings of the jury and the trial court would be conclusive of the facts in that respect. As so found as a fact, the consideration for the conveyance was not commissions earned by the grantee White as agent of either J. L. Rutherford or Lindsay, Rhone Hair, but solely a note purporting to be a vendor's lien note for $5,900 by G. P. Holford to C. C. Hutcherson on January 5, 1910, as part of the consideration of the purchase of sections 7, 8, 13, 14, and 15 in block 19 of the La Prieta grant in El Paso county, Tex. Such note, as admittedly appears, and as the court expressly found as a fact, was executed by "a fictitious person or a person residing beyond the limits of the state and having no property in the state." The inference is strongly in favor of the conclusion that the maker of the note was a fictitious person, and there is no insistence to the contrary. And the evidence conclusively points to the fact that the note, with its recitals, was issued as a scheme to further an evil purpose of imposition upon innocent people in the sale and purchase thereof. There was no La Prieta grant of land in existence, and there never had been, as admittedly proven. The recitals in the note were false and fraudulently made. The original payee, very shortly after the issuance of the note, indorsed it in blank to Wright, who, it appears, fully knew the facts of the issuance of the note and the nonexistence of the land. A written transfer of the note and the superior title by Hutcherson to Wright was also given. About January 10, 1910, after the transfer of the note to him, Wright, it appears, went to Winnsboro, Tex., and there traded the note in question to Lindsay, Rhone Hair, indorsing it in blank, for a certain tract of land. Subsequently the note was negotiated to J. L. Rutherford of Mt. Vernon for 440 acres of the Margaret Oliphant survey and 160 acres of another survey. Such land was worth about "ten dollars an acre," as proven. Two deeds were executed by J. L. Rutherford; one being to Lindsay, Rhone Hair for 340 acres of the Oliphant survey and 160 acres of another survey, and the other being the deed in suit to B. B. White for the other 100 acres of the Oliphant survey. Lindsay, Rhone Hair transferred the note to J. L. Rutherford "without recourse." According to the evidence in behalf of J. L. Rutherford, the note was also indorsed by White "without recourse." But the evidence in behalf of Mr. White is that he did not indorse the note at all. There is no express finding upon that issue by the trial court; but his finding, in view of the judgment involves the finding, which is here sustained, that B. B. White indorsed the note without recourse. The evidence for Mr. White goes to show that he had no interest whatever in the note. But, in view of the jury finding that he was not the agent of any of the parties, the inference from the record would be that Mr. White had some interest in the note, in the purchase from Wright, along with Lindsay, Rhone Hair. For the evidence in behalf of Rutherford goes to show that Mr. White did indorse the note, and such indorsement implies an interest. And the circumstances further show that the deed of Rutherford to Lindsay, Rhone Hair conveyed the 340 acres of the Oliphant survey and the other 160 acres for the consideration expressed, viz.:
"In consideration of $3,400.00 to me in hand paid by Lindsay, Rhone and Hair, being $3,400.00 in one certain vendor's lien note given by G. P. Holford to C. C. Hutcherson."
The sum of $3,400 represented only a part interest in the note. It is not denied that this $3,400 interest in the note was the consideration for the deed to Lindsay, Rhone Hair. Mr. White does not in any wise contend that the 100 acres was a mere donation to him by J. L. Rutherford. If the land was not a donation, and Mr. White was not the agent of any of the parties, then the conveyance to Mr. White of the 100 acres can reasonably be accounted for upon the ground only of the consideration of his interest in the note above $3,400. It conclusively appears that very soon after the conveyances above of January 19, 1910, it was discovered by the parties thereto that the note was entirely worthless and wholly ineffectual as a lien against land and fraudulently issued in the first instance. The suit for cancellation was then filed January 22, 1910. It is admittedly shown that the two indorsers, Hutcherson and Wright, were wholly insolvent at all times. The transaction, it appears, was innocently made by all the parties, except Hutcherson and Wright. Neither Lindsay, Rhone Hair nor B. B. White made any misrepresentations about the note to J. L. Rutherford. It appears that they, as well as J. L. Rutherford, knew nothing about the facts, independent of the face of the note, concerning the execution of the note and the nonexistence of the purported grant of land, prior to the transfer to J. L. Rutherford. It is conclusively shown that J. L. Rutherford conveyed the 100 acres of land, as well as the, other lands, for the interest of Mr. White and of Lindsay, Rhone Hair in the note, in reliance and belief of such note's being secured by a valid lien against land, and would not otherwise have made the conveyance. All the parties knew that J. L. Rutherford conveyed the lands in sole reliance and belief on the fact that the note was secured by a lien against land.
J. A. Ward, of Mt. Pleasant, for plaintiff in error.
R. T. Wilkinson, Jr., of Mt. Vernon, and Williams Williams, of Mt. Pleasant, for defendants in error.
The points made on appeal are, in effect, that the cancellation of the deed to the 100 acres of land was not justified, because, namely:
(1) The services rendered by B. B. White as agent constituted a sufficient consideration to sustain the deed, as the evidence established that he was not himself a party to any fraud or illegality affecting the vendor's lien note.
(2) There was proven to be no fraud committed nor fraudulent representation made by B. B. White affecting the vendor's lien note; and the conveyance of land by a warranty deed cannot be rescinded and canceled upon the ground alone of the mere failure, although complete, of consideration.
It is thought that the first point stated above cannot prevail because an essential factual element is lacking, that the consideration for the conveyance of the 100 acres of land was, in part or in whole, the compensation to Mr. White for services performed as agent. The facts appear otherwise as to the consideration for the conveyance. The jury found that Mr. White did not act in the capacity of agent for any of the parties, and the trial court found that the sole consideration for the deed was the interest of Mr. White in the purported vendor's lien note in evidence. There is evidence to support these findings of fact.
The facts upon which the second point above stated is founded are without dispute. The maker of both the deed to the land in El Paso county and the purported vendor's lien note was a fictitious person; there was no such grant of land in existence; there was no vendor's lien upon any land. Therefore legality of any lien on land is wanting; and a swindle and cheat in that respect is evident, constituting fraud. Separating the lien, as nonexisting, and the note, the latter, as such, merely was proven entirely worthless as an obligation of the payee. He was and is wholly insolvent. The other indorser, Wright, was wholly insolvent. Consequently, under the facts, an entirely worthless note, and having inception in fraud, was acquired by Lindsay, Rhone Hair and B. B. White, although they became bona fide holders in due course of trade from Mr. Wright. They gave the note to J. L. Rutherford, indorsing it "without recourse," in exchange for lands and did not make any misrepresentations or false assertions affecting the note. It is apparent that all the parties to the conveyance were dealing with the note solely as a note secured by a vendor's lien on land, believing it to be true, as the note purported to be, that it was a valid vendor's lien note against land in El Paso county. That was the essence of the agreement to exchange the note for the land. It is thought the circumstances sufficiently afford ground of relief as between the immediate parties, in the remedy of rescission and cancellation of the deed. It is believed that it is inequitable for Mr. White to hold the land. The agreement of Mr. White to give a valid vendor's lien note against land of La Prieta grant was and is impossible of performance. The supposed vendor's lien did not exist at the time of the agreement to exchange the note for the land. In an executed contract, the want or failure of the consideration is ground for rescission, in case such want or failure existed at the time of the agreement. 1 Black on Rescission and Cancellation, § 160. The situation is not less inequitable than gross inadequacy of price. 2 Pomeroy, Eq. (3d Ed.) §§ 926, 927.
J. L. Rutherford was given an entirely worthless note, having inception in fraud, for the land. Mr. Rutherford got nothing whatever of value in exchange for his land, and as to him it operates as constructive or legal fraud. Rutherford v. White (Tex.Civ.App.) 174 S.W. 930; Cummings v. Moore, 27 Tex. Civ. App. 555, 65 S.W. 1113; Rouse v. Bolen. 17 Ariz. 14, 147 P. 736. There is distinguishment between the character of consideration in the present case and that of the cases cited, like the following: Mayer v. Swift, 73 Tex. 367, 11 S.W. 378; Chicago, T. M. C. Ry. Co. v. Titterington, 84 Tex. 218, 19 S.W. 472, 31 Am.St.Rep. 39.
We have considered the other assignments, and think there was no error, and they are each overruled.
The judgment is affirmed.