Case ID: sw_185/html/0562-01.html
Source: Caselaw Access Project
Author: {"author": "\n      YANTTS, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BRANNIN et al. v. RICHARDSON et al.
    (No. 2457.)
    (Supreme Court of Texas.
    May 3, 1916.)
    1. Bills and Notes @=3342 — Failure of Consideration — Notice to Purchaser.
    Where the recitals of purchase-money notes merely advised their pui-chaser that they were secured by vendor’s liens retained in the deed conveying the land, containing no facts to arouse the suspicion of a prudent person that a defect in title existed, such notes were insufficient to put their purchaser upon inquiry.
    [Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. §§ 830-841; Dec. Dig. @=> ,342.]
    2. Vendor and Purchaser @==>265(3) — Vendor’s Lien Notes — Assumption of Payment.
    When a purchaser of land contracted with the sellers to assume the payment of vendor’s lien notes executed by them to their vendor, such purchaser became legally bound for their payment, becoming principal, and the sellers sureties, though there was no privity of contract between him and the original seller of the land to his vendors, since the payee of a note has an interest in any collateral security given by the principal on such note to his surety, and is allowed to resort to such additional security to enforce payment of the note.
    [Ed. Note. — For other eases, see Vendor and Purchaser, Cent. Dig. § 709; Dec. Dig. @=> 265(3).]
    3. Bills and Notes @=>370 — Vendor’s Lien Notes — Assumption—Statute.
    Under Rev. St. 1895, art. 307, providing that the assignee of a negotiable instrument may sue in his own name, and that, if he obtained the instrument before maturity and gave valuable consideration without notice of defense, he shall be compelled to allow only just discounts against himself, the purchaser of land, who assumed payment of vendor’s lien notes executed by his sellers to their original vendor, when sued by an innocent purchaser of the notes before maturity from the original vendor, could not set up failure of consideration in defense, since the sellers could not have done so against a holder in due course, while the buyer stood in their shoes as primary obligor.
    [Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. § 963; Dec. Dig. @=>370.]
    4. Vendor and Purchaser @=>265(3) — Remedies of Vendee — Defenses—Failure of Consideration.
    The purchaser of land, who assumed payment of vendor’s lien notes given by his sellers to their original vendor, could plead failure of consideration as defense when sued for the price by the sellers to him.
    [Ed. Note. — For other cases, see Vendor and Purchaser, Cent. Dig. § 709; Dec. Dig. @=> 265(3).]
    5. Bills and Notes @=>383 — Holder in Due Course — Defense of Payment — Statute.
    Under Rev. St. 1895, art. 307, providing that the assignee of a negotiable instrument obtained before maturity for valuable consideration and without notice of any discount or defense against it shall be compelled to allow only just discounts _ against himself, payment is no defense against a holder in due course of a negotiable instrument.
    [Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. § 956; Dec. Dig. @=>383.]
    6. Bills and Notes @=>534 — Attorney’s Fees — Reasonableness — Proof — Necessity.
    Where notes provided for 10 per cent, attorney’s fees, if the notes were placed -with an attorney for collection, or if collected by suit, a holder in due course of such notes, suing the buyer thereon, could recover attorney’s fees without proving the reasonable value of the services rendered, in the absence of proof that the amount was unreasonable.
    [Ed. Note. — For other cases, see Bills and Notes, Cent. Dig. §§ 1946, 1947; Dec. Dig. ⅞=> 534.]
    Error to Court of Civil Appeals of Second Supreme Judicial District.
    Suit by L. E. Branniu and another against Barton M. Richardson and others. To review a judgment of the Court of Civil Appeals (148 S. W. 348) affirming judgment for •plaintiffs for a limited amount, plaintiffs bring error.
    Judgments of the Court of Civil Appeals and the trial court reversed, and judgment rendered for plaintiffs.
    J. J. Butts, of Cisco, and Batts & Brooks, of Austin, for plaintiffs in error. J. L. Alford and Spann & Alford, all of Rising Star, for defendants in error.
   YANTTS, J.

The issues in this case are disclosed by the Very clear statement of the case which was made by the honorable Court of Civil Appeals. 148 S. W. 348. We quote therefrom as follows:

“L. E. Brannin and C. P. Brannin instituted this suit against Barton M. Richardson, Catherine Richardson, A. B. Teston, and E. L. Tes-ton to recover upon a number of vendor’s lien notes alleged to have been acquired by L. B. Rivers, deceased, of whose will the plaintiffs had been duly appointed executors. There was a prayer for foreclosure of the vendor’s lien upon the land described in the petition, and for which it was alleged the notes had been given in part payment. E. L. Teston was dismissed from the suit, and the trial resulted in a judgment for plaintiffs against A. B. Teston for the sum of $250.40, with a foreclosure of lien upon the land described in the petition, and the plaintiffs have appealed.
“The trial was upon an agreed statement of the facts, from which it appears that on the 2d day of October, 1906, one W. C. Dawdy, in consideration of $400 in cash paid by Barton M. Richardson and the execution by said Barton Richardson and his wife, Catherine Richardson, of the notes herein sued upon, and of one other note for the sum of $160, sold and conveyed to the said Richardson the land described in the plaintiff’s petition. The deed of conveyance to Richardson contained the usual general warranty clause, and retained the vendor’s lien upon the land therein conveyed to secure the payment of the notes. On the 9th day of October, 1906, W. C. Dawdy, for a valuable consideration then paid by L. E. Brannin, one of the plaintiffs herein, and who was then and there acting as the agent of and for L. B. Rivers, sold and assigned all of the said notes to said L. B. Rivers, said assignment being in writing and duly acknowledged, and conveyed to L. B. Rivers all .the title and interest of W. C. Dawdy to said lands, as well as to said notes. On the 19th day of October, 1906, Barton M. Richardson and Catherine Richardson, in consideration of the payment to them of the sum of $422.26 by A. B. Teston and the assumption by Teston of the payment of the notes herein sued upon, as well as of said note for $160, sold and conveyed to said A. B. Teston the land described in the plaintiffs’ petition, and that had been sold to the Richardsons by Dawdy; this deed also containing the usual covenants of warranty. Teston on the same day paid to L. E. Brannktj as the agent of L. B. Rivers, the $160 note which, is not involved in this suit. Thereafter, in July, 1907, the Waples-Platter Grocery Company instituted suit in the district court of Eastland county against A. B. Tes-ton and others to recover the Thomas Benson Survey of land, of which the land conveyed by W. C. Dawdy to the Richardsons and by the Richardsons to the defendant A. B. Teston was a part. L. E- Brannin _ owned a part of the Benson Survey at the time, and was made a party to and defendant in the suit, as did also A. B. Teston. Other parties claiming to be the heirs of Thomas Benson intervened in the suit. Appellant A. B. Teston, as stated, contested the claim of the opposing parties; but the trial resulted in a judgment in favor of the plaintiffs and interveners in that suit for all of the land so purchased by Teston, excepting 183/36o, and this judgment has never been set aside. It is agreed that at the time of the sale of the notes in controversy by Dawdy, L. B. Rivers took them without any notice of any defect in the title to the land for which they were given, further than she could in law be charged with by reason of the execution and record of the deed from Dawdy to Barton M. Richardson and from the Richardsons to A. B. TestOn and the recitations in the note, but the agreement is silent as to whether the plaintiff L. E. Brannin, as agent for L. B. Rivers, had or had not notice of any defect of title in the land; the agreement in this respect being: ‘In the purchase of the said notes herein sued upon the plaintiff L. E. Bran-nin, as agent of L. B. Rivers, acted for and on behalf of the said L. B. Rivers, and the said L. B. Rivers was not a bona fide purchaser of said notes, unless the said L. E. Brannin would have been a bona fide purchaser thereof had he purchased them for himself and on his own behalf.’
“The judgment for $250.40 against appellee Teston amounts to but 133/3go part of the total sum assumed by Teston in the deed from the Richardsons to him, and the comjfiaint of the judgment is that the appellants and plaintiffs below were entitled under the agreed facts to a judgment for the total amount; the contention in behalf of appellants being that L. B. Rivers was_ an innocent purchaser for value of the notes in controversy, and therefore, took them by virtue of article 307 of our Revised Statutes, free of Teston’s defense of a partial failure of the consideration for which they had been executed. Appellee, 6n the other hand, contends that the recitations of the deeds and notes referred to affected Rivers with notice of the defect in title, by reason of which Teston later lost the greater part of the land purchased by him.”

As seen from the foregoing statement, the trial in the district court resulted in a judgment for plaintiffs in error against A. B. Tes-ton for only an amount equal to the value of the portion of the land to which the title had not failed; in other words, the trial court gave full effect to Teston's’ plea of failure of consideration. The honorable Court of Civil Appeals sustained this holding. The plaintiffs in error presented here their petition for writ of error, which1 was granted by this court

It is contended by the plaintiffs in error that, as the executors of the estate of L. B. Rivers, they are entitled to recover judgment against A. B. Teston for the full amount of the Richardson notes, whose payment Tes-ton assumed when he purchased the land from the Richardsons, and that the defense of failure of consideration is not available to Teston,- since L. B. Rivers was an innocent purchaser of said notes before maturity. It is contended by Teston that L. B. Rivers was not an innocent purchaser without notice, by reason of the recitals in the notes and in the deed, which were the usual recitals so common in use in the sale of real estate. It is not contended that L. B. Rivers, in fact, knew there was a defect in the title to the land, but it is contended that the recitals themselves amounted to notice of such defect, either actual or constructive. We do not think these recitals amounted to notice, or that they were sufficient to put L. B. Rivers upon inquiry for a defect of title. These-recitals only advised Rivers, the purchaser of the notes, that they were secured by vendor’s liens which were retained in the deed in which the land was conveyed. They contained no information that a defect in the title to said land existed. Neither did they contain any facts which would arouse even the suspicion of a prudent person that a defect existed, and were therefore insufficient to put Rivers upon inquiry for such defect. The contention by Teston that the recitals in the notes and the deed constituted notice to L. B. Rivers of the defect must be overruled.

It was held by the honorable Court of Civil Appeals that the notes sued upon should be offset to the extent of the value of. the land to which the title had failed, although L. B. Rivers was an innocent purchaser of the notes before maturity, on the ground that Teston was only liable on his assumption agreement, for which reason it was believed that Teston’s obligation was not such as falls within article 307 of the Revised Statutes. We believe this holding to be erroneous. When Teston contracted with the Richardsons to assume the payment of these notes, which were then owned by Rivers, he became legally boun<j for their payment, notwithstanding there was no privity of contract. Spann v. Cochran & Ewing et al., 63 Tex. 240; Muller v. Riviere, 59 Tex. 640, 46 Am. Rep. 291; Wallace v. Freeman & Co., 25 Tex. Supp. 91; Bank of Garvin v. Freeman, 181 S. W. 187. This rule which binds Teston to Rivers on the assumption, even in the absence of privity of contract, has been evolved from the rule of equity which vests in the payee of a note an interest in any collateral security which may have been given by the principal on such' note to his surety, and allows such payee a resort to such additional security to enforce the payment of the note. Keller v. Ashford, 133 U. S. 610, 10 Sup. Ct. 494, 33 L. Ed. 667; Johns v. Wilson, 180 U. S. 440, 21 Sup. Ct. 445, 45 L. Ed. 613. In a suit on such an assumption contract as is presented here, the assumption contract is regarded as the additional security to which the payee, Rivers, through his executors, may resort for the collection of the notes sued on. The rule allowing a recovery on such assumption contract is not only the established rule in Texas, but it is the general rule in other jurisdictions.

We think that, when Teston bound himself to assume the payment of said notes, he then occupied the position of an original promisor. 1-Iis relation became that of principal, and the Richardsons’ that of sureties. Long v. Patton, 43 Tex. Civ. App. 11, 93 S. W. 519. He took the position of the Richard-sons, who had originally executed the notes, and was bound for their payment as a primary obligor. Hill v. Hoeldtke, 104 Tex. 594, 142 S. W. 871, 40 L. R. A. (N. S.) 672; Hoeldtke v. Hortsman (Civ. App.) 128 S. W. 642. Could the Richardsons, if sued by Rivers on said notes, have pleaded in defense a failure of consideration? Undoubtedly they could not, because such defenses as payment, offset, and other equities are unavailing as against the notes in the hands of an innocent purchaser before maturity. If the Richardsons could not plead such defense, it necessarily follows that Teston, who occupied Richard-sons’ place, could not do' so. The Richard-sons were the makers of the notes, and by reason of this fact were denied, under article 307, Revised Statutes, the privilege of pleading as against an innocent purchaser such as Rivers a failure of consideration, or any other such “just discount.” Article 307, Revised Statutes, is as follows:

“Any person to whom any of the said negotiable instruments may have been assigned, may maintain any action in bis own name which the original obligee or payee might have brought; but he shall not only allow all just discounts against himself, but, if he obtained the same after it became due, he shall also allow all just discounts against the assignor before notice of the assignment was given to the defendant; but should he obtain such instrument before its maturity, by giving for it a valuable consideration, and without notice of any discount or defense against it, then he shall be compelled to allow only the just discounts against himself.”

Now, since the statute fixed the status of the Richardsons in a way that denied them the right to plead any “just discount” against Rivers, and since Teston assumed the Richardsons’ obligations, he necessarily assumed the obligations as they existed, under which the Richardsons were denied the right to plead a failure of consideration. This results from his contract to take the Richardsons’ place and assume their obligations as they then existed. It is very true that Teston could have pleaded this equity as a defense if the suit had been by the Rich-ardsons, who sold him the land. But it does not follow that he can plead it against L. B. Rivers, who was an innocent purchaser before maturity. The settled principles of the law merchant deny him this righR Under article 307, Revised Statutes, and under the law merchant, even a plea of payment cannot constitute a defense against such innocent .purchaser. To allow a set-off for a failure of consideration to be pleaded as a defense to a note in the hands of such an innocent purchaser, and at the same time to deny as a defense, under the same circumstances, the actual payment of the note, which is the settled law, would appear, indeed, an amazing contradiction. It should not and cannot exist. 1-Iow could it be allowed that Teston could plead as an offset, under such circumstances, the failure of consideration, when under the law merchant, as well as under article 307 of the Revised Statutes, in his attitude he could not plead any other kind of offset when the suit was by an innocent purchaser before maturity? To so hold would be to allow a plea of failure of consideration to be of greater dignity than the plea of actual payment of the note. Such a holding could not be justified upon any principle known to us.

We conclude that the Court of Civil Appeals erred in holding that Teston’s plea of failure of consideration was available as a partial defense to the payment of said notes.

We also think the Court of Civil Appeals erred, as did the trial court, in denying a recovery to the plaintiffs in error for the attorney’s fees provided for in said notes. There was a provision in each note for 10 per cent, attorney’s fees to become due and payable in case the notes should be placed with an attorney for collection, or if collected by suit. This entitled the plaintiffs in error to recover the attorney’s fees without the necessity on their part of proving the reasonable value of the services rendered, in the absence of proof to the effect that such amount was unreasonable. There was formerly a conflict upon this question among some of the decisions of the Courts of Civil Appeals, but the question was settled by this" court, as indicated herein, in the case of First National Bank of Eagle Lake v. Robinson, 104 Tex. 166, 135 S. W. 372. The plaintiffs in error are entitled in this case to recover the attorney’s 'fees sued for; there being no evidence that the amount provided for by contract is unreasonable.

The judgments of the Court of Civil Appeals and of the district court are reversed, and judgment is here rendered against A. B. Teston and in favor of the plaintiffs in error for the amount of principal, interest, and attorney’s fees due on the notes in suit, and against A. B. Teston, Barton M. Richardson, and Catherine Richardson for a foreclosure of the vendor’s lien against the land and premises described, as prayed for, together with all costs of suit. 
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