Case Name: W. L. Hill v. C. S. Preston et al.
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1931-01-21
Citations: 119 Tex. 522
Docket Number: No. 4942
Parties: W. L. Hill v. C. S. Preston et al.
Judges: 
Reporter: Texas Reports
Volume: 119
Pages: 522–547

Head Matter:
W. L. Hill v. C. S. Preston et al.
No. 4942.
Decided January 21, 1931.
(34 S. W., 2d Series, 780.)
J. R. Hill for plaintiff in error.
Lloyd and Preston were mortgagees in possession. Lindsey v. Hart, 276 S. W., 200; Bassham v. Evans, 216 S. W., 450; Whitehead v. Garrity, 64 Texas, 638; Duty v. Graham, 12 Texas, 427; Soell v. Hadden, 85 Texas, 182; Railway v. Whittaker, 68 Texas, 634.
A mortgagee in possession is bound to apply the revenues from the mortgaged premises to the payment of the mortgage debt. Davis v. Hubbard, 38 Ala., 185; Chambers v. Mauldin, 4 Ala., 477; Bennett v. Butterworth, 12 Howard, 367, 13 L. Ed., 1026; 27 Cyc., 1250, 1835, 1838, 1839; Morgan v. Morgan, 48 N. J. Eq., 399, 22 Atl. 545.
When the revenues from the mortgaged premises were sufficient to satisfy the mortgage debt, the title to the premises passed to the mortgagor, free from lien and the title of the mortgagor became absolute.
Where the holder of vendor’s lien notes demands that the maker thereof pay same, and then sues the maker on the notes, obtains personal judgment against the maker, with foreclosure of the vendor’s lien, and issues execution and order of sale on the judgment, such acts constitute an election on the part of the holder of the notes to affirm the contract of the sale of the land and operates as a renunciation of title to the land. Mozoch v. Sugg, 240 S. W., 625; Stansberry v. Booghery, 158 S. W., 247; Von Roerder v. Robson, 20 Texas, 754; Gardner v. Griffith, 93 Texas, 267, 35 S. W., 314; Trust Co. v. Beekley, 93 Texas, 267, 54 S. W., 1027; Douglas v. Blunt, 95 Texas, 381; Stratton v. Fire Ins. Co., 187 S. W., 6; Bassham v. Evans, 216 S. W., 450; Wiseman v. Cottingham, 141 S. W., 819; Jirou v. Jirou, 186 S. W., 498; Rice v. Garrett, 194 S. W., 672.
Where the vendor of land takes a conveyance from the sub-vendee of his vendee, and afterwards elects to affirm the sale and pursues his vendee on the notes to personal judgment, foreclosure of the vendor’s lien and the issuance of execution and order of sale, the title acquired by the deed from the sub-vendee is merged in the judgment and where the judgment is satisfied the title vests in the vendee. Flarris v. Masterson, 91 Texas, 171.
Morris, Sewell & Morris, N. B. Morris, Jr., and Cole, Cole & O’Connor, for defendants in error.
Where Richard Lloyd sold to plaintiff, in consideration of $40,000.00, evidenced by 40 vendor lien notes for $1,000.00 each, and where plaintiff in turn sold to Parker and LaRoe for a cash consideration and the assumption of plaintiff’s notes to Richard Lloyd, and where Parker and LaRoe in turn sold to Scott Woodward, who bought subject to the Richard Lloyd notes, and while the title is outstanding in Scott Woodward, plaintiff alleges an oral agreement by Richard Lloyd to acquire this title and go into possession and farm the land and account to plaintiff for rents as a credit on plaintiff’s notes to Richard Lloyd, such an agreement is within the statute of frauds and unenforceable, in that it contemplates the securing of a reconveyance to Richard Lloyd by Scott Woodward and a subsequent conveyance by Richard Lloyd to the plaintiff on the payment of the plaintiff’s notes. No trust was created by such an agreement. Plaintiff was not in possession and was not entitled to possession. In a sale by vendor of property reserving the vend- or’s lien, vendee is entitled to possession until foreclosure; and plaintiff having parted with his title to Parker and LaRoe, who in turn had parted with it to Scott Woodward, plaintiff had neither possession nor the right of possession. The equity of redemption was in Scott Woodward. There was no consideration for the agreement alleged by plaintiff. Plaintiff claimed no defenses to the notes and he would part with no right in permitting Richard Lloyd to go into possession and he would assume no burden in permitting Richard Lloyd to take care of the property and pay plaintiff’s debt. Wade v. Cohen, 173 S. W., 1168; Thorp et al. v. Gordon, 43 S. W., 323; Workman v. Ray, 180 S. W., 291, 293; Newsom v. Minton, 250 S. W., 768; Friedsam v. Rose, 271 S. W., 417; Downing v. Brennan, 232 Mass., 525, 122 N. E., 729.
It will be observed that plaintiff himself sold the property to Parker and LaRoe, who assumed plaintiff’s debt to Richard Lloyd on the vendor lien notes. The effect of this, of course, was to make Parker and LaRoe the principal debtors to Richard Lloyd and reduce the status of plaintiff to that of a surety for payment of the debt. (Hill v. Hoeldtke, 104 Texas, 594, 142 S. W., 871, 40 L. R. A., (N. S.) 672.)
Parker and LaRoe themselves sold to Scott Woodward, and the right of possession had passed from plaintiff and his vendees, Parker and LaRoe, to Scott Woodward: Mason v. Bender, 97 S. W., 715 ; Lindsey v. Hart, 276 S. W., (Com. App.) 199.
The vendor, Richard Lloyd, was entitled, of course, either to rescind or to foreclose his vendor, lien. Heirs of Roberts v. Lovejoy, 60 Texas, 255; Summerhill v. Hanner, 72 Texas, 227; Hamblen v. Folts, 70 Texas, 137; Cattle Co. v. Boon, 73 Texas, 54.
Hill was not in possession and had parted with his equity of redemption (Harris v. Masterson, 91 Texas, 17; 41 S. W., 482), and, as shown above, occupied the position of surety for the payment of the notes. In this attitude, the oral agreement alleged by Hill is violative of the statute of frauds. The equity of redemption was in Scott Woodward and the agreement alleged by Hill would require the securing of a reconveyance from Scott Woodward to Richard Lloyd. Defendants had voluntarily “released plaintiff and the lands involved from the judgment of foreclosure and had declared the judgment satisfied and that they would not further prosecute any right or title under the same, or claim anything against plaintiff or the premises in controversy by virtue thereof.” Any possibility of injury to plaintiff from the judgment of foreclosure against him is hereby eliminated and brings the case in that regard on a par with the Foster v. Ross case, in which case. Burnett bought in the land for $500.00, instead of the face of his judgment, and as to which Judge Gill remarked: “It will be observed from plaintiff’s petition that he alleges that Scott Woodward conveyed the land back to C. S. Preston as executor of the will of Richard Lloyd. Unless equity would keep the indebtedness against plaintiff alive, for the protection of plaintiff’s vendor, this would appear clearly to result in a merger of the vendor’s lien and the equity of redemption in plaintiff. 41 C. J., p. 775, Sec. 869.” The plaintiff’s allegations, therefore, would ordinarily show a merger to the release and extinguishment of his indebtedness to Richard Lloyd, and appearing thus on the face of the petition would be an additional ground for sustaining the general demurrer. See Ellis v. Scarborough, 279 S. W., 859, affirmed by Commission of Appeals, 289 S. W., 1002, and which case follows Harris v. Masterson, and holds a merger occurs on the vendor re-acquiring the equity of redemption unless prevented for the benefit of the vendor.

Opinion:
ON MOTION FOR REHEARING.
It may be said that on the default of Hill, LaRoe and Parker and Scott Woodward to pay the interest on their debt to Lloyd, that if they were without equities, Lloyd had the right, without notice to them, and if with equities, after notice to sell the land to another party and convey the superior title: Kennedy v. Embry, 72 Texas, 387, 10 S. W., 88; Lipscomb v. Fuqua, 103 Texas, 585, 131 S. W. 1061; Thompson v. Westbrook, 56 Texas, 225; Morrison v. Barry, 30 S. W., 376 (writ refused).
On the other hand where a vendor elects to sue for the debt and the establishment of his lien, he thereby loses his right to sue for the land and his only remedy is to foreclose his lien—the superior title passing out of him to his vendee: Von Roeder v. Robson, 20 Texas, 754; Roberts v. Lovejoy, 25 Texas Sup., 437, 28 Texas, 641; Bartley v. Harris, 70 Texas, 181, 7 S. W., 797; Gunst v. Pelham, 74 Texas, 586, 12 S. W., 233; Pierce v. Moreman, 84 Texas, 596, 20 S. W., 821; Gardner v. Griffiths, 93 Texas, 355, 55 S. W., 314; Mozoch v. Sugg, 254 S. W., (Com. App.) 770; Wiseman v. Cottingham (Civ. App.), 141 S. W., 817; Moon v. Sherwood (Civ. App.), 180 S. W., 296.
When Judge Hill sold to LaRoe and Parker, who assumed the debt to Judge Hill, LaRoe and Parker became the principal obligors and Judge Hill became only their surety: Spann v. Cochran & Ewing, 63 Texas, 240; Hill v. Hoeldtke, 104 Texas, 594, 142 S. W., 871; Brannin v. Richardson, 108 Texas, 112, 185 S. W. 562; Allen v. Traylor, 212 S. W., (Com. App.) 945; Carraway v. Fowler, 267 S. W., (Com. App.) 672; Clemmens v. McDowell, 5 S. W., (2d) 224, affirmed 12 S. W., ( Com. App.) 955; Snyder v. Slaughter, 208 S. W., 974; Strickland v. Higginbotham, 220 S. W., 433; Pickett v. Jackson, 42 S. W., 568; Clayton v. Watkins, 47 S. W., 810; Smith v. Farmers' Loan & Trust Co., 51 S. W., 515; Fox v. Robbins, 70 S. W., 597.
After the sale of the land by Hill to Parker and LaRoe, Hill had no further interest in the land other than to require in event Lloyd sought to hold Hill personally on the notes, that the land be sold first as a primary fund and exhausted before any such personal recourse could be had against him: Harris v. Masterson, 91 Texas, 171, 41 S. W., 482; Ellis v. Scarborough, 289 S. W., (Com. App.) 1002, affirming 279 S. W., 859; Farmers & Merchants State Bank v. Cameron, 203 S. W. (El Paso) 1167; affirmed 231 S. W., (Com. App.) 738; Newby v. Harbison, 185 S. W., (Amarillo) 642; Doolen v. Hulsey, 192 S. W., (Amarillo) 364; Campbell v. Jones, 230 S. W., (El Paso) 710; Note 46 A. L. R., 322.
As such surety Judge Hill would have no cause of action against LaRoe and Parker and would not be entitled to sue them as his principals until he had paid off the notes to Richard Lloyd: 50 C. J. Sec. 408, p. 250; Ennis v. Cocke, 2 Texas, 592.
And a court of equity would not interfere on Judge Hill's behalf as surety to compel his principals, LaRoe and Parker, to pay the debt before it had been ascertained that the land, primarily liable,, was insufficient to discharge it: 50 C. J. 244, Sec. 396, Note 35, p. 245; Slawson v. Watkins, 86 N. Y., 597.
All this is in analogy to the fact that one's surety cannot maintain a cause of action for contribution against a co-surety until such surety has paid the creditor more than his share of the debt: 50 C. J. 294, Sec. 491; Jackson v. Murray, 77 Texas, 644, 14 S. W., 235; Langley v. Godwin, 264 S. W., 323, affirmed on other grounds, 276 S. W., (Com. App.) 659.
This surety relationship is not changed by the fact that Hill in his deed to LaRoe and Parker reserved a vendor's lien to secure him against his liability on the notes which he had executed to Lloyd: Harris v. Masterson, 91 Texas, 171, 41 S. W., 842; Strickland v. Higginbotham Bros. & Co., 220 S. W., 433.
The rights of a subsequent vendee are protected against contracts between the original vendor and his immediate vendee: Huffman v. Mulkey, 78 Texas, 556, 14 S. W., 1029, 22 Am. St., 71; Bonner v. Mem. Home Bank, 122 S. W., 430; Levy v. Persons, 131 S. W., 446; McDonald v. Miller, 90 Texas, 309, 39 S. W., 89.
When the legal title went out of Lloyd by his suit to foreclose, it went through Hill and LaRoe and Parker into Scott Woodward, and was not subject to divestiture by oral agreement. Sanborn v. Murphy, 86 Texas, 43, 25 S. W., 610; Dial v. Crain, 10 Texas, 444; McDonald v. Whaley, 244 S. W., (Com. App.) 596.
It is a non-sequitur as held by this court that under the facts based on Woodward's abandonment and LaRoe and Parker's inability to pay the rents, that "under this state of facts Hill, as vendee of Lloyd, had the right of possession without accounting to Lloyd for the rent." Mozoch v. Sugg, supra.
Lloyd clearly had the right on reacquiring the equity of redemption from Scott Woodward, to elect either a merger or not as he saw proper. If he elected a merger, all adverse claims against the mortgaged premises (except, of course, any intervening liens held by third parties) are extinguished. If he elected to treat the outstanding obligation as evidenced by Hill's vendor lien notes as in existence, then he had a right to hold Hill and LaRoe and Parker personally, but when he did so, Hill and LaRoe and Parker had the correlative right (and that only) to require the land to be sold as a primary fund before recourse could be had against them personally. Neither Hill nor LaRoe and Parker would be entitled to any excess which the premises might bring, as that would go to Lloyd as the holder of Scott Woodward's equity of redemption. This Court will find Harris v. Masterson followed and approved by the following authorities:
Ellis v. Scarborough, 289 S. W., (Com. App.) 1002, affirming, 279 S. W., 859; Newby v. Harbison, 185 S. W., (Amarillo) 642; Dooley v. Hulsey, 192 S. W., (Amarillo) 364; Farmers & Merchants State Bank v. Cameron, 231 S. W., (Com. App.) 738; Campbell v. Jones, 230 S. W., (El Paso) 710, 718.
If Hill was to obtain any additional rights to that right which he possessed as a surety for LaRoe and Parker, he must obtain the same in some legal manner, and since the subject matter of the contract is real estate, it would have to be in writing and obviously would have to be for a valid consideration. Foster v. Ross, 77 S. W., 990 (writ of error refused) ; Wade v. Cohen, 173 S. W., 1168; Thorp v. Gordon, 43 S. W., 323; Workman v. Ray, 180 S. W., 291, 293; Newsom v. Minton, 250 S. W., 768; Friedsam v. Rose, 271 S. W., 417; Oviett (Northwestern Fire & Marine Ins. Co. et al.) v. Warner, 288 S. W., (Com. App.) 434; Davis v. Holloway, 295 S. W., (Mo. Sup.) 105; Seward v. N. Y. Life Ins. Co., 152 S. E., (Va. Sup.) 346; Downing v. Brennan, 232 Mass., 525, 122 N. E., 729; Shriner v. Craft, 166 Ala., 146, 51 So., 884, 139 A. L. R., 918; 13 C. J., Sec. 209, p. 352 et seq.