First National Bank, Perryton v. McClung

483 S.W.2d 935, 1972 Tex. App. LEXIS 2253

• Court: Court of Appeals of Texas
• Decided: July 31, 1972
• Docket: No. 8233
• Status: Published

Opinions

JOY, Justice.

This is a summary judgment case wherein plaintiff has appealed from the judgment for defendants. Affirmed.

The parties are referred to here as they appeared in the trial court. Defendants owned 640 acres of farm land located near Dalhart, Texas, upon 440 acres of which a first lien existed in favor of American Trust Life Insurance Company. Defendants further were indebted to the plaintiff in an amount not shown by the record secured by a second lien and deed of trust. Defendants defaulted and became delinquent on the first lien note to American Trust, and foreclosure was threatened as of November 5, 1968. On November 2, 1968, defendants contacted plaintiff in reference to a loan to pay the delinquent amount owed by them to American Trust in the amount of $3,080.95. The plaintiff bank was unwilling to loan defendants the monies needed without an agreement by defendants to sell the land for an amount anticipated to be sufficient to pay off the American Trust indebtedness as well as the plaintiff’s second lien indebtedness. The letter agreement is hereinafter set forth in full:

“November 2, 1968

“The First National Bank

“Perryton, Texas

“Re: Section 12, Block 47½ H&TC Ry. Co. Survey, Dallam County, Texas.

“Gentlemen:

“All of the captioned property except the West 200 acres of the North Half will be sold at foreclosure sale at the Courthouse in Dallam County, Texas, on Tuesday, November 5, 1968, unless your bank provides funds to prevent such sale. In consideration of the advancement of your bank of the sum of $3,080.95 we agree as follows:

“(1) That unless we are able to sell the South Half and the Northeast Quarter of said section on or before Sunday, November 24, 1968, for at least enough to pay off the liens now on our land, and in addition to pay our cattle indebtedness in the sum of $10,643.41, we will offer such land for sale on December 14, 1968, in accordance with the following provisions:

“(a) We shall offer the surface and one-half (½) of the minerals for sale.

“(b) We authorize the commencement of advertising of such sale on Thanksgiving day and on each Sunday thereafter in such newspapers as we shall mutually agree on.

“(c) We shall offer such land with the understanding that possession will be delivered immediately, that the purchaser will have no longer than thirty (30) days in which to examine abstracts of title; that the purchaser will put ten (10%) percent of the selling price in escrow with you as escrow agent; that we shall furnish certificates showing payment of all ad valorem taxes for 1968 and prior years. The land shall also be offered subject to existing easements if any.

contract

“(2) The considofatiea of sale shall specify that it shall be closed either at your bank, or at such other place designated by you in Perryton, Texas.

“The agreements set forth above are made with the express understanding that your bank will make the necessary arrangements with the American Trust Life Insurance Company so that there will be no foreclosure sale on Tuesday, November 5, 1968.

“Very truly yours,

“/s/ L. E. McClung

“/s/ Catherine McClung

“ACCEPTED AND APPROVED BY:

“THE FIRST NATIONAL BANK, PERRYTON, TEXAS

“By ,/s/ R. H. Holland

“R. H. Holland, Executive Vice-President”

The defendants had previously listed the entire 640 acres for sale with a real estate broker but had been unsuccessful in securing a purchaser. Subsequent to the execution of the letter agreement the plaintiff, with defendants’ consent, advertised the entire 640 acres for sale with the stipulation in each ad that the seller reserved the right to reject any and all bids. A price agreeable to defendants could not be secured, and the bid or bids made in response to the advertising were rejected by defendants. At some later date not disclosed by the record, the first lien holder foreclosed under the terms of its deed of trust and plaintiff bank foreclosed its second lien, purchased the 440 acres, paid off the first lien and applied the excess proceeds to the bank’s second lien indebtedness, leaving an unpaid balance due plaintiff by defendants in the sum of $21,897.44 plus interest. The plaintiff then brought this action upon the letter agreement to require the defendants to sell the remaining 200 acres claimed by defendants as homestead. The defendants answered contending that the 200 acres were exempt from the sale under the Constitution of the State of Texas. Defendants’ motion for summary judgment was granted upon the stated ground that no genuine issue of any material fact existed.

The plaintiff is here on a single point of error that “the trial court materially erred in granting the appellees’ motion for summary judgment.” The plaintiff recognizes in both its pleadings and affidavit that defendants claimed the 200 acres as their homestead. Plaintiff contends that even if the letter agreement is uncertain as to whether defendants agreed to sell the 440 acres or the total 640 acres, defendants verbally agreed to sell the total tract. Even assuming that the letter agreement is not limited to that portion of 440 acres, we are of the opinion that after a careful review of the entire record before us that the plaintiff, by entering into the agreement and advancing additional monies is, in effect, attempting to enforce indirectly a lien against the homestead which is forbidden by Article 16, § SO of the Texas Constitution, Vernon’s Ann.St. By the terms of the letter agreement, the bank was not the purchaser of the homestead, but obviously attempted to secure amounts of money advanced to defendant both prior to the letter agreement and at the time of and in consideration for the execution thereof. The substance of the contract or letter agreement as opposed to the form reflects nothing more than an attempt to enforce a lien and forced sale upon the homestead. The agreed purpose of the advancement of the additional monies to prevent the foreclosure by American Trust upon its first lien is not for any of the purposes provided by the Constitution. See Toler v. Fertitta, 67 S.W.2d 229 (Tex.Com.App.1934).

Plaintiff urges McDaniel v. Newton, 187 S.W.2d 139 (Tex.Civ.App.—Fort Worth 1945, writ ref’d w. o. m.) as authority that specific performance will lie against the homestead when the contract has been fully performed. In the McDaniel case no contract or agreement to convey was involved but a fully executed conveyance with the complete consideration having been paid. Therefore, the case is not in point.

The judgment of the trial court is affirmed.