Busby v. Michael ( 1940 )

As disclosed in the original opinion in this case, the court, at the conclusion of all the testimony, instructed a verdict for the defendant. The instruction of the verdict and the rendition of the judgment are based upon the court's construction of the written contract copied in full in the original opinion. He construed it to be a contract for the sale of lands, and therefore not subject to oral modifications. The correctness or otherwise of the court's construction of the contract and the instruction of the verdict is the sole question to be determined on this appeal.

This court in its original opinion affirmed the judgment. The consideration now is on the motion for rehearing.

We have concluded the trial court was in error, and likewise this Court in its original opinion.

Of course, if a contract is ambiguous or difficult of construction the situation of the parties and their relation to the subject matter at the time the contract was made may always be looked to for the purpose of interpreting the contract. The evidence in this case, from both interested and disinterested sources, establishes the fact that Mrs. Busby furnished, out of the funds inherited by her from her father's estate, to the extent of $2,000, the cash payment made on the tract of land involved in this suit, and that it was not a loan out of her separate funds. How the balance of the purchase money in the sum of $3,000, for which a vendor's lien note was executed, was paid may become a question of fact to be determined on the trial of the case. It may be presumed that Michael and his attorneys, at the time they entered into the contract of September 16, 1916, knew the facts as they were and as developed on the trial of this cause, and therefore knew that Mrs. Busby was the owner of a two-fifths interest in all events in the lands. All the parties knew at that time the record title had gotten into McKeen as a result of the fraud of himself and O. M. Busby. Mrs. Busby, on September 16, 1916, was interested in protecting her interest in the land. Michael held a deficiency judgment against O. M. Busby; had abstracted it in Frio County for the purpose of fixing a judgment lien against the land in the name of O. M. Busby. Michael likewise was interested in protecting any interest that he might acquire in the land by virtue of his abstract of judgment. To further their common interests Michael and Mrs. Busby, joined by her husband, therefore, entered into the contract of September 16, 1916. The heart and core of that contract is found in the second paragraph following the numbered paragraph "8th."

We think it plain that Louis M. Michael agreed to sell, and Mrs. Lorena Busby agreed to buy, the judgment Michael held against her husband, O. M. Busby, for the sum of $3,000 and costs. That agreement is found in this recitation in the paragraph referred to: "* * * and in the event of the revival of said judgment lien, issuance of order of sale and of sale thereunder, that he said Louis M. Michael, will accept the sum and amount of Twenty-five Hundred Dollars, with Five Hundred Dollars attorney's fee to be paid Leo Tarleton, and Ryan Matlock, attorneys for said Michael, on said intervention suit, and costs of suit, in all Three Thousand Dollars and costs, in full settlement and compromise of said judgment lien or otherwise against said Oscar M. Busby in favor of said Michael; * * *."

This is the meat of their agreement, and there is no reference whatever made to the sale and purchase of any land, but it refers to a sale and purchase of the judgment and judgment lien against Oscar M. Busby. The contract continues with a provision that the amount to be paid may be in cash, or, at the option of the Busbys or other assignee or holder of her interest in this contract and agreement, deferred for two years and draw eight per cent interest, thereby making it plain that she and they had in mind the procurement of one who had the money and could and would come to her rescue; the contract reciting further that the $3,000 is to be paid as compromise of the Michael judgment against Oscar M. Busby.

It is perfectly clear that the parties contemplated some one other than the Busbys or Michael might become the purchaser at the sheriff's sale of the land. Had that occurred, and some one bid any sum in excess of the $3,000 and costs, Mrs. Busby would have been entitled to the excess and owned the judgment against her husband. Had Mrs. Busby become the purchaser at the sheriff's sale and neither paid the money nor given the formal mortgage as provided for in the contract, equity would have regarded that done which ought to have been done, and construed the contract of September 16, 1916, to be a mortgage in favor of Michael to secure his debt. Hicks v. Morris, 57 Tex. 658, 662; Boehl v. Wadgymar,54 Tex. 589; Taylor v. H. J. Huck Co., 65 Tex. 238, 242; Texas W. Ry. Co. v. Gentry, 69 Tex. 625, 8 S.W. 98; Johnson v. Portwood,89 Tex. 235, 248, 34 S.W. 596, 787; Parks v. O'Connor, 70 Tex. 377, 385,8 S.W. 104; Dunman v. Coleman et al., 59 Tex. 199.

There can be no distinction made as to the situation of the parties. The relation of debtor and creditor remained the same. Michael's deed, therefore, was nothing more nor less than a mortgage. What happened afterwards is a matter of pleading and proof. Of course it was contemplated that Michael might become the purchaser at the sheriff's sale, and that he might therefore take the sheriff's deed to the property. This is emphasized in the paragraph following the one last referred to in this language: "* * * that should (meaning nothing more than ``if') Louis M. Michael be the purchaser of said land upon which his lien rests by a credit on said judgment by his bid, for the full amount of his said judgment of about seven thousand dollars, more or less, he will irrespective of how much credit on said judgment his purchase price of said land may be, he agrees, upon payment of said compromise amount of three thousand dollars to convey by special warranty deed, the land above described, * * *." This provision is merely emphasizing the fact that he recognized Mrs. Busby's superior interest in the land and was willing therefore to accept less than one-half the amount of his judgment, not for the land described in the contract and involved in this suit, but for his judgment against Oscar M. Busby. That was further emphasized in the next paragraph wherein the recitation is made that he is agreeing and binding himself to take less than one-half of his unpaid judgment, valid and subsisting in his favor against O. M. Busby, and that he will release Busby from any further payment on said judgment when the compromise settlement is completed.

The only provision to be found in the whole of the contract, where it relates to the agreement that could possibly suggest or lead anyone to in any wise think the contract was one for the sale of real estate, is the provision wherein he agreed to convey the land to Mrs. Busby by special warranty deed in the event he should become the purchaser at the sheriff's sale.

What was or could have been the reason to anticipate that Michael might revive his judgment lien and not foreclose it? As against McKeen, assuming the fraud, it was good and could be foreclosed; as against Mrs. Busby it could not.

From the standpoint of Michael and his attorneys, there were two apparent reasons why the Busbys should not and did not intervene in Cause No. 1477: (1) If the facts were permitted to develop as they did in this trial, and as we must presume they were known to be, the court would not have permitted the foreclosure as against Mrs. Busby's interest; (2) a common fight and joint effort might make the issues of fact difficult in the light of the previously admitted conspiracy and fraud of O. M. Busby. This latter situation confronted the Busbys and their attorney and probably was the reason why they remained out.

The testimony shows that Louis M. Michael was a moneylender in San Antonio. The undenied testimony is that O. M. Busby pledged a $9,000 vendor's lien note, the property of his wife, to Michael to secure a note for $7,000; that the proceeds of the $7,000 were, $100, for which the receipt (exhibit G) was given, a check for $5,900, and $1,000 retained by Michael as a commission for making the loan. The deficiency judgment for approximately $7,000, abstracted and mentioned in the agreement of September 16, 1916, was in the suit brought by Michael on this $9,000 note.

We have concluded, therefore, that the contract is not one for the sale of real estate, but was one for the sale and purchase of the judgment against Oscar M. Busby, and that the motion for rehearing should be granted, the former judgment of this court and that of the trial court reversed and the cause remanded for a new trial, and it is so ordered.