Nichols-Steuart v. Crosby

On June 1, 1854, John C. Watrous was the owner of lot 531, section number 1, Galveston Island, containing about twenty-six acres, and all parties hereto claim under him as a common source. Said Watrous, July 8, 1854, executed a power of attorney to Martin, authorizing him to sell and convey this and other property to pay debts due Martin from Watrous, which instrument was duly recorded January 29, 1855.

February, 1855, Watrous, by said attorney Martin, in consideration of $500, executed to W.R. Smith a deed conveying this lot and others, which deed was duly recorded June 1, 1855. In 1873 Smith died testate, bequeathing all his property to his two children, J.M. Smith and Mrs. Crosby. Before the institution of this suit said Mrs. Crosby died, leaving her three children, Mildred, Dixie, and William Crosby, her sole heirs.

July, 1890, Alex. Sampson bought the interest of said J.M. Smith in said lot 531 and seven others, at a sale under an execution against said Smith, issued on a judgment rendered in favor of a loan company against said J.M. Smith, and paid for said lots at such sale the sum of $5 each, said judgment being for several thousand dollars.

Said three Crosby children claiming one-half of said lot 531 under their mother, and said Sampson claiming the other half as vendee of J.M. Smith at said execution sale, brought this suit in trespass to try title to recover from defendant Marx the land described in the deed to him hereinafter set out, being the greater part of said lot 531.

Marx claims title under the following facts:

Moreland, on June 9, 1854, in the District Court of Galveston County, recovered judgment against said Watrous, common source of title, for a sum of money on which judgment execution issued July 21, 1854, which was returned "nulla bona" August 12, 1854, and the second execution issued thereon July 23, 1855, under which the land was regularly sold in November, 1855, to C.B. Adams. In 1860 Adams conveyed the land to O'Connor. In September, 1871, O'Connor executed to a trustee for Frank Nichols-Steuart a trust deed on said lot 531 and other property, to secure the payment to said Steuart of notes aggregating $8804, representing money loaned by Steuart to O'Connor at the date of said trust deed. On November 20, 1873, the trustee conveyed said property to said Steuart in pursuance of a sale made under said trust deed. On July 25, 1877, said Steuart recovered, in the District Court of Galveston County, a judgment for all of said lot 531, except three acres off the northeast corner, against said O'Connor. March 5, 1890, Steuart conveyed 23 3/4 acres out of said lot 521, which appears to be what he recovered in said judgment, to Reppen, for $3770, and Reppen conveyed same land, on March 14, 1890, to Marx for $7125. All said instruments were duly recorded at time of their respective executions.

Upon the rendition of said judgment, June 9, 1854, in favor of Moreland against Watrous, it became a lien on said lot 531, then belonging to Watrous. It is conceded that such lien was lost, by reason of the fact that more than one year elapsed between the issuance of the first execution, July 21, 1854, and the issuance of the second execution, July 23, 1855, under which the sale was made. Therefore the sale did not foreclose the judgment lien, and did not pass such title as Watrous owned at the date of the judgment, June 9, 1854, but only passed such title as he owned at the date of the levy which was made after the issuance of the second execution, on July 23, 1855.

It appears from the above statement, however, that Watrous had, in February, 1855, conveyed the land in controversy to W.R. Smith by deed duly recorded June 1, 1855, and therefore Adams acquired no title by his purchase at such sale. It results, that upon the face of the record the plaintiffs Crosby and Sampson, claiming under W.R. Smith, have a superior title to defendant Marx, claiming under Adams.

Defendant Marx, however, claims that the superior title of W.R. Smith passed by estoppel to said Steuart, one of his remote vendors, by reason of the following facts found by the Court of Civil Appeals: "In 1871 O'Connor applied to W.H. Nichols, brother and agent of said Frank Nichols-Steuart for a loan of a considerable sum of money, offering as security the land in controversy and other lands. While the agent had the loan under consideration, W.R. Smith advised with him and discussed the security offered, and stated that he knew the land; that O'Connor had bought it before the war and had a good title to it; and advised Steuart's agent to accept it as security, and make the loan. The agent knew nothing of any claim to the property but that of O'Connor; had never heard of Smith's title to same, and in the conversation between them Smith made no mention of it. The agent being thus induced, and supposing O'Connor's title to be undisputed, and knowing nothing of the Smith title, made the loan, and subsequently, in order to pay the debt thus contracted, the land was sold and bought in by Steuart, still without any knowledge of any adverse claim; that neither Smith during his life, nor his executor after his death, ever made any claim to or paid any taxes on the land, and that no one has ever asserted title to it but those claiming under Adams, until about the time of the sheriff's sale under which Sampson bought. On the other hand, those claiming under the Adams title have paid taxes for thirty-five years or more preceding trial; have executed conveyances, mortgages, and other documents asserting title to it, and as early as 1868 or 1869 took actual possession, which, though not continuous, was from that time to the present occasionally maintained. It plainly appears, according to the evidence, that the decision to make the loan to O'Connor was not reached until after much deliberation and discussion, in which Smith took part, and it is evident that the application would have been rejected had any mention been made of a claim adverse to O'Connor's. Smith's assurance as to O'Connor's ownership was in effect a statement that he himself had no claim to it, and probably so operated on the mind of Steuart's agent as to relax any efforts that might have been made to ascertain the true condition of the title. The money being in the hands of W.H. Nichols for investment, he consulted with his father and mother, who were also the father and mother of Frank Nichols-Steuart, as to the advisability of accepting O'Connor's application. The father favored and the mother opposed the loan; not, however, on a question of title. W.R. Smith was present at the discussion and was appealed to for his views, and gave them as before stated, cautioning the parties against any homestead claim or right O'Connor might have. This was investigated and adjusted, and the loan made. W.H. Nichols, testifying by deposition, does not mention the fact that Smith made the statement, but says that he was present and took part in the discussion. T.P. Nichols does testify, that the statement was made while the question of the loan was under discussion, and in the presence of W.H. Nichols and his father and mother; that Nichols did not know Smith had any claim to the land, though the deed was of record, and was not investigating with reference to it; but a clear inference from the transaction is, that had he been told of it he would not have made the loan, and that in this sense his action was influenced by Smith's affirmative statements. There is no direct evidence that at the time referred to Smith had in his mind his title to the land, but we hold that knowledge of such title must be imputed to him, and that his failure to mention it when he actively advocated the loan and made statements as to O'Connor's title, shows either an abandonment of it or culpable negligence."

In addition to the above, the undisputed facts in the record show that W.R. Smith, at the time said loan was made, was a man of considerable means, was a careful business man, and dealt largely in real estate; and was the family physician and an intimate friend of the Nichols family. If it be true that the deed to W.R. Smith was ever delivered to him so as to vest title in him, it follows that he made a false statement to W.H. Nichols' agent in stating that the title of O'Connor was good. Since the deed to Smith could not have become effective unless delivered to him, we are of the opinion that the Court of Civil Appeals were justified in imputing knowledge to him of its existence at the time he made the representation. We think said court was also correct in holding that theconstructive notice of the deed to Smith, arising from its record, did not give Nichols actual knowledge of same so as to show that, notwithstanding Smith's misrepresentation of the title, still Nichols knew of Smith's deed. There can be but little doubt that, under all the circumstances Smith intended his statements to be acted upon, and that they were acted upon and did influence Nichols to make the loan, as found by the Court of Civil Appeals. The essential elements of an estoppel by conduct are said to be, (1) a false representation of material fact; (2) such representation must have been made with knowledge of such facts; (3) the party to whom the representations were made must have been ignorant of the truth of the matter; (4) it must have been made with intent that it be acted upon; (5) it must have been acted upon. Big. on Estop., p. 25; 2 Pom. Eq. Jur., sees. 779-782, inclusive.

We can not say, as a matter of law, that the evidence did not justify the court in finding the facts as above set out. On such finding, the conclusion of law arrived at by the trial court and the Court of Civil Appeals, that such facts estopped Smith and all persons claiming under him, except bona fide purchasers for value without notice, from asserting the Smith title against the Nichols trust deed, is correct.

By virtue of the estoppel, the title of W.R. Smith vested in Frank Nichols-Steuart upon his purchase at the sale under the trust deed; prior to that time it was merely a security for the debt. Therefore the Crosby heirs, claiming by devise from Smith to their mother, and by inheritance from their mother, took no title, and were not entitled to recover. It is clear, also, that when Sampson bought at execution sale the interest of J.M. Smith, in 1890, J.M. Smith had no title to the land, it having passed from his father by estoppel as aforesaid.

But Sampson claims that he, at said execution sale was a bona fide purchaser for value, without notice of the facts constituting the estoppel. This contention must be true in order to authorize a recovery by him.

The execution sale may have been sufficient to pass to him the title of J.M. Smith in a controversy between them, and still not sufficient to put Sampson in a better position than J.M. Smith would have been had lie sued to recover the land from Marx before the execution sale.

Sampson does not ask to be allowed to recover only such interest as his vendor in execution, J.M. Smith, had, but seeks to be placed, in a court of equity, upon higher grounds, upon the theory that he is a bona fide purchaser for value, withoutnotice of the estoppel which passed the title from W.R. Smith to Steuart.

We are of opinion that the consideration of $5 paid by Sampson for land then worth in the neighborhood of $8000 is so grossly inadequate that a court of equity can not considerit a valuable consideration, nor him a bona fide purchaser without notice, within the meaning of the rule. A purchaser may be a bona fide purchaser for valuable consideration and be protected against a superior title of which he has no notice, in cases where he has paid less than the real value of the property; but where the price is grossly inadequate, as in this case, we are of the opinion that he can not be considered either a bona fide purchaser or a purchaser for value in a contest with the claimant of such superior title. We have been cited to no case where a court of equity has postponed a superior title in order to protect a purchaser for such a consideration. Rev. Stats., art. 2318; McKamey v. Thorp, 61 Tex. 652; Worthy v. Caddell,76 N.C. 82; Dunn v. Barnum, 51 Fed. Rep., 358; Knapp v. Bailey, 79 Me. 195; Hume v. Frantzen (Iowa), 34 N.W. Rep., 490; Phillips v. Pullen (N.J.), 16 Atl. Rep., 10; Curts v. Cisna, 7 Biss., 267; Hoppin v. Doty, 25 Wis. 589; 2 Dev. on Deeds, sec. 733; 2 Warv. on Vend., p. 610, sec. 10.

The cases in which the defendant in execution seeks to set aside the sale on the ground of inadequacy of price are not in point, for in such cases no attempt is made to postpone or set aside a superior title to protect the purchaser at execution sale. Weaver v. Nugent, 72 Tex. 275; Kauffman Runge v. Morriss, 60 Tex. 121; Jones v. Pratt, 77 Tex. 211 [77 Tex. 211].

It follows, that we are of opinion that the Court of Civil Appeals were correct in reversing the judgment of the court below and rendering judgment in favor of defendant Marx, and it is ordered that the judgment of the Court of Civil Appeals be affirmed.

Affirmed.

Delivered January 28, 1895.