Woods v. Topletz

YOUNG, Justice. The Court, on its own motion, withdraws its former opinion herein, of date January 14, 1939, and in lieu thereof substitutes the following as our opinion in this case; the judgment as heretofore rendered in the matter of reversal and remand not being disturbed, Mr. Chief Justice BOND dissenting. This is without prejudice to appellees’ right to amend their motion for rehearing (now on file), in view of the above action of the Court. Susie Woods, a widow, has prosecuted this appeal following an adverse judgment of the trial court by way of peremptory instruction, S. Topletz and M. Saffir being defendants and appellees. A summary of plaintiff’s second amended petition on which the case was tried (March 30, 1937) discloses that she was the owner of certain lots on Thomas and Thompson Streets, Dallas, on May 24, 1927, when she consummated loans thereon from appellees, thereby financing the erection of a two-story brick building, comprising four 5-room. apartments; the cottage- already on the premises being improved as a part of the loan agreement. First and second lien notes secured by separate deeds of trust, evidenced the transaction. These consisted of an $8,500 note payable five years after date to order of S. Topletz with eight per cent, interest payable semi-annually; a second lien note in the sum of $5,872.62, payable to order of M. Saffir in monthly installments of $150 each, beginning six months after July 1, 1927, until paid bearing eight per cent, interest, the amounts due each month prior to said date being somewhat larger. Said monthly payments were to be deposited regularly as stipulated with the holder of the installment note, and applied first to the interest as it accrued on the $8,500 note, then to interest on such second note, the balance to the principal thereof. L. Topletz was trustee in both deeds of trust, and policies of fire and tornado insurance were taken out and held by said Topletz and Saffir as additional and collateral security under the provisions of the said instruments, in connection with the policies of fire insurance just mentioned, plaintiff alleged that she at no time knew the amounts thereof nor the insuring companies, but that under the terms of same, a loss clause was payable to S. Topletz as holder of the $8,500 note, who had an arrangement with M. Saffir, the second lien holder, as to how the policies should be handled in case of fire. The premises in question sustained a material fire damage on May 7, 1932, according to plaintiff’s pleading, under which an adjustment of $3,704.81 was made with the insurance company, and an accounting was asked in relation thereto; plaintiff claiming that the necessary repairs in rehabilitating the property were $1,002.60, and after further deduction of taxes and interest on both notes, a substantial amount remained from this loss to apply on the aforesaid indebtedness. Plaintiff further alleged the occurrence of a second fire on May 30, 1935, at a time when the fire policies were held by defendants Topletz and Saffir, and the notes of defendants were in good standing, the payments having been met, as plaintiff claims, in accord with the agreement and understanding of the parties; further pleading a destruction of the building and contents to such an extent that she could not rent the same, so as to get sufficient income therefrom, pending reconstruction, for .continuing her payments on the notes, which the defendants understood; that she secured figures as to cost-of repairs, the estimate being $1,200; and that a few days thereafter she called *783 upon defendants and reported the amount of said estimate, requesting permission to repair the premises, which was refused by defendants on the ground that they desired to collect the insurance and make the repairs themselves. Allegations were further that some time latér the adjustment was effected as to the loss, and after drafts aggregating $4,195.01, payable to plaintiff, defendants, and another, had been received, .plaintiff refused to endorse same until defendants had agreed to the expenditure of not more than $1,200 in repairing the property, the balance of the $4,195.01 to be applied to the notes and interest, after deducting adjustment cost; that plaintiff later discovered defendants were in a conspiracy to appropriate the whole of said fire proceeds to their respective notes, placing plaintiff in default as to said debts, with her property in a burned condition, thereby depriving her of any rents and revenues from which to make current payments ; and that defendants breached their said agreement to repair and to apply the balance of the insurance; but, on the other hand, credited the whole of the $4,195.01 to their notes and then declared the balance of same in default and subject to foreclosure. Plaintiff pleaded a deed of trust sale under the $8,500 first lien note owned by Topletz, a purchase of the property described therein by the latter, a sequestration proceeding by S. Topletz whereby plaintiff was .ejected, a replevy thereof by defendants, who have since possessed, repaired and rented the premises, diverting all rents and revenues to their’ own use and benefit. Plaintiff prayed in said amended pleading and cross action for a restoration of the property, an accounting and application of the insurance money according to the alleged agreement; and for damages on said sequestration bond, both actual and exemplary, against appellees and sureties as a result of her ejectment and loss of property. By way of answer to the merits of the above stated cause, defendants Topletz and Saffir pleaded a written accord and settlement as to the fire of May, 1932, admitting the history of the two notes described by plaintiff; Topletz averring the extension and renewal of the $8,500 first lien to May 24, 1935; and that prior to said maturity date and continuously thereafter, he had advised plaintiff that said note must be paid when due and would not be' extended, at all times insisting on its payment. Defendant Saffir similarly pleaded a defaulted condition of the second lien note on May 24, 1935; and that at the time of the fire (May 30, 1935), both obligations .being past due, these defendants, as they had the legal right to do, applied the fire insurance proceeds as follows: Jack Barr, adjuster employed to adjust the loss, $209.75; back taxes and insurance advanced by Topletz and Saffir, $514.88; interest on the first lieii note to July 11, 1935, $132.90; interest on the second lien note to July 1, 1935, $81.84; to principal of first lien, $1,246.35; to balance of principal second lien, $2,009.25. After above credit of interest on the Top-letz $8,500 note, the allegations of this defendant were that the principal of same on July 11, 1935, was $7,253.65; reciting a demand upon plaintiff and refusal by her to pay same, and that the deed of trust sale resulted. Defendants claimed the legal right to make- the above application of funds by reason of the full coverage mortgage clause in the policies of insurance, all indebtedness being past due; Topletz further setting forth a cross action for title and possession; and in the alternative, both defendants ask for judgment in amount of their debts and foreclosure, etc. Defendant Topletz set up in trial amendment the rebuilding of the premises after May 30, 1935, at' a cost of $3,000, praying that if the foreclosure sale be set aside, the proceeds of the fire be not credited upon the notes until after deduction of the above cost of repairs and other items. In connection with the evidence introduced on behalf of plaintiff, she testified that in 1927, when the apartments were completed and turned over to her, defendants agreed to collect the rents and apply same to the notes; and after the first fire in 1932, when she began rent collections, that defendants never demanded greater payments from her than-she could collect and turn over to them from rents. It was undisputed that $8.75 was paid to and accepted by S. Topletz on May 27, 1935, as a deposit qn first lien interest, which was three days after the note’s maturity date; nothing then being said by said noteholder about his debt being past- due, or for a payment of same in full; plaintiff stating that Mr. Top.-letz merely asked for more rents, which were promised in a few days when the tenants paid. It also appears that plaintiff had paid during May, 1935,. the sum of $22.50 on the principal of the second note, the balance of the Saffir note on May 15 being $2,-524.11; also, her testimony was that appel-lees occupied the same office, Saffir doing the field work, L. Topletz the bookkeeping *784 and S. Topletz furnishing the money. Her further testimony disclosed that after the fire on May 30 and while adjustment of loss was in process, she had estimates made of repair costs and determined that $1,200 would be sufficient to reconstruct the premises; and when drafts for the insurance money of $4,195.01 came in, payable to all interested parties, that she refused to endorse them unless that amount of the funds be paid to her for such repairs; the balance to be applied on the loan after adjustment costs. Plaintiff’s version of the conversations as to this, and leading up to signing the drafts, should here be quoted. She testified: “Q. What did you do after you had that estimate made? Did you have any conversation at all with Mr. S. Topletz and Levi Topletz? A. I had a conference with Mr. Levi and S. Topletz both; Mr. Topletz, Levi, I asked — I was talking to him all the time I was up there, I went every day, and I told Mr. Levi I could get the house repaired back for $1200.00, and he said if I didn’t let Mr. Saffir repair the house then they would foreclose on me, and I told him * * * that was Mr. L. Topletz. I told him that I would get somebody to take up my note; I said that you had done took all the money you can get, and I can get the note taken up when I get the house repaired; I have three different men that will take up the note after I get it repaired, and he said he could take the money, he could do anything he wanted to do. “Q. Did you ever go back to him after that? . A. Yes Sir. . “Q. Who was with you when that statement was made? A. Mr. S. Topletz was there at my house, and Mr. Levi made that statement, and there was two other men in the office with him. “Q. Did you go back at any time and reach any kind of an agreement about repairing it? A. No sir, he didn’t try to reach any kind of an agreement; I asked him if he would let me have $1200.00 to repair the house, and he said he wouldn’t unless I would agree to let Saffir repair the house and that he would foreclose and take all the money and the house too. “Q. You had all these estimates made on the second fire? A. Yes. "Q. Pending adjustment of the fire loss, —or between 'the adjustment of the fire loss and the executing of- these papers, did you have any conversation with him about signing these drafts? A. I wouldn’t go down and sign the drafts then; I went down to Judge King Williamson’s office, and the Judge said, 'Phone and ask him if he is going to let you have the money to repair the house;’ if he would let me have the money if I would sign the draft, and I did phone and he said, 'Yes, come on and sign the draft,’ and he would let me take $1200.-00 to repair the house, and I went up there and signed the draft, and he told me then to come back in two weeks, and when I went back in two weeks then he told me his father was not going to carry the note any longer. * * * “Q. Why did you sign these drafts? A. He told me if I would sign them he would let me have the' $1200.00 to replace the building; then after I signed them he told me to come back in two weeks, then he said he was not going to let me have it and was going to foreclose, his father was not going to carry the note any longer. “Q. Did you get the $1200.00 — what was he to do with the balance of the money? A. He was to apply that on the note. “Q. Both notes? A. Yes sir.” S. Topletz then obtained possession of the property through trustee’s sale and sequestration proceedings, substantially as alleged by plaintiff. L. Topletz had supervised the collection of the property rents from 1927 to the fall of 1932, and plaintiff testified that defendants were at all times, previous to the second fire, satisfied with the arrangement whereby the-rents were to apply on and liquidate the loans; that no demand for payment in full of either note was made until after defendants had collected the insurance; and several witnesses said that around $1,200 would reconstruct the burned improvements. An aggregate of $20,410.43 had been paid on the debt and interest prior to May 30, 1935. It will be noted that in June, 1932, when the first fire loss was adjusted and the property restored, the $8,500 note was then past due, the three-year extension thereon not being executed until long afterward. Plaintiff contends that her evidence in chief presented jury questions of whether in view of the course of dealing between the parties, the acceptance of a partial payment after May 24, 1935, and a demand for further small payments, constituted a waiver of the strict provisions of the note regarding payment in full and right of foreclosure; and of estoppel, under the alleged agreement to repair the building for $1,200, apply the balance of *785 the insurance money on the notes, and then permit plaintiff to take up or rearrange the entire debt. The directed verdict here came at the close of plaintiff’s case and admitted the truth of the evidence in support of her cause of action. In this situation, we must indulge in every legitimate conclusion favorable to the appealing party and warranted by the facts proved; likewise, the record and all inferences properly drawn therefrom are to be construed by the courts against such peremptory instruction. 41 Tex.Jur. Trial (civil) Sec. 180, p. 955; City of Panhandle v. Byrd, Tex.Civ.App., 77 S.W.2d 904. In view of our conclusion that a reversal should follow this appeal, it would be improper to comment on the evidence under review except to say that, in our opinion, jury questions were raised both as to waiver and estoppel. Though the notes on their face were obviously past due, the first as to maturit}' and the second in the installment payments as stipulated, yet considering the history of the loans, the theretofore consistent course of dealing between the parties relative to liquidation thereof from rents, the acts and conduct of S. Topletz prior to May 30, 1935, involved, we think, fact questions of waiver of the strict provision of the note as to payment in full on its due date, and similar provisions of the deed of trust as to foreclosure. Also this agreement, alleged and testified to by plaintiff, raised appropriate issues involving estoppel to declare the debts due with consequent penalties, pending the performance of such promise, assuming its existence. Whether appellees have properly applied the insurance money after the second fire, under the well settled principles of Naquin et al. v. Tex. Sav. & Real Est. Inv. Ass’n, 95 Tex. 313, 67 S.W. 85, 58 L.R.A. 711, 93 Am.St.Rep. 855, becomes a matter of law after above fact issues are determined. Appellees ' argue that the notes were by their terms past due, hence in law they had the right to apply the insurance proceeds on the matured loans as they did; also contending that the facts, considered most favorable to plaintiff, evidenced only an attempt to extend the time of payment by parol, prohibited by Art. 5522, R.S. ; and the attempted extension of past due notes by an alleged agreement to pay same out of future rents was too indefinite, and contrary to the Statute of Frauds. The instant facts we think do not involve an ex-tension of matured debts by parol, but only a waiver of the right on May 30, 1935, to demand payment in full of the notes and foreclosure under the strict provisions, thereof and of the deeds of trust, which alleged defense required no special consideration in support. John Hancock Mut. Life Ins. Co. v. Howard et al., Tex.Civ. App., 85 S.W.2d 986; Manes et al. v. Bletsch, Tex.Civ.App., 239 S.W. 307 (Syl. 3); Cofer et al. v. Beverly, Tex.Civ.App., 184 S.W. 608, 609; and plaintiff’s allegations and evidence, tending to show an agreement whereby she endorsed the drafts on assurance that only $1,200 out of the insurance money would be expended to repair the premises, whereupon she could obtain a loan to repay Topletz and Saffir, raise issues of equitable estoppel. This claimed agreement was plainly based upon sufficient consideration if found by the jury to exist; nor was it within the purview of the above statute requiring lien note extensions to be written, or the provisions of Art. 3995 (Statute of Frauds). See generally the following authorities and cases on-the law questions here discussed. Jones on Mortgages, Vol. 2, 6th Ed., Sec. 1189-1191; 41 C.J. p. 861, Sec. 1054; Diamond et al. v. Hodges, Tex.Civ. App., 58 S.W.2d 187; Ward v. Scarborough et al., Tex.Com.App., 236 S.W. 434; Toplitz v. Bauer, 161 N.Y. 325, 55 N.E. 1059; Arnot v. Union Salt Co., 186 N.Y. 501, 79 N.E. 719; Blackman v. Carey, 192 Iowa 548, 185 N.W. 87. Appellees strenuously argue in-support of the court’s peremptory instruction, of an entire lack of proof corresponding -to plaintiff’s allegations that on July 11, 1935, she endorsed the insurance drafts-on the promise of defendants to repair the property at a cost of $1,200, and apply the balance on the notes. While it is true, the above quoted testimony of 'Susie Woods discloses a somewhat different promise, i. e., one in which she would receive the stipulated amount and make the full repairs, whereupon, she endorsed the drafts, yet the pleading and the evidence taken together clearly raise the material issue of, whether the parties agreed to the expenditure of not more than $1,200 to fully repair the property, on which she acted, as she testified, to her prejudice. Defendants further contend the agreement just mentioned was between plaintiff and Levi Top-letz, without any proof of authority in the latter to bind the defendants. The young *786 er man (styled J. Topletz in plaintiff’s pleading) was alleged to be the agent and attorney for S. Topletz and M. Saffir, and that all three were in a conspiracy to appropriate the whole of the $4,195.01 to the payment of the notes and then place her in default. The connection of Levi (or J.) Topletz in the dealings between the plaintiff and defendants from the beginning, and as trustee in the instruments creating the liens; long a collector of the rents; acting in other transactions testified to in the record, wherein L. Topletz dealt with plaintiff for and on behalf of defendants, we think raise the issue of authority to make the agreement claimed; and, referring again to plaintiff’s verbatim testimony, heretofore shown, the same reasonably charges Mr. S. Topletz with knowledge of plaintiff’s refusal to let Saffir repair the house, as well as of her request to be paid $1,200 for such purpose. Where one with knowledge of, or with notice which would put him on inquiry as to the facts, accepts the benefits of an unauthorized transaction, he is deemed to ratify the same. 2 C.J.S., Agency, Sec. 49, Notes 12, 13, and authorities; and Levi Topletz was undeniably an agent, in some capacity, of the defendants in the transaction, though his authority to make the promise testified to by plaintiff, whereby she endorsed the drafts, is not shown. Even so, the principal, by accepting the benefit of the agent’s act, .adopts also the means by which he procured it, although he may have had no knowledge as to what those means were. American Nat. Bank of Austin v. Cruger et al., 91 Tex. 446, 44 S.W. 278; Allen et al. v. Garrison, 92 Tex. 546, 50 S.W. 335; Lockney State Bank v. Damron, Tex.Civ. App., 179 S.W. 552. Reversed and remanded. BOND, C. J., dissents.