Hill v. Hoeldtke
1912 Tex. LEXIS 100, 104 Tex. 594, 142 S.W. 871 (1912)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When a vendee of land assumes a mortgage debt and the mortgagee accepts the vendee's assumption, the vendee becomes the principal debtor and their obligation to the mortgagee becomes irrevocable without the mortgagee's consent.
Facts:
- F.W. Horstman executed a note for $690 to H.C. Hoeldtke, secured by a vendor's lien on 57 acres of land.
- On November 6, 1905, Horstman sold the land to B.S. McLeary, who assumed the payment of Horstman's $690 note to Hoeldtke.
- On October 16, 1906, McLeary sold the land to L.C. Hill, and as part of the consideration, Hill assumed the payment of the $690 note owed to Hoeldtke.
- Shortly after Hill's purchase, Hoeldtke accepted Hill's assumption of the debt, a fact not known to Hill.
- During the sale, McLeary falsely represented to Hill that a separate $140 note, also a lien on the land, had been paid off.
- On July 11, 1907, McLeary and Hill mutually agreed to rescind their sale; Hill deeded the land back to McLeary, who in turn agreed to re-assume the $690 note. Hoeldtke was not a party to this rescission.
- Hill was unaware of McLeary's misrepresentation about the $140 note at the time of the rescission and only discovered it in February 1908.
- Shortly after the original sale to Hill, McLeary had acquired the $140 note for cancellation, effectively curing any potential injury from the misrepresentation.
Procedural Posture:
- H.C. Hoeldtke sued F.W. Horstman, B.S. McLeary, L.C. Hill, and J.M. Leach in the District Court of Fannin County (a trial court).
- The trial court rendered a personal judgment against Horstman and McLeary but refused to enter a personal judgment against Hill.
- The plaintiffs appealed to the Court of Civil Appeals (an intermediate appellate court).
- The Court of Civil Appeals reversed the trial court, rendering a personal judgment against Hill as well.
- Hill (as petitioner) was granted a writ of error to have the case heard by the Supreme Court of Texas (the state's highest court).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a subsequent agreement between a vendor and a vendee to rescind a land sale and release the vendee from his promise to pay a mortgage debt relieve the vendee of his obligation to the mortgagee, after the mortgagee has accepted the vendee's assumption of the debt?
Opinions:
Majority - Mr. Justice Dibrell
No. A subsequent agreement between a vendor and vendee to rescind a land sale does not relieve the vendee of his obligation to the mortgagee after the mortgagee has accepted the vendee's assumption of the debt. When the vendee (Hill) assumed the debt and the mortgagee (Hoeldtke) accepted that promise, a binding contractual relationship was formed directly between Hill and Hoeldtke. At that moment, Hill became the principal debtor and the original debtor (McLeary) became a surety. This obligation is not revocable by a subsequent agreement between the vendee and vendor without the mortgagee's consent. The fraud claim asserted by Hill is immaterial because he did not rescind the contract based on the fraud, as he was unaware of it at the time. Furthermore, any potential harm from the fraud was cured when McLeary obtained the outstanding note for cancellation shortly after the sale.
Analysis:
This case solidifies the application of third-party beneficiary contract principles to mortgage assumptions in Texas. It establishes a clear point of no return: once the mortgagee-beneficiary accepts the new debtor's promise, the new debtor's liability becomes fixed and cannot be undone by the original contracting parties (the buyer and seller). This ruling provides security and predictability for mortgagees, who can rely on an assumption agreement once accepted, preventing subsequent side deals from undermining their security interest. The decision clarifies that the new relationship is contractual, with the assuming grantee becoming the principal debtor and the grantor becoming a surety.
