89 P. 952 | Or. | 1907
Lead Opinion
Opinion by
Upon the first appeal of this case it was determined that the facts stated in each of the three separate defenses constituted a good defense to the action, which, with the necessary legal inferences therefrom, under the principle of stare decisis, are now binding on this court. It was there held that it may be shown by parol that a promissory note was in fact made to secure the debt and liability of another, and thus all the makers be entitled
The principal question now to be determined is whether there was any competent testimony offered tending to support any of the alleged defenses, so that it was incumbent upon the court at least to submit the cause to the jury, and also whether, from the admitted facts and uncontradicted testimony material to the issues, the court was bound to direct a verdict for the defendants or for a part of them. The following facts were either admitted or jiroven by competent testimony:
The Portland University was incorporated in 1891 under the laws of Oregon for the purpose of establishing and maintaining an institution of learning, which, for brevity, will be hereafter referred to as the “University.” This corporation was without funds and credit. To provide it with both, another corporation was formed and known as the Portland Guarantee Company, which, for the same reason, will be referred to as the “Company.” The purpose and object of its formation was to aid the University and to act as its financial agent. The plan adopted for getting money for the University was to issue bonds and have their payment guaranteed by the Company. Bonds to the amount of $250,000 were issued and guaranteed. With these bonds a large amount of land in the suburbs of Portland was purchased by and conveyed to the University, which was also conveyed by it to the Company. This land was laid out into lots and blocks and platted as “University Park.” The object and purpose of this transaction was to have the Company act as the financial agent of the Universitjr with full power to dispose of and convey the lands to purchasers, 'and from such sales, not only pay off the bonds as they fell due, but acquire funds necessary to commence the construction of necessary college buildings and maintain the school. Many lots were sold, a building was erected,
In February, 1892, the University was in need of money, and the Company undertook to procure it. With this object in view, it applied to Ben Selling, who was the financial agent of Mrs. Sarah Wertheimer, for a loan of $15,000. Selling had that amount of his principales money in hand which he desired to loan, but refused to lend it to the Company, giving as a reason that he did not consider it financially responsible. At this time Dr. C. C. Stratton was president oE the board of directors of the University and was a director in the Company. P. L. Willis Avas secretary of both corporations. Messrs. Akin, Meyers, Willis, Crawford and one other were directors of the Company. Akin Avas also a partner in business Av-ith Selling, who was also a stockholder in the University and was conversant with its needs and plans as Avell as the object and purpose of the Company. Stratton, Willis and Akin discussed among themselves and Avith Selling the ways and means of securing the needed money, and concluded that individuals interested in the success of the University might be induced to sign a note to assist the Company in procuring the money, and in formulating this plan each of these parties had talked with Selling. With this object in vieAv, Stratton Avent to each of these defendants and stated in substance that he was acting for the Company; that it needed $15,000 to supply the wants of the University, and could obtain it if he could procure the signatures of 15 good responsible people to the note which he exhibited to each of them; that the Company was amply responsible to the amount of the note, and would pay the note out of the proceeds of the property conveyed to it by the University, Avhich it was then selling by lots; and that, in case there should be a failure thus to pay the note, the Company would set aside about 88 lots out of which sales Avould be made to pay the note. The Company was to sell the lots, but how the said 88 lots were to be set aside for security was not agreed upon Avhen Stratton procured the signatures of the defendants and
Stratton, after obtaining the signatures, delivered the note to Willis, as secretary of the Company, which, on February 29, 1892, the date of the note, ordered a note of like amount and upon tbe same terms executed in its name and in favor of the defendants and their co-makers, and to secure the payment of the same it also ordered that a deed of general warranty be executed in its name, conveying to E. H. Habighorst certain lots in University Park, both of said instruments to be left in escrow with P. L. Willis, to be by him delivered to. said Habighorst upon the latter’s request, for the protection and benefit of the makers of the note. In pursuance of such order, a note and deed of the character described were executed, but were never delivered to Habighorst. Nor did any of the defendants know of the execution of the note until after this action was brought. Nor did any of them, except Habighorst, know of the execution of the deed; and he learned of its existence only after the making of the contract extending the time of payment of the note in suit. Willis, after receiving from Stratton the note in suit, took it to Selling and received from him the money. Selling never had any dealings with any of the defendants or their comakers in the matter of making said loan. ,
The interest, which fell due quarterly, was paid by the Company to Selling at the latter’s office, Willis always attending to that matter. The records of the Company show that a warrant
From these facts plaintiff contends that the essence of the transaction is a loan by Mrs. Wertheimer to defendants and their co-makers, who thereupon loaned the money to the Company and received its note payable one year after date with security; that the relation of principal and surety between the Company and defendants did not exist, especially as to Mrs. Wertheimer, who had declined to loan to the Company, because there was no privity of contract between her and the Company; and that the extension agreement plead as a defense was not made by her with the principal debtor, but with a stranger to the original transaction, and that its execution could have no effect on the rights of these defendants. The defendants, however, contend that the Company borrowed the money from Mrs. Wertheimer, and that their note was given to be used’ by the Company as collateral security for such loan with the knowledge of such fact in Mrs. Wertheimer, and that thereby they were sureties only.
But we are to inquire what knowledge, if any, Mrs. Wertheimer is chargeable with respecting such relationship of principal and surety as to this debt. Besides Selling’s knowledge of the purpose and object of the loan and who derived the sole benefit thereof, and the peculiar manner in which the defendants’ signatures were obtained, all of which we think would be quite sufficient for that purpose, we need go no further than the recitals of the contract-\for extension of payment to conclusively settle that matter. ' It is there admitted over Mrs. Wertheimer’s signature, affixed thereto by her agent, Selling, that the loan was for the benefit of the Company, and that it received the money, and its duty to pay the loan in the first instance is at least impliedly admitted. It is therein recited that “said Company desires a further extension of time,” and it is therein expressly agreed that “said Wertheimer shall and will extend the time of payment of said loan so that it may be paid by said Company on or before the 29th day of August, 1894.” This language, necessarily presupposes knowledge of the existence of some prior legal obligation resting on the Company to pay said loan arising either out of a direct promise to that effect made to Selling or out of a collateral promise made to the makers of said note.
The ease of M'Questen v. Noyes, 6 N. H. 19, cited and quoted from with approval by Mr. Chief Justice Bean in Hoffman v. Habighorst 38 Or. 261 (63 Pac. 610: 53 L. R. A. 908), at page 269 of the opinion, is very much to the point here, and in Commercial Bank v. Wood, 56 Mo. App. 214, which is a case very similar, at least in principle, to the case at bar, the plaintiff made the same contention that is now made here. Mr. Justice Ellison says: “Plaintiff seeks to avoid the force of the contract of extension of. time by the assertion that the extension of time must be on a contract with the principal debtor, and that Patton, and not Schneider Meyer, is the principal debtor in this case. But we have already seen that in this state it is settled that Schneider Meyer by his assumpsit became a principal debtor to the holder of the note.” In Union Life, Ins. Co. v. Hanford, 143 U. S. 187 (12 Sup. Ct. 437: 36 L. Ed. 118), Mr. Justice Gray applied the same doctrine. There a mortgage upon realty was made to secure a loan. Subsequently the mortgagor sold and conveyed the premises by warranty deed to a third party, excepting, however, from the warrantee the said mortgage. The deed recited that the grantee expressly agreed to assume and pay the mortgage debt. This contract was brought to the knowledge of the mortgagee, who, for a valuable consideration, paid by the grantee, extended the time of payment of the mortgage debt without the consent of the mortgagor. Afterwards, on foreclosure, the mortgagee asked for a personal judgment against the original mortgagor for a deficiency after sale of the mortgaged premises. At page 190 of 143 U. S. (page 438 of 12 Sup. Ct.: 36 L. Ed. 118), Mr. Justice Gray says that “by the law of Illinois, where the present action was brought, as by the law of New York and of some other states, the mortgagee may sue at law a grantee, who, by the terms of an absolute conveyance from the mortgagor, assumes the payment of the mortgage debt.” And this is upon the principle of law announced by this court in Washburn v. Interstate Invest. Co. 26 Or. 436 (38 Pac.
The settled law of this state is the same as that of Illinois and New York — that one who accepts a conveyance of lands in which it is provided that the grantee shall assume the payment of a lien on such lands makes the debt his own, as though he had originally executed it: Haas v. Dudley, 30 Or. 355 (48 Pac. 168); Farmers' Nat. Bank v. Gates, 33 Or. 388 (54 PaC. 205: 72 Am. St. Rep. 724); Windle v. Hughes, 40 Or. 1 (65 Pac. 1058). In Haas v. Dudley, 30 Or. 355 (48 Pac. 168), Mr. Justice Wolyerton says: “The defendants, however, became the principal debtors, as between them and the plaintiff, when they assumed the payment of the $5,712 upon the mortgage, and the plaintiff remained simply as surety for them.” And in Farmers’ Nat. Bank v. Cates, 33 Or. 388 (72 Am. St. Eep. 724: 54 Pac. 205), Mr. Justice Bean says: “By the terms of the conveyance from Gates he assumed and agreed to pay it as a part of the purchase price, and thus made it his own as effectually as if he had executed it himself.” And hence the cases of Union Life Ins. Co. v. Hanford, 143 U. S. 187 (12 Sup. Ct. 437: 36 L. Ed.
It will hot" be necessary to consider any other of the assigned errors, as this doubtless disposes of the case. The judgment should be reversed, and the cause remanded for such further proceedings as may be proper and not inconsistent with this opinion. Reversed.
Rehearing
Decided 23 July, 1907.
On Motion for Rehearing.
Opinion by
A very earnest motion for a rehearing has been filed by plaintiff’s counsel in this case, in which connection all the issues involved have been reargued; but, after a painstaking and careful re-examination of the whole case, we are constrained to recommend an adherence to- the opinion.
While the Company may be a stranger to the transaction, so far as disclosed by the paper evidence of it, yet it was not a stranger to the real transaction as disclosed by all the facts giving origin to the paper. It may be conceded, for the purpose of argument, that the defendants, in fact, as well as by the terms of the note, were the real borrowers from Mrs. Wertheimer of $15,000, and were her principal debtors at the time of the signing of the note, .yet back of their contract with her, there is 'another contract between the defendants and the Company, to the effect that if defendants would sign the note in question, and permit the Company to obtain from Mrs. Wertheimer, for its own use and benefit, the ju’oeeeds thereof, it would become paymaster of the note, and upon which the later transaction was based. Mrs. Wertheimer, through her agent, Selling, had notice of this collateral contract at the time of the execution of the note, as well as at the time of the execution of the extension
In Arnold v. Green, 116 N. Y. 566 (23 N. E. 1), it is said that the terms “stranger” and “volunteer,” as used with reference to the subject of “Subrogation,” mean one who in no event resulting from the existing state of affairs can become liable for the debt, and whose property is not charged for the payment thereof, and cannot be sold therefor. The payment by one who is liable to be compelled to make it or lose his property will not be regarded as made by a stranger. When the person paying has an interest to protect, he is not a stranger: Suppiger v. Garrels, 20 Ill. App. 625; Bennett v. Chandler, 199 111. 97 (64 N. E. 1052) ; Mavity v. Stover, 68 Neb. 602 (94 N. W. 834). If, during the period of leniency granted in the extension agreement, defendants had tendered payment of the note, and it was accepted, and then they had sued the Guarantee Company upon its contract of indemnity with them, it, no doubt, could successfully plead in abatement its extension agreement with the payee; but, if defendants had been sued by Mrs. Wertheimer upon this note prior to the expiration of the time given in the extension agreement, they not only could have successfully pleaded the agreement as a defense, but they would have been bound to do so to preserve their right of immediate indemnity as against the Guarantee Company. Not to do so would be in effect confessing judgment upon a demand, the maturity of which had been extended for a valuable consideration paid by one in privity with the defendants.
No distinction whatever has been suggested by counsel for plaintiff, and we think none can be found, between the case at bar. and the case of Union Life Ins. Co. v. Hanford, 143 U. S. 187 (12 Sup. Ct. 437: 36 L. Ed. 118), cited and quoted in the opinion, and other eases cited there in the same connection, to which may be added the following, to the same effect: Herd v. Tuohy, 133 Cal. 55 (65 Pac. 139); Wyatt v. Dufrene, 106 Ill.
For these' reasons the motion should be disallowed.
Beversed: Bei-iearing Denied.