*607Opinion by
Mr. Chief Justice Bean.
1. The statute provides that the court may “in its discretion and upon such terms as may be just, at any time within one year after notice thereof, relieve a party from a judgment, order or other proceeding taken against him through his mistake, inadvertence, surprise or excusable neglect.” Section 103, B. & C. Comp. An application under this section to be relieved from a default, is addressed to the discretion of the trial court. It however is not arbitrary, but should be exercised in conformity with the spirit of the law, and in a manner to advance substantial justice. An erroneous exercise thereof is reviewable by this court. Thompson v. Connell, 31 Or. 231" court="Or." date_filed="1897-04-19" href="https://app.midpage.ai/document/thompson-v-connell-6897387?utm_source=webapp" opinion_id="6897387">31 Or. 231 (48 Pac. 467: 65 Am. St. Rep. 818) ; Hanthorn v. Oliver, 32 Or. 57" court="Or." date_filed="1897-12-27" href="https://app.midpage.ai/document/hanthorn-v-oliver-6897523?utm_source=webapp" opinion_id="6897523">32 Or. 57 (51 Pac. 440: 67 Am. St. Rep. 518).
2. A judgment taken against a party contrary to an understanding or agreement with his adversary, is taken against him by surprise within the meaning of the statute (Thompson v. Connell, supra; Durham v. Commercial Nat. Bank, 45 Or. 385: 77 Pac. 902), and upon a showing to that effect, seasonably made, should be opened, and the defaulted party permitted to defend, if he has a meritorious defense.
3. Now it seems to us from the affidavits- on file that the decree in question was taken against the investment company contrary to the understanding and agreement between the plaintiff and Mr. Muir, the counsel for such company. It is true negotiations for the settlement and adjustment of the litigation concerning the title to the mining property were principally conducted between plaintiff and the Merchants’ National Bank, but the bank was, in effect, acting for the investment company. The company was largely indebted to it, and had no assets with which to discharge such indebtedness, except its interest in the mining property, and this it was willing the bank might dispose of as it thought expedient. The *608bank and company were both represented by the same attorney, and the bank was, by the assent of the company and its attorney, trying to arrive at some adjustment which would protect it. In making the several agreements, therefore, it was in effect acting as agent of thé investment company, and its agreement was that of the company. The purpose was to dispose of the entire controversy over the title to the mining property by vesting such title in the Taber Fraction Mines Company. This was to be done either by a voluntary conveyance from the investment company or as a result of the litigation then pending concerning the title, or such other litigation as might thereafter be instituted by either party to the agreement. That this understanding and agreement was still in force at the time the default was taken is evidenced by the fact that on June 7th after such’ default had been entered, a modification thereof was made Plaintiff claims, however, that these agreements had reference only to litigation then pending against the Geiser-Hendryx Investment Company in Spokane, and not that in Baker County. The title to the mining property was the subject of the contract, and that was not in controversy in the Spokane litigation. The only suit concerning the title was in Baker County, and therefore the contract must have had reference to such litigation. It was the manifest purpose of the parties to adjust and settle all litigation pending at the time, either in Washington or Oregon, and to adjust it as to all parties concerned therein, with the exception of Taber. This view is confirmed by the letter of June 7th from plaintiff to his attorney, written at the request of Mr. Muir and to the contents of which Mr. Muir assented. In this letter plaintiff says: “I think that every matter embraced in the Baker County litigation will be adjusted as a result of the agreement now in process of consummation,” and that “we have every reason to believe that we will eventually strike hands in such a way that we will both join forces for the administering of á licking *609to Clark Taber.” Taber was the only party, other than the investment company, claiming any interest in the mining property in Baker County, and it is evident throughout all the negotiations between the plaintiff and Mr. Muir, as well as in the letter referred to, that it was the understanding and agreement that the interest of the Geiser-Hendryx Investment Company would be disposed of in accordance with the stipulation of the parties, and that, if such agreement was consummated, a complete settlement of the litigation then pending, except as to Taber, would be perfected. It was in pursuance of this understanding and agreement that plaintiff wrote his attorney at Baker City not to take a decree against the investment company until Muir could obtain its written consent thereto. The decree subsequently taken was in violation of the letter and spirit of this understanding. It was taken without notice to or knowledge of Mr. Muir, and without ascertaining whether he had obtained the necessary written authority from his client. It seems to us that, under all the circumstances, equity and fair dealing require that the decree be set aside and that defendant be permitted to answer, and that it was an erroneous exercise of discretion by the court below, to refuse such relief.
4. It is suggested that a rule of the. court provides that no contract or agreement between parties litigant will be recognized or enforced unless it is made in open court and a note thereof made in the judge’s minutes, or reduced to writing and signed by the parties to be bound thereby. This rule we think was complied with in the case at bar. The agreement to postpone the entry of the decree which we think was violated, was in writing and signed by the plaintiff, the party to be bound thereby, and thus complied in spirit and letter with the rule referred to.
The decree of the court below is reversed and the cause remanded to that court, with directions to allow the motion to set aside the decree and for permission to answer. Reversed.