7 Or. 161 | Or. | 1879
By the Court,
On the nineteenth day of August, 1874, the appellant, B. Goldsmith, borrowed of the respondent one hundred thousand dollars, and gave his promissory note therefor, a copy of which is set out in the agreement of the parties hereinafter set forth. To secure the payment of this note, the appellants, Goldsmith and Teal, and their wives, executed certain deeds to the respondent, Henry Hewett, conveying a large amount of land to him, which deeds were absolute upon their face, but were, in fact, trust deeds, and the condition and terms of the trust were defined by a certain instrument of writing, executed at the same time, which is as follows:
“ Whereas, B. Goldsmith, of the city of Portland, Oregon, has borrowed of James I). Walker, of the city of San Francisco, California, the sum of one hundred thousand dollars, for which he has executed his promissory note; and the same with this instrument and with the deeds hereinafter mentioned, are to be delivered contemporaneously, and take effect at the same time, of which promissory note a copy is in letters and figures following, to wit:
*172 “$100,000. Portland, Oregon, August 19, 1874.
“Two years after date, without grace, for value received, I promise to pay to James D. Walker, or order, one hundred thousand dollars, with interest thereon at the rate of one per cent, per month, from date, till paid. Interest to be paid monthly. Principal and interest to be paid in gold coin of the United States, and not otherwise, at the office of Falkner, Bell & Co., in the city and county of San Francisco, California. And if there be default in the payment of interest for the period of twenty days, then the whole sum, principal and interest, shall, at the option of the holder of this note, be immediately due and payable; provided, that at any time after one year from date before maturity of this note, the same or any installment not less than twenty thousand dollars, exclusive of interest, may, at my option, be paid on thirty days’ notice to the holder.
(Signed) “B. Goldsmith.
“And, whereas, Joseph Teal, of the city of Portland, Oregon, in consideration of said loan and the advance of the said one hundred thousand dollars by said Walker to said Goldsmith, has agreed to become surety for said Goldsmith to the extent of his, said Teal’s, interest and estate in the lands hereinafter mentioned, and not otherwise; and at the request of said Goldsmith, the security for the payment of said money is taken by said Walker in the form 'of trust deeds, or deeds with a separate declaration of trust by way of mortgage instead of mortgages proper, and said B. Goldsmith and Emma, his wife, and Joseph Teal and Mary E. Teal, his wife, as parties of the first part, have executed to Henry Hewett, of the city of Portland, Oregon, as party of the second part, absolute warranty deeds upon their face, as follows
[Here follows an enumeration of the deeds executed, and descriptions of the land conveyed by such deeds.]
“ Now, these presents made by Henry Hewett, aforesaid, party of the first part, said B. Goldsmith and Joseph Teal, party of the second part, and said James D. Walker, party of the third part, witness: That said parties, in considera*173 tion of the premises, mutually agree and declare each to and with each as follows, to wit:
“ 1. Said Hewett holds the legal title to all the lands in the above-mentioned deeds described, in trust, and to the uses herein declared.
“ 2. Subject to the legal title in said Hewett, as aforesaid, said Teal and Goldsmith, or Goldsmith alone, shall retain and have possession of and control over all the said lands; and enjoy and have, without account, the issues, rents, and profits thereof, until such time as the promissory note above-described shall become due, and being overdue shall remain thirty days unpaid, and upon such default in payment being made, said Goldsmith and Teal, and Goldsmith will and shall on demand, peaceably surrender to said Hewett or his representatives or successors in said trust, the possession of all said lands, and every parcel thereof, to be by him disposed of as herein provided, it being understood and agreed that until and up to the time that said default in payment of said note shall happen, and possession of said land delivered to said Hewitt or his successor in trust, the said Goldsmith and Teal, and Goldsmith will and shall pay all taxes of every sort and name, and all assessments and public charges levied on or becoming a lien on said land, and that if they fail to so pay in due time such taxes, charges and assessments, the said trustee may pay the same, and whatever sum he may so pay shall be added to the principal debt against B. Goldsmith, and be repaid with interest at one per cent, per month, from date of payment out of said lands, and be deemed as lien thereon.
“3. If the above-recited promissory note, and the interest thereon, and all the taxes, charges and assessments on said land be duly paid by said Goldsmith or for him, then the deeds aforesaid shall be deemed void, and said Hewett or his representatives or successors in trust shall reconvev all said lands and every parcel thereof to said Teal and Goldsmith, or said Goldsmith, or their representatives entitled thereto. But if the said Goldsmith shall fail to pay the above described promissory note or the interest thereon,*174 and default be made, so that according to the tenor of said note the same shall be thirty days overdue, then said Henry Hewett or his successor in trust may and shall proceed and take possession of said lands, and on thirty days’ notice in writing-to said Teal and Goldsmith and Goldsmith or said 33. Goldsmith, requiring them to pay said debt (including also any delinquent taxes or any taxes paid by said trustee as hereinbefore provided), and on their failure so to pay, shall sell the same at public auction, on not more than thirty days’ public notice, either in parcels or in a body (that is to say, the Linn county lands in a body and the Polk county and Benton county lands in a body or in parcels), at the option of said trustee, and such sale shall be (if made) for cash, and the party of the third part may at his option, being the highest bidder, become and be the purchaser, taking and applying the land purchased upon and in satisfaction in full or pro tanto of the debt aforesaid; and said parties of the second part covenant and agree that if upon such sale any other or further deed, release or conveyance by them or either of them may be necessary to convey their interest to the purchaser, or shall be demanded by such purchaser to quiet his title, they and their heirs or representatives will and shall make, execute and deliver the said deed, release or conveyance, at their own cost and charge. It is expressly understood, however, that when sufficient lands have been sold to pay said debt and charges, the residue of said lands remaining in the name of said trustee are to be reconveyed over to said Teal and Goldsmith or Goldsmith alone, as the right may be. And upon sale of said lands or any portion of them the said trustee is to dispose of the proceeds of sale in manner following, to wit: * * * It is agreed that if at the expiration of one year from date hereof, or at any time thereafter before the maturity of said note, said Goldsmith and Teal shall desire to dispose of any portion of said lands so as to make a payment on said principal sum in said promissory note named, to an amount not less than twenty thousand dollars, the trustee, said Henry Hewett, or his successor in trust, shall so dispose of the*175 same and sell it at prices not under the fair and reasonable value thereof, at private sale, to wit: * * * ”
This agreement was entered into August 19,1874, and was signed by Walker, Hewett, Goldsmith and Teal.
On the eighteenth day of October, 1876, only a small portion of the debt having been paid, other lands were conveyed by Goldsmith and Teal and their wives to Hewett as additional security for the debt, and a second agreement was made between the parties, reciting the existing agreement and the failure of Goldsmith to comply therewith, and that Goldsmith desired an extension of time for one year, with the privilege of paying the interest at the rate of one twelfth of ten per cent, per annum, monthly, and the remaining two twelfths at the expiration of the year; and the fact that Goldsmith and Teal, as further and additional security, had by deeds absolute conveyed to Hewett other lauds described to be held, as the lands already conveyed were held, under the agreement of August 19, 1874, and for the further purposes in the new agreement thereafter named. It was provided in this new agreement that Goldsmith should pay the interest monthly, and the principal at the end of the year as above recited. It was further provided as follows:
“The parties of the second part, in consideration of the extension of the time of the payment of said note for a period of one year from the date hereof, undertake and agree that said Goldsmith will promptly pay one twelfth of ten per cent, per annum of the interest upon the unpaid principal of said promissory note, each and every month, and at the 6nd of the year he will pay the whole of said principal, and the remaining two twelfths of the interest specified in said note upon said principal sum of ninety-six thousand seven hundred and fifty dollars, and in default of the payment of said principal sum or interest, as herein above specified, the whole of said principal sum, and the then accrued interest, shall become due and payable as provided in said agreement of August 19, 1874. And, further, if suit shall be instituted for the collection of said money or any portion thereof, that he, Goldsmith, will pay*176 such attorney fee for instituting such "suit and collecting such money, as the court may adjudge reasonable as attorney’s fees in such suit, which sum may be added to the said principal sum, and judgment or decree may be taken therefor, and it shall become a part of said principal debt payable in gold coin of the United States, and secured as said principal debt is by said trust deeds, and the property therein described, and conveyed to said Henry Hewett. That nothing herein contained shall be so construed as to prevent or prohibit said trustee from selling said land to him conveyed as provided in said agreement of August 19, 1874, upon the default of the payment of said principal sum and interest, as herein above provided that the same shall be paid.
“That said party of the third' part agrees to extend the time of the payment of said principal sum of ninety-six thousand seven hundred and fifty dollars, and two per cent, thereon, for a period of one year from the date hereof, or until default shall be made in the monthly payments of the interest as herein above specified and provided, and no longer; but if default shall be made in the monthly payments of interest, as herein above provided, or of any such payments, then the whole of the said principal sum, with interest thereon accrued at the time of such default, at the rate of one per cent, per month shall become due and payable in gold coin of the United States, as in said note specified, and the said property conveyed to said Hewett in trust, and mentioned and referred to in said agreement of August 19, 1874, and said property herein above described or referred to shall be sold for the payment thereof, as by law and in said agreement provided, and for the payment of such attorney fee as the court may adjudge reasonable in case suit shall be instituted.
“It is distinctly understood and agreed by the parties hereto that said sum of ninety-six thousand seven hundred and fifty dollars, and the interest to accrue thereon, is and shall be payable only in gold coin of the United States, and that none of the security heretofore given or now given by said Goldsmith and Teal to secure the payment of said*177 note is surrendered or forfeited. And, further, that the agreement of August 19, 1874, is not annulled, vacated or set aside by the execution of this agreement, excepting in so far as the same may conflict with this agreement; in all other respects the two instruments are to be taken and construed together. It is further understood and agreed that if the interest shall be promptly paid upon the principal now due upon said note, as herein above provided and agreed, that said interest shall be paid, without default for a period of one year from the date hereof, so that the interest shall at that time all be paid, then the term for the payment of said note (the principal thereof) shall be extended upon the same terms and conditions for a period of another year, the security for the payment thereof remaining the same.”
The monthly interest due on the note was paid up until the twenty-first of December, 1876, but default was made in the payment of interest on the twenty-first day of January, 1877. Since then no interest has been paid. There is no evidence to show that Teal was ever notified of' the failure of Goldsmith to pay the interest due on (he note until some time in May, 1877. In January or February, 1877, at San Francisco, negotiations were entered into between Goldsmith and Hewett, as the agent of Walker, for an extension of the time for the payment of the debt, or, rather, for renewing the loan for several years at a lower rate of interest. Nothing, however, was definitely agreed upon at that time, and the matter was left open for further consideration. Goldsmith having returned to Portland, negotiations for an extension of the loan were resumed by telegraph on the twenty-seventh day of March, 1877, when the following correspondence was had:
“Portland, Oregon, March 27, 1877.
“To James D. Walker, Henry Hewett, agent, San Francisco, Cal., care Faulkner, Bell & Co.:
“If you will delay collection of interest on that one hundred thousand dollar loan of mine, until May next, I will pay it up, and will accept your proposed modification of loan. If this is satisfactory, answer immediately.
“B. Goldsmith.”
*178 “San Francisco, March 27, 1877.
“Received at Portland, Oregon, 27, 1877, 3 r. m.
“To B. Goldsmith:
“Walker absent to-day — unless urgent, wait my return next steamer.
“Henry Hewett.
“10 collect D. R. V.”
“Portland, Oregon, March 28, 1877. “To H. Hewett, care Faulkner, Bell & Go.:
“It is necessary and of importance to have definite answer within two days.
“B. Goldsmith.”
“San Francisco, 28, 1877.
“Received at Portland March 28, 1877, 1:57 T. m.
“To B. Goldsmith:
“We agree — payment back interest May — then renewing loan installment plan — seven years — ten per cent. — answer if accepted.
“J. D. Walker.
“19 collect W. V.”
Goldsmith answered this last telegram, accepting the offer it contained. Nothing further was done until after the first of May, when Hewett, as the agent of Walker, notified Goldsmith of the expiration of time for payment of interest as follows:
“Portland, May 4, 1877.
“B. Goldsmith, Esq., Portland:
“Dear Sir: — When in San Francisco, we agreed to wait, until May, for the back interest due on your note to J. D. Walker. May is now here and Mr. Walker instructs me to collect at once or foreclose.
“Bef erring to our conversation of yesterday, I can only repeat that, from present appearances, it would not be wise for me to inake any new arrangement regarding the Walker loan; but, when the interest is kept paid up, it is easy to arrange the balance. Yours truly,
“Henry Hewett, Agent.”
Teal was not a party to these negotiations for extension of time, and was not cognizant thereof. On the seventeenth day of April, 1877, Goldsmith and wife by deed conveyed
Thus matters stood, and nothing further was done by the respondents until the twenty-sixth day of September, 1877, when this suit'was commenced to foreclose the lien upon the lands conveyed in trust to Hewett by the deeds of Goldsmith and Teal on the nineteenth of August, 1874, and eighteenth of October, 1876. •
The complaint, in addition to the usual allegations in a suit to foreclose a mortgage, avers that Teal became personally liable, under the agreement of October 18,1876, to pay the full amount of Goldsmith’s indebtedness. That he also became liable to pay the same by his acceptance of the deed of April 17, 1877, from Goldsmith to him of the lands conveyed in trust to Hewett.
Goldsmith filed a separate answer, raising the question of the reasonableness of the claim for attorneys’ fees and charges of the trustees.
Teal and wife file a separate answer, in which they deny that Teal was ever personally bound as surety or otherwise. They aver the failure and neglect of Walker and Hewett to proceed according to the terms of the contracts to sell the trust property, and that' Teal was thereby discharged from his liability as surety for Goldsmith. They further aver that in March, 1877, Walker and Hewett entered into an agreement with Goldsmith, without his (Teal’s) knowledge or consent, whereby the time for the payment of the said indebtedness, principal and interest, was extended to May, 1877, and that the property of Teal was thereby discharged from all liability for the debt.
The replication denies the averments set forth in the answer. These are all the points in the pleadings to which we think it necessary to refer.
The court below entered a decree in favor of the respondent Walker against Goldsmith for one hundred and eleven
From this decree both parties have appealed to this court. The first point made by respondents is that under and by virtue of the agreement of October 18, 1876, Teal became personally liable to pay Goldsmith’s debt to Walker. In other words, that he then ceased to be a- surety and became a principal equally liable with Goldsmith for the whole amount due to Walker. To establish this personal liability of Teal, the respondents rely on the following clause of the second agreement dated October 18, 1876: “ The parties of the second part, in consideration of the extension of time of the payment of said note for a period of one year from the date hereof, undertake and agree that said Goldsmith will promptly pay one twelfth of ten per cent, per annum of the interest upon the unpaid principal of said promissory note each and every month, and at the end of the year he will pay the whole of said principal, and the remaining two twelfths of the interest specified in said note upon said principal sum of ninety-six thousand seven hundred and fifty dollars.” We do not consider that Teal incurred any personal liability to pay Goldsmith’s debt by this clause in the agreement. There is no promise by him to pay anything; and the parties themselves specify in the same sentence, and as a part of it, what should be the consequences of a non-payment by Goldsmith, in these words: “And in default of the payment of the said principal sum, or interest as herein above specified, the whole of said principal sum and the then accrued interest shall become due and payable as provided in said agreement of August 19, 1874.”
This clause in the agreement is simply that in consideration of the extension of the time for payment, Goldsmith and Teal promised, not that they, but that Goldsmith would pay the specified interest every month, and the principal at the end of the year; and on the failure of Goldsmith to do
On the seventeenth day of April, 1877, Goldsmith and wife conveyed to Teal all their interest in the common lands ■which had formerly been conveyed in trust to Hewett. This deed contained a recital that Teal “ took said lands subject to said James D. Walker’s lien upon them, for the payment of the promissory note aforesaid, and subject to the indebtedness by said note evidenced.” It is now insisted by respondents that the acceptance of this deed by Teal rendered him personally liable to pay the debt of Goldsmith. This proposition we regard as untenable. The rule, as laid down in the leading authorities, is this: “Where one who has mortgaged land to secure a debt afterwards sells the equity of redemption subject to the lien of the mortgage, and the purchaser assumes the payment of the mortgage as a portion of the purchase-money, the latter becomes personally liable for the payment of the debt of the former to the holder of the mortgage in the first instance.” (Halsey v. Reed, 9 Paige, 446; Marsh v. Pike, 10 Id. 595; Russell v. Pistor, 7 N. Y. 171; Trotter v. Hughes, 12 Id. 74; Stebbins v. Hall, 29 Barbour, 524.)
The supreme court of this state has, in effect, adopted this rule. (Miles v. Miles, 6 Or. 268.) The recital in Goldsmith’s deed to Teal does not state that Teal assumed the payment of Walker’s debt, nor is there any evidence in the case tending to prove that fact. On the contrary, the testimony of B. Goldsmith shows that the consideration for that deed was not the payment of Walker’s debt, but the payment of some other notes which Teal had indorsed for him. We now come to consider the relations of Teal to the debt upon which this suit is founded, and the nature and extent of the liability of his property conveyed to Hewett in trust for the payment of that debt. Teal was not a maker of the note to Walker, nor was he a guarantor
This liability of Teal’s property in the nature of surety-ship for Goldsmith’s debt gave him all the rights of a personal surety with respect to tbe enforcement of the contract. And any act on the part of Walker or Hewett, or the omission to perform any duty or obligation by them which would discharge Teal if he were a personal surety, will equally discharge his property from liability. (Brandt on Suretyship, sec. 21; Vertie v. Underwood, 18 Barb. 561; Van Horn v. Everson, 13 Id. 526; Bank of Albion v. Burns, 46 N. Y. 170; 11 Wend. 312.)
Teal claims that Walker and Hewett neglected to sell the trust property conveyed to Hewett, when by the terms of the contract he was required to do so within a specified time, and that such neglect thereby discharged his property from all liability for Goldsmith’s debt. It is well settled, as a general rule, that the mere passive delay of a creditor in proceeding against the principal, however long continued and however injurious it may be to the surety, will not discharge the surety. But to this rule there are exceptions. If there be a stipulation between the parties that the creditor is on default to sue the debtor without delay, passiveness will discharge the surety. (The Bank of Ireland v. Beresford, 6 Dow. 233.) So where the defendant’s testator was a guarantor for the value of coals to be supplied to one N H. on condition that no application should be made to the surety for payment “ but on the failure of the utmost efforts and legal proceedings ‘of the plaintiffs to obtain payment from N. H.’” It was held by the court of king’s bench that where the plaintiffs suffered two years to elapse before bringing suit against the principal, that the surety was discharged.
Lord Denman, delivering the opinion of the court, said: ‘ ‘ The agreement virtually is (plainly for the surety’s protection) that they, the plaintiffs, shall use their utmost efforts
In the agreement of August 19, 1874, it was stipulated, among other things, as follows: “But if the said Goldsmith shall fail to pay the above-described promissory note or the interest thereon, and default be made so that according to the tenor of said note the same shall be thirty days overdue, then said Henry Hewett, or his successor in trust, may and shall proceed and take possession of said lands, and on thirty days notice in writing to said Teal and Goldsmith and Goldsmith or said B. Goldsmith, requiring them to pay said debt, including also any delinquent taxes or any taxes paid by said trustee as herein before provided, and on their failure so to pay, shall sell the same at public auction on not more than thirty days public notice, either in parcels or in a body.”
By the terms of the note, in the event that Goldsmith should make default in the payment of the interest for twenty days, it became optional with Walker to have the whole amount of the note become due and payable. But after it became payable by the lapse of two years, that option was gone. As it became due on the nineteenth day of August, 1876, Hewett was required, by the terms of the contract, to take possession of the lands on the eighteenth day of September following, and to give Goldsmith and Teal notice to pay the debt on or before the eighteenth day of October, 1876, and in case of failure to proceed and sell the lands within thirty days following.
On that day, the eighteenth day of October, 1876, the parties entered into the new contract, whereby the time for the payment of the debt was extended for one year from that
By this contract, it was no longer optional with Walker to consider the debt due or not due upon the failure to pay the interest punctually. That option given by the first contract was taken away by the second, and a default in the payment of a month’s interest, renderéd the entire debt due at once. It became due by the terms of the contract, and independent of the will of the parties. And in that case, the second contract exacted promptitude in the sale of the lands by Hewett, in accordance with the terms and provisions of the contract of August 19, 1874, as follows: “But if default shall be made in the monthly payments of interest, as herein above provided, or of any such payments, then the whole of the said principal sum, with interest thereon accrued at the time of such default at the rate of one per cent, per month, shall become due and payable in gold coin of the United States, as in said note specified, and the said property conveyed to said Hewett in trust, and mentioned and referred to in said agreement of August 19,1874, and of said property herein above described or referred to, shall be sold for the payment thereof, as by law and in said agreement provided.”
Goldsmith made default in the payment of interest, on the wenty-first day of January, 1877, andón that day the whole lebt became due and payable. By the terms of the agreements, Hewett was required to take possession of all the lands when the debt was thirty days overdue, that is on the twentieth day of February, 1877, and in case of a failure of Goldsmith and Teal to pay the debt after thirty days notice to them, the contract enjoined upon him the duty of selling all the lands at public auction, on not more than thirty days notice, after the failure of Goldsmith and Teal to comply with the requirements of the notice. In other words, Mr. Hewett, the trustee, was required to sell all the trust lands within ninety days after the twenty-first day of January, 1877. This is not like a case of mere forbearance to enforce
It is urged by the counsel for respondents that when default was made by Goldsmith in the payment of interest, Teal had the privilege of paying the debt and taking an assignment of the note from Walker, and that it was his duty to do so, if he desired no forbearance should be extended to Goldsmith in the sale of his property. That undoubtedly would be so in ordinary cases of suretyship, where the surety is under obligation to pay the whole demand in default of payment by his principal. But that is not so in this case. Teal did not agree to become surety for the payment of the whole debt, and to impose this burden upon him would be unjust. And yet he could not obtain possession or control of the note without payment of the full amount to Walker. Teal had, moreover, placed his own property beyond his control by conveying it to Hewett specially to pay this demand, and he had no power to dispose of it even' to pay the debt for which it was pledged. This could be done by Hewett, and by him alone, and only in the manner specified in the agreement of the parties.
It is urged by the counsel for respondents, that Hewett, as trustee, was as much the agent of Teal as he was of Walker, and that his neglect to sell the property was as much chargeable to the one as to the other. We do not so regard it. Hewett directly represented Walker, whose interests were adverse to those of Teal. Teal had already parted with his title to the property, and could no longer control it or direct how or when it should be sold by the trustee. If, instead, the lands had been mortgaged directly to Walker, with power to sell the same at public auction in case of default in the payment of the debt, it could hardly be contended that the mortgagee would be the agent of the mortgagor in making the sale. We think that the neglect to sell the property conveyed to the trustee within the time prescribed
Taking this view of the case, it becomes unnecessary for us to decide what was the effect of the contract made by telegraph on the twenty-eighth of March, 1877, between Walker and Goldsmith as to the extension of time for the payment of the debt.
The decree of the court below is affirmed, so far as it relates to the appellant, B. Goldsmith, and revoked so far as it directs a sale of the lands conveyed by Joseph Teal and wife to Henry Hewett on August 19, 1874, and October 18, 1876. And the said Henry Hewett is hereby directed to reconvey the said lands to said Joseph Teal within three months from the date of this decree, upon the payment by said Teal of the reasonable fees for making such reconveyance.
