Daily capital journal. (Salem, Oregon) 1903-1919, 1911-11-17

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ed it and the deed and loaned to the
Stone company through its secre-
try, Baylis, $4,000, taking as secur-
ity in pledge therefor $4,000 of the
bonds provided for in the mortgage
The fact that the loan was made on
these bonds as a pledge was kept Sc
cret from the intervenors until after
the deed had been surrendered and
it and the mortgage recorded Yield
ing to the opportunities and persua-
sions of the president of the Trust
company, the interyenors accepted
this $4,000 together with $500 other
wise raised by the Stone company
and the $4,000 in bonds, all the time
ignorant of the fact that the 10000
had been raised upon pledge Of the
| S17,0 900 in bonds. Afterwards these
pledged bonds were sold in part so
that they were reduced to $1S, 1000 and
the proceeds from such sales and
payments from other sources re-
duced the note to $4.19T45 on July
21, 1909. Becoming dissatisfied with
the Trust commpany as trustee, the
| intervenors caused it's removal as
aforesaid and directed the new trus-
tee to commence suit to foreclose
the mortgage for the payment of
their bonds amounting to S2O,5O0 and
S6,5O0 of bonds held by other parties
about which there is no question,
making $4,000 in all
For the purpose of this decision,
the answers of the other defendants
or lien holders are not material at
this juncture. The defendant Trust
company answered and after some de-
malls set up, in substance, that II
took the $4,000 remaining on hand
of the bonds for collateral security
for the $4,000 loaned to the defen-
dant Stone company through its sec
retary, Baylis; that it had brought
suit to foreclose it's pledge and
sought to apply the proceeds of a
| sale of the $4,000 bonds not only to
the payment of the Baylis note but to
other Indebtedness of the defendant
Stone company owing to the Trust
company and that at the sale upon
the decree ensuing, 1t had purchased
the $4,000 of bonds remaining and
was then the owner and holder
thereof. The intervenors then filed
their complaint in Intervention
charging, in substance, that, having
entered into the escrow agreement
mentioned, the defendant Trust COM
pany and the officers of the defen-
dant Stone company had formed a
conspiracy to defraud the interven-
ors and to so manipulate the bond
transactions as to deprive them of
their property in the stone quarry
and to prevent them from realizing
the full purchase price thereof The
burden of their prayer was that the
$4,000 bonds should be cancelled
and held for naught in the hands Of
the defendant Trust company. An
swering the complaint in interven-
tion, the Trust company, after GER
tain denials, attempted to plead that
the intervenors, having accepted the
| S10,500 cash and $4,000 in bonds un-
der the offer and acceptance and not
having returned either the cash or
bonds to the Stone company, but on
the contrary, are seeking to have the
mortgage foreclosed to pay these
very bonds, are estopped to make
the allegations of the intervention
complaint The Trust company also.
in this answer, deraigned title to the
$4,000 of bonds by virtue of pur-
chase at the sale on foreclosure of
the pledge as before mentioned. The
new matter Of the Trust company s
answer to this complaint was ira
versed by the intervenors.
The substance of the dcree of the
court below was to cancel these
bonds and forecose the mortgage for
the payment of the remaining $27,-
900 of the $4,000 issue authorized by
the mortgage in the first instance
The Trust company appeals from
that decree.
Burnett, ]. The question to be de.
termined upon this appeal is wheth.
er or not that $4,000 of the bonds
mentioned are valid in the hands oi
the Trust company, as against the
intervenors here.
In effect, the Trust company, BY
its custody of the intervenors deco
to the land in escrow, held the lane
itself in trust for the time being ac.
cording to the terms of the escrow
agreement. The transaction amount
ed to an option agreement for the
sale of the real property in question
to be effected or not according t
whether the notes mentioned were
paid and the other conditions were
performed or not Under these cir
cumstances it was the duty Of thu
Trust company to act with the ut
most candor and fairness toward thu
intervenors and not to part will
their property or what was substan
TALLY the same thing, surrender theil
deed without actual authority from
them to do so. Above all, In equitl
and good conscience, 1t could not 81
manipulate the transaction as to i'm
pair or lessen the security for thu
payment of the purchase price OF tn,
land as against its clients, the inter
venors, or so as to gain over then
an advantage for itself
It is contended however, on behal
Of the Trust company, that the Of
fer of the Stone company made Jan
uary 23 1908, and above quoted con
stituted a new contract which super
sedes and nulliies the escrow agree
ment under which the Trust com
pany held the deed of the lnteryen
ors and hence justified the Trus
company in delivering the deed tC
the grantee and released It from ans
obligation to the intervenors. This
position is fallacious ana unsount
for three reasons; first, the offer anC
acceptance Of January %, 1908, was
still eXecutory when the Trust com
pany delivered the deed and could
not amount to payment Of the pur.