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

gam du advantage 10 llSeu over
them. The conditions OF the resolu-
ton passed with reference to the
bonds were that they were to be
sold, and that until said S10,500 cash
had been realized and such settle
ment made with Mr.. Hegele and Mr.
Riedle no bonds should be sold ex-
cept on the condition that the money
received therefor should be refunded
and the return Of the bonds demand
ed in case Of failure to realize $10,-
500 by sale of the bonds on or be-
fore April 1, 1908. The Trust COM
pany was conversant with these con-
ditions. The interyenors had a right
to rely upon their being performed
and actual sales made. The clear
weight of the testimony shows that at
the time they took the $40, 100000 cash
and SlS,00000 bonds the intervenors
did not know that the Trust Company
had assumed to take SIT 100000 OF the
bonds as pledge to secure the pay
ment of the 100000. 1t is contended
for the Trust Company that they must
have known 1t or ought to have known
1t or at least by the exercise of rea-
sonable diligence and prudence might
have discovered It, This contention
would be we'll enough il the interven-
ors and the Trust Company had been
dealing with each other as adversa-
ries or on equal terms, but they were
not The Trust Company occupied a
fiduciary relation to the intervenors.
1t cannot escape its duty by saying
what they must have known or ought
to have known or might have known.
The intervenors were entitled to rely
upon their trustee for fair dealing,
and the absence of any action of the
Trust Company hostile to them or
favorable to its own interests as
against those Of the lntervenors.
Neither is 1t a question of what the
Stone Company had right to do with
its own bonds. The question is what
right had the trustee to accept these
bonds as a pledge In such q way as
to operate against the interest of the
intervenors when 1t was bound in
equity to protect that interest? It is
manifest that the action of the Trust
Company in taking $17,00000 of the
bonds as a pledge for repayment to II
of S10,0000O loaned to Baylls for the
Stone Company and finally buying in
100000 of them at a sale to fore
close the pledge for the balance then
due was inimical to the interest of
the intervenors; for by as much as
the proceeds of sale under foreclos-
ure of the mortgage to secure the
bonds would have to be applied to the
pledged bonds, by so much would the
fund applicble to the payment of the
intervenors' bonds be diminished and
their security lessened. The essence
OF the Trust company's fault as a
trustee is that 1t used its position to
speculate on the securities so as to
get them at about fifty per cent of
their face value, while the interven-
ors we're paying one hundred per cent
This could not have been accomp-
lished unless the Trust Company had
abused the confidence of the inter-
venors by surrending their deed with
out authority and In violation of the
escrow agreement
The decree in the suit by the Trust
company to foreclose the pledge Of
the $13, 100000 bonds does not improve
its title to those bonds as against the
intervenors, for the latter were not
parties to that suit and can be in no
way affected by It,
1t remains to consider the plea of
estoppel urged by the Trust company.
In that connection 1t is alleged, in
substance, that the original escrow
agreement was merged In the offer
and acceptance and terminated by the
mutual consent of the Stone company
and the intervenors; that the offer
and acceptance became and was the
only agreement between the interven-
ors and the Stone company touching
any of the property mentioned In the
complaint in Intervention; that the
latter agreement was performed by
the payment by the Stone company of
$10,50000 cash and 100000 in bonds
and that the intervenors had not re-
turned either the cash or bonds TO
the Stone compny, but are seeking in
this suit to foreclose the mortgage
and force the payment OF the bonds
and in the language of the plea they
are, still seeking to enforce the pay
ment of the said bonds and the fore
closure OF said mortgage or deed OF
trust long after they had known and
been familiar with all the facts and
circumstances and with all the repre-
sentations and statements made at and
prior to and subsequent to the accept
, ance of said cash and OF said bonds
by the intervenors."
In our judgment the Trust company
can take nothing by this plea OF
estoppel. 1t hinges upon the effect
of the offer and acceptance. The
Trust company not bieng a party tC
that arrangement is not affected by
II in It's character as holder OF the
escrow deed and can claim nothing
= under the offer and acceptance in It's
own behalf. 1t Is elementary law that
an estoppel applies only to parties and
prlyies. Falls City Lumber Co. v.Wat-
kins, SO Or. 81. Not being In prlvty
b with the Stone company II can make
no difference to the trustee whether
the intervenOrs returned the money tC
the Stone company or not. Moreover
the offer and acceptance does not In
any way refer to the escrow agree.
ment and cannot be held to aboiRh
or terminate It. In order to reach
p the conclusion Of law set up in this
plea of estoppel to the effect that the
escrow agreemnt was abrogated by
tho offer and acceptance the Trust
company should have pleaded all the
facts surrounding that transaction
among which, to be effectual, would
have been, If It we're a fact, the sur.
render of the deed to the intervenors
and the notes to the Stone company
This would have indicated that the