Court Opinion

ID: 6906750
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:01:40.247372+00
Date Added: 2024-06-11T16:06:22.705781
License: Public Domain

BURNETT, J.
(Dissenting). — This suit was before this court on an appeal by the plaintiff from a decree of the Circuit Court sustaining a demurrer to the third amended complaint and dismissing the suit. In an opinion reported in 84 Or. 124 (163 Pac. 1166), the decree of the Circuit Court was reversed with instructions to overrule the demurrer. This having been done, the defendant answered, the plaintiff replied and the court heard the testimony of the parties and entered a decree dismissing the plaintiff’s suit with costs. She again appealed.
In addition to the statement in the former opinion, it is proper to say that we glean from the pleadings and evidence that the Cálice Consolidated Mines Company, hereinafter called the company for the sake of brevity, was an Oregon corporation owning mining property in Southern Oregon, and the plaintiff had invested in its stock a sum of money in excess of $15,000. It! was indebted to a banking concern at Grants Pass for borrowed money in the sum of $2,000 and interest, for which the company had given its note and mortgage upon the property, and this constituted the first lien on its holding. The defendant Phegley had purchased this note and mortgage, paying therefor its face and the accrued interest. This appears from undisputed testimony.
One Anderson and his associates had recovered two judgments against the company, one for $2,500 and another for $2,600, which constituted liens second only to the $2,000 mortgage already mentioned. The defendant had a $6,000 mortgage on the property, subsequent and inferior to the judgment liens already mentioned. In a suit to foreclose, making the judgment lienholders defendants, he had obtained a decree fore*316closing Ms mortgages, had issued execution and the day of sale was appointed for June 15, 1907. About this time, the plaintiff, in order to obtain contról of the property with a view of protecting the investment she had already made, approached the defendant, whom she met for the first time according to her testimony, and proposed to purchase his claims against the company. She testifies that she was told of the mortgage by a broker with whom she had had some dealings, and in consequence of this information she felt it necessary to act at once in order to obtain control of the property. Previous to this, Phegley had entered into a contract with Anderson, the substance of which was that the property should be sold either by virtue of the Anderson judgments or foreclosure of the mortgages held by Phegley, and should be bought in by one or the other as they might choose, and the property pooled with mining ground held by Anderson and his associates, the assessment work kept up so as to maintain title, and finally all the properties should be sold together for the minimum' price of $26,000, of which Anderson and associates should receive $16,000 and Phegley $10,000, any excess over the minimum upset price to be divided equally between Phegley on the one hand and Anderson on the other.Anderson was appointed by the pooling agreement to represent all parties in the supervision of the necessary assessment work and maintenance of the property and was tq receive $40 per month for his services.
As stated, Phegley had foreclosed his mortgages and obtained a decree and order of sale, at which juncture the plaintiff opened negotiations with him for the purchase. As a result of these negotiations she had her attorney prepare for her what is known as exMbit “33,” attached to her complaint, it being a *317contract between the plaintiff as party of the first part and the defendant here as party of the second part, whereby under date of June 11, 1907, they agreed as follows:
“That in consideration of the promises of said party of the first part hereinafter set forth, the said party of the second part does hereby sell, assign, transfer and set over unto said party of the first part a half interest in and to the mortgage and other claims belonging to him against the G-alice Consolidated Mining Company and of his rights under a certain decree .entered in his favor in the circuit court of Oregon for Josephine County in a case where he is plaintiff and the G-alice Consolidated Mining Company and others were defendants, under which decree there is to be a sale of the property of said Galice Consolidated Mining Company on June 15, 1907.
“In consideration of the foregoing, the said party of the first part does hereby agree to pay to said party of the second part one half of the amount of his claim against said company at the present time, including one half the money expended by him in the care of said property, amounting in all to ninety-six hundred dollars.”
The remainder of the agreement recites in substance that they should share equally in purchasing the property at the coming sale and neither should dispose of the undivided interest thus obtained, without giving the other an option of thirty days to purchase the same. The plaintiff also bound herself by exhibit “B” to the performance of half of Phegley’s obligation under the pooling agreement.
Afterwards, on October 19, 1907, they entered into the agreement called exhibit “C,” attached to the complaint, narrating the foreclosure of the mortgage and the judgment hens of Anderson; that Phegley had purchased the property of the company by virtue *318of the sale and confirmation thereof and the consequent sheriff’s deed, and that he had assigned to plaintiff a half interest, and later the remaining half, and declaring finally:
“Now, therefore, this is to certify that the said Grant Phegley now holds the naked legal title to the properties so purchased by him at such shle, in trust for the said Anderson, Williamson and Phillips of the one part and said Emma G. Robinson of the other part, whatever the said several interests may be, and without any beneficial interest of his own in and to said property or any part thereof.”
The complaint here was amended by interlineations on its return to the Circuit Court at the time of trial, so as to attack not only the mortgage for $6,000 but also the one for $2,000, on the ground that the latter encumbrance represented a false and fraudulent claim and that in fact no part thereof was due and owing to Phegley from the corporation at any time. The complaint is to the effect that the existence and validity of the $6,000 indebtedness and the liability of the corporation for the further sum of $2,000 were material and prime considerations on the part of the plaintiff, inducing her to “purchase the interests of the defendant, in that the same constituted, if the averments of the defendant were true, a valid and existing lien upon and thereafter a title to the corporate property, the control of which lien and title was necessary for the protection of the plaintiff’s interest in said corporation.” She says in effect that on the contrary neither of these claims had any validity and neither of them represented any actual indebtedness against the corporation. She claims that the foreclosures were collusive. She says she has no plain, speedy or adequate remedy at law, offers to return to the de*319fendant all of the choses in action, property and rights transferred to her by the agreements, exhibits “B” and “C,” and prays that the agreements be canceled and that she have judgment against the defendant for $34,345.43, which presumably is the amount of the various sums of money she has expended in the venture, although it cannot be computed at that figure from the abstract before us.
The answer admits the making of the agreements, traverses all allegations of fraud and misrepresentation and denies the charge that the mortgages mentioned were not valid claims against the company. Affirmatively, the defendant avows making the contracts alluded to and that by virtue thereof the plaintiff entered into possession of the property and has retained the same and the beneficial use thereof up to the present time. Other questions are raised by the affirmative matter in the answer which are deemed unnecessary for consideration.
The crux of the controversy is whether or not the two mortgages in question for $2,000 of money originally borrowed from the bank, and the $6,000 included in the mortgage given directly to the defendant, were valid claims against the company. The plaintiff gave no evidence whatever to support her averment of the invalidity of the $2,000 mortgage. On the contrary, the defendant testifies that the bank was pressing the company for its money which it had loaned and that at that time he bought the note and mortgage from the banking concern for its full face value, including the accrued interest. There is nothing whatever in the testimony to dispute this assertion of the defendant and hence the attack on the plaintiff must fail as to the $2,000 mortgage. She says in her complaint concerning the $6,000 mortgage that it was *320given to - indemnify the defendant against liability which might befall him by virtue of an undertaking which he had signed for the company on an appeal from the judgments rendered against it in favor of Anderson, but that the appeal having been dismissed, that mortgage had served its purpose and thereafter was of no effect, notwithstanding which the defendant had sold it to her, together with the decree for its foreclosure. There is no evidence whatever in the record tending in the least to sustain the plaintiff’s allegation in this respect, although it was denied by the defendant. On the contrary, the latter proved by the testimony of the secretary of the corporation that the company was indebted to its president for money advanced for the expenses of the corporation, and to its then secretary for his salary, which were actual, bona fide claims, and that there were other demands against the company, swelling the total to about $8,000; that the sum of $2,000 returned from a surety company which had taken that deposit as indemnity against liability, was deducted from the total liability of $8,000, leaving a balance of $6,000 of actual indebtedness of the company, which was embodied in the mortgage for that amount of money. The defendant explains that it was takeü. in his name at the instance of the president and the secretary of the company, neither of whom desired to have precedence over the other in his demand against the company, hence at their request he took and held it in trust for them as their interest might appear. He testified as the first witness for the plaintiff, who thereby having called him to testify, vouched for his credibility. He says that for his services he was to have as his compensation one third of the proceeds of the mortgage. He explains that when the property was sold on foreclosure he invested the( *321proceeds of the $6,000 mortgage in stock in another mining company at the direction of the beneficiaries.
It is well to attend to the terms of the agreement which the plaintiff had her attorney prepare. It is said there:
“That in consideration of the promises of said party of the first part [the plaintiff here] hereinafter set forth, the said party of the second part does hereby sell, assign, transfer and set over unto said party of the first part a half interest in and to the mortgage and other claims belonging to him against the Cralice Consolidated Mining Company and of his rights under a certain decree entered in his favor, * # under which decree there is to be a sale of the property of said * # company on June 15, 1907.”
On her part, she promised to pay not only one half the amount of his claim against the company thus recited and evidenced, but also one half of the money expended by him in care of the property, amounting in all to $9,600. She agreed to do those two things: First, to take up half the decree, and second, reimburse the defendant for half he had otherwise expended.
In a sense, these are mutual contractual considerations. They are the language of the plaintiff herself, speaking through her own attorney who prepared the contract. She knew what she was signing and she knew what she was contracting to do and what the defendant agreed to perform. As said in Sutherlin v. Bloomer, 50 Or. 398, 407 (93 Pac. 135, 139):
, “The consideration specified in the written contract consists of certain acts to be performed, and the authorities are practically unanimous in holding that, where the statement in the written instrument as to the consideration is of a contractual nature, as where the consideration consists of a specific and direct *322promise by one of the parties to perform certain acts, it cannot be changed or modified by parol or extrinsic evidence. A party has a right to make the consideration of his agreement of the essence of the contract, and, when this is done, the consideration for the contract, with reference to its conclnsiveness, must stand on the same footing as its other provisions, and accordingly cannot be affected by the introduction of parol or extrinsic evidence: (Citing authorities.)”
The plaintiff’s object, stated by herself, was to obtain control of the property through the sale of the same under the decree of foreclosure, which sale was then near at hand. The decree was a valid one. With the purpose she had in view it could make no difference to her whether the $6,000 mortgage was held by Phegley as trustee or in his own right. Such a representation, even if untrue, would be immaterial under the circumstances and would not be any basis upon which to charge fraud. The undisputed testimony shows that it'was given by order of the directors upon a thorough investigation of the claim upon which it was based, which was for money advanced to the company and for salary to its secretary. Neither can it make any difference to her what disposition was to be made of the proceeds of the sale under the decree, or what compensation the beneficiaries for whom the mortgage was held should give to the defendant for his services. Taking for true all that Phegley said about holding the $6,000 mortgage for the benefit of those to whom the money was due, yet the decree was valid because Section 29, L. O. L., says:
“An executor or administrator, a trustee of an express trust, or a person expressly authorized by statute, may sue without joining with him the person for whose benefit the action is prosecuted. A person with whom or in whose name a contract is made for *323the benefit of another is a trustee of an express trust within the meaning of this section.”
Although Phegley held this mortgage in trust for other parties to whom the indebtedness was actually due, and although they were to compensate him for his services, all of which is undisputed, the claim upon which the mortgage was based, the mortgage itself and the decree entered in pursuance thereof constituted a valid claim against the company and a lien upon its property. Its ownership gave her the control she desired. The plaintiff herself says that she sought Phegley, not he, her. She said she had never met him before and had never even known his name until she “learned he had foreclosed this mortgage.” She further says:
“So then I talked over the matter with him and said I wanted to save my possession, and it resulted in me buying out the half of his interest for exactly dollar for dollar of what he himself had put into the property.
“Q. How was the amount arrived at?
“A. We counted up the first mortgage and interest on that and the second mortgage and interest on that and what he claimed he had spent on the property, and attorney’s fees and expenses in going over the property and different times down to Grants Pass and everything dollar for dollar of what he had expended up to that time on the property and I was to pay that; it amounted at that time to nine thousand, six hundred and three dollars, and when I took over the one half I paid him cash difference, the one dollar and a half so as to make it a round number.”
On cross-examination she testified as follows:
“Q. Just when you made the deal, just what did Mr. Phegley say to you regarding the claim he had?
“A. I could not repeat his words eleven years after. I am under oath. I know, the impression I got from him.
*324“Q. I don’t care.about the impression.
“A. I conld not repeat Ms words. He said he had advanced so much. He used words so that I fully understood that he had advanced that money, — put that much money right over into the property.
“Q. Did he use the word ‘advanced’?
“A. I could not swear to that.
“Q. Did he use the word ‘pay ’?
“A. I could not swear to the exact words he used.
“Q. All you are testifying to is the impression that he left with you?
“A. I am testifying to the exact understanding his words gave me, but whether he used this word or that word I couldn’t say. I 'know I talked with him that I wanted to save my stock in that property and must do so.
“Q. And you wanted to get these mortgages so you could save it? .
“A. Yes, sir; that was the only way open to me, was to buy a half interest with him.’?.
The ground of her attack upon the $6,000 mortgage, as stated before, is to the effect that it' w;as given solely to secure the defendant against any liability which might arise out of his suretyship on the appeal undertakings which he had signed for the company in appeals which had long since terminated, thus destroying any possibility of Ms being held upon the undertakings. But, as stated, she produced no syllable of testimony on that subject. The validity of the mortgage is beyond dispute and it was an actual, bona fide indebtedness of the company. It is a mere quibble to say that because Phegley held it as trustee, claiming also an interest in the proceeds as compehsation, the claim was not a valid one for which the property was liable. Phegley was entitled to collect every cent of the claim, because he had a valid decree for it which the plaintiff has utterly failed to impeach in dny sense 6f the word.
*325She has sought by this suit, not to recover damages for the fraud she claims to have been practiced upon her, but to rescind the contract on account of the alleged deceit and to secure a restoration to her of all that she parted with in consequence of having made the agreement. She might have elected to sue for damages. She did not, but chose rather to sue in equity for a rescission. But, whichever horn of the dilemma she adopts, and whether this is to be treated as a suit to rescind or as an action for damages, she has utterly failed to prove any of the allegations of her complaint respecting the fraud charged.
While testifying as a witness for the plaintiff, after stating that he was a trustee for parties who had advanced the $6,000 to pay the debt of the company, Phegley was asked this question by her counsel:
“Was that fact communicated by you to Miss Robinson at the time of your negotiations with her, as a result of which the contract admitted in the pleadings was executed?”
—and replied:
“I may have told Miss Robinson that I was holding the $6,000 mortgage for other parties, but the $2,000 mortgage I owned myself.”
In brief, under the circumstances disclosed by the evidence it is immaterial whether Phegley held this $6,000 mortgage and the decree in pursuance thereof; entirely in his own right or wholly in the right of another or partly in his own right and partly in that of others. It was still a valid lien upon, the property which the plaintiff sought to obtain so as to control the holdings of the company. Having prepared the agreement herself by. her own attorney after a full explanation and computation of the several amounts due, she certainly cannot claim that she was defrauded. *326She has wholly failed to establish a solitary controverted allegation of her complaint. She may have paid too dearly for her stock in the first instance, but she did not buy that from Phegley, nor was he known to her at that time. The corporation may have suffered in its litigation resulting in the two judgments against it, but Phegley is not shown to have influenced that matter. Moreover, no question is raised about them in this suit. The essence of the present contention is that she insists the mortgage was fraudulent, whereas it is plainly demonstrated that it was a just and valid claim against the concern. In the present juncture she has no cause of complaint, for she has utterly failed to prove her allegations. Very likely, she made an unprofitable investment like many another, possessed by a craving for sudden wealth, who has put money into mining ventures without experience in the business or knowledge of the property; but that is no reason why we should amerce Phegley for her benefit. The decree rendered by the judge who heard the testimony and saw the witnesses should be affirmed. Modified. Rehearing Denied.