Court Opinion

ID: 6902336
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:56:13.001004+00
Date Added: 2024-06-11T16:06:12.992717
License: Public Domain

*393Decided December 26, 1911.
On Petition for Rehearing.
[119 Pac. 724.]
Mr. Justice Burnett
delivered the opinion of the court.
7. In its petition for a rehearing the Portland Trust Company of Oregon seems to proceed upon the theory that in the transaction in question it and the interveners and the Stone Company were all dealing at arms’ length as to each other. It may be conceded that this is true as between the Stone Company and the interveners, and as between the Stone Company and the Trust Company. This, however, is not the case as between the Trust Company and the interveners. As to the latter, the Trust Company occupied a fiduciary relation entailing upon it the strictest fidelity to the interveners, who were, in fact, for the time being its cestius que trustent.
8. It is contended in the petition for rehearing that the interveners accepted the benefits of the transaction named, and that they must be bound by its burdens or by the changed conditions brought about by the act of the Trust Company in delivering the escrow deed. The answer to that proposition is that the interveners accepted nothing from the Trust Company. What they received they had from the Stone Company. As between the interveners and the Trust Company, the escrow agreement was the standard of conduct to be observed. By operation of law one condition of that contract was that the latter should not act under it to the disadvantage of the former. Any act, therefore, of the Trust Company amounting to an impairment in any degree of the ability of the Stone Company to meet its obligations to the interveners, would be a violation in effect at least of the fiduciary obligations resting upon the Trust Company in respect to the interveners. The delivery of the deed left with the Trust Company in escrow rendered it possible for that company *394to acquire $17,000 of the bonds of the Stone Company for the sum of $10,000, and this was one of the results flowing from the transaction. The difference between those two amounts virtually represented a premium paid by the Stone Company for the use of the $10,000. The payment of, or liability to pay, so large a premium as a result of the pledgingtransaction by that much, diminished the ability of the Stone Company to pay the interveners the obligation due to them. In this we think that the Trust Company was at fault, and equity will so mould the conduct of the parties as to make it comply with the standard prescribed by their own stipulations.
9. It is also contended, in substance, that, because the interveners may have bought $2,500 of the bonds of the Stone Company at 90 per cent, they should share in the proceeds of sale on that basis if the Trust Company is itself held to account for the difference between $10,000 and $17,000 the face of the bonds, or is to be relegated to a junior incumbrancer’s place. This would be true probably except for the fiduciary relations between the Trust Company and the interveners already noted. The latter, however, owed no such duty to the Trust Company, and they were privileged to go into the open market and buy the bonds as cheaply as they could. And so with the Trust Company as against the Stone Company, but not as against the interveners on account of the trust relation existing. We do not feel called upon to analyze the transaction beyond its consummation in the loan of the $10,000. If afterwards the Trust Company chose to loan money to the Stone Company, it was no concern of the interveners.
10. We think, perhaps, that the conclusion on the former opinion was not as clearly stated as might be, and so we recast the matter in this way. As respects the bonds only without reference to other liens either prior *395or junior, the mortgage securing the bonds should be foreclosed, and the property sold in the manner provided by law. The proceeds of this sale should be applied pro rata to the payment of the bonds held by H. C. Leonard in the sum of $5,000, Mrs. J. E. Hall $1,000, the Commercial Bank of Oakland $500, the interveners $20,500, and the Trust Company in the sum of $4,197.45; but the remainder of the $13,000 of the bonds held by the Trust Company should be postponed to a second place in relation to the residue of the bonded debt already noted and paid only after such residue is satisfied.
With this modification, the decree of the court below is affirmed as stated in the former opinion.
Rehearing denied. Modified : Rehearing Denied.