Court Opinion

ID: 6906916
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:01:54.440709+00
Date Added: 2024-06-11T16:06:23.082969
License: Public Domain

On Petition for Rehearing.
(187 Pac. 604.)
On petition for reliearing, former opinion modified as to costs, otherwise approved and rehearing denied.
Modified as to Costs. Rehearing Denied.
Mr. Edmund B. Tongue and Mr. Thomas II. Tongue, for the petition.
Mr. Thomas Mannix, Mr. Guy L. Wallace and Mr. Frank Schlegel, contra.
JOHNS, J.
The original agreement known as exhibit “A” was executed on January 8,1915. This was modified by another writing on January 30, 1915, by which the plaintiff undertook and agreed that she would “at her own cost and expense suitably support and educate and maintain the two minor children of the parties hereto during the minority of such children and during the minority of the younger thereof,” and that she would protect and save harmless the defendant “from any liability arising out of and because of the signing of any notes or other evidence of indebtedness by said Louis Hodler, in connection with the purchase of any real estate now standing in the name of the said Delia Hodler.” On February 1, 1915, the plaintiff executed to the defendant her certain negotiable promissory note for $16,000, payable to his order on or before three years after date, with interest at the rate of 7 per cent per annum. Concurrent therewith and to secure the payment thereof, she executed to him the real mortgage upon the land in Washington County, *212the title to which was conveyed to her by her mother. Within a few days after its execution the $16,000 note was indorsed and delivered by Louis Hodler to the defendant Eliza Stone, who became the apparent owner and holder thereof, and to whom the plaintiff paid one year’s interest. The complaint in this suit was filed on or about August 8,1917, and Eliza Stone was made a defendant, for the reason that she claimed to be and apparently was the owner and holder of the note and mortgage. The complaint alleged that while she claimed to be such owner, in truth she was not, and that the note was indorsed without consideration, and that she held it in trust for the use and benefit of the defendant Louis Hodler.
It will be noted that the $16,000 note was dated February 1,1915, and by its terms became due and payable on or before February 1, 1918; that this suit was commenced on or about August 8, 1917; that Eliza Stone was made a defendant because she was the apparent owner of the note and mortgage, and that to obtain a decree, in addition to all other matters, it was necessary for the plaintiff to allege and prove that the transfer from Louis Hodler to Eliza Stone was without consideration, and that the latter defendant held the note in trust for the use and benefit of Hodler.
Counsel for Louis Hodler now vig-orously contend that the Hodlers are in pari delicto, and for such reason neither party is entitled to relief, and that the suit should be dismissed.
As we pointed out in the former opinion, the plaintiff does not rely upon the contract or seek to have it enforced. For her cause of suit, she alleges that it was executed by her through fear and duress and that it was null and void, as against public policy. In his further and separate answer the defendant Hodler pleaded *213that it was a valid and binding contract, and that it was not executed under duress, and he prayed for a decree that it be enforced. Those were the issues upon which the case was tried.
The Circuit Court found that the agreements were executed by the plaintiff under fear and duress, and were void as against public policy, and that the fault of the defendant was greater than that of the plaintiff.
As we construe the record, Delia and Louis Hodler were in pari delicto in the execution of the original contract, exhibit “A,” and in the proceedings to obtain the decree of divorce. The agreement of January 30,1915, shows upon its face that it was based upon, is a part and a continuation of the original contract of January 8,1915. At that time the son Albert was sixteen years old, and Joseph was thirteen. By that instrument it was agreed that the father should be released from any liability for their care, maintenance or education, and that the mother alone should assume all such cares and duties. It appears that one of the boys was then almost a cripple, and in the need of constant care and attention. Although there is no testimony as to the gross amount of such expense until such time as each of them would arrive at the age of majority, it is fair to assume that for the five and eight year periods it would be several thousand dollars, and the question naturally arises, why Louis Hodler should be relieved from that burden and the sole responsibility be thrust upon the mother of his own offspring. As stated in the former opinion, the execution of the agreement of January 30, 1915, by the plaintiff was strong evidence that she was then acting under fear and duress.
Much reliance is placed upon the case of Cincinnati H. & D. R. Co. v. McKeen, 64 Fed. 36 (12 C. C. A. 14), in which Section 1 of the syllabus reads:
*214“Where the parties are in pari delicto, an executed contract will not, as a general rule, be set aside because of want of authority to make it.”
But it further says:
“That the contract had been fully executed; and both parties being equally chargeable with notice of its illegality, and no circumstances of oppression or fraud on defendant’s part being established, it would not be set aside, nor would the note be canceled, the illegality of the contract being a complete defense at law, and the note being overdue at the commencement of this suit.”
The opinion in that case holds:
“In respect to the prayer for the cancellation of the note given by Ives, there is no need for the interposition of equity, even assuming the. contract, in all its parts, to have been illegal and void as beyond the corporate powers of the railroad company. If, at the time this suit was commenced, the company was liable to suit by McKeen, either at law or in equity, upon the note itself, or for its amount as being the balance of the stipulated price for the shares purchased by Ives, trustee, the illegality of that contract would have been a complete defense. Upon the theory that the contract was ultra vires of the plaintiff, it may be that a suit in equity might have been maintained for the cancellation of the note, if one had been commenced before the note fell due, and while there was danger of its being transferred to a bona fide holder for value, without notice from the note itself or otherwise of the illegality of the contract out of which it arose. But this suit was not brought until after the maturity of the note, and therefore a transfer of it, after the institution of this suit, to a third person, would not have cut off any defense that the railroad company could have made as against McKeen, the payee.”
There the note was past due, the illegality of the contract would have been a complete defense in an action at law, and for such reason a court of equity did not *215have jurisdiction. In the instant case, the suit was brought before the note became due and payable, when it was in the possession of a third party who was the apparent owner thereof, and to whom the yearly interest bad been paid on that assumption. While the McKeen case is authority upon the point for which it was cited in the dissenting opinion of Mr. Justice Harris, it is equally good authority for holding that a suit in equity, brought before the maturity of a void note, may be maintained for the cancellation thereof, especially where the note is in the bands of a third party who is the apparent owner and holder, as in the instant case.
Complaint has been made that without any reference to either of them the original opinion overrules the cases of Henderson v. Henderson, 37 Or. 141 (60 Pac. 597, 61 Pac. 136, 82 Am. St. Rep. 741, 48 L. R. A. 766), Ogilvie v. Ogilvie, 37 Or. 171 (61 Pac. 627), and Ross v. Ross, 21 Or. 9 (26 Pac. 1007). The Ross case cites Section 499 of Hill’s Code, now Section 511, L. O. L., which provides that:
“Whenever a marriage shall be declared void or dissolved, the party at whose prayer such decree shall be made shall in all cases be entitled to the undivided third part in his or her individual right in fee of the whole of the real estate owned by the other at the time of such decree, in addition to tbe further decree for maintenance provided in Section 513; and it shall be the duty of the court in all such cases to enter a decree in accordance with this provision. ’ ’
It appears that the plaintiff and the defendant, William Ross, were married in Umatilla County on July 9, 1886, and lived together as husband and wife until February 2, 1888, when the wife commenced a suit for divorce in Morrow County, on the grounds of cruel and inhuman treatment, and that a divorce was granted *216March 16, 1888, on the grounds alleged in the complaint. At that time the defendant was the owner of a larg’e amount of real property, no reference to which was made in the complaint and of which no disposition was made in the decree. On April 1, 1888, William Ross died intestate, after which the plaintiff brought a suit against his heirs and the administrators of his estate, claiming that as his divorced wife, under the above section of the Code, she was entitled to an undivided one-third interest in all of the real property of William Ross at the time of his death. She alleged that when she brought her suit for divorce she was acting under duress, and for that reason did not set forth in her complaint her claim to the real property. The court found that she was not acting under duress, and that at the time the divorce suit was brought the defendant deposited in a Pendleton bank a deed to her for about 1,200 acres of land, which was delivered to her after the decree was rendered; that in addition thereto she had received other property and money from him to the amount of about $2,000; that she had brought nothing to her husband, and lived with him only about a year and a half, and that for such reason she was estopped to claim an undivided one-third interest in his real property under the terms and provisions of Section 499 of Hill’s Code. That was the only point decided in the Ross ease.
In the Henderson case the plaintiff was also granted a divorce from the defendant, and by the terms of the decree the defendant was required to support and educate their minor child until the latter reached majority and to pay the plaintiff $150 per month as alimony. The decree was founded upon a written stipulation between the parties, which was embodied in and made a part of the decree. Afterwards the defendant sought *217to have the amount of this alimony reduced to $75 per' month. The plaintiff contended that he should he es-topped to claim such reduction; that it had been stipulated between them that he should pay $150 per month to her, and that this agreement had been embodied in and made a part of the decree. The defendant urged that the stipulation was void as against public policy, and the opinion there'held:
“It may be stated, generally, that any contract or agreement between husband and wife, which, by its terms or effect, is conducive to a relaxation or a severance of the marital ties, is void, as contrary to public policy, and will not be upheld or maintained. But where a separation has been induced, not by collusion, but by the vicious conduct or disability of one of the parties, without inducement or fault of the other, and it has furnished just grounds for legal separation, then a contract looking to a settlement of property rights and the proper maintenance of the one not in fault is in no sense repugnant to public policy. ’ ’
The court further said:
“When such an agreement has been approved by the solemn decree of the court, it becomes forever binding, to the same degree and with like effect as ordinary contracts between parties admittedly sui juris, and is not subject to revocation or modification, except by the consent of the parties thereto.”
There the stipulated alimony was to be paid to the plaintiff, who obtained the decree, by the defendant, against whom it was rendered.
In Ogilvie v. Ogilvie, 37 Or. 171 (61 Pac. 627), citing Henderson v. Henderson, 37 Or. 141 (60 Pac. 597, 61 Pac. 136, 82 Am. St. Rep. 740, 48 L. R. A. 766), the opinion says:
“Where a separation has been induced, not by collusion, but by the vicious conduct of one of the parties, *218without inducement or fault of the other, and it has furnished just grounds for divorce, then a contract looking to a settlement of the property rights and the proper maintenance of the one not in fault could prop^ erly be entered into, as not repugnant to public policy. ’ ’
In the instant case it was the plaintiff, and not the defendant Louis Hodler, who obtained a decree of divorce ; and by the terms of that decree it was the plaintiff, Delia Hodler, “at whose prayer” the decree of divorce was rendered. It was there adjudicated that Louis Hodler was in faiilt, and that Delia Hodler had just and legal grounds for divorce. He aided and facilitated the obtaining of that decree on the grounds alleged, and Section 511, L. O. L., above quoted, gives an undivided one-third interest in the real property to the party in whose favor the decree is rendered only when that party is not at fault. Here, it is the plaintiff who obtained the decree of divorce, who asked to have the property agreement declared null and void, and the defendant against whom the decree was rendered in an affirmative defense pleads that it is valid and binding.
As he was at fault himself, and his wife had just grounds for a divorce, the defendant Louis Hodler would not have any statutory claim of one third or any interest in her property for compensation as one of the conditions by which she should obtain a divorce.
The decisions in each one of those three cases relied upon by counsel are founded upon the particular facts in each case and there is a marked difference between each of them and the facts in the Hodler case. The original opinion in the Hodler case does not overrule or in any particular modify the opinion of this court in any one of those cases.
*219On January 8, 1915, Delia Hodler and Louis Hodler entered into a contract by which she was to apply for and obtain a divorce from him upon the grounds of cruel and inhuman treatment, for which after the decree was rendered she was, in legal effect, to pay him $20,000. He aided her in obtaining the divorce on such grounds. At his instance and request the agreement of January 30 th was executed, by which she assumed the education, care and maintenance of their two minor children, and he was relieved from any liability therefor. On February 1st, she, in effect, paid him $4,000 in money, and gave him her note secured by a real mortgage on her property, payable on or before three years after date with interest at 7 per cent per annum, and he in turn gave her quitclaim deeds for the real property of which she was the owner and the title to which was in her name. About August 8, 1917, she commenced this suit to cancel the $16,000 note and mortgage upon the grounds that they were obtained under fear and duress and were void as against public policy.
For affirmative answer the defendant pleaded that the agreement was valid; that he relied thereon; that if he had not, he would have contested her divorce and filed a cross-complaint to obtain a divorce from her; that he was always a faithful, kind and loving husband, and that his then wife never had any just grounds for a divorce for cruel and inhuman treatment, or for any other reason; that he had a good and valid defense to her divorce suit, and that in truth and in fact he had a just cause of complaint for a divorce from her, not only upon the grounds of cruel and inhuman treatment but on account of her meretricious relations with Orr. His sworn testimony strongly supports such contentions. His niece, Clara Wenger, was a witness for *220Delia Hodler in the divorce suit and gave strong’ corroborative testimony as to specific acts of cruel and inhuman treatment towards the plaintiff.
As a witness for him in this suit Claga Wenger now testifies that she committed perjury in the divorce suit, and that Hodler was a kind and loving- husband. It is upon such a state of facts that the authorities were cited in the original opinion upon which we then held and now hold that the contract between the Hodlers was void as ag'ainst public policy, and that he was not entitled to enforce payment of the $16,000 note.
It is now vigorously contended that the parties should be left in the same position they were before the suit was filed, and that neither of them should have relief, and numerous decisions of this court are cited to the effect that—
“Whenever it shall develop during a trial that the contract, the subject of the controversy, is fraudulent, the court will of its own motion dismiss the proceeding. ’ ’
We have no fault to find with the law laid down in those decisions, but we ai-e confronted with the undisputed facts in the Hodler case. The plaintiff, as the moving party, does not seek to enforce a void contract, but to be relieved from it. It is the defendant, Hodler, who as an affirmative defense pleads the validity of the contract and seeks to have it enforced. As pointed out, at the time the suit was brought the $16,000 note was in the possession of a third party who claimed to be its owner, and, while as between the Hodlers the note was void, to protect the plaintiff it was necessary to have that fact established by a decree of court, which cannot be done if the suit is dismissed. Neither was there anything to prevent other and dif*221ferent transfers of the note to other parties, and to prevent that the plaintiff applied for and was granted an injunction restraining the defendants from the further sale or assignment of the note pending- suit. It must be conceded that equity would have, and did have, jurisdiction to determine who was the true owner of the note and to prevent its transfer, and that in those particulars the plaintiff would not have complete and adequate remedy at law.
We have examined every Oregon case cited by counsel, and while it is true that, upon the facts stated in each, they lay down the rule of law for which counsel contend, it is also true that there is a material difference between the facts in the Hodler case and any of those cases relied upon, and that no Oregon case can be found where the vital and material facts are similar to those in the Hodler case.
5. The jurisdiction of equity must depend upon the actual facts as they exist at the.time the complaint was filed and the relief which is sought to be. obtained by both the plaintiff and the defendant, as evidenced by the pleadings. At the time the plaintiff had outstanding and in the hands of a third person, who claimed to be and was apparently the owner, her void negotiable promissory note for $16,000, from which she could only obtain relief in a suit in equity, and to obtain which it was necessary to make, and she did make, the holder of the note a defendant. Here there was not only danger of the note being transferred, but it had actually been transferred to an apparent holder for value. For such reason, under the law laid down in the McKeen case, the suit could be maintained where it was “commenced before the note fell due, and while there was danger of its being transferred to a bona fide holder for value, without notice from the note itself or *222otherwise of the illegality of the contract ont of which it arose.”
6. After a careful consideration of the able and vigorous petition of counsel for defendant Hodler, for a rehearing, we adhere to our original opinion on the merits.
7. This case has been expensive and was bitterly contested. The transcript was filed in this court by the defendant Hodler. We are advised that it cost $800, and we assume that to be true. The plaintiff also appealed, but there was only one transcript filed in this court. By the former opinion neither party was to have costs. But as the plaintiff had the benefit of the transcript filed by the defendant Louis Hodler, we feel as a matter of justice and equity that she should pay for one half of that transcript. The original decree of this court is therefore modified, and the defendant Louis Hodler is given judgment for costs against the plaintiff, Delia^Hodler, for the sum of $400 with interest thereon from December 21, 1918, at the rate of 6 per cent per annum. Otherwise, the original decree of this court is affirmed, and the petition for rehearing is denied.
McBride, C. J., concurs in the opinion.
Bean and Burnett, JJ., concur in the result.
Bennett, J., dissents.