Blue River Sawmills, Limited v. Gates

• Citation: 358 P.2d 239,225 Or. 439
• Parties: BLUE RIVER SAWMILLS, LTD., and George E. Shroyer and Helen Shroyer, Appellants, v. Robert Diamond GATES and Mary Naoml Gates and United States National Bank of Portland, Oregon, Respondents.
• Decision Date: 14 December 1960
• Court: Supreme Court of Oregon

Page 239

358 P.2d 239

225 Or. 439

BLUE RIVER SAWMILLS, LTD., and George E. Shroyer and Helen Shroyer, Appellants, v. Robert Diamond GATES and Mary Naoml Gates and United States National Bank of Portland, Oregon, Respondents.

Supreme Court of Oregon, Department 1.

Argued and Submitted June 9, 1960.

Decided Dec. 14, 1960.

Mark V. Weatherford, Albany, argued the cause for appellants. With him on the brief was Sidney E. Ainsworth, Ashland.

Karl T. Huston, Corvallis, argued the cause for respondents Gates. On the brief were Huston, Thomas & Johnson, Corvallis.

Before McALLISTER, C. J., and ROSSMAN, WARNER, GOODWIN and HOLMAN, JJ.

WARNER, Justice.

This is a suit in equity, wherein plaintiff Blue River Sawmills, Ltd., a corporation, organized under the laws of the Province of British Columbia, Canada (hereinafter called Blue River), and plaintiffs Shroyer, husband and wife, seek to have a conveyance, absolute on its face, declared to be a mortgage and for further and related relief premised upon plaintiffs' theory that the consideration for a certain transaction had in January, 1956, was in fact a loan and not a sale, as contended by the Gates. From an advance decree, plaintiffs appeal.

The subject matter of the deed was the conveyance of 29 perpetual timber licenses issued by the Canadian government. They were in the nature of grants of rights to cut timber on 29 sections of government lands situated in British Columbia, Canada. We shall hereinafter refer to the deed as a conveyance of 'timber.'

For convenience we shall refer to the plaintiff Shroyer and the defendant Gates as if they were the only plaintiff and defendant having those names, although, in fact, their respective wives were joined as plaintiffs or defendants.

The plaintiffs advance but one assignment of error, which in substance is: that the trial court erred in decreeing the transaction of the parties to be one of absolute sale instead of a mortgage loan.

The negotiations had between Gates and Shroyer and Blue River were consummated on the sixth of January, 1956, and finally reflected by the execution of the following documents, subsequently prepared by the solicitor for Blue River: (1) a deed (Exhibit P), absolute on its face, executed by the plaintiff Blue River, in Vancouver, B. C., as of January 13, 1956, to the defendant Gates and wife, conveying the timber to which we have already made reference. This was acknowledged on behalf of the grantor corporation on January 20, 1956, by F. J. G. Johnson, its secretary and one of its directors, pursuant to a resolution of all of its stockholders, dated January 13, 1956. The consideration for the deed was $150,000 paid to Blue River by Gates on or about January 30, 1956; ¹ and (2) an option agreement (Exhibit A), dated as of January 13, 1956, and executed in Benton County, Oregon, by the Gates, as vendors, who, in consideration of $1,000 from Blue River, therein called the purchaser, granted to Blue River a right to repurchase the timber conveyed by the deed upon payment of certain sums at the times therein stipulated.

An escrow agreement (Exhibit D) was thereafter entered into by and between the parties to the option with defendant United States National Bank, as escrow agent, at its Corvallis Branch, on March 13, 1956. Deposited with the bank for its guidance was a copy of the option, the 29 timber licenses described in the deed from Blue River to Gates, and a deed from the Gates to Blue River (Exhibit B), for delivery to the latter upon payment of the sums required by the option on or before the dates therein stipulated. Although the option agreement was executed by the Gates in January, as above indicated, the $1,000 consideration therefor was not withheld from the amount paid by Gates for the deed received from Blue River. Meantime; that is, between January thirteenth and a date early in March, 1956, the option reposed in the office of Gates' Canadian solicitor, George William Lane, who then delivered a copy thereof to Blue River upon receipt of $1,000 in behalf of Gates. This delay in payment of the consideration for the option accounts for the delay in completing the escrow arrangement to which we have made reference above.

The pertinent part of the option to repurchase given by Gates to Blue River relates to the amount of payments necessary to repurchase the timber if made on or before the three alternative payment dates therein specified. That part of the instrument reads:

'Firstly the sum of Two hundred and twenty five thousand ($225,000.00) Dollars if such sum is paid to the United States National Bank at Corvallis in the State of Oregon, United States of America (hereinafter called 'the Bank') between the 31st day of July 1956 and the 15th day of October 1956.

'Secondly in the alternative the purchase price shall be the sum of Three hundred thousand ($300,000.00) Dollars if such sum is paid to the Bank between the 15th day of October 1956 and the expiration of two (2) years from the date of this Agreement.

'Thirdly in the further alternative the purchase price shall be the sum of Three hundred thousand ($300,000.00) and interest payable as follows; that is to say, the sum of One hundred and seventy five thousand ($175,000.00) Dollars if such sum is paid to the Bank between the said 31st day of July 1956 and the expiration of two (2) years from the date of this Agreement and the further sum of One hundred and twenty five thousand ($125,000.00) Dollars if such sum is paid to the Bank together with interest as hereinafter mentioned within three (3) years from the date of this Agreement. The said interest shall be at the rate of ten (10%) per cent per annum upon the said sum of One hundred and twenty five thousand ($125,000.00) Dollars and shall be calculated as from the date of payment of the said sum of One hundred and seventy-five thousand ($175,000.00) Dollars up to the date when the said sum of One hundred and twenty five thousand ($125,000.00) Dollars shall be paid to the Bank.'

The documents, except the escrow agreement, to which we have made reference were prepared in the offices of Hamilton Read, of Vancouver, B. C., solicitor for Blue River.

There is but little diversity of opinion of counsel regarding the law of the case.

The primary inquiry in a matter of this kind relates to the discovery, when possible, of the mutual intention of the parties at the time the transaction was consummated. It is then the character of their dealing is fixed. Umpqua Forest Industries v. Neenah-Ore. Land Co., 1950, 188 Or. 605, 628, 217 P.2d 219; Harmon v. Grants Pass Banking & Trust Co., 1911, 60 Or. 69, 73, 118 P. 188; 1 Jones, Mortgages (8th Ed.), 380 § 314.

This intent must be sought in all the circumstances surrounding the transaction, the pecuniary relations of the parties, their previous negotiations and their acts contemporaneously with the making of the deed, as well as by the written memorials of the deal.

The subsequent acts and admissions of the parties respecting the subject matter of the contract, while material and relevant, are to be considered rather as evidence or corroborative of a previously-existing intent shown to exist. Elliott v. Bozorth, 1908, 52 Or. 391, 396, 97 P. 632; Umpqua Forest Industries v. Neenah-Ore. Land Co., supra, 188 Or. at page 614, 217 P.2d at page 223; Leathers v. Peterson, 1952, 195 Or. 62, 75-76, 244 P.2d 619; Beall v. Beall, 1913, 67 Or. 33, 128 P. 835, 135 P. 185; 1 Jones, supra, 369, § 309. But such subsequent declarations or admissions should be closely scrutinized and weighed with caution on account of the possibility of witnesses misapprehending the language used and the difficulty of repeating its import. Stephens v. Allen, 1884, 11 Or. 188, 196, 3 P. 168.

As a further preliminary to our evaluation of the facts, we take note of certain controlling propositions of law in a matter of this kind. Based on the maxim that a person takes ordinary care of his own concerns (ORS 41.360(4), a disputable presumption arises from the execution of an absolute deed that such an instrument evidences the intention of the parties, except in cases of fraud. Harmon v. Grants Pass Banking & Trust Co., supra, 60 Or. 69, 118 P. 188; Smith v. Headlee, 1919, 93 Or. 257, 264, 183 P. 20.

Proceeding from the premise that a deed, absolute on its face, is what it purports to be, there is a heavy burden cast upon the proponent of a construction to the contrary. It calls for proof that is clear, convincing and consistent if such a proponent would succeed. In the absence of such evidence the presumption that the conveyance is what it purports to be must prevail. Smith v. Headlee, supra, 93 Or. at page 264, 183 P. at page 23; Umpqua Forest Industries v. Neenah-Ore. Land Co., supra, 188 Or. at page 645, 217 P.2d at page 235; Cole v. Fogel, 1957, 210 Or. 257, 261, 310 P.2d 315; Sweek v. Bennett, 1930, 133 Or. 388, 396, 290 P. 747; Emrich v. Emery, 1958, 216 Or. 88, 93, 332 P.2d 1045, 335 P.2d 604, 337 P.2d 972; Osborne, Mortgages, 182 § 74; 5 Tiffany, The Law of Real Property (3d Ed.), 259, § 1395.

The negotiations had between the parties prior to the consummation of the transaction usually offer the most promising point of inquiry. In the instant matter it produces the contradictions in evidence concerning what the respective parties said and did in the offices of appellants' counsel, Read, of Vancouver, B. C., immediately before he drafted the deed and option agreement.

But we do not begin with those conferences in our examination of the record. We turn back to the point of Gates' first contact with Shroyer. In so doing we have in mind the rule to the effect that the business, social or other relationships of the parties are circumstances relevant to the main issue of intentions. Umpqua Forest Industries v. Neenah-Ore. Land Co., supra, 188 Or. at page 633, 217 P.2d at page 230; Corey v. Roberts, 82 Utah 445, 25 P.2d 940. Thus, we discover several...