Fogarty v. Hunter

• Decision Date: 06 February 1917
• Citation: 162 P. 964,83 Or. 183
• Parties: FOGARTY v. HUNTER ET AL. (CRAWFORD ET AL., INTERVENERS.
• Court: Oregon Supreme Court

162 P. 964

83 Or. 183

FOGARTY v. HUNTER ET AL. (CRAWFORD ET AL., INTERVENERS.

Supreme Court of Oregon

February 6, 1917

Department 1.

Appeal from Circuit Court, Multnomah County; Henry E. McGinn, Judge.

Suit by R. L. Donald against Frank T. Hunter, Joseph M. Healy and others to foreclose a mortgage, in which H. B. Fogarty was substituted as plaintiff, and W. R. Crawford and another intervened as receivers of a defendant corporation. From a decree denying foreclosure and requiring certain payments to be made to the receivers, the plaintiff and defendant Healy appeal. Reversed, and decree of foreclosure entered.

Plaintiff seeks by his first cause of suit to foreclose as a first lien a mortgage of $30,000, with interest and attorney's fees upon certain real estate described in the complaint; and by a second cause of suit to foreclose a second lien of $35,000 with interest and attorney's fees, on said real property with the exception of 32 lots.

The defendant the Empire Life Insurance Company and the intervening defendants, W. R. Crawford and M. D. Haynes receivers of that company, allege in the answer that the contract is a Washington one, executed and to be governed by the laws of that state, and by a cross-complaint assert:

That they are entitled to have the trust deed executed by Joseph M. Healy to Frank T. Hunter declared to be a mortgage in the sum of $270,000, interest and attorney's fees, and foreclosed; that the same is prior and superior to all the claims, "excepting only the mortgage of Realty Associates of Portland, Or., provided it shall be shown by due and sufficient proof herein that the plaintiff is the owner and holder thereof for a valuable consideration, and the amount due thereon, principal and interest, shall be established by due and legal proof."

As a second further answer and cross-complaint they allege that they are entitled to recover $7,000 paid by the insurance company to Realty Associates as interest on the $30,000 mortgage before it was assigned to Healy, and to be subrogated to the rights of the Realty Associates to that amount, with interest.

For a third further separate answer and defense it is averred:

"That said alleged agreement on the part of the defendant the Empire Life Insurance Company to resell for the said defendant Joseph M. Healy $7,500 shares of the capital stock of the defendant the Empire Life Insurance Company so subscribed for by the said defendant Joseph M. Healy, was given solely in consideration of the agreement on the part of the defendant Joseph M. Healy to pay to the said defendant the Empire Life Insurance Company the sum of $270,000 for the 13,500 shares of the capital stock of the defendant the Empire Life Insurance Company," and that there has been a failure of consideration for the alleged agreement to resell the stock as Healy has failed to pay the $270,000.

For a fourth separate answer and defense it is asserted:

"That during the latter part of the year 1911 defendant Joseph M. Healy sold and delivered all of his stock in the defendant the Empire Life Insurance Company to the Columbus Securities Company, a New Jersey corporation, and that at the same time and as a part of the same transaction Merchants' National Bank of Portland, which, under some arrangement with defendant Joseph M. Healy, had certain shares of the capital stock of said defendant the Empire Life Insurance Company belonging to said defendant Joseph M. Healy as collateral security for certain indebtedness and liability to it from said Joseph M. Healy, exchanged, with the consent of the said defendant Joseph M. Healy, the shares of the capital stock of said defendant the Empire Life Insurance Company so held by it as collateral security for the indebtedness and liability of the said defendant Joseph M. Healy to it, for stock in the Columbus Securities Company, a New Jersey corporation."

They set forth the contract between the Columbus Securities Company and Healy, and aver that by reason of the premises the insurance company is relieved from any further obligation to sell the stock of the defendant Healy and placed beyond power to comply with the contract of July 27, 1910, in that respect.

As a fifth separate answer these defendants pleaded that the contract of July 27, 1910, and that of June 6, 1911, referred to in the complaint, are Washington contracts governed by the laws of that state, which statutes are set forth in the answer. They aver:

"That the alleged indebtedness of the defendant the Empire Life Insurance Company to defendant Joseph M. Healy arose by, through, and under the attempted agreement, if at all, on the part of the defendant the Empire Life Insurance Company, in said instrument of July 27, 1910, to purchase its own stock.

"That said agreement of July 27, 1910, between the defendant the Empire Life Insurance Company and the defendant Joseph M. Healy, more particularly referred to in * * * the second cause of action stated in the complaint, in so far as it was, or could be, construed to be, either in law or in equity, an agreement on the part of defendant the Empire Life Insurance Company, to purchase its own stock, either by the payment of money or by authorizing the said Frank T. Hunter, trustee, to sell the said mortgaged property described in said agreement and turn over the proceeds of said sales, either in cash or securities, to the defendant Joseph M. Healy, in exchange for its stock, was, and is, by and under the laws of the state of Washington, above quoted and referred to, void as against public policy, illegal, fraudulent, and ultra vires to the power of the defendant the Empire Life Insurance Company, and should be set aside and held for naught.

"That the alleged contract referred to and attempted to be set up in paragraph XI of the second cause of action stated in the complaint, under the alleged date of June 6, 1911, was, and is, by and under the laws of the state of Washington above quoted and referred to, without consideration, void as against public policy, illegal, fraudulent, and ultra vires to the powers of the defendant the Empire Life Insurance Company, and should be set aside and held for naught in so far as the defendant the Empire Life Insurance Company is concerned."

These defendants pray for a decree: (1) Dismissing the first and second causes of suit; (2) holding the contract of July 27, 1910, between defendant the Empire Life Insurance Company and the defendant Joseph M. Healy in so far as it is an agreement on the part of the defendant company to purchase its own stock, and the alleged contract of June 6, 1911, between the insurance company and Frank T. Hunter and defendant Joseph M. Healy, void; (3) for a judgment against defendant Healy for the sum of $270,000, with interest thereon at the contract rate of 6 per cent. per annum from July 27, 1910, and the further sum of $13,500 attorney's fees, and for costs and disbursements herein; (4) for a judgment against Joseph M. Healy for the further sum of $7,000 paid by these defendants to Realty Associates, a corporation, upon the note and mortgage, with interest; (5) that plaintiff and each of the defendants herein be foreclosed of all right, title, and interest in the mortgaged property, and that it be sold to satisfy the judgment.

By a cross-complaint the defendant Joseph M. Healy requests a foreclosure of a lien on said real estate (except 32 lots selected by him) for $57,240, and the additional sum of $34,500. with interest, less $9,100 paid thereon November 24, 1912.

The trial court held:

"That the stock subscription contract mentioned in paragraph 8 of the findings of fact, the promissory note from defendant Hunter as trustee to the defendant insurance company, mentioned in paragraph 9 of the findings, the deed from defendant Healy to defendant Hunter in trust mentioned in paragraph 10 thereof, the contract of July 27, 1910, between the Empire Life Insurance Company and defendant Joseph M. Healy, described in paragraph 11 thereof, and the contract dated June 6, 1911, between the Empire Life Insurance Company, Frank T. Hunter, trustee, and Joseph M. Healy were at the time of their execution and now are void," and that defendant Healy was the equitable owner of the real property.

That court declined to foreclose the $30,000 mortgage, and postponed it to a lien created by the court in favor of the receivers of the insurance company, aggregating $47,066.80, and held that, unless this sum should be paid by Healy, the first mortgage of $30,000 should be deemed satisfied, and the title to the real estate should be conveyed by Frank T. Hunter, trustee, to the receivers, and that upon the payment of said sum by Healy within six months the title should be conveyed by the trustee to him.

Pending the suit Healy advanced $4,256.70 for the payment of tax liens on the property involved pursuant to the orders of the court that the same, with interest at 7 per cent., should be a first lien upon the property. No provision was made in the final decree to carry out such orders. Plaintiff and defendant Healy appeal.

A statement of the main facts relating to the several contracts and transactions involved will probably lessen the necessity of stating at a greater length the issues which are appropriately raised by the pleadings and are necessarily lengthy.

On July 27, 1910, defendant Joseph M. Healy was the owner of the realty described in the complaint, which consisted of 25 lots in Council Crest Park and 40 acres of adjoining land which at that time was unplatted. It was choice view property in and about the city of Portland. Its value was estimated in the testimony to be from $200,000 to $300,000. A mortgage for $30,000 was given by Mr. Healy to the Realty Associates, of...