Gabel v. Armstrong

• Decision Date: 26 February 1918
• Citation: 171 P. 190,88 Or. 84
• Parties: GABEL v. ARMSTRONG.
• Court: Oregon Supreme Court

171 P. 190

88 Or. 84

GABEL v. ARMSTRONG.

Supreme Court of Oregon

February 26, 1918

Department 1.

Appeal from Circuit Court, Multnomah County; C. U. Gantenbein Judge.

Suit by George Gabel against Jennie Armstrong. From a decree for plaintiff, defendant appeals. Reversed and remanded.

This is a suit brought to foreclose a chattel mortgage on a bakery given to secure promissory notes of the defendant aggregating $2,500. Payments had been made on the debt, and at the time the suit was brought, the balance due was alleged to be $1,100, with interest. The defendant was permitted to file four answers. Plaintiff's demurrer to the affirmative matter in the fourth amended answer was sustained. The court refused to permit defendant to file a fifth answer, and the case was tried on the complaint and the denials contained in the fourth amended answer. The decree was for plaintiff, and the defendant appeals.

Bradley A. Ewers, of Portland (Sears & Ewers, of Portland, on the briefs), for appellant. B. Cole, of Portland (C. A. Bell, of Portland, on the briefs), for respondent.

McCAMANT J. (after stating the facts as above).

Error is assigned on the refusal of the circuit court to permit defendant to file a fifth amended answer. Permission to amend after a demurrer is sustained should ordinarily be granted but the matter rests in the discretion of the court. West v. McDonald, 74 Or. 421, 423, 144 P. 655. In the case at bar we are advised by the briefs of certain matters which should have inclined the circuit court to be liberal in permitting defendant to amend. These matters do not otherwise appear from the record. We cannot say that there was an abuse of the court's discretion when defendant was denied the right to file a fifth answer.

Error is also assigned on the exclusion of testimony offered by the defendant. This testimony tended to sustain the affirmative allegations which went out of the case on demurrer. The issues as they stood at the time of trial did not authorize the admission of this evidence. The only other errors assigned by defendant are based on the order sustaining the demurrers to the three affirmative defenses set up in the fourth amended answer.

The first of these affirmative defenses alleges that defendant purchased the bakery described in the mortgage from plaintiff and his co-owners for $3,000; that $500 of this sum was paid in cash, and that the notes for the security of which the mortgage was given represented the remainder of the purchase price. It is then alleged that the vendors falsely represented to defendant that the purchase covered certain personal property of the reasonable value of $350, located on the premises, but that thereafter the vendors induced defendant to pay them the sum of $350 for this property. It is alleged that defendant is entitled to have this sum credited on the cause of action asserted in the complaint. The $350 was paid July 7, 1913, the suit was brought October 23, 1914, and the fourth amended answer was filed March 30, 1916. There is nothing to show that defendant acted under duress in making this payment. The payment was made at a time when the falsity of the representations had been demonstrated and when defendant labored under no misapprehension as to the facts. She therefore paid as a volunteer, and cannot recover the money. Scott v. Ford, 45 Or. 531, 535-545, 78 P. 742, 80 P. 899, 68 L. R. A. 469; Eugene v. Lane County, 50 Or. 468, 470, 93 P. 255. If she were otherwise entitled to rescind and recover the $350, lapse of time would bar her right, in the absence of some equity not disclosed by this record. Cooper v. Hillsboro Garden Tracts, 78 Or. 74, 85, 152 P. 488, Ann. Cas. 1917E, 840. The court did not err in holding this pleading insufficient.

The second affirmative answer repeats the allegations of the first defense as to the circumstances under which the notes and mortgage were executed by defendant. It is then averred:

"That in order to induce the defendant to purchase from the plaintiff, Henry Gabel and Mary Gabel, the personal property hereinabove described, the plaintiff, Henry Gabel and Mary Gabel, falsely and fraudulently represented to the defendant that many months prior to said July 5, 1913, they had been operating the said bakery; * * * that they were drawing between them $39 per week as part of the running expenses of said business, and after paying all other expenses of conducting the said business were making a profit of not less than $300 per month, which they were dividing among them; that said bakery business was being conducted at a large profit of not less than $300 per month, and would continue in the ordinary course of business to net defendant such profit; * * * that each and all of the said representations were false and untrue, and were known by the plaintiff, Henry Gabel and Mary Gabel, to be false and untrue, and were made by them to the defendant for the purpose of falsely and fraudulently inducing the defendant to purchase said personal property, and that plaintiff and Henry Gabel and Mary Gabel intended that the said defendant should rely upon said representations, and defendant did rely thereon, and, believing the same to be true, made the purchase aforesaid; that in truth and in fact the said bakery business had not been conducted at a profit by the plaintiff and said Henry Gabel and Mary Gabel, but had in fact for some time prior to the said sale been conducted by them at a loss."

There are other allegations not necessary to be quoted. We think that the averments which we have set out sufficiently allege actionable fraud. They contain all of the elements of a valid plea as defined in Rolfes v. Russel, 5 Or. 400, 402. While the pleading is to be most strongly construed against the pleader, the language is to be interpreted fairly and in accordance with the intent of the pleader if that intent is to be gathered from a reasonable construction of the language used. Defendant plainly intended to charge that plaintiff and his co-owners represented that they were in possession of the bakery at the time of the sale; that they had been operating the bakery for many months at a profit which was specified in the representations; that in fact the bakery was conducted at a loss; that the representations were made with intent to deceive and were acted on by defendant to her injury. There can be no doubt of the materiality of the misrepresentation. The profitableness of a business is vitally related to its value, and is always important from the standpoint of the purchaser.

This portion of defendant's pleading is denominated a counterclaim. It is clear that if defendant had sued in assertion of the rights alleged, her remedy would have been at law. 39 Cyc. 1997. This affirmative answer is therefore not good as a counterclaim in equity within the provisions of section 401, L. O. L.

It is well settled, however, that the sufficiency of a pleading is to be tested by its allegations, not by the name which the pleader has given it. A pleading is not obnoxious to general demurrer if any portion of it by fair construction states a cause of action or defense. Simpson v. Prather, 5 Or. 86, 88; Jackson v. Jackson, 17 Or. 110, 112, 113, 19 P. 847; Waggy v. Scott, 29 Or. 386, 388, 45 P. 774. It is of no consequence that the pleader has misapprehended the legal effect of his allegations and claims for them conclusions not warranted. Hanna v. Hope, 168 P. 618, 619; Robinson v. Phegley, 84 Or.79 124, 128, 130, 163 P. 1166. If this portion of the answer states a defense to the suit, the circuit court erred in sustaining the demurrer by which it was attacked.

It is a well-established principle of equity jurisprudence that the mortgagor may defend against the foreclosure of a purchase-money mortgage on the ground of fraudulent representations inducing the purchase, and that this defense is available where the right to rescind is waived and damages are claimed by way of recoupment. Twitchell v Bridge, 42 Vt. 68; McMichael v. Webster, 57 N. J. Eq. 295, 41 A. 714, 73 Am. St. Rep. 630; Allen v. Henn, 197 Ill. 486, 494, 495, 64 N.E. 250; 27 Cyc. 1556; 19 R. C. L. 542, 543; 21 L. R. A. 324, note. Under the old chancery practice, such defense could be set up by answer; a cross-bill was unnecessary to its assertion. McMichael v. Webster, 57 N. J. Eq. 295, 297, 298, 41 A. 714, 73 Am. St. Rep. 630. This is tantamount to holding these allegations defensive; it is well settled that affirmative relief...