Glaser v. Holdorf

• Court: Washington Supreme Court
• Writing for the Court: ROSELLINI; WEAVER
• Citation: Glaser v. Holdorf, 352 P.2d 212, 56 Wn.2d 204 (Wash. 1960)
• Decision Date: 12 May 1960
• Docket Number: No. 34678
• Parties: Einar GLASER et ux., Appellants, v. Dwight HOLDORF et ux., and Edith Skene, Individually and as Administratrix of the Estate of Graham Skene, Deceased, Respondents.

Page 204

56 Wn.2d 204

352 P.2d 212

Einar GLASER et ux., Appellants, v. Dwight HOLDORF et ux., and Edith Skene, Individually and as Administratrix of the Estate of Graham Skene Deceased, Respondents.

No. 34678.

Supreme Court of Washington, Department 2.

May 12, 1960.

Rehearing Denied Aug. 10, 1960.

Wright & Wright, Seattle, for appellants.

No appearance for respondent.

ROSELLINI, Judge.

This is an action to foreclose a real estate mortgage and to recover judgment on the debt for which it was given. The court found that the mortgagors had obtained the land through fraud and ordered cancellation of the mortgage and restoration of the property to Edith Skene, individually and as administratrix of the estate of Graham Skene, deceased. The mortgagees have appealed. The respondents did not file a brief and did not appear for argument.

The transactions which culminated in this action occurred in the following manner:

In 1949, Graham and Edith Skene, an elderly couple who lived on land which they owned on Hood Canal in Mason county, met one Errion and one Holdorf who induced them to deed their property (valued by one appraiser at around $55,000) to Holdorf in exchange for certain oyster lands near Coos Bay, Oregon. Errion and Holdorf represented that the oyster lands were about to be condemned and that the transaction would be very profitable to the Skenes. However, this representation was entirely false, and in fact the Oregon property was practically worthless. The Skenes made no investigation of the property or of the men with whom they dealt. Mrs. Skene did not discover that fraud had been practiced upon them until 1954, after her husband's death and three years after the property had been mortgaged to the appellants by Holdorf, to secure a loan of $25,000. The Skenes retained three hundred feet of the property and continued to live there.

The appellants met Errion and Holdorf in the early spring of 1951, through their partner in the logging business in Oregon. At the time they were desirous of selling the business, which they valued at approximately $1,000,000, Errion represented that he was a man of considerable experience in investment counseling, tax accounting, and well versed in the logging business and would be able to dispose of their property to their advantage. Like the Skenes, the appellants did not investigate Errion or Holdorf. These very talented confidence men inveigled a loan of $25,000, for which they gave the mortgage involved in this suit. The appellants took the mortgage and made the loan without investigating the state of the title or examining the land. However, a savings and loan association was asked to investigate the value of the security and reported that it was satisfactory.

Thereafter the appellants, in the course of their dealings, became increasingly aware that Errion and Holdorf were not to be trusted. There was evidence that the appellants, as early as March 1952, learned that the land on which they held a mortgage had been obtained through fraud. Thereafter they brought, this suit to foreclose the mortgage, and to obtain a personal judgment against the Holdorfs for the amount of the note which it was given to secure. Mrs. Skene was named as a defendant claiming some interest in the property.

In her answer, Mrs. Skene affirmatively alleged that the property was acquired through fraud and that the appellants had knowledge of the fraud and were not bona fide mortgagees in 'good faith without notice and with value or consideration.' She asked that the deed and mortgage be declared null and void and the latter removed as a lien upon the property.

At the trial, the defendant Dwight Holdorf appeared and admitted that the deed was obtained through fraud. He also admitted the receipt of $25,000 for which the mortgage was given, but claimed that he had no interest in it or in the property and that the transactions were conducted in his name at the direction of Errion, who was the true owner of the land and borrower of the funds.

The trial court found:

'No bona fide and real examination of the premises was made by the plaintiffs prior to the alleged note and mortgage, although $25,000.00 was involved, no customary title search was made to ascertain the merchantability of the title, nor was there inquiry to determine that the Skenes were in possession of said property at the time of the alleged mortgage.'

The trial court further found that a close relationship existed between the appellants and Errion and Holdorf after the note and mortgage were given; and that they learned of the fraud, but made no inquiry of the Skenes and did nothing about it until this suit was instituted. There was no finding that, with diligence, anything could have been done.

The court found that the consideration for the note and mortgage was paid as alleged. The court concluded that the appellants were not good-faith encumbrancers without notice of existing equities, and declared the mortgage null and void. They were denied judgment against the Holdorfs, and the latter were ordered to deed the property back to Mrs. Skene.

Certain errors are assigned to the findings, and it is also contended that the findings do not support the judgment, there being neither finding nor evidence that the appellants knew of the fraud at the time they took the note and mortgage, and gave consideration therefor.

If the findings are read alone, it would appear that the trial court bottomed its conclusion on the finding that the appellants made no title search and no examination of the premises prior to making the loan and taking the mortgage. However, a reading of the memorandum opinion discloses that the court did not find that the appellants had either actual or constructive notice of the fraud, but based its conclusion on the holding of Calvary Cemetery v. Bell, 181 Wash. 455, 43 P.2d 25.

In that case an investor entrusted certain of his funds to an insolvent corporation, which misappropriated them....