Hanna v. Hope

• Decision Date: 13 November 1917
• Citation: 86 Or. 303,168 P. 618
• Parties: HANNA v. HOPE ET AL.
• Court: Oregon Supreme Court

168 P. 618

86 Or. 303

HANNA v. HOPE ET AL.

Supreme Court of Oregon

November 13, 1917

In Banc.

Appeal from Circuit Court, Malheur County; Dalton Biggs, Judge.

Action by George W. Hanna against M. G. Hope and others. From decree in favor of defendants Hope on their counterclaim, plaintiff appeals. Reversed and remanded.

This is a suit brought by George W. Hanna against M. G. Hope and I W. Hope to quiet the title to 160 acres of land in Malheur county. The complaint is in the usual form. The answer admits plaintiff's ownership, and denies that defendants claim any interest in the property, except a lien thereon created by a mortgage for $15,000, executed and delivered to the defendants by plaintiff and Sarah Hanna, his wife, August 1 1911. On application of the defendants, Sarah Hanna was joined as a party defendant to the suit. The answer of defendants Hope contained a counterclaim, alleging the execution of the said mortgage and notes evidencing the debt which it secured; the counterclaim sets up the default of plaintiff and prays for the foreclosure of the mortgage. The defendant Sarah Hanna alleges that the mortgage is a purchase-money mortgage and that she is therefore not personally liable for the debt. The plaintiff filed an amended reply November 27, 1916, admitting the execution of the notes and mortgage, and setting up two affirmative defenses. In the first of these defenses it is alleged that the notes and mortgage were executed as a part of the purchase price of the property described in the complaint together with a water right appurtenant thereto, amounting to 250 inches, miners' measurement, during the irrigating season of each year. It is alleged that the total purchase price was $20,000, and that it was paid in part by the conveyance from plaintiff to the defendants Hope of real property of the agreed value of $5,000; the notes and mortgage constituting the remainder of the price. Plaintiff avers that the purchase was induced by representations made to him by the defendants Hope that there was appurtenant to the property water of sufficient quantity to irrigate seasonably and properly all of the lands purchased; that plaintiff had no knowledge as to the water rights aforesaid and the defendants Hope were well advised with reference thereto; that in fact there was no water right appurtenant to said property, and that plaintiff had been able to use only 50 inches of water for its irrigation, and that only for a few days early in the season; that if properly irrigated the land was worth $20,000, but that under the conditions obtaining it was worth only $4,000. The reply sets up that the representations of the defendants Hope were made with intent to defraud plaintiff, and that plaintiff relied on these representations in making the purchase. The reply alleges a collateral agreement in writing, under which plaintiff claims an abatement of the interest charge asserted in the counterclaim. This first affirmative reply concludes with these allegations:

"Plaintiff alleges, further: That by reason of the acts, omissions, and representations, practices, and frauds of defendants, as above set forth, the consideration for said notes and mortgage, so made and delivered, and set forth and described in 'Exhibit A,' has wholly failed, and that the same were obtained by fraud, and wholly without consideration, and that defendants, as a matter of good conscience and equity should not be permitted to maintain their alleged counterclaim as set out in their answer, nor obtain any affirmative relief whatsoever in this suit, and should be estopped from further proceedings or doings in the matter of attempting to enforce, in any manner, the provisions of said notes and mortgage as to plaintiff, and that said notes and mortgage should be ordered produced in court, and canceled and declared void and of no effect as to plaintiff. That, except as hereinbefore admitted, qualified, or explained, plaintiff denies each and every allegation in said answer contained."

The second affirmative reply attempts to incorporate by reference the allegations of the previous reply, and alleges that plaintiff has sustained damages in the sum of $16,000 by the acts of the defendants Hope therein averred. The prayer of the reply asks for the cancellation of the notes and mortgage, the dismissal of the counterclaim, and a judgment against the defendants Hope for $16,000.

Defendants Hope demurred to the affirmative matter in the reply for insufficiency of facts. This demurrer was sustained. The parties thereupon stipulated as to the payments made by plaintiff on the notes and mortgage and as to certain other facts. A decree was thereupon entered, foreclosing the mortgage held by the defendants Hope, and plaintiff appeals.

C. M. Crandall, of Vale, for appellant. George E. Davis, of Vale (Davis & Kester, of Vale, on the brief), for respondents Hope.

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

This suit is brought under section 516, L. O. L., which is as follows:

"Any person claiming an interest or estate in real estate not in the actual possession of another may maintain a suit in equity against another who claims an interest or estate therein adverse to him, for the purpose of determining such conflicting or adverse claims, interests, or estates."

The complaint alleges that plaintiff is the owner and in possession of the real property in question and that the defendants Hope claim an interest therein. These allegations are sufficient. Zumwalt v. Madden, 23 Or. 185, 31 P. 400; Savage v. Savage, 51 Or. 167, 170, 94 P. 182.

The answer of defendants Hope alleges the ownership of a mortgage given them by plaintiff, and on appropriate allegations prays for its foreclosure. It has been held that the foreclosure of a mortgage may be decreed on the defendant's cross-bill, in a suit to quiet title or a suit to remove a cloud from the title. Jenkins v. Jonas Schwab Co., 138 Ala. 664, 35 So. 649; Cassell v. Lowry, 164 Ind. 1, 72 N.E. 640; Newaygo Co. v. Stevens, 79 Mich. 398, 406, 44 N.W. 852; Switz v. Black, 45 Iowa, 597. Plaintiff did not demur to the defendants' counterclaim, but replied thereto. He must therefore be deemed to have waived any objection otherwise available to him to question the propriety of the relief demanded in the instant case. Templeton v. Cook, 69 Or. 313, 317, 138 P. 230; Johnson v. Taylor, 150 Cal. 201, 88 P. 903, 907, 10 L. R. A. (N. S.) 818, 119 Am. St. Rep. 181.

With respect to the issues arising on the counterclaim, the defendants Hope became the moving parties ( Walton v. Perkins, 28 Minn. 413, 10 N.W. 424, 425), and plaintiff was entitled to set up in his reply any defensive matter to the counterclaim which he could have pleaded if the defendants Hope had filed a complaint for the foreclosure of their mortgage. The first affirmative reply alleges that the mortgage in question was a purchase-money mortgage and the purchase was induced by fraudulent representations of the defendants Hope. The materiality of the representations, the intent to deceive and the reliance on the representations are sufficiently alleged. It has been repeatedly held in this jurisdiction that in such case the party defrauded has an election to return what he has received and rescind the contract of purchase or to retain what he has received and sue for damages. Scott v. Walton, 32 Or. 460, 464, 52 P. 180; Whitney v. Bissell, 75 Or. 28, 34, 35, 146 P. 141, L. R. A. 1915D, 257; T. B. Potter Co. v. Breitling, 79 Or. 293, 304, 305, 155 P. 179; Kruse v. Bush, 167 P. 308, 309. Plaintiff must be deemed to have elected to pursue the latter remedy. In recoupment against the claim asserted by the defendants Hope he may set up the damages alleged to flow from their fraud in inducing the purchase for which the mortgage was given. Caples v. Morgan, 81 Or. 692, 696, 160 P. 1154, L. R. A. 1917B, 760; Kreinbring v. Mathews, 81 Or. 243, 159 P. 75.

The defendants Hope are correct in their contention that this affirmative...