Hanson v. Johnson

• Decision Date: 27 June 1933
• Citation: 143 Or. 532,23 P.2d 333
• Parties: HANSON et al. v. JOHNSON et ux.
• Court: Oregon Supreme Court

23 P.2d 333

143 Or. 532

HANSON et al. v. JOHNSON et ux.

Supreme Court of Oregon

June 27, 1933

Department No. 1.

Appeal from Circuit Court, Lane County; G. F. Skipworth, Judge.

Action by W. L. Hanson and V. Bergman against Claus Johnson and Emma Elizabeth Johnson, his wife, who filed a counterclaim against plaintiffs and the New Amsterdam Casualty Company. From a judgment for defendants against plaintiffs and the New Amsterdam Casualty Company, plaintiffs and the New Amsterdam Casualty Company appeal.

Affirmed.

This is an appeal from a judgment in favor of two of the defendants in an action upon a promissory note for $200, bearing the signature of those two defendants, and given by them to the plaintiffs, who are real estate brokers, as part payment of a commission. The respondents (the two defendants just mentioned) filed an answer admitting the execution of the note and, based upon allegations that the plaintiffs fraudulently misrepresented the subject of the respondents' purchase, demanded that the plaintiffs recover nothing, but that the respondents have judgment for $5,000 damages against the plaintiffs and the surety upon their real estate broker's bond (New Amsterdam Casualty Company) which was added as a defendant, upon the motion of the respondents. From a judgment in favor of the respondents and against the plaintiffs and their surety, in the sum of $1,500, the three last mentioned persons have appealed.

Donald Young, of Eugene, for appellants Hanson and Bergman.

Harry J. DeFrancq, of Portland (J. S. Moltzner, of Portland, on the brief), for appellant New Amsterdam Casualty Co.

H. E Slattery, of Eugene, for respondents.

ROSSMAN, Justice.

A brief review of the evidence will facilitate an understanding of the assignments of error. In the summer of 1931 the two plaintiffs were real estate brokers. The New Amsterdam Casualty Company was the plaintiffs' surety upon their real estate broker's bond filed by them in the office of the state real estate commissioner, pursuant to the requirements of section 63-720, Oregon Code 1930. Claus Johnson and his wife, Emma, who were the two defendants when this action was instituted, were at that time residing in Santa Monica, Cal., where they owned a parcel of real property. At the same time C. B. and Edna Wallace owned a farm of 137 acres, situated six and one-half miles south of Eugene, near a community entitled Goshen. The Johnsons were desirous of trading their California property for a farm in this state. July 20, 1931, the plaintiffs wrote the Johnsons a letter stating: "We enclose herewith description of a 137-acre ranch near Goshen on the Pacific Highway south of Eugene. With this place we can get you all the stock and equipment and hay crops which are already harvested on the place. This man has good machinery and good team of horses four good cows, three heifers and bull. We took the matter of a trade for your place up with owner of this ranch this afternoon and at first he said that he would not take anything with that much mortgage on it, but we finally got him to agree to consider it. This place is located west and a little south of Goshen about one mile off the Pacific Highway. Let us hear from you. ***" The description of the farm mentioned in the letter was set forth upon a typewritten sheet, a copy of which follows:

"137 A. Ranch located about 7 miles south of Eugene, on Pacific Highway and one-half mile from small town and one-half mile to high school and church, on paved road. 65 A. in cultivation, 60 A. in crops consisting of oats and vetch good drainage, black loam soil, all fenced and cross fenced. Several good springs for water supply, large house about 5 years old, barn 30x60, chicken house 40x60, brooder house, granary, machine shed, etc.

Price $12,000 $2,000 loan due in 1937, 6%

interest,

House is wired for electricity, electricity being available at a very short distance.

Owner will consider trade for good California property.

"Hanson & Bergman Realty Co.

119 E. Bdwy. Eugene, Ore."

Following their receipt of this letter the Johnsons had one Powers visit the farm to which the plaintiffs referred and which is the one the Wallaces owned, and received from him a report. Powers' qualifications for such a task and the nature of his report are not disclosed by the evidence. Next, some letters were exchanged between the plaintiffs and the Johnsons, and in August of 1931 the Johnsons came to Oregon for the purpose of calling upon the plaintiffs in regard to this farm. The following day (Saturday) the latter took the Johnsons to the wallace farm. On the same day the Johnsons signed a document prepared by the plaintiffs entitled "Offer of Exchange" in which they offered to trade their California property for the Wallace farm. Sunday the Johnsons and one of the plaintiffs again visited the Wallace farm and later in the day the Johnsons began their return trip to California. In September they again came to Oregon, this time for the purpose of taking possession of the Wallace farm. During their absence an agreement of exchange had been effected. September 28, 1931, they paid the plaintiffs $100 cash as part payment of the commission, and signed a note-the $200 which is the subject-matter of the complaint. When this note was not paid following several demands, the plaintiffs instituted this actions. Upon filing their answer the defendants moved that the surety upon plaintiffs' broker's bond be made a defendant. The motion was allowed. The answer averred the employment of the plaintiffs by the Johnsons as real estate brokers to effect an exchange of their California property for an Oregon farm and their dependence upon the plaintiffs due to the fact that they (the Johnsons) were strangers in Oregon and unfamiliar with local farming conditions. Next, their answer avers that the plaintiffs, for the purpose of inducing them to accept the Wallace farm in exchange for the plaintiffs' California property, made the following representations: "(a) That there was no gumbo or adobe land upon the said Lane County property; (b) that the said Lane County real estate was well drained; and that there was no danger of water standing thereon; (c) that there were 65 acres under cultivation upon the said Lane County real estate; (d) that there was a high school located within one-half mile of the said Lane County land." The answer avers that these representations were false, were made with knowledge by the plaintiffs of their falsity, that the Johnsons believed them to be true, relied upon them and were damaged thereby. To this counterclaim the New Amsterdam Casualty Company filed an answer in which it admitted its corporate character, denied that the plaintiffs had been damaged, and denied that it possessed sufficient information to form a belief as to the other averments of the counterclaim which included an allegation that it had executed the plaintiffs' broker's bond. The plaintiffs in their reply denied all charges of fraud and averred that the Johnsons had made a full investigation of the Wallace farm before agreeing upon the exchange of properties.

The first, second, and third assignments of error present the issue whether the circuit court erred when, upon the motion of the Johnsons, it made the plaintiffs' surety a party defendant. Section 1-314, Oregon Code 1930, provides: "The court may determine any controversy between parties before it, when it can be done without prejudice to the rights of others, or by saving their rights; but when a complete determination of the controversy can not be had without the presence of other parties, the court shall cause them to be brought in." The bond signed by the brokers (plaintiffs) and their surety conditioned its liability upon the provisions of 1929 Session Laws, chapter 423, which, among other matters, prohibits brokers from employing false representations in negotiating the sale or exchange of real property. In Twentyman v. Nichol, 125 Or. 579, 267 P. 824, 826, we held that in a fraud action against a real estate broker the surety upon his bond was a proper party defendant. In support of their contention that the circuit court erred when it entered the above-mentioned order, the appellants cite Ladd & Tilton Bank v. Rosenstein, 122 Wash. 301, 210 P. 677; McColl v. Cottingham, 124 S.C. 380, 117 S.E. 415; Continental Guaranty Corp. v. Chrisman, 134 Or. 524, 294 P. 596. In the first of these cases the bank averred that it was a bona fide holder of an unpaid trade acceptance issued by the defendant and sought judgment upon it. The defendant admitted it had accepted the draft, but averred that the consideration for the instrument arose out of a contract between itself and Wade & Co., drawers, and that Wade & Co. be made a defendant. In holding that Wade & Co. were not proper parties, the court pointed out that if the plaintiff was a bona fide holder in due course of the instrument it was entitled to recover, even though the contract had been breached and that if it was not a bona fide holder the defendant had as complete a defense as if Wade & Co. were parties to the action.

In the second of these cases a depositor in a bank, when sued on account of an overdraft, alleged that a decedent's estate which was in the process of being probated, and in which he had an interest as a devisee, had on deposit in the bank a large sum of money. The probating of the estate had not yet been concluded. In holding that the defendant's allegations did not constitute a counterclaim because he could not sue the bank for any part of the deposit, the court somehow saw fit to remark: "Additional parties cannot be brought in for the purpose of setting up a counterclaim." No one had moved for an order to add parties. In the third...