Hulin v. Veatch

• Decision Date: 31 July 1934
• Citation: 35 P.2d 253,148 Or. 119
• Parties: HULIN v. VEATCH.
• Court: Oregon Supreme Court

35 P.2d 253

148 Or. 119

HULIN v. VEATCH.

Supreme Court of Oregon

July 31, 1934

Department 1.

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

Action by L. G. Hulin against Marion Veatch to recover a balance of $10,500 due on an $11,000 promissory note, payable to plaintiff, with interest and attorney's fees. From a judgment, entered in defendant's favor after the court struck out portions of plaintiff's amended complaint and sustained a demurrer thereto as not stating facts sufficient to constitute a cause of action and plaintiff declined to plead further, plaintiff appeals.

Affirmed.

H. E. Slattery, of Eugene (Eugene V. Slattery, of Eugene, on the brief), for appellant.

Lawrence T. Harris, of Eugene (Harris, Smith & Bryson and William G East, all of Eugene, on the brief), for respondent.

ROSSMAN Justice.

The complaint alleges the following: April 22, 1926, the plaintiff sold a parcel of real property which he owned situated in Eugene, to Fred H. Lindsay and William Hargreaves at a price of $31,000, $20,000 of which was paid at the time of the execution of the deed and the balance of which was evidenced by the promissory note with which we are now concerned, executed by the two purchasers, together with their wives. This note, dated April 27, 1926, was payable three years after date and provided for 7 per cent. interest payable semiannually. At that time the parties agreed that this note should be secured by a mortgage covering the conveyed property, but, since Lindsay and Hargreaves contemplated borrowing $45,000 from the Union Savings & Loan Association with which to improve the property, it was further agreed that their $45,000 note should be secured by a first mortgage covering the property. April 26, 1926, they delivered to the association their note for $45,000, and secured it with a mortgage upon the aforementioned property. May 5, 1926, Lindsay and Hargreaves, together with their wives, signed and delivered to the plaintiff, as agreed, a mortgage describing the aforementioned property as security for the payment of the $11,000 note. December 4, 1926, $385 interest was paid upon the $11,000 note, and June 1, 1927, a like payment was made. November 29, 1927 Lindsay, Hargreaves, and their wives, executed and delivered to the defendant a deed conveying to him the aforementioned property, which recited that the conveyance was subject to the aforementioned first and second mortgages, but contained no provision requiring the defendant to assume or pay those mortgage debts. December 1, 1927, June 5, 1927, and December 28, 1928, the defendant paid three more installments of interest upon the $11,000 note. April 27, 1929, the $11,000 note became due. May 1, 1929, the plaintiff and the defendant, without the knowledge or consent of Hargreaves, Lindsay, and their wives, or any of them, executed an instrument, the material parts of which are as follows:

"Whereas second party is the owner of the property described in said mortgage and is under obligation to pay said loan and the interest on the note secured thereby, the principal of which is now due and owing; And whereas 2nd party desires an extension of time thereon and the parties hereto have agreed upon an extension of time on said note and mortgage of one year, at an increased rate of 1% per annum:

"Now Therefore it is hereby agreed, that in consideration of the agreement of and by 2nd party to pay interest on said note at the rate of 8% per annum from date hereof, which 2nd party does hereby agree and promise to pay, until paid, first party does hereby grant unto second party an extension of time on said note of one year from date hereof, interest to be paid semi-annually, as originally provided in said note and hereby agree that no proceedings for the collection of said note or foreclosure of said mortgage shall be instituted during said term of one year provided the other terms of said note and mortgage shall be complied with."

Thereafter the defendant made six more payments of interest upon the note, and on August 11, 1931, paid $500 upon the principal. Because of default in the payment of installments on the $45,000 note owned by the Union Savings & Loan Association, that corporation, on May 27, 1932, commenced a suit to foreclose its mortgage. October 18, 1932, a decree of foreclosure was entered which also granted judgment against the makers of that note in the sum of $30,270.93. November 19, 1932, the sheriff sold the property to the Union Savings & Loan Association for $30,264. Later this sale was confirmed. October 4, 1932, the plaintiff instituted the present action.

The amended complaint, in alleging the manner in which the plaintiff claims that the defendant subjected himself to liability to pay the $11,000 note, avers the following: "At all times up to about October 1, 1932, this plaintiff believed that the said defendant had assumed the payment of the said two mortgages by the terms of the said deed, and it was not until after he was served with a summons on September 30, 1932, in the hereinafter described foreclosure suit that plaintiff discovered the fact to be that defendant had not personally assumed and agreed to pay the said mortgage." Further, it avers that on May 1, 1929, when the $11,000 note was overdue, "the defendant stated unto plaintiff that he would pay the said note and mortgage, and that he owed the same to the plaintiff and requested an extension of one year's time. *** Because of the fact that the defendant represented unto the plaintiff that he was under obligation to pay the said note and mortgage, and because of the fact that plaintiff believed the said representation to be true, and relied thereon," plaintiff signed the extension agreement. Next, the complaint alleges that January 14, 1932, one A. E. Wheeler, agent of the plaintiff, in a letter, requested payment of the note and that the defendant, in replying, stated: "Received your letter in regard to the note which I owe Mr. Lester Hulin. I appreciate the position and obligation that I am under to Mr. Hulin, but ***." And that on the same day the defendant sent a letter to the plaintiff, stating: "I received a letter a few days ago from Mr. A. E. Wheeler in regard to the note which I owe you."

The averments mentioned in the preceding paragraph were stricken from the complaint upon the motion of the defendant. The propriety of that ruling, and of the order which sustained the demurrer to the complaint, are the subject-matter of the assignments of error. We shall proceed as though the motion had not been allowed.

It will be observed that the plaintiff depends upon the following to sustain his contention that the defendant has rendered himself liable to payment of the $11,000 note: (1) The following recitals contained in the agreement, signed May 1, 1929: "Whereas second party *** is under obligation to pay said loan and the interest on the note secured thereby *** and whereas second party desires an extension of time ***." (2) The fact that the extension was granted. (3) An estoppel predicated upon the representations which the plaintiff avers the defendant made wherein he declared himself under obligation to pay the note, and the plaintiff's alleged reliance thereon when he signed the extension agreement. And (4) the practical construction which the parties placed upon the extension agreement as indicated by their correspondence above quoted.

As we approach the problem presented by these contentions, we deem it well to take note of some fundamental rules frequently mentioned by other courts confronted with kindred problems. We quote from Fitzgerald v. Flannagan (Iowa) 125 N.W. 995, 997: "The fact that the owner of land on which a mortgage has been placed by a prior owner makes payments thereon, or seeks an extension of the time in which to remove the lien, does not of itself establish a personal undertaking for its payment. He may be willing to pay it to save his investment in the land or in the hope of being able to resell it at a profit, but to enforce it as a personal obligation, there must be a valid contract express or implied to make the debt his own."

From Frase v. Lee, 152 Mo.App. 562, 134 S.W. 10, 11, we quote: "It is contended now by plaintiff that the payment of interest by Block, and his having written a letter to plaintiff in which he mentioned something about paying the debt was recognition by him of the deed of trust, and that he is, for that reason, now held for its payment, and therefore, if he pad interest upon the note, the running of the statute of limitations was suspended, and that his suit is in time. With this contention we do not agree. If Block did not agree at the time he purchased the land to pay the debt secured by the deed of trust, a subsequent agreement made by him with the holder of the note to be binding would have to be based upon a new consideration, so that even though he may have promised to pay the debt, and did, as a matter of fact, pay interest upon it, this would not constitute a contract upon his part to pay the principal of the note."

In Macfarland v. Utz, 175 Ill.App. 525, the court stated: "By accepting a conveyance of the property subject to the trust deed Crouse did not assume the payment of the note secured by said trust deed, nor did the extension agreements entered into between Crouse and Nony Williams, the then holder of said note, on April 18, 1898, and April 18 1900, whereby Crouse agreed to pay the interest on said note, or the act of Crouse in thereafter paying such interest, create a personal liability upon the part of Crouse to pay the principal of said note. Ray v. Lobdell, 213 Ill. 389 ; Scholten v. Barber, 217 Ill. 148 ." To like effect, see Crebbin v. Shinn, 19 Colo. App. 302,...