Kreinbring v. Mathews

• Decision Date: 18 July 1916
• Citation: 159 P. 75,81 Or. 243
• Parties: KREINBRING v. MATHEWS ET UX.
• Court: Oregon Supreme Court

159 P. 75

81 Or. 243

KREINBRING v. MATHEWS ET UX.

Supreme Court of Oregon

July 18, 1916

Department 1.

Appeal from Circuit Court, Columbia County; J. A. Eakin, Judge.

Suit by Frank H. Kreinbring against L. P. Mathews and wife. Decree for defendants, and plaintiff appeals. Cause remanded, with directions.

This is a suit to foreclose a purchase-money mortgage upon the southwest quarter of the northeast quarter and the northwest quarter of the southeast quarter of section 25, township 6 north, range 5 west, W. M., in Columbia county. The answer admitted the making of the mortgage, but set up as an affirmative defense that on July 14, 1910, plaintiff falsely represented to defendants that he was the owner of the land described in the mortgage and that it was free from all incumbrances; that there was valuable timber upon the southwest quarter described in said mortgage, and plaintiff falsely and fraudulently represented that he owned said timber; that plaintiff, relying upon these false representations, purchased the tract described in said mortgage for the sum of $3,500, and received from plaintiff and his wife a general warranty therefor containing a covenant against incumbrances of all kinds; that defendant paid all the purchase price except $625, to secure which he gave the mortgage and note sued upon; that at the time said contract was entered into there was a valid and outstanding right in one M. J. Kinney to cut and remove the timber upon said southwest quarter for the term of ten years, which right does not expire until December 5, 1916; that such interest in said timber was conveyed by Kinney to the Appledale Land Company, which corporation now holds the same; that the existence of such interest was known to plaintiff, but was not known to defendants when the contract was entered into that the value of said timber and the right to remove the same is the sum of $750; that there has been a total failure of the consideration for which said note and mortgage was given; and that plaintiff has been damaged in the sum of $750. Plaintiff replied denying the new matter in the answer and alleged that at the time of said transfer defendants had full knowledge regarding the title to said timber. There were findings and a decree for defendants canceling the mortgage and for costs, from which plaintiff appeals.

Sam M Johnson, of Portland (J. J. Fitzgerald, of Portland, on the brief), for appellant. Jerry E. Bronaugh, of Portland (Bronaugh & Bronaugh, of Portland, on the brief), for respondents.

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

It is argued by plaintiff that the defendants' answer presents a counterclaim for unliquidated damages and nothing more, and that, such being the case, it cannot be successfully urged in this proceeding; but it is more than a mere counterclaim. It is pleaded not only as such, but also as an equitable defense. By it defendants say:

"It is true we gave this mortgage, but the consideration of the mortgage was falsely represented to be a tract of unincumbered land. We now find that there is upon it an incumbrance which diminishes its represented value to the extent of more than the amount of the mortgage. We are willing to discharge the mortgage so soon as the plaintiff shall have extinguished the incumbrance. If plaintiff declines to do this, we are entitled to have the value of the incumbrance deducted from the amount of the mortgage."

This is not like the case of an outstanding claim of title. Here is an incumbrance of record plain and incontestable which its owner declines to extinguish without compensation. In such a case, it would be extremely inequitable to require the defendant to pay for what it is probable he will never get and relegate him to a remedy upon a covenant against incumbrances which covenant was broken when his deed was delivered. Conceding for the purposes of this case that the answer is insufficient as a counterclaim, it contains all the elements of a valid defensive answer, and was evidently so treated by the court below. We are of the opinion that the evidence sustains the findings of the court below as to the facts, and this conclusion leaves for our consideration the question of the sufficiency of these facts to justify the decree rendered.

Under most circumstances, a vendee of land will not be permitted to set up an outstanding title as a defense to a suit brought against him to foreclose a mortgage for the purchase money. Edgar v. Golden, 36 Or. 448, 48 P. 1118, 60 P. 2; Farmers' Nat. Bank v. Gates, 33 Or. 388, 54 P 205, 72 Am. St. Rep. 724; Gennes v. Peterson, 54 Or. 378, 103 P. 515; Abbott v. Allen, 2 Johns. Ch. (N. Y.) 519, 7 Am. Dec. 554. A distinction seems to be made in some of the cases between an outstanding title which affects the seisin and goes to a paramount right in the fee and possession, and a mere incumbrance such as an outstanding mortgage. In the latter case, it has been held that the outstanding incumbrance must be disposed of before equity will foreclose the purchase money mortgage. Van Riper v. Williams, 2 N. J. Eq. 407. In Abbott v. Allen, supra, Chancellor Kent, after stating that as a general rule a failure or defeat of title cannot be set up by the vendee to defeat a suit to foreclose a purchase money mortgage, uses this language:

"Perhaps an outstanding incumbrance, either admitted by the party or shown by the record, may form an exception, in cases of covenant against incumbrances. Some dicta in the books (see Sergeant

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