Manley v. Smith

• Decision Date: 02 April 1918
• Parties: MANLEY v. SMITH ET AL.
• Court: Oregon Supreme Court

171 P. 897

88 Or. 176

MANLEY v. SMITH ET AL.

Supreme Court of Oregon

April 2, 1918

Department 1.

Appeal from Circuit Court, Multnomah County; C. U. Gantenbein Judge.

Suit by A. B. Manley against Alice Smith and others. Decree for defendant Thad Sweek, and plaintiff appeals. Reversed and rendered.

The plaintiff Manley, brought this suit to foreclose a mortgage executed by Milton W. Smith, Alice Smith, his wife, and Thad Sweek, to secure a note signed by the Smiths and Alex Sweek. The mortgage contained a covenant in these terms:

"And the said parties of the first part (the mortgagors) for their heirs, executors and administrators, do covenant and agree to pay to said party of the second part, his executors, administrators or assigns the said sum of money as above mentioned."

The only defendant answering is Thad Sweek, one of the mortgagors. The substance of his defense is that the quoted clause was inserted in the mortgage by the mutual mistake of Manley and the other parties to the transaction. He prays that the instrument be corrected by the elision of that clause, and that the mortgage as thus reformed be foreclosed. His averments in that behalf were denied by the reply. A decree was entered, reforming and foreclosing the mortgage according to the prayer of Thad Sweek, and the plaintiff appeals.

W. Y. Masters, of Portland (Brice & Masters, of Portland, on the brief), for appellant. J. F. Shelton, of Portland, for respondents.

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

Mrs Smith is a sister of the Sweeks. According to the testimony she and her husband were indebted to Manley in the sum of $1,400 for money loaned to them on their note given previous to the one in suit. Her husband was declared a bankrupt, and about that time Manley began an action on the note he then held and attached real property of Mrs. Smith sufficient to satisfy his claim. At this juncture Alex Sweek approached Manley with a view to securing the claim, obtaining an extension of time and releasing the attachment. It seems that Mrs. Smith had one lot, and that Thad Sweek had another lot and a fraction adjoining, composing the realty described in the mortgage now in question. Both were incumbered by a previous mortgage. Alex Sweek testifies:

"So I went to Mr. Manley and told him I thought I could get a second mortgage on those two lots, or whatever it was two lots and a fraction, for what was coming to him; that I would be willing to sign the note, and I was satisfied that Thad would sign the mortgage, so far as binding his lot was concerned, but he would not sign the note and would not become responsible, so we finally agreed upon that. Mr. Manley agreed to do that, and somebody prepared the mortgage; I don't know who, not me, but somebody prepared the mortgage. * * * My recollection is this: That after I talked to Mr. Manley, he was going away, and he turned the matter over to his attorney, W. Y. Masters, but I am not sure about that. My recollection is that Mr. Manley was going out of town, and after we talked over and agreed upon the completion of the mortgage, as I remember, he went away; I may be wrong, but that is my recollection. It is a long time ago, and I haven't paid much attention to it."

On cross-examination he stated:

"There wasn't any talk about the promise to pay in the mortgage, so far as the talk was concerned, but it was understood that my brother Thad would not be responsible for the debt. There wasn't any talk about putting in a clause or striking out a clause. * * * No; but the understanding was that my brother Thad would not be responsible for the debt, if he would put in the lot."

He said, further, in substance, that he took up the matter with Mr. Manley and W. Y. Masters, but that he did not have any discussion with the latter that Thad was not to be bound. The only negotiation between Thad Sweek and Manley is detailed by the former in his testimony as follows:

"I met him (meaning Manley) in the entrance to the Board of Trade Building once, and he asked me what we were going to do about it. * * * In the first place, as it was presented to me one time, it was wrong. * * * The mortgage had no release clause in it, and in the copy of the note in the mortgage it had my name to it, and I wouldn't sign it. Q. You had not signed any note? A. No; I had not, and it was definitely understood that I should not; that I was putting up my property to assist in it, and it was all that I would do, and definitely understood at all times. Q. Now, you spoke about a release clause not being in the first mortgage. A. I mean the first copy of this mortgage here, not the first mortgage, but when this first draft of this was shown to me it was that way. Q. That is, there wasn't any release clause in it? A. No. I mean there was no provision releasing my lot when the first mortgage was put on, and also the copy of the note in the mortgage bore my signature to it, in the copy here as it was typewritten. Q. And, as I understand it, in that first draft of the mortgage there wasn't any release clause as it is now contained in the present mortgage, as follows: 'It is agreed that the mortgagee will release lot 3 and the south 5 feet of lot 2, whenever the existing mortgage of $2,000.00 upon lot 4 is fully paid?' A. Yes. Q. That was not in the first draft of the mortgage? A. No; nothing about that. Q. And you refused to sign it for the reason that was left out, and for the further reason that in the copy of the note in the mortgage your name appeared upon it? A. It did; yes. Q. Now, was there anything said between you and Manley at that time that you were not to become personally liable? A. Well, I couldn't say that there was any specific agreement to that effect, but that was--or the exact words that were said, but I indicated that to the best of my ability. Of course, it is a long time ago, and it is pretty hard to say just the exact words that were used between people in a casual meeting."

Nobody seems to know who actually prepared the mortgage, although it was introduced in evidence. It is in a printed form in which the blanks except signatures are filled in typewriting. Neither of the witnesses to its execution was called to testify. As stated by Thad Sweek, he objected to the first draft presented to him on account of the note having his name to it and because the instrument did not contain a clause releasing his lot and a fraction when the prior mortgage on the property should be satisfied. Speaking of the mortgage in suit, Thad Sweek gave evidence as follows:

"Q. Did you look at the mortgage at that time, to ascertain whether or not the correcttions that you had previously objected to had been made in the mortgage? A. Well, I looked at it to see that the release was in there--I remember distinctly, to see that this release provision was in there, and also that my name was not on the copy of the note in the mortgage. I looked at it that far, and I presume that I might have read more. I am not sure whether I did or not, but probably not, because my brother had telephoned to me--my brother Alex had telephoned to me that the mortgage was now proper--corrected and proper to be signed, and that Mr. Smith would take me to have it executed, or would bring it to me to have it executed, and Mr. Milton Smith went with me to this office in the Board of Trade Building, where the mortgage was executed, and, seeing that those provisions were in there, and he telling me that, I might have taken it for granted, without being very careful. I am not very sure just now about that. Q. Now, I will ask you this question, if you had read the mortgage over, and saw the clause in the mortgage to the following effect: 'And the said parties of the first part, for their heirs, executors and administrators, do covenant and agree to pay to said party of the second part, his executors, administrators or assigns, the said sum of money as above mentioned'--would that have meant anything to yourself? A. No; I had always considered that in executing a mortgage that there would be no deficiency obtained against you, unless you had

also signed the note. I find that I erred in that belief, but I had always thought so anyway, until this suit came up. That had been my firm belief at all times. I thought that there could not be a deficiency secured against you, unless you had actually signed the note."

On cross-examination he testified thus:

"Q. You say you read this clause in the mortgage referred to there by Mr. Shelton, where you agreed and promised to pay, and so forth? A. I don't know as I did, but if I had read it, it wouldn't have meant anything to me. Q. It wouldn't have meant anything to you? A. No. Q. You would have signed it just the same? A. Yes. Q. The reason that you would have signed it if you had seen that there, and known it was there, was because of the fact that you believed they could not get a deficiency judgment against you on the mortgage? A. I did believe it. Q. And that was your reason for signing it? A. Something might have called my attention to it. Q. Now, you say that you took this matter up with your brother Alex in his office, and you discussed this matter about your liability, with your brother, on the mortgage, and so forth? A. Well, there wasn't any great discussion. Q. And the first mortgage you refused to sign, because you thought you would be liable? A. Yes. Q. And your brother is an attorney, and he was acting for you and looking after your interests too, I presume? A. There were other reasons for not signing the first mortgage beside that."

Manley, as a witness for himself, narrates the original loan of money to the Smiths, the commencement of the action and attachment, and says:

"I was then busy, getting ready to leave the city

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