Suit by
P.A. Marquam against J. Thorburn Ross and others to redeem
certain land from mortgage foreclosure sale. From a decree in
favor of plaintiff, defendants appeal. Reversed.
See 78
P. 698.
This is
a suit against the United States Mortgage & Trust Company, a
New York corporation, hereinafter called the "Mortgage
Company," the Title Guarantee & Trust Company, an Oregon
corporation, hereinafter called the "Title
Company," the Oregon Company, and J. Thorburn Ross to
redeem block 178, known as the "Marquam Block," and
lots 1, 2, 3, and 4, in block 120, in the city of Portland
and 80 acres of land in or near that city from a purchase by
Ross, as trustee for the Title Company, at a sheriff's
sale, under a decree in a suit brought by the Mortgage
Company against Marquam, the plaintiff herein, the Title
Company and others, to foreclose a mortgage on such property
and to require the Title Company, and to require the Title
Company and the Oregon Company, its successor in interest, to
account for the rents and profits accruing after the
purchase. The facts are these: In August, 1894, the plaintiff
was the owner of the property in question, which was
incumbered with mortgages and attachments for more than
$300,000. His creditors were pressing him for payment, and he
was obliged to secure a new loan or suffer a forced sale of
the property. He made application to the Title Company, the
local correspondent of the Mortgage Company, for a loan from
the latter of $400,000, at 5 1/2 per cent. interest, to be
secured by mortgage on the Marquam building, offering, if the
loan were made, that the rents of the property should be
impounded as additional security therefor, and collected and
disbursed by the Title Company. The Mortgage Company declined
to make the loan as applied for, but after considerable
negotiation finally agreed, on October 16th, to lend
$300,000, for five years, at 7 per cent., secured by a
mortgage on the Marquam Block and the 80 acres of land; the
management and control of the property and the collection of
the rents to be in charge of the Title Company during the
existence of the loan. The plaintiff was willing to accept
this offer. As the $300,000 was not sufficient to pay his
pressing demands, however, or relieve his property from
liens, the Title Company agreed, at his request, to advance
sufficient money to make up the deficiency, such advances to
be secured by a lien on the property and the rents subsequent
to that of the Mortgage Company. Plaintiff thereupon entered
into a contract with two of his attaching creditors, the
Portland National Bank and George B. Ellis, which, after
reciting his desire to borrow of the Mortgage Company
$300,000, and secure the same by mortgage on the Marquam
Block and the 80 acres of land, and stating in detail his
indebtedness and the claims against the property, proceeds as
follows:
"Now
therefore, this agreement entered into on this thirtieth day
of October, 1894, by the undersigned parties interested in
the premises, witnesseth: That the Title, Guarantee & Trust
Company, acting for and on behalf of the said P.A. Marquam
(and said P.A. Marquam hereby agreeing to the terms hereof)
does for certain valuable considerations agree to procure for
him the necessary funds to discharge the hereinbefore
described two mortgages, the taxes for 1893, costs of repairs
of roof, fire insurance premiums and expense in securing loan
aggregating three hundred and fifteen thousand dollars
($315,000), and to procure for the said Marquam funds with
which to make a cash payment to said W.W. Cotton, on the
indebtedness due the said Ellis of Riverside, California, of
thirty-six hundred dollars ($3,600), provided the said suits
be both dismissed and said attachment to be released, and
provided that upon the execution of the mortgage on said
property and notes in favor of the United States Mortgage
Company for three hundred thousand dollars ($300,000) said
property shall be conveyed by the said P.A. Marquam and Emma
Marquam, his wife, to said the Title Guarantee & Trust
Company in secret trust to hold the said property and to
collect the rents thereof for the following purposes, to wit:
"First--To
pay the fixed charges for operating the buildings on said
premises and to pay for necessary repairs and for services
in collecting rents, and to pay the interest on said loan
of three hundred thousand dollars ($300,000), and all taxes
and other public charges on said property and on said
indebtedness.
"Second--To
pay all amounts to be advanced by said the Title Guarantee
& Trust Company for the said Marquam in carrying out the
requirements expressed herein, with interest thereon at ten
per cent.
"Third--To
pay pro rata said claims of the Portland National Bank and
Mr. Ellis and interest thereon at ten (10) per cent. per
annum.
"Fourth--To
pay said the Title Guarantee & Trust Company for its
services in executing said trust, and,
"Fifth--After
said three hundred thousand dollars loan to be made by
said the United States Mortgage Company shall be paid
off, to reconvey said property to the said P.A. Marquam
or to his assigns.
"And
the said W.W. Cotton, for and on behalf of his said
client, and the said Portland National Bank, in
consideration of the premises, do hereby agree to accept
a settlement of their said claims in the manner
hereinbefore set out. Said action not to be dismissed and
said attachment not to be discharged until said trust
deed is executed, as above provided, and a certificate of
said trust issued to said attaching creditors, reciting
the same and the terms of this agreement, duly executed
and acknowledged.
"P.A
Marquam.
"The
Portland National Bank,
"By W.D. Fenton, of Its Attorneys.
"George
B. Ellis,
"By W.W. Cotton, His Attorney."
At the
time this contract was made, and as part of the same
transaction, the plaintiff agreed in writing with the Title
Company to pay it $4,500 for exchange, title insurance,
brokerage, etc., for procuring the loan, 3 per cent.
commission on all collections, of whatsoever nature, after
October 31, 1894, and $1,000 per annum for its services,
together with one-sixth of the rents and profits derived from
the mortgaged property in excess of what was then being
received. On November 13, 1894, the transaction was finally
consummated by the plaintiff and his wife executing and
delivering to the Mortgage Company a first mortgage on the
Marquam Building and the 80-acre tract of land to secure the
payment of their promissory notes for $300,000, principal,
due five years from date, and 20 interest notes, for $5,250
each, one of which matured every three months, also a deed to
the Title Company of the mortgaged property and lots 1, 2, 3,
and 4, in block 120, absolute in form and purporting to
convey the legal title, subject, however, to the prior
mortgage, and entered into a written defeasance or agreement
with the Title Company as follows:
"This
Declaration of Trust and Agreement, entered into in
duplicate, on this, the thirteenth day of November
A.D.1894, by and between P.A. Marquam and Emma Marquam, his
wife, of the city of Portland, Oregon, and the Title
Guarantee & Trust Company, a corporation, organized and
doing business under the laws of the state of Oregon,
witnesseth:
"That
whereas, in consideration of the premises and of the
agreements on the part of the said P.A. Marquam and Emma
Marquam hereinafter contained and heretofore understood
between the parties hereto, said the Title Guarantee &
Trust Company has rendered certain services, and has
advanced and will advance certain sums of money, and has
secured for said P.A. Marquam and Emma Marquam a loan in
the sum of three hundred thousand dollars ($300,000) from
the United States Mortgage Company of New York, to secure
the repayment of which said P.A. Marquam and Emma Marquam
have this day made their certain promissory notes for
principal and interest and executed their mortgage to
said United States Mortgage Company, covering those
certain parcels of real property situated in the county
of Multnomah and state of Oregon, and particularly
described as follows, to wit: First, all of block
numbered one hundred and seventy-eight (178), containing
eight lots, in the city of Portland, Oregon, according to
the duly recorded map or plat thereof, said block being
bounded on the north by Alder street, on the east by
Sixth street, on the south by Morrison street, and on the
west by Seventh street, in said city of Portland; and,
second, all of that portion of the John Quinn donation
land claim, particularly bounded and described as
follows, to wit: Beginning fifteen (15) chains north of
the southeast corner of section twenty-five (25), in
township one (1), north of range one (1) east of the
Willamette meridian, and from thence running east eleven
(11) chains and ninety-four (94) links; thence north
twenty-five (25) chains; thence west thirty-two (32)
chains; thence south twenty-five (25) chains; thence east
twenty chains and six (6) links, to the place of
beginning, containing eighty acres of land. And, whereas,
in consideration of securing said loan, and of the
premises, said P.A. Marquam and Emma Marquam have granted
and conveyed by deed to said the Title Guarantee & Trust
Company in secret trust for the purposes hereinafter set
out, all of lots numbered one (1), two (2), three (3) and
four (4), in block numbered one hundred and twenty (120),
in said city of Portland, in the county of Multnomah, and
state of Oregon, and also all of said property described
in said mortgage to said United States Mortgage Company,
subject, however, to said...
