McLeod v. Despain

• Decision Date: 11 June 1907
• Citation: 49 Or. 536,90 P. 492
• Parties: McLEOD v. DESPAIN et al.
• Court: Oregon Supreme Court

90 P. 492

49 Or. 536

McLEOD v. DESPAIN et al.

Supreme Court of Oregon

June 11, 1907

Appeal from Circuit Court, Umatilla County; W.R. Ellis, Judge.

Suit by J.S. McLeod against Nancy E. Despain and others. From a decree for plaintiff and defendant Lina H. Sturgis, the other defendants appeal. Reversed.

This is a suit in equity by J.S. McLeod to foreclose three mortgages executed by Nancy E. Despain, Florence L. Berkeley, Bernice C. Dickson, Albert M. Despain, Edith Geraldine (Despain) Berkeley, together with Louise B. Despain, Eleanor M Despain, and Constance A. Despain, minors, by their guardian Nancy E. Despain, who with Norborne Berkeley, H. Dickson, and Chas. C. Berkeley, constitute the appellants herein. These mortgages were given to J.N. Teal to secure a note for $28,000, dated March 28, 1898, payable five years after date with interest at the rate of 8 per cent. per annum, and together with the note, were assigned to C.B. Wade, trustee to secure certain other notes thereafter executed to him as such trustee, one of which was assigned to plaintiff, McLeod, and one to Lina H. Sturgis, who constitute the respondents herein. The remainder of the notes so executed were indorsed by Wade to other persons not parties to this suit. Lina H. Sturgis was made a party defendant and answered, asserting her claim in the mortgage to the extent of her interest therein, as evidenced by her note. Wade was made a nominal party defendant; but not having been served with summons, made no appearance. Various other persons, not involved here, were also made defendants on account of interests claimed by them in the after-acquired mortgaged property. McLeod demands a decree foreclosing the mortgages to satisfy the sum of $7,000, with unpaid interest, while Sturgis prays a decree of foreclosure for an alleged unpaid balance of $1,157.45, with interest. Appellants, by their answer, allege that all of the notes and mortgages were paid in full to Wade as agent and trustee of respondents, and ask a decree dismissing the suit, together with affirmative relief to the effect that all the notes referred to be declared paid and the mortgages canceled of record. A trial was had before the court, resulting in a decree in favor of the respondents, as prayed for, from which decree this appeal is taken.

Wirt Minor and T.G. Hailey, for appellants.

John McCourt, for respondent McLeod.

Jas. A Fee, for respondent Sturgis.

KING, C. (after stating the facts).

The facts leading up to this suit, as we gather them from the record, are substantially as follows: In March, 1898, appellants borrowed $28,000 from J.N. Teal, of Portland, Or., executing their promissory note therefor, payable to his order five years after its date at the Pendleton Savings Bank, Pendleton, Or., with interest at the rate of 8 per cent. per annum. To secure the payment of this note, three mortgages were also executed and duly recorded, covering certain lands in Umatilla county, Or. In June of the same year appellants, desiring to reduce the rate of interest and in order to sell their lands and apply the proceeds upon the indebtedness, wanted the privilege of paying the principal and interest before due, and as Teal would not accede to these terms, but was willing to receive the full amount at any time, they made application for a loan to C.B. Wade, then cashier of the First National Bank, of Pendleton, Or. Norborne Berkeley testified that, as their agent, he made the application, and that the first time he spoke to Wade concerning the loan he answered: "We haven't got the money now, but can probably let you have it later;" that during the same week he renewed the request, and Wade replied: "I think we can get the money now, and will let you have it." After talking the matter over, he told Wade that, if he would buy the Teal note and hold it and allow them to pay it off in such sums as they could, it would suit them better than as it was, since they wanted to sell certain ranches and apply the proceeds on their obligation. Wade was to give them a lower rate of interest, and for his services in the transaction would charge $1,500, all of which was agreed to; and after learning that Wade had received the note and mortgages from Teal appellants executed eight promissory notes, made payable to "C.B. Wade, trustee," dated June 29, 1898, with interest at the rate of 7 per cent. per annum, payable semiannually, "on or before five years from date." The notes aggregated $29,500, as follows: Two for $7,000 each, and two for $2,500, two for $1,500, one for $3,500, and one for $4,000. One of the $1,500-notes represented the bonus to Wade. All the signatures of the new notes were procured within a short time after Wade received the Teal note and mortgages duly assigned. The new notes were accordingly turned over to him, and, with the exception of the bonus note, were duly assigned to the parties advancing the money.

As a part of the transaction, appellants and Wade entered into an agreement concerning the payment and disbursement of rents to be received on the property, which on June 30, 1898, was reduced to writing, and, omitting the signatures, is as follows: "This agreement, made and entered into this 30th day of June, 1898, by and between N.E. Despain, Florence L. Berkeley and Norborne Berkeley, Jr., her husband, Bernice Dickson, and Haldane Dickson, her husband, Albert M. Despain, Edith G. Despain, and N.E. Despain as guardian of the persons and estates of Louis B. Despain, Eleanor Despain and Constance A. Despain, minors, parties of the first part, and C.B. Wade, trustee, party of the second part, witnesseth: That whereas the first parties have borrowed of C.B. Wade, trustee, party of the second part, twenty-eight thousand dollars ($28,000), payable on or before five years, and bearing interest at the rate of seven per cent. per annum, said loan being secured by a note and mortgage for $28,000, which note is secured by a real estate mortgage on certain city property in the city of Pendleton, and farm lands in Umatilla county, Oregon, same having been duly executed and delivered to J.N. Teal, of Portland, Oregon, by said first parties, and by said J.N. Teal duly assigned to second party hereunto, therefore, in consideration of the premises, and for the further security of said C.B. Wade, trustee, said first parties hereto do sell, transfer, set over and assign to C.B. Wade, trustee, all the rents and profits of the property in the city of Pendleton, described in said mortgage from said first parties to J.N. Teal, for the period of five years, unless said sum of twenty eight thousand dollars ($28,000), and interest thereon, shall have been sooner paid to said second party. First parties do further agree that they will, without expense to said second party, collect and deposit in the First National Bank, of Pendleton, Oregon, to the credit of the second party, the rents and profits of mortgaged property within limits of the city of Pendleton. And said second party agrees (1) that of moneys so deposited by said first parties, if same be sufficient therefor, he will pay or cause to be paid to N.E. Despain, the sum of one hundred fifty dollars ($150) per month; (2) that he will pay interest on said loan semiannually; (3) that he will pay premiums on such fire insurance policies as may be procured, subject to approval of second party, by said first parties on property in city of Pendleton material to this agreement; and (4) that if, after such payments as hereinbefore set forth are paid, there remains any balance of such rents and profits, the same shall be paid on principal of said loan of twenty eight thousand dollars ($28,000); provided, however, that if first parties shall be unable to pay taxes assessed against said property the party of first part may pay such taxes from such balance, if any there be." It appears that after receiving the application Wade spoke to McLeod, Sturgis, and others concerning it, explaining the time, terms, and conditions desired, and suggested that they advance the necessary money, indicating it would be a safe investment, for the reason he would procure an assignment of the note and mortgages from Teal to himself, as trustee; and, as an additional safeguard, he would arrange to have all rents from the property, together with receipts of sales of lands, if sold, paid to him, during the period of the loan, which he would apply in payment of the interest, when due, and credit the excess upon the principal. With this understanding McLeod furnished $7,000, Lina H. Sturgis a like sum, while the balance of the funds was advanced by other parties not involved here. The money advanced, being sufficient for the desired purpose, amounting to $28,000, was paid over to Wade, who with full knowledge, consent, and request of all concerned paid the same to Teal. The assignment was in the usual form, dated June 29, 1898, and executed to "C.B. Wade, trustee"; the note being indorsed, "without recourse, to J.N. Teal."

The new notes were given for the purpose of indicating and specifying in writing the terms of payment of the obligation represented by the Teal note and mortgages, as well as to indicate the interest each of the parties advancing the money might have in the entire indebtedness and mortgage security, including the additional $1,500 bonus note given. These notes were executed, assigned, and accepted with the full knowledge and understanding of all the parties concerned that Wade, as trustee, was to hold the Teal note and mortgages and neither the note nor mortgages should be deemed discharged until the amounts specified in the new notes should be fully paid. Wade accordingly entered upon his trust, retained possession of the Teal note and mortgages, received all rents...