Murray v. Wiley

• Citation: 127 P.2d 112,169 Or. 381
• Parties: MURRAY v. WILEY et al.
• Decision Date: 30 June 1942
• Court: Oregon Supreme Court

127 P.2d 112

169 Or. 381

MURRAY v. WILEY et al.

Supreme Court of Oregon

June 30, 1942

Rehearing Denied and Opinion Modified

Sept 29, 1942.

See 129 P.2d 66.

Appeal from Circuit Court, Klamath County; Arthur D. Hay, Judge.

Action by E. J. Murray against Wilson S. Wiley and others to establish plaintiff's interest in property, record title to which stood in names of certain of defendants. From an adverse judgment, plaintiff appeals.

Reversed and remanded.

Prior to August 20, 1932, the plaintiffs, E. J. Murray and Rebecca J. Murray, his wife, were owners as tenants by the entirety of real property located in Klamath Falls, Oregon, and described in the complaint. In March, 1938, the plaintiffs brought this suit to establish their interest in the property, the record title to which at that time stood in the names of certain of the defendants. On August 8, 1938 Rebecca J. Murray died. On December 29, 1938, the plaintiff E. J. Murray, filed a second amended complaint, alleging her death and his consequent sole ownership of the property.

At and prior to August 20, 1932, the property was subject to a first mortgage in favor of the Pacific Savings and Loan Association, on which there was a balance due of approximately $57,000. The plaintiff, Murray, was also indebted to the defendant attorneys, Wiley and D'Albini for services rendered. On August 5, 1932, the Conger Corporation was organized the sole stockholders being W. A. Wiley, G. Q. D'Albini, and Marie D'Albini, his wife. On August 20, 1932, the plaintiffs conveyed the Murray Building to the Conger Corporation by deed warranting against all encumbrances except "existing mortgage, liens and taxes."

The plaintiff contends that the deed, although absolute in form, was in truth a second mortgage given by the Murrays to secure to the defendants, Wiley and D'Albini, the payment of their fees. Those defendants, on the contrary, contend that the real property was conveyed to the Conger Corporation (subject to the first mortgage) in payment of the plaintiff's indebtedness to said defendants. This presents the first issue of the case.

In May, 1934, the Pacific Savings and Loan Association brought suit to foreclose its first mortgage, and on March 23, 1935, the property was sold pursuant to decree for $56,984.78, the mortgagee being the purchaser.

On March 21, 1936, the Conger Corporation, which appeared as the record owner, gave notice of intention to redeem. On March 23, 1936, being the last day of the redemption period, the Conger Corporation assigned to Mary L. Moore, Merle S. West, Charles J. Martin and Thomas B. Watters the right of redemption and also executed and delivered to them a bargain and sale deed to the property. Shortly after 5:00 o'clock of the same day, Watters and his associates, whom we shall call the purchasing defendants, exercised their purported rights by redeeming the property, since which time they have claimed to be the owners in fee thereof, free from any claim of the plaintiff.

It is the contention of the plaintiff that the Conger Corporation was the alter ego of Wiley and D'Albini, and that after the Pacific Savings and Loan Association had caused the property to be sold on foreclosure, the Conger Corporation, i. e. Wiley and D'Albini, still held what remained, namely, the statutory right of redemption, as trustees or mortgagees, to secure to themselves the payment of the moneys owed them by the plaintiff, and that if they or their assignee-grantees exercised that right of redemption they would still hold the property as mortgagees, subject to the equitable rights of the plaintiff as mortgagor. (Once a mortgage, always a mortgage.)

The defendant attorneys deny that they or the Conger Corporation took the property as security and contend that the conveyance was made as payment of the fees owing them from the plaintiff. As a second ditch defense, they contend that even if the property was held by the Conger Corporation as security for the benefit of the defendant attorneys they were still within their legal rights in selling the equity of redemption on the last day of the year. The purchasing defendants assert that they are bona fide purchasers for value without notice, from one having the record title and that they are entitled to prevail regardless of the decision upon the preceding issues.

Ralph R. Bailey, of Portland (Maguire, Shields & Morrison, Hugh L. Biggs, and Donald K. Grant, all of Portland, on the brief), for appellant.

W. S. Wiley, of Klamath Falls (G. Q. D'Albini, of Klamath Falls, on the brief), for W. S. Wiley, G. Q. D'Albini, and Marie N. D'Albini.

D. V. Kuykendall, of Klamath Falls (Kuykendall & Kuykendall, of Klamath Falls, on the brief), for Mary L. Moore, Merle S. West, Emma West, Charles J. Martin, Lynna Martin, Thomas B. Watters, and Evelyn Watters.

Before KELLY, C.J., and BELT, BAILEY, LUSK, RAND, ROSSMAN, and BRAND, JJ.

BRAND, Justice.

It is undisputed that in August, 1932, the plaintiff was indebted to the defendant attorneys in a substantial sum, on account of work performed by them in connection with litigation in which plaintiff was then interested.

In August, 1932, the plaintiffs, Murray and wife were the owners of the Murray Building, subject to the Pacific Savings and Loan Association mortgage, and of the Keystone Apartments on 8th Street, in the City of Klamath Falls, which was also subject to a first mortgage. On or about August 1st, the plaintiff, Murray, and the defendant attorneys entered into discussions concerning the disposition of these two properties. There is a conflict of testimony as to who first suggested the solution of the problem, but during that month and under the advice and direction of the defendant attorneys two corporations were organized, the Conger Corporation and the Keystone Building Company. The defendants, Wiley and D'Albini and Mrs. D'Albini, were the sole stockholders and directors in each of said corporations. The capital stock of the Conger Corporation was $5,000.

On August 20, 1932, the plaintiffs conveyed the Murray Building to the Conger Corporation, the transaction being handled in the following manner: Wiley and D'Albini borrowed $5,000 from the bank and deposited the same to the credit of the Conger Corporation in purported payment of the stock thereof. The Conger Corporation then issued its check to E. J. Murray in the sum of $5,000 as purported consideration for a deed of the property to the corporation, whereupon Murray paid the same $5,000 to the bank in liquidation of the bank's loan to Wiley and D'Albini, whose notes were returned to them. Murray also paid to the bank $10 for the use of the money which had been loaned to the defendant attorneys. An identical transaction took place with reference to the Keystone Apartments, which the plaintiffs conveyed to the Keystone Building Company, and in that instance also $5,000 was borrowed by the defendant attorneys from the bank, paid to the Keystone Building Company in purported payment of the stock thereof, then paid by the Keystone Building Company to Mr. Murray, who in turn paid the obligation of the defendant attorneys at the bank.

It is the defendants' contention that the simple circulation of the two checks closed that transaction and placed the title to both properties absolutely in the respective corporations. It is difficult to harmonize this contention with defendants' claim that the Murray building was transferred in payment of fees owing the defendant attorneys. The fictitious transaction involving the circulation of the two checks for $5,000 was obviously for the purpose of making it appear that the Conger Corporation had purchased the plaintiff's interest in the Murray Building for $5,000 and had likewise purchased the plaintiff's interest in the Keystone Apartments for a like sum. If the transaction was in fact a conveyance of the property in payment of the indebtedness owed, a safer and more candid procedure would have been to recite the cancellation of plaintiff's debt as the consideration for the deed.

The defendant, Wiley, as a witness acknowledged that he did not recall having given any receipt to the plaintiff indicating the payment of the fees.

Again, the testimony of the defendant attorneys establishes that the Keystone property was transferred to the Keystone Company by a transaction identical to that involved here, yet shortly after March 23, 1936 (the date of the sale to Watters et al.), the defendant attorneys turned over the Keystone property to Mr. Hannon merely on an order signed by Murray.

Again, Wiley testified as follows:

"Q. May I ask you this further question: Did you make the statement at any time that this property was deeded to you in satisfaction of attorney's fees for services rendered prior to August, 1932, the date of the conveyance? ***

"Q. I am simply asking you if you made that statement? A. I have no such knowledge, I do not recall."

Plaintiff, Murray, testified positively that at the time of the transfer of the property to the Conger Corporation in 1932, the defendant attorneys promised to reconvey the property to him, that the understanding was that this was to be done as soon as his indebtedness was cleaned up and that the defendant attorneys never asserted a right to the property exclusive of the plaintiff until a few days before the expiration of the right of redemption. Defendants, Wiley and D'Albini, on the contrary, testified that the ownership of the property was in the Conger Corporation, and Mr. Murray was to be out of it, that the property was to belong absolutely to the corporation, that Murray was to have nothing to do with it and that Murray was advised of and agreed to that proposal by telephone.

In view of this conflict of...