Murray v. Wiley

• Decision Date: 30 June 1942
• Citation: 169 Or. 381,129 P.2d 66
• Parties: MURRAY <I>v.</I> WILEY ET AL.
• Court: Oregon Supreme Court

169 Or. 381

129 P.2d 66

MURRAY

v. WILEY ET AL.

Supreme Court of Oregon.

Argued March 5, 1942.

Reversed June 30, 1942.

Rehearing denied September 29, 1942.

Mortgages — Deed as mortgage

1. In determining whether a deed conveying building to corporation whose sole stockholders were attorneys to whom grantor was indebted for fees was intended to be a mortgage, attorneys' retention of grantor's notes in settlement of indebtedness for legal services rendered prior to date of conveyance was persuasive evidence that debt continued after the conveyance.

Mortgages — Deed as mortgage

2. A deed absolute on its face, though knowingly executed, may be shown in equity, by parol, to be a mortgage, without allegations of fraud, accident, or mistake.

Mortgages — Deed as mortgage

3. A deed absolute intended as a mortgage does not pass legal title.

Mortgages — Deeds — Consideration

4. Where pre-existing debt is not extinguished upon delivery of deed, a strong inference arises that conveyance was intended as security for debts, which inference is fortified if no fresh consideration passes from grantees to grantor.

Mortgages — Deed as mortgage

5. Evidence showed that deed conveying building to corporation whose sole stockholders were attorneys to whom grantor was indebted for fees for services rendered prior to conveyance was in equity a "mortgage" on ground that conveyance was intended merely as security for indebtedness, especially in view of attorneys' acceptance of grantor's notes in settlement of indebtedness after the conveyance.

Fraudulent conveyances — Creditors — Preference

6. If conveyance of realty to a corporation whose sole stockholders were attorneys to whom grantor was indebted for fees was made as security only, grantor could prefer the attorneys to that extent over other creditors if done in good faith, notwithstanding such conveyance would render claims of other creditors less easy of collection.

Corporations — "Alter ego"

7. Where corporation was formed by attorneys as sole stockholders for sole purpose of holding building conveyed by attorneys' debtor, and corporation was permitted to expire after corporation conveyed the building to third parties, corporation was the "alter ego" of the attorneys and debtor's rights in building were the same as if conveyance had been made directly to attorneys.

Mortgages — Deed as mortgage — Right of redemption

8. Where deed conveying mortgaged realty to corporation whose sole stockholders were attorneys to whom grantor was indebted was in equity a second mortgage, and if grantor had given an instrument in form a second mortgage corporation would have had at most 60 days from date of sheriff's sale within which to redeem, and corporation as record title holder assigned right of redemption from first mortgage foreclosure sale on last day of year from date of sale grantor's interest was not wiped out by foreclosure of first mortgage, since the exercise of right of redemption for a year, in equity belonged to grantor who as between himself and attorneys was owner of the realty.

Mortgages — Power of sale

9. The grantee of a deed absolute in form but in equity a mortgage cannot foreclose by exercising a purported power of sale.

Mortgages — Right of redemption

10. Before sale to first mortgagee at foreclosure sale of property in possession of second mortgagee, relation of parties was analogous to that of "trustee" and "cestui que trust", and after foreclosure sale, under maxim once a mortgage always a mortgage, second mortgagee held right of redemption as security and if second mortgagee had redeemed same maxim would have applied, and, if second mortgagee sold property to one chargeable with notice, maxim would again apply and right of mortgagor to redeem would still persist.

Mortgages — Deed as mortgage

11. Where deed conveying mortgaged realty to corporation was in equity a second mortgage and first mortgage was foreclosed, purchasers who received conveyance from corporation together with assignment of right of redemption were assignees of rights which in equity belonged to grantor, and upon exercising right of redemption purchasers were mortgagees in possession having right to foreclose against grantor, subject to his right to redeem upon payment of indebtedness, unless purchasers were bona fide purchasers for value without notice.

Vendor and purchaser — Burden of proof — Purchase for value

12. Parties who received conveyance and assignment of right of redemption from a corporation which in fact was a second mortgagee, but which was record owner of realty which had been sold to first mortgagee at foreclosure sale, had burden to allege and prove that they were purchasers for valuable consideration without notice of mortgagor's equitable claim, in mortgagor's suit to establish his interest in the realty.

Vendor and purchaser — Knowledge — Record title

13. If purchasers of realty from corporation holding record title were put on notice regarding corporation's actual status as second mortgagee and did not make reasonable inquiry, purchasers were charged with knowledge of all facts that they might have learned had such diligence been exercised, as regards mortgagor's interest in such realty.

Vendor and purchaser — Knowledge — Notice to all

14. Under evidence establishing existence of intimate relationship between all of purchasers of realty from corporation which was record title holder but which in fact was a second mortgagee, and that all purchasers were represented by same attorney, notice to or knowledge by any of purchasers would be deemed "notice" to all, as regards mortgagor's interest in realty purchased.

Vendor and purchaser — Mortgagee in possession

15. Evidence disclosing that parties, who received conveyance and assignment of right of redemption from corporation which was record title holder of building which had been sold to first mortgagee at foreclosure sale, had notice that corporation in fact was a second mortgagee holding building as security for indebtedness from mortgagor to corporation's sole stockholders, showed that such parties were not "bona fide purchasers for value without notice" but "mortgagees in possession" and that mortgagor was beneficial owner subject to liens.

Attorney and client — Attorney's fee

16. A client's notes to attorneys for services rendered constitute evidence, but not conclusive evidence, of amount of attorney's fees.

ON PETITION FOR REHEARING

Mortgages — Foreclosure — Sale — Redemption

17. The statute requiring that in suits for foreclosure of a mortgage the realty shall be sold subject to mortgagor's right of redemption, being for the benefit of a mortgagor, was not applicable in mortgagor's action to redeem, where mortgagor prayed only for relief in the nature of strict foreclosure and had already enjoyed a period of more than a year after foreclosure sale within which he was entitled to redeem.

                  See 36 Am. Jur. 749; 37 Am. Jur. 211
                  27 C.J., Fraudulent Conveyances, § 379
                  42 C.J., Mortgages, § 2280
                

Before KELLY, Chief Justice, and BELT, BAILEY, LUSK, RAND, ROSSMAN and BRAND, Associate Justices.

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. REHEARING DENIED.

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.

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...