Page v. Ford

• Citation: 131 P. 1013,65 Or. 450
• Parties: PAGE v. FORD et al.
• Decision Date: 29 April 1913
• Court: Supreme Court of Oregon

131 P. 1013

65 Or. 450

PAGE v. FORD et al.

Supreme Court of Oregon

April 29, 1913

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

Action by C.H. Page against A.H. Ford and others. From a judgment for defendants, plaintiff appeals. Reversed and remanded.

This is an action brought by the appellant, C.H. Page, to recover the amount due on a promissory note executed by respondents to the Oregon-Idaho Company, a corporation, and by it transferred to appellant. The note was executed August 15 1910, by respondents, and by the terms thereof they promised to pay to the order of the Oregon-Idaho Company the sum of $15,000 on or before six months thereafter, with interest at the rate of 6 per cent. per annum and a reasonable sum as attorney's fee in case of suit or action. The note was given as part of the purchase price of certain real estate and personal property. On the margin of the note these words were written: "This note is secured by mortgage of even date given to secure the balance of the purchase price of the property described in said mortgage." The real estate consisted of land on which was a sawmill. The personal property consisted of certain tools, machinery, and lumber. The defendants answered: (1) That the note was given as a part of the purchase price of certain real estate sold by the said Oregon-Idaho Company to defendants A.H. Ford and F.F Williams, and that at the same time and as a part of such consideration said Oregon-Idaho Company entered into a contract with such defendants to furnish and deliver to them 200,000,000 feet of logs, not less than 10,000,000 feet the first year, and from 15,000,000 to 25,000,000 feet each succeeding year, until the 200,000,000 feet should be delivered. That the note had not been transferred to appellant by said corporation or by its authority, and said contract had been breached by said Oregon-Idaho Company and defendants damaged thereby in a sum exceeding the amount of the note; hence the action should abate. (2) That, the note being for the balance of the purchase price of real estate and secured by a mortgage thereon, no personal judgment could be recovered. A copy of the mortgage was set forth, and it appears therefrom that the note was given as a part of the purchase price of certain real estate and personal property covered by the mortgage. A demurrer to this defense was sustained by the court. (3) It was averred as a defense to the action that the Oregon-Idaho Company had since the execution of such note, mortgage, and contract, been adjudged a bankrupt, and that the note had not been transferred to appellant by authority of such corporation; hence the trustee in bankruptcy was the real party in interest. (4) That plaintiff purchased the note with knowledge of the fact that said contract to supply defendants with logs was a part of the consideration therefor and that such contract had been breached, and alleged damages in excess of the amount due on the note. To the first, third, and fourth defenses appellant replied, denying the same and alleged that prior to any breach of the contract for logs, if any occurred, defendants sold and assigned such contract to the Cow Creek Mill Company, a corporation.

At the trial the court overruled respondents' contention that the holder of a note given for the balance of the purchase price of real estate and secured by a mortgage thereon is confined to the remedy of foreclosing the mortgage, and held that such holder may ignore the mortgage and recover a personal judgment in an action on the note. The note as stated was executed by the respondents to the Oregon-Idaho Company, and was by such company indorsed: "Pay to order of Frank Smith. Oregon-Idaho Co., by L.R. Ferbache President." Smith indorsed it back in the form following: "Without recourse pay to the order of the Oregon-Idaho Co. or L.R. Ferbache. Frank E. Smith." It was then indorsed to appellant thus: "Pay to Chas. H Page, or order, this 9th day of September, 1910. L.R. Ferbache, President Oregon-Idaho Co." and "For value received, I hereby guarantee the payment of the within note absolutely without condition and waive demand, notice, or protest for nonpayment. L.R. Ferbache." The court ruled that the indorsement by Smith "to the order of Oregon-Idaho Co. or L.R. Ferbache" was an alternative indorsement and destroyed the negotiability of the note. It was also contended by respondents that at the time the Oregon-Idaho Company entered into the contract to furnish said respondents 200,000,000 feet of logs it did not own land upon which there was any such quantity of timber, and that that fact operated as a breach of the contract at the moment it was made; and the court so held, or at least admitted testimony tending to show, that said company then had not over 40,000,000 feet of timber, and the court refused to instruct the jury that the mere fact, if they so found it, that said company did not own land on which there was 200,000,000 feet of timber at the date the contract was executed would not constitute a breach of the contract.

C.W. Fulton, of Portland (King & Saxton, of Portland, on the brief), for appellant.

Robert T. Platt, of Portland (Platt & Platt and J.O. Bailey, all of Portland, on the brief), for respondents Williams.

Manning & White, of Portland, for respondents Ford.

McBRIDE C.J. (after stating the facts as above).

There are four questions arising on this appeal, namely: (1) Is one who holds a note given for a balance due on the purchase price of real and personal property secured by a mortgage on such property restricted to the remedy of foreclosing the mortgage and a sale of such mortgaged property? (2) Did the aforesaid alternative indorsement render the note nonnegotiable? (3) Did the provision in the mortgage that the mortgagors should pay taxes assessed against the note or mortgage render the note nonnegotiable? (4) Did the fact that at the time the Oregon-Idaho Company undertook to supply respondents with 200,000,000 feet of logs within a period of years it did not own land containing that quantity of timber constitute a breach of such contract?

A correct solution of the first proposition turns upon the construction to be placed upon section 426, L.O.L., which is as follows: "When judgment or decree is given for the foreclosure of any mortgage, hereafter executed, to secure payment of the balance of the purchase price of real property, such judgment or decree shall provide for the sale of the real property, covered by such mortgage, for the satisfaction of the judgment or decree given therein, and the mortgagee shall not be entitled to a deficiency judgment on account of such mortgage or note or obligation secured by the same." That a creditor holding a note secured by mortgage may ignore his security and bring an action upon the note is settled beyond the pale of discussion. Jones on Mortgages (4th Ed.) §§ 1215, 1218, 1220. The section quoted by its terms is applicable only to suits for the foreclosure of mortgages. The plaintiff having brought his action at law upon the note is not precluded by this section from obtaining the usual judgment rendered in such cases. This view is strengthened by an examination of the title of the act abolishing deficiency judgments, which is as follows: "An act to abolish deficiency judgments upon the foreclosure of mortgages to secure the unpaid balance of purchase price of real property." Session Laws 1903, p. 252. By its title as well as by its text the effect of the act is confined to foreclosure suits. It will be noted that the act abolishing deficiency judgments upon foreclosure makes no mention of, nor does it purport to repeal, section 429, L.O.L., which is as follows: "During the pendency of an action at law for the recovery of a debt secured by any lien mentioned in section 422, a suit cannot be maintained for the foreclosure of such lien, nor thereafter, unless judgment be given in such action that plaintiff recover such debt or some part thereof, and an execution thereon against the property of the defendant in the judgment is returned unsatisfied in whole or in part."

Did the alternative indorsement render the note nonnegotiable? This is a question of much nicety, involving the construction of section 5841, L. O.L., being identical with section 27 uniform negotiable instruments law as it appears in Crawford on Negotiable Instruments, which first-mentioned section reads as follows: "The instrument is payable to order where it is drawn payable to the order of a specified person, or to him or his order. It may be drawn payable to the order of (1) a payee who is not maker, drawer, or drawee; or (2) the drawer or maker; or (3) the drawee; or (4) two or more payees jointly; or (5) one or some of several payees; or (6) the holder of an office for the time being. Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty." At common law a note so indorsed was nonnegotiable. 1 Daniel on Negotiable Instruments (4th Ed.) § 103; Randolph on Commercial Paper, § 155; 1 Parsons on Notes and Bills, p. 34, note; Story on Promissory Notes, § 33. But this rule which was accompanied with many inconveniences, and was supported more by archaic precedent than sound logic, seems to have been abrogated by the uniform negotiable instruments act, now adopted by 34 states of the Union. Crawford on Negotiable Instruments (3d Ed.) p. 20; Selover on Negotiable Instruments (2d Ed.) p. 75; Union Bank v. Spies, 151 Iowa, 178, 130 N.W. 928. The opinion of Mr. Crawford, who prepared the negotiable instruments act, is entitled to great consideration. The act is remedial in its nature, and should be liberally construed. We conclude, therefore, that in...