Security Savings & Trust Co. v. Loewenberg

• Decision Date: 12 November 1900
• Citation: 62 P. 647,38 Or. 159
• Parties: SECURITY SAVINGS & TRUST CO. et al. v. LOEWENBERG et al.
• Court: Oregon Supreme Court

62 P. 647

38 Or. 159

SECURITY SAVINGS & TRUST CO. et al. v. LOEWENBERG et al.

Supreme Court of Oregon

November 12, 1900

Appeal from circuit court, Multnomah county; John B. Cleland, Judge.

Action by the Security Savings & Trust Company and others against Bertha Loewenberg, executrix, and others. From a judgment in favor of defendants, plaintiffs appeal. Reversed.

This is a suit to foreclose a trust deed given as security for the payment of money. The facts, which are undisputed, are that on June 19, 1893, the defendant Loewenberg and wife conveyed to the plaintiff, as trustee, by a deed absolute in form certain real property, to secure the payment of $100,000 to be loaned to him by certain banks of Portland, and contemporaneously therewith, as a part of the same transaction, received from the trust company a written defeasance, which, after setting out the fact of the conveyance, recites that: "Whereas, said real property so conveyed to the said Security Savings & Trust Company trustee, was conveyed for the purpose of securing said Security Savings & Trust Company, trustee, for moneys to be advanced from time to time, not exceeding one hundred thousand dollars, to the said Julius Loewenberg, which sums of money are to be repaid to it on demand, with interest at eight per cent. per annum, together with any taxes or other charges that said Security Savings & Trust Company may be required to pay on said moneys so loaned or upon said real property; and which sums of money, not exceeding the said sum of $100,000, are to be advanced and loaned to the said Julius Loewenberg at the request and for the accommodation of the said Julius Loewenberg and Bertha Loewenberg, and to secure the same the said Julius Loewenberg and Bertha Loewenberg have executed the conveyance aforesaid: Now, this instrument certifies and declares that whenever the sums of money that may from time to time be advanced by the said Security Savings & Trust Company, trustee, to the said Julius Loewenberg as aforesaid, shall be repaid to the said Security Savings & Trust Company, trustee, with interest at eight per cent. per annum, together with any taxes or other charges that it may be required to pay on account of said loan, then the said Security Savings & Trust Company will reconvey to the said Julius Loewenberg and Bertha Loewenberg, in such manner as they shall direct, the whole of the real property hereinabove described." The deed was recorded on the 27th day of July, 1893, in the record of deeds, but the defeasance was not placed of record. The associated banks thereupon advanced money to Loewenberg from time to time through the plaintiff corporation, aggregating in amount $100,000, the larger portion of which had been repaid prior to the commencement of this suit. On January 5, 1895 Loewenberg was indebted to the First National Bank of Portland in the sum of $23,000, and to the London & San Francisco Bank, Limited, in the sum of $10,000, but, fearing the effect upon his other creditors, refused to secure the same by a formal mortgage upon the property described in the deed to the plaintiff corporation. After much importunity, however, with the understanding that it should not be placed of record, he executed and delivered to the banks a written instrument, of which the following is a copy: "To the Security Savings & Trust Company, Portland, Oregon: The undersigned, J. Loewenberg, of Portland, Oregon, being at this day justly indebted to the First National Bank of Portland, Oregon, in the sum of twenty-three thousand dollars ($23,000), and to the London & San Francisco Bank, Ld., in the sum of ten thousand dollars ($10,000), which sums he has agreed to secure by mortgaging and pledging the hereinafter described property heretofore conveyed to you by the said J. Loewenberg and wife, and which you hold the title to as security for the sum of $75,000 now remaining due, therefore the undersigned, J. Loewenberg, does hereby grant and convey to the said First National Bank of Portland and London & San Francisco Bank, Ld., as security, and as a mortgage to secure the said sums so due said two banks, the following portion of the real property heretofore conveyed to you by J. Loewenberg and wife on June 19, 1893, subject to the liens and claim for which you now hold the same, to wit: The undivided one-half of block No. 28 in Watson's addition to the city of Portland; the undivided one-half of lots Nos. 5 and 6, block No. 168, in said city of Portland (being on the corner of Sixth and Madison streets in said city); the undivided one-half of the northwest quarter of Sec. 29, T. 1 N., R. 2 E., W.M.; undivided one-half of 33 acres described particularly in deed made to you; lots in what is known as Cedar Hill and known as my homestead, in said city of Portland, and particularly described in deed made to you by J. Loewenberg and wife, said homestead being subject to a mortgage thereon of $30,000,--all said real property being situate in Multnomah county, Oregon. And you are hereby directed to hold the said real property herein last above described as security for said sums of $23,000 due the First National Bank of Portland and $10,000 due the London & San Francisco Bank, Ld., subject, however, to the prior liens and claims thereon held by you. Witness my hand and seal this January 5, 1895. [ Signed] J. Loewenberg. Witness: Joseph Simon." This instrument was immediately delivered to, and a memorandum thereof made on the books of, the plaintiff corporation, which agreed by parol to hold the title to the property therein described in trust to secure the payment of the amounts due the two banks. The defendants Watson and Leonard a short time thereafter, without knowledge of the instrument of January 5th, or of the claims of the banks thereunder, and without making any inquiry of the plaintiff corporation as to the nature and character of its claim under the deed of June 19, 1893, commenced separate actions at law against Loewenberg to recover the sums of about $15,000 and $4,000, respectively, and caused the property described in such deed to be attached. They subsequently recovered judgment against Loewenberg, and an order for the sale of the attached property. Thereafter this suit was brought by the Security Savings & Trust Company, the First National Bank of Portland, and the London & San Francisco Bank, Limited, to foreclose the lien of the trust company for the balance still due on the $100,000 loan; also to foreclose and enforce the instrument of January 5, 1895, from Loewenberg to the plaintiff banks. Both Watson and Leonard, who were made defendants, answered, setting up their attachments, which they claimed should prevail over the rights of the plaintiff banks under the instrument of January 5, 1895, because they had no knowledge of its existence at the time the levies were made. The court below held this contention sound, and the plaintiffs appeal.

Joseph Simon, for appellants.

W.T. Muir, for respondents.

BEAN, C.J. (after stating the facts).

The question for decision is one of priority between the claim of the plaintiff banks and that of the defendants Watson and Leonard. The right of the plaintiff corporation to a prior lien for the amount due on the original loan to Loewenberg is not disputed by any of the parties. The instrument of January 5th, under which the plaintiff banks claim, although not executed or acknowledged so as to make it a formal mortgage is, nevertheless, effective as such between the parties and subsequent purchasers or attaching creditors with notice. Moore v. Thomas, 1 Or. 201; Musgrove v Bonser, 5 Or. 313. Unless, therefore, the defendants Watson and Leonard, as attaching creditors, are entitled to the rights of a bona fide purchaser for value, the plaintiff banks must prevail in this suit, because their claim is prior in time, and therefore prior in right. On behalf of the plaintiffs it is insisted that the deed of June 19, 1893, from Loewenberg and wife to the plaintiff corporation, conveyed the legal title to the property therein described, and that no interest remained in Loewenberg which could be levied upon under a writ of attachment; while the contention for the defendants is that the transaction amounted to nothing more than a mortgage, and simply created a lien upon the property in favor of the plaintiff corporation for the debt intended to be secured thereby. It has long been settled in this state that a deed absolute in form, but intended by the parties as security for the payment of money, or the performance of any other legal act, if accompanied by a separate defeasance, is a mortgage at law ( Hurford v. Harned, 6 Or. 362; Stephens v. Allen, 11 Or. 188, 3 P. 443; Canal Co. v. Crawford, 11 Or. 243, 4 P. 113; Wilhelm v. Woodcock, 11 Or. 518, 5 P. 202); and this seems to be the general rule on the subject. Thus, in 3 Devl. Deeds (2d Ed.) § 1101, it is stated that, "where the deed and defeasance have been executed and delivered at the same time, and form parts of one transaction, the courts have universally considered them as constituting a legal mortgage." And in Teal v. Walker, 111 U.S. 242, 4 Sup.Ct. 420, 28 L.Ed. 415, it is said by the supreme court of the United States: "A deed absolute upon its face, but intended as a security for the payment of money, is a mortgage, even at law, if accompanied by a separate contemporaneous agreement in writing to reconvey upon the payment of the debt." To the same effect, see, also, 1 Jones, Mortg. (2d Ed.) § 244; Lanahan v. Sears, 102 U.S. 318, 26 L.Ed. 180. It is also well settled in this state that a mortgage vests no title in the mortgagee, but is a mere security for the payment of a debt. Anderson v. Baxter, 4 Or. 105; Sellwood v. Gray, 11 Or. 534, 5 P. 196. From these two...