After stating that the defendant's wife and her sister and two of her brothers had been her pupils, and that "they were a lovely family of boys and girls that I thought a great deal of; and so when I found she was married to Mr. Phegley I at once had implicit confidence in Mr. Phegley that I could rely upon him," the plaintiff testified: "I talked over the matter with him, and said I wanted to save my possession, and it resulted in me buying out the half of his interest for exactly dollar for dollar of what he himself had put into the property. * At any rate I signed the contract for one-half, for exactly onehalf of what he put in, cash advanced, nothing else. "Q. Will you state whether or not there was to be any profit or loss on his part in the transaction? A. Not a cent. * * A. He gave me to understand that he had put in dollar for dollar for that in the property, money advanced by him in the property, and he was actually entitled to it. He said he had put that much money into the property; every dollar of it. * * "Q. Will you state whether or not you were suspicious of the statements made by Mr. Phegley at the time of this transaction? A. I had no suspicions whatever. "Q. Will you state to the court whether or not this consideration would have been paid or contract entered into by you at the time had you known that this $6.000 mortgage was a mortgage given to secure the president and manager of that corporation for alleged past in debtedness due them? A. I never would; I wouldn't have entered into it." tract between them, dated June 11, 1907, was prepared and executed on the represen. tation that the defendant was the owner and holder of the $6,000 note and mortgage in his own right and name, and the plaintiff never knew or was advised that the defendant held the mortgage as trustee for Cousins and Cable until he testified as a witness in this case. Referring to the $6,000 note and mortgage, he testified that he was to receive one-third of that amount, or $2,000, for his services as trustee for Cousins and Cable, who were the real owners, and that important fact was concealed from the plaintiff, who paid the full face value of both mortgages and accrued interest and other moneys advanced, making a total of $9,600. While the record shows that the full amount of the $6,000 mortgage was a just and valid debt and lien against the corporation, the fact that the defendant was to receive $2,000 out of the principal for his services as trustee of that mortgage is sufficient faith of the whole transaction. Legitimate to arouse at least a suspicion of the good business is not done on any such basis. It further appears that when the plaintiff paid the agreed purchase price to the defendant the latter took the trustee money of Cousins and Cable, which he received from her, and purchased stock for them in another mining corporation of which he was the moving spirit. [2] On the record, we are of the opinion that the defendant held the $6,000 note and mortgage as trustee for the use and benefit of Cousins and Cable only; that they were executed for a valuable consideration, and constituted a valid and subsisting lien on the property of the mining company at the time of purchase by the plaintiff. The agreement by which the plaintiff purchased the Regarding her contract with the defend- $6,000 note and mortgage included and carant, she further testified: "I was to take over one-half of Mr. Phegley's interest, dollar for dollar, for what he had put in; I would make good to him for one-half and not a dollar more. "Q. Didn't you and Mr. Phegley agree before this meeting you were to buy half of this $9,600? A. No, sir; it was half of what he put into the property. "Q. You had not agreed with Mr. Phegley how much you were to pay for this property? A. I repeated that I agreed, over and over, I agreed to pay him dollar for dollar for what he put into it." Although the defendant denies that he ever represented to the plaintiff that he had "paid out or expended on this property that $6,000 claim," he does not dispute her testimony that she was "buying out the one-half of his interest for exactly dollar for dollar, all of what he himself had put into the property," and the fact remains that the original con ried with it the agreement that she was to pay "dollar for dollar all of what he himself had put into the property." That was one of the considerations for, and which entered into, the purchase. It is very apparent that the defendant misled and deceived the plaintiff and concealed from her the fact that he was to have and did receive a fee of for his services as trustee for Cousins and $2,000 out of the $6,000 note and mortgage, Cable, and that the plaintiff relied upon the statements of the defendant as to the amount of his investment. We hold that in equity and good conscience the defendant should be required to pay over to the plaintiff the $2,000. [3] This is a suit in equity, and is tried de novo in this court. The decree of the circuit court will be modified, and one entered here in favor of the plaintiff against the defendant for $2,000, with costs in this and the circuit court. (182 P.) BURNETT, J. (dissenting). This suit was [ 000, of which Anderson and associates should before this court on an appeal by the plaintiff receive $16,000 and Phegley $10,000, any exfrom a decree of the circuit court sustaining cess over the minimum upset price to be a demurrer to the third amended complaint divided equally between Phegley on the one and dismissing the suit. In an opinion re- hand and Anderson on the other. Anderson ported in 84 Or. 124, 163 Pac. 1166, the de- was appointed by the pooling agreement to cree of the circuit court was reversed, with represent all parties in the supervision of instructions to overrule the demurrer. This the necessary assessment work and maintehaving been done, the defendant answered, nance of the property, and was to receive $40 the plaintiff replied, and the court heard the per month for his services. testimony of the parties and entered a decree dismissing the plaintiff's suit with costs. She again appealed. In addition to the statement in the former opinion, it is proper to say that we glean from the pleadings and evidence that the Galice Consolidated Mines Company, hereinafter called the company for the sake of brevity, was an Oregon corporation owning mining property in Southern Oregon, and the plaintiff had invested in its stock a sum of money in excess of $15,000. It was indebted to a banking concern at Grants Pass for borrowed money in the sum of $2,000 and interest, for which the company had given its note and mortgage upon the property, and this constituted the first lien on its holding. The defendant Phegley had purchased this note and mortgage, paying therefor its face and the accrued interest. This appears from undisputed testimony. As stated, Phegley had foreclosed his mortgages and obtained a decree and order of sale, at which juncture the plaintiff opened negotiations with him for the purchase. As a result of these negotiations she had her attorney prepare for her what is known as Exhibit B, attached to her complaint, it being a contract between the plaintiff as party of the first part and the defendant here as party of the second part, whereby under date of June 11, 1907, they agreed as follows: "That in consideration of the promises of said party of the first part hereinafter set forth, the said party of the second part does hereby sell, assign, transfer and set over unto said party of the first part a half interest in and to the mortgage and other claims belonging to him against the Galice Consolidated Mining Company and of his rights under a certain decree entered in his favor in the circuit court of Oregon for Josephine county in a case where he is plaintiff and the Galice Consolidated Mining Company and others were defendants, under which decree there is to be a sale of the property of said Galice Consolidated Mining Company on June 15, 1907. "In consideration of the foregoing, the said party of the first part does hereby agree to pay to said party of the second part one-half of the amount of his claim against said company at the present time, including one-half the money expended by him in the care of said property, amounting in all to ninety-six hundred dollars." The remainder of the agreement recites in substance that they should share equally in purchasing the property at the coming sale, and neither should dispose of the undivided interest thus obtained, without giving the other an option of 30 days to purchase the same. The plaintiff also bound herself by Exhibit B to the performance of half of Phegley's obligation under the pooling agree One Anderson and his associates had recovered two judgments against the company, one for $2,500 and another for $2,600, which constituted liens second only to the $2,000 mortgage already mentioned. The defendant had a $6,000 mortgage on the property, subsequent and inferior to the judgment liens already mentioned. In a suit to foreclose, making the judgment lienholders defendants, he had obtained a decree foreclosing his mortgages, had issued execution, and the day of sale was appointed for June 15, 1907. About this time, the plaintiff, in order to obtain control of the property with a view of protecting the investment she had already made, approached the defendant, whom she met for the first time according to her testimony, and proposed to purchase his claims against the company. She testifies that she was told of the mortgage by a broker with whom she had had some dealings, and in consequence of this information she felt it necessary to act at once in order to obtain control of the property. Previous to this, Phegley had entered into a contract with Anderson, the substance of which was that the property should be sold either by virtue of the Anderson judgments or foreclosure of the mortgages held by Phegley, and should be bought in by one or the other as they might choose, and the property pooled with mining ground held by Anderson and his associates, said Grant Phegley now holds the naked legal "Now, therefore, this is to certify that the the assessment work kept up so as to maintain title to the properties so purchased by him at title, and finally all the properties should be such sale, in trust for the said Anderson, Wilsold together for the minimum price of $26,-liamson and Phillips of the one part and said ment. Afterwards, on October 19, 1907, they entered into the agreement called "Exhibit C." attached to the complaint, narrating the foreclosure of the mortgage and the judgment liens of Anderson; that Phegley had purchased the property of the company by virtue of the sale and confirmation thereof and the consequent sheriff's deed, and that he had assigned to plaintiff a half interest, and later the remaining half, and declaring finally : Emma G. Robinson of the other part, whatever | he bought the note and mortgage from the the said several interests may be, and without banking concern for its full face value, inany beneficial interest of his own in and to said cluding the accrued interest. There is nothproperty or any part thereof." ing whatever in the testimony to dispute this assertion of the defendant, and hence the atThe complaint here was amended by inter- tack on the plaintiff must fail as to the lineations on its return to the circuit court $2,000 mortgage. She says in her complaint at the time of trial, so as to attack not only concerning the $6,000 mortgage that it was the mortgage for $6,000, but also the one for given to indemnify the defendant against $2,000, on the ground that the latter incum- liability which might befall him by virtue brance represented a false and fraudulent of an undertaking which he had signed for claim, and that in fact no part thereof was the company on an appeal from the judg-due and owing to Phegley from the corpora- ments rendered against it in favor of Andertion at any time. The complaint is to the son, but that, the appeal having been diseffect that the existence and validity of the missed, that mortgage had served its pur$6,000 indebtedness and the liability of the pose and thereafter was of no effect, notwithcorporation for the further sum of $2,000 standing which the defendant had sold it to were material and prime considerations on her, together with the decree for its foreclothe part of the plaintiff, inducing her to "pursure. There is no evidence whatever in the chase the interests of the defendant, in that record tending in the least to sustain the the same constituted, if the averments of the plaintiff's allegation in this respect, although defendant were true, a valid and existing it was denied by the defendant. On the conlien upon and thereafter a title to the cor- trary, the latter proved by the testimony of porate property, the control of which lien the secretary of the corporation that the comand title was necessary for the protection of pany was indebted to its president for money the plaintiff's interest in said corporation." advanced for the expenses of the corporation, She says in effect that on the contrary nel- and to its then secretary for his salary, which ther of these claims had any validity, and were actual, bona fide claims, and that there neither of them represented any actual inwere other demands against the company, debtedness against the corporation. She swelling the total to about $8,000; that the claims that the foreclosures were collusive. sum of $2,000, returned from a surety comShe says she has no plain, speedy, or ade- pany which had taken that deposit as indemquate remedy at law, offers to return to the nity against liability, was deducted from the defendant all of the choses in action, prop total liability of $8,000, leaving a balance of erty, and rights transferred to her by the $6,000 of actual indebtedness of the company, agreements, Exhibits B and C, and prays that which was embodied in the mortgage for that the agreements be canceled, and that she amount of money. The defendant explains have judgment against the defendant for that it was taken in his name at the instance $34,345.43, which presumably is the amount of the president and the secretary of the comof the various sums of money she has ex-pany, neither of whom desired to have prepended in the venture, although it cannot be computed at that figure from the abstract be fore us. The answer admits the making of the agreements, traverses all allegations of fraud and misrepresentation, and denies the charge that the mortgages mentioned were not valid claims against the company. Affirmatively, the defendant avows making the contracts alluded to, and that by virtue thereof the plaintiff entered into possession of the property, and has retained the same and the beneficial use thereof up to the present time. Other questions are raised by the affirmative matter in the answer which are deemed unnecessary for consideration. The crux of the controversy is whether or not the two mortgages in question for $2,000 of money originally borrowed from the bank, and the $6,000 included in the mortgage given directly to the defendant, were valid claims against the company. The plaintiff gave no evidence whatever to support her averment of the invalidity of the $2,000 mortgage. On the contrary, the defendant testifies that the bank was pressing the company for its money which it had loaned, and that at that time cedence over the other in his demand against the company; hence at their request he took and held it in trust for them as their interest might appear. He testified as the first witness for the plaintiff, who thereby having called him to testify, vouched for his credibility. He says that for his services he was to have as his compensation one-third of the proceeds of the mortgage. He explains that when the property was sold on foreclosure he invested the proceeds of the $6,000 mortgage in stock in another mining company at the direction of the beneficiaries. It is well to attend to the terms of the agreement which the plaintiff had her attor ney prepare. It is said there: "That in consideration of the promises of said party of the first part [the plaintiff here] here, inafter set forth, the said party of the second part does hereby sell, assign, transfer and set over unto said party of the first part a half interest in and to the mortgage and other claims belonging to him against the Galice Consolidatcertain decree entered in his favor, * ed Mining Company and of his rights under a under which decree there is to be a sale of the property of said company on June 15, 1907." * (182 P.) On her part, she promised to pay, not only one-half the amount of his claim against the company thus recited and evidenced, but also one-half of the money expended by him in care of the property, amounting in all to $9,600. She agreed to do those two things: First, to take up half the decree; and, second, reimburse the defendant for half he had otherwise expended. In a sense, these are mutual contractual considerations. They are the language of the plaintiff herself, speaking through her own attorney who prepared the contract. She knew what she was signing, and she knew what she was contracting to do and what the defendant agreed to perform. As said in Sutherlin v. Bloomer, 50 Or. 398, 407, 93 Pac. 135, 139: "The consideration specified in the written contract consists of certain acts to be performed, and the authorities are practically unanimous in holding that, where the statement in the written instrument as to the consideration is of a contractual nature, as where the consideration consists of a specific and direct promise by one of the parties to perform certain acts, it cannot be changed or modified by parol or extrinsic evidence. A party has a right to make the consideration of his agreement of the essence of the contract, and, when this is done, the consideration for the contract, with reference to its conclusiveness, must stand on the same footing as its other provisions, and accordingly cannot be affected by the introduction of parol or extrinsic evidence [citing authorities]." The plaintiff's object, stated by herself, was to obtain control of the property through the sale of the same under the decree of foreclosure, which sale was then near at hand. The decree was a valid one. With the purpose she had in view it could make no difference to her whether the $6,000 mortgage was held by Phegley as trustee or in his own right. Such a representation, even if untrue, would be immaterial under the circumstances, and would not be any basis upon which to charge fraud. The undisputed testimony shows that it was given by order of the directors upon a thorough investigation of the claim upon which it was based, which was for money advanced to the company and for salary to its secretary. Neither can it make any difference to her what disposition was to be made of the proceeds of the sale under the decree, or what compensation the beneficiaries for whom the mortgage was held should give to the defendant for his services. Taking for true all that Phegley said about holding the $6,000 mortgage for the benefit of those to whom the money was due, yet the decree was valid because section 29, L. O. L., says: "An executor or administrator, a trustee of an express trust, or a person expressly authorized by statute, may sue without joining with him the person for whose benefit the action is prosecuted. A person with whom, or in whose name a contract is made for the benefit of another, is a trustee of an express trust within the meaning of this section." Although Phegley held this mortgage in trust for other parties to whom the indebtedness was actually due, and although they were to compensate him for his services, all of which is undisputed, the claim upon which the mortgage was based, the mortgage itself, and the decree entered in pursuance thereof constituted a valid claim against the company and a lien upon its property. Its ownership gave her the control she desired. The plaintiff herself says that she sought Phegley, not he, her. She said she had never met him before, and had never even known his name until she "learned he had foreclosed his mortgage." She further says: "So then I talked over the matter with him and said I wanted to save my possession, and it resulted in me buying out the half of his interest for exactly dollar for dollar of what he himself had put into the property. "Q. How was the amount arrived at? A. We counted up the first mortgage and interest on that and the second mortgage and interest on that and what he claimed he had spent on the property, and attorney's fees and expenses in going over the property and different times down to Grants Pass and everything, dollar for dollar, of what he had expended up to that time on the property, and I was to pay that; it amounted at that time to $9,603, and when I took over the one-half I paid him cash difference, the $1.50 so as to make it a round number." On cross-examination she testified as follows: "Q. Just when you made the deal, just what did Mr. Phegley say to you regarding the claim he had? A. I could not repeat his words 11 years after. I am under oath. I know the impression I got from him. "Q. I don't care about the impression. A, I could not repeat his words. He said he had advanced so much. He used words so that I fully understood that he had advanced that money-put that much money right over into the property. "Q. Did he use the word 'advanced'? A. I could not swear to that. "Q. Did he use the word 'pay'? A. I could not swear to the exact words he used. "Q. All you are testifying to is the impression that he left with you? A. I am testifying to the exact understanding his words gave me, but whether he used this word or that word I couldn't say. I know I talked with him that I wanted to save my stock in that property and must do so. "Q. And you wanted to get these mortgages the only way open to me, was to buy a half inso you could save it? A. Yes, sir; that was terest with him." The ground of her attack upon the $6,000 mortgage, as stated before, is to the effect that it was given solely to secure the defendant against any liability which might arise out of his suretyship on the appeal undertakings which he had signed for the company in appeals which had long since terminated, thus | two judgments against it, but Phegley is not destroying any possibility of his being held shown to have influenced that matter. Moreupon the undertakings. But, as stated, she over, no question is raised about them in this produced no syllable of testimony on that suit. The essence of the present contention subject. The validity of the mortgage is be- is that she insists the mortgage was frauduyond dispute, and it was an actual, bona fide lent, whereas it is plainly demonstrated that indebtedness of the company. It is a mere it was a just and valid claim against the conquibble to say that because Phegley held it cern. In the present juncture she has no cause as trustee, claiming also an interest in the of complaint, for she has utterly failed to proceeds as compensation, the claim was not prove her allegations. Very likely she made a valid one for which the property was lia- an unprofitable investment like many another, ble. Phegley was entitled to collect every possessed by a craving for sudden wealth, cent of the claim, because he had a valid de- who has put money into mining ventures cree for it which the plaintiff has utterly without experience in the business or knowl failed to impeach in any sense of the word. edge of the property; but that is no reason She has sought by this suit, not to recover why we should amerce Phegley for her benedamages for the fraud she claims to have fit. The decree rendered by the judge who been practiced upon her, but to rescind the heard the testimony and saw the witnesses contract on account of the alleged deceit and should be affirmed. to secure a restoration to her of all that she parted with in consequence of having made the agreement. She might have elected to sue for damages. She did not, but chose rather to sue in equity for a rescission. But, whichever horn of the dilemma she adopts, and whether this is to be treated as a suit to rescind or as an action for damages, she has utterly failed to prove any of the allegations of her complaint respecting the fraud charged. While testifying as a witness for the plaintiff, after stating that he was a trustee for parties who had advanced the $6,000 to pay the debt of the company, Phegley was asked this question by her counsel: "Was that fact communicated by you to Miss Robinson at the time of your negotiations with her, as a result of which the contract admitted in the pleadings was executed?" -and replied: "I may have told Miss Robinson that I was holding the $6.000 mortgage for other parties, but the $2,000 mortgage I owned myself." In brief, under the circumstances disclosed by the evidence, it is immaterial whether Phegley held this $6,000 mortgage and the decree in pursuance thereof entirely in his own right or wholly in the right of another or partly in his own right and partly in that of others. It was still a valid lien upon the property which the plaintiff sought to obtain so as to control the holdings of the company. Having prepared the agreement herself by her own attorney after a full explanation and computation of the several amounts due, she certainly cannot claim that she was defrauded. She has wholly failed to establish a solitary controverted allegation of her complaint. She may have paid too dearly for her stock in the first instance, but she did not buy that from Phegley, nor was he known to her at that time. The corporation may have suffered in its litigation resulting in the (93 Or. 96) SWEENEY v. JACKSON COUNTY et al. (Supreme Court of Oregon. July 15, 1919.) 1. APPEAL AND ERROR 878(6)—REVIEW— DETERMINATION. Where plaintiff did not appeal in an equity case, the appellate court cannot increase the award in his favor even though it hears the case de novo. 2. APPEAL AND ERROR 895(1)-REVIEW BEAN, J. Acknowledging our appreciation of the assistance rendered by the briefs of able counsel upon both sides of this suit, we note that it is earnestly urged upon a petition for rehearing that the court erred in affirming the decree of the trial court for the For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes |