BEAN, C. J.
The history of the Portland Cattle Loan Company, Inc., and the transaction claimed to bear upon the same, is said to be about as follows: For a number of years prior to 1922, former United States Senator R. N. Stanfield had been engaged in the sheep business in Oregon and Idaho. His operations were carried on through various companies and partnerships, and not infrequently he would finance the business of an individual, taking his note secured by mortgage upon the sheep purchased. Large sums were borrowed from time to time by Mr. Stanfield from the two Portland companies, engaged at the time in sheep and other livestock financing: Portland Cattle Loan Company, an Oregon corporation (predecessor of the appellant Portland Cattle Loan Company, Inc., a Washington corporation), and the Columbia Basin Wool Warehouse Company. There were loans directly to the companies and partnerships controlled by Senator Stanfield, and, in other instances, notes running to Stanfield were indorsed over and the accompanying
chattel mortgage assigned, Stanfield remaining secondarily liable upon his indorsement. Included in the latter class of transactions was a note or notes for $20,-988.70, executed by John W. Densley in favor of Stan-field, secured by chattel mortgage on the Densley sheep. This note was indorsed and the mortgage assigned to the Columbia Basin Wool Warehouse Company.
When the post-war deflation in livestock values came, the two companies, the Portland Cattle Loan Company and the Columbia Basin Wool Warehouse Company, found themselves with wholly inadequate collateral for their Stanfield paper, and after some negotiation an agreement was reached between the two companies and Senator Stanfield, which provided for the following arrangement:
(a) An appraisal was made of all of the sheep and livestock back of the Stanfield loans, direct and indirect (including the Densley discounted notes), and the Portland Company paid the Columbia Basin Company one-half of the value thus ascertained and took over all interest of the Columbia Basin Company in the collateral securing its Stanfield paper.
(b) All of the Stanfield interests were placed in the hands of a trustee, John T. Updike, who was empowered to operate the different outfits through corporations to be organized or otherwise as he might determine, for the account of the Portland Company first since that company proposed to provide the additional funds for the operation, and then for the account of the Columbia Basin Company and other creditors, and finally for Senator Stanfield after the extinguishment of all indebtedness.
With the property thus acquired by the Portland Company was the John Densley note of $20,988.70, payable to Stanfield and indorsed by him to the Columbia Basin Company. The Densley sheep were appraised at $16,154.44, and the Portland Company was called upon to decide whether to foreclose and apply the proceeds on the Stanfield indebtedness or to renew the Densley paper, undertaking to make such further advances as might be necessary for continuing the Densley operation. The latter course was adopted. A new mortgage was taken from Densley, running to the Portland Company for $16,154.44, the appraised value of the sheep. The balance of the Densley indebtedness to Stanfield, whether on account of the large note or otherwise, was ascertained by Stanfield’s representative, Miss K. N. Kivett, pursuant to a plan under which deficit notes of similarly situated growers were to be given to Stanfield and by him indorsed over to the trustee. In the case of Densley it was planned to secure, by a second mortgage on the sheep covered by the first mortgage, the note representing the balance of the indebtedness taken over from the Columbia Basin Company. This is referred to in the record as a Stanfield “equity.” It was a balance over what was covered by the new first mortgage which, if worked out by Densley, would be available to the Portland Company in further reduction of the Stanfield indebtedness, as claimed by that company.
While Densley owed Stanfield other moneys in addition to the note indorsed to the Columbia Basin Company, the Portland Company and the trustee, Updike, were interested only in the balance of the. $20,988.70 obligation over and above the amount of the new first mortgage, and, as claimed by the Portland Company,
the understanding was that a note representing this difference would he executed by Densley and secured by a second mortgage on the sheep covered by the newly executed first mortgage. Thereupon the Portland Company agreed to undertake the financing of the Densley sheep operation, evidently expecting to get back not only its advances for running expenses and the amount of the new first mortgage note but also the amount of the second mortgage note. The Portland Company asserts that without this incentive it is obvious that that company would have had no object in making further advances to Densley to finance his sheep operations. The sheep would have been sold at once and the proceeds applied on the Stanfield indebtedness.
Thus far, it is asserted in the briefs, there is very little, if any, dispute between the parties. The trustee, J. T.' Updike, and the Snake River Yalley Livestock Company, a corporation organized for the purposes of the trust, had an office on the ground floor of the Washington Hotel building in Weiser, Idaho. Senator Stanfield, at the same time, had an office presided over by Miss Kivett on an upper floor of the hotel building. It is claimed by the Portland Company that Miss Kivett, from the “upper office,” advised the accountant from the “lower office,” after months of computation and checking, that Densley should execute, in addition to the first mortgage note of $16,-154.44, three additional notes in favor of Stanfield: one for $4,698.64, to be secured by a second mortgage on the same sheep, which mortgage was executed and dated February 1, 1923; one for $5,000; and one for $4,000, making a total of $13,698.64. Each of the latter notes were dated June 1, 1922. Immediately upon
their execution these notes were indorsed by Stanfield, one to the Bank of Echo, and one to the Bank of Stan-field, and the note for $4,698.64 was turned over to the trustee TJpdike. Later Densley organized the Eagle Valley Sheep Company and transferred his sheep business to that company. In July, 1925, Densley caused the Eagle Valley Sheep Company to execute a new note in favor of the Portland Company for ■ $4,819.16 in renewal of the Densley note for $4,698.64. The renewál note was for a less amount on account of an error of $1,000 in the amount of the original note, as to. which there is no dispute.
The Stanfield trust was terminated in January, 1925. The Densley note, with the other assets held by the trustee, was turned over to appellant, Portland Cattle Loan Company, Inc., which had succeeded to the rights of the old Portland Cattle Loan Company. When the Eagle Valley Sheep Company assumed the Densley obligation, its note was made directly to the Portland Cattle Loan Company, Inc. In October, 1925, the Eagle Valley Sheep Company undertook to pay off this indebtedness. Other moneys had been borrowed from the Portland Company, which increased the first mortgage indebtedness to $24,363.05, and the Eagle Valley Sheep Company proposed to pay off both obligations. Upon Stanfield’s objection that the payment to cover the note of $4,819.16 was “payable to him for his account or for the account of certain other persons or corporations” the arrangement for the deposit of the money with plaintiff Baker Loan and Trust Company was made.
Defendant Mack claims the details of the transaction, pertaining to his note particularly, were as follows : In the year 1920 he loaned to B. N. Stanfield
the sum of $5,000, taking Stanfield’s note for that amount and, as collateral behind Stanfield’s obligation, a note of John W. Densley running to Stanfield and indorsed over to Mack for the amount of $5,000. Densley’s obligation to Senator Stanfield was renewéd from time to time subsequent to the year 1920, and- in October, 1923, it was found that Densley did not owe Senator Stanfield, after receiving certain credits on account of sheep and wool sales, etc., an amount sufficient to justify the making of a renewal note in the sum of $5,000, but that such note should be only in the amount of $4,281.21, represented by the sum of $3,698.64, with accrued interest thereon from June 1, 1922, the last preceding renewal, to the date of the subsequent renewal note October 3, 1923. Mr. Mack held, at the time of the deposit of the fund referred to, Stanfield’s note in the principal sum of $5,000, with Densley’s collateral note in the principal sum of $4,281.21. This renewal note executed by Densley, along with others made at the same time, was secured by a mortgage executed October 3, 1923, by Densley. Mack claims the fund deposited by Densley to pay his obligation of $3,698.64, with interest thereon from June 1, 1922, aggregating $4,281.21 on October 3, 1923, with, interest from that date.
"When the transfer was made pursuant to the agreement of April 7, 1922, between the Columbia Basin Wool Warehouse Company and the Portland Cattle Loan Company, which wa,s assented to by R. N. Stan-field, it is clear that the Portland Company held the notes of J. W. Densley for $20,988.70, payable to Stan-field and indorsed by him to the warehouse company as collateral to secure the payment of the notes of Stanfield to the warehouse company for a much larger
amount. The Densley sheep were appraised at $16,-154.44, for which a first mortgage on the sheep was given by Densley to secure the same. The appraised value of the sheep appears to have been considered by the parties as equivalent to a payment of that amount, but it was not sufficient to square the Densley indebtedness of $20,988.70. The transfer and adjustment, which involved several growers whose obligations Stanfield held and indorsed to the Portland Company, took some months, although it was made and the notes were dated as of June 1, 1922. After the status of Densley’s accounts was ascertained, at least in part, a note in favor of R. N. Stanfield, dated June 1, 1922, for the sum of $4,698.64 was executed by John W. Densley. This note was indorsed without- recourse by R. N. Stanfield, as he states, inadvertently, and transferred to John T. Updike, as trustee for the Portland Company, together with a large number of other notes. It was secured by chattel mortgage on 3,323 head of sheep, dated February 1, 1923, executed by Densley in favor of Stanfield, and was duly recorded. During 1922 the Densley sheep were sold and the proceeds duly credited. There seems to be but little attention paid to the security of the chattel mortgages to secure the so-called duplicate notes. On July 10, 1925, the note just mentioned, being unpaid, the Eagle Valley Sheep Company executed and delivered to the Portland Cattle Loan Company, Inc., its promissory note dated July 10,1925, due October 9,1925, in the sum of $4,819.16, which was secured by chattel mortgage executed and delivered to the Portland Company. This note was in lieu of the John W. Densley note of $4,698.64.
In the memorandum of agreement of April 7, 1922, executed and acknowledged by R. N. Stanfield for the
purpose of facilitating and insuring, as far as possible, the payment of his obligations to the Portland Company, he assigned and transferred to John T. Updike, trustee, and Ms successors, all Ms interest in the corporations, partnersMps and individuals, whose mortgages are listed in ExMbits A and B to the agreement between the Portland Cattle Loan Company and the Columbia Basin Wool Warehouse Company, and the notes that he had made and indorsed or guaranteed, which were secured by said mortgages. John T. Updike, as trustee, was fully authorized to consolidate or merge the properties mentioned in the agreement
“with full power and authority * * * to make any and all necessary adjustments and agreements with any or all of the said mortgagors named in said Exhibits A and B to said last mentioned agreement for the purpose of ascertaining and agreeing upon the amount or amounts of any note or notes to be given by said mortgagors or any of them in lieu of any existing and outstanding note or notes listed in Exhibits A and B * *
Therefore, the trustee had full authority to take the note of J. W. Densley for $4,698.64 and to have the same renewed by the Eagle Yalley Sheep Company on July 10, 1925, in the sum of $4,819.16.
Turning to Exhibit A of the agreement of April 7,1922, between the Portland Company and the warehouse company, referred to, we find, together with other notes and mortgages listed amounting to $1,-721,140.32, the following item: “J. W. Densley, Rich-land, Oregon, UMted States National Bank, Portland, $20,988.70.” Following the adjustment of the accounts, Senator Stanfield states that he came from WasMngton to Weiser for that purpose and indorsed and turned over the notes and securities mentioned, among
which was the Densley note which he did not notice and indorsed inadvertently, there being so many of them that he nearly had “writer’s cramp.” R. N. Stanfield having transferred the Densley note to the Portland Company, it was entirely proper for Mr. Updike to take the note and second mortgage from Densley for any balance over and above the amount of the appraised value of the Densley sheep, for which a note and first mortgage on the sheep had been executed by Densley, up to the amount of the Densley note of $20,988.70, indorsed by Stanfield to the Columbia Basin "Wool Warehouse Company.
It should be borne in mind that the Densley note and first mortgage did not equal the $20,988.70, the amount assigned to the Portland Company by Stan-field. The Portland Company, through the trustee, advanced money to Densley for the purpose of purchasing and running a large number of sheep, after the sheep he had on June 1, 1922, had all been sold, and thereby assisted Densley to pay his indebtedness in full.
It is in accordance with equity that the Portland Company should have the benefit of the security which it enabled Densley to create. Densley was perfectly satisfied to pay the money to the Portland Company and did not know of any claim of Mack’s until the litigation commenced.
The agreement between the warehouse company and the Portland Company, which was assented to by R. N. Stanfield, provided for the manner of conducting the business as follows:
“ The-Portland Company will not be obligated to but may advance or lend money to the mortgagors listed in Exhibit A, and may deal with them or any of them in its own discretion and without restriction
so far as this agreement is concerned, and without interference by the Warehouse Company or any of the holders of notes secured by the mortgages fisted in Exhibit A, who have authorized the making of this agreement, and without any obligation to them or any of them whatsoever except as herein provided and as is provided in the contract of which Exhibit C is a copy, and may make such arrangements with íí. N. Stanfield or with the said mortgagors or any of them for consolidation, merger or reorganization of them or any of them, whether as corporations, partnerships, or as individual outfits as the Portland Company may deem necessary or desirable for its own business; and it may have any or all of the mortgagors and their successors as often as it may require organize corporations, or partnerships, sell out or consolidate, or retire from business, enter into new business relations or continue in existing relations, all as may seem desirable or advantageous to the Portland Company or as may be able to agree upon with anyone interested at the time; * * .
This paragraph of that contract provided further that at the end of five years, if there remained any part of the notes of R. N. Stanfield unpaid, the warehouse company or any holders thereof might pursue such remedies for the collection thereof from the makers and endorsers, if any, as it might deem proper or necessary,
“not however asserting or claiming thereby any right or claim as to said notes of- R. N. Stanfield prior or superior to the right or claims of the Portland Company, or its assigns, acquired under or in harmony with this agreement or the agreement between the Portland Company and R. N. Stanfield attached hereto and marked ‘Exhibit C’.”
It is contended on behalf of Mack that the latter condition of the contract indicates that it was contemplated and understood at the time that there were
certain outstanding obligations of Senator Stanfield, by indorsement growing out of Ms transactions with growers, which were or could be “prior or superior to the right or claim of the Portland Company, or its assigns.” It appears that clause was inserted for general direction and in the interest of the warehouse company or other holders of the notes of B. N. Stan-field.
The same contention is made in regard to a further stipulation to the effect that, if there is any lien or encumbrance prior to the mortgaged lien of the warehouse company affecting any of the property mortgaged in the mortgages listed in ExMbit A, the Portland Company should be protected against the same by the warehouse company. We fail to see that this provision has any bearing upon the question at issue.
Similar claims were made to the provision inserted in the contract between the Portland Company and Senator Stanfield, ExMbit F, as follows:
“NotMng contained in this agreement or in the said agreement between the Warehouse Company and the Portland Company of (or) the exhibits thereto shall deprive me of the right hereafter to' question the correctness of the amount or amounts claimed to be due from me to the Warehouse Company and the Portland Company respectively by reason of my endorsement of or signature or guaranty upon the notes listed in said Exhibits A and B to said agreement. My liability to the holders of said notes for the B. N. S. face amounts thereof is not questioned.”
TMs last quoted clause simply shows that the notes and mortgages listed in ExMbit A of the warehouse contract were transferred as collateral security and not as an additional liability of Mr. Stanfield. Mr. Stanfield does not and can not now claim any equity
in the note of the Eagle Yalley Sheep Company or the money in question. As shown by the deposit agreement, Stanfield claimed “that said last named indebtedness, $4,819.16, is payable to him for his account or for the account of certain other persons or corporations.” In any event he claims it “is payable to him.” He mentions himself first and for his account before that of “certain other persons.” Mack’s name was not mentioned at the time the deposit agreement was made, and the memorandum does not indicate that there was any thought of him.
The note of Densley for the excess, $4,698.64, was not taken until some time after Densley’s accounts had been adjusted and the balance ascertained, but like other similar transactions the note was dated June 1, 1922, at the same time the accountant for the trustee took two other notes of John W. Densley in favor of the Portland Cattle Loan Company, one for $5,000 and the other for $4,000. Upon the trustee’s being informed by Miss K. N. Kivett, Mr. Stanfield’s representative, that notes for the amounts for which these two notes were executed had been indorsed by Mr. Stanfield, one to the Bank of Echo and one to the Bank of Stanfield, and that the notes had been renewed by Densley in the “upper office” the trustee delivered the $5,000 note and the $4,000 note to Miss Kivett and took her receipt therefor, but kept the Densley note, $4,698.64, which was renewed by the Eagle Yalley Sheep Company. A second chattel mortgage on 3,323 sheep and lambs was executed by Densley on February 1, 1923, to secure the last named note. This is said to have been after the sheep had been sold.
It is asserted on behalf of Mack that in March, 1920, Mack loaned to Stanfield the sum of $5,000 and
took as collateral security a note of John W. Densley running to Senator Stanfield in that amount indorsed by Stanfield.
Miss Kivett, as a witness for defendant Mack, testified in substance, as follows: That she, in representing E. N. Stanfield, worked from April 7, 1922, to about the middle of June, with E. P. Eoy, who was employed with the trustee in checking over and working out and adjusting the accounts of the several growers; that after crediting Densley with the proceeds of the 1922 wool and an error, Densley owed Stanfield $12,-698.64, and notes were taken for this amount in favor of Stanfield, one for $5,000, one for $4,000, and one for $4,698.64, which, on account of the error, was $1,000 too large, the latter being endorsed to Mack, and that she informed Mr. Douglas, who was engaged in the office of the trustee, of the notes she had taken ; that in October Densley renewed the three notes and gave a mortgage to secure them; that she first learned of the note in question on July 18, 1925, when Densley came to the “upper office” and was requested to renew his paper; that Densley said “I don’t owe that much money. I have just signed some paper down stairs.” They went to the “lower office” and she picked up the $5,000 and $4,000 notes, dated June 1, 1922, and tore the name of John W. Densley off of each note and informed the trustee that the two notes had been discounted to the Echo bank and Stanfield bank; that she searched through the office and could not find the other note.
Mr. A. W. Douglas, who handled the matter of taking the note of the Portland Cattle Loan Company and the second mortgage, and who was an expert accountant, testified to the effect that Miss Kivett did not
inform the office of the trustee of the three notes that John W. Densley had signed in Stanfield’s office; that Miss Kivett told him notes were drawn up for $5,000 and $4,000, and that they were hypothecated, and as to the other note of $4,698.64, she had told him that was “all we may lay claim to as a Stanfield equity” inasmuch as the balance of it in the amount of $9,000 had been pledged; that the item of $4,698.64 was entered in the books of the trustee under “bills payable”; that the note and mortgage were prepared as soon as Densley was credited with the 1922 wool and the amount of the excess or equity was ascertained. On cross-examination he testified, in part, as follows:
“Q. What I want to know is this: Where did you get the information upon which you were able to adjust that Densley account and prepare the three notes there at that time; one in the amount of $4,000.00 and one for five thousand dollars and one for the amount of $4,698.64?
“A. From Miss Kivette. I was an absolute stranger to this and I knew nothing and if I hadn’t been instructed I would have taken a second mortgage for the total amount, but being instructed I separated and segregated the nine thousand in any shape they wanted it drawn and that instruction was received from Miss Kivette.
“Q. I am interested in knowing why you prepared the three notes dated June 1st?
“A. Because I was asked to.
“Q. By Miss Kivette?
“A. Yes, sir.”
It does not seem that the trustee would be keeping any of Densley’s accounts, and the Portland Company would not have undertaken to finance Densley any further unless Stanfield, or his representative, had determined that there was a Densley balance to be
treated as a Stanfield “equity” and for which Densley had executed a note to be indorsed by Stanfield and delivered to the trustee. This was the basis of the transaction.
In October, 1925, when the Eagle Valley Sheep Company decided to pay its indebtedness, there was in the hands of the Portland Company a first mortgage note of $24,363.05; also a note for $4,819.16 (a renewal of the Densley note of $4,698.64), which was secured by a second mortgage upon the sheep of the Eagle Valley Sheep Company. The sheep company did not question its obligation to pay this second mortgage note. It was a valid and enforcible obligation of the Eagle Valley Sheep Company. The Portland Company was a holder thereof in due course for value: § 57-402, Oregon Code 1930. It took the note in good faith and for value.
Every negotiable instrument is deemed
prima facie
to have been issued for a valuable consideration, and every person whose signature appears thereon to have become a party thereto for value. An antecedent or preexisting debt constitutes value. Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who became such prior to that time: §§ 57-201, 57-202, 57-203, Oregon Code 1930;
American Nat. Bank v. Kerley,
109 Or. 155 (220 P. 116, 32 A. L. R. 262).
Among the mass of collateral notes and mortgages assigned to the trustee by Mr. Stanfield, the only strange thing is that there were not more controversies. No one could be expected to remember all the details in regard to them. We do not criticize any one. We think the equities are with the Portland Cattle Loan Company, Inc., and the legal status of the note is in its favor.
Charles A. Hart,
of Portland (Carey, Hart, Spencer & McCulloch, of Portland, on the brief), for appellant.
Blaine Hallock,
of Baker (Nichols, Hallock & Donald, of Baker, on the brief), for defendant R. N. Stan-field and respondent H. H. Mack.
The decree of the circuit court will be reversed and a decree will be entered directing that the fund deposited with the Baker Loan and Trust Company, being said sum of $4,851.02, with interest thereon at the rate of 3 per cent per annum from November 6, 1925, be paid over to the Portland Cattle Loan Company, Inc., after deducting therefrom the sum of $65 to be paid to the court reporter and $50 to be paid to plaintiff’s attorney, and the sum of $11 as plaintiff’s costs, as decreed by the circuit court, and that all of the defendants bear their own costs and disbursements in this court and the circuit court.
Rossman and Campbell, JJ., did not participate in the consideration of this case.
Former opinion adhered to on rehearing January 31,1933