Couch v. Scandinavian-American Bank

197 P. 284, 103 Or. 48

• Court: Oregon Supreme Court
• Decided: December 20, 1921
• Status: Published

Opinions

BROWN, J.

1, 2. The Scandinavian-American Bank, the defendant and cross-complainant, asserts that Mary H. Couch, plaintiff, has estopped herself from making any claim to the building situate upon her land, by taking a position, in the suit of Mary H. Couch v. Portland Ice Hippodrome and the Oregon Surety & Casualty Company, inconsistent with that taken in the present suit. In order to be available as a defense, an estoppel must be pleaded. This court has held that:

“Under the provisions of Section 73, B. & C. Comp. (Section 73, Or. L.), the defendant can only put in evidence under the denials such facts as go to disprove the plaintiff’s cause of action. If he intends to rest his defense upon any other matter, such as * * estoppel, * * , it must be pleaded.” Springer v. Jenkins, 47 Or. 506 (84 Pac. 479).

Chief Justice Bean, discussing this subject, said:

“Where an estoppel is relied upon, the facts constituting it must be pleaded with particularity and precision, and it must be alleged that the party setting up the estoppel relied upon such facts, believing them to be true, and will be prejudiced by allowing them to be disproved. Nothing can be supplied by inference or intendment.” Haun v. Martin, 48 Or. 304 (86 Pac. 371).

In the case of Rugh v. Ottenheimer, 6 Or. 231 (25 Am. Rep. 513), a suit in the nature of a cross-bill to an action of ejectment, the court said:

“It is claimed, as a further defense in this case, that the plaintiff is estopped from claiming this land, as she acquiesced in giving the deed to her husband by Gardner, and that it is a fraud for her to now claim the land against the creditors of her husband, who furnished the goods on the faith that he was the owner of this land. * * If she has been guilty of fraud which should estop her, then the same should be pleaded to make it allowable, which is not done, and the matter of estoppel cannot be considered in this case.”

The doctrine of this case, that an estoppel, to be relied upon as a defense, should be pleaded, is approved in many subsequent Oregon cases, among which are: Bays v. Trulson, 25 Or. 109 (35 Pac. 26); First National Bank v. McDonald, 42 Or. 257 (70 Pac. 901); Duff v. Willamette Iron & Steel Works, 45 Or. 479, 482 (78 Pac. 363, 368, 17 Am. Neg. Rep. 121); McCully v. Heaverne, 82 Or. 653 (160 Pac. 1166, 162 Pac. 863); Vogt v. Marshall-Wells Hardware Co., 88 Or. 464 (172 Pac. 123).

Chief Justice McBride, in speaking for this court, said, in Portland v. Inman-Poulsen Lbr. Co., 66 Or. 103 (133 Pac. 829, 836, Ann. Cas. 1915B, 400, 46 L. R. A. (N. S.) 121); that

“Equity will not concern itself as to the lack of technical pleading of an estoppel, as such, when all the facts necessary to constitute such estoppel are pleaded and no objection is made as to the form of the pleading,” citing in support thereof Carlyle v. Sloan, 44 Or. 357 (75 Pac. 217).

In the case at bar, Mary H. Couch successfully maintained an action against the Oregon Surety & Casualty Company, a corporation, and recovered $6,500 for the removal from her premises of the structure known as the “Hippodrome” and for the restoration of the premises to their former condition.

It is a principle of law that:

“A party who has, with knowledge of the facts, assumed a particular position in judicial proceedings, and has succeeded in maintaining that position, is estopped to assume a position inconsistent therewith to the prejudice of the adverse party. It is necessary, hoAvever, that the claim or position previously asserted or taken should have been successfully maintained, that it should be actually inconsistent with the position presently taken, and that it should not have been taken through the fault of the adverse party. It is essential also that the party claiming the estoppel should have been misled by his opponent’s conduct, that he should have acted in reliance thereon, and that his rights would be injuriously affected if his opponent were permitted to change his position.” 21 C. J. 1223.

We do not believe that The Scandinavian-American Bank is in a position to plead an estoppel, because it is an established principle of law that

“In order to work an estoppel the position assumed in the former trial must have been successfully maintained. In proceedings terminating in a judgment, the positions must be.clearly inconsistent, the parties must be the same, and the same questions must be involved.” 21 C. J. 1229, 1230.

The Scandinavian-American Bank offered in evidence the certified copy of judgment-roll in the case entitled, “Mary H. Couch, Plaintiff v. Portland Ice Hippodrome, a Corporation, and Oregon Surety & Casualty Company, a Corporation, Defendants. ” This was received in evidence without objection. The record shows that Mary H. Couch had pleaded her judgment against the Oregon Surety & Casualty Company. While the record fails to disclose an estoppel, it must be kept in mind that this is a suit wherein the plaintiff has asked relief from a court of equity. The judgment against the Oregon Surety & Casualty Company is a pertinent circumstance in establishing whether or not Mary H. Couch, herself, has done equity. Does she come into a court of conscience with clean hands?

3. We will now briefly examine the appellants’ request for relief. Appellants ask this court for the dismissal of plaintiff’s complaint, and that an order be entered directing a decree of foreclosure of the mortgage upon the building and a sale of the saíne to satisfy the amount of such mortgage and costs. Such an order would be futile. It is a rule of law that when personal property has been pledged by way of mortgage, that is to say, the interest of the lessee in the term, a court of equity, in case a foreclosure of the mortgage is sought, will not decree the idle ceremony of a sale: 2 Underhill on Landlord and Tenant, 1100; Miller v. Warren, 182 N. Y. 539 (75 N. E. 1131; affirming 94 App. Div. 192, 87 N. Y. Supp. 1011).

4. In the case at bar, the lessee’s title failed. The mortgagee has no better title than the lessee: 27 Cyc. 1041.

“As a consequence of a termination of the lessee’s rights, all interests of 'third persons acquired and held by them under the lessee are also terminated, as they can acquire no rights in the premises other than the original lessee had.” 16 R. C. L., §661, under title “Landlord and Tenant.”

“A forfeiture terminates as a general rule all rights of the lessee in the demised premises.” 16 R. C. L., § 660, under title “Landlord and Tenant”;

Kutter v. Smith, 2 Wall. (69 U. S.) 491 (17 L. Ed. 830); Bush v. Havird, 12 Idaho, 352 (86 Pac. 529, 10 Ann. Cas. 107).

When The Scandinavian-American Bank took a mortgage on this property, it took it subject to all the restrictions placed by law upon the Portland Ice Hippodrome, the tenant and mortgagor. The bank could acquire no rights greater than or superior to those of its mortgagor: Bush v. Havird, 12 Idaho, 352 (86 Pac. 529, 10 Ann. Cas. 107), citing Sweet v. Myers, 3 S. D. 324 (53 N. W. 187); Free v. Stuart, 39 Neb. 220 (57 N. W. 991); Fuller v. Brownell, 48 Neb. 145 (67 N. W. 6); Talbot v. Whipple, 14 Allen (Mass.), 177; 13 Am. & Eng. Ency. of Law (2 ed.), 653; 2 Underhill on Landlord and Tenant, § 653.

It is said in 2 Tiffany, Landlord and Tenant, Section 247:

“A creditor, or other person claiming under the tenant, has ordinarily no right of removal if the tenant would not have such right. So it has been held that if the tenant would have no right of removal owing to the expiration of the tenancy, or his relinquishment of possession, one to whom he has sold or mortgaged the article would not have such right.” Citing Talbot v. Whipple, 96 Mass. (14 Allen) 177; Smith v. Park, 31 Minn. 70 (16 N. W. 490); Free v. Stuart, 39 Neb. 220 (57 N. W. 991); Fuller v. Brownell, 48 Neb. 145 ( 67 N. W. 6); Massachusetts Nat. Bank v. Shinn, 18 App. Div. 276 (46 N. Y. Supp. 329); Id., 163 N. Y. 360 (57 N. E. 611).

“So a purchaser at a sale under mortgage of a fixture annexed by the tenant cannot remove it if the tenant would not have such right.” Ozark v. Adams, 73 Ark. 227 (83 S. W. 920); Sweet v. Myers, 3 S. D. 324 (53 N. W. 187).

The mortgagee of the leasehold interest takes it subject to all the conditions and covenants of the lease, and a failure to pay the rent and keep the taxes paid was equally a default in the Scandinavian-American Bank as in the Portland Ice Hippodrome.

As stated in the case of Abrahams v. Tappe & Fry, 60 Md. 322, 323:

“The rent having been allowed to remain unpaid for more than one year, and Mrs. Abrahams having by reason of that default, and in the assertion of her rights as landlord, secured an actual and peaceable repossession of the premises * * , the lease became absolutely forfeited and the mortgage, so far as it affected the premises, fell with it. * * She took and held possession in assertion of her claim to the ownership of the fee, and her actual re-entry following the perfected right to re-enter, worked the forfeiture of the lease; and she stands in relation • to the property as if the lease had never been made. So far, then, as she is concerned, the interest or estate conveyed in the mortgage is as if it had never existed.” Mayhew v. Hardesty, 8 Md. 479; Cook v. Brice, 20 Md. 397; Bush v. Havird, 12 Idaho, 352 (86 Pac. 529, 10 Ann. Cas. 107); Hughes v. Kershaw, 42 Colo. 210 (93 Pac. 1116, 15 L. R. A. (N. S.) 723); 24 Cyc. 987.

The Scandinavian-American Bank should have protected itself against the forfeiture of its security. It had a right to pay the rent and taxes so as to prevent the forfeiture of the lease. .A valuable case on the privilege of subrogation by mortgagee to the rights of the lessee of the leasehold interest is that of Dunlop v. Chance, 174 N. Y. 411 (67 N. E. 60), and authorities there cited. The bank has been slow indeed in asserting its rights or in assuming its obligations by paying the rent and taxes on the property; but this is accounted for by the fact that it was lulled into a sense of security by the representations of Mr. Clisan, attorney in fact for Mary H. Couch, when he said to Neppach:

“I remember it real distinctly, that Mr. Clisan came down to my place of business and asked me not to remove the building; that it was a big asset for his aunt; and I told him that as long as he did not interfere with our rights as mortgagee, we certainly would not harm him, and he agreed to it; and I have kept faith with him, too. ’ ’

It has been written that:

“It is well settled that where the agreement secured is simply one for. the payment of money, a forfeiture either of land, chattels, securities, or money, incurred by its nonperformance, will be set aside on behalf of the defaulting party, or relieved against in any other manner made necessary by the circumstances of the case, on payment of the debt, interest, and costs, if any have accrued, unless by his inequitable conduct he has debarred himself from the remedial right, or unless the remedy is prohibited, under the special circumstances of the case, by some other controlling doctrine of equity.” 1 Pomeroy’s Equity Jurisprudence, § 450.

To like effect is Maginnis v. Knickerbocker Ice Co., 112 Wis. 385 (88 N. W. 300, 69 L. R. A. 833), and a valuable note on the subject of equitable relief against forfeiture of estate.

Prior to coming into equity, Mary H. Couch sued an insurance company and obtained a judgment for the sum of $6500 for removing the building from her lands. She then came into equity and asked the court to cancel the chattel mortgage upon that building, for the reason that it constituted a cloud upon her title. The building was a structure which cost some $60,000, all paid for with other people’s money. After collecting or obtaining a valid judgment for the sum of $6,500 for the purpose of demolishing and removing that structure from the premises, she now comes into a court of equity and asserts that the building is hers, and asks that the chattel mortgage he canceled because it clouds the title to her building.

5. From an understanding of the facts in the case at bar, we necessarily reject the suit of Mary H. Couch. In effect, she asks a court of equity, by forfeiture, to give her a good title to a building worth $60,000, in spite of the fact that she has no money invested in the structure, and notwithstanding there are many creditors who should be paid. She is not in a position to seek equity.

The decree appealed from is modified, and this cause remanded to the court below for the purpose of' affording the defendant bank equitable relief against the forfeiture of its lien. The court below is directed to take evidence for the purpose of determining the amount of taxes, rent, assessments, and any other sum or sums of money due, or that in good conscience 'should be paid to Mary H. Couch by reason of the aforesaid lease; and upon the payment into court, within four months from the date hereof, of such sums, if any, ascertained do be due her, the defendant bank shall have a decree foreclosing its chattel mortgage; otherwise, the claim of the bank shall be barred.

It is ordered that the appellant bank recover costs herein. Modified.

McBride, Bean and Johns, JJ., concur.

Modified December 20, 1921.

On Petition to Modify Decree.

(202 Pac. 558.)

Decree Modified.

■Mr. Guy C. H. Corliss, Messrs. Joseph, Haney & Littlefield and Mr. S. J. Graham, for the petition.

Messrs. Wilbur, Spencer, Beckett <& Howell, contra.

6. This matter comes before ns on an application in the nature of a petition for rehearing. Statement of facts will be found in the original opinion filed April 12, 1921, and reported ante, p. 48 (197 Pac. 284). On appeal, the decree of the lower court in favor of Mary H. Couch and against The Scandinavian-American Bank and others whereby a mortgage lien was annulled, was modified by this court and the cause remanded for the purpose of affording the defendant bank equitable relief.

On September 27, 1913, the plaintiff entered into a lease with the Portland Ice Hippodrome, whereby certain real property was let to the company. Under the terms of that lease the building involved in this litigation was constructed, at a cost of more than $60,000, for the purpose and with the intention of conducting an ice skating-rink. The building, by the terms of the lease, was a chattel, which the lessee bound itself to remove. The Portland Ice Hippodrome executed a mortgage upon the building to The Scandinavian-American Bank, for the purpose of securing numerous creditors. Later, the Hippodrome went into bankruptcy, and the plaintiff, exercising her option contained in said lease, declared the same to be null and void and of no effect, and, prior to the institution of the suit at bar, brought an action at law against the Portland Ice Hippodrome and the Oregon Surety & Casualty Company for the purpose of recovering rents, taxes and interest, and for damages by reason of failure to remove from her premises the building erected by said Portland Ice Hippodrome. Plaintiff recovered judgment for the total sum of $10,000, about $6,500 of this amount being for damages resulting from failure to remove the building in question. Thereafter, she asserted ownership of that structure and instituted the instant suit, wherein she prayed the court to cancel the chattel mortgage upon the building running to the defendant The Scandinavian-American Bank, for the alleged reason that it constituted a cloud upon her title. The lower court granted plaintiff’s prayer.

Upon appeal this court denied plaintiff the relief sought. We did not deem it equitable that a sixty-thousand dollar building should be forfeited to the plaintiff, particularly when she had no money invested therein, and in view of the further fact that the Portland Ice Hippodrome had many unpaid creditors. We modified the decree appealed from and remanded the cause to the court below for the purpose of affording the defendant bank relief against the forfeiture of its lien upon the building, under certain conditions.

It is difficult for us to determine from the record before us whether Edgar J. Bryan deserves equitable relief. ’ It is asserted that his conduct in placing obstacles in the way of the reorganization of the Portland Ice Hippodrome and the redemption of the property was so inequitable that affirmative relief should not be granted him. Upon the other hand, it is averred that his time, labor and expenditures in caring for the property have been such that in equity and good conscience he is entitled to be reimbursed before appellant should be allowed a decree of foreclosure. After due consideration, this court has decided that evidence may be taken for the purpose of determining what sums, if any, should, in good conscience, be paid to Edgar J. Bryan by reason of the foregoing.

The direction contained in the former opinion is changed to read as follows:

The decree appealed from is modified and this cause remanded to the court below for the purpose of affording the defendant bank equitable relief against the forfeiture of its lien upon the structure. The court below is directed to take evidence for the purpose of determining the amount of taxes, rent, assessments, penalties and interest, and any other sum or sums of money due, or that should be paid, to Mary H. Couch by reason of the aforesaid lease. Against these sums should be charged the whole of the rentals that have been received from Edgar J. Bryan, or from any other source, together with the net sum collected by her from the Oregon Surety & Casualty Company as damages for failure to remove said structure from her premises.

These sums having been ascertained, and any balance remaining due Mrs. Couch having been paid by The Scandinavian-American Bank, the bank shall have a decree for the foreclosure of its mortgage. Provided, nevertheless, that Edgar J. Bryan may offer evidence in support of his claim for labor and expenditures in caring for and preserving the property involved in this controversy, for the purpose of enabling the court to determine what sum or sums, if any, he is justly entitled to be paid before the bank shall have a decree for the foreclosure of its mortgage.

If the bank shall, within twenty days after the filing of the mandate, give notice of its intention to proceed thereunder, the court below shall proceed to take such accounting. If the bank fails to give .such notice within the time herein provided, the court shall enter a decree confirming Mrs. Couch’s title and forever barring the bank from any relief by reason of its mortgage. If the bank elects to proceed with the accounting, as aforesaid, the court will proceed to take the same, and if, upon the final hearing, any sum is found due to plaintiff, or to Edgar J. Bryan, or both, such sum or sums shall be paid by the bank within twenty days thereafter. The bank shall then have a decree of foreclosure for the amount of its mortgage against the building as a chattel; otherwise, it will be barred of all claim against the property.

Modified.