Roth v. Troutdale Land Co.

162 P. 1069, 83 Or. 500, 1917 Ore. LEXIS 44

• Court: Oregon Supreme Court
• Decided: February 13, 1917
• Status: Published

Opinion

Mr. Justice Bean

delivered the opinion of the court.

Defendants, Troutdale Land Company and Joseph Mossi, contest the right of plaintiff Frank H. Brown to a decree for the amount of the first note of $8,428.75, with interest and attorney’s fees, and for $1,116.49, interest on the second and third notes secured by the mortgage, which sums were advanced by Brown to stay an earlier foreclosure of the mortgage. It is the contention of these defendants that this note and amount of interest was paid on January 6, 1912, by the Syndicate out of a loan to them by Brown and that the note was thereby extinguished. On the other hand, plaintiff Brown claims to have purchased an interest in the notes and mortgage to the amount of $10,214, and asks that the same be foreclosed. The claim of these defendants is based upon the new trust agreement of January 6, 1912, whereby the Syndicate assumed the Roth-Michel mortgage. Plaintiff Prank H. Brown, did not sign this agreement and owned no share in the Syndicate at that time. When he furnished the money to take up the first note and pay the interest on the other two, he was in no way bound to do so. He was not the debtor, and was not liquidating his own debt. It was agreed between plaintiff Brown and the other parties who were about to form the so-called Syndicate that if he would arrange to take up the note and prevent a foreclosure, then they would pay him in addition to the rate provided for in the mortgage 2 per cent interest on the amount making 8 per cent on the sum' advanced. In order to evidence this agreement a memorandum or renewal note was authorized by a resolution of the Syndicate to be executed by George N. Davis, manager, for the amount so advanced with interest at 8 per cent. It provided and the evidence plainly shows that it was understood and agreed between Brown and the Troutdale Land Company, the mortgagor, that the note should not be canceled. The resolution recited that it should be held by Brown as collateral security for the Syndicate note, There was only one principal indebtedness evidenced by these two notes.

1-4. The indorsement and transfer by a mortgagee of a promissory note secured by a mortgage carries with it the mortgage security without a formal assignment of the mortgage: 27 Cyc. 1287; Roberts v. Sutherlin, 4 Or. 219; Bamberger v. Geiser, 24 Or. 204 (33 Pac. 609); Barringer v. Loder, 47 Or. 223, 224 (81 Pac. 778). The transfer by Roth and Michel to Brown of the three notes secured by the mortgage and the interest on the other one of two notes, carried with it the pro rata security of the mortgage securing the same: 27 Cyc. 1289, and note; Sargent v. Howe, 21 Ill. 148; Walker v. Schreiber, 47 Iowa, 529; Foley v. Rose, 123 Mass. 557; Brown v. Delaney, 22 Minn. 349; Johnson v. Brown, 31 N. H. 405. Brown had an interest in the subject of the suit and the relief to be obtained and was properly made a party plaintiff to foreclose the mortgage in which he held an interest: Section 393, L. O. L. The mortgage could be foreclosed as security for the three notes in one suit, and there was no error in overruling the demurrer interposed to the complaint on account of a misjoinder of parties or causes of suit.

5. After temporary arrangements had been made as to the Roth-Michel mortgage Brown furnished several thousand dollars to enable the Brown-Kelly Land Company to clear and dike the land and obtained for the improvement certificates of shares in the Syndicate which were exchanged for contracts of purchase of the land subject to the mortgages. All rights conferred by such contracts were subsequent and inferior to the first and second mortgages and have been foreclosed in this suit. Under such circumstances and according to the fair agreement between the Troutdale Land Company people and Brown, good conscience requires that the lien of the mortgage should be kept alive in toto. Mergers are not favored in equity. In Watson v. Dundee, 12 Or. 474 (8 Pac. 548), Mr. Justice Lord said:

“It is only in those cases where it is perfectly indifferent to the party in whom the interests had united whether the charge or term should or should not subsist, that in equity the term is merged. But if the owner has an interest in keeping them distinct, or there is an intervening right, there will be no merger. * * In the absence then of an express intention to the contrary, the intention to keep the two estates separate will be implied and presumed, when it is for the interest of the party that they should be kept separate. It will not do, then, as was said by Elliott, J., to assume, as a matter of course, that there was a merger, for there are many cases in which, in order to prevent injustice, courts will not allow merger to take place, although all the essential elements of a technical merger combine in the particular case. ’ ’

See Katz v. Obenchain, 48 Or. 352 (85 Pac. 617, 120 Am. St. Rep. 821); Fogarty v. Hunter, 83 Or. 183 (162 Pac. 964). Brown, however, obtained his right to an interest in the mortgage security not from the Syndicate but from Roth and Michel. He, therefore, has a kind of partnership interest with the mortgagees in the mortgage and is entitled to have the same foreclosed.

6. Defendants Troutdale Land Company and Mossi pray in their answer that in any decree that may be entered ordering the sale of any land described in the mortgage, it be provided that the tract of land conveyed by the Troutdale Land Company to the defendant Commerce Trust and Savings Bank (formerly the Merchants’ Savings & Trust Company) be sold first leaving the remainder of the land covered by the mortgage. Tract No. 1 which was first sold upon execution included a portion of the land the title to which still remained in the Troutdale Land Company, the same never having been conveyed to the trustee. The Trout-dale Land Company and Mossi complain because more land was included in the tract than that conveyed to the trustee. It appears, however, that the proceeds of the sale of this tract were insufficient to satisfy the judgment of plaintiffs and the sale of Tract No. 2 was necessitated and made; therefore, we see no reason for these defendants to complain upon the ground that there was too much land included in the tract first sold when in fact the amount was not large enough to satisfy the required demand. It does not appear that the land would have sold to better advantage in smaller tracts. A second sale should not be ordered.

7. The decree of the lower court properly postponed the lien of plaintiff Brown, including the interest advanced, to thht of the other plaintiffs as to the second and third notes, and provided for a large number of liens subsequent to the plaintiffs’ mortgage which are not directly involved upon this appeal.

8. It is claimed by counsel for Multnomah County that the decree appealed from is erroneous as affecting some highway. No appeal was taken by the county and the effect of the decree as to this defendant cannot be considered or changed upon this appeal. It follows that the decree of the lower court should be affirmed and it is so ordered.

Affirmed. Rehearing Denied.

Mr. Chief Justice McBride, Mr. Justice Moore and Mr. Justice McCamant concur.