This is a suit to foreclose a real estate mortgage. The court rendered a decree foreclosing the mortgage on a portion of the real estate and dismissing the suit as against F.E. Hume, as to tracts 8 and 9, Toliver Acres, in Clackamas county, Oregon. Plaintiff appealed.
On November 12, 1929, the Union Central Life Insurance Company loaned to I.M. Toliver, Mary C. Toliver and Faye Toliver $4,000, secured by a mortgage upon tracts 1, 2, 6, 7, 8, 9 and 10, Toliver Acres in Clackamas county, Oregon. The mortgagor agreed to pay this sum in 21 payments, the first payment being due February 1, 1930, in the sum of $61.45, and the remaining 20 annual payments, each in the sum of $377.57, on February 1 of each year thereafter. In 1932, F.E. Hume purchased from defendants Toliver tracts 8 and 9, Toliver Acres, being a portion of the lands mortgaged to plaintiff, but obtained no release of the Union Central Life Insurance Company's mortgage. After the execution of the mortgage and prior to the foreclosure, I.M. Toliver died. Mary C. Toliver is the widow and Faye Toliver the daughter. W.W. Everhart is administrator of the estate of I.M. Toliver, deceased. The mortgagors failed to make the payments called for in the mortgage. The mortgage did not contain a provision that any portion of the land should be released, that is, by partial release of the mortgage. In 1933, the mortgagors applied for two releases and the mortgagee issued separate partial releases for tract 6, consisting of ten acres, for which the mortgagors paid the mortgagee $496.75 on the mortgage debt, and applied $3.25 on their abstract continuation, totaling $500. A second partial release was issued covering tract 10, consisting of ten acres, upon payment of $350 on the mortgage. The original mortgage covered 66 acres; after the partial releases were issued there remained 46 acres. *Page 187
In 1934 the mortgagors applied for a partial release on tract 2, containing six acres, and tracts 8 and 9, containing ten acres each, a total of 26 acres, for which partial releases the mortgagors tendered $1,200 to the mortgagee, $200 of which was for tract 2, together with the sum of $25 to pay the abstracting costs in connection with the transaction. The request of the mortgagors was rejected by the mortgagee. The lump sum payments of the partial releases of tracts 6 and 10 were applied largely on the principal sum and not on the annual payments, since the security was reduced. No question was raised by the mortgagors at the time of the application or thereafter. Notes numbered 1, 2 and 3 were paid, besides payment for the partial releases. After serial note numbered 3, which accrued February 1, 1932, was paid, no further payments were received from the mortgagors except the two items for the partial releases.
On September 15, 1934, plaintiffs filed this foreclosure suit. F.E. Hume answered alone; the remaining defendants answered together. In both answers it is alleged that the Tolivers and Hume entered into a written contract on March 12, 1932, for the purchase and sale of tracts 8 and 9, Toliver Acres, for $1,500, payable $500 in cash and the balance at the end of five years. Hume's answer contains the following:
"That the said tentative agreement for the sale of the said premises and the purchase thereof by this defendant was submitted to the duly and legally authorized agent of plaintiff at Oregon City, Oregon, and was approved by said agent * * *."
"That on or about the 16th day of May, 1934, this defendant paid to plaintiff the sum of $1000.00 in lawful money of the United States, which said sum was paid to the duly authorized agent of plaintiff at Oregon City, Oregon, which sum said agent accepted and *Page 188 receipted for in accordance with and for the purpose of crediting the same upon the mortgage of plaintiff and of delivering to plaintiff a satisfaction of said mortgage upon the said tracts 8 and 9 aforesaid in accordance with the said agreement heretofore had with plaintiff, * * *"
"That defendant is informed and believes and therefore alleges, that the said sum of $1000.00 was transmitted by the said duly authorized agent who accepted and receipted for the same, to the home office of said plaintiff and there retained by said plaintiff until on or about May 22, 1934, when the same was returned to defendant * * *."
The plaintiff denied all of the matters quoted herein except that there was tendered plaintiff the sum of $1,200 and a demand was made for satisfaction of the mortgage for tracts 2, 8 and 9, Toliver Acres, and that the tender was returned to the defendants. The answer of defendants, other than that of F.E. Hume, contained the following allegations:
"That said contract of sale was made with the knowledge, consent and approval of plaintiff and of its duly appointed agents * * * out of the sum of $500.00 paid on said contract, the sum of $414.41 was paid to plaintiff and applied on plaintiff's mortgage with the mutual understanding and agreement had among and between the said I.M. Toliver, F.E. Hume and the duly appointed agents of plaintiff that upon the payment of the balance of the purchase price thereof, to-wit: $1000.00, all in accordance with the terms and conditions of said contract, that plaintiff would accept the same and credit the same on plaintiff's mortgage and release said mortgage as to Tracts 8 and 9."
"That defendant, W.W. Everhart, Administrator, at the time of tendering the said sum of $1000.00 to plaintiff on or about May 11, 1934 * * * offered to pay all interest due on said Hume contract and all taxes due to said date upon the lands so held under said mortgage * * * but that said plaintiff after accepting *Page 189 said sum of $1000.00 afterwards returned the same."
It is not alleged or claimed by defendants that the plaintiff agreed in writing to issue the partial release of said mortgage. The defendants alleged that tract 2 was sold for the total sum of $400 from which they secured the sum of $200 to tender for the release of said tract. Defendants allege that the understanding and agreement for the partial release of tracts 8 and 9 was a verbal contract had with Philip Hammond, attorney at law, and who, they allege, at said time was the plaintiff's attorney, having charge of such matters in Oregon City, Oregon, as the agent of plaintiff. Plaintiff demurred to the answer, which demurrer was overruled, whereupon plaintiff filed a general denial of the matters set forth in the answer, except as admitted by the complaint. The burden was upon defendants to prove the affirmative allegations of their answers. They have failed to make such proof or to show that there was an agreement by plaintiff for a partial release of the mortgage as to tracts 8 and 9.
It appears that prior to the sale of the land to Hume, I.M. Toliver was ill and unable to look after his business, and he called upon his friend, W.W. Everhart, to look after the matter for him and endeavor to make a sale of tracts 8 and 9 to Dr. Hume. Toliver, it is stated, had been a client of Philip Hammond for several years, and after Everhart made a tentative agreement with Dr. Hume for the sale of tracts 8 and 9 Everhart went to the office of Mr. Hammond to have a contract drawn. Mr. Everhart testified:
"Court: How did Mr. Hammond happen to draw that contract between Toliver and Hume? *Page 190
A. He was dealing with Mr. Toliver. Mr. Toliver was not able to appear — he was very sick — so he had me take his place, and I naturally went to his office, because he was dealing with Mr. Toliver."
Hume paid $500 to Everhart on the contract. Everhart also testified:
"A. The Hume land, in order to get the five hundred dollar payment on the land it was a question of whether we could get — it seems as though the security might be reduced, and Mr. Hammond thought it, and he figured he could get by with the company. [Italics ours.] So we proceeded to close the deal on that basis. This tract 8 and 9 was not very desirable piece of land. In other words, it lay way back from the end of the place, and was wet, and quite a bit of brush on it, and stumps, and the price of the land was considered a very good price for the land. * * * Seventy-five dollars an acre, which was considered an extra good price for it."
In answer to the question as to what Hammond meant when he said he could get by with the company, Mr. Everhart said:
"A. They would be willing to give a release for the price of fifteen hundred dollars, and release Tracts 8 and 9 to Dr. Hume.
Q. Well, now, I don't want to ask a direct question, but that is what you intended to do, or not?
A. That is what we intended to do. That is what we intended to do as far as I was concerned, and Mr. Toliver intended to do. I think it was fully understood in all cases. I didn't figure on anybody being criticized, or putting anybody in the hole. It was a matter of clean business, and we all understood it clear through; * * *"
The language of Mr. Hammond, as testified to by Mr. Everhart that "he figured he could get by with the company", seems to indicate that Hammond would make the application for the release. It does not take *Page 191 the form or substance of a promise to give a release. Everhart had no good reason to consider the statement of Hammond as an agreement to make a release. Mr. Hammond testified that he was not at that time either attorney or agent for the Union Central Life Insurance Company, and that he was not its attorney until the time he filed a complaint in the foreclosure suit. There is no substantial proof in the record to the contrary. He had worked with or for John F. Kaufman and Sons of Portland, financial correspondents of the Union Central Life Insurance Company. The testimony of Everhart indicates that he went to Hammond's office to have the contract with Hume prepared for the reason that Hammond had been Toliver's attorney.
Defendants submit the following questions:
"1. Was Philip Hammond the attorney and agent of plaintiff corporation on March 12, 1932, at the time the contract of sale covering Lots 8 and 9, Toliver Acres, was executed and delivered?
Did he act for and on behalf of plaintiff as attorney and agent in preparing said contract of sale?
Did he agree with W.W. Everhart, then representing Toliver and Hume, that upon the payment by Hume of $1500.00 as provided in said contract, and the keeping of the terms and conditions thereof by Hume that plaintiff would accept said sum, credit it upon the Toliver notes, and that plaintiff would release its mortgage on said lots?"
Concerning an attorney's authority, we find the language of the late Justice BURNETT in the case of Walk v. Hibberd, 65 Or. 497,503 (133 P. 95), as follows:
"The term `attorney' is defined by our code thus: `An attorney is a person authorized to appear for and represent a party, in the written proceedings in any action, suit, or proceeding, in any stage hereof': L.O.L. § 1074 [§ 32-101, Or. Code, 1930]. `An attorney has *Page 192 authority: (1) To bind his client in any of the proceedings in an action, suit, or proceeding, by his agreement, filed with the clerk or entered upon the journal of the court, and not otherwise. (2) To receive money or property claimed by his client in an action, suit, or proceeding, during the pendency thereof, or within three years after judgment or decree, and upon the payment or delivery thereof, and not otherwise, to discharge the claim or acknowledge satisfaction of the judgment or decree': L.O.L. § 1083 [§ 32-202, Or. Code 1930]. The representative capacity of an attorney is thus defined and limited by these statutes. When nothing more is shown as in this case, a party dealing with one who is only an attorney must take notice of the limitations of his authority as just defined. * * *"
In Welch v. Johnson, 93 Or. 591, 607 (183 P. 776, 184 P. 280), we read:
"In the absence of any pending litigation in which Johns was appearing as the attorney of record for Welch, no more importance can be attached to the letter than to the declaration of anyone else who assumes to speak for another. The case is not affected by the fact that the writer was a member of the Bar. He might as well have been the plaintiff's grocer or laundryman. It would be necessary to show that the declarations in the letter were authorized by the plaintiff and within the scope of the authority conferred upon the writer, before the writing could bind the plaintiff. How far an attorney may bind his client in compromise or renunciation of his claim, is discussed in Pomeroy v. Prescott, 106 Me. 401 (76 A. 898, 138 Am. St. Rep. 347, 21 Ann. Cas. 574, and note)." See Toomey v. Casey, 72 Or. 290, 295 (142 P. 621).
Defendant Hume pleads and defendants attempt to prove that:
"with the understanding and agreement between plaintiff and the said I.M. Toliver and this defendant that upon the payment of the balance of the purchase price *Page 193 thereof, to-wit: the sum of $1000.00 with interest and the compliance of defendant with all of the terms and conditions of said contract that plaintiff would accept the same and credit the same on plaintiff's mortgage and release said mortgage as to the said Tracts 8 and 9 of Toliver Acres and that defendant might receive a deed therefor from the said I.M. Toliver and Mary Toliver, his wife, free and clear of said mortgage."
In other words, defendants are trying to enforce an alleged agreement concerning real property asserted to have been made by an agent of the plaintiff, the party sought to be charged. The agreement between Toliver and Hume for the sale and purchase of the land was in writing, but the alleged agreement upon the part of Hume and Union Central Life Insurance Company was not in writing, and it is not claimed to have been in writing; neither was the authority of the alleged agent in writing. To prove their contention the defendants must prove the alleged agreement as provided by sections 9-905 and 9-909, subd. 6 and 7. The alleged agreement is not established by any competent evidence. Section 9-909, Oregon Code 1930, provides:
"In the following cases the agreement is void unless the same or some note or memorandum thereof, expressing the consideration, be in writing and subscribed by the party to be charged, or by his lawfully authorized agent; evidence, therefore, of the agreement shall not be received other than the writing, or secondary evidence of its contents, in the cases prescribed by law:
* * * * * An agreement for the leasing for a longer period than one year, or for the sale of real property, or of any interest therein;
An agreement concerning real property made by an agent of the party sought to be charged unless the authority of the agent be in writing; * * *"
27 C.J. 218, § 200. *Page 194
There is no contention in the present case that Philip Hammond was authorized in writing to make any arrangement for the releasing of plaintiff's mortgage on tracts 8 and 9. Section 54-109, Oregon Code 1930, provides as follows:
"No mortgage upon real estate in any county in this state shall be satisfied or released so as to free said property from the lien of said mortgage, except by the person appearing upon the records of the county where said mortgage is recorded to be the owner thereof, and a satisfaction or release of said mortgage by the party appearing upon said record to be the owner and holder of said mortgage shall operate to free the land described in such mortgage from the lien of such mortgage, so far as regards all subsequent purchasers and incumbrances for value, and without notice."
Defendants Toliver were charged with notice printed on each of the twenty-one notes which they signed, as follows:
"No agent is authorized to make any contract, verbal or written, differing from that written and printed on the face of this note and the instrument securing it; nor is an agent permitted to collect any part or whole of it unless endorsed to him for collection by an officer of the Company."
Mr. Everhart, who attended to the transaction, testified in regard to the $500 that the money was paid to Mr. Hammond "in his office to take care of this note. Also the taxes up to date. And other expenses regarding this transaction. Then after it was satisfied with all these payments made, there was a small balance left, and that was turned over to Mr. Toliver, and a receipt to Mr. Hammond".
It is quite significant that the $1,500 was not all paid or tendered to plaintiff. A portion of the first $500 paid was applied on the 1932 note and a portion *Page 195 on the taxes and expenses, and a small balance was paid to I.M. Toliver, although it is claimed that the $1,500 was the consideration for the release of the Hume tracts.
It does not appear that defendant Hume relied upon any conversation with Mr. Hammond in regard to the release. He testified at that time that he did not know Mr. Hammond and did not see him. He states, evidently referring to the contract for the sale of the tract: "I got a paper stating I would get a clear title to the land on or before five years." It is inconceivable that an insurance company, in 1932, would agree to release a mortgage on payment of an amount less than the average amount loaned per acre five years after that date. There is no testimony in the record that the Union Central Life Insurance Company ever assented to the Toliver-Hume contract or approved or ratified the same in any way. The evidence does not disclose that the plaintiff ever had knowledge of the fact that Hume paid the $500 on the contract, of which the plaintiff received $381.49, in payment of the 1932 Toliver note. There is no evidence that the plaintiff, in 1932, held out Hammond as its agent or induced either of defendants to believe that Hammond was authorized to make a contract to release a portion of plaintiff's mortgage, but the testimony is to the contrary.
About September 4, 1934, the plaintiff paid the delinquent taxes on the land according to the terms of the mortgage in the sum of $485.93.
Dr. F.E. Hume testified that after he made the contract to purchase the land he cleared the same, tiled the land, set out nut trees and improved the same to the extent of more than $3,000.
The plaintiff should first sell the land included in the mortgage, other than the tracts 8 and 9 sold to *Page 196 Hume, to satisfy the mortgage, and the proceeds of the sale of tracts 8 and 9, if any there be in excess of plaintiff's claim, should be paid to F.E. Hume.
The decree of the lower court should be modified and the cause will be remanded with direction to enter a decree foreclosing plaintiffs mortgage on all of the land embraced therein, except the two tracts which were released from the mortgage, in accordance with this opinion. It is so ordered.
RAND and BAILEY, JJ., concur.
CAMPBELL, C.J., dissents. *Page 197