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TEAL V. WALKER, 111 U. S. 242 (1884)

U.S. Supreme Court

Teal v. Walker, 111 U.S. 242 (1884)

Teal v. Walker

Argued March 25-26, 1884

Decided April 7, 1884

111 U.S. 242


When a demurrer to a complaint for failure to state a cause of action is overruled, the defendant, by answering, does not lose his right to have the judgment on the verdict reviewed for error in overruling the demurrer.

A conveyance to a trustee, absolute on its face but with an instrument of defeasance showing that it is to secure payment of a debt due to a third party, is a mortgage, and is subject to the rule that a mortgagee is not entitled to the rents and profits until he acquires actual possession.

The rule that the mortgagee is not entitled to the rents and profits before actual possession, applies even when the mortgagor covenants in the mortgage to surrender the mortgaged property on default in payment of the debt, and nevertheless refuses to deliver it after default, and drives the trustee to his action to enforce the trust.

The statute of Oregon which provides that

"a mortgage of real property shall not be deemed a conveyance so as to enable the owner of the mortgage to recover possession of the real property without a foreclosure and sale according to law"

establishes absolutely the rule that a mortgagee is not entitled to the rents and profits before foreclosure.

This was an action at law brought by Walker, the defendant in error, against Teal, the plaintiff in error. The record disclosed the following facts: On August 19, 1874, Bernard Goldsmith borrowed of James D. Walker the sum of $100,000, and gave to the latter his note, dated Portland, Oregon,

Page 111 U. S. 243

August 19, 1874, for the payment to Walker or his order, two years after date, of the sum borrowed, with interest payable monthly at the rate of one percent per month from date until paid. Goldsmith at the time the note was executed, was the owner in fee of certain lands in the State of Oregon and in the Territory of Washington, and he and Joseph Teal were the joint owners and tenants in common of certain other lands in Oregon. On August 19, Goldsmith conveyed to one Henry Hewett by four several deeds, absolute on their face, the lands in Oregon and in Washington Territory of which he was the sole owner, and on the same day he and Teal executed and delivered, to the same grantee, three several deeds, absolute on their face, for the lands which they jointly owned as tenants in common, one being for lands in Linn County, another for contiguous lands in Polk and Benton Counties, and the third for lands in Clackamas County, all in the State of Oregon. These deeds were intended as a security for the above-mentioned note, as appeared by a defeasance in writing, executed on the same day as the note by Goldsmith, Teal, Hewett, and Walker. This instrument, after reciting the execution of the note above mentioned, declared that Hewett held the legal title to the lands conveyed to him as aforesaid, in trust and for the uses therein described. It then declared as follows:

"Subject to the legal title of Hewett, Teal and Goldsmith, or Goldsmith alone, shall (1) retain possession of the lands, and take and have, without account, the issues and profits thereof -- they paying all taxes and public charges imposed thereon -- until said note should become due and remain unpaid thirty days; (2) that if such default is made in the payment of said note, Goldsmith and Teal 'will and shall, on demand, peacefully surrender to Hewett' the possession of said property, who 'may and shall proceed and take possession' of the same,"

"and on thirty days' notice in writing to Teal and Goldsmith, . . . requiring them to pay said debt, . . . and on their failure so to pay, shall sell the same at public auction on not more than thirty days' notice,"

"or sufficient thereof to pay the debt and charges."

The instrument further declared

"That if the above-recited

Page 111 U. S. 244

promissory note, and the interest thereon, and all the taxes, charges, and assessments on said land be duly paid by said Goldsmith, or for him, then the deeds aforesaid shall be void, and said Hewett, or his representatives or successors in trust, shall reconvey all said lands, and every part thereof, to said Teal and Goldsmith, or said Goldsmith, or their representatives entitled thereto."

On October 18, 1876, there was due and unpaid upon the note made by and delivered by Goldsmith to Walker the sum of $96,750. To secure an extension of time of one year from that date for the payment of the note, Goldsmith and Teal agreed to give further security for its payment.

Thereupon, Goldsmith conveyed, by a deed absolute on its face, to Hewett certain lots in the City of Portland, of which he was the owner, and Goldsmith and Teal, by a like deed, conveyed to Hewett certain other lots in Portland and certain lands in Linn County, Oregon, of which they were joint owners and tenants in common. On the same day, October 18, 1876, Walker, Hewett, Goldsmith, and Teal executed another defeasance, in which, after reciting the conveyances by Goldsmith and Goldsmith and Teal, above mentioned, declared that Hewett held the legal title to lands so conveyed in trust and to the same uses and purposes for which he held the lands mentioned in the defeasance of August 19, 1874. By this instrument, Goldsmith and Teal undertook and agreed that Goldsmith should pay promptly one-twelfth of ten percent per annum of the interest of the note every month, and should pay the principal and the residue of the interest at the end of the year. It was further stipulated between the parties that if default was made in the payment of the monthly installments of interest, the principal should immediately become due, and all the property, both that conveyed August 19, 1874, and that conveyed October 18, 1876, should be sold for the payment thereof, as by law and the agreement of August 19, 1874, was provided. The instrument of October 18, 1876, further provided as follows:

"The agreement of August 19, 1874, is not annulled, vacated, or set aside by the execution of this agreement, excepting insofar as the same may conflict

Page 111 U. S. 245

with this agreement; in all other respects the two instruments are to be taken and construed together."

Interest was paid on the note made by Goldsmith to the plaintiff up to January 21, 1877, but none after that date. In April, 1877, Goldsmith conveyed to Teal all his estate in the lands which he had conveyed in trust to Hewett, by the deeds of August 19, 1874, and October 18, 1878, and put Teal in possession thereof.

On July 6, 1877, the interest on the note being in arrear since January 21 preceding, Hewett demanded of Teal the possession of all the property conveyed by said deeds. He refused to yield possession, and held the lots in the City of Portland until November 30, 1878, and the farmlands until some time in the same month and year.

Walker, by reason of Hewett's refusal to surrender possession of the property conveyed in trust to Hewett, was compelled to and did bring suit to enforce the sale of the property. All the property was sold, either in accordance with the terms of the defeasances above mentioned, or by order of court, and the proceeds of the sale fell far short of paying the note, leaving a balance due thereon of more than $50,000, which Goldsmith had no means to pay.

This action was brought by Walker, the payee of the note, against Teal, to recover the damages which he claimed he had sustained by the refusal of Teal to surrender possession of the property of which Goldsmith had been the owner, or which he had owned jointly with Teal, and which had been conveyed to Hewett in trust as aforesaid. The complaint recited the facts above stated, and averred that by reason of the refusal of Teal to surrender possession of the property to Hewett, Walker had been damaged in the sum of $16,000, for which sum the complainants demanded judgment.

Teal filed a demurrer to the complaint, on the ground that it did not state facts sufficient to constitute a cause of action. The demurrer was overruled, with leave to Teal to answer. He answered, and, among other things, denied that Walker had been damaged, by the refusal of Teal to deliver possession of the property, in the sum of $16,000, or any other sum.

Page 111 U. S. 246

The case, having been put at issue by the filing of a replication, was tried by a jury, which returned a verdict for the plaintiff for $5,345.88, on which the court rendered judgment. To reverse that judgment Teal prosecuted this writ of error.

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