Mt. Vernon National Bank v. Morse

This is an action on an ordinary promissory note for the sum of $4,025. The note was executed in Jackson County, Oregon, payable in the State of Washington and given in part payment of real property situated in the State of Washington. The entire purchase price of the real property was $21,025, of which $6,025 was paid. Defendant took a contract to purchase said real property from the English Lumber Company, its owner, and agreed to pay the balance of said purchase price in six annual installments of $2,500 each. Defendant borrowed the sum of $4,025 from plaintiff for which the note was given. Plaintiff also loaned the sum of $2,000 to one F.D. Clark, on which note defendant was indorser. The two notes mentioned represent the amount borrowed by defendant and said Clark for the purpose of making the first payment on said purchase contract. Said contract of purchase was assigned to plaintiff to secure the payment of said notes. Defendant denies that the note was executed in the State of Washington, but alleges that it was made and delivered in the State of Oregon, and that plaintiff exhausted its remedy by foreclosing the purchase contract taken by defendant and by him assigned to plaintiff for security as aforesaid. Defendant defaulted in his payments of said installments and the plaintiff was obliged to make payment of one installment and interest in order to protect its security. Thereafter plaintiff instituted a suit in equity in the State of Washington to foreclose its lien upon defendant's interest in said real property.

In the said foreclosure suit defendant was a party, the two notes mentioned above were included therein, judgment demanded for the amounts represented by the notes, and the sale of defendant's interest in said real property demanded to satisfy any judgment plaintiff should recover in said suit. Defendant was served personally with summons in Jackson County, Oregon, and never appeared in said suit. Judgment was taken on the amount advanced by the bank to protect its lien and for the $2,000 note signed by Clark and indorsed by defendant, but no judgment was taken against defendant for the note involved in the instant action. Defendant's interest in the realty was sold on execution for the amount plaintiff advanced to protect its security. Nothing was paid either on the $2,000 note or the note involved in the instant litigation.

Defendant claims that the note involved herein was given as a part of the purchase price of the real property, and the bank's lien on defendant's interest therein having been foreclosed and the interest of defendant sold, plaintiff had exhausted his remedy and could not maintain an action in this state on the note. The case was tried to a jury and upon motion of plaintiff, after the evidence was taken, the presiding judge directed a verdict in favor of plaintiff. Defendant alleged in his third amended answer:

"That said attempted, pretended and purported sale was invalid and of no effect for the reason, among other things, that no notice of said sale was ever published in any newspaper, or at all, all of which acts were done by the Mt. Vernon National Bank with the intent and purpose of defrauding this defendant."

This allegation was stricken on motion of plaintiff. Granting said motions to strike and direct a verdict in favor of plaintiff are the errors assigned.

AFFIRMED. The order of the court striking the allegation from the answer is sustained. Sale of land or an interest therein on execution without the statutory notice is an irregularity when the court has jurisdiction of the subject matter and of the parties. For the purpose of directing a sale of the real property the court, in the State of Washington, had jurisdiction both of the parties and the subject matter. The sale was confirmed. Defendant's attack thereon is collateral and is therefore not available to defendant in this action.

"An execution sale without proper notice is in any event a mere irregularity, and such sale cannot be attacked collaterally. Freeman, Executions, § 286, and cases there cited." Davis v. Magnes, 58 Or. 69, 72 (113 P. 1).

The court, in the suit brought by plaintiff to foreclose defendant's interest in the real property in the State of Washington, never acquired jurisdiction of defendant. That court acquired jurisdiction of the subject matter, was authorized to foreclose said contract, to sell the land and all of the interest of the defendant therein, but could not render a valid judgment against defendant personally. The record shows that it did not attempt to. No judgment has ever been rendered against defendant on the note involved. No valid judgment could have been rendered against defendant in the State of Washington upon the service made in that case without the personal appearance of defendant:Pennoyer v. Neff, 95 U.S. 714 (24 L. Ed. 565).

It appears from the pleadings that the note given by defendant to plaintiff, and which is the basis of the case at bar, was not secured by a purchase price mortgage within the meaning of Section 426, Or. L. It is referred to in the proceeding to foreclose said contract, in the State of Washington, as having been given on account of the purchase price of said land. In a sense it is true because the money represented by the note was paid to the vendor by defendant who was vendee on account of the purchase price. The note actually was given for money borrowed from plaintiff. The only way in which plaintiff sold the land must have been, under the pleadings and the record, as an agent for the owner. Plaintiff, through some of its agents, may have acted as agent, either for defendant or the owner and vendor of the land, or both, in the sale to defendant. In no other way can the allegations and denials of defendant's answer be reconciled. The note was not given for "the balance of the purchase price," which is the language used in said Section 426. The note was given for money actually borrowed from plaintiff and paid to the vendor. That is a very different transaction from giving a mortgage for the balance of the purchase price.

This court has ruled that where money is borrowed from and a note given to a person other than the vendor, it may represent money that is used in making payment on account of the purchase price but does not thereby come within the provisions of said Section 426: Ladd Tilton Bank v. Mitchell, 93 Or. 668 (184 P. 282, 6 A.L.R. 1420).

It is unnecessary to discuss other questions presented by the briefs. It is immaterial whether the contract should be construed according to the laws of Oregon or of Washington. The note sued upon has never been reduced to judgment. It has never been paid. It was not given for the balance of the purchase price of real property but was given by defendant for money borrowed from plaintiff. The allegations in the answer do not constitute a defense to the note. The court correctly directed a verdict in favor of the plaintiff.

The judgment is affirmed. AFFIRMED.

RAND, C.J., and McBRIDE and ROSSMAN, JJ., concur.