FIRST STATE BANK v. MEADOW LAKE STABLES, 55 Or. App. 917 (1982)

640 P.2d 662

No. 35760, CA 19185Oregon Court of Appeals.Submitted on record and briefs July 2, 1981.
Affirmed February 8, 1982.

Appeal from Circuit Court, Yamhill County.

Kurt C. Rossman, Judge.

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The appeal filed by appellants on October 23, 1980 was dismissed against defendants Forest Moyer, Lee Kirchem and Alice Kirchem on January 21, 1981.

Ralf H. Erlandson and Patricia A. Erlandson, Aurora, filed the brief pro se for defendants Erlandson.

James K. Gardner, Hillsboro, filed the brief for respondents Roy J. Smallwood and Connie L. Smallwood, Clarence C. Wickware and Clara R. Wickware, Jimmy D. Elliott and Jane Doe Elliott, and James Foster and Louwana Foster.

Terry G. Hannon, Virgilia S. Culver, and Gleason, Scarborough, Trammell Hannon P.C., Gresham, filed the brief for respondent First State Bank of Oregon.

Before Buttler, Presiding Judge, and Joseph, Chief Judge, and Warren, Judge.

BUTTLER, P. J.

Affirmed. Costs to respondents.

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BUTTLER, P. J.

Appellants appeal from a decree of foreclosure. We revie de novo and affirm.

In January, 1970, Daniel and Margie Durham executed a mortgage to the State of Oregon covering some 115 acres in Yamhill County. That mortgage is a first lien on the property subject to this proceeding and is not at issue here.

In 1970, Durham and appellant Ralf Erlandson formed Meadow Lake Stables, Inc., and Ralf Erlandson acquired a one-half interest in the 115 acres. In 1970, Meadow Lake Stables, Inc., borrowed $30,000 from A. C. Wherry and Emma L. Wherry and executed a second mortgage[1] on approximately 62 of the 115 acres to secure the payment of that amount. The note was guaranteed by Ralf H. Erlandson, who subsequently acquired the legal title and transferred it to his wife, Patricia. Between 1972 and 1974, the 62 acres was subdivided, and all but one of the parcels were sold under land sale contracts, subject to the mortgage, to defendants Moyer, Vereecken, Freeman, Smallwood, Wickware, Elliott and Foster. The remaining parcel, the smallest of the group, was retained by appellants.

Of appellants’ four assignments of error, only one warrants discussion: whether the amount of plaintiff’s judgment, including costs and attorney fees, should have been prorated among the individual tracts according to acreage or should have been paid first from the sale of the vendor’s retained land, with the remaining balance charged against each of the other parcels in inverse order of their alienation, until the judgment is satisfied. The doctrine of inverse order of alienation is an equitable one related,

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somewhat loosely, to marshalling of assets. The general rule has been adopted in Oregon. Oliver v. Wright, 47 Or. 322, 327-28, 83 P. 870 (1905). There are, however, exceptions and qualifications. For example, in Portland T. S. Bank v. Lincoln Realty Co., 180 Or. 96, 127-28, 170 P.2d 568 (1946), the court recognized that where the property first alienated was transferred without consideration, the rule might not apply.

Although we have not found other Oregon cases in point, the few reference works on the subject mention numerous exceptions and qualifications, some of which relate to the parties’ intent and some to equitable defenses. One such qualification, applicable here, is that the right to invoke this equitable doctrine, as a general proposition, belongs to the earlier or earliest grantee, who may use it only to protect himself, not to the grantors-debtors, such as appellants here. See, e.g., Annot., 131 ALR 4, 110-11 (1941); 53 Am Jur 2d, Marshalling Assets, § 78 (1970).[2]

One of the earliest grantees, defendant Moyer, who did not appear in this court, requested proration of the judgment debt according to acreage. The other grantees and plaintiff did not object. Appellants, the grantors-debtors, are the only parties urging that the property be sold in inverse order of alienation. As we indicated above, the rule has its qualification. There may be circumstances where the debtor may be able to show substantial prejudice if the rule is not invoked and where equity would be served by doing so even if the alienees oppose it. No such showing has been made here,[3] and those parties who could invoke the rule have not done so.

Affirmed. Costs to respondents.

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