This is a suit for a declaratory judgment. It seeks a construction of three instruments relating to the title of property described as Lot 4, in Block 3, of Woodburn, Oregon. These consist of a deed dated 1912, a deed dated 1921, and a provision in the will of F.W. Settlemier, deceased.
The defendants appellant, Dell Guiss and fourteen other persons named, are the only heirs of J.H. Settlemier, deceased, and together are hereinafter called the "Heirs."
J.H. Settlemier died on February 20, 1913. His son, F.W. Settlemier, died testate on September 16, 1951. The plaintiff respondent U.S. National Bank appears as the executor of the will of F.W. Settlemier, deceased.
The defendants respondent Woodburn Lodge 106 AF&AM, Evergreen Chapter No. 41, Order of Eastern Star, Woodburn Chapter No. 29 Royal Arch Masons, and St. Elmo Commandery No. 20, Knights Templar are various Masonic unincorporated bodies or associations
Woodburn Lodge No. 106 is the body having the greatest interest in this matter. It is the organization through which the business relations concerning the subject property were in the main conducted. We will hereinafter refer to this fraternal group as the "Lodge," and when speaking of the four fraternal organizations, collectively, as the "Lodges."
It is the contention of the Lodge that it acquired fee simple title to the property under the 1912 deed by payment of the indebtedness therein stipulated.
The Heirs assert that the Lodge defaulted in the conditions of the 1912 deed and by reason thereof, the property reverted to them as the heirs of the grantor, J.H. Settlemier.
The Heirs appeal from the decree which confirms title to said premises and the whole of the building located thereon in Woodburn Lodge 106, AF&AM, subject to such interests as the three other defendant Lodges may have acquired therein by virtue of the 1921 deed.
As a logical incident to the holding made with respect to the title, the bank, as executor of F.W. Settlemier's will, was directed to render an accounting to the Lodge of all income received by it as rentals or otherwise from occupants from the date of its appointment, and after deducting charges made against the property, to surrender the balance to the Lodge. The executor does not appeal from the decree or any part thereof.
Our conclusion makes it unnecessary to give any attention to the will of F.W. Settlemier.
Long prior to 1912, indeed, as far back as October, 1902, the Lodge became interested in acquiring a meeting hall of its own. It appointed a committee to find a location and ascertain the cost of such project. On December 18, 1905, the Lodge minutes recite that after the committee had made its verbal report: "* * * Bro. J.H. Settlemier tendered a deed for Lot 4 in Block 3 amid much enthusiasm. Same was accepted and it was ordered that a vote of thanks be sent Bro. J.H. Settlemier * * *."
There is no record that such a deed was then or after delivered, or, if delivered, that it was ever recorded. No claim, however, is made by any of the parties concerning that deed, or promise of a deed, as the case may be. We here point to the Lodge minutes of December 18, 1905, for two reasons only: First, to establish a beginning date of the Lodge's interest in constructing a building of its own, and secondly, to record Mr. J.H. Settlemier's early association with, and deep interest in, the success of the Lodge's ambition and his own intentions in aiding in its realization.
For reasons unknown, the matter of a Lodge building was not crowded. It apparently lay dormant for four years. At least we do not hear of it again until
On April 18, 1910, this building committee, as shown by the Lodge minutes of that date, reported that "plans and specifications had been obtained and perfected and that further action by the Lodge was now necessary in order to take advantage of the offer of lot for building purposes * * *." (Emphasis ours.)
The committee, theretofore temporary, was, on the same date, "made a permanent committee with full power to act * * *." (Emphasis ours.) It embarked upon its duties with alacrity, and, so far as the record reveals, without interference or direction from the Lodge. This committee was never discharged and continued up to the Fall of 1912 to collect and apply rents in the Lodge's behalf.
The new building, a two-story brick structure with rental units for business purposes on the first floor, was completed late in 1910 and the Lodge moved into its quarters on the second floor in December of that year. The building, it was reported, had cost over $20,000. At that time (December 19, 1910), the Lodge had reason to believe that the title to the lot had been transferred to the Lodge in accordance with J.H. Settlemier's tender of deed reported in the minutes of December 19, 1905. Some support for this belief is disclosed by the fact that during the years 1910 and
On April 17, 1911, about four months after the Lodge moved into its new quarters, its building committee made a written report, signed by F.W. Settlemier and J.M. Poorman. This disclosed that the total cost of the new building was $23,276.49, derived from moneys which the committee had borrowed from the Bank of Woodburn on their own credit. The report commended to the Lodge's attention consideration of some plan for its orderly liquidation, adding: "* * * We think this can be done if the Lodge will be economical * * *." We have little doubt that the committee had in mind the use of building rentals for that purpose. Such is to be inferred from the nature of the committee's report filed in 1913.
The last report of the building committee available in the record in this matter, and probably the last report of its kind, was filed May 5, 1913, showing rentals collected during the year 1912, and as to one renter, the payments it made to April 1, 1913. This reveals a total income of $4,005 with disbursements for insurance, interest on the building indebtedness, taxes, and items for maintenance in the same amount. Attached to it is a financial statement showing assets valued at $29,010. This includes a value of $26,970 for the lot and building.
The next event of importance is reported in the Lodge minutes of February 19, 1912, where it is recorded that on motion a committee was appointed to draw a resolution "thanking Bro. J.H. Settlemier for his most liberal donation to this Lodge of the ground
We also observe at this point that F.W. Settlemier, in 1905, when his father tendered the deed, reported in the minutes of December, 1905, was the secretary of the Lodge and continued to occupy that office in 1906 and 1907. Presumptively, he authored the Lodge minutes for those years and as part of the established duties of the secretary of Lodge 106 received and was custodian of all the Lodge records and documents. In the years 1909 to 1912, inclusive, he occupied the highest office in the Lodge, that of Worshipful Master, and was necessarily cognizant of what transpired in the Lodge Halls during those four years. That would include, among other things, the report of the building committee made in 1911, and the resolution adopted in February of 1912, lauding his father for "his most liberal donation to this Lodge of the ground upon which this Temple now stands." We think it is a fair inference that as presiding officer of the Lodge, F.W. Settlemier appointed the committee which framed that resolution. It is a circumstance not without significance. Although the titular officer of the Lodge at the time, F.W. Settlemier remained silent while his associates paid tribute to his father's generosity and suffered them to labor under the mistaken belief that the Lodge held title to the property, when, in fact, he then held the deed by which J.H. Settlemier had conveyed this very property to him, as trustee, on the fourteenth day of January, 1912, or about five weeks prior to the Lodge meeting in February of the same year.
Moreover, F.W. Settlemier kept his secret well.
We now come to the first of the deeds we are asked to construe. Earlier, we have alluded to it as the deed of 1912. It is the instrument from whence the Lodge derives its claim of title and upon which the defendant Heirs predicate their claim. It was executed on January 14, 1912, by J.H. Settlemier and his wife, as grantors. Their son, F.W. Settlemier, as trustee, is the grantee.
This deed, so far as pertinent, provided:
It will be observed that the deed of 1912 is clear and explicit in that: (1) the trustee is mandated to deed the property to the Lodge whenever it paid or caused to be paid the indebtedness for the building cost, thereby making it function as security to the building committee, the members of which had advanced or arranged for the advancement of the $20,000 or more; and (2) in the event that the Lodge failed to pay such cost, the trustee was directed to sell the property, liquidate the construction debt and pay the remainder, if any, to the Lodge. Thus, as was appropriately said by the trial judge: "* * * Except for the convenience of this method, substantially the same results would have been achieved by a direct conveyance to the Lodge or its Trustees, with a mortgage back * * *."
1. Not only did the grantors in the 1912 deed convey
The Lodge, even though without knowledge of the provisions of the 1912 deed, was always conscious that it had some obligation to pay the cost of erecting the building where the Lodge was housed and many times made efforts to rid themselves of this debt. Beginning in 1912, the Lodge gave serious consideration to ways and means to liquidate that cost, but without coming to a successful conclusion. Inquiries made concerning details of the debt were rebuffed. This continued until 1921. Meanwhile, it was making annual payments to F.W. Settlemier, of the building committee, denominated "rent."
2. The Lodge minutes for March 16, 1914, report an interesting account of F.W. Settlemier's apparent effort to exercise his power under the deed to fix "a reasonable time" for the Lodge to pay the construction debt. The record reads:
The current secretary of the Lodge reported at the trial that he was unable to find this written communication after an extended search.
As a corollary to the "notice" made in the March sixteenth meeting, we glean from the Lodge account of its meeting on October 5, 1914, that:
Of course, whether the "notice" did or did not comply with the directions of the deed of 1912, the trustee was, as trustee or as his father's executor, powerless to terminate the Lodge's interest in the property by withdrawing his father's "donation of the Lot upon which the building stands."
Even assuming that his "notice" of March, 1914, was a valid compliance with the procedure directed by the deed, the trustee did not proceed to sell the property as the deed also directed under the circumstances. Title continued in trustee until that step was accomplished.
3. It should be remembered that up to this juncture, and, indeed, until long after 1921, no member of the Lodge had knowledge of the provisions of the deed of 1912. That was a secret which F.W. Settlemier reserved unto himself. Whether by design he thus expected to oust the Lodge from any claim of ownership, or whether in ignorance of his rights in the premises,
The actions of Settlemier during the year 1914, referred to above, did, however, mark a change in his attitude toward the property. Thenceforth, he treated with it as being its sole and absolute owner. He collected the rents without report of any kind to the Lodge. In the absence of a more exact record, it would appear from the evidence adduced at the trial, that the rentals from the Masonic Building to December 31, 1921, were between a maximum of $18,877.50 and a minimum of $13,335.50. As of the date of the 1921 deed (December 1, 1921), only $10,000 of the original building cost remained unpaid. Enjoying, as he did in 1914, the utmost faith and confidence of the Lodge, his actions evidently left in the Lodge a sense that his withdrawal of the lot was in order and as a result the title had become invested in him.
These conclusions are not strange when we turn to the testimony of the many who were members and some who were officers in the Lodge during the years in which the transactions previously referred to were had. F.W. Settlemier is pictured as a dominant, positive and authoritative personality, particularly within the Lodge Halls. He was regarded with a respect akin to a species of awe and fear. Other witnesses who were his contemporaries, describe him as one who would not discuss matters which he had no desire to discuss or respond to questions he had no desire to answer. Sometimes he would parry inquiry by walking away from his inquisitors or abruptly turn the conversation to another subject. As stated by counsel for the Heirs, "he stiff-armed inquiry from the lodges."
In addition to this unique place of confidence which Settlemier enjoyed in the Lodge, is another factor which must be noted. At sometime unknown, the Lodge records; that is, the minute books, treasurer's records, and such documents as the secretary would receive from time to time, disappeared. The missing minute books and documents covered the period from 1907 to 1917. The missing financial records were for the period from 1905 to 1921. The whereabouts of the secretarial records referred to were accidently discovered to be in the possession of Settlemier at his home. This was sometime after 1930. The location of the treasurer's books for that period is still unknown. After it became known that Settlemier had the minute books, the Lodge directed its then secretary, Mr. Proctor, to call
Such were the conditions prevailing before and up to December 1, 1921, on which date F.W. Settlemier and his wife, as grantors, executed a deed conveying to the four Lodges, as grantees (represented by a trustee for each Lodge), "all of that portion of the building above the first story of the brick structure now situated upon" the subject property.
That deed, so far as pertinent to our consideration, reads:
The Heirs treat the deed of 1921 as a valid instrument. Thus, they claim that the Lodges have thereunder taken title to the upper story of the Masonic Building. The alleged resulting trust upon which their assertion of title rests, goes only to the first story of that building.
The Heirs also describe the Lodge as a conditional beneficiary under the deed of 1912. They represent
Consistent with the Heirs' premise that the 1921 deed is valid, they rest the other facet of their resulting trust proposition upon the recitals found in the "whereas" clauses of that deed. These, they argue, operate as a renunciation of the Lodge's interest in the trust deed of 1912 and complete release of the trustee of all obligations to the Lodge as a beneficiary thereunder and assert that the Lodge is estopped to impeach them. The Heirs contend that the legal effect of these recitals was to terminate the trust as to the Lodge and its interest in that part of the Masonic Building not conveyed to the four Lodges by the 1921 deed. They observe that the 1912 deed provides for no other beneficiaries to take the remaining trust title in the property, and, therefore, conclude a trust results in their favor as the heirs of the original grantor,
In one respect, the Lodge and the Heirs are in complete accord, and that is as to the nature of F.W. Settlemier's interest in the title. They say in their brief, and we think correctly, that the trustee in his own right never had any interest in the trust property; that he paid no part of the consideration; that, as trustee, he could not acquire any interest therein adverse to his duties and responsibilities as trustee, except for the benefit of the trust estate; and that he was without power or authority to change or modify the terms of the trust or create a new trust as he futilely attempted to do by his last will and testament.
As plausible as may be the estoppel theory of the Heirs in the abstract, it must be tested in terms of the trust relationship existing between the grantor and grantee Lodge as of December, 1921. For the exonerating character of the recitals in the 1921 deed make it a significant fact that it was designed to secure for the trustee a substantial and valuable personal benefit.
Before proceeding to give further attention to the contentions of the Heirs, we pause here to take note of Frank's relationship to the Lodge before and at the time of the execution of the 1921 deed. He well may be said to have occupied two confidential and fiduciary positions, each imposing upon him heavy and inexorable duties in the eyes of the law.
5. The second relationship was one of express trust and confidence. It arose from the trusteeship created by the deed of 1912, wherein the members of the Lodge Building Committee, as creditors for the advancement of the building costs, were beneficiaries along with the Lodge.
6. When such confidential and trust relationships exist, the burden rests upon the dominant confidant to exercise the utmost good faith and undivided loyalty. The existence of such responsibilities upon the part of the confidant or trustee will warrant the interposition of equity to scrupulously examine every transaction and set it aside if there is an unfair advantage in favor of the person in whom the confidence is reposed. Davis v. Hurlburt, 194 Or. 584, 593, 242 P.2d 784; Grandy v. Robinson, 180 Or. 315, 324, 175 P.2d 463; 54 Am Jur 246, Trusts § 311; 3 Bogert, Trusts
How did he meet the burdens of loyalty, good faith, and openhandedness between 1912 and 1921 which equity demands of a trustee? We have already alluded to some items of his conduct which depart from the traditional standards of rectitude which the law commends, but we again repeat in explanation for the ignorance of the Lodge as to its rights and its interest in the title as of 1921. The evidence stands uncontradicted that F.W. Settlemier not only dominated the thought of the Lodge during that period by reason of his strong personality and mistaken faith of the members in his integrity and unselfish interest in its welfare. It also stands unchallenged that during this interim of approximately nine years, the trustee had done about all that was possible for him to do in order to lull the Lodge into a false understanding of its true interest in the building and kept it in that state of ignorance until he attempted to capture the title to the lower part of the premises for his own uses and purposes. To this end, he kept the 1912 deed off the records for eight years; remained silent as to its true contents; secretly obtained and retained in personal possession all Lodge records which might be revealing; collected and applied all rentals accruing from the lower part of the building; made no reports to the Lodge concerning the same and rebuffed all inquiry. In Wood v. Honeyman, 178 Or. 484, 169 P.2d 131, 171 ALR 587, we declared that one of the duties of a trustee was to supply information, saying at page 557:
See, also, 4 Bogert, Trusts and Trustees, 238, § 961; 2 Scott on Trusts, supra, 1293, § 173.
The trustee also suffered the Lodge by various abracadabra and concealment to believe that the property his father had given to it was withdrawn in October, 1914, and that he, in some vague and nebulous way had become the owner of the entire building. Consistent with his longtime policy of concealment, he failed to tell them that the $10,000 would cancel the debt for the construction cost.
Of the original Lodge committee of five who had a part in negotiating with F.W. Settlemier in 1921, only three were alive at the time of trial. They were H.M. Austin and Keith Powell, who, in 1921 and before, was president of the Bank of Woodburn, and Thomas Sims, all members of the Lodge and all at one time Past Masters of the organization. The first two appeared as witnesses. Mr. Sims was reported as very old and feeble and unable to leave his home. Austin and Sims were also the only two surviving trustee-grantees named in the 1921 deed. Both Powell and Austin testified that they had no knowledge of the terms of the 1912 deed or its provisions or that the title to the building reposed in a trustee at the time the 1921 deed was executed. They understood that F.W. Settlemier was the owner at the time, as was apparently the common understanding within the Lodge.
At 37 CJS 211-212, Fraud § 2, we find:
7. Constructive fraud usually arises from a breach of duty where a relationship of trust and confidence exists, as here. Darrow v. Robt. A. Klein & Co., Inc., 111 Cal.App. 310, 295 P 566, 568; In re Marine Trust Co., 281 N.Y.S. 553, 156 Misc. 297. Indeed, it is said to arise from the very conception and existence of such relationship. Stout v. Vesely, 228 Iowa 155, 290 NW 116. See, also, 37 CJS 213, Fraud § 2; 23 Am Jur 764, Fraud and Deceit § 14; Gilmore v. Burch, 7 Or. 374, 383; Legler v. Legler, 187 Or. 273, 310, 211 P.2d 233.
8. We take the following statement concerning constructive fraud arising from confidential relationships from 23 Am Jur, supra, at p 764:
As a corollary to that proposition, we adopted with approval the language of 3 Pomeroy's Equity Jurisprudence (5th ed), 814, § 958d, declaring that any transaction between a trustee and his beneficiary, whereby the trustee obtains a benefit is "prima facie voidable." (207 Or at 607). In Waterbury v. Nicol, supra (207 Or. 595), we also approved the following statement which is an excerpt from the foregoing citation to Pomeroy:
In Waterbury v. Nicol, supra (207 Or. 595), we also relied upon 2 Scott on Trusts, supra, 1599, § 216.3, which, so far as presently pertinent, reads:
Also see 3 Scott on Trusts (2d ed) 2514, § 343; 54 Am Jur 240, 247, 250, 252, Trusts §§ 304, 313, 315, 318; 90 CJS 274-277, Trusts § 250; 3 Bogert, Trusts and Trustees, 161, § 493, and where the author adds: "Putting it in another way, the presumption of its fraudulent character is irrebuttable." See 2 Perry, Trusts
What was the precise situation of the parties as of the date of executing the deed of 1921? The representatives of the Lodge were in utter ignorance of the deed of 1912 and its provisions; they had for nearly seven years labored under the belief that F.W. Settlemier was the owner of the building and entitled to receive and use all of the rentals derived therefrom, all induced by the trustee's concealment and use of half-truths, including his assertion in October, 1914, that he, as his father's executor, had withdrawn his father's gift. They knew nothing about the moneys he had collected, nor the interesting fact that those collections when augmented by the $10,000 they were offering as "consideration" for the upper story of the Masonic Temple amounted to as much or more than the original construction cost of the building. This situation of payment of the building cost then entitled the Lodge under the deed of 1912 to a conveyance of a fee simple title to the entire building from F.W. Settlemier, as trustee, and not just the fractional part which they received.
It is inconceivable that if the Lodge or its representatives at the transactions and negotiations resulting in the deed of 1921, had known of these things, as was the obligation of F.W. Settlemier, as trustee, under the deed of 1912 to have informed them, they would have bartered away those valuable rights, taking half when they were entitled to the whole. They were
Yet it appears at that late date that the Lodge and its members so continued to have the fullest faith and confidence in the integrity of their trustee that they negotiated with F.W. Settlemier without having the aid and advice of counsel. They were still responsive to the domination Settlemier had for so long successfully exercised over them.
We think it is a fair inference that during those negotiations F.W. Settlemier made no offer, as was his bounden duty as a trustee, to disabuse their minds or correct their erroneous impressions concerning their rights which he had so successfully conjured by what now appears to have been a studied concealment. To have at that late hour revealed to them the matters and things he had held secret for so long would have scandalized the Lodge and invited obloquy in his community. But that possible fear was not alone the reason for his continued silence. All that he hoped to accomplish by the deed of 1921, that is, a release from the Lodge and the confirmation of his mistaken belief of right of ownership with rents from the first story, would be lost if he had lifted the veil which had so long hidden his malefactions as trustee.
We interpolate to say that so perfectly were his secrets kept that all suspicions were allayed until shortly before his death, when members of the Lodge, in search for historical data concerning the Lodge for use in an anniversary celebration, accidentally learned
The appellant heirs have failed completely to produce, as was their burden, any evidence which would exonerate the trustee by showing that in the course of the 1921 transactions with the Lodge, or before, F.W. Settlemier, as trustee, gave the lodge "a perfectly honest and complete disclosure of all the knowledge or information concerning the property possessed by himself." Waterbury v. Nicol, supra (207 Or at 607).
F.W. Settlemier did not meet the mandates enjoined upon trustees by ORS 128.010;
We now give attention to the appellants' second and last assignment of error, wherein it is claimed that the court overruled the objection of the Heirs to the admission of evidence pertaining to the interpretation and effect of the provisions of the deeds of 1912 and 1921.
9. This is addressed to a general objection made by the Heirs at the outset of the case and continued with the court's permission as a standing objection, the merits of which were to be determined after the conclusion of the trial. The Heirs invoked it by reference from time to time during the course of the trial, but
which at that time they supplemented to cover any depositions, as well as any oral evidence.
Despite its rhythm and alliteration, such a general objection, resting alone upon the phrase, "incompetent, irrelevant and immaterial" is not a favorite of the court and is sustained only when a propounded question is obviously improper. Goldfoot v. Lofgren, 135 Or. 533, 539, 296 P 843; Hamilton v. Kelsey, 126 Or. 26, 40, 268 P 750; Stroh, Admr. v. Rhoads, 188 Or. 563, 567, 217 P.2d 245.
10. The information garnered from the documents, records, and minutes proferred by the defendant Lodge were of definite materiality to the propositions put in issue by its counterclaim. They were highly relevant in that they possess a "rational probative value" or a "logical connection" to the ultimate facts sought to be proved. Trook v. Sagert, 171 Or. 680, 690, 138 P.2d 900 (1943).
In opposing testimony relating to the Lodge's information, or want of information, concerning the 1912 and 1921 deeds, the Heirs would have us accede to the issue as being one controlled by ORS 42.230
The Lodge's offer of the Lodge books from whence we have quoted, qualifies as business records under ORS 41.690 and as "best evidence" under ORS 41.640. The minutes and records of the Masonic Lodge are ancient documents and self-authenticating. ORS 41.360(34). Howard v. Russell, 75 Tex 171, 12 SW 525; 32 CJS 664, Evidence § 746(2).
The admittance of the evidence introduced by the Lodge violated no exclusionary rule. It was properly admitted and considered by the trial judge. The assignment is not well taken.
The decree is affirmed. All parties to pay their own costs.
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(3) The truth of the facts recited from the recital in a written instrument, between the parties thereto, their representatives or successors in interest by a subsequent title; but this rule does not apply to the recital of a consideration.