Heitkemper v. Schmeer

*306 BELT, J. This suit was commenced to enjoin the violation of an alleged covenant in a trust agreement against the erection of an apartment house in a residential district. It arose under the following facts: On October 28, 1910, the plaintiff and the defendant Schmeer, together with six other persons, were the owners of certain real property in Goldsmith’s addition to the city of Portland and were desirous of protecting the same against the invasion of flats or apartment houses. The Gile Investment Company owned lots 16 and 17 in block 11 of this addition and the property owners above mentioned were apprehensive that it might be used for apartment house purposes. A plan was therefore devised to purchase these two lots from the Gile Investment Company and the defendant Schmeer was delegated to handle the transaction. The interest of each property owner was to be in proportion to the amount contributed by him towards the purchase of this property. The plaintiff had a one-ninth interest therein by reason of the amount which he contributed. Acting under this plan, the two lots were purchased for $12,000, $4,500 being paid in cash and the balance of the purchase price secured by mortgage on the property. Conveyance by the Gile Investment Company was made to the defendant Schmeer as trustee on October 28, 1910, and the deed was duly recorded on the following day. Schmeer thereupon executed a declaration of trust which in part is as follows: “* * * and I do, for myself, my heirs, executors and administrators, covenant and agree to and with said parties and each of them, and with their and each of their executors, administrators, and assigns, that I will hold manage and dispose of said real property as in my judgment may seem best, and I will convey the said real property by a good and sufficient deed to the purchaser of said property when the same is sold and *307 after deducting any and all sums paid for assessments, taxes, and charges of every kind that may have been paid or advanced by me for the benefit of said property and the payment of said mortgage and interest, that the balance remaining shall be paid to the several parties in interest in proportion to their payments on account of the said purchase price, assessments, taxes, costs, mortgage and interest.” Contemporaneously with the execution of the above declaration of trust and as a part of the same transaction, the following instrument was executed: “The undersigned, property owners and residents in the vicinity of the hereinbefore described real property, for the purpose of preventing the purchase of said real estate by a stranger and the possible erection thereon of an apartment house or flats, which we consider will be detrimental to the appearance and value of our several residences and lots, have appointed E. W. Schmeer our Trustee to purchase and hold the title of said real estate, and we have contributed to the said purchase price the several amounts as herein-before stated, and we hereby further agree to reimburse our said Trustee on demand for any and all sums paid for assessments, taxes and charges of every kind that he may pay on account of said property and said mortgage and interest. “We hereby agree to the terms and conditions of the Declaration of Trust signed by E. W. Schmeer. (Signed) M. G. Thorsen Mrs. E. Becker, by Claude DeF. Smith, Attorney in Pact, J. E. Krausse Prank A. Heitkemper A. L. Levy C. J. Cook Wm. Gadsby.” About four years later, namely, on April 17, 1914, Mr. Schmeer wrote a letter to the plaintiff in which he *308 stated that he had been requested by several of the joint owners of the property to call a meeting to devise means of disposing of it and that a majority had expressed themselves as willing to sell the same for apartment house purposes, claiming that this would be the only way whereby they would be able to realize the amount of their investment. In this letter Mr. Heitkemper was requested to state whether he would be willing to sell the property for an apartment house site. On April 24,1914, Mr. Heitkemper replied to this letter as follows: “In reply to your ldnd letter of Apr. 17th will state that I would regret very much to see an apartment house put up on the 100 by 100 at 25th and Pettygrove Streets. I would much prefer to see the disposition of this property in accord with the purposes for which it was bought and the trust created. “It may be dead property now, and there may be no sale for it as residence property, and it may be that we will have to hold it for a few years and pay taxes on it, but I am willing to do this. “However, I would not like to be the only one to stand out, and if the others concerned would prefer to sell I would not feel like maldng an objection, provided we could sell for a price which would not mean a loss.” After the writing of these letters there seems to have been a lapse of about eight years before anything further was done relative to the disposition of this property. At any rate, Schmeer was unable to sell the property “for a price which would not mean a loss” to the plaintiff. The next correspondence between Mr. Schmeer and the plaintiff is evidenced by a letter dated March 23, 1922, wherein Schmeer advised Heitkemper that, at a meeting of the property owners, he had been instructed to sell the property for $7,500, with restrictions so that the property could be used only for *309 dwelling or apartment house purposes. Schmeer also stated in this letter that, unless objection was made in writing within the next five days, the property would be offered for sale on the terms mentioned. Mr. Heitkemper made no reply to this letter. However, the lots were not thus offered for sale. In 1925, Mr. Heitkemper gave Mr. Schmeer an option to purchase his one-ninth interest for the sum of $500, but the same was never exercised and it expired November 1st, 1925. On January 21, 1926, Mr. Heitkemper wrote to Mr. Schmeer calling attention to the fact that his option to purchase the property had expired and stating that he “would not be in favor to sell it for any other purpose than for residence property”. About eleven months after the date of this letter, Mr. Schmeer, who had succeeded in acquiring the interests of all of the beneficiaries under the trust agreement, with the exception of the plaintiff, again undertook to purchase the interest of Heitkemper in this property, but he refused to sell. On November 29, 1926, the defendant Schmeer, as trustee, conveyed the north half of these two lots in question to the defendant, A. Larrowe, providing therein against the use of the same for “any shop, store, saloon, hotel, auto garage, holding more than three machines, stable, foundry, warehouse, public laundry, factory or other place of business, or be used for the carrying on of any trade or business whatsoever, ’ ’ but excepting from such restrictions the use of the property for “flat or apartment house purposes”. On December 18, 1926, Mr. Schmeer wrote to the plaintiff advising him that he had sold the property to Mr. A. Larrowe for $3,500 cash, and enclosed a check for $363.42, covering the plaintiff’s interest in the proceeds of the sale, after deducting commission and *310 expenses. During the latter part of the month of December, Larrowe commenced the erection of a three-story brick apartment house. Mr. Heitkemper sought the advice of counsel and on January 8,1927, returned the check to Mr. Schmeer and advised him by letter that he had no authority to sell the property for the purposes of an apartment house and that necessary steps would be taken to protect his rights. On January 12, 1927, plaintiff advised the defendant Larrowe by letter that Schmeer held the property as trustee; that under the terms of the trust the property could not be sold for the purpose of erecting an apartment house thereon; and notified him not to proceed further. Mr. Larrowe, who had procured title insurance on the property, proceeded however with his construction work which was finally completed at a cost of $65,000. On March 9, 1927, the plaintiff filed suit for an injunction. The trial court sustained a demurrer to the complaint and, upon refusal of the plaintiff to plead further, dismissed the suit. Upon appeal to this court, the decree of the lower court was reversed and the cause remanded with directions to permit the plaintiff to file an amended complaint and to compel defendants to answer within ten days thereafter. The lower court was also directed that, if upon the merits the decree be in favor of plaintiff, it should be in the alternative, namely, that defendants remove the apartment house from the lots within ¿ reasonable length of time or, upon their failure so to do, that they respond in damages. Amended pleadings were filed and, upon issue being joined, the trial court, after hearing, found that plaintiff had been damaged in the sum of $3,000, and entered a decree in the alternative form above mentioned. From this decree the defendants appeal. The plaintiff also filed a cross-appeal asserting error in *311 the refusal to include as damages the sum of $363.42, being his share of the proceeds of the sale of the property by Schmeer to Larrowe. Defendants urge that, under the allegation that plaintiff is the co-owner with his wife of the property alleged to be damaged by reason of the erection of the apartment house, it is impossible to ascertain the extent of his interest and, therefore, the amount of damages, if any, that should be awarded to him cannot be determined. This question was not raised in the court below nor on former appeal. It may well be deemed to have been waived. At any rate, we are satisfied the plaintiff has sufficient interest to maintain the suit. The wife was not a party to the trust agreement. It is the contention of the plaintiff that the declaration of trust executed by defendant Schmeer and the writing signed by the beneficiaries must be construed as one instrument and that when so construed a clear intention is expressed to prevent the erection of apartment houses or flats on the lots described in the trust agreement. The defendants assert that the declaration of trust is complete in itself, that it does not refer to the other writing signed by the beneficiaries, that it was in no way attached thereto at the time the trust agreement was executed, and that there is no restriction contained therein relative to the use of the real property. Plaintiff concedes that, if we look solely to the declaration of trust, his suit fails. The two writings in question were under consideration by this court on former appeal (Heitkemper v. Schmeer, 130 Or. 644 (275 P. 55, 281 P. 169)) and were construed adversely to the contention of the appellants. The court said: “When the declaration of trust executed by Schmeer is read in the light of the instrument contem *312 poraneously executed by the beneficiaries, there can be no doubt that it was the intention of the parties thereto to prevent the invasion by apartment houses of this residential district.” It was held that the complaint alleged facts sufficient to constitute a cause of suit. In passing on the demurrer, the court attached no importance to the allegations concerning the interpretation of the written trust agreement set forth in the complaint. Such allegations amounted only to a conclusion and were subject to be stricken on motion. The court looked to the writings in determining whether a trust agreement was created. Thus the law of the case relative to the construction of the two writings in question was declared on former appeal. It is controlling here. As was said by Mr. Justice Band, speaking for the court in Simmons v. Washington Fidelity National Insurance Co., 140 Or. 164 (13 P. (2d) 366): “It is a general principle of law and one well recognized in this state that when a ruling or decision has been once made in a particular case by an appellate court, while it may be 'overruled in other cases, it is binding and conclusive both upon the inferior court in any further steps or proceedings in the same litigation and upon the appellate court itself in any subsequent appeal .or other proceeding for review.” Citing numerous authorities in support thereof. Counsel for appellants recognize the force and effect of such rule but assert that it is within the power of the court to declare otherwise on this appeal and urge that the court again construe these writings to the end that there may be an adherence to well-established legal principles relative to the creation of trust agreements. Without invoking the “law of the case”, we are convinced that the construction of these writings on *313 former appeal is sound. We think the two writings should he construed together for the following reasons: (1) The papers were executed contemporaneously and were unquestionably a part of the same transaction. (2) The papers were physically attached to each other immediately after their execution. This statement may be based upon the testimony of defendant Schmeer alone, as witness the following portion of the record: “Q. You had this in your possession either duplicate or copy of it from the time it was made! “A. Yes, sir. “Q. And was this second paper signed by these neighbors attached to it! “A. Yes, sir. “Q. And in your possession all the time! “A. Yes, sir.” As to the legal effect of the physical attachment of two or more papers pertaining to the same transaction, see 27 C. J. 263. (3) The writing executed by Heitkemper and the other beneficiaries referred to the declaration of Schmeer. (4) Each of the papers made reference to the same subject matter, namely, the creation of a trust concerning the disposition of real property. (5) The writing signed by the beneficiaries was not complete in itself as shown by the reference therein to the “hereinbefore described real property” and to the several amounts contributed to the purchase price “as hereinbefore stated”. It will be observed that, in the declaration of trust, the real property is described and the names of the beneficiaries and the several amounts which had been contributed towards the purchase price are set forth. *314 (6) The parties themselves have construed these two papers as constituting a trust agreement containing a covenant against the use of the real property for apartment house purposes, as clearly evidenced by their course of dealing concerning the same. When the writings are construed together, there can be no doubt as to the intention of the parties to the trust agreement and the same can be ascertained without resort to parol testimony. We are not unmindful of the general rule that an unsigned paper may not be read in connection with a signed paper which makes no reference to it. See numerous cases cited in note, 85 A. L. R. 1204. However, we think this general rule has no application to the facts in this case. When we take into consideration all of the matters to which attention has been directed relative to the execution of this trust agreement, it seems clear that the parties adopted the two papers as constituting their agreement and that they may be considered as one instrument: 25 R. C. L. 680. We are unable to agree with the contention of the appellants that the trustee had the power to decide for what purpose he might sell the property. The discretionary power which was vested in him relative to the sale of the property is limited by the restriction in the trust agreement regarding apartment houses or flats. If force and effect be given to the law as declared on former appeal, it follows that when defendant Schmeer sold the property to Larrowe without any restriction against the erection of an apartment house there was a breach of the restrictive covenant and the plaintiff, by reason thereof, is entitled to recover whatever damages were sustained, unless the record discloses a waiver of such restriction or his conduct has *315 been such as to estop him from asserting a breach of the trust agreement. True, at one time the plaintiff offered to sell his interest to Schmeer without restrictions as to the use of the property but the option was never exercised and after its expiration the plaintiff consistently maintained his objection to the sale of the property for apartment house purposes. We think the facts do not show a relinquishment of his rights under the trust agreement. Certainly there is no element of estoppel involved. The plaintiff did nothing to mislead the defendants. When Schmeer sold the property to Larrowe he was fully apprised of the attitude of the plaintiff and he proceeded, as he says, under the belief that he had a legal right to make the sale. Neither was Larrowe misled as he had constructive, if not actual, knowledge of the trust agreement. He makes no real contention that he was an innocent purchaser. He was willing to acquire the property feeling secure by virtue of his title insurance and the covenants of warranty contained in the deed from Schmeer. It is next contended by defendants that there has been such a radical change in the character of the district in question, caused by the invasion of apartment houses and other commercial enterprises, that it would be inequitable to enforce the restriction under consideration. We recognize the rule that, where such changes in the character of the district have taken place that enforcement of such restrictions would not have any effect towards carrying out the original purpose for which the restriction was imposed, courts of equity will refuse enforcement. See numerous authorities cited in exhaustive note, 54 A. L. E. 812. However, we believe that the evidence in this case does not show that there has been such a radical change. The district is still predominantly residential in character. The fact *316 that the character of the territory surrounding this restricted district has changed does not affect the question of the enforcement of the restriction within such district: Thompson v. Langan, 172 Mo. App. 64 (154 S. W. 808); Bolin v. Tyrol Investment Company, 178 Mo. App. 1 (160 S. W. 588). Neither do we think it material that, by virtue of a zoning ordinance enacted by the city of Portland in 1924, the erection of apartment houses is permitted in a district which includes the property of the plaintiff. Such ordinance would not have the effect of abrogating the contract upon which plaintiff relies: Ludgate v. Somerville, 121 Or. 643 (256 P. 1043, 54 A. L. R. 837); Crawford v. Senosky, 128 Or. 229 (274 P. 306). Assuming that there had been such change in character in the district as contended by the defendants, it would, no doubt, be ground for denying equitable relief, but would not preclude redress at law for damages sustained by reason of the breach of the restrictive covenant: Amerman v. Deane, 132 N. Y. 355 (30 N. E. 741, 28 Am. St. Rep. 584); Kountze v. Helmuth, 67 Hun. 343 (22 N. Y. S. 204). In the instant case the plaintiff has been denied equitable relief. The cause was remanded to determine the amount of damages, if any, to which plaintiff was entitled in the event he prevailed after issue was joined on the facts. Equity, having assumed jurisdiction, will grant complete relief. We next proceed to the question of damages. How much less valuable a,s a home was plaintiff’s property by reason of the use of the building erected for apartment house purposes? In consideration of this phase of the case it is important to have in mind the situation of the parties as it existed at the time the trust agreement was executed. The eight persons who entered into this trust agreement in 1910 were at that time the owners of residence property located in five contiguous *317 blocks in Goldsmith’s addition, such district lying between Northrup street on the south, Pettygrove street on the north, 24th street on the east, and 26th street on the west. At the time of the execution of the trust agreement there were no apartment houses in block 11 in which plaintiff’s property is located. The apartment house nearest to this property was the Bruce apartment house about one block south, facing on 25th street. This, however, was not within view of the house where plaintiff lived. The Pettygrove apartments were later constructed on the northeast corner of the block adjoining block 11 on the east. At the present time there are apartment houses and flats on the north side of Northrup street between 25th and 23d streets. Plaintiff’s house faces on Overton street. There are no apartment houses on this street for a distance of several blocks and it is essentially of a residential character. Overton street is one block south of Pettygrove street. The apartment house which Larrowe erected is on the northwest corner of block 11 and faces on Pettygrove and 25th streets. The rear of the house which plaintiff erected in 1907 at a cost of $8,500 is about seventy feet distant from the back of the apartment house. In view of the general encroachment of commercial interests upon this district and the fact that these property owners had control of only two lots for the purpose of preventing the invasion of apartment houses, it is apparent that the trust agreement was an improvident one. Block 11 contains a few vacant lots which, under the zoning ordinance, might be used for apartment house purposes. Nevertheless plaintiff was entitled to the full benefit of his contract and it is immaterial that all of the other beneficiaries have seen fit to dispose of their interests therein to defendant Sehmeer. It would greatly extend this already *318 lengthy opinion to recite in detail the evidence bearing on the question of damages. We are convinced that the damages found by the lower court are excessive. It is believed that the sum of $1,000 would be full and fair compensation. In addition to this amount, plaintiff is entitled to recover from the defendant Schmeer the sum of $363.42, being his share in the proceeds of the sale of the property to Larrowe. The decree of the lower court will be modified and the cause remanded with directions to enter a joint and several judgment against the defendants Schmeer and Larrowe in the sum of $1,000 and also a several judgment against the defendant Schmeer in the sum of $363.42. Neither party will recover costs and disbursements in this court.