Appeal from Circuit Court, Multnomah County. Richard J. Burke, Judge.
Richard Maizels, Portland, argued the cause for appellants. With him on the brief were Maizels & Marquoit, Portland.
William J. Daw, Portland, argued the cause and filed a brief for respondent.
This is a suit to foreclose a mortgage given by the defendants to secure performance of an indemnity agreement. Defendants Stanley G. Terry and Gladys R. Terry appeal from the decree in favor of plaintiff. The facts are as follows: The plaintiff purchased the Norcrest China Building from defendants Terry. At the time of sale there were two judgment liens of record against the defendant Stanley G. Terry: Martin v. Terry, $13,405.53; and Simmons v. Terry, $21,432.02. In connection with the sale, the defendants executed a written indemnity agreement in favor of plaintiff to "protect the above described real property from foreclosure and sale on account of said liens * * *" and to indemnify and save plaintiff harmless from any damage or expense in connection with any of said liens. The indemnity agreement further provided that defendants would execute and deliver to plaintiff a second mortgage on the Dekum Building, Portland, Oregon, and "notwithstanding anything hereinabove provided, NORCREST CHINA COMPANY shall not pay or satisfy any of such liens or institute a foreclosure suit for Terry's breach of this Indemnity
Agreement without first giving Terry 10 days' written notice of its intention to do so * * * in order to give Terry an opportunity to cure any such breach or default." The mortgage on the Dekum Building was executed and delivered. It provided that "[t]his mortgage is intended to secure Mortgagors' performance of that certain Indemnity Agreement * * * dated December 31, 1969, which Indemnity Agreement is hereby incorporated herein * * *." All three instruments, the deed, indemnity agreement, and mortgage, were executed on December 31, 1969. The Norcrest China Building was levied upon by the judgment creditors and the plaintiff paid the full amount of said judgments, totaling $34,837.55, to the Department of Judicial Administration of Multnomah County, Oregon, to satisfy both of said judgments.
The trial court found "that there was a breach of the Indemnity Agreement dated December 31st, 1969 between Norcrest China Company and Defendants Stanley G. Terry and Gladys R. Terry in that they did not protect the real property which is the subject to the Indemnity Agreement from judicial foreclosure of liens thereon, and that the Plaintiff is entitled to foreclose its mortgage * * *" and decreed the foreclosure of the mortgage as to defendants Stanley G. Terry and Gladys R. Terry.
The sole assignment of error is that "[t]he Court erred in entering a Decree foreclosing the mortgage, when the respondent had breached the Indemnity Agreement by failing to give the required notice."
The defendants contend that "Mr. Terry did not have the required written notice of Norcrest China Company's intent to satisfy the judgment in accordance
with * * * the Indemnity Agreement," and this was precedent to defendants' liability. Defendants rely on the language in Hoffman v. Employer's Liability Corp., 146 Or 66, 29 P2d 557 (1934):
"The parties to this contract had a lawful right to make the giving of notice a condition precedent to liability and that they intended to do so is clearly evidenced by the language used in the contract. * * * Courts have no power to ignore such provisions nor to eliminate them from the contract after the parties have once entered into it. Such action upon the part of a court would result in the making of a new contract ...