Case ID: abb-ct-app_3/html/0624-01.html
Source: Caselaw Access Project
Author: {"author": "Peckham, J. Wright, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PRIOR v. WILLIAMS.
    September, 1866.
    An instrument may be reformed in equity, although the contract contained in it would be invalid if not in writing.
    An instrument executed by a surety may be reformed as against him, where it is the subject of fraud or mutual mistake, in the same manner as if it were executed by the principal debtor.
    Horace Prior and James Prior, as executors of Henry Prior, deceased, brought an action, in the New York superior court, against Gibson T. Williams, Harriet H. Chamberlin and William B. Chamberlin, in which they asked, as subsequent mortgagees, to be allowed to redeem certain premises in the city of Buffalo, owned by Harriet H. Chamberlin, from the lien of a mortgage held by Williams. They also asked that the mortgage under which they claimed might be reformed.
    The facts of the case were, that William B. Chamberlin, son of Harriet Chamberlin, being a member of the firm of Prior, Holcomb & Co., doing business in New York, had induced his mother to indorse certain notes in blank, upon the agreement than they were to be signed by the firm and used in their business. One of these notes, for fifteen hundred dollars, at three months, he (William H. Chamberlin) signed with his own individual name, and negotiated to Henry Prior, brother of the Horace Prior of his firm. On the note falling due, Henry Prior agreed to extend the time for payment to one year, provided he were secured by a mortgage on Mrs. Chamberlin’s property' in Buffalo. A mortgage was accordingly made by Mrs. Chamberlin to meet the wishes of Henry Prior. By a mistake, however, the mortgage was made to Horace Prior, and ¡the note, to secure the payment of which the mortgage was made, was described as being payable “ one year after the 
      
      date thereof,” instead of three months after date, The false description of the note was not noticed, and the mortgage was assigned by Horace Prior to Henry Prior, and held by him up to the time of his death, and after that by his executors, until the property on which it was given being about to be sold under the foreclosure of a prior mortgage, they brought this ' action to be allowed to redeem, and to have their mortgage ' reformed by having the words “ one year after date thereof,” in the description of the note, stricken out, and the words “ three months after date thereof” inserted.
    
      The referee reported in favor of plaintiffs, and the judgment thereon was affirmed by the court at general term. Defendants appealed to this court.
    
      J. D. II. Chamberlin, for defendants, appellants.
    That a contract by a surety can not be reformed except for fraud. Ontario Bank v. Mumford, 2 Barb. Ch. 613; Walsh v. Bailie, 10 Johns. 180; Dobbin v. Bradley, 17 Wend. 422; Wing v. Terry, 5 Hill, 160; Birckhead v. Brown, Id. 634; Philips v. Garvin, 8 Paige, 322. That it would be contrary to the statute of frauds. Fullam v. Adams, 4 Am. Law Reg. N. S. 460.
    
      William Dorsheimer, for plaintiffs, "respondents.
    That the misdescription of the note in the mortgage was an immaterial variance, — cited Goodhue v. Berrien, 2 Sandf. 630; Jackson v. Bowen, 7 Cow. 13. That the instrument should be reformed. Leavitt v. Palmer, 3 N. Y. 19; Quick v. Stuyvesant, 8 Paige, 84.
   Peckham, J.

The only point made by the appellants requiring examination is, whether this mistake in this mortgage can be corrected by the court, as the mortgagor was a mere surety.

The appellant does not urge that the mortgage is already sufficient, as perhaps she might. See Jackson v. Bowen, 7 Cow. 13, and cases cited.

Counsel referred to the remarks of the chancellor in Ontario Bank v. Mumford, 2 Barb. 596, at 613. It is true the chancellor used language which the case, as finally disposed of, did not require. He remarked that a bond could not be reformed as against a surety, a even though it was his intention to bind himself at the time the bond was executed. For the statute of frauds requires an agreement in writing to bind a surety, and if the surety has not already executed a valid agreement to answer for the debt or default of his principal, this court cannot compel him to execute such an agreement, upon the ground that he has attempted to do so, but has failed of accomplishing his object by mistake or inadvertence.”

With deference, I do not think it an answer to a bill for the' reformation of an instrument, that it would have been invalid if not in writing, and that, therefore, it cannot be reformed. Upon such a doctrine, a deed of land or a mortgage could not be reformed even against a principal, because either is invalid if not in writing.

A party sells a farm of one hundred acres, but by a mistake of the scrivener the deed conveys but fifty. The mistake is not discovered until after the deed is accepted and the money paid by the grantee. This doctrine would prevent the reformation of that deed. The right to grant relief in such a case will scarcely be denied. But the proof of the mistake must be entirely clear and satisfactory.

In Phelps v. Harrow, 8 Paige, 322, where one Smith had purchased goods of the plaintiffs under an agreement to give Harrow’s indorsement on their draft on Smith therefor, payable to Harrow’s order, the draft was made and indorsed accordingly. Harrow took up the draft and then brought his action against the plaintiffs as drawers. They then filed their bill against Harrow to restrain the further prosecution of that suit, not to reform the draft. The court dismissed the complaint. holding that Harrow was not liable either at law or in equity, though he admitted that he intended to become liable by indorsing the draft.

The courts now would hold him liable under such facts at law.

There, however, was no mistake of fact, and courts have frequently recognized the force of a distinction between a mutual mistake of law and of fact, although, as a general rule, there is little ground for the distinction. In most cases there is as good ground for relief when both parties have acted under a mistake of the law, as there is where the mistake is confined to the fact.

The mistake found here is one of fact. The other cases cited by the appellants of Walsh v. Bailie, 10 Johns. 180; Dobbin v. Bradley, 17 Wend. 422; Wing v. Terry, 5 Hill, 160; Birckhead v. Brown, Id. 634, only illustrate the extreme strictness with which contracts of sureties are construed, and that they will not be extended beyond their letter. They have no pertinence to the question.

The power of a court of equity to reform an instrument as against a surety is fully recognized and declared in Story Hq. vol. 1, § 164.

In Wiser v. Blachley, 1 Johns. Ch. 607, where a bond given by a surety for the guardian of an infant was taken by the surrogate in the name of the people, instead of the infant, the court corrected the mistake, — the chancellor remarking that he had no difficulty in saying that it was within the ordinary jurisdiction of that court to correct such a mistake by holding the party according to his original intentions. That was in harmony with good morals as well as with sound law.

So in Weaver v. Shryock, 6 Serg. & R. 262, 964, Tilghmast, Ch. J., affirmed the same doctrine as against a surety.

Many cases may be conceived where the grossest injustice would result if courts had no power to correct mistakes as against sureties. Mistakes are as likely to occur with them as with others, and there is no sound principle that prevents their being compelled to act justly and honestly. Where the surety is aware of and assents to the purpose to which his obligation is to be applied, and it is so used, though without consideration except that advanced to the principal, equity will reform any mistake of fact so that the obligation shall fulfill its purpose.

In the case at bar, from the facts disclosed, the testator would probably have been able to collect his note at maturity had he not relied upon the mortgage. Upon the mortgage nine months’ longer time was procured with the knowledge of the mortgagor. It was given by her for that precise purpose, and so accepted by the mortgagee. If by mistake in the description of the note or by any other mistake therein misleading the mortgagee, it has failed to execute its purpose, the courts have the power, and we think it their duty to reform the instrument so as to carry out the intent of the parties.

The judgment of the court below should be affirmed

Wright, J.

The briefs of counsel are confined principally to a discussion of the facts. We do not look into the evidence to determine whether the referee has found the facts correctly; our province is to take the facts as found by the referee, and determine whether he has or has not drawn correct legal conclusions from them. Hence no question is before us as to the sufficiency of the evidence of notice of protest of the note which the mortgage is claimed to have been given to secure, to charge Mrs. Chamberlin as indorser. The referee distinctly finds that the note was protested for non-payment by the proper officer, and due notice given to her. Nor is the attempted ground of defense in the case, that the note was fraudulently diverted from its purpose, and, therefore, Mrs. Chamberlin, an accommodation indorser, is discharged from liability. True, the note was made by filling up one of the notes previously indorsed in blank by Mrs. Chamberlin, for the accommodation of the firm of Prior, Holcomb & Co., of which William B. Chamberlin, her son, was a member. But Henry Prior, the holder and owner of the note, was not one of the firm, and the finding is, that upon the note, he, in good faith, lent and advanced to the maker, Wm. B. Chamberlin, on the day of its date, the sum of fifteen hundred dollars, and the money was by Chamberlin paid into the firm, as a contribution by him to the capital thereof. The principle that a Iona fide holder for value may recover against an accommodation indorser, even when there has been a misappropriation of the paper, if there was any in this case, is too familiar to require illustration. The note was misdescribed in the mortgage in a single particular. It was described as being payable one year after date, whereas, it should have been three months after date. The sole question is, whether, upon the facts before us, a reformation of the instrument, in this respect, was error. I think it was not. They were in substance these: Wm. B. Chamberlin, as has been stated, was a member of the firm of Prior & Co., of the city of New York. Harriet H. Chamberlin, his mother, resided at Buffalo. The note in question was made by the son, and indorsed by Mrs. Chamberlin, to raise money to contribute his proportionate share of increase capital of the firm. It was for fifteen hundred dollars, dated November 23, 1859, and payable to the order of Harriet H. Chamberlin, three months after date thereof. About the day of its date it was negotiated by Wm. B. Chamberlin, the maker, to Henry Prior, the plaintiff’s testator, who lived on Long Island, and was in no way connected with the firm. Some days after Prior had loaned or advanced the money on it, an arrangement was made .between him and Chamberlin to the effect that Chamberlin should obtain a mortgage from his mother to secure the payment of this note, and that the loan should be thereupon extended for a year from the date of the note. Thereupon, Chamberlin wrote to a brother of his, at Buffalo, who resided with his mother, informing him, in substance, that a note made by him, and indorsed by his mother, dated November 23, 1859, for fifteen hundred dollars, and payable three months from its date, was outstanding, and that he had arranged with Horace Prior, so that by giving her mortgage to secure it, a year’s time from the date thereof could be obtained thereon; and requesting him to draw such mortgage to Horace Prior, and get his mother to execute it. . The contents of this letter, on being received, were made known to Mrs. Chamberlin. Shortly after the receipt of the letter, and on December 10, 1859, Mrs. Chamberlin executed, acknowledged, and forwarded by mail to Wm. B. Chamberlin, at the city of New York, a mortgage upon the premises described in the complaint (and which is the instrument sought to reform), bearing date on November 23, 1859, in which Horace Prior was named as mortgagee, expressing a consideration of fifteen hundred dollars, and conditioned as follows: “Provided always, and these presents are upon the express condition that if the said Harriet H. Chamberlin, party of the first part, her heirs, executors or administrators, shall well and truly pay, or cause to be paid to the said party of the second part, his heirs, executors, administrators or assigns, the just and full sum of fifteen hundred dollars, with interest from the date hereof, according to the condition of a certain promissory note, bearing even date herewith, made by the said Harriet H. Chamberlin and William B. Chamberlin, of the city of New York, payable one year after the date thereof, with interest, then these presents and the said promissory note shall cease and be null and void.” The mortgage also contained a power of sale to be effective in case of the non-payment of the said sum of fifteen hundred dollars, or of the interest thereof, or any part thereof, at the time above limited for the payment thereof.” Mrs. Chamberlin, as the referee finds, in executing this instrument, intended to execute a mortgage to secure the payment of the note held by Henry Prior, the plaintiff’s testator, one year from the date thereof, in order to enable her son, Wm. B. Chamberlin, to obtain the nine months’ additional time for its payment; and that the note was misdescribed in the mortgage inadvertently, and by mistake of Mrs. Chamberlin. This mortgage was forwarded by mail fo Wm. B. Chamberlin. Soon after receiving it, he handed it to Horace Prior, who acted as the agent of Henry Prior, and by his authority, in making the agreement for the extension of the loan, and in receiving the mortgage. Horace .Prior objected to the mortgage, that it was made to him instead of Henry Prior, and suggested that it should be sent back for correction; but upon being advised by counsel that he could assign the mortgage to Henry, and this would be as well as to have it sent back to be corrected, he withdrew his objection and accepted the mortgage, and on December 13, 1859 (three days after its execution), assigned and delivered the mortgage to Henry Prior, who continued to hold the same up to the time of his decease. The mortgage was accepted in pursuance of the agreement that the time for the payment of the note, on giving the mortgage, should be extended for one year from its date. Horace Prior, the agent, and Henry Prior, the holder and owner of the note, believed the mortgage to be a valid security, and, by inadvertence and mistake, failed to observe that it did not correctly describe the note. When the note by the terms thereof became due and payable, it was duly presented for payment and payment thereof demanded and refused, and thereupon, on the same or ensuing day, notice of such presentment, demand and refusal, was given by Henry Prior, through a notary public, to Mrs. Chamberlin, the indorser. On or about November 23, 1860, the note and mortgage, with the interest thereon, remaining unpaid, Mrs. Chamberlin and her son, William B. Chamberlain, gave their promissory note, payable four months from its date, for the first year’s interest. The note was never paid, and when this action was brought to redeem the mortgaged premises from the defendant Williams, .the assignor of a senior mortgage, the entire sum intended to be secured by the mortgage in question remained unpaid. It is not clear that it was essential to reform the mortgage according to the prayer in the 'complaint, as it seems scarcely to have been a controverted question that the particular note in evidence was the one that the mortgage was given to secure. But, if essential, the referee decided correctly in granting the relief. The rule is, that a court of equity will reform a deed or. writing if, by accident or mistake, it does not express the real intention of the parties. This case, I think, is one for the application of the rule. The plaintiffs’ testator loaned to William B. Chamberlin fifteen hundred dollars on his note, indorsed by Mrs. Chamberlin, payable three months from date. Subsequently, it is agreed between them, that Chamberlin should obtain a mortgage from his mother, who was a party to the paper, to secure the payment of the note, and thereupon the loan should be extended one year from the date of the note. Mrs. Chamberlin, intending to carry out this agreement, executes a mortgage, and the plaintiffs’ testator accepts it, believing it to be in accordance with the agreement. By mistake or accident, the mortgage was drawn up so as to describe a note which was never in. existence. The parties intended by the mortgage to secure the payment of the note in question, but the writing varies from their intent by expressing something differing in substance from the truth of that intent. It is a clear case, it seems to me, for the interference of a court of equity to reform the deed, so as to make it just what the parties intended it should be.

I am for an affirmance of the judgment.

All the judges concurred.

Judgment affirmed, with costs.