Archer v. McClure

Walker, J., after stating the case: The doctrine is elementary that parol evidence is not, in general, admissible between, the parties to vary a written instrument, but it is equally well settled that mistake, fraud, surprise, and accident furnish exceptions to the universal principle, and parol evidence, in any case brought within one of the exceptions, is admitted to vary the writing so far as to make it,accord with the true intention and agreement of the parties. These exceptions rest upon the highest motives of policy and expediency, or otherwise an injured party would generally be without remedy. Equity follows — 144 — the law, it is true, but sometimes it will intervene and afford relief where the remedy at law is inadequate for the purpose. The doctrine we have stated has often been applied by this and other courts in the correction of written contracts, bonds, deeds, and other instruments, where the mistake was one of fact, mutual and common to all the parties, and the proof clear, strong, and convincing. 2 Pomeroy’s Eq. Jur. (1 Ed.), sec. 858; 1 Beach Mod. Eq. Jur., secs. 48 and 51; 1 Story’s Eq. Jur. (12 Ed.), sec. 138 and note; Dillard v. Jones, 229 Ill., 119. A mistake exists when a person, under some erroneous conviction of law or fact, does or omits to do some act which but for the erroneous conviction he would not have done or omitted. It may arise either from unconsciousness, ignorance, forgetfulness, imposition, or misplaced confidence. Where the mistake arises from imposition or misplaced confidence, relief may be had on the ground of fraud. Where it arises from unconsciousness, ignorance, or forgetfulness, no element of fraud exists, and redress must be obtained, if obtained at all, on the distinct equitable basis of mistake. Bispkam on Equity (6 Ed.), sec. 185. It is said in 34 Cyc., 908, to be settled by a host of authorities that where because of mistake an instrument does not express the real intention of the parties, equity will correct the mistake, unless the rights of third parties, having prior and better equities, have intervened. This is done, not for the purpose of relieving against a hard or even oppressive bargain or to give either party a better one, but simply to enforce the agreement as it was made and to prevent the- injustice which would ensue if this is not done. Nor will chancery make a new contract, under the pretext of correcting a mistake, for where there is no meeting of the minds, there is no case or ground for reformation. Wherever an instrument is drawn with the intention of carrying into execution an agreement previously made, and by mistake of the draftsman or scrivener it fails to do so, the mistake will be corrected, and the original contract enforced according to the real intention of the parties. — 145 — We have said tbe mistake must be mutual, but by this is not meant tbat both parties must agree at tbe bearing tbat tbe mistake was in fact made, but tbe evidence of tbe mutuality must relate to tbe time of tbe execution of tbe instrument and sbow tbat tbe parties then intended to say one thing and by mistake expressed another and different thing. 34 Cyc., 907 to 935. A court of equity cannot add or substitute other parties for those appearing on tbe face of a contract, since tbe effect might be to make a new contract, but tbe mistaken use of names of parties appearing in tbe contract may be rectified in order to carry out tbe real agreement. 34 Cyc., 934, and cases cited; as, for instance, tbe insertion of a wrong name through a clerical error or a misnomer of tbe true obligee in a bond. 34 Cyc., 935, and cases in tbe notes. Care must be taken to distinguish between tbe rule at law excluding parol evidence to vary or contradict a written instrument and tbat in equity, by which it is reformed so as to make it speak tbe truth. We considered these questions recently in Wilson v. Scarboro, 163 N. C., 380, and defined tbe jurisdiction of a court of equity in such matters. There are decided and well considered eases to tbe effect tbat a court of equity will thus correct a mistake in tbe name of a party to tbe contract where it was erroneously inserted for tbe name of another, which is our case precisely. In a case of this sort, Chief Justice Parker, in Brown v. Gilman, 13 Mass., 158, said: “Authorities have been read to show tbat where a contract in writing has been made and signed, but tbe name of tbe party contracted with omitted, it may be supplied by extrinsic proof. Of this we have no doubt, where tbe name was omitted by mistake or a wrong name inserted(Italics ours.) And the same was held in Gayle v. Hudson, 10 Ala., 116, where tbe name of one person was inserted as obligee for tbat of another, who was tbe one intended, and it was further said tbat tbe equity of reformation could be enforced even against a surety to tbe bond. Tbe Court concluded as follows: “It is abundantly shown by tbe citations — 146 — to tbe point, and wbat we bave said, that a court of equity is entirely competent to reform the bond so as to make it speak the intention of the paities, upon satisfactory proof being adduced of the mistake.” Without commenting upon them separately, it will be found that the following authorities clearly sustain the right in equity to have this bond corrected so as to insert the name of the intended, obligee, some of them being much like our case in their facts, and in them the correction was decreed where the name of the agent had been inadvertently or by mistake inserted for that 'of his principal: Wait v. Axford, 63 Mich., 227; Bell v. Tanguay, 46 Ind., 49; Rankin v. Miller, 43 Iowa, 11; Lee Percival, 85 Iowa, 639; Eustis Mfg. Co. v. Saco Brick Co., 198 Mass., 212; Denver B. and M. Co. v. McAlister, 6 Col., 261; Scales v. Ashbrook, 58 Ky. (1 Metcalf), 358; Smith v. Watson, 88 Iowa, 73; Smith v. Wainwright, 24 Vt., 97. The courts are more inclined to exercise this jurisdiction where it will not prejudice the obligor in the bond or the party against whom correction of the instrument is asked. Gayle v. Hudson, supra. Applying these principles to the facts of this case, we find that there is ample evidence of a mutual mistake. M. E. Gozad was the agent of the plaintiffs, and also had charge of the prosecution of the other action for them. There was but one suit pending in the county relating to the timber, and that was the one in which the bond was given. There was no reason for indemnifying Gozad, as the contract was not with him, but with the plaintiffs, whose timber was about to be removed. According to Mr. Dillard’s testimony (and he drew the bond), it was intended to indemnify the plaintiffs in the suit in which G-. W. McClure was defendant, and from whom the Albert Haas Lumber Company had bought the lumber, and the plaintiffs in that suit were Robert N. Archer and others. There cannot be the least doubt, upon the evidence, • as to the suit referred to in the bond, though the name of the plaintiff therein was mistakenly supposed to be M. E. Gozad. It would not be creditable to the indemnity company should we assume that it was engaging in — 147 — so important a business transaction as the giving of a bond of indemnity in a suit without knowing wbat suit it was and where it was pending. And again, it may be said that it is immaterial to defendant who was named as obligee by mistake, as its main and only reliance for reimbursement was upon its coobligors or the principals in the bond, and in that respect the bond is not changed. The defendant owes the money, and it would not be right if we should permit it to escape upon a mere technicality, or an inadvertence of the draftsman, or mistake .of the parties as to the real name of the plaintiff. The law is strongly against any such view. It does not regard the name of persons so much as it does the substance and actual identity of the agreement. The Court, in Smith v. Wainwright, supra, upon a state of facts not substantially unlike ours, said: “Under these circumstances it seems to us that it would be a virtual fraud upon the obligees to allow Wainwright to escape from the obligation of the bond. Upon this ground alone, if they made proper application to the court of chancery to have the bond reformed in this particular, we entertain no doubt it would be the duty of that court to make such a decree upon the present state of the evidence.” If we could see, as contended by the defendant, that it had made one contract and plaintiffs were attempting to substitute another, we would not hesitate to deny the latter any relief; but in this case, while the contract was nominally with M. E. Gozad, it was really with his principals, the plaintiffs. There is one case decided by this Court which seems to be directly in point, McIntosh v. Insurance Co., 152 N. C., 50, and it was an action upon an insurance policy. The Court there said, by Justice Brown: “In Henkle v. Insurance Co., 1 Ves., case 156, p. 318, the bill sought to reform a written policy after loss had actually happened, upon the ground that it did not express the intent of the contracting parties. Lord Hardwiclce said: No doubt but this Court had jurisdiction to relieve in respect of a plain mistake in contracts in writing as well as against frauds in contracts, so that if reduced to writing contrary to the intent of the parties, on proper proof, it would be — 148 — rectified! If the plaintiffs can establish by the proper degree of proof that this contract of insurance was made for the benefit of the wife and the two infants, who are the owners of the property, and that by mutual mistake, or the error of the draftsman, A. H. McIntosh was erroneously made the beneficiary therein, instead of the other plaintiffs, they will have made out a cause of action which will enable them to have a reformation of the written policy.” In Nicholson v. Dover, 145 N. C., 18, 21, the Court said, citing and quoting from Woodruff v. McGehee, 30 Ga., 158 : “Where an agent makes a contract without disclosing the name of his principal, the latter may claim all his rights, with the single limitation that the other party shall not be injured thereby.” And the law is the same, as we have seen, where the contract runs in the name of the agent, without his being designated as such, when it was intended to be for the benefit of the principal. The jury have found, upon sufficient evidence, that the bond was intended by the parties to be given in the Archer suit, and that the authority of Albert Haas, as attorney in fact for the indemnity company, related to that suit and extended to the giving of the particular bond now in question. There are no grounds, for the reasons stated, for disturbing the verdict. The bankruptcy of McClure and' the Haas Lumber Company does not affect plaintiff’s right to recover. It was the misfortune of the indemnity company that it occurred, and it is in no way attributable to any fault of the plaintiffs. There was no exception, though, on this ground. The evidence of the mistake must, of course, be clear, strong, and convincing, because of the force of the presumption in favor of the correctness of the instrument as written; but whether it is of that character is for the jury, and not for the court, to decide. Lehew v. Hewett, 138 N. C., 6 (s. c., 130 N. C., 22); Cuthbertson v. Morgan, 149, N. C., 72; Avery v. Stewart, 136 N. C., 426; but if we were at liberty to decide upon it in this case, we would unhesitatingly hold it to be clear and satisfactory — 149 — tbat ¿ mutual mistake bad been made, and tbat tbe name of M. E. Gozad bad been erroneously inserted for tbe names of tbe plaintiffs. There was no error in tbe proceedings below. No error.