Richey v. Clark

KiNG, J.: The record in this case discloses the following facts r William Stowell on the 1st day of September, 1888, sold a tract of land to W. R. Swan, taking in part payment. therefor a note secured by a mortgage on the land. The. mortgage was duly recorded on the 12th of the same* month. For a valuable consideration, Stowell assigned, on October 29, 1888, the note and mortgage to defendant. A few days prior thereto, Swan conveyed, by warranty deed, 40 lots to plaintiff, the latter believing them free from all incumbrances. Swan supposed they were covered by the mortgage to Stowell, but omitted to inform plaintiff of this. In October, 1890, plaintiff and her husband desired — 472 — to mortgage the lots in order to secure merchandise for their business. An abstract was required, and they employed an attorney to examine the record and secure one. A few days thereafter the information was conveyed to plaintiff by her attorney that the lots were embraced within the mortgage then held by defendant, which had been given by Swan to Stowell. She thereupon went to Swan, in “order to pay the mortgage off,” and to secure a release of the lots from defendant’s mortgage. Swan could do nothing, and she called on defendant. He declined for some time to execute a release, but plaintiff’s ¡husband, who was acting for her, insisted, and stated that, with the lots freed from all liens, they could obtain $4,000 worth of merchandise to aid them in their business. Plaintiff fully believed that the mortgage held by defendant embraced the lots, and defendant entertained the same ■view. In fact, it seems clear from the record that it was the design of the mortgagor and mortgagee that the mort.gage should cover the lots in question, as the security was •■somewhat inadequate without them; and it was supposed ¡by all the parties to the transaction that the lots were ¡subject to the mortgage. Clark purchased the note and mortgage with this understanding. After some negotiations between plaintiff and defendant, it was agreed that the latter should release the lots from the supposed incumbrance, and the former should pay him $400; and on December 24, 1890, plaintiff’s husband, together with her attorney, went to Swan’s office, and there paid, either to defendant •or Swan, the amount agreed upon, and the release was then and there executed by Clark. Both parties acted in good faith. The money was paid in order, as plaintiff supposed, to disencumber her property, and was received by defendant only at the solicitation of plaintiff’s husband, in order to aid them in their business, and recompense him for the supposed loss of security. As soon as the — 473 — money reached defendant he gave Swan credit for it upon Jiis note, relieving the maker pro tanto. In January, 1892, -appellant obtained a decree of foreclosure of the Swan mortgage. Plaintiff was not made a party t@ the foreclosure proceedings, because of the release theretofore ■executed, although Clark, who had, when he brought his suit, discovered the omission of the lots from the mortgage, .asked for a correction of the mortgage so as to include them. In the suit upon the note and mortgage the judgment against Swan did not include the $400. The court treated it as a payment on the note. While the record is not clear, it appears that after exhausting the security there was still .a balance due Clark on the note. In the latter part of 1892, plaintiff learned of the mistake in the mortgage, and •demanded that defendant return the $400. He refused, and in December of the same year this action was commenced, to recover said amount, the complaint alleging payment by mistake. The trial judge held “that defendant was more negligent than plaintiff,” and instructed the jury to find for the latter. Plaintiff contends that where money is paid by mutual mistake an action will lie for its recovery. Defendant does not controvert this general rule, but claims that the case .at bar comes within well-recognized exceptions. It is apparent that one of the parties to the controversy must ■suffer loss, unless plaintiff could recover from Swan, as suggested by appellant’s counsel, for a breach of warranty, or from her attorney, for negligence. But that question is not before us. Each having acted honestly and in.good faith, we think equitable principles would require that the misfortune be visited upon the one contributing more to the mistake; in other words, the one whose conduct was the more negligent. Defendant, in receiving the money, seems to be free from fault or negligence. Plaintiff was the actor. Her representations induced the payment. They — 474 — were the proximate cause of defendant’s passive conduct,, which resulted in his receiving the money. She, by her agent, searched the records, and reached 'the conclusion that the title was not clear. She then approached Clark. He was guilty of no fraud or deceit. He made no representations, except, when interrogated,, to state that he-would execute no release, unless paid, and concealed no-facts known to him. There was an apparent cloud upon plaintiff’s title. It was important that it be removed, and at once, as her business demanded the immediate purchase-of goods, and this could not be done without the lots as security. Defendant was asked, as a favor, to relinquish his supposed lien. If negligence is to be imputed to either, it must be charged to plaintiff. Her agent ¡made the mistake. His examination of the records was faulty, and plaintiff was thereby misled. No relation of trust or confidence existed between the parties. They were dealing as strangers, “at arm’s length.” Plaintiff did not rely upon defendant. Her conduct was the outgrowth of her own investigations, and the knowledge of the existence of supposed facts, which resulted from her own inquiries. The mistake did not proceed from a violation of obligation's imposed by’law upon defendant, and his conduct is not inconsistent with good faith. “ When each party is equally innocent, and there is no concealment of facts which the other party has a right to know, and no surprise or imposition exists, the mistake or ignorance, whether mutual or unilateral, is treated as laying no foundation for equitable interference. It is strictly clcmnum absque injuria.” 1 Story, Eq. Jur. § 151. It would seem that reasonable diligence upon plaintiff’s part would have avoided the mistake. And when “the fact is equally unknown to both parties, or where each has adequate and equal means of information, or where the fact is doubtful from its nature, in every such case, if — 475 — the parties have acted in entire good faith, a court of equity will not interfere; for in such case the equity is deemed equal between the parties, and where it is so a court of equity is generally passive, and rarely exerts an active jurisdiction/’ Id. § 150. There ought to be finality to transactions between parties. The law does not tolerate carelessness and indifference in settlements between individuals. In disputed questions, where all parties have full opportunity to investigate and ascertain the facts, and where there is no fraud or misrepresentation, and when after such investigation, they become satisfied as to their respective rights, and thereupon adjust them, neither law nor equity will countenance efforts to revive and litigate-the' controversy. Even if there were no negligence on plaintiff’s part, in her investigations concerning the title, it would seem that there was laches in waiting for nearly two years before making any demand for restitution of the money. The law sometimes imputes laches, even in the absence of knowledge. But what appears to us to be the strongest reason for denying plaintiff relief is found in the changed condition of the parties. A restoration of the-parties to their original position is impossible. It has been held that equity will not decline to afford relief, in cases of mutual mistake, merely because of the intervention of circumstances which render it difficult to restore parties to their original position. Beauchamp v. Winn, 3 L. R. 6 H. L. 223. But the rule which has-received approval in the supreme court of the United States is that “mistake, to be available in equity, must not have arisen from negligence, when the means of knowledge were easily accessible. * * * ’ A court of equity is always reluctant to rescind, unless the parties can be put back in statu quo. If this cannot be done, it will give such relief only where the strongest and clearest, — 476 — equity imperatively demands it.” Grymes v. Sanders, 93 U. S. 61, 62. When an insurance company purchased, received the .assets, and assumed the liabilities of another company, and the transaction was afterwards declared to be ultra vires, it was held that, while the mistake was one equity would have the power to relieve against, yet, as it was impossible to restore both companies to their original situation, this was an insuperable objection to allowing the purchasing •company to prove against the selling company an excess of debts over assets received. In re Saxon Life Assur. Soc., 2 Johns. & H. 408. “The rule is general that money paid under a mistake of material facts may be recovered back, .although there is negligence on the part of the party making the payment; but this rule is subject to the qualification that the payment cannot be recalled when the situation of the party receiving the money has been changed in •consequence of the payment, and it would be inequitable to allow a recovery. The person making the payment must ■in that case bear the loss occasioned by his own negligence.” Walker v. Conant, 65 Mich. 195, 31 N. W. 786. When the contract had been fully performed by the defend.ant, relief predicated on the sole ground of mutual mistake of fact was denied because the “situation of the parties had been so changed by reason thereof as to render it impossible to restore them to their situation at the time the contract was made. A court of equity will not interfere to rescind a contract, on the sole ground of a mutual .mistake of fact, unless the parties can be restored substantially to their situation at the time the contract was made; for to so interpose would not cure the mischief, but simply shift it.” Eastman v. Water-Poiuer Co., 24 Minn. 437. And the illustration employed by the court of Tennessee ..seems to square with the case under consideration. It is — 477 — said: “To illustrate the principle, take the case of a payment, without knowledge of the facts, made, not to the original creditor of the party paying, whose debt had been previously satisfied, but to a creditor of his, who received the money in good faith, ignorant of the mistake, and in satisfaction of a just demand, and who, in consequence of such payment, may have waived or lost his remedy against his debtor. In such case it is clear, upon well-established principles, that the plaintiff would not be entitled to recover. The defendant, in the given case, would be equally innocent as the plaintiff of the mistake; and, having lost-his remedy upon the faith of such payment, it would not be against conscience for him to retain the money, and the loss must fall upon the plaintiff, by whose act, though innocently done, it was occasioned.-” Guild v. Baldridge, 2 Swan, 295; McArthur v. Luce, 43 Mich. 437, 5 N. W. 451; Sanger v. Mellon, 51 Wis. 560, 8 N. W. 487; Boas v. Updegrove, 47 Am. Dec. 425; Hall v. Shultz, 4 Am. Dec. 270; Moyer v. Shoemaker, 5 Barb. 319; Espy v. Allison, 9 Watts, 462. The rule is not changed because the party receiving the money has no interest whatever in the property. Manzy v. Hardy (Neb.), 13 N. W. 12. Defendant herein, acting upon the strength of plaintiff's-conduct, credited Swan with the money paid. Plaintiff caused defendant to change his position with Swan, and long before plaintiff commenced this action the rights of Clark and Swan had become fixed by decree of court. Applying the principle announced in the case of Grymes v. Sanders, supra, to the facts in this case, it is obvious that the plaintiff is not entitled to recover. It cannot be said that the “'clearest and strongest equity” demands a-rescission of the contract made. Indeed, we think it would be inequitable, and against good conscience, to uphold the judgment of the lower court. In view of the facts that — 478 — the parties cannot be placed in statu quo, and that the mistake is attributable to plaintiff, rather than defendant, we are of the opinion that the court erred ■ in directing a verdict for plaintiff. Its judgment is therefore reversed, and the cause remanded, with directions to grant a new trial. Merritt, O. J., and Smith, J., concur.