Bailes v. Advance-Rumley Thresher Co.

MUNGER, District Judge (after stating the facts as above). [1] The defendant insists that the vice president of plaintiff was guilty of [679] negligence in failing to read the draft of the deed presented to him by Mr. Winn, before he signed it. It is the general rule that a written contract or deed cannot be annulled, in the absence of fraud, by proof that a party to it did not read it before he signed it, because it was his legal duty to read it or to have it read to him, and a failure to read it or to have it read to him is gross negligence. Upton, Assignor, v. Tribilcock, 91 U. S. 45, 23 L. Ed. 203; Chicago, St. P., M. & O. Ry. Co. v. Belliwith, 83 Red. 437, 28 C. C. A. 358. In this case the vice president had the assurance of Winn, the general attorney for the company and its trusted legal advisor, who had served the company for many years, that the deed was for the Seventh street property which the directors had voted to convey. Reliance on such a statement was not negligence. In the practical conduct of the affairs of large modern business organizations, action upon such reliance is the common and necessary method of managing its business, or, in other words, it is what ordinarily prudent men constantly do. [2] It is also said that the stenographer was negligent in failing to call for the file she had been told to obtain, that the document clerk was negligent in failing to ascertain the proper one of the two files relating to the Grand Forks properties, and that Mr. Winn was negligent in failing to- compare the description o£ the property in the file brought to him, with the description referred to in the correspondence with defendant, before he sent his message to defendant and when he prepared and sent the deed to 'defendant. Appellant claims that a party cannot be relieved from the consequences of a mistake, if the party making the mistake had the means of knowledge of the true state of facts, and made the mistake because of his want of ordinary care, and in support of this principle are cited cases such as Gryrnes v. Sanders, 93 U. S. 55, 23 L. Ed. 798; Files v. Brown, 124 Fed. 133, 59 C. C. A. 403; Burk v. Johnson, 146 Fed. 209, 76 C. C. A. 567; Great Western Mfg. Co. v. Adams, 176 Bed. 325, 99 C. C. A. 615; Bailey v. Fisle Mfg. Co., 238 Fed. 257, 152 C. C. A. 3. The authority of these cases is undoubted, but the rule that is applicable to the facts in this case is supplied by the statutes of North Dakota. Section. 5934 of the North Dakota Civil Code (Compiled Raws 1913) provides: “A party to a contract may rescind tilo same in the following cases only: “(1) If the consent o£ the party rescinding, or of any party jointly contracting with him was given by mistake or obtained through duress, menace, fraud or -undue inhuonce exercised by or with the connivance of the party as to whom he rescinds or of any other party to the contract jointly interested with such party.” Section 5854 provides as follows: “Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake and consisting in: “(1) An unconscious ignorance or forgetfulness of a fact past or present material to the contract; or, “(2) Belief in the present existence of a thing material to the contract which does not exist, or in the past existence of such a thing which has not existed.” [680] [3] An enlargement of equitable rights given by a state statute may be administered by the United States court as well as by the courts of the state. Case of Broderick’s Will, 21 Wall. 520, 22 L. Ed. 599; Holland v. Challen, 110 U. S. 15, 3 Sup. Ct. 495, 28 L. Ed. 52; Smith v. Reeves, 178 U. S. 436, 20 Sup. Ct. 919, 44 L. Ed. 1140; Devine v. Los Angeles, 202 U. S. 313, 26 Sup. Ct. 652, 50 L. Ed. 1046. [4] Under the provisions of the North Dakota Code which has been quoted, the mistake of fact which authorizes a decree of rescission or cancellation is “a mistake not caused by the neglect of a legal duty on the part of the person making the mistake,” and may consist in an unconscious forgetfulness of a present or past fact material to the contract. The Supreme Court of North Dakota in the case of Benesh v. Travelers’ Ins. Co., 14 N. D. 39, 103 N. W. 405, quoted this statutory definition of mistake and applied it to a written contract agreeing to convey more land than the grantor intended to convey and held a rescission to be authorized. It also repelled the suggestion that relief should be denied because of the grantor’s negligence in failing to examine accessible papers from which a correct description of the property could have been obtained, holding that failure to avail one’s self of the means of knowledge did not bar relief from mistake provided there is no “neglect of a legal duty.” The acts of the stenographer, document clerk, and general attorney of the plaintiff upon which the defendant relies as constituting negligence cannot be said to be the neglect of legal duties, but were acts of unconscious ignorance or forgetfulness of facts. Not every act of negligence is a neglect of legal duty. 2 Pom. Eq. Jur. § 856. [5] The evidence was clear and convincing that plaintiff’s deed was executed and delivered under a “mistake” as defined in the state statute. The evidence is also convincing in support of the trial court’s finding that Bailes knew, or at least suspected and had good reason to know, when he received the deed, that a mistake had been made by the vendor. The parties had long negotiated for the sale of the Seventh street tract and the transaction had practically been closed, and neither party had suggested the sale of the Third street tract. The price mentioned in Winn’s telegram was identical with the price agreed on in the prior negotiations as to the other property. It was a grossly inadequate price for the Third street property, and defendant was aware of that fact. The defendant showed unusual haste and secrecy in accepting the deed before he had examined the abstract of title, and many circumstances indicate that he knew he was obtaining a deed to property that the grantor did not intend to convey. His position is not that of a favorite in equity. The decree of the District Court will be affirmed.