American Mortgage Co. of Scotland, Ltd. v. O'Harra

MQBBOW, District Judge. This is a suit in equity, brought in the United Stai.es circuit court for the district of Oregon, December 16, 1885, to rectify a mistake in a mortgage executed by Erven Q’Harra and Julia OT larra to the American Mortgage Company of Scotland, April 21, 1881!, to secure the payment, of a note for the principal sum of SI,(MM), and four interest, notes, aggregating $;);12.80, and for a. decree of foreclosure and sale of the property intended to be mortgaged to pay the indebtedness due the mortgagee. The property intended io be mortgaged was land owned by the O’Harras near Pendleton, in Umatilla county, Or., described, as Hie S. W. 1 of section 2. in township 4 N., range -12 ID. of the Willamette meridian, containing 1(50 acres. The land erroneously described, in the mortgage was the N. TV. -j- of the same section, township, and range, winch the mortgagors did not own, and which was so described by mistake. The author of the mistake is nof disclosed, but neither of the parlies to the mor I gage knew of the error at the time of the execution of that instrument. One J. IT. Cavanag’h transacted the business between the parlies as the agent or correspondent of the American Mortgage Company, and he appears io have acted also for the OTIarras. The defendant D. X. ¡Tinih, residing at Pendleton, the county seat of Umatilla county. Or., had something (o do with the transaction as the manager of Cavanagh’s business. The mistake in the mortgage was discovered some time after its execution by Wirt Minor, a lawyer, and E. W. Farrow, an abstractor, while they were engaged.iii examining the records of Umatilla county. Farrow informed Cavn-nagh of the mistake in the presence of Smith. Minor notified [280] O’Harra of tbe error, who said he would malee it right. Minor also informed Smith of the mistake, under the impression that the latter was the agent of the mortgage company in the transaction. Smith stated that he would have the mistake corrected, but, instead of doing so, he took advantage of his information to secure a transfer of the land from the O’Harras to himself through negotiations carried on by the defendant Thompson, who was to take the land and assume the payment of the mortgage. The land was, however, conveyed directly to Smith, although O’Harra supposed he was making the conveyance to Thompson. The deed from the O’Harras to Smith was executed September 20, 1884, and recorded on the same day. Two days after, or on September 22, 1884, Smith conveyed the land to the defendant Thomas F. Bourke. The consideration named in the deed was $3,000. Bourke had this title when the present action was commenced by the complainant in December, 1885, against Erven O’Harra and Julia O’Harra, his wife, D. K. Smith, Thomas F. Bourke, and Lillian O. Bourke, his wife. June 18, 3887, the Bourkes conveyed the land to the defendant Christiana Cbeeley, and on July 29, 1889, the complainant filed a supplemental bill, making Oliver Cheeley, Christiana Chee-ley, and Thomas Thompson also parties defendants. In all cases of mistake in written instruments courts of equity will intefefere as between the original parties or those claiming under them in privity, such as personal representatives, heirs, devisees, legatees, assignees, voluntary grantees, or judgment creditors, or purchasers from them with notice of the facts; but as against bona fide purchasers for a valuable consideration withont notice courts of equity will grant no relief, because they have at least an equal equity to the protection of the court. 1 Story, Eq. Jur. par. 165. The defendant D. K. Smith took the deed of September 20, 1884, from the O’Harras, with notice of the mistake in the mortgage, and knowing that it was intended by them to subject the land described in the deed to the payment of the mortgage; but the question here relates to the title of the land as it stood at the date of the commencement of this action, when it was held by Thomas F. Eourlce. The bill charged that Bourke had notice of fixe mistake in the mortgage, and that the conveyance of the land to him by Smith was fraudulent, and made without •value or consideration. The bill did not waive an answer under oath, and accordingly Bourke and his wife answered the allegation of the bill denying that they had notice or knowledge of the facts therein alleged. The answer further alleges that the defendant Bourke purchased the land in good faith and for a valuable consideration, and that prior to the execution and delivery of the deed by Smith to Bourke, and the payment of the purchase price, the defendant caused the records of conveyances and mortgages of Umatilla county to be examined by a competent attorney, and that no lien or incumbrance was found to exist upon the records against the land; and that, acting upon the faith of such examination and record, tbe defendant purchased the premises, and paid for the same, without any knowledge or notice of the existence of com [281] plainant’s mortgage, or alleged error therein, or alleged interest in or claim or lien upon the land. This answer was verified by the oath oi' the defendant Bourke, and was responsive-to the allegations of the bill, and the rule of equity practice requires that such an answer must be overcome by the satisfactory evidence of two witnesses, or of one witness corroborated by circumstances which are equivalent in weight to another, before the complainant can be granted the relief prayed for in the bill. We fail to find such evidence in the record. There are some suspicious circumstances connected with the transaction, — such, for instance, as the conduct of the; attorneys who examined the title and drew up the deed for Bourke; the contradiction between the allegations of the answer and the testimony of the defendant as to the amount paid for the land, and the sums for which two notes were given for deferred payments; the fact that Bourke had other business relations with Smith, and that the two were frequently seen together about the time Bourke purchased the land from Smith following closely after the transfer of the title by deed from OTXarra to Smith, — but these circumstances are not sufficient to overcome the positive evidence in favor of the integrity of the transaction so far as they relate to the title acquired bv the defendant Bourke. Morrison v. Durr, 122 U. S. 518, 7 Sup. Ct. Rep. 1215. In this view of the case it will not be necessary to determine whether the Cheeleys had notice of the mistake in the mortgage, or how far they are bound by the constructive notice arising out of the pendency of this action. Tt is sufficient for the present purpose io say that their grantors, being innocent purchasers for a valuable consideration, notice to the Cheeleys would not he available to re-esfablish complainant’s equity as against the land in their hands, unless it was also shown that they were parties to the original fraud; and this has not been done, 1 Story, Eq. Jur. par. 409; 2 Pom. Eq. Jur. par. 754; Mills v. Smith, 8 Wall. 27-32; Commission v. Clark, 94 U. S. 278-286; Dorsey v. McFarland, 7 Cal. 342-346; Allison v. Hagan, 12 Nev. 38-55. The decree is affirmed.