Opinion
No. 33784.
October 16, 1939.
1. REFORMATION OF INSTRUMENTS.
In bank receiver's suit to reform settlement, relieving another of indebtedness to bank in consideration of additional payment and foreclosure of trust deed, on ground of mistake in describing different lot from that which plaintiff believed he was purchasing at foreclosure sale in foreclosure petition, order, and deed, evidence warranted decree requiring that debtor and maker of trust deed, which debtor assigned to bank as additional security for indebtedness, pay receiver amount bid by him or that mortgaged property be re-advertised and resold under correct description.
2. REFORMATION OF INSTRUMENTS.
Mistaken belief of bank receiver, one assigning note and trust deed to bank as additional security for indebtedness thereto, and trustee, that another lot than that purchased by receiver at foreclosure sale was being sold by trustee, justified reformation of settlement, relieving assignor of such indebtedness in consideration of foreclosure of trust deed, as against contention that diligence by trustee would have disclosed error in description of lot in foreclosure petition, order, and deed, where description in trust deed was by metes and bounds and there was no record source of surveys clearly disclosing real lot at time of sale.
APPEAL from the chancery court of Yalobusha county; HON. L.A. SMITH, SR., Chancellor.
R.F. Kimmons, of Water Valley, for O.T. Hamner, appellant.
The only question involved is whether or not there was a mistake in a compromise agreement to settle between Hamner and the Receiver whereby Hamner was released from all of his obligations to the Peoples Bank on the payment of $740.00 regardless of other circumstances or conditions.
Wise v. Brooks, 69 Miss. 891; Sample v. Bridgeforth, 72 Miss. 293; Ingram Day Lumber Co. v. Robinson, 129 Miss. 365; Hall v. Lafayette County, 69 Miss. 529.
While contending that it is wholly immaterial what Hamner believed or what Thompson Hamner, one or both, believed in regard to the foreclosure of exhibit "H" which was a trust deed on the filling station lot, and whether or not the Peoples Bank acquired title to said lot, the appellant still contends that there was no mutual mistake between the parties in regard to that question. He contends that he knew that the bank did not have title to said lot, and he further contends that he did nothing inequitable or unjust in regard to such foreclosure.
Railway v. Turnbull, 71 Miss. 1029; Hogue v. Armstrong, 159 Miss. 875; 2 Pom. Eq. Jur., par. 892-893; Sample v. Bridgeforth, 72 Miss. 293; Wise v. Brooks, 69 Miss. 891; Watson v. Owen, 142 Miss. 677.
Appellant contends that any mistake made by Thompson, the Receiver, was solely because of his inattention and gross negligence and that he has no one to blame but himself and therefore cannot sustain this bill of complaint.
Sample v. Bridgeforth, 72 Miss. 293; Carhart v. Aldridge, 144 Miss. 178; Griffith's Chancery Practice, 745 Par. 642; Wall v. Wall, 177 Miss. 743; Scarborough v. Naval Stores, 95 Miss. 497; Goodrich Rubber Co. v. Holland, 159 Miss. 346.
Appellant contends that in the purchase of the 30 foot lot under the foreclosure proceeding that Thompson acted at his peril and that the doctrine of caveat emptor applied in full force.
Wells v. Ellabee, 93 Miss. 269; 28 A. E. Enc. L. p. 820-821; Rayborn v. Mize, 151 Miss. 558.
Reformation of a settlement cannot be had unless the status of a party be restored which cannot be done in this case.
53 C.J., 969; Wall v. Wall, 177 Miss. 743; Eaton on Equity, page 254, par. 120.
Appellant says that the decrees of the Chancellor authorizing a foreclosure proceeding and the approval of such proceeding after the foreclosure and the making of the deed by the trustee; and also the decrees of the Chancellor authorizing the settlement with Hamner became irrevocable and could not not be set aside after the rights of third parties based on such decrees intervened.
Ex Parte Stanfield, 98 Miss. 214; Anderson v. McInnis, 99 Miss. 823; Allen Commission Co. v. Millstead, 92 Miss. 837.
Appellant Hamner denied that the Peoples Bank or Thompson the Receiver at any time held Exhibit "H" which is the trust deed which covered the filling station as collateral security for any obligation of his. He claims that Exhibit "F" alone which covered the 30 foot lot corrected by Exhibit "G" was given to Hunter the cashier of the bank as additional security to his indebtedness to the Bank and by a distinct and positive agreement with Hunter no right under Exhibit "H" passed to said Bank, and that Thompson the Receiver acquired no rights under it.
Green v. Norris, 117 Miss. 635.
James Stone Sons, of Oxford, for Earl Fudge, appellant.
The deed of trust which is Exhibit "H" did not follow the two Fudge notes by operation of law and it is immaterial whether it did or not.
The Complainant is not entitled to a reformation or a modification of the Decree involved in this case under the evidence as shown in this case.
Griffith's Chancery Practice, Sec. 642, page 745; 23 R.C.L. 349, Sec. 45; Progressive Bank v. McGehee, 142 Miss. 655; Watson v. Owen, 142 Miss. 676; Rogers v. Clayton, 149 Miss. 47; Jones v. Jones, 88 Miss. 784; Whitney Central National Bank v. First National Bank of Hattiesburg, 158 Miss. 93.
This is a case where the exercise of any diligence whatever would have prevented the alleged mistake. It is a case where the Complainant obstinately and persistently refused to see the facts. If this Complainant can secure the high remedy of reformation then the doors are open wide to fraud and negligence and anything can be reformed.
Kermit R. Cofer, of Water Valley, and Flowers, Brown, Hester, Robert Burns, and F.W. Bradshaw, all of Jackson, for appellee.
The lower court reformed the settlement as prayed for because the proof showed that both parties labored under a mutual mistake as to the property purchased at the foreclosure sale by Ray Sissell, Trustee, on December 2, 1935.
Nixon v. Carco, 28 Miss. 14; Gunberry v. Trust Company, 132 So. 334, 159 Miss. 460; Insurance Company v. Hoffheimer, 46 Miss. 644; Miles v. Miles, 37 So. 112; Bain v. McGee, 80 So. 379; Cox v. Insurance Company, 160 So. 744; 4 R.C.L. 506, sec. 20; Pomeroy's "Equity Jurisprudence," (4 Ed.), Sections 852, 853, and 854.
The lower court preferred to hold appellant mistaken rather than hold him guilty of fraudulent or inequitable conduct. The proof as contained in the record justified the lower court in finding that a mutual mistake existed and if the court had not entered this finding, it would have been forced to hold that appellant Hamner was guilty of fraudulent or inequitable conduct in his dealings with appellee's predecessor, Thompson, Receiver, in which the same relief would have been granted.
Hurst v. National Bond Investment Company, 117 So. (Fla.) 792, 59 A.L.R. 807; Young Company v. Stringer, 113 Minn. 382, 121 N.W. 773; Morgan v. Owens, 228 Ill. 598, 81 N.E. 1135; Hudson v. Smith, 43 L.R.A. (N.S.) 654, 85 A. 384; Armour Company v. Renaker, 121 C.C.A. 259, 202 Fed. 901; Smith v. Mackin, 4 Lans. (N.Y.) 41; Crosby v. Andrews, 61 Fla. 554, 55 So. 57; Conland v. Sullivan, 110 Cal. 624, 42 P. 1081; Bell v. Carroll, 212 Ky. 231, 278 S.W. 54.
Deed of trust, Exhibit "H" to Bill of Complaint, was held by Peoples Bank as security for Hamner indebtedness at the time of the foreclosure by Ray Sissell, Trustee. The proof clearly showed that the deed of trust covering the filling station, Exhibit "H" to the Bill of Complaint, was held by Peoples Bank as security for the Hamner indebtedness at the time of the foreclosure, but if the deed of trust had not been actually so held, the lien thereof belonged to Peoples Bank because the transfer of a secured indebtedness carries with it the security held therefor.
Sections 505 and 853 of the Mississippi Code of 1930; Box v. Early, 178 So. (Miss.) 793; Brown v. Yarbrough, 94 So. (Miss.), 887; Nestor v. Davis, 56 So. 347, 100 Miss. 199; Foundry v. Ice Company, 72 Miss. 608, 18 So. 364; Allen v. Smith, 133 So. (Miss.) 599.
The order of the Chancery Court, authorizing the settlement between Hamner and Thompson, Receiver, was an interlocutory order.
Sections 407, 559, and 643 of Griffith's Chancery Practice.
Argued orally by R.F. Kimmons, for appellant.
Everett Cocke, receiver for the Peoples Bank of Water Valley, Mississippi, brought suit in the Chancery Court of Yalobusha County against O.T. Hamner and Earl Fudge as individuals, and Ray Sissell as trustee, to reform a settlement made between the receiver of the bank and O.T. Hamner, by which the latter was relieved of certain indebtedness due the bank in his individual capacity, and as endorser on the notes of others, in consideration of the payment of an additional $740, and foreclosure of the deed of trust involving the securities of the bank upon certain property embraced in the deed of trust. It was found that in the foreclosure mentioned, the lot actually described therein was a different lot from that on which a filling station was located, and which was also embraced in one of the deeds of trust and assigned to the bank as collateral security.
It appears that O.T. Hamner was indebted to the bank prior to the transaction mentioned, on two notes, one for $19.50, the other for $1,554; and that he was also an endorser on a note for another. To secure the amounts mentioned, $19.50 and $1,554, O.T. Hamner gave a deed of trust upon certain lands described by metes and bounds, containing about sixty acres, and in addition to this security, assigned notes and deeds of trust on Earl Fudge to O.T. Hamner, the three notes aggregating a balance due of something in excess of $8,000.
The deeds of trust to O.T. Hamner, of which there are two described lands in one of them as: "That part of Lot No. 276 west of the Illinois Central Railroad, as per the J.W. Mercer map and survey of the city of Water Valley, Mississippi, all in second district of Yalobusha county and State of Mississippi, and more particularly described as follows: Beginning at a point on the east line of said Lot 276, 200 feet from the northeast of T.E. Green lot, which is Lot 276; thence run west to the west line of Lot 276; run thence with the said west line of said Lot 276, 30 feet; run thence east to the point of beginning, being the same property conveyed to Earl Fudge by Mrs. Martha L. Johnson and Wiley Johnson on November 13, 1930, as the same appears of record in Deed Book `Y' at page 503 of the records of deeds in the Chancery Clerk's office at Water Valley, Mississippi, all lying and being situated in the City of Water Valley, Mississippi."
The second deed of trust describes the property therein as: "All that part of Lot 276 west of the Illinois Central Railroad according to the J.W. Mercer may and survey of the City of Water Valley, Mississippi, and all in the City of Water Valley, Mississippi, and in the second district of Yalobusha county, Mississippi, and more particularly described by metes and bounds as follows: Begin at a point on the west side of Main street and on the east side of said Lot No. 276 west, which point is 298 feet north of the southeast corner of said Lot No. 276 west, measured along the east line of the said lot, and run thence north 69 degrees and 45 minutes west to the west line of said Lot No. 276, west, a distance of 64 feet 5 inches, to a point, and run thence easterly parallel to the north line above and in a straight line 72 feet 8 inches to a point on the east line of said Lot No. 276 west, which is 30 feet south of the point of beginning, and run thence northwardly along the east line of said Lot No. 276, 30 feet to the point of beginning."
It was recited in this deed of trust that it was given to correct an error and to give a more accurate description of land to be conveyed by the deed of trust executed on the 26th day of March, 1931, by Earl Fudge to Ray Sissell, trustee, for the benefit of O.T. Hamner, which deed of trust is of record in the office of the chancery clerk of the second district of Yalobusha county, in book 11, at page 343; and that this deed of trust secured the same debt as is secured by the said deed of trust, which debt is additionally secured by deed of trust given by Earl Fudge to Ray Sissell, trustee, for the benefit of O.T. Hamner, on March 11, 1930, and is of record in the office of the chancery clerk of said district and county in book 11, at pages 281, 282; the lien and security of the said deeds of trust not to be affected in anywise by the giving of this instrument as additional and cumulative security, but to remain in full force and effect.
It appears that after the bank was in receivership, the receiver applied to the chancellor for authority to foreclose a deed of trust given by Earl Fudge to O.T. Hamner, securing the indebtedness mentioned, and that the Chancery Court entered an order directing the trustee to foreclose on the property described in the petition therefor, it being supposed by the receiver and the chancellor in taking such action, that this was the lot upon which a filling station, known as the Pearce filling station, was located. But through error the 30-foot lot was described in the order of the chancellor, and in the petition to him, and in the foreclosure or trustee's deed; the receiver of the bank bidding for the 30-foot lot the sum of $2,000, in the belief that he was bidding on the filling station lot. The trustee testified that in crying off the property at said sale, after reading of the description thereof, he stated to those present that this was best known as the Pearce filling station property. This 30-foot lot was of little value, estimated at $400 to $750.
After the sale and buying in of the property, which it appears that at the time all parties thought to be the filling station lot, arrangement was made by the receiver of the bank and O.T. Hamner that if the latter would pay the additional sum of $740, to be obtained from the Federal Land Bank upon the property embraced in the deed of trust above mentioned, the 60 acres owned by Hamner, the bank would release Hamner from the indebtedness secured by his deed of trust, and would also release him as endorser on the papers of J.W. Hamner, Jr.; the loan was procured from the Federal Land Bank through the appropriate agency, and the $740 thereby obtained was turned over to the receiver of the bank, who thereupon surrendered to O.T. Hamner his notes and deeds of trust.
In the settlement it was agreed, however, that one, T.O. Gore, who was also an endorser on the J.W. Hamner, Jr., note, would not be affected or released, and that the liability of Earl Fudge on the note held by the bank would not be released, but that the Earl Fudge note was credited with the $2,000 bid at the sale under the deed of trust.
After the foreclosure of the deed of trust, in the negotiations looking to the compromise, O.T. Hamner wrote the receiver of the bank that the bank should obtain at least $3,000 for the filling station property. O.T. Hamner also admitted on cross-examination, that at the time he was of the opinion that the filling station lot had been sold; but he contends that this belief on the part of the receiver of the bank, and on his part, and on the part of the chancellor in ordering the sale by decree, on petition therefor, and the belief of the trustee, in crying off the property, that he was selling the filling station lot, should not justify reformation of the transaction, for the reason that diligence would have disclosed the error, had the trustee been diligent in looking into the matter, and comparing the description embraced in the proceedings with the real description of the lot on which the filling station was located.
He also argued that Earl Fudge was not shown to have shared in the mistake; that he, being a party to the suit, had a deed of trust on his property involved in this suit, subject to the facts stated and to the right of the bank to resort to the foreclosure on his property, to satisfy the debt due by Hamner to the bank. From a consideration of the entire evidence it appears that the chancellor was warranted in entering the decree which provided that Hamner and Fudge should, within forty-five days, either repay, or pay to the receiver of the bank, the $2,000 bid for the property; or, in default thereof, that the property should be readvertised and resold under the correct and appropriate description. It appears to us that there is not such changed condition in the status of the parties to the suit as would prevent equity from applying the doctrine of mistake to the transaction. Fudge received credit on his debt to the amount of the bid for the lot, and his interest would not be adversely affected by requiring either that he pay this amount, or in default thereof, that the property be readvertised and resold; because he could not equitably retain the credit of $2,000 and still own the filling station lot. And this is also true of O.T. Hamner. The transaction, under the decree, would stand, provided the bank received $2,000, the amount of its bid.
In reference to the diligence feature of the case, the description was by metes and bounds; and it does not appear that at that time there was a record source of surveys which would clearly disclose the real lot. Everybody seems to have regarded the transaction as the sale of the filling station, the value of which induced the bid. It was under lease for a monthly rental of $40; whereas, the lot actually conveyed in the foreclosure sale was unimproved, and seems to have no rental value whatever.
From a consideration of the record, and all the evidence therein, we are constained to confirm the decree of the chancellor.
Affirmed.
McGowen, J., did not participate in the decision of of this case.