Opinion
12-17-1901
WHELEN et al. v. OSGOODBT et ux.
John V. Joline and D. J. Pancoast, for complainants. Martin V. Bergen, for defendants.
Bill by Henry Whelen and another, executors of Henry Whelen, deceased, against George M. Osgoodby and wife. Decree for plaintiffs.
John V. Joline and D. J. Pancoast, for complainants.
Martin V. Bergen, for defendants.
REED, V. C. The bill states that the complainants, the executors of Henry Whelen, deceased, in August, 1899, agreed to sell a piece of land at Montclair, Essex county, N. J., to George M. Osgoodby, for $3,700,$3,200 of the price to be secured by a mortgage payable in five years, with interest at 5 per cent. payable annually or semiannually; that this agreement was reduced to writing on August 23, 1899, but by a mutual mistake did not clearly state that interest was to be so paid; that on April 28, 1900, a deed was delivered to the wife of defendant, who, with her husband, made a mortgage upon the said property to secure the sum of $3,200, which mortgage, by mutual mistake, contained the same omission in respect to the time of the payment of the 5 per cent. interest; that said mistake was not observed until after the execution and delivery of the deed and mortgage; that defendant refused to correct said mistake. It is also stated that by mutual mistake the word "successors" was employed in the mortgage instead of the word "heirs," by which mistake a life estate was mortgaged to the executors, and that the defendants have refused to correct this. The answer states that the agreement was that the interest should be payable at the end of five years, and that the written agreement and the mortgage correctly, fully, and properly expressed the intention of the parties. It also denies that there was any mistake in using the word "successors" instead of the word "heirs." The defendants, by way of cross bill, ask that the deed made to Osgoodby may be reformed by inserting in it a warranty of title in accordance with the agreement for the sale of said property. It appears that the agreementfor the sale of this property was made for the complainants by Robert c. Ryerson, a real estate agent at Montclair. So far as appears, there was no meeting between the executors of Whelen and Osgoodby in which the terms of the sale were discussed. The agreement for the sale was drawn by Mr. Ryerson on August 23, 1899. This agreement provides that the executors shall furnish abstracts of title; that the consideration to be paid is $3,700, to be paid as follows: $500 or more on or before May 1, 1900, at which time a proper deed of conveyance was to be delivered by the party of the first part, and a properly executed bond and mortgage, bearing interest at the rate of 5 per cent., for the balance, if any part of the purchase money remained unpaid, to be delivered by the party of the second part to the said party of the first part; the said bond and mortgage to run for five years, with the privilege to the party of the second part to pay $500, or any larger sum, whenever he desired to do so. The bond and mortgage for $3,200 were executed on April 28, 1900. The condition of the instrument is in the following words: "Mary E. T. Osgoodby shall pay to Whelen and others, executors, etc., their successors, $3,200, .with interest, to be computed from May 1, 1900, at the rate of five per cent. five years from date, which will be on May 1, 1905; with the privilege to said Mary E. T. Osgoodby to pay $500, or any larger sum, to apply thereon, whenever she desires to do so." The bill was filed March 21, 1901. The delay in filing the bill is thus explained: The bond was sent to the executors, who put it away without their attention being drawn to the interest clause. Afterwards, when the time came for a semiannual payment of the interest, as the interest was not paid, the executors put the matter into the hands of their Philadelphia solicitor, who found that the contract did not express when the interest was to be paid, and the executors at once asked for the payment of the interest. The solicitor of the executors in Philadelphia, having only the bond, desired to see the mortgage, and he was informed that it was not received by the executors from the record. He at once wrote to Mr. Ryerson to obtain the mortgage from the record, and it was sent to him. He for the first time noticed that the word "successors" was used in the mortgage, instead of the word "heirs," and then consulted with Mr. Joline, of the New Jersey bar, concerning the effect of the word "successors"; and Mr. Joline, in examining the mortgage, discovered that the condition in it did not call for annual or semiannual payments of interest. Soon thereafter, upon the refusal of the mortgagor to rectify the alleged mistake or pay the interest, this bill was filed.
In respect to the word "successors," it is clear that its insertion was the result of a mutual mistake, both parties intending that the mortgage should be upon the fee of the mortgaged property. Mr. Osgoodby, who drew the mortgage, is a New York lawyer, and says that those words, according to law of that state, are sufficient to pass a fee; and he, in effect admits that the words were used in this mortgage with the intention that they had that force. The mortgage in this respect should be reformed.
The perplexing question is in regard to the interest clause in the condition of the mortgage. The language of the condition in the mortgage imports an obligation to pay interest at the time of the payment of the principal, namely, May 1, 1905, at the end of the five years. Cooper's Adm'r v. Wright, 23 N. J. Law, 200. There is no doubt at all that the mortgagee and his agent, Mr. Ryerson, had no intention whatever to take a mortgage with such a condition. Mr. Ryerson swears he had no such intention, and that none such was expressed in his negotiations with Mr. Osgoodby. But while a unilateral mistake may be ground for a rescission upon the theory that the minds of the parties never met, and so no contract arose, it is not a ground for reformation in the absence of fraud. Green v. Stone, 54 N. J. Eq. 387, 396, 34 Atl. 1099, 55 Am. St. Rep. 577. Unless, therefore, Mr. Osgoodby participated in the mistake, there could be no reformation, unless in drawing the mortgage he was guilty of a fraud upon the complainants. If Mr. Osgoodby, who drew this mortgage, wrote the condition, not by mistake, but knowing that it was not as the mortgagees intended, he was guilty of a fraud, which would justify a rescission or reformation of the mortgage. The circumstances would bring the case within the principle laid down by Mr. Pomeroy that equity will afford the affirmative relief of reformation when, through fraud of the other party, the instrument fails to express the real relation that existed between the parties. 2 Pom. Eq. Jur. § 872. In Wiswall v. Hall, 3 Paige, 313, where a vendor, knowing that the vendee understood that he was getting a lot, secretly had included in the deed only a part of the lot, for which the vendee paid the consideration agreed upon for the whole lot, he was compelled to make a deed for the rest of the lot; and this was practically a reformation, although in the shape of a decree for specific performance. To justify a reformation upon either of these grounds, the proof must be entirely clear. Either mistake or fraud must be proved, not only by the weight of evidence, but beyond a rational doubt. Green v. Stone, supra. As to the matter of mistake Mr. Osgoodby swears that there was an agreement that the interest was to be paid at the end of five years. In this he directly contradicts Mr. Ryerson. There being nothing to impeach the character of either Mr. Ryerson or Mr. Osgoodby, it follows that, if there was nothing in the character of the transaction itself to support thestatement of either of these parties, the complainants' case must fail. But, while the testimony of an unimpeached witness is not to be arbitrarily disregarded, it must be measured by the standard of common experience and business usage. The statement that a man under certain circumstances did something which we know from experience that not one in a thousand would do under the same circumstances is discredited by the inherent improbability of the statement. It is more rational to believe that the testimony is intentionally or mistakenly untrue than it is to believe that the marvelous occurred. Now, the experience of men who have had occasion to take mortgage securities to run for more than one year for the payment of money is that interest is payable annually or semiannually. Mr. Jones, in section 73 of his work on Mortgages, remarks, "Interest is usually payable annually or semiannually from the date of the mortgage." Vice Chancellor Codd observes in Ackens v. Winston, 22 N. J. Eq. 444-447, the prevailing usage as to mortgage debts is to pay interest as often at least as once a year. Now, when a party asserts that it was agreed that interest upon a mortgage debt to run for five years should not be paid until the end of the whole term, his assertion is so contrary to usage and common experience that it should be fortified by convincing evidence before it becomes credible. That such an express agreement was made in this case is, as already remarked, denied by Mr. Ryerson. It is also improbable from the fact that it nowhere appears in the agreement for the sale of the mortgaged premises when the interest shall be paid. If such an exceptional arrangement had been entered into, it is in the highest degree improbable that the mortgagor would not have insisted that it should be put into the written agreement in express terms. In fact, the agreement says nothing concerning the time when the interest is to be paid. It says that on May 1, 1900, $500 is to be paid, and the deed is to be delivered, and a mortgage bearing interest at 5 per cent. for the balance is also to be delivered. Then the agreement provides in a separate sentence that the mortgage is to run for five years. I am clear, therefore, that there was no express contract entered into between Mr. Osgoodby and Mr. Ryerson that the interest upon the mortgage should not be paid until the end of five years. But it is equally clear that nothing at all was said about the time when the interest should be paid. The written agreement embodies all that was said, which was substantially this: That the mortgage should be given bearing 5 per cent. interest, and that the mortgage should run for five years. The question is whether, by this language, the meaning is that the interest upon the mortgage shall be payable annually or at the end of the term. People speak of 6 per cent. and 5 per cent. mortgages. When mortgages run for a term longer than a year, the implication Is, from usage, that interest shall be paid at least annually. A mortgage differs from a promissory note, which is rarely drawn for a longer period than a year. If the court of equity was called upon to decree a specific performance of this agreement to make this mortgage, it seems to me, in the light of general usage, it would decree execution of a mortgage with interest payable at least annually. Such would be the legal construction of the agreement, and such was the intention of the parties at the time the agreement was signed. Now, if this be so, then the condition as placed in the mortgage of Mr. Osgoodby was varied from the terms of the agreement. If the language he used was used by mistake, it should be reformed; if it was used purposely, knowing it to be contrary to the intention of the other side, trusting that it would be overlooked until after the transaction was consummated, it was a fraud on his part, for which the mortgage should be reformed. In my judgment, the probabilities lie in the direction that Mr. Osgoodby did not appreciate the force of the language he used in the condition, and that afterwards, when he ascertained that by its legal construction he was not bound to pay interest until the end of the five years, he refused to pay interest annually, and resolved to stand upon the strict letter of the condition. If the transaction was fresh, and no improvements had been put upon the property, and the parties could be placed in their former state, I would be inclined toward a rescission of the whole matter. As matters stand, I will advise a decree that the mortgage shall be reformed by substituting the word "heirs" for "successors," and by inserting in the condition the provision that the interest shall be paid annually.
The prayer of the cross bill is denied.