Allgood v. Allgood

• Decision Date: 28 January 1926
• Docket Number: 11911.
• Citation: 132 S.E. 48,134 S.C. 233
• Parties: ALLGOOD et al. v. ALLGOOD et al.
• Court: South Carolina Supreme Court

132 S.E. 48

134 S.C. 233

ALLGOOD et al. v. ALLGOOD et al.

No. 11911.

Supreme Court of South Carolina

January 28, 1926

Appeal from Common Pleas Circuit Court of Anderson County; S. T Lanham, Judge.

Action by James E. Allgood and others as executors of the last will and testament of Edward F. Allgood, deceased, against John F Allgood, Commercial Bank of Easley and J. M. Jameson. From a decree for plaintiffs, the two last-named defendants appeal. Reversed, with directions.

The decree of the trial judge is as follows:

In this case the plaintiffs seek the reformation and foreclosure of a mortgage executed by the defendant John F. Allgood on March 6, 1920. The defendant mortgagor defaulted, and testifies in support of the plaintiffs' case. The defendant Commercial Bank of Easley resists plaintiffs' action for reformation, claiming that a later mortgage given to it by John F. Allgood should have priority. The defendant J. M Jameson is trustee in bankruptcy for John F. Allgood and files a formal answer.

It appears that E. F. Allgood, a citizen of Anderson county owned a large amount of land and had a large family of children. In 1919 he undertook to dispose of his land-effecting nominal transfers thereof to different purchasers at high prices. On January 13, 1920, he died, leaving his estate owing a great deal of money, and holding a great deal of this land paper, covering land most of which came back to the estate. He left a will, and the three plaintiffs and the defendant John F. Allgood, four of his sons, are his executors. John F. Allgood has acquired one of these tracts of land, and on October 7, 1919, gave his note to E. F. Allgood for purchase money, in the sum of $13,655, on which there have been payments as indicated in the report of the special referee.

Shortly after the testator's death his executors set about the task of conserving, collecting and administering the estate; the other executors knew that John owed a large amount of money, although it is not shown that he was at that time insolvent or that plaintiffs knew he was insolvent, if he was. He realized that he would not be able to pay the note, and, in consideration of some extension of time, agreed with the other executors to execute and deliver a mortgage upon the land described in the paper here involved for the purpose of securing the note, which he had given for the purchase money. He applied to W. C. Smith, president of the Easley Bank, to draw the mortgage, which, on March 6, 1920, he did; making same however, to E. F. Allgood instead of to his executors. This mortgage was recorded November 11, 1920.

John F. Allgood became considerably indebted to the Bank of Easley, and, the bank itself becoming involved into an agreement with the defendant Commercial Bank of Easley, February 17, 1921, by which defendant bank took over all the assets and liabilities of the Easley Bank; Mr. Smith, the president of the Easley Bank, continuing, as the agent of the Commercial Bank, to aid in adjusting its affairs, taking security for debts, making collections, etc., for the Commercial Bank. On December 30, 1921, he obtained from John F. Allgood a mortgage to the defendant Commercial Bank due one year after date, purporting to secure his note for $3,335.15.

John F. Allgood filed a petition in bankruptcy in July, 1922.

There was an order of reference referring the case to H. E. Bailey, Esq., judge of probate, as special referee, to take the testimony and report the same together with his finding of fact herein, who has now filed his report. Among other things, the referee found that it was the true intention and agreement of John F. Allgood on the one side and the plaintiffs as executors of E. F. Allgood on the other side to secure the debt of John F. Allgood, evidenced by his note referred to in the mortgage. He also reported the following findings:

"I find that there was no new consideration from the Commercial Bank to John F. Allgood at the time he made his mortgage to the said bank, but that the mortgage was taken to secure antecedent indebtedness. I further find that the Commercial Bank has not been misled to its injury by the first-mentioned mortgage being made to E. F. Allgood instead of to his executors or representatives. In this connection Mr. Smith testified that he did not think that the fact that this $3,375 mortgage was a second mortgage would have affected the completion of the agreement between the two banks, and there was no testimony to the contrary, and I find that the evidence establishes that, at the time the second mortgage was taken by Mr. W. C. Smith (Easley Bank), acting as the agent for the Commercial Bank, said agent had both actual and constructive notice of the mortgage sought to be foreclosed in the amended complaint herein. Mr. Smith knew that Mr. Allgood was dead, having attended the funeral. He drew and witnessed the first paper, and also drew Mr. Allgood's will. Both John F. Allgood and Keith Allgood testified that, when the second mortgage was drawn, there was a discussion with Mr. Smith about it being a second mortgage, and L. C. Julian testified that he heard Mr. Smith himself say that it was a second mortgage. Mr. Smith himself says that he would not deny that John suggested that it be written into the bank's mortgage that it was a second mortgage, although he did not recall it. He stated that he could not now say on oath that he thought then they were getting a first mortgage. The first-mentioned mortgage had been on record for more than a year, November 11, 1920 to December 1, 1921, and he testified that, if he had examined the record and found his name as a witness, he would have recalled all the circumstances surrounding the first transaction. Under these circumstances it seems plain that there was both actual and constructive notice to the defendant bank or to Mr. Smith, who was acting as its agent, of the existence of the first-mentioned mortgage."

After a careful consideration of the testimony, I am of the opinion that the court thinks that the findings of the referee are amply supported, and his report is therefore confirmed, and ordered to be recorded along with this degree.

What conclusions of law ought properly to follow?

Certain minor or preliminary questions suggested by the attorneys for the defendant bank will be first considered.

(1) It was suggested that the executors of E. F. Allgood had no power under the will to take mortgages. It seems to me that the executors had the power to contract for security for the purpose of protecting and saving the assets of the estate. Such powers are incident to the duties of the executors to collect, preserve and hold the assets of the estate under the will.

(2) It was also suggested at the hearing by the attorneys for the bank that the mortgage first given by John F. Allgood amounts to an assignment for the benefit of the creditors under section 5511 of the Code, in which a preference is given the Allgood estate, but this position was not very strenuously argued. No such issue was raised by the pleadings; it does not appear that the mortgage was sufficient to operate as a general assignment; it was not proved that John F. Allgood was insolvent at the time it was given; it was not shown that this was all the real property that he had or how much personal property he had, and there was no proof that either he or E. F. Allgood's executors knew at that time that he was insolvent, if he was.

(3) The defendant bank raised the point in its answer that there was another fund to which plaintiffs might resort for the collection of their debt, to wit, property that would be coming to John F. Allgood under E. F. Allgood's will, but this point was not strongly pressed. The referee says: "I do not find that the defendant has established that there is any such fund available for the payment of said debt." In this conclusion I think that the referee is correct. Moreover, under the terms of this will it would be a long time before it is determined whether there will be anything coming to John at all or not, and the owners of the mortgage who seek foreclosure cannot be postponed to any such settlement.

This brings the court to the main question in the case: (1) As between the plaintiffs on the one hand and John F. Allgood on the other, has a proper case for reformation been made out? (2) If the plaintiffs have presented against John F. Allgood a proper case for reformation, can the bank show any just cause to defeat the decree for such relief?

1. Do the facts in the case present a proper case for reformation as against John F. Allgood?

No reason is perceived why, as a general rule, an instrument may not be reformed as to parties thereto as well as in any other particular. "A mistaken use of the names of parties appearing in a contract may be rectified in order to carry out the real intention of the contractors." 34 Cyc. 934.

Compare Chapman v. Williams, 100 S.E. 360, 112 S.C. 402; which recognizes that upon proper proof of contract a mortgage may be reformed by changing the name of the obligee.

In a case like this, where the parties to the instrument had a clear agreement or understanding, and the effort to express the true agreement fails by reason of a mistake of the scrivener, the court will reform the instrument whether the mistake be one of fact or of law. It cannot be doubted for an instant that the real purpose of the parties to the instrument was to secure the estate of E. F. Allgood, and that the mistake of the draftsman prevented the real agreement from being embodied in the written instrument. See Brock v. O'Dell, 21 S.E. 976, 44 S.C. 22, 31 32, 33; Wilson v. Watkins, 26 S.E. 666, 48 S.C. 341; Whitehill v. Dacus, 27 S.E. 201, 49 S.C. 277; Austin v. Hunter, 67...