American Bank v. Bray

• Decision Date: 18 December 1928
• Docket Number: No. 26396.,26396.
• Citation: 11 S.W.2d 1016
• Parties: AMERICAN BANK, Appellant, v. W.G. BRAY, ORA BRAY and J.H. O'BRIEN.
• Court: Missouri Supreme Court

11 S.W.2d 1016

AMERICAN BANK, Appellant, v. W.G. BRAY, ORA BRAY and J.H. O'BRIEN.

No. 26396.

Supreme Court of Missouri. Division Two.

December 18, 1928.

Appeal from Dunklin Circuit Court. — Hon. W.S.C. Walker, Judge.

AFFIRMED.

John T. McKay for appellant.

The judgment and decree of the court is against the evidence, the weight of the evidence and the law under the evidence. (1) When because of a mistake of fact, an instrument does not express the agreed intention of the parties, equity will correct such mistakes unless the rights of innocent parties have intervened. Leitensdorfer v. Delphy, 15 Mo. 161; Tesson v. Mut. Ins. Co., 40 Mo. 33; Schwickerath v. Cooksey, 53 Mo. 75; Moran Mfg. Co. v. Car Co., 210 Mo. 715. (2) The testimony in this cause establishes beyond doubt that it was the intention of the parties to the deed of trust sought to be reformed to describe the land in range eight instead of range nine, as it was described. Therefore it became the duty of the court to reform the instrument, unless the evidence disclosed defendant was a bona-fide innocent purchaser for value without notice. (3) The claim of an innocent purchaser is an affirmative defense, and the party pleading it must come to a court of equity with absolutely clean hands, he must deny notice, though it be not charged. He must deny fully and in most precise terms every circumstance from which notice could be inferred. Young v. Scofield, 132 Mo. 660; Holsa v. Holsa, 8 Mo. 303; Holsworth v. Shannon, 113 Mo. 508; Conn. Ins. Co. v. Smith, 117 Mo. 294. (4) Notice of a conveyance by which another has been defrauded of his land, does not mean positive information brought directly home to the person sought to be charged with the notice. Any facts which will put a prudent man on inquiry constitutes notice. Conn. Ins. Co. v. Smith, 117 Mo. 261; Morrison v. Juden, 145 Mo. 298; Kelsay v. Farmers Bank, 166 Mo. 172; Stephenson v. Kilpatrick, 166 Mo. 268; Johnson v. Fluetch, 176 Mo. 474; Zweigart v. Reed, 221 Mo. 44; Addams v. Gossom, 228 Mo. 583; Jones v. Nichols, 280 Mo. 668; Mathews v. O'Donnell, 289 Mo. 269. (5) Courts of equity, since their foundation, have always recognized that the still small voice of suggestion, eminating as it will from contiguous facts and surrounding circumstances, pregnant with inference and provocative of inquiry, is as potent to impart notice as a Presidential proclamation or an army with banners. Conn. Ins. Co. v. Smith, 117 Mo. 261; Mathews v. Odomett, 233 S.W. 459; Wallace v. Wilson, 30 Mo. 335.

Hal H. McHaney for respondent.

The judgment and decree of the court is not against the evidence, the weight of the evidence on the law under the evidence. (1) The appellate court in an equity case will review both the law and the evidence, but the findings of the chancellor will be deferred to unless he has manifested disregard of the evidence. Sharp v. McPike, 62 Mo. 300; Snell v. Harrison, 83 Mo. 651; King v. Mfg. Co., 250 S.W. 621. (2) Considering the facts most favorable to the appellant, there was insufficient evidence to merit the relief of reformation, because of a mutual mistake of fact. (a) When it is sought to correct a mistake in a deed by parol the evidence of mistake must be clear and convincing and must not permit a reasonable doubt. Courts of equity will only grant the remedy of relief upon certainty of error. Stephens v. Stephens, 183 S.W. 572; Brown v. Gwin, 197 Mo. 499; Griffin v. Miller, 188 Mo. 334; Bartlett v. Brown, 121 Mo. 353; Sweet v. Owens, 109 Mo. 1; Turner v. Shaw, 96 Mo. 22; Modrell v. Riddle, 82 Mo. 31; Worley v. Dryden, 57 Mo. 226; State ex rel. v. Frank, 51 Mo. 98; Able v. Insurance Co., 26 Mo. 56. (b) The mistake to merit the remedy of reformation must be mutual and not the mistake of one of the parties only. Implement Co. v. Rogers, 229 S.W. 779; Wall v. Mays, 210 S.W. 871; Stephens v. Stephens, 183 S.W. 572; Crouch v. Thompson, 254 Mo. 477; Benn v. Pritchett, 163 Mo. 560; Dougherty v. Dougherty, 204 Mo. 228. (c) It is necessary for the appellant to have established by strong evidence the present indebtedness of the maker of the note for which the deed of trust in controversy was given granting relief of reformation. Young v. Coleman, 43 Mo. 179. (3) If any equity of reformation ever existed in the case at bar, same was cut off by negotiating the notes secured by the deed of trust in controversy to H.O. Stonum, who was an innocent purchaser for value prior to their maturity, and it is immaterial whether or not the purchaser at the foreclosure sale had knowledge of the deed of trust in controversy. (a) A holder in due course of negotiable notes has all the rights of a bona-fide purchaser as to the security therefor and is not subject to any equities as between the original parties that he had no knowledge of. Borgess Inv. Co. v. Vette, 142 Mo. 560; First Nat. Bank v. Rohrer, 138 Mo. 369; Baade v. Cramer, 213 S.W. 121. (b) A purchaser of securities with notice of infirmities of title from a purchaser of negotiable instruments without notice of such infirmities takes good title. Lemay v. Poopenez, 35 Mo. 71; Dray v. Doyle, 99 Mo. 459; Finley v. Babb, 173 Mo. 257. (4) Equity will not correct a mutual mistake in a deed of trust as against bona-fide purchasers for value. Respondent's testator had no knowledge of the deed of trust in question, and occupies the position of a bona-fide purchaser. Young v. Coleman, 43 Mo. 26; Grisby v. Barton County, 169 Mo. 226. (5) Even though a purchaser is put upon inquiry because of suggested defects of title, he is only required to exercise the care of a reasonably prudent person, and if after the exercise of such care the defect in title is not disclosed, such person has exhausted the diligence required by law and is not subject to any equity of reformation. Connecticut Mut. Life Ins. Co. v. Smith, 117 Mo. 261; Morrison v. Juden, 145 Mo. 298; Kelsay v. Farmers and Traders Bank, 166 Mo. 172; Stephenson v. Kilpatrick, 166 Mo. 268; Johnson v. Fluetch, 176 Mo. 474; Zweigart v. Reed, 221 Mo. 44; Adams v. Gossom, 228 Mo. 583; Jones v. Nichols, 280 Mo. 668; Matthews v. O'Donnell, 289 Mo. 269. (6) The answer of respondent sufficiently alleged the defense of his being an innocent purchaser for value. Young v. Scofield, 132 Mo. 660.

HIGBEE, C.

This action was brought in the Circuit Court of Dunklin County to reform a deed of trust executed by W.G. Bray and Ora Bray, his wife, December 15, 1911, to secure the payment of their note to the German-American Bank of DeSoto for the sum of $3500 and interest, due two years after date. The court found the issues for the defendant O'Brien and the plaintiff appealed. Since the appeal the death of J.H. O'Brien, one of the defendants, has been suggested, the appearance of J.L. O'Brien, the administrator of his estate, has been entered, and the cause revived in the name of the administrator.

It is averred in the amended petition that plaintiff bank is a corporation and successor to the German-American Bank; that W.G. Bray owned the southeast fourth of the southwest quarter of Section 32, Township 17 north, Range 8 east, in Dunklin County, Missouri, and that it was mutually intended that Bray and his wife would convey said tract by a deed of trust to secure the payment of their note for $3500 to the German-American Bank, a corporation, but by mutual mistake in making said deed the said tract was erroneously described as being in Range 9 east, a tract of land which W.G. Bray did not own; that at a later date Bray and his wife conveyed the tract first described to John Keating and wife and Bray took back a deed of trust on said tract from Keating and wife to secure the payment of the notes given to Bray for the purchase price, and afterwards Bray assigned said notes given to him by Keating to H.O. Stonum, as collateral security to a note given by Bray to Stonum, which deed of trust was duly filed and recorded in the office of the Recorder of Deeds of Dunklin County, Missouri; that Stonum, as holder of the notes, on January 16, 1922, foreclosed said Keating deed of trust for default in payment of the notes, and J.H. O'Brien became the purchaser at said sale of said tract of land first above described, and that said J.H. O'Brien had full knowledge at the time he purchased at said sale that there was a former deed of trust against the said real estate.

The amended answer of J.H. O'Brien is a general denial, and denies any knowledge or notice of any claim of plaintiff through any deed of trust on said land; that he bought said land in good faith and expended ____ dollars for same; that he has made lasting and valuable improvements thereon without notice of any defect of title, and that Bray and his wife are the plaintiffs in fact in the case and do not come into court with clean hands.

The evidence shows that Bray and his wife executed the deed of trust as averred in the petition to secure the payment of their note to the German-American Bank; that they intended to convey the forty acres of land in Range 8, as averred, which was owned by Bray, but by mutual mistake the tract was erroneously described as being in Range 9, a tract not owned by Bray. The note secured by the deed of trust remained unpaid at the time of the trial.

Bray testified that Donnell was present when the deed of trust was executed and he thought the deed was made to him, as he understood Donnell owned the bank. Bray did not learn of the error in the description of the land in the deed of trust until after the foreclosure of the Keating deed of trust. Mr. Donnell died before the trial.

On May 16, 1916, W.G. Bray and his wife executed a deed of trust, which was duly recorded, conveying 240 acres, including the forty acres in controversy, to secure his notes for $5,165, payable to the Abston-Wynne Cotton Company or order, "subject to a former deed of trust for about $25 per acre, together with other property, due in three years." On April 15, 1917, W.G. Bray...