American Mining Co. v. Basin & Bay State Mining Co.

• Decision Date: 22 October 1909
• Citation: 104 P. 525,39 Mont. 476
• Parties: AMERICAN MINING CO., Limited, v. BASIN & BAY STATE MINING CO. et al.
• Court: Montana Supreme Court

104 P. 525

39 Mont. 476

AMERICAN MINING CO., Limited, v. BASIN & BAY STATE MINING CO. et al.

Supreme Court of Montana

October 22, 1909

Appeal from District Court, Jefferson County; Lew. L. Callaway Judge.

Action by the American Mining Company, Limited, against the Basin & Bay State Mining Company and others. Decree for defendants and plaintiff appeals. Reversed and remanded.

Massena Bullard, for appellant.

Chas R. Leonard, Wight & Pew, and Gunn & Rasch, for respondents.

SMITH J.

The plaintiff in this action seeks the reformation of two deeds also an accounting for rents, and to have its title to the real estate in controversy quieted. The complaint alleges that on September 25, 1897, the plaintiff and the defendant Basin & Bay State Mining Company each owned an undivided half interest in certain real estate in the town of Basin, in Jefferson county; that at the time the Basin & Bay State Mining Company acquired its interest the land was unimproved and thereafter, but prior to September 25, 1897, plaintiff at its own expense erected valuable improvements thereon, of which it was the sole owner; that the title of the Basin & Bay State Mining Company stood in the name of Alexander J. and James Glass on the records of Jefferson county; that on September 25, 1897; it was agreed between the parties that the Basin & Bay State Mining Company should become the owner of one-half the improvements, and that transfer thereof should be made by the plaintiff to Alexander J. and James Glass, representing and acting for the company, to the end that the parties should be tenants in common of the land, together with the improvements thereon; that "it was intended by the parties interested that the deeds should convey a half interest undivided in the improvements, and it was not intended that any interest in the real estate should be conveyed, and also that it was not intented that any mineral reservation should be included in the deeds; that by the mutual mistake of all the parties the deeds were so written as to convey a half interest in the real estate as well as in the improvements, and also to make a mineral reservation." It is further alleged that the Basin & Bay State Mining Company collected and accounted for the rents until August, 1899, since which date it has refused to account therefor; also, that plaintiff did not discover the alleged mistakes in the deeds until October 19, 1905. The defendants denied all of the plaintiff's allegations with regard to mistakes in the deeds, and denied the allegation of that paragraph of the complaint which set forth that plaintiff did not discover the mistakes until October 19, 1905. Defendants also alleged affirmatively that plaintiff's cause of action is barred by the provisions of section 512 of the Code of Civil Procedure of 1895. Defendants' so-called fourth defense reads as follows: "Allege that, as to the property mentioned in said complaint, the plaintiff herein gave a good and sufficient deed thereto unto Alexander J. Glass and James Glass, which by mesne conveyances has passed to the Basin & Bay State Mining Company; that said deeds were recorded in the office of the county clerk and recorder of Jefferson county, Mont., on the 24th day of March, 1900, in book 25 of Deeds, at page 72, and book 29 of Deeds, at page 84. Defendants allege that plaintiff is barred from maintaining this action for that the records of said county clerk and recorder are notice to the plaintiff herein, and plaintiff has delayed its application for reformation of said deeds for over five years after such notice thereof." At the trial James Glass testified in categorical substantiation of the allegations of the complaint, relating to the intention of the parties at the time the transfers were made, and that mistakes were made in the deeds. He was corroborated by R. H. Kleinschmidt, an officer of the plaintiff company, and it was stipulated that, if Alexander J. Glass were present as a witness, he would testify to the same effect as had James Glass. Kleinschmidt also testified that the American Mining Company first became aware of the mistakes in the deeds at the time of a certain trial in court on October 19, 1905, and that he personally became aware of the error at the same time. No other officer of the plaintiff testified. At the close of plaintiff's case, the defendants moved for a nonsuit, upon 19 grounds, the principal of which are substantially: (1) That no equity is stated in the complaint or disclosed by the evidence; and (2) that the cause of action is barred by laches and the express provisions of the statute. The court granted the motion, and from a judgment subsequently entered in favor of the defendants and an order denying plaintiff a new trial these appeals are prosecuted.

We think the district court erred in granting the motion for a nonsuit. It is not seriously contended that the complaint does not state facts sufficient to constitute a cause of action. The testimony of James Glass is ample to prove that mistakes were made in the deeds, and that they do not express the agreements between the parties. This being so, the plaintiff is entitled to the relief sought, unless its cause of action is barred by the statute, or it has too long delayed seeking the aid of a court of equity. This action was begun on December 11, 1905. The section of the statute relied upon in this court is referred to by the respondents in their brief as paragraph 4, § 513, Code Civ. Proc. 1895, which provides that the periods prescribed for the commencement of actions, other than for the recovery of real property, are (among others) "within five years: (4) An action for relief on the ground of fraud or mistake. The cause of action in such case not to be deemed to have accrued until the discovery of the aggrieved party of the facts constituting the fraud or mistake." It is immaterial whether the period of limitation to be applied is two years or five years, for the reason that more than five years had elapsed from the time the transfers were made until the commencement of the action, and section 513, Code Civ. Proc. 1895, is not specially pleaded; the defendants relying upon the facts set forth in their fourth defense. The objection that the action was not commenced within the time limited can be taken only by answer. Rev. Codes 1907, § 6475; Grogan v. Valley Trading Co., 30 Mont. 229, 76 P. 211. It is conceded that the section specially pleaded--i. e., section 512, Code Civ. Proc. (Rev. Codes 1907, § 6445)--has no application. But it is contended that the defendants in their fourth defense have pleaded the "facts showing the defense," and have therefore brought themselves within the provisions of section 6575, Rev. Codes 1907. Conceding this to be true, the only fact upon which they rely is manifestly that the deeds were recorded in the office of the county clerk and recorder of Jefferson county on March 24, 1900, and that more than five years elapsed between that date and the time of the commencement of this action. They contend that the record of the deeds was constructive notice to the plaintiff of the mistakes contained therein. No case exactly in point and involving mistake rather than fraud has been called to our attention; but respondents have referred us to the case of Shain v. Sresovich, 104 Cal. 402, 38 P. 51, wherein the Supreme Court of California held under a statute similar to our own that, as fraud and mistake are placed in the same category in the statute, the rules applicable to the one must govern the other. The rule is thus laid down in 25 Cyc. 1195: "The principle which governs the running of the statute of limitations in cases where equitable relief is sought on the ground of mistake is substantially the same as that applicable in cases of fraud." Many cases may be found in the books wherein the courts have held that in actions brought to set aside conveyances of real property on the ground that the same were made to defraud creditors the mere fact of recording the fraudulent deed is not of itself sufficient to charge a creditor with constructive notice of the fraudulent transfer of title. See Jones v. Danforth, 71 Neb. 722, 99 N.W. 495; Chinn v. Curtis (Ky.) 71 S.W. 923; McGehee v. Cox (Ky.) 58 S.W. 532; Coulson v. Galtsman, 1 Neb. (Unof.) 502, 96 N.W. 349; Forsyth v. Easterday, 63 Neb. 887, 89 N.W. 407.

We think the better rule to be established in this state is that the recording of the instrument is to be considered with other facts and circumstances in determining whether the plaintiff is to be charged with notice, either actual or constructive, but that the fact of recording alone will not so charge him. In this...