Carey v. Gunnison

• Decision Date: 14 December 1883
• Parties: CAREY v. GUNNISON.
• Court: Iowa Supreme Court

17 N.W. 881

CAREY

v.GUNNISON.

Supreme Court of Iowa.

Filed December 14, 1883.

Appeal from Fremont circuit court.

Action at law upon a contract. There was a judgment upon a verdict for defendant. Plaintiff appeals. The facts of the case are fully stated in the opinion.James McCabe, for appellant.

W. W. Morsman, for appellee.

BECK, J.

1. This action was brought to recover upon a written contract, entered into between plaintiff and defendant and one Warren, whereby plaintiff sold and transferred his interest to defendant in the property and business of a mercantile firm, of which plaintiff and Warren were partners. The agreement provides that plaintiff shall pay the indebtedness of the firm to the amount of $10,000, and that the other indebtedness of the partnership shall be paid by defendant and Warren. The petition, after setting out the contract, alleges breaches of it as to the condition just stated, in that defendant failed to pay debts of the firm amounting to near $5,000, which plaintiff was compelled to pay. The answer of defendant alleges that the contract was procured by the fraud of plaintiff in representing to and inducing defendant to believe that the indebtedness of the firm did not exceed $15,000, when in fact it amounted to $19,000, and that defendant has paid indebtedness exceeding $15,000, when, according to plaintiff's representations, he would be bound to pay no more than that sum. The second count of the answer alleges that the contract was executed under a mistake of fact as to the amount of the firm indebtedness, which was represented by plaintiff and believed by defendant not to exceed $15,000, and that it was mutually agreed by the parties that defendant should become bound for an amount not exceeding $5,000, and in that belief the contract was assented to by defendant, and it was not the agreement or the purpose of any of the parties to the contract that defendant should become liable thereon for a greater sum. The third count sets up a counter-claim for damages resulting from the issuing of an attachment in the case, wrongfully, maliciously, and without probable cause, which was levied upon a stock of merchandise and other property of defendant, and the same was taken and for a long time kept from the possession of defendant. The new matter pleaded in the answer is put in issue by plaintiff's reply.

2. The plaintiff moved the court to transfer to the equity docket the issues arising upon the second count of the answer, which pleads as a defense that the contract was entered into through mistake. The ground of the motion is that the issues are exclusively cognizable in a court of equity. The motion was overruled. This decision is the ground of the first objection to the judgment urged upon our attention by the plaintiff. This branch of the case presents the following question: May an issue arising upon the pleadings in an action at law, involving a mistake in a written contract which under the rules of equity constitutes a ground to defeat recovery thereon, be tried in the manner of an issue at law? We need not at present inquire whether the mistake, as pleaded and proved, is sufficient in equity to defeat the contract. Our consideration of the case just now is confined to the inquiry whether the issue involving the mistake is triable according to the method of a law or a chancery action. The Code, § 2655, p. 6, provides that in actions at law “the defendant may set forth in his answer as many causes of defense, or counter-claim, whether legal or equitable, as he may have.” Section 2740 provides that “issues of fact, in an action in an ordinary proceeding, [action at law,] must be tried by a jury unless the same is waived. All other issues shall be tried by the court, unless a reference thereof is had.” The succeeding sections prescribe the method of trial of all issues in law actions, and the next section provides the method of the trial of equitable actions. These sections do not direct that an “equitable issue” arising in a law action shall be tried in the manner prescribed for the trial of issues in actions in equity. On the contrary, they expressly provide: First, that equitable defenses may be pleaded in actions at law; and, second, that all issues of fact in actions at law shall be tried by a jury as issues arising upon legal defenses are tried. The statute explicitly provides that all issues in a law action, whether they arise upon equitable or legal defenses, must be tried according to the manner prescribed for the trial of actions at law.

It will be observed that sections 2741 and 2742 prescribe the manner of trial of issues in law and chancery actions without regard to the character of their issues, whether they arise upon equitable or legal defenses. They designate the method of trial by reference to the actions in which they arise; that is, they prescribe that issues involving equitable defenses arising in a law action shall be tried according to the method of trial prescribed for actions at law. So it is provided that issues arising in chancery actions shall be tried in the manner provided for the trial of equitable actions. It is not provided that issues arising upon equitable defenses shall be tried as issues in chancery; but, on the contrary, that such issues shall be tried by a jury unless it be waived. The provisions in unmistakable language require issues arising upon equitable defenses to be tried as at law. In this provision the rule prevailing in chancery, that issues arising upon defenses which are not purely equitable in character must be tried as equitable issues, is extended to law cases. Thus, an issue under the statute of limitations, or under the statute of frauds, or upon a plea of payment, or accord and satisfaction, which arises in a chancery case, though it is what may be called a legal issue,--that is, an issue presenting a defense good at law,--is tried when it arises in an equitable action as all other issues in chancery. The reason for the rule is that the court having jurisdiction of the cause, and power to grant the relief sought, may try all issues arising therein, and that it would be a hardship upon suitors to send them to another forum for the trial of a part of the issues in their cases. The same reasons seem to demand that a like rule should prevail in actions at law when the proper relief may be obtained by the judgments rendered in such actions.

In the case before us mistake is pleaded as a negative defense; no affirmative relief is sought. Recovery on the contract is resisted by reason of the mistake. No affirmative relief, as the reformation of the contract, its cancellation, discovery of fraud inducing the mistake, restraint by injunction, or the like, is asked. In equity the mistake defeats the contract. It is therefore called an equitable defense, and may be pleaded in an action at law under Code, § 2655. Why should the defendant be sent to another forum in chancery to establish his defense, when at law all the relief he seeks may be granted him? The letter and spirit of our statutes, prescribing the procedure in courts, is against such a thing. Rights and remedies should not be denied for the sake of forms. It seems absurd to require a defendant to go into a court of equity to establish a defense which the law says he may plead to an action at law. It cannot be claimed that the issues involved in the defense cannot be tried at law. Then why direct the defendant to another court for the settlement of their issues? This can only be done in the spirit which retards with fetters of forms the progress of the age in reforms of judicial procedure, and clings with blind tenacity to the proceedings of the olden times. See Bliss, Code Pl. § 347.

3. We are now required to determine whether a contract may be defeated upon the ground of mistake without a reformation thereof by an action in equity. This inquiry becomes necessary in view of the consideration that a remedy through the reformation of the contract cannot be had at law. We concede that mistake constitutes an equitable defense, and that if it cannot be pleaded except when a reformation of the contract is prayed for, and cannot be enforced except through such reformation, the defense cannot be established in an action at law, and when pleaded therein the case ought to be transferred to equity, to the end that proper relief be granted to the defendant.

It must be remembered that the defendant in this case is resisting the enforcement of a remedy for the non-performance of the contract according to the terms as expressed in the writing. He is not seeking to enforce the contract. His case is different from that of a plaintiff who is seeking to enforce a written contract, which through mistake fails to show the true agreement of the parties. Now, if the plaintiff were seeking in an action in chancery a remedy upon the contract, and under the rules of equity he could in defense set up the mistake without asking a reformation of the contract, it cannot be doubted that he could, under the statute authorizing the pleading of equitable defenses in an action at law, try the issues thus raised in that action without being sent to chancery. If he can have all the relief he seeks by a judgment at law, there exists no reason which requires the transfer of the case to equity.

In an action in chancery to enforce the specific performance of a contract, mistake may be pleaded as a defense thereto, and, if established, will defeat recovery. In such a case it is not necessary for the defendant to pray for the reformation of the contract. Plaintiff's bill will be dismissed upon the chancellor's finding the mistake. Adams, Eq. 204; 1 Story, Eq. §§ 750 a, 770, 770 a. In some cases equity will award damages when full relief cannot be otherwise given, as in an action for specific performance of a contract, when the defendant has so disposed of the subject-matter of the contract that it...