Denver Brick & Mfg. Co. v. McAllister

• Decision Date: 01 December 1882
• Citation: 6 Colo. 261
• Parties: DENVER BRICK AND MANUF'G Co. v. McALLISTER.
• Court: Colorado Supreme Court

6 Colo. 261

DENVER BRICK AND MANUF'G Co. v. McALLISTER.

Supreme Court of Colorado

December, 1882

Error to County Court of Arapahoe County.

THE case is stated in the opinion.

Messrs FRANCE and ROGERS, for plaintiff in error.

Mr ENOS MILES, for defendant in error.

STONE J.

This was an equitable proceeding in the court below for the reformation and foreclosure of a trust deed. The bill of McAllister, the complainant below, alleges that the defendants, the Denver Brick Manufacturing and Building Company, a corporation, on the 10th day of March, 1875, was the owner in fee of certain lots in the city of Denver; that on said date the other defendants, McFarland, Epley and Neely, were officers and directors of said company; and that acting on behalf of said company, they borrowed, on said date, of one Wheeler, the sum of $1,200, and executed a note therefor to said Wheeler, and signed the same as officers and directors of said company; and that, to secure the said note, the said officers and directors executed to the complainant, as trustee, a trust deed of the said property of the company, signing the same as officers and directors of the company in like manner as in the note, both of which instruments are set out in the bill. That the said loan was made solely on the security of the property of the company so conveyed, and that the defendnats intended and believed in good faith that they were executing the note and trust deed of the company, and not as the individual acts of said officers and directors named; that the money was borrowed by and used in the interest and for the purposes of said company, but that by inadvertence and mistake the said note and deed of trust were executed by said officers and directors in their individual names under the description aforesaid, and not in the corporate name of the company. That afterwards the said Wheeler sold and assigned the said note to McAllister, the complainant; that no part of said note had been paid except the sum of $162, being nine months' interest thereon; that no other rights or incumbrances upon said property had intervened; and thereupon the bill prays that that the deed be decreed to be the deed of the said company according to the intent of the parties in interest, and that the same be held to be a mortgage in law and equity, and be foreclosed as such by the usual decree for the sale of mortgaged premises, and that the equity of redemption be barred, and for such other and further relief as the nature of the case may require.

To this bill defendants demurred, and the overruling of the demurrer is made the ground for the first assignment of error. The principal objection made by the demurrer is, that there was no 'privity or mutuality' between the complainant and respondent company in the court below to entitle the complainant to the relief sought. That to warrant the reformation of a written instrument on the ground of mistake, such mistake must be alleged and shown to be the mutual mistake of the parties; that it must appear that both parties have done what neither party intended. In view of this, it is contended that the complainant, McAllister, was a stranger to the contract; that, having nothing to do with the making of the contract, nor interested therein, he had no intention respecting the matter, and that, therefore, the essential element of mutuality of mistake is wanting in the case.

While the requirements of the bill are correctly laid down by counsel, the position assumed respecting the complainant here we think is not sustainable. It is not denied that, under the allegations of the bill, the relief prayed might properly be granted if the cestui que trust, the original creditor, were himself the complainant. But the complainant here stands in the shoes of his assignor, Wheeler. It is the settled doctrine in equity that the assignment of a debt secured by mortgage or deed with power of sale, as a trust deed, carries the security with it as an equitable estate annexed, and vests in the assignee the same rights and powers respecting it as were possessed by the assignor. The debt is the principal thing, and the security attaches and passes in the same condition and to the same extent as an incident, unless otherwise limited by the terms of assignment. Keyes v. Wood, 21 Vt. 331; Sargent v. Howe, 21 Ill. 148; Sangster v. Love, 11 Iowa, 580; Anderson v. Baumgardner, 27 Mo. 80; Slee v. Manhattan Co. 1 Paige, 48; Johnson v. Hart, 1 Johns. Cases, 320; 4 Kent Com. 147; Gale's Executor v. Morris, 29 N. J. Eq. 222; Fassett v. Mulock, 5 Col. 466.

Complainant, therefore, cannot be said to be a stranger to the contract, but on the contrary, for all purposes of this suit, is as much a party to the contract and in privity therewith as though he were to original creditor. The bill alleging a mistake in the making of the instruments, pointing out the character of the mistake and praying the necessary correction to make the deed effectual in carrying out the original intent of the parties thereto, is, we think, sufficient, and there was no error in overruling the demurrer. Hearne v. Marine Ins. Co. 20 Wall. 490; West et al. v. Madison Co. Agr'l Board, 82 Ill. 205; Hancock v. Yunker, 83 Ill. 208; Wood v. Wheeler, 93 Ill. 153.

We will now pass to the fifth and sixth assignments of error, under which it is contended that the decree for the reformation of the deed is not supported by the evidence.

Upon a careful examination of the evidence we are convinced that it warrants the decree for reformation of the deed as prayed by the bill. The business was transacted by agents of the principals on both sides. Wheeler, who loaned the money, lived in Pennsylvania, and the loan was made by an agent here. The company for which the money was borrowed, being a corporation, necessarily acted through agents. The money was used by and for the company through its officers as such agents, and by them the property of the company was proposed and sought to be conveyed in trust to secure the payment of the money thus procured and used. From the very nature of the transaction and the fact that the fee of the land furnishing the security was in the company, as well as by the testimony of the officers of the company who signed the deed, it seems evident that the intent was to make the note and trust deed the instruments of the corporation for whom the debt was contracted. The persons who signed the instruments were the proper officers of the corporation to execute the same on behalf of the corporation, but not having signed the instruments in the name of the company, it was a defective execution-a mistake in the formal and legal mode of carrying out the intent of the parties.

Upon such a state of facts, the relief sought by the bill was properly granted, and although upon the rule that equity treats what is agreed to be, and ought to be done, as done it was unnecessary to formally decree a preliminary reformation of the deed at that stage of the case, after default in payment, and when the orders for reformation and foreclosure were made eo instanti, there was no error in the decree in this respect. Millver v. R. & W. R....