Hooper v. Capitol Life Ins. Co.

• Decision Date: 03 April 1933
• Docket Number: 12700.
• Citation: 92 Colo. 376,20 P.2d 1011
• Parties: HOOPER v. CAPITOL LIFE INS. CO. et al.
• Court: Colorado Supreme Court

20 P.2d 1011

92 Colo. 376

HOOPER v. CAPITOL LIFE INS. CO. et al.

No. 12700.

Supreme Court of Colorado

April 3, 1933

In Department.

Error to District Court, City and County of Denver; Samuel W Johnson, Judge.

Suit by the Capitol Life Insurance Company against Thomas J. HooperEdward J. James, and others.To review the decree, Thomas J Hooper brings error.

Affirmed.

A. L Doud and James D. Parriott, both of Denver, for plaintiff in error.

Charles R. Bosworth and Roderic J. Bosworth, both of Denver, for defendants in errorEdward J. James and Edward P. Gallup.

BUTLER Justice.

The plaintiff in error, Thomas J. Hooper, owned five lots in Denver.On lots 31 and 32 and the south half of lot 33 there was an apartment house known as No. 1753 Grant street; on the north half of lot 33 and all of lots 34 and 35 there was an apartment house known as No. 1755 Grant street.Hooper borrowed $14,000 from defendant in error the Capitol Life Insurance Company, and gave his promissory note for that amount, and, to secure the payment of the note, he gave his mortgage upon the five lots, together with all improvements thereon.Thereafter Hooper conveyed to Edward J. James the property known as No. 1755 Grant street, in exchange for a farm.The deed covenanted that the property was free from incumbrances, except the $14,000 mortgage, 'which said mortgage and the whole thereof' the grantee 'hereby assumes and agrees to pay.'James borrowed money from defendant in error Edward P. Gallup, and, to secure the repayment of the amount so borrowed, gave a trust deed of No. 1755, naming defendant in error Wheeler S. Peck as trustee.The insurance company sued to foreclose the Hooper mortgage.Hooper, in a cross-complaint, alleged that James, by said clause in the deed to him, assumed and agreed to pay the entire $14,000 mortgage.James filed a cross-complaint, seeking a reformation of the deed.In it he alleged that such assumption was contrary to the agreement of the parties; that the assumption clause was inserted in the deed by the scrivener at the instance of Hooper and without the consent or knowledge of James; and that James did not know of its presence until after this suit was brought.These allegations are denied by Hooper.Hooper claims, and James denies, that the property deeded to James is the primary fund for the payment of the entire debt secured by the mortgage given by Hooper.The trial court found the issues in favor of James, decreed a reformation of the deed to him by striking out the assumption clause, and decreed, further, that, as between Hooper and James, the property deeded to James should bear three-eighths, and the property retained by Hooper should bear five-eighths of the total mortgage debt.The correctness of these rulings is questioned by Hooper.There are other matters discussed, but they are merely incidental to the questions raised by the foregoing rulings.

1.It is contended that the assumption clause in the deed expressed the true agreement of the parties.

To justify the reformation of a deed, the proof must be clear, unequivocal, and indubitable; a mere preponderance of the evidence is not sufficient.Colorado Trout Fisheries v. Welfenberg,84 Colo. 592, 273 P. 17;Anderson v. Juanita Coal & Coke Co.,83 Colo. 562, 267 P. 400;Merrick v. Morelock,73 Colo. 245, 215 P. 133;Gibbs v. Wallace,58 Colo. 364, 147 P. 686;Loukowski v. Pryor,46 Colo. 584, 106 P. 7;Wilson v. Morris, 4 Colo. App. 242, 36 P. 248;Connecticut Fire Insurance Co. v. Smith,10 Colo.App. 121, 51 P. 170;Wells v. Crawford,23 Colo.App. 103, 127 P. 914.But where the proof is of that character, the instrument may be and should be reformed.Colorado Trout Fisheries v. Welfenberg, supra.

Several weeks prior to the conveyance, the parties executed a written agreement, whereby Hooper agreed to convey to JamesNo. 1755 Grant street, 'said property being subject to $14,000, otherwise clear of incumbrance,' in exchange for James' ranch, 'the same to be subject to incumbrance of $11,000, as shown of record.'

Experts on real estate values testified that the value of the property deeded to James was $15,000, and that the value of the property retained by Hooper was $25,000.It was on this basis that the trial court apportioned the mortgage debt, three-eighths to the former property and five-eighths to the latter property.The James ranch was valued by both parties at $40,000.It had an incumbrance of $11,000.James' equity, therefore, was $29,000.If it is true, as Hooper contends it is, that the agreement was that James assumed and agreed to pay the entire incumbrance on both the properties he acquired and the property retained by Hooper, namely, a total of $14,000, he would be receiving for his $29,000 equity in the ranch only $1,000, which would mean a clear loss of $28,000.It is highly improbable, indeed, incredible, that any one in his right mind would make such an agreement, and, of course, James' sanity is not questioned.The disinterested testimony of qualified experts as to the value of the apartment house properties was opposed by the testimony of Hooper alone.He placed a much higher value on those properties.The evidence as to the terms of the agreement and as to whether or not James knew, at the time he received the deed, or at any time Before the suit was brought, that it contained the assumption clause, is in sharp conflict.We will not burden the opinion with a detailed statement of the evidence introduced by each litigant.A careful review of all the facts and circumstances in evidence satisfies us that the written agreement for exchange of properties expressed the real intent of the parties; that the assumption clause was inserted in the deed at Hooper's instance and without the consent or knowledge of James; and that not until after suit was brought did he know that the deed contained such clause.

2.Counsel for Hooper contend that James cannot be permitted to deny knowledge of the presence of the assumption clause in the deed; and that, at any rate, his ignorance thereof was the result of gross negligence on his part, which, it is said, disentitles him to relief.

To sustain their contention, counsel cite, among other casesJaeger v. Whitsett,3 Colo. 105;Gillett v. Flora,68 Colo. 218, 187 P. 527;Parker v. McGinty,77 Colo. 458, 239 P. 10;andWork v. Wagner,76 Colo. 407, 231 P. 1110, 1111.Those cases were not suits or cross-suits for reformation, and the facts were unlike those in the case at bar.In the Work Case, supra, the trial court denied an application for leave to amend a complaint so as to ask for reformation of a mortgage.We said: 'Whether or not the mortgage might be reformed in a proper proceeding and under other circumstances need not be determined.'Then something is said concerning the mortgagee's negligence in taking the mortgage containing a misdescription.The facts gage containing a misdescription.The facts bar.We have decisions in this jurisdiction that are applicable to this case.In Lloyd v. Lowe,63 Colo. 288, 165 P. 609, 610, L.R.A. 1918A, 999, an action for a personal judgment on a promissory note, the plaintiff claimed that, by virtue of a clause in a deed, the defendant assumed and agreed to pay the note.As an equitable defense, the defendant pleaded that the assumption clause was inserted in the deed without the defendant's authority, knowledge, or consent.There, as here, the parties previously made a written contract in which it was stated that the land was subject to the incumbrance, but there was no reference to an assumption or agreement to pay.There, as here, it was contended that, having received the deed, the defendant was bound to know its contents, and that, if he did not, it was because of his own negligence in not reading the deed, and therefore that he could not be heard to complain of the assumption clause or escape his liability thereunder.We said: 'The fact that the defendant agreed to purchase land 'subject to a mortgage' raises no presumption that there was an agreement to assume and pay the incumbrance.* * * Elliott v. Sackett,108 U.S. 132, 27 L.Ed. 678, 2 S.Ct. 375.* * * The defendant in this case denies that he accepted the deed at all.But, assuming that the evidence clearly shows that he did accept the deed, it also shows that he accepted it without knowledge of the assumption clause, and therefore cannot be bound under the rule stated in Demaris v. Rodgers[110 Minn. 49, 124 N.W. 457], supra.The fact that he did not read the deed had no bearing either upon his...