Reiss v. Wintersmith

• Decision Date: 19 January 1932
• Citation: 241 Ky. 470
• Parties: Reiss v. Wintersmith.
• Court: United States State Supreme Court — District of Kentucky

241 Ky. 470

Reiss v. Wintersmith.

Court of Appeals of Kentucky. Chancery Branch, Second Division.

Decided November 10, 1931.

As Extended on Denial of Rehearing January 19, 1932.

1. Reformation of Instruments. — Where purchaser failed to inform vendor that mortgage which purchaser had agreed to assume was apparently released of record, reformation of deed to show purchaser did not assume mortgage was not authorized because of mistake that mortgage was satisfied, since mistake was unilateral.

2. Mortgages. — In determining whether deed is mortgage, neither form of instrument nor of transaction is controlling.

3. Deeds. — Deed may be canceled for mistake, where parties' minds did not meet, if application to cancel is timely made.

4. Contracts — Deeds — Reformation of Instruments. — Unilateral mistake may authorize rescinding contract or deed, but not reforming instrument.

5. Reformation of Instruments. — Direct conflict in evidence regarding mutuality of alleged mistake in deed is conclusive against its reformation.

6. Reformation of Instruments. — More than mere preponderance of evidence is required to secure reformation of deed.

7. Reformation of Instruments. — Gross negligence of one party to transaction does not authorize reformation of instrument.

8. Evidence. — Recited consideration in deed or memorandum to be used in preparing deed is prima facie correct, and recitation is some evidence of its correctness.

9. Mortgages — Reformation of Instruments. — Evidence of mutual mistake held not to entitle purchaser to have deed declared mortgage, or reformed to eliminate assumption of mortgage.

10. Appeal and Error. — Chancellor's finding on facts will not be disturbed by Court of Appeals, where mind is left in doubt regarding truth.

11. Appeal and Error. — Chancelor's finding is not binding on Court of Appeals, where mind is not left in doubt regarding truth.

12. Appeal and Error. — Court of Appeals will review for itself facts adduced, and, if chancellor's finding of facts is clearly contrary to evidence, it will review evidence and determine its weight, and disregard chancellor's judgment, if finding is palpably against preponderance of evidence.

13. Appeal and Error. — Where appeal is presented on partial transcript, notice of filing of partial record must be served on appellee, and notice and schedule must be copied in record (Civil Code of Practice, sec. 737, subsec. 7).

14. Appeal and Error. — That circuit court granted appeal did not preclude appellant from abandoning such appeal and entering motion for appeal, as provided by statute (Civil Code of Practice, sec. 734).

Appeal from Jefferson Circuit Court.

JAMES BOSWELL YOUNG for appellant.

LAWRENCE S. POSTON for appellee.

OPINION OF THE COURT BY JUDGE RICHARDSON.

Reversing on original and affirming on cross-appeal.

This appeal brings under review the trial of an action originally instituted under the Declaratory Judgment Act, section 639a-1 et seq., Civil Code of Practice. In the petition it is alleged that T.F. House executed and delivered to the appellant a note for $1,000, payable one year after date, and that to secure it he executed and delivered to him a mortgage on certain described property. The note and mortgage are dated September 25, 1928. The mortgage was recorded November 1, 1928. Subsequent to its execution and delivery, but before its recordation, House for a valuable consideration, a part of which was the assumption of his $1,000 note to Reiss, conveyed the appellee, Tom Wintersmith, the property covered by his mortgage. Subsequently appellant filed an amended petition, making other lienholders defendants, and prayed for personal judgment against Wintersmith and House for his debt, interest, and costs, and for the enforcement of his lien against the described property, alleging that Wintersmith was liable to him therefor by reason of his assumption thereof as a part of the consideration of the conveyance to him of the property by House.

To prevent a judgment against himself, Wintersmith traversed the allegations of the amended petition and supplemental petition, and in the second paragraph of his answer averred that this recital in the deed was by mutual mistake inserted therein, namely:

"That for a valuable consideration, receipt whereof is hereby acknowledged, and for the further consideration of the assumption by said second party of two mortgages now against the property herein conveyed, provided that a release of said mortgages by the holder shall operate as a release of the lien retained herein to secure said assumptions, the party of the first part has granted, bargained and sold and hereby conveyed with covenant of general warranty unto the said party of the second part, his heirs and asigns forever in fee simple, further covenanting law seizing of the property herein conveyed with full power to convey the same and that same is free from all encumbrances except the mortgages herein assumed and state and county taxes for the year 1929, the following described property in Louisville, Jefferson County, Ky."

It was further set out in this paragraph that House undertook to convey this property to Wintersmith, and that he accepted a conveyance of the title subject to the mortgage or mortgages existing on October 20, 1928, and not otherwise, and that he was the owner and held title to the property by virtue of a deed from House to him, "subject to and burdened with such mortgage or mortgages as existed upon such property October 1, 1928." He further alleged in paragraph 3 that, during the negotiations between him and House, House informed him that there were two mortgages on the property, one to Reiss and the other to the Southern Trust Company, and that they were the two mortgages "referred to in the deed"; that, after House imparted to him knowledge of the existence of the two mortgages, he examined the records of the office of the clerk of the Jefferson county court, and that the mortgage of Reiss at that time was not on record, but was recorded some days after the date of his examination of the record; that there was a mortgage to Reiss on the property for $1,000, and, on the margin of the record of it, it was marked, "Satisfied in full and hereby released," duly attested by the clerk of the county court. He averred that under this state of facts he was a purchaser of the property for value and without notice, and that he acquired title to it prior to the mortgage of Reiss. In his prayer for relief he asked that the deed be reformed; that he be relieved of personal liability for the debt of Reiss and the Southern Trust Company; that his title to the property be decreed to be prior and superior to the mortgage of Reiss, and that his mortgage be adjudged inferior and subordinate to his title.

By proper pleadings the issues were formed, evidence taken, and, on a trial, the chancellor refused to reform the deed in accordance with the prayer of appellee's answer, and instead thereof, under the prayer for general relief, adjudged the deed was intended to be, and was, a mortgage to secure Wintersmith in the payment of the $1,090 note which is not set up in any pleading and not found in the record.

A consideration and disposition of the issues presented require an examination and close scrutiny of the evidence. Only the testimony of three witnesses and the exhibits bear on the vital issue of mutual mistake of the parties, if any was made in the insertion of the deed of the language which we have heretofore set out.

In order to state the testimony of the witnesses correctly, we give it in their own language. House's version of the transaction is in this language:

"The consideration was, I owed Mr. Wintersmith some money, and I didn't have enough money, and I told him — `I will deed you this property, there are two mortgages, if you will pay the debts and clean up the mortgages,' and he agreed to do that. He said, `I don't know whether I will get out enough money to pay me or not, but I will do that. Get Mr. Woodbury to write this deed, then you give me your note for $1,000 or $1,100, and as soon as I sell this property I will give you back the note.' I think it in September, along about the 25th I think, or a little before the 25th, I went to him and told him I needed some money, and I said I have not got enough money to pay out on the building or to protect you, I want to do the right thing and I owe two mortgages on this property. The property is in my name, and the Southern Trust Company and Dr. Fred Reiss have mortgages, and he agreed to take it. He said, `I don't know whether I am going to get out on it by taking it. Suppose you give me your note,' and I gave him my note."

Elsewhere in his deposition this witness made this statement:

"He said, `Well, I will take it, give me a deed to the property, subject to these two mortgages, we will have Mr. Woodbury write the deed, I am to assume the mortgages,' and then he said, `I don't see how I will get out on it. . . . You can just give me your note.' He told me, `I will pay these off. . . . If I pay these off, I don't see how I could come out on it, to get what I owed him out of it."

Mr. Wintersmith made these statements:

"Mr. House owed me some money for some lumber and other material that was furnished on Thornberry Avenue. I was out at the plant talking about getting some money for it and he said he didn't have any money. He said, `I will deed you that property as protection to you for this money.' I said, `What is against it?' and he said, `The Southern Trust Company, $2,700 and Dr. Reiss about $1,000.00.' I said, `Let us go and look at the house,' and we got in my machine and I went out and went through the house and he said the house was worth $5,000.00 and as soon as I looked at it I knew the house was not worth that and I doubted whether I could get any equity out for that money and while out there Mr. House told me how much he had lost on various...