Bellows v. Stone

| Superior Court of New Hampshire | Aug 15, 1843

Parker, O. J.

There is one aspect of this case which seems not to have attracted the attention of the parties.

The mortgage which the plaintiff seeks to redeem is made to secure the payment of a certain certificate, issued by the agent of the creditors of Carlisle &, Co., and purporting to contain evidence that the defendants, Stone & Bellows, were entitled to receive from the avails of the effects assigned by Carlisle & Co. for the benefit of their creditors, the sum of $5300.

The mortgage is given to Thomas Bellows, but it appears that he, at the time of its execution, held the certificate as a security to indemnify him for signing a note of $2900 to the Cheshire Bank, as security for Stone & Bellows. Beyond the purpose of this indemnity he held the certificate and the mortgage in trust for the benefit of Stone & Bellows.

But it appears, also, that their interest in the certificate was not originally an absolute interest, subject only to the right of Thomas Bellows to hold it for his indemnity, and to appropriate the avails of it, so far as might be necessary, for that purpose. The bill avers, and the answer of Stone & Bellows admits, that they held this certificate as a collateral security. The parties, however, are not agreed as to the character of the claims and demands for the security of which the certificate and mortgage were taken by Stone &. Bellows; and the controversy here seems to be a material one.

The bill alleges that Stone & Bellows had become liable as indorsers for the plaintiff at several banks, particularly at the Cheshire Bank ; that to relieve himself from these liabilities and to secure them, he procured them to raise $2900 for him at the Cheshire Bank, on their note, indorsed by-Thomas Bellows : and, for the purpose of paying that note, and to indemnify Stone & Bellows for any other liabilities they might be under on his account, the plaintiff procured the certificate to be made to them, and for that purpose alone; that, to indemnify Thomas Bellows for signing the note, he made the mortgage with the condition that he would pay or cause the certificate to be paid.

It avers that there is a balance of $300 and some interest due on the note to the bank, and that the plaintiff is not indebted to Stone & Bellows, or either of them, in any other sum, or for the payment on his account of any other sum. It alleges that he is ready to pay all such sums of money as may be justly due them on account of the premises, and insists that, upon the payment thereof, he is entitled to have the farm freed and discharged from the mortgage, and to a return of the certificate.

It states that, during the pendency of the suit at law founded upon the mortgage, he moved that an auditor might be appointed, to ascertain the sum due in the premises ; and although it states an agreement that an auditor should be appointed, to audit the accounts between Stone Sf Bellows and himself J and to ascertain the sum justly due between them, and that they appeared before the auditor, to have the claims between them settled, and the balance ascertained, yet, in alleging the plaintiff’s attempts to procure a settlement before that time, the bill states that he called upon Stone & Bellows to render an account of the avails of the certificate and the amount of their payments in respect thereof, and to come to an adjustment of all the said concerns and business between them.

It alleges that the defendants have never rendered any account in the premises; that they sometimes pretend that the certificate was not given as collateral security to indemnify them against the note to the bank and such other liabilities as they might have been under for and on account of the plaintiff; whereas the plaintiff expressly charges the contrary to be the truth, and that it was procured and delivered as collateral security, to indemnify them against the liabilities aforesaid, and was given as the proper debt of Carlisle & Co. to him, and for no other account or consideration whatever. The defendants are interrogated whether the certificate was not made and delivered to Stone & Bellows to indemnify them for executing said note, and upon the consideration as set forth in said bill of complaint. The bill then prays that Stone & Bellows may render an account of all sums of money paid by them upon the note, and for all sums of money paid by them or either of them for any liabilities which they or either of them were under for or on account of the plaintiff; that an account may be taken ; that, upon payment of the balance of the account so taken, the plaintiff may be at liberty to redeem, and that the certificate may be returned.

The answer of Stone & Bellows, after some preliminary statements of the dealings between the parties, sets forth that April 19, 1822, the plaintiff made a note to them of $5338.35, as security for subsisting debts and liabilities and those which afterwards might arise to them, and secured the note by a mortgage of mills, locks, &c. at Lebanon; that on the 9th of September, 1823, the plaintiff was indebted to them in the sum of $5149.46, according to the account annexed to the answer, for debts due to them, monies advanced, and services rendered, for the security of which they held the mills, locks, &c. at Lebanon, thus mortgaged ; that the plaintiff, being desirous of selling that property, proposed to substitute for it the certificate for $5300, mentioned in the bill, and another certificate, to be held by them for all sums then due, all monies advanced, &c., and that, they objecting to the sufficiency of the security, the plaintiff proposed to secure the first certificate by a mortgage of the farm now sought to be redeemed; that they, having occasion to borrow §2900 of the Cheshire Bank, procured Thomas Bellows to sign the note as their security, undertaking to have the farm mortgaged to him, to be held by him for his indemnity, and in trust also, to pay them whatever he might receive beyond that upon the mortgage and certificate, or to convey to them upon being indemnified; that this was done, and that they released to the plaintiff the Lebanon property.

The answer then denies that the plaintiff procured them to raise $2900 at the Cheshire Bank for his use, and alleges that they had already paid all the debts there and elsewhere for which they had been holden on his account, and that the certificate was delivered to them to secure to them whatever sums were then due and owing to them from, the plaintiff, or which might become due to them on his account, and for no other purpose, and that the mortgage was made for the purpose aforesaid, and no other purpose.

This is a very different statement in relation to the matter for which the certificate and mortgage were to bo security, from that contained in the plaintiff’s bill. The bill alleges that the certificate was made and the mortgage executed for the purpose of paying the note to the Cheshire Bank and to indemnify Stone & Bellows for any other liabilities they might be under on account of the plaintiff. The answer states a distinct indebtedness of the plaintiff to them in a large sum at the time of the transaction, and that the certificate was expressly made to them to secure that and what might afterwards arise, and that the mortgage was executed for farther security, they releasing another mortgage which they before held.

Without adverting at present to the impediments to the redemption, (which the defendants contend are insuperable, and the plaintiff maintains may be overcome in the proceedings,) the inquiry, in the first place, seems to be whether the allegations of the bill, to which we have already referred, stating the nature of the indebtedness which the mortgage was made to secure, are in fact sustained on the case before us. The difference between the parties on this point, as shown by the pleadings, is, whether this mortgage should stand as a security only for such liabilities as Stone & Bellows were under for the plaintiff at the time of its execution, or whether it was made as a security also for all debts and demands then due from the plaintiff to them.

It is not important at this stage of the proceedings to inquire whether there are, in fact, any debts now due from the plaintiff to them, except such as have arisen out of such liabilities. Nor is it of consequence to ask whether there is any thing in them except what arises from the note of $2900. The bill alleges that there is nothing due except the balance of that. It is not essential to the maintenance of this suit that the allegation should prove to be true. If there is anything else due them arising out of liabilities existing at the date of the mortgage, the bill asks an account of it, and avers a readiness to pay the amount in redemption of the premises. But the bill takes no note of any other description of debt which may be due to them.

If, then, no impediment exists to a redemption, and an account is to be taken and a redemption decreed, it must be because the plaintiff has sustained the allegations and maintained the rights set forth in the bill, and because the mortgage was made to secure the description of debts which he alleges, and he is entitled to have an account taken of the same, and to redeem on the payment of the amount. The defendants cannot, in such case, tack any thing else to the redemption.

But, if it appears that the mortgage and certificate were to secure debts due directly from the plaintiff to Stone & Bellows, the fundamental averments of the bill, upon which all the others rest, are disproved, and the superstructure falls. Upon this bill the court are not called upon to cause an account to be taken of all the debts due from the plaintiff to Stone & Bellows, for the plain reason that the plaintiff states no such agreement, asks for no such account, professes no readiness to pay the balance of it when taken, and prays no decree of redemption based upon such a proceeding.

It is apparent, then, that the averment in the bill, that, by the agreement, the mortgage and certificate were to secure those liabilities only, is a material allegation, which the plaintiff must prove as laid, or fail to sustain his case, by reason of a variance between his allegation and the evidence. 9 N. H. Rep. 385, 393, Tilton vs. Tilton; Gresley's Eq. Ev. 171; 2 Ball & Beatty 444, 451, Savage vs. Carroll. A party cannot set up in his bill one contract, and obtain relief on evidence of another of an entire different character. Harris & Johns. 288, 293, Drury vs. Conner; 10 Peters 177, Boone vs. Chiles.

Is the plaintiff’s allegation supported by the proof ? The part of the answer of Stone & Bellows in which they deny this part of the bill, and aver that the certificate and mortgage were made to secure what is due to them, is responsive to the bill. They were required to state whether they held the certificate and mortgage in the manner stated in the bill, and it was not sufficient for them merely to deny that they held as security for liabilities alone. If they did not admit the allegation as made, but held the papers as security, they were bound to state for what they held them. This part of the answer must, therefore, be overcome by the plaintiff’s evidence. But the answer is corroborated, to some extent, by the evidence on both sides. The mortgage of the Lebanon property has not been introduced in evidence. The answer states that it was to secure a note of $5388.35, and that this note was given to secure all debts; but there is no evidence on this point. That the certificate and the mortgage now in question was substituted for the mortgage of the locks, mills, &c. at Lebanon, is shown by the testimony of Josiah Bellows, senior, introduced by the defendants. The only evidence which tends to impeach the answer in this particular, is that of Carlisle, who says that he understood from the conversation that this mortgage was given to secure only the $2900 note. But it is clear that he is mistaken, for the bill, although it avers that there is nothing else due, admits that the security was for all liabilities ; and Carlisle, in answer to a cross interrogatory, says that this was substituted for the locks, mills, &c. Those, however, he speaks of as mortgaged to indemnify Stone & Bellows for signing a prior note to the bank, the note of $2900 being given for the balance of it. But this is, to some extent, inconsistent with the fuller evidence of Josiah Bellows, senior, that the plaintiff, who undertook to get the mortgage made to secure the certificate, had it made running to Hubbard Bellows ,• that, acting as agent of Stone & Bellows, he objected to this, and proposed that it should run to them; “ but finally told Josiah Bellows, 2d, that, if he had any objection to that course, it might be executed to Thomas Bellows, who had some interest in the payment of the sums intended to be secured by the mortgage.” He says also that the note secured by the mortgage of the mills, &e. was, at the time of the giving of the new mortgage, in the possession of Stone & Bellows, and was treated throughout the transaction as being all due, and he did not then hear any thing to the contrary. He states farther, that, prior to the suit on the mortgage, he exhibited to the plaintiff the account of Stone &. Bellows, ■which he acknowledged to be all correct except a charge for a demand against James Dewey & Co., which, he said, he never would pay. The witness, however, is unable to recollect the amount of the account, but it is to be distinctly inferred from the whole case that it was not for the balance of the note to the. Cheshire Bank only.

The evidence of the plaintiff, then, so far from overcoming the answer on this .point, is itself overcome by the evidence of the defendants, and the bill is not sustained.

The plaintiff having failed to prove his ease as alleged, the court might stop here and dismiss the bill. The utmost the plaintiff could ask, upon a strict consideration of his rights, would be that the dismissal should be without prejudice to his right to commence another suit.

But the power of the court extends to the granting of an amendment of the bill, even at this stage of the proceedings ; and, as the parties have proceeded to a hearing without presenting this question distinctly, and the plaintiff may desire to make this motion, we have considered the matters upon which the arguments of the parties have placed them at issue. We have done this the more readily, because this litigation has been protracted to an unreasonable length, and because, when it finally came to a hearing, the state of the business of the court was such as to cause some additional delay in the examination of the case.

The plaintiff makes no question in his bill that the condition of the mortgage was broken, nor that the suit upon it for possession was well instituted : but he alleges a mistake in the agreement of the counsel upon which the conditional judgment was rendered for the sum of §5000, viz., that he understood the whole matter of a hearing in chancery was to be gone into before the auditor, notwithstanding that judgment, which was to stand as security only ; that he was applied to subsequently, and gave some writing respecting the possession or foreclosure, of which he prays a discovery ; and he sets forth that after that, and within a year, he attempted to have a hearing before the auditor, to ascertain the amount due to Stone & Bellows ; that he then offered to prove that the certificate was but a security, and requested Stone & Bellows to present their claims, which they refused to do, alleging that they had no claim but the judgment; that the auditor decided that he could only allow such payments or matters of set-off as the plaintiff should prove, in reduction of the amount of the judgment, and that, in consequence of this decision, nothing was done.

The answer of Stone & Bellows denies any mistake in the agreement, denies that the judgment was nominal, and to stand as security only, admits the proceedings generally before the auditor, and makes discovery of the writing executed by the plaintiff, which appears to be a lease duly executed by the plaintiff, April 1, 1833, reciting that Thomas Bellows had, at the May term of this court, A. D. 1832, recovered the conditional judgment as of mortgage, in his action against Josiah Bellows, 2d, for the possession of the Stanley farm, and that on the 1st of April, 1833, said Thomas had entered into, and taken possession of, said Stanley farm under said judgment, and for condition broken in his mortgage from Josiah Bellows, 2d.

And here the plaintiff is met by an objection on the part of the defendants, that the mortgage is foreclosed by the peaceable possession of the defendant, Thomas Bellows, for the term of one year next after the giving of this lease, that possession being held by the plaintiff as his tenant. The defendants contend that this operated as a foreclosure by the express provision of the statute, and that the court cannot now open it and permit the plaintiff to redeem, even if there was a mistake in the agreement upon which the judgment was entered.

■ There is no doubt that the possession of the plaintiff under the lease, acknowledging the title of Thomas Bellows, and covenanting to pay rent, is as good for the purpose of a foreclosure against the plaintiff as an actual personal possession by Thomas Bellows himself could have been. This possession was not obtained by any legal process issued under the judgment, but was obtained by the voluntary agreement of the plaintiff himself. The lease recites the rendition of the judgment; and the fact that it had been rendered, may have had its influence in inducing the plaintiff to yield up the possession and take a lease ; but still the entry of Thomas Bellows was a peaceable entry, without process, by the consent of the defendant; and if he had had possession for the term of a year under it, without any attempt on the part of the plaintiff to redeem, or some proceedings which can be lawfully considered as keeping the redemption open, that possession must, under the statute, operate as a foreclosure, notwithstanding any mistake in entering the judgment; because the possession was not the fruit of the judgment, and because the plaintiff might have proceeded to redeem as if the judgment had not been entered : and, if that was wrongfully interposed as an obstacle, might have proceeded to attempt to remove the difficulty. '

But the possession is not of itself conclusive. Aside from any influence the judgment may have upon the case, a demand of an account by the plaintiff within the year, and a refusal or neglect by the mortgagee to render one, would operate to keep the foreclosure open. 9 N. H. Rep. 404, Wendell vs. The N. H. Bank. And this is precisely what the plaintiff alleges and proves was done.

Notwithstanding his bill sets out that the mortgage was made to secure Stone & Bellows for their liabilities on his account, and for that alone, it alleges that the parties met before the auditor, to have the claims between Stone &. Bellows and himself settled, and the balance ascertained, and his evidence shows a request as broad as the allegation. It can make no difference that this was in the presence of an auditor, and on the occasion of a proposed hearing arising out of the judgment. Laying out of the case any justification for a refusal which is to be derived from the judgment, here is enough to keep the foreclosure open until the account is rendered, according to the express doctrine of the case just cited.

It is farther objected, that the court should not interfere, even if accident or mistake is clearly proved, unless it is also proved that injury has been sustained, or is possible, and that the plaintiff has made out no such proof, but that the contrary is apparent from the evidence. But this argument assumes that the state of the account is as set forth by the defendants in their answer, because there is not before the court sufficient evidence to disprove that account.

This does not seem to be the proper stage of the case to settle the amount of the account. If the bill had alleged the agreement to be such as is stated in the answer, and prayed that an account might be taken, alleging that a less sum was due than that stated by the defendants, the course, in order to settle that question, would be to refer it to a master, to state the account; and upon that, farther evidence might be introduced and the state of the defendants’ claims turn out to be different from what they allege them to be in the answer. We cannot, therefore, assume, on any computation in the case now before us, that there has been no injury, or that none is possible, if there has been mistake, and the judgment has b'een erroneously entered up, and wrongfully used as evidence of the amount of the claims of Stone & Bellows.

If the judgment had not been entered, and upon a hearing in equity the certificate had been admitted to be given as a security, it would have been incumbent on the mortgagee to show what demands were due to him. If it had been denied that the certificate was held in pledge or as security, that might have furnished a case for equitable relief.

It appears, therefore, that if the plaintiff had alleged in his bill that the certificate was made to Stone & Bellows as a collateral security for the sum due to them, as well as for their liabilities, he, having demanded an account within the year after Thomas Bellows took possession, might be entitled to maintain this bill, unless the rendition of the judgment in the suit at law interposes a bar to it.

We come, then, to the consideration of the effect of that judgment and the circumstances under which it was rendered. If it was rendered without mistake or misapprehension, and the construction contended for by the defendants, and placed upon it by. the auditor, was correct, then the request for an account by the plaintiff was nugatory, or was complied with; because he had, by means of the judgment, which they produced in answer to his request, an account of the demands of the defendants ascertained by his own agreement, except so far as he could reduce the amount by evidence of payments or matters in set-off on his part.

If duly rendered without mistake, and with an effect such as the defendants allege, they had only to point to the judgment, as they did do, and their account was furnished. In such a state of facts it would have been the duty of the plaintiff to reduce or pay the amount of it, in order to redeem ; and not having done so, the mortgage would have been foreclosed at the expiration of the year.

The next question is, was there any mistake in the agreement upon which that judgment was rendered ? and would the plaintiff be entitled to relief on a bill stating an agreement that the certificate should stand as security for all debts and claims due to Stone &, Bellows ? It is objected, on the part of the defendants, that although a court of equity will receive parol evidence of a mistake in drawing an agreement, for the purpose of resisting a decree of specific performance, it is not admissible on the part of the plaintiff to procure a reformation of the written contract and a decree to enforce it.

There are authorities in support of this position, but there are, it is admitted, others against it, and the doctrine is strongly controverted in Gillespie vs. Moon, 2 Johns. Ch. Rep. 585; and the better opinion seems to be that a court of equity may receive such evidence, as well on a bill for a reformation and a specific performance, as when the party is resisting a bill of that character. In Tilton vs. Tilton, 9 N. H. Rep. 385, this court did not undertake to settle the question, but in that case we held parol evidence admissible to show a mistake in a deed.

The objection, however, is not one that could apply in this case, even if the principle contended for was undoubted. The plaintiff in his bill asks no reformation of any contract, nor for a decree that, when reformed, it shall be carried into execution. He states in his bill that, by accident and mistake, the agreement was erroneously drawn and executed, but he no where asks in terms that it should be altered or reformed. His specific prayer for relief is that an account may now be taken and that he may be permitted to redeem. It is not necessary or proper, in order to do this, that any alterations should be made in the terms or stipulations of the agreement, and the matter be then committed to the auditor, to take the accounts for the purpose of correcting that judgment ; and it cannot be inferred, therefore, that the plaintiff asks such reformation and specific performance under his general prayer for other relief.

The prayer of the bill asks to have the agreement disregarded, and, if it be necessary in order to do this, that it should be set aside. The general prayer for other relief may perhaps include such a request, but there is nothing to show that the plaintiff now seeks to have an alteration made in the terms of that agreement, and then to have a hearing before Mr. Upham, the auditor, on the agreement thus corrected.

It is a familiar principle that equity may set aside an agreement, on a proper case made for that purpose, to sustain which we need not cite authorities.

But it is contended, on the part of the defendants, that here is no mistake ; that the writing was drawn precisely as the parties intended, and that there is nothing to reform ; that there must be a mutual mistake, in order to warrant a reformation; and that a misapprehension of one party is not sufficient to warrant a reformation of a contract.

It is apparent that the court could not, in a case of that character, undertake to alter or reform the written articles; because, when reformed so as to constitute an agreement such as the party complaining of mistake intended, they would not contain the agreement which the other party understood he had entered into.

The evidence shows that Mr. Bell, the counsel for the defendants, understood the agreement to be as expressed in the written contract; and there is no evidence to show that Mr. Smith, on the other side, supposed the terms of the agreement to be different from those set down in the writing. There is no evidence that anything was inserted which he did not intend should have been, or anything omitted which he expected would have been inserted in it. But there is evidence that the construction put upon the written articles by the auditor, (and which perhaps was not the necessary construction,) wa.s different from what Mr. Smith understood to be the true construction of the agreement he had entered into. This is fully made out by his evidence.

The parties, then, had a different understanding of the import of their contract; and the appropriate relief, if any ought to be granted, is not to reform the terms of this contract, but, as the defendant contends, to set it aside.

Here, however, the defendants farther contend that a court of equity will not set aside judgments of a court of law for any misconception of the party seeking relief in the mode of managing his cause, nor for a mistake in the rule upon which judgment was rendered, nor for any irregularity, and that the court of law in which the judgment was rendered would have furnished an ample remedy.

This objection seems to be well founded. Courts of equity, it is said, set aside judgments at law when they have been obtained by fraud, but not because of any error in the proceedings. This is not, perhaps, strictly speaking, an erroneous judgment; but if the agreement under which the judgment was entered, has operated otherwise than the parties intended, this court has power, as a court of law, to set aside the judgment on proper terms, and this relief could better be administered upon an application or petition, and rule to show cause, than by bill in chancery on the equity side of the court. If this were all the objection, the plaintiff might now make that application, and the court grant it, on such terms as should be reasonable.

It seems that the judgment has been used so as to operate differently from what the plaintiff anticipated; and if the construction given to the agreement by the auditor is the true one, we see not why it might not be used in the same way oh a reference to a master to take an account, so long as it stands as a valid judgment. It might be necessary, therefore, before any effectual relief could be granted to the plaintiff, if his bill had set forth the agreement rightly, that he should obtain an order of the court to vacate that judgment.

It is farther objected, that the plaintiff shows no case which should induce the court, in the exercise of a sound discretion, to interfere.

On the case before us it appears that he has not made out a case in which we can exercise any discretion. But if the case had exhibited a pledge of the certificate to secure all the debts due to Stone & Bellows, and their liabilities for the plaintiff, a mortgage predicated upon that, an attempt to foreclose, and a demand of an account within the year, with a neglect to render a proper one, (for such, as it appears, would be the plaintiff’s case, if rightly stated,) and the judgment interposed no obstacle, we are not prepared to say that he would not have a valid claim to relief. There has been great delay, to be sure, but the plaintiff is not alone chargeable with it. •

Upon the delivery of the foregoing opinion, Livermore, for the plaintiff, moved for leave to amend, saying that it was through oversight merely, and not by reason of any unwillingness to admit that the certificate was given as security for debts as well as liabilities, that the omission was made, and that it never was brought to his notice till the opinion of the court was given.

The Court gave the plaintiff leave to amend upon the following terms, viz.: that the plaintiff file a bond to pay rent from July, 1841, until he surrenders the possession, (unless he redeems,) or the court, upon cause shewn, will rescind the order in whole or in part; and also that the plaintiff pay the costs from 1841.