“The above said property last described subject to incum-brance to be given by A. J. Leeper and wife. $26,000 on the % section on which.house is located. $20,000 on the NE]¡4 without buildings. $10,000 on the south 80 acres.
“The above incumbrances shall bear 5 per cent interest payable annually, due 7 years from March 1, 1919. Interest from 3-1-19.
“All papers shall be executed and deeds passed on or before June 1, 1918, at the office of A. W. McGregor, Cedar Eapids, Iowa.
“Both parties to this contract shall retain possession of their respective leases until March 1, 1919, and shall pay taxes due January 1, 1919, on their present respective holdings.”
On May 10, 1918, Leeper and wife executed notes and mortgages for $56,000, including those in suit. These notes and mortgages purported in terms to run for seven years from March 1, 1919, at 5 per cent annual interest. In fine print, however, the notes contained the following proviso:
“If said real estate or property shall be sold or title changed, this note becomes due'. A removal from Delaware County, Iowa, by the maker thereof shall cause this note to become due thereupon immediately.”
“If said premises be sold, shall cause the whole of said money to become due, and this mortgage may be foreclosed thereupon immediately. ’ ’
These provisions in fine print were not discovered by Leeper at the time he executed the notes and mortgages, nor were they discovered until many months thereafter. On October 15, 1918, Leeper sold the 400-acre farm to the defendant Allfree. Some time between October, 1918, and March 1, 1919, Allfree negotiated with Merriam, who was in the real estate business in Delaware County, for a renter. A renter was found for him by Merriam, to whom Allfree rented the land for the year 1919. Merriam was at that time the holder of the notes and mortgages in suit by a transfer thereof from Mangold, which appears to have been made on June 4, 1918. At this time, and up to the fall of 1919, both Allfree and Leeper were still ignorant of these provisions now referred to. They gained their first information in that regard by a notice from Merriam to the effect that he had declared the notes and mortgages due.
As already indicated, the trial court found that the plaintiff had waived the provision, so far as the particular sale from Leeper to Allfree was concerned, but refused to reform the instruments for want of sufficient proof. The result is that, though the sale by Leeper to Allfree cannot further be made a ground for declaring the mortgages due, yet Allfree becomes bound to these provisions for the future, and is unable to sell his property without accelerating the due date of the mortgages. He is further subjected to the same peril because he is not a resident of Delaware County. Allfree and Leeper are both residents of Jasper County.
The evidence is undisputed that the provision of the contract for 5 per cent interest for a term of seven years is a very valuable one for the payor, and that mortgages for such a term and at such a rate could be replaced only at an expense of approximately $6,000. Where this loss, if any, should fall, as between Leeper and Allfree, is a question not litigated; but Allfree and Leeper join in the same defense and cross-bill, Leeper being personally liable on the notes as the maker thereof, and Allfree being liable thereon as having assumed the debt.
The discussion of the question thus presented by the cross-bill divides itself quite naturally into two stages:
(1) Was Leeper under legal obligation to sign these notes and mortgages in the form in which they were drawn at the time he signed them? Could he, in legal right, in view of his antecedent contract, have refused to sign the notes and mortgages in the form in which they were presented to him?
(2) Were the objectionable provisions included by mutual mistake? Did the plaintiff’s assignor use any artifice with fraudulent intent to prevent Leeper from reading the fine print in the instruments, or with intent to induce him not to do so? If yea, was such artifice an efficient cause in so inducing Leeper to omit the reading of such provisions?
Turning to the first phase, we have already set forth the provisions of the antecedent contract as to the incumbrances which were to be executed by Leeper and his wife upon the 400-acre farm purchased by him. The contract represented a meeting of the minds of the parties, and was an enforcible contract. It did not deal in the details of the form of the incum-brances that were to be created. The quoted provisions, however, implied that the incumbrances were to be put into appropriate form. A court of equity might well find, in the enforcement of the contract, that it contemplated the execution of notes and mortgages in the ordinary and usual form necessary to carry out its fair implications. If Leeper had discovered these objectionable provisions before he signed the papers, and if
Without pursuing this feature of the discussion further, we are very clear that the conditions,thus included within the notes and "the mortgages were not within the contemplation of
“I would not have parted with my money at all upon any different terms than those set forth in the instruments which were presented to Leeper to sign.”
To award a reformation in such a case would be to leave the benefit of the consideration in the hands of Leeper, and yet to withdraw from the lender the provisions upon which he had insisted. True, if Leeper had read the mortgages and had discovered their provisions, he would have had the absolute right, in such a case, to refuse to execute them. The other party would have had an equal right to refuse to loan the money. For such reason, a court of equity would weigh the evidence with great caution, and would hold the complaining Leeper to a very strict burden of proof of fraud or mistake. Such is not the case before us. The minds of these parties had previously met, and their contract had been reduced to writing. Their mutual rights and liabilities were thereafter defined by such written contract. There is no claim of any Mistake in such contract. There were no later negotiations looking to a new contract. The notes and mortgages in question were not mutually intended as an undertaking of new obligations. They were executed simply as convenient instruments of evidence, pursuant to the existing contract and obedient thereto. Neither party intended to incur any new liability or to waive any right acquired by such antecedent contract. Under such circumstances, the antecedent contract becomes and is the conclusive gauge by which to determine whether there was a departure therefrom or an addition thereto in the provisions of the notes and mortgages. The rule in such a case, as stated by Story in Ms Equity Jurisprudence, Vol. 1 (13th Ed.), Section 115, is:
"Where an instrument is drawn and executed which professes or is intended to carry into execution an agreement previously entered into, but which, by mistake of the draftsman either as to fact or to law, does not fulfill that intention, or violates it, equity will correct the mistake so as to produce a conformity to the instrument. ’ ’
The case before us bears some analogy, also, to a case of substitution of a copy for a lost contract, where a mistake in the copy is later discovered. This was the case presented to us in Christensen v. Harris, 190 Iowa 256. In that case, the complaining party signed, without reading, an alleged substituted copy of the lost contract, on the representation of the other party that it was an exact copy. In such a case, even if the complaining party had read the alleged copy, she might not have been able to detect with certainty whether it was a correct copy or not. The mistake in such signed copy being later discovered, she was awarded relief by reformation.
In the case at bar, the rights of the parties were complete under the antecedent contract. Even though Leeper had failed and refused to sign any notes or mortgages at all, equity could have enforced the contract in favor of the creditor quite as effectively without the notes and mortgages as with them. True, it was competent for the parties to the antecedent contract to modify the same by subsequent negotiations, and such modification could properly have been included in the notes and mortgages. But there were no negotiations between the parties looking to any modification of the original contract. The payee purported to draw the notes and mortgages in strict conformity to the antecedent contract, and the payor signed them with no other purpose or intent than that they should conform to such antecedent contract. The antecedent contract was the satisfactory, if not the conclusive, evidence of the intent of the parties in the execution of the notes and mortgages. It being discovered later that the notes and mortgages contained provisions which were highly prejudicial to the payor, and inconsistent
It is our conclusion that the facts here considered constitute sufficient and satisfactory evidence of mutual mistake.
III. There is another feature of the case which leads us to the same result. The business of obtaining the notes and mortgages was transacted for the payees by th.eir agent, McGregor. He called unexpectedly upon Leeper at his farm home, very early in the morning, and intercepted Leeper while he was on his way to his field. Several circumstances were put in evidence by the defendants, tending to show artifice and a fraudulent purpose by McGregor to create a situation for Leeper which would induce him. to forego the reading of the papers before signing the same. If it be assumed that McGregor was conscious of the variance between the papers which Leeper was about to sign and the antecedent contract, these circumstances were sufficient, in our judgment, to find fraud on his part, and that Leeper was thereby induced to forego the reading of the papers. That McGregor did know the contents of the papers which he himself had prepared and brought with him for Leeper’s signature, could properly be inferred. Such inference could, of course, be negatived by testimony. The circumstances themselves could be explained. McGregor became a witness on behalf of the plaintiff, and testified that he himself did not knoiu that the objectionable provisions were contained in the papers signed. No other material evidence was offered by the plaintiff to explain any circumstance or to rebut the inference of fraud therefrom. Accepting the testimony of McGregor as true, we may grant that it would exonerate him from the charge of fraud. On the other hand, it established indisputably the mutuality of the mistake.
In view of the state of the record as we have so far set it forth, we have no occasion to discuss the evidence bearing upon the question of fraud. It is our conclusion that the defendants are entitled to relief upon their cross-bill by reformation, on the ground of mutual mistake. The decree of the district court will, therefore, be affirmed on plaintiff’s appeal, and will be reversed on the appeal of the defendants. Decree may be had in this court upon motion of either party. Otherwise, the case may be remanded for decree consistent herewith. — Affirmed .in part; reversed in part.