Coates v. Smith

160 P. 517, 81 Or. 556, 1916 Ore. LEXIS 303

• Court: Oregon Supreme Court
• Decided: October 17, 1916
• Status: Published

Opinions

Mb. Justice Bean

delivered the opimon of the court.

It is contended by defendant B. L. Sabin that he is an innocent third party, that the acknowledgment of the mortgage did not entitle the same to be recorded, and that therefore the recordation imparted no notice to the trustee, and that the latter took the title to the property unaffected by the plaintiff’s mortgage.

1-4. In the consideration of the certificate of the acknowledgment of the mortgage the whole instrument should be examined. "Where the certificate of acknowledgment of a conveyance identifies the parties as known to the officer taking the acknowledgment to be the persons who executed the same, the fact that the names of the parties appear in such certificate spelled as “Samuel H. Smith” and “Adora L. Smith” instead of the names of the mortgagors, Chester A. Smith and Otis S. Smith, will not vitiate the instrument. It will be presumed that such variance in names is the result of a clerical error merely: 1 C. J., p. 848, note 67b; 1 R. C. L., p. 284, § 62; Rodes v. St. Anthony & Dakota Elevator Co., 49 Minn. 370 (52 N. W. 27); Bell v. Evans, 10 Iowa, 353. The material matter in such a certificate of acknowledgment is the identification of the mortgagors, and not the notation of their names. The one in question shows that the officiating notary declares that the persons appearing before him and acknowledging the execution of the instrument are personally known to him to be the identical persons described therein, and who executed the same. It therefore appears from the instrument that the officer taking the acknowledgment identified the mortgagors, although he did not correctly write their names.

Under our statute there is no specific requirement that the name of a grantor or mortgagor shall be contained in the certificate of acknowledgment. Section 7109, L. O. L., directs that:

“The officer taking such acknowledgment shall indorse thereon a certificate of the acknowledgment thereof, and the true date of making the same, under his hand.”

If the certificate shows that such officer knows that “the person making such acknowledgment is the individual described in and who executed such conveyance, ’ ’ the identification is complete according to Section 7119, L. O. L. No other description or name of the grantor is absolutely essential. Omitting the erroneous names, which may be treated as surplusage, the certificate in the present case plainly identifies the mortgagors. A reference to the mortgage clearly indicates that the names written in the certificate, and also the description of one of the mortgagors as the wife of the other, when both are designated in the conveyance as “single,” are clerical errors. It is now well established by the great weight of authority that a certificate failing to name the acknowledging party where reference is made in the certificate to the party who executed the conveyance does not affect the validity of the acknowledgment: 1 R. C. L., p. 284, § 62; Larson v. Elsner, 93 Minn. 303 (101 N. W. 307, 2 Ann. Cas. 989, and note); Pickett v. Doe, 5 Smedes & M. (Miss.) 470 (43 Am. Dec. 523); Milner v. Nelson, 86 Iowa, 452 (53 N. W. 405, 41 Am. St. Rep. 506, 19 L. R. A. 279, and note); Wilcoxon v. Osborn, 77 Mo. 621. Neither does it render the record of the instrument less efficacious. The record of such an instrument is sufficient to impart constructive notice to a subsequent purchaser in good faith without actual knowledge: Milner v. Nelson, 86 Iowa, 452 (53 N. W. 405, 19 L. R. A. 279). The language of such certificate will be accorded a liberal construction, and, when it refers to the conveyance, reference may be had to the body of the deed or mortgage in aid of the certificate of acknowledgment, and, if the two together show a substantial compliance with the statute, it is sufficient: 1 C. J., p. 846, § 187; 1 R. C. L., p. 282, § 59; 1 Cyc. 585, 586; Bell v. Evans, 10 Iowa, 353; Milner v. Nelson, 86 Iowa, 453 (53 N. W. 405, 19 L. R. A. 279); Wilcoxon v. Osborn, 77 Mo. 621; Carpenter v. Dexter, 8 Wall. 513 (19 L. Ed. 426); Bird v. McClelland etc. Co. (C. C.), 45 Fed. 458; Geekie v. Kirby Carpenter Co., Fed. Cas. No. 5295; Frederick v. Wilcox, 119 Ala. 355 (24 South. 582, 72 Am. St. Rep. 925); Touchard v. Crow, 20 Cal. 150 (81 Am. Dec. 108); Wilson v. Russell, 4 Dak. 376 (31 N. W. 645); International Kaolin Co. v. Vause, 55 Fla. 641 (46 South. 3); Summer v. Mitchell, 29 Fla. 179 (10 South. 562, 30 Am. St. Rep. 106, 14 L. R. A. 815); Rackleff v. Norton, 19 Me. 274; King v. Merritt, 67 Mich. 194 (34 N. W. 689); Hughes v. Morris, 110 Mo. 306 (19 S. W. 481); Graham v. Whitely, 26 N. J. Law, 254; Bauer v. Schmelcher (City Ct. Brook.), 5 N. Y. Supp. 423; Beckel v. Petticrew, 6 Ohio St. 247; Dahlem’s Estate, 175 Pa. 454 (34 Atl. 807, 52 Am. St. Rep. 848); Love v. Shields, 3 Yerg. (Tenn.) 405; Gulf etc. Ry. Co. v. Carter, 5 Tex. Civ. App. 675 (24 S. W. 1083); Chandler v. Spear, 22 Vt. 388; Blake v. Hollandsworth, 71 W. Va. 387 (76 S. E. 814, 43 L. R. A. (N. S.) 714); Hiles v. La Flesh, 59 Wis. 465 (18 N. W. 435). It is unnecessary to reform the certificate of acknowledgment.

5, 6. The substantial requirement of the recording statute should not unnecessarily be sacrificed for an obvious clerical mistake. It does not appear that anyone has been misled or injured thereby, and the acknowledgment and record of the mortgage were not thereby invalidated. Section 7119, L. O. L., requires that the officer taking the acknowledgment know, or have satisfactory evidence, that the person making it is the individual described in and who executed the conveyance, and it is presumed that the officer did his duty. The officer taking acknowledgment of a deed in this state is required to indorse thereon a certificate of the acknowledgment thereof: Section 7109, L. O. L. No particular form is required for an individual acknowledgment. The mortgage of plaintiff was acknowledged so as to entitle the same to record, and was therefore constructive notice of plaintiff’s equity, notwithstanding the notary’s clerical error in the certificate: 1 Am. & Eng. Ency. of Law (2 ed.), p. 547b; King v. Merritt, 67 Mich 194 (34 N. W. 689); Kentucky Land Co. v. Crabtree, 113 Ky. 922 (70 S. W. 31); Shelton v. Aultman Co., 82 Ala. 315 (8 South. 232). As stated in 1 Am. & Eng. Ency. of Law, supra.

“"Whenever substance is found, obvious clerical errors and technical omissions or defects will be disregarded.”

In 1 C. J., p. 848, § 190, the rule is thus laid down:

“Where, from an inspection of the whole instrument, it appears with reasonable certainty that the person who acknowledged was the one who executed it, the clerical error in stating the name of the grantor will not invalidate-the instrument.”

The following principle is briefly stated in the case of Platt v. Rowand, 54 Fla. 237 (45 South. 32):

“The declared and settled policy of the law as construed by this court is ‘to uphold certificates of acknowledgment of deeds, and wherever substance is found obvious, clerical errors and all technical omissions will be disregarded.’ ”

Any interest that the trustee in bankruptcy may have in the premises is subordinate to the lien of plaintiff’s mortgage.

7-12. It is next contended by counsel for the defendant trustee that a reformation of a written instrument will not be decreed as against third parties whose rights were acquired without notice of the circumstances, and that the trustee is such a party. It is therefore pertinent to inquire as to the status of the trustee.

Bankruptcy Act of July 1, 1898, Chapter 541, Section 47, subdivision “a,” clause 2, 30 Stat. 557 (U. S. Comp. Stats. 1901, p. 3438), as amended by act of June 25, 1910, Chapter 412, Section 8, 36 Stat. 840 (U. S. Comp. Stats. Snpp. 1911, p. 1500 [U. S. Comp. Stats. 1913, § 9631]), provides that a bankrupt’s trustee, as to all the property in the custody or coming into the custody of the bankruptcy court, shall be vested with all rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon, and as to all property not in the bankruptcy court the rights of a judgment creditor holding an execution duly returned unsatisfied: See Pacific State Bank v. Coats, 205 Fed. 618 (123 C. C. A. 634, Ann. Cas. 1913E, 846). Under the amended statute a trustee in bankruptcy is in the position of a lien creditor, and as stated by Mr. Remington in his work on Bankruptcy, has—

“whatever rights creditors under state law would have had had they been ‘armed with process,’ whether actually so ‘armed’ or not; the trustee being deemed a levying creditor, so far as property in the custody of the bankruptcy court is concerned, and a creditor armed with an execution returned unsatisfied as to property not in such custody”: 2 Remington, Bankruptcy, § 1207.

In Collier on Bankruptcy, page 660, it is stated:

“The purpose of Congress was to embrace within these words every class of creditors with liens by legal or equitable proceedings favored by the varying registration laws of each of the states.”

Assuming that the rights of the trustee are equal to those of an attaching creditor under our statute, and considering the case first from such standpoint, it is the settled law in this state that a trustee having the right of an attaching creditor is not ipso facto a bona fide purchaser for value. That one is such a purchaser, and not affected by outstanding equities, is an affirmative defense which must be pleaded and proved. Before an attaching creditor or one standing in an equal position can be deemed a purchaser in good faith, he must allege and prove all the.facts necessary to establish that character of his ownership: Rhodes v. McGarry, 19 Or. 222, 229 (23 Pac. 971); Meier v. Hess, 23 Or. 599, 601 (32 Pac. 755) ; Raymond v. Flavel, 27 Or. 219, 248 (40 Pac. 158); Laurent v. Lanning, 32 Or. 18 (51 Pac. 80); Dimmick v. Rosenfeld, 34 Or. 101, 105 (55 Pac. 100); Flegel v. Koss, 47 Or. 366 (83 Pac. 847); Jennings v. Lentz, 50 Or. 483, 487 (93 Pac. 327, 29 L. R. A. (N. S.) 584); Ayre v. Hixson, 53 Or. 19, 27 (98 Pac. 515, 133 Am. St. Rep. 819, Ann. Cas. 1913E, 659); Barnes v. Spencer, 79 Or. 205 (153 Pac. 47). It would seem from the record in this case that, at the most, the standing of the trustee in bankruptcy is equal to that of a judgment creditor: Pacific State Bank v. Coats, 205 Fed. 618, 626 (123 C. C. A. 634, Ann. Cas. 1913E, 846); Cooper Grocery v. Park, 218 Fed. 42, 43 (134 C. C, A. 64); Smith v. Bank, 57 Or. 82, 86 (110 Pac. 410).

Section 7129, L. O. L., provides thus:

“Every conveyance of real property within this state hereafter made, which shall not be recorded as provided in this title within five days thereafter shall be void against any subsequent purchaser in good faith and for a valuable consideration of the same real property, or any portion thereof, whose conveyance shall be first duly recorded. ’ ’

Equity will exercise its jurisdiction for the correction or reformation of a written instrument on the ground of mutual mistake, and for this purpose will receive parol testimony: Jones, Ev., § 437.

Reformation of a written instrument on the ground of mutual mistake will be decreed in a court of equity as between tbe original parties or those claiming under them in privity, such as judgment creditors: 1 Story, Eq. Juris. (13 ed.), §165; Lally v. Holland, 1 Swan (Tenn.), 396; Smith v. Interior Warehouse Co., 51 Or. 578, 581 (94 Pac. 508, 95 Pac. 499); Howard v. Tettelbaum, 61 Or. 145 (120 Pac. 373); Zartman v. First Nat. Bank, 216 U. S. 134 (54 L. Ed. 418, 30 Sup. Ct. Rep. 368); Meier v. Kelly, 22 Or. 136 (29 Pac. 265). Mr. Elliott, in his work on Contracts (Yolume 3, Section 2381), says:

“In cases of mistake in written contracts equity may interfere, not only as between the original parties, but those claiming under them in privity,' such as personal representatives, heirs, assignees and the like. * * However, reformation will not be granted where intervening rights of bona fide purchasers for value will be prejudiced, and it has been held that this protection will be extended to the grantee of a bona fide purchaser, even though he had notice of the mistake.”

In Zartman v. First Nat. Bank, 216 U. S. 134 (54 L. Ed. 418, 30 Sup. Ct. Rep. 368), which was a suit to reform a written contract, it was held that the jurisdiction which equity has to decree correction of errors in written contracts caused by mutual mistake is not suspended by the bankruptcy law; and the trustee takes property as the debtor had it at the time of the petition subject to all valid claims, liens and equities, including the power of a court of equity to correct a manifest error by mutual mistake in an agreement made prior to the petition.

Was the note due when this suit was instituted? In order that this may be shown, it is necessary to reform the note to conform to the agreement of the parties as they intended the same to be executed. The defendant demurred to the complaint and supplemental complaint, and insists that the same are insufficient for such purpose. Each demurrer was as follows:

“Comes now E. L. Sabin, trustee in bankruptcy, one of defendants herein, and demurs to plaintiff’s amended complaint for the reason that the same does not state facts sufficient to constitute a cause of action: I. That the note set forth in said complaint shows upon its face that the same is not due, and consequently that there has been no default in the payment of interest, and nothing is set forth in said complaint to modify or change the rule that a written instrument cannot be varied by parol evidence. II. That the mortgage, copy of which is set forth in said complaint, and foreclosure of which is prayed, is not a valid mortgage as against the trustee in bankruptcy, same showing upon its face that it was not acknowledged by the makers thereof as prescribed by law. III. That said complaint does not show that permission of the District Court of the United States for the District of Oregon was obtained before suit was instituted- against E. L. Sabin, who is an officer of said court.”

In Sellwood v. Henneman, 36 Or. 575, at page 577 (60 Pac. 12, at page 13), Mr. Justice Moore states the rule as follows:

“It has been repeatedly held by this court that, in a suit to reform a deed or written contract on the ground of mistake,' the complaint should distinctly show the original agreement of the parties, and point out with clearness and precision wherein there was a mistake.”

See, also, Ramsey v. Loomis, 6 Or. 367; Hyland v. Hyland, 19 Or. 51 (23 Pac. 811); Hughey v. Smith, 65 Or. 323 (133 Pac. 68); and cases to which those opinions refer.

The particular circumstances constituting the mistake should be pleaded: 14 Ency. PI. & Pr., pp. 43, 45, and notes; 18 Ency. PI. & Pr., p. 824.

The complaint does not show that it was the intention of the parties that the alleged oral agreement as to the time of payment of interest should be incorporated in the note, nor that it was not the intention of either of the parties to rely upon the oral agreement which is averred to have been made both before and after the execution of the note. When the alleged omission was discovered by plaintiff is not disclosed; nor what instructions were given to the scrivener or by whom. No fraud on the part,of the payors is asserted. The circumstances relating to the transaction as set forth in the pleading are very meager. While it may be possible that, in the absence of a demurrer, the complaint might be held sufficient, a majority of the members of the court are of the opinion that there was error in overruling the demurrer.

The decree of the lower court, therefore, will be reversed, and the cause remanded for such further proceedings as may be deemed proper, not inconsistent herewith. A default decree was rendered against the trustee defendant. He failed to ask the trial court to set the same aside. To have this done appears to be the main purpose of this appeal: See Section 103, L. O. L.; White v. Northwest Stage Co., 5 Or. 99; Bailey v. Williams, 6 Or. 71; Mayer v. Mayer, 27 Or. 133 (39 Pac. 1002). It is doubtful if the specifications of the demurrer directed the attention of the trial court to the point now urged against the complaint. Neither party, therefore, should recover costs upon this appeal. Reversed.