Coffing v. Taylor

16 Ill. 457

• Court: Illinois Supreme Court
• Decided: June 15, 1855
• Status: Published

Opinion

Scates, 0. J.

The bill professes to make a case for reforming an agreement, and for a foreclosure of a mortgage. I am of opinion that neither the bill nor proofs present sufficient grounds to entitle the party to relief, as prayed.

In making out the former case, I understood the defendant to assume the position that he bought of 0. Coffing all his interest in the partnership enterprise between them, and that Coffing fraudulently drew up the contract to transfer this interest, in such manner and language as was liable to a double construction, and which, therefore, was insufficient to express and secure the whole interest bargained for, and intended to be conveyed. It is put upon the ground of design, and not of a mistake. Now is this shown to be true by the bill and evidence ?

First, we inquire of the intent of the parties. To arrive at it, we put ourselves, as well as we may, into their condition, examine their situation and circumstances, the character, condition and circumstances of the property, or interests, about which they contract; and so examine into their contract, its terms, language, and, when proper, the negotiations which led to it, and thus elicit and apprehend their true intent and meaning. 4 Scam. R. 254; 1 Greenl. Ev., Secs. 287 to 289, and notes; 4 Gil. R. 536; 12 Ill. 218.

In viewing the situation of these contracting parties, and the condition or character of the property, we find they were partners in trade, one having advanced five and the other ten thousand dollars, as capital, for which they stood credited upon the partnership books; that Ooffing had drawn out $18,340 for his private use, and had executed to the firm a mortgage to secure its payment to the firm, and which was not yet due for near two years. That the firm was owing large sums of money, and had large sums due to it, and large amounts of personal and real property.

This is the situation of the parties, and' this is the character and condition of the property and interests they contract about, together with a private interest of Ooffing in a certain charter, banking-house and business in it, under the charter. Whatever is said and agreed, we must understand as applying and being intended as applicable to all these circumstances.

The bill does not set up a sale of all Coffing’s interests in the enterprise of the partnerships, for that would have claimed his capital with it, but that it was a sale of all his interest in the “ property, effects, claims, assets and debts of the firm,” together with Coffing’s interest in his own private property in a charter, house and-banking business. Such being the extent of the property and interests purchased, the controversy arises upon a clause of reservation inserted in the contract, as follows: “ excepting the indenture given by the said Ooffing to Taylor & Ooffing- aforesaid, which is to stand and remain as it is, unaffected by this deed of sale,” but which the bill alleges should have read, “that nothing in said articles contained should alter or affect the indentures for securing Coffing’s debt to the firm, so as to prevent Ooffing having three years’ time in which to redeem said premises and which last construction, the bill alleges, was placed upon it at the time of its execution by both parties. Two as shrewd and intelligent men, as this record shows these parties to be, need hardly be told that such an exception or reservation as the last, would be wholly inoperative and useless, as the length of credit and right of redemption were not in the least affected by -the agreement. The credit and right of redemption were not interests of the firm, but of Ooffing, individually, and in nowise contemplated by, or included in, those described in the agreement. Neither was his right to reimbursement of his capital on settlement with his partner of this part of the joint enterprise, nor any other several interest, save his plank road charter, house and. banking adventure under it.

In proposing a reformation of a contract, by change of a phrase or clause, it would be more comprehensible if operative meaning were given by the substitute. The effect of the one proposed here would be accomplished by simply striking out the excepting clause, for, by it, the interests named would be and stand in the precise condition proposed by this emendation. This would seem to present the case in an entirely different point of view, and more in the light of a bill to interpret, or correct the fraudulent interpretation of the contract, to the one given by the parties at the time of its execution, than one to reform the terms of it. So far from there being fraud in the making and execution of the contract, it does appear that the same was read and compared by the parties, their attention specially drawn to this particular part of it, and that they mutually agreed to a false and unmeaning interpretation of it, if witnesses are under no mistake, for it evidently means no such thing as is alleged for it, whatever else it may. Was all this. fraudulently done by Coffing to impose on Taylor ? It is difficult to search the secret-mind of Coffing any further than provable acts and language offer indices to it and its motives. In presenting these indicia, we have been furnished, not only with the whole previous negotiation about, and the verbal conclusion of, this particular contract, but with, apparently, the whole history of their first connection, and previous business together, and its conditions and results, with considerable portions of each one’s private transactions and affairs. Surveying this large field of operations, and gathering from it every ray of light reflected from every prominent object or transaction in it, it seems to make one or two facts apparent and satisfactorily plain: that the firm, although largely in debt, and pressed and liable to become embarrassed by it, was yet by no means insolvent, though supposed to have been badly managed. Taylor had offered to sell to Coffing at a sacrifice, which he was not in a situation to avail himself of. He offers, in turn, afterwards, his interest in the effects of the firm, if discharged from its liabilities, and certain individual property, as a reimbursement of advances. This was accepted, and the witnesses to this negotiation understood it, not only as including his interest in what the firm owned, but all his interest in the adventure. They do not pretend to give the words, nor do they state the substance of what was said in the negotiations, but it is very manifest that they give their own inferences and understanding. This is dangerous testimony, and must be received with great care and caution, to prevent a substitution of the witnesses’ understanding for the contract and meaning of the parties. And this is true, however strong the impression may be on the mind of witnesses, although the belief of it has become a part of his being, as one witness says. The condition of the partnership at the time, is invoked to aid. The only exhibition of its affairs shows the firm solvent, and capital safe, and profits accrued. The motive to make a sacrifice is not apparent from the condition of the firm.

Under such facts and circumstances as I have briefly alluded to, Coffing drew up an assignment, read it to Taylor, and he signed it, embracing a great deal less in it than we would understand the witnesses as included in the verbal agreement; and in the presence, too, of one of those witnesses. Now, at the time of the execution, the witness does not make the purport and extent of Coffing’s statement clear, and to embrace distinctly any more than is included in its terms. We derive no aid in the interpretation, from that source, to favor the reformation proposed. When we turn to Coffing’s statement of it, after-wards made to Brewster, we find it in general terms, with Brewster’s particular understanding thrown in, like Paine’s was into the verbal agreement. All this is wholly unsatisfactory, and insufficient to overcome and change the deliberate acts of Taylor, in reading, or having the contract truly read, and thereupon signing it. Taylor must meet and account for these acts, by showing that he was fraudulently imposed on in doing so, or he must abide the writing as it is. Were the whole contract now resting in parol, and offered in proof by one witness swearing that, in concluding the contract, the parties used the identical language of this agreement, I should so find this to be the contract, notwithstanding what Paine has sworn was his understanding of their meaning and contract, and Brewster’s understanding of Coffing’s statement of it afterwards. The writing is more reliable than the memory of a witness, for the exact words and meaning.

Once allow these parol meanings and understandings of witnesses of written contracts, and all distinction is at once destroyed between written and verbal contracts; and not only that, but parol contracts, established by the exact words used, or the substance of what was said, must, in like manner, yield to the inferences of witnesses. It is not enough to prove that witnesses understood the parties differently; it must be shown that the true intention of both parties was different, and that, by some mistake, or fraud, it was not truly represented in the writing. It is far short of either, in this case, to offer us Coffing’s interpretation as proof of this mistake or fraud. There is no proof of imbecility on Taylor’s part, nor of any relation of trusting confidence in the acts, skill, intelligence or integrity of Coffing. Taylor is shown to be very capable of taking care of his own interests, and was, in this instance, relying upon himself, and not upon Coffing. It has not the first feature in it of an imposition of that character, and we arc not able or authorized to draw such inferences from the fact of Coffing drawing it up. Taylor had the opportunity, and did fairly examine the writing, before he signed it. The writing must thenceforth speak his language and intention for him. I know of no rule of law, in settling the interpretation of a controverted intent, that will allow one differing from the writing to be substituted, unless upon the ground of accident, mistake or fraud. Parties are sometimes held to their mutual acts, in fulfilling contracts, where they have acted and acquiesced in an erroneous construction. Latent ambiguities are explained by parol, but this is unlike either, or any other known rule for altering, or aiding in construction. It may be asked, why did Taylor sign the contract with this clause in it, if it does not express truly the agreement and meaning of the parties V He is presumed to understand, and if he did not in fact know it, yet he cannot in law be indulged to deny; that the writing alone can speak; and that witnesses cannot be heard to contradict it: the individual interpretation of the parties to it is inadmissible, and does not become part of it any further than authorized by it.

_ I am wholly unable to give any other solution to this dispute, than that the respective parties may have used and understood the terms and language they respectively used in the negotiation and contract, in a different sense, and that without culpability or fraud in either; and this is the more manifest and conclusive to my mind, from apparent mutual mistakes of the law which governs the interests about which they were dealing.

Both seem to have regarded a transfer of Coffing’s interest in the effects of the firm as including his liability to account for the moneys advanced to him by the firm, or, in other words, withdrawn by him from it. This was not true in law. It would be but an item in the account in adjusting the liability of one partner with the other, upon the terms of the partnership, after its dissolution, and settlement of its affairs with third persons. Wilson, etc., v. Soper, etc., 13 B. Monroe R. 411; Smirall v. O’Bannons, 7 B. Monroe R. 608 ; Richardson v. The Barde of England, 18 Eng. Ch. R. 169, 170: Crawshay v. Collins, 2 Russ. R. 325; 15 Ves. R. 218, 220 ; Foster v. McDonald, 1 Jac. and Walk. R. 252; Ex parte Yonge, 3 Ves. and Beam. R. 31; Story on Part. 522, Secs. 348, 348a, and note.

To obviate this, and prevent the debt from Coffing to the firm passing under that description of interest, the clause in controversy appears to have been inserted, with a view to except it from the debts or effects conveyed. The clause, strictly and technically in law, is insufficient, and inapt for that purpose.

This exception reserves simply the “ indenture,” the incident or security for the debt, and not the debt itself. An assignment of the debt might carry the mortgage security as an incident, but the contrary is not true. Ellison v. Daniels, 11 N. Hamp. R. 274; Bell v. Morse, 6 ibid. 205 ; Jackson ex dem. Curtis v. Bronson, 19 John. R. 325. This indenture may have been assigned to one without carrying the debt, and then the debt to another without carrying with it the mortgage security, and so the two would become separated. The mortgage estate would be liable to be defeated, without payment to the assignee of it, who would have no power of foreclosure of it, or for the debt, and so it becomes a nullity or mere right of possession until payment. So of the assignee of the debt, who might enforce payment out of other property, but not by foreclosure on the mortgage, for that security is destroyed and gone while it remains in separate hands. I advert to these principles to show the mistake in law, of what is still very apparently the intention and meaning of Coffing. The witnesses go a great way beyond, and would not only have it understood that Coffing agreed to sink and abandon his capital put in, and transfer this amount drawn out, but they would understand all parties, and the witnesses present at the reading and execution of the contract, as agreeing that this exception simply reserved and preserved Coffing’s rights as mortgagor to pay and redeem the estate, rights not at all contemplated in the transfer, or affected by it. Et is impossible for me to see how men could so far misapprehend the import of language, as to draw this latter conclusion. The others might very naturally occur to men unfamiliar with the law governing property under these peculiar circumstances. This advance was not a debt to or effect of the firm, and there was no power in law to enforce it as such, even for the benefit of joint creditors. The liability of each partner for the debts of the firm could be enforced, but not as debts due the firm, for it arises under the law of contracts and partnership. The right of contribution to equalize profit and loss, is not one of the partnership firm, but of the individual members of it, arising out of it.

Before we can reform this contract, therefore, even upon the ground of misapprehension or mistake in the mind of Taylor, as to the extent of the property and interest he was entitled to acquire by the agreement, we must carefully examine, to see if we would not make the reformed contract such an one as would equally surprise and deceive the true intention of Coffing, and entitle him immediately to file a bill to reform the reformation. It would not be enough that one of the parties so understood and intended it; both must. Otherwise the bill should rather be for rescisión than reformation.

From all the proofs, I have no reason for a moment to believe, that Cofling ever intended to make, or would have consented to make the contract set up in the bill, with the interpretation of it given by the witnesses. We cannot, therefore, lay his interests, intentions and consent aside, and make a contract for him with defendant, by, or in the name of reforming this agreement, to meet his own understanding of it, and that of his witnesses.

This simple solution of misapprehension of each other’s meaning, at once explains the difficulty, and should mutually remove all grounds for suspicion of each other’s motives and conduct, and all cause for hard feelings and strife. I cannot say that this would place the parties in a satisfactory position, in relation to the property. Nor is it now in the power of the law, to correct a mistake on one side, While the other was in no fault in entering fairly into such a contract as he intended and understood himself as maldng, using no improper arts to impose on the other party.

I have no evidence in the record, that Taylor would ever have consented to enter into the contract as now contended for by doffing; nor would he, judging from the claims made for him in this case, have ever entered into the contract as stated in his own bill, with a full knowledge of all the legal consequences and effects flowing from it, as I understand the law applicable to it.

The only difference I can make between them is, that under Taylor’s statement, the $13,340, balance of doffing’s withdrawals, passed; and by doffing’s statement, it did not. But we are clearly of opinion that the allegations of the bill and proofs will not authorize the emendation asked.

It would seem to me, that the construction put upon the defeasance, is equally unfortunate and unsustainable. It simply recites what is the right and power of a mortgagor, that of selling or remortgaging for the payment of the debt, and declares that, in the event he shall raise or be able to raise the money in that mode, the mortgagees shall reconvey to doffing, the mortgagor, to enable him to do so. This is supposed to confer a power of sale, in the execution of which he becomes trustee of the mortgagees. He had all the power without it, that is claimed to be contained in it. All the effect that I could give it, would be to enforce it against the mortgagees as a covenant to reconvey, when a proper case was presented, to enable the mortgagor to convey to new parties. And the case would only be required to show, that another purchaser or mortgagee refused to take a conveyance, without such release of the previous incumbrance. But not in any sense, as enabling him to convey subject to it, for that he may do by law, as owner of the equity of redemption. Consequently, I do not understand the parties, as intending to create a power already in existence, but to provide for making it effectual by releasing the encumbrance, whenever that might be required.

But supposing that the deed of defeasance did raise a power, and create a trust, still it did not destroy his equity of redemption, nor power of sale of it. And it becomes a question of fact, whether he exercised the power under the trust, or his right of' sale of his own equity. The deed itself leaves no room for doubt that Coffing sold in his own right, because he expressly recites the existence of the mortgage, and covenants not to remove it, but that it is paid off and discharged, clearly showing that he conveys in his own right, and not by power conferred upon him as trustee. The deed should disclose the power and right as trustee, where there are two rights or powers existing in the same person. We might refer the execution of a deed to the existence of any power, though -not named or referred to, in order to sustain a fair, bona fide transaction for a valuable consideration. But in the absence of all evidence on the face of the writing, and two rights appearing, one of the party’s own, and one in a representative character, we should presume it to be in the party’s own right. So we interpreted the deed of Paine and wife, in the case of Davenport v. Young et al., 16 Ill. R. who filled the office of administrator, at the same time.

Again it is claimed that the failure to apply the purchase money was a breach of trust, and thereupon, the credit due on the mortgage debt became forfeited, and the debt became presently due, with a right of foreclosure. The only consequence that could follow such a breach of trust, would be to hold the lands in the hands of the purchaser, chargeable with the trust, and vendor and vendee with the purchase money to the use of the mortgagee. I am unable to perceive how it could possibly affect the equity of redemption or the liability of the mortgagor.

Again it is as equally untenable a position, that a conveyance of the fee by the mortgagor, is a forfeiture of his equity of redemption or credit under the mortgage. The lands would surely pass encumbered with the mortgage and mortgage debt, by such a conveyance, which could only assure the equity of redemption, even with full covenants, whatever it might purport to convey.

The mortgage and mortgage debt, therefore, remained the same as before the conveyance, and the doctrine of forfeitures has no application to such a case.

Under this view of the case, the mortgage debt was clearly not due when this bill was filed. Had the defendant a right to the collection of rents, his remedy was at law upon his mortgage deed.

I have examined this case in every point of view presented, and am unable to discover any equity in the appellee’s case, or grounds for sustaining the decree entered in his favor.

Decree reversed and bill dismissed.

Decree reversed.