Thomas Andrews et al., Executors, etc., Respondents, v. William S. Gillespie, impleaded, etc., Appellant

Thomas Andrews et al., Executors, etc., Respondents, v. William S. Gillespie, impleaded, etc., Appellant. In an action brought by the assignee of a mortgage to foreclose the same, the mortgagor has the right to set up and prove a mistake in the drawing of the instrument, and have the same reformed. When the mistake is in the terms of payment, delay in moving to correct the mistake, and payment by the mortgagor of an installment, or a promise to pay as specified in the mortgage, under protest, asserting the mistake, furnish no ground for a denial of the relief to which he is entitled; nor will the absence of the assignor as a party bar him from such relief. The assignor is not a necessary party to the action, as upon the coming in of the answer, and notice thereby of defendant’s claim, plaintiff may give notice of such claim to the assignor, and offer to him the future management of the suit, which wonld make the judgment binding upon him in respect to the fact of the mistake. (Submitted February 6, 1872; decided February 13, 1872.) Appeal from, judgment of the General Term of the Supreme Court in the fourth judicial department, affirming a judgment for plaintiffs entered upon decision of the court at Special Term. The action was brought to foreclose a mortgage executed by defendant, Gillespie, to Mary E. Gage, and by her assigned to William Andrews, plaintiffs’ testator. Gillespie, the mortgagor, sets up in his answer a mistake in the terms of the mortgage, and asks for a reformation of the instrument according to the real agreement of the parties to it, and alleges that, when thus reformed, nothing was due thereon. The mistake, as claimed by defendant and found by the court, arose from a clerical error of the attorney who drew the bond and mortgage, by which he made the principal therein payable in five years instead of ten. When the first payment became due, the bond and mortgage was owned by plaintiffs, and they claimed from Gillespie the whole sum called for by the mortgage. Gillespie then informed them of the mistake, and produced a witness to corroborate his statement. Plaintiffs commenced a foreclosure, and defendant finally paid the amount claimed. The next payment is the one on which the present action was brought. At this time defendant paid the interest due, but protested against paying any principal, insisting upon the mistake, and asking that the bond and mortgage be corrected. Upon the trial it appeared that Mrs. Gage had not been served with process in the action, and defendant offered to prove by her that when she assigned the mortgage to plaintiffs’ testator, she informed him of the mistake in the terms of the mortgage. The court excluded the evidence, on the ground that she was not a competent witness upon such fact. Upon the whole case the court held that the defence could not be sustained, for the reasons set forth in the opinion. W. <f. Wallace for appellant. The assignor was not a necessary party to the action. Even were the assignor a necessary party, had the action been brought to reform the bond and mortgage, she was not, in this case, because the defence did not necessarily involve a reformation of the instrument. (Bartlett v. Judd, 21 N. Y., 200.) Defendant was not precluded by making payments on the bond and mortgage. (2 Story’s Eq., §§ 15, 20; 2 J. Ch., 585 ; East v. Thornbury, 3 P. Wins., 126; 3 Vesey, 573 ; 40 N. Y., 391; 4 Pick., 228.) An assignee of a bond and mortgage takes subject to all the equities of the mortgagor. (Hartley v. Tatham, 1 Keyes, 222 ; Mickles v. Townsend, 18 N. Y., 575; Bush v. Lathrop, 22 id., 535; 1 Story’s Eq., § 64; 2 J. Cases, 438; 1 Paige, 131.) F. Hiscoak for respondents. The defence was properly overruled for defect of parties. (Levitt v Palmer, 3 N. Y., 19, 38; Pattison v. Hull, 9 Cow., 747, 755, 756 ; Haine v. Baker, 5 N. Y., 357; Auburn City Bank v. Leonard, 20 How., 193; Story’s Eq., §§ 15, 24, 122.) The payment by Gillespie precluded him from obtaining a reformation of the contract. (Sawyer v. Wood, 3 J. Ch., 416 ; Story’s Eq., §§ 15, 35 ; Massom v. Boved, 1 Denio, 69, 74; Bronson v. Hinman, 4 Seld., 182; Adams v. Gage, 28 N. Y., 103.) [MAJORITY — Grover, J.] Grover, J. Bonds and mortgages are not negotiable instruments. The assignee acquires no better title than that of his assignor. He takes title subject to any existing defence, either legal or equitable, of the mortgagor against the assignor. (Mickles v. Townsend, 18 N. Y., 575; Hartley v. Tatham, 1 Keyes, 222.) It was not, therefore, necessary for the defendant to prove that the plaintiffs’ testator knew of the mistake at the time he purchased the mortgage of the mortgagee. It is therefore immaterial whether the assignor was a competent witness to prove this fact against the representatives of the deceased assignee or not, as the proof,' if given, would have been of no benefit to the defendant. This answers the exception taken to the exclusion of the witness. íhe defendant by his answer set up, in substance, that the scrivener who drew the mortgage made a mistake by making the money thereby secured, payable in ten semi-annual installments with interest then accrued on all sums unpaid, when, by the contract of the parties, it should have been made payable in twenty such installments, and claimed affirmative relief by reforming the mortgage in this respect, so as to make it conform to the real contract of the parties. Upon the trial this mistake was clearly proved by the written contract between the mortgagor and mortgagee, in the attempted execution of which the mortgage was given, and other evidence. The judge before whom the cause was tried found, as a fact, that this mistake had been made, but held, as conclusions of law, that it constituted no defense, and that the defendant was not entitled to any relief upon that ground, for the reasons, first, that the defendant, after he discovered the mistake, made the first payment as required by the mortgage as it was written, although he complained of the mistake and desired its correction, and that upon the second of such installments becoming due he paid interest, and promised to pay the principal in a few days, which he failed to do, still urging the mistake; and for the further reason that the mortgagee was a necessary party to an action for reforming the mortgage by correcting the mistake, and ordered the usual judgment for foreclosure and sale, although, had the mistake been corrected, there would have been nothing due upon the mortgage. Section 149 of the Code gives the defendant the right to set forth, in his answer, any new matter constituting a defence or counter-claim. The mistake thus set forth, so far as affirmative relief was demanded, was an equitable defence, I think counter-claim, within the provisions of section 150 of the Code. The correction of mistakes in written instruments, occurring by accident, fraud or otherwise, has been one of the acknowledged branches of equity jurisdiction from the earliest history of the court, and the party injured by the mistake has a right to demand its correction upon furnishing satisfactory proof that it has been made. (Gilles pie and wife v. Moon, 2 Johns. Ch., 585.) In this case, Chancellor Kent, with his usual ability, states the doctrine and the principles upon which it rests, and reviews many of the cases which had then been determined, and shows that delay in commencing proceedings will not alone prevent the granting of relief. In this case, a mistake in a deed was corrected after the lapse of fourteen years, there then being no statute barring the action if not commenced within that period. This, and the cases cited, shows that lapse of time, in the absence of such statute, will not prevent the granting of the relief. In the present case, only about six months had elapsed after the discovery of the mistake before the commencement of the action. The counsel for the respondents cites several authorities, showing that when a party seeks to rescind a contract upon the ground of mistake or fraud, he must act promptly upon the discovery, and that any act by him thereafter, recognizing the validity of the contract, will preclude him from exercising such right. These authorities have no application to the present , case. Here the defendant does not seek the rescisión of any contract ever made by him, but the correction of a writing purporting to be his contract (but never made), so as to make it conform to the contract really made, having no right or desire to annul this contract. We have seen that the defendant had the same right to have the mistake corrected as against the plaintiffs’ testator, that he had against his assignor. Payment of the first installment, and promising to pay" the second while protesting against his liability, on the ground of the mistake, furnish no ground for a denial of the relief to which he was entitled. The remaining ground upon which the relief was denied was the absence of the assignor as a party to the action. But such absence was no reason for holding the defendant bound by a contract which he never made, and enforcing the performance thereof by him. If the assignor was a necessary party to a complete determination of the controversy, she should have been so made under the provisions of section 122 of the Code, instead of depriving the defendant of a right, to which he was clearly entitled, because of her absence as such party. It was for the protection- of the interest of the plaintiffs, and not that of the defendant, that made her a necessary party, if so at all. By the sale and assignment of the mortgage to the plaintiffs’ testator, the assignor impliedly warranted that there was no legal defence to its collection, arising out of its origin. (Delaware Bank v. Jarvis, 20 N. Y., 226.) The defence and counter claim, based on the alleged mistake, if proved, showed a breach of this implied warranty, and it was important to the plaintiffs that the assignor should be concluded by the judgment establishing the mistake. But it was not necessary to make the assignor a party, to accomplish this object. It is well settled that a purchaser of property, with a warranty of title, upon being sued for the recovery thereof by one claiming a paramount title thereto, may give notice to his vendor of the action, and offer to him the conduct of the defence; and that upon his so doing, the vendor is bound by the judgment in respect to the title, whether or not the defence is undertaken by him. This, in principle, is analagous to the present case. Here the assignor of the mortgage had impliedly warranted that it was a valid, subsisting instrument, for the payment of the sum of money therein specified, as therein provided for. Upon the coming in of the defendant’s answer, the plaintiffs were notified of the claim of the defendant, that it was not such; that there was a mistake therein, which the defendant was entitled to have corrected, and that the defendant was liable only for the payment of the money in twenty semi-annual installments, instead of ten, as expressed in the mortgage. The plaintiffs might have given notice of this claim of the defendant to the assignor, and offered to her the future management of the suits, and this would have made the judgment binding upon her, in respect to the fact of the mistake. If the plaintiffs failed to do this, it was not the fault of the defendant. There was no dispute as to any of the facts. They were found by the judge, upon uncontroverted evidence, but may be controverted upon another-trial. The exceptions were to his conclusions of law, that, upon the facts found, the defendant was not entitled to a correction of the mistake, and was bound to pay the money, as specified in the mortgage. These conclusions were erroneous, and the judgment based thereon must be reversed and a new trial ordered, costs to abide event. All concur. Judgment reversed.