U.S. Supreme Court
Hunt v. Rousmanier, 26 U.S. 1 Pet. 1 1 (1828)
Hunt v. Rousmanier
26 U.S. (1 Pet.) 1
It is a principle of equity that when an instrument is drawn and executed which professes or is intended to carry into execution an agreement, whether in writing or by parol, previously entered into but which by mistake of the draftsman either in fact or in law does not fulfill or which violates the manifest intention of the parties to the agreement, equity will correct the mistake so as to produce a conformity of the instrument to the agreement.
The execution of instruments fairly and legally entered into is one of the peculiar branches of equity jurisdiction, and a court of equity will compel a delinquent party to perform his agreement according to the terms of it and to the manifest intention of the parties.
So if the mistake exists not in the instrument which is intended to give effect to the agreement, but in the agreement itself, and is clearly proved to have been the result of ignorance of some material fact, a court of equity will in general grant relief according to the nature of the particular case in which it is sought.
If an agreement was not founded on a mistake of any material fact, and if it was executed in strict conformity with itself, it would be unprecedented for a court of equity to decree another security to be given different from that which had been agreed upon or to treat the case as if such other security had in fact been agreed upon and executed.
Courts of equity may compel parties to execute their agreements, but it has no power to make agreements for them. The death of one of the parties and the consequent inefficiency of the security selected, intended to be valid and complete, but which was not so, will not give the right of interference. chanroblesvirtualawlibrary
A mistake arising from ignorance of law is not a ground for reforming a deed founded on such mistake except in some few cases, and those of peculiar characters.
If the obligee of a joint bond by two or more agrees with one obligor to release him, and does so, and all the obligors are thereby discharged at law, equity will not afford relief against the legal consequences, although the release was given under a manifest misapprehension of the legal effect of it in relation to the other obligors.
It seems that there may be cases in which a court of equity will relieve against a plain mistake arising from ignorance of law. But where parties, upon deliberation and advice, reject one species of security and agree to select another under a misapprehension of the law as to the nature of the security thus selected, a court of equity will not, on the ground of misapprehension and the insufficiency of the security, in consequence of a subsequent event not foreseen, direct a security of a different character to be given or decree that to be done which the parties supposed would have been effected by the instrument which was finally agreed upon. The court would be much less disposed to interfere in such a case in favor of a particular creditor against the general creditors of an insolvent estate.
The appellant filed a bill on the chancery side of the Circuit Court of the United States for the District of Rhode Island setting forth that in January, 1820, Lewis Rousmaniere obtained from him two loans of money, amounting, together to $2,150, and at the time the first loan was made, Rousmaniere offered to give, in addition to his notes, a bill of sale or mortgage of his interest in the brig Nereus, then at sea, as a collateral security for the repayment of the money. A few days after the delivery of the first note, dated 11 January, 1820, he executed a power of attorney authorizing the plaintiff to make and execute a bill of sale of three-fourths of the Nereus to himself or to any other person, and in the event of the loss of the vessel to collect the money which should become due on a policy by which the vessel and freight were insured. In the power of attorney it was recited that it was given as collateral security for the payment of the notes and was to be void on their payment, on the failure of which the plaintiff was to pay the amount and all expenses and to return the residue to Rousmaniere. On 21 March, 1821, an additional sum of $700 was loaned, for which a note was taken and similar power of attorney given to sell his interest in the schooner Industry, this vessel being also still at sea.
On 5 May, 1820, Rousmaniere died intestate and insolvent, having paid $200 on account of the notes, and the plaintiff gave notice of his claim to the commissioners of insolvency appointed under the authority of the Insolvent Law of Rhode Island. The plaintiff in his bill alleged that, on the return of the Nereus and Industry, he took possession chanroblesvirtualawlibrary
of them, and offered the interest of the intestate in them for sale, and the defendants having forbade the sale, this bill was brought to compel them to join in it.
To this bill the defendants demurred and their demurrer was sustained in the circuit court, but leave was given to the plaintiff to amend. An amended bill was then filed in which it was stated that it was expressly agreed between the parties that Rousmaniere was to give specific security on the Nereus and Industry, and that he offered to execute a mortgage on them. Counsel was consulted on the subject, who advised that the power of attorney which was actually executed should be taken in preference to a mortgage, because it was equally valid and effectual as a security and would prevent the necessity of changing the papers of the vessels or of taking possession of them on their return to port. These securities were, it was alleged, executed with a full belief that they would and with intention that they should give to the plaintiff, as full and perfect as security as would be given by a mortgage.
The defendants having also demurred to the amended bill, the circuit court decided in favor of the demurrer and dismissed the bill, and an appeal was entered to this Court. At the February session, 1823, this Court considered that the appellant might be entitled to the relief prayed for in equity, but the respondents were permitted to withdraw their demurrer and to file an answer in the court below. 21 U. S. 8 Wheat. 174. The answer of the defendants admits the loans of money and the delivery of the promissory notes, and that but $200 was paid before the death of the intestate. The execution of the powers of attorney was also admitted, but it was denied that possession of the vessels was taken by the appellant, and they alleged their resistance of the attempt to take possession of them.
The answer also asserts ignorance of any agreement for a specific lien on the vessels except that imported by the language of the powers of attorney; that they had heard and believed that the appellant meant to be concerned as a partner in the voyage of one of the vessels, which was relinquished, and that afterwards he offered to loan the money on security, upon which the intestate offered to give a mortgage, but the appellant preferred taking the powers of attorney to avoid inconvenience, and took the powers of attorney by advice of counsel. The answer also states that a bill of sale of the vessels, dated the day before the death of the intestate, by which the vessels were intended to be conveyed to one Bateman, and which the respondents state they had heard and believed was intended to be executich the vessels were intended to be conveyed to one Bateman, and which the respondents state they had heard and believed was intended to be executich the vessels were intended to be conveyed to one Bateman, and which the respondents state they had heard and believed was intended to be executed on the evening of that day. The answer also alleges the insolvency of Rousmaniere chanroblesvirtualawlibrary
and that it existed a long time before his death, which they assert must have been known to the appellant, and that the intestate resorted to improper modes to keep up his credit.
The evidence taken in the case consisted of the deposition of Mr. Hazard, the counsel who drew the papers, and in which he stated that they were intended by both parties to have the effect of a specific lien or mortgage, and he advised them they would have that effect, and also the deposition of Mr. Merchant to show that the appellant admitted that the motive by which he was induced to make the loan was to compensate Rousmaniere for the disappointment sustained by his not uniting with him in a voyage of one of his vessels, and accordingly an agreement was made by which the appellant was to let Rousmaniere have a sum of money, and that he was to give a bill of sale of a certain vessel, but that afterwards he refused to take the same on account of the inconvenience and difficulties which might attend the same, and that he had consulted with Mr. Hazard upon the subject, who told him that he could or would draw an irrevocable power of attorney to sell, which would do as well, or words to that effect, and which was accordingly done.
The circuit court pronounced a decree declaring that the appellant had no specific lien or security upon either of the vessels and no equity to be relieved respecting them, and dismissing the bill with costs, from which decree, an appeal was entered to this Court.
On the part of the appellants it was contended that the decree ought to be reversed and a decree entered for the appellant.
That the answers to the bill do not respond to the only material facts in the cause, it being fully proved that the powers of attorney were intended to have the effect of a specific lien, the appellant is entitled to the relief he seeks upon the principles laid down in the former decisions of this Court. chanroblesvirtualawlibrary