US SUPREME COURT DECISIONS

By a written agreement between S. and E., S. agreed to convey land to E. "subject to" an encumbrance on it of $9,000, and E. agreed to pay to S. $15,000, by conveying to him land, some of it "subject to" an encumbrance. Without any further bargain, S. delivered to E. a deed, conveying the land "subject to" the encumbrance, and also containing a clause stating that E. assumes and agrees to pay the debt secured by the encumbrance as a part of the consideration of the conveyance. E., being ill, did not read the clause in the deed respecting the assumption of the debt, but discovered it afterwards, and promptly brought this suit to have the deed reformed. He had made two payments of interest on the encumbrance. In the negotiations prior to the agreement, S., through his agent, had solicited E. to assume and agree to pay the encumbrance, but E. refused. S. chanrobles.com-redchanrobles.com-red

Page 108 U. S. 133

understood the difference in meaning between the two forms of expression. D., the owner of the encumbrance, was no party to the transaction, acid had done nothing in reliance on the deed. He was, on his own application, made a party to the suit, and also filed a cross-bill for a foreclosure of the encumbrance, and the enforcement of a personal liability against S. and E. for the debt. The circuit court made a decree dismissing the bill in the original suit, and adjudging that E. had agreed with S. to pay the amount due on the encumbrance; that S. and E., or one of them, should pay the debt due to D., and in default thereof the land should be sold and the deficiency reported, and that if S. should pay any part of the debt, he might apply for an order requiring E. to repay the amount to him. On an appeal by E.,

Held:

1. The decree was a final decree, as to E.

2. The amount involved in the original suit was the $9,000.

3. The agreement created no liability on the part of E to pay the debt to D.

4. There was a departure in the deed, through mutual mistake, from the terms of the actual agreement.

5. Under the special circumstances of the case, E. had a right to presume that the deed would conform to the written agreement, and was not guilty of such negligence or laches in not observing the provisions of the deed as should preclude him from relief, nor was he guilty of any laches in seeking a remedy.

8. The payment by E. of interest on the encumbrance was not inconsistent with his not having assumed the payment of the debt.

7. E. is entitled to have the deed reformed.

The case of Snell v. Insurance Co., 98 U. S. 85, cited and applied.

Bill in equity to reform a contract.

In February, 1876, George A. Sackett and John A. Elliott executed a written agreement under seal which provided that if Elliott should first make the payments and perform the covenants thereinafter mentioned on his part to be made and performed, Sackett agreed to convey to him " in fee simple, clear of all encumbrances, except as stated, whatever," by a warranty deed, "the house and lot known as No. 166 Calumet Avenue, the lot 50 x 127 feet," in Chicago, Illinois, and to assign the insurance policy then "on said improvements," and to pay to Elliott $50; that Elliott agreed to pay to Sackett $15,000, "subject to an encumbrance now on said property" of $9,000,

"in the manner following: lots 8, 9, and 10, block 5, Pittner & Son's addition to So. Evanston, being 150 x 200 feet, subject to an encumbrance of $1,750, and interest at eight percent from June, 1873; also, lot one (1), block seven (7), Grant's

Page 108 U. S. 134

subdivision of So. Evanston, and 120 acres of land, Palo Alto Co., Iowa; the two last-named pieces of property are clear of encumbrances, and title to pass by good and sufficient warranty deeds, and to pay all taxes, assessments, or impositions that may be legally levied or imposed upon said lots, except and after the fourth installment of South Park assessment,"

and, in case of the failure of Elliott to make either of the payments, or perform any of the covenants on his part, the contract to be forfeited and determined at the election of Sackett, and Elliott to fulfill all payments made by him on the contract, and such payments to be retained by Sackett in full satisfaction and liquidation of all damages by him sustained, and he to have the right to reenter and take possession.

By a warranty deed dated March 8, 1876, acknowledged the same day and recorded March 10, 1876, Sackett and his wife conveyed to Elliott the Calumet Avenue property by a proper description. The deed expressed a consideration of $15,000, and contained this clause:

"This conveyance is made subject to a trust deed executed by the parties of the first part [Sackett and wife] to John De Koven, on the (10th) tenth day of May, 1870, securing the notes of said George A. Sackett to Hugh T. Dickey, for nine thousand dollars, due four years from that date, with interest of nine percent per annum, interest payable semiannually, and a further extension of payment, commencing on the tenth day of May, 1874, for same amount above mentioned (nine thousand dollars), payable in five years from said date, with interest of nine percent, the interest notes payable semiannually, which debt, with its interest, the said party of the second part [Elliott] assumes and agrees to pay as part of the consideration of this conveyance, or purchase price above stated. The covenants hereinafter are subject to the above encumbrance."

Then follow covenants of seizing and warranty, and against encumbrances.

The controversy in the present case arises out of the difference between the written agreement executed by the parties and the deed to Elliott, there being no question as to the conveyances chanrobles.com-redchanrobles.com-red

Page 108 U. S. 135

by Elliott of the land which he agreed to convey. By the agreement, the Calumet Avenue property was to be conveyed subject to the $9,000 encumbrance. By the deed, the conveyance is not only made subject to the encumbrance, but Elliott is made to assume and agree to pay the $9,000 debt as part of the consideration of the conveyance, or purchase price of $15,000.

In April, 1877, Elliott filed a bill in a state court in Illinois against Sackett, praying that the deed be reformed by striking therefrom the words stating that Elliott assumes and agrees to pay the $9,000 debt, as part of the consideration. The bill alleges that the consideration for the agreement of Sackett to convey the Calumet Avenue property to Elliott was the agreement of Elliott to convey to Sackett the other property named in the written agreement; that one Hill as agent of Sackett, solicited Elliott to purchase the Calumet Avenue property; that during the negotiations Hill and Sackett solicited Elliott to assume the payment of the encumbrance, but Elliott refused to assume any liability on account of it, and insisted that he would simply purchase the property subject to the encumbrance, and thereupon the written agreement was made; that the statement in the deed that Elliott assumes and agrees to pay the encumbrance as a part of the consideration for the premises was contrary to the mutual understanding between Hill and Sackett and Elliott, and contrary to the written agreement; that Elliott, when he received the deed, was suffering under physical infirmities and mental distress, and did not examine the deed as carefully as he should otherwise have done, but had the deed recorded, believing that Sackett had acted in good faith, and had made the deed in conformity with the understanding of the parties and the written agreement, and that Elliott had recently discovered the mistake in the deed.

In June, 1877, Dickey, the owner of the $9,000 note made by Sackett and secured by the deed of trust, was, by an order of the state court, on his petition, made a defendant in the suit, and allowed to file an answer and a cross-bill. His answer controverts the material allegations of the bill. A few days later, on the petition of Dickey, the suit was removed into the chanrobles.com-redchanrobles.com-red

Page 108 U. S. 136

Circuit Court of the United States for the Northern District of Illinois, and Dickey filed a cross-bill in the latter court, making as defendants Sackett and his wife, De Koven, the trustee, Mattocks, his successor in the trust, Elliott, and Underwood, the tenants of Elliott. The cross-bill alleges that the whole amount secured by the note and the trust deed is due, and that by the terms of the conveyance to Elliott he became liable to pay the debt to Dickey, and prays for a sale of the premises to pay the amount due, and a foreclosure of the equity of redemption of the defendants, and the payment of the debt out of the proceeds of sale, and a decree against Sackett and Elliott for any balance due beyond the proceeds of the sale.

Sackett answered the original bill. The answer admits that Sackett entered into an agreement in writing to convey the premises "in a certain manner and on certain conditions," the exact words and terms of which he does not remember. It admits that Sackett at the time of the negotiation with Elliott for the sale of the premises, solicited Elliott to assume and agree to pay the encumbrance of $9,000. It then proceeds:

"And this respondent denies that the said complainant refused the said solicitations and request of this defendant, but this respondent avers and will at the proper time and place, prove the truth to be, that when the negotiations, conversations, and details preliminary to the final completion of the transactions upon which the suit was brought were ended and the parties were ready to close the transaction by the delivery of the deeds, it was fully and fairly understood by the parties to the same that a warranty deed conveying the said premises, 166 Calumet Avenue, should and would be accepted by the said Elliott with the condition of conveyance therein provided, viz., that the said Elliott did assume and agree to pay, as a covenant of said deed, the before-mentioned $9,000, and interest semiannually, and the warranty deed of this defendant contained that provision accordingly."

The answer also avers that Elliott carefully read over the deed in the office of Hill at the time of the delivery of the papers in the transaction, in the presence of Sackett,

"being fully aware of and noting especially, as this defendant believes,

Page 108 U. S. 137

from his best recollection, the said clause in said deed which complainant now desires shall be expunged."

In March, 1878, Elliott answered the cross-bill, setting up that the clause in the deed from Sackett and wife as to the agreement by Elliott to pay the encumbrance was inserted by mistake or fraud on the part of Sackett or his agent, and repeating the averments of his original bill.

Replications were filed to the answer of Sackett to the original bill and to the answer of Elliott to the cross-bill, and the cross-bill was taken as confessed as to the other defendants in it, and the cause was referred to a master to take proofs and report the same to the court, with the amount due to Dickey. Proofs were taken and the causes were brought to a hearing thereon. The court made a decree dismissing the original bill for want of equity, and adjudging that all the material allegations in the cross-bill are proved; that the equities are with Dickey; that there is due to him from Sackett $11,399.28, with interest, and that Elliott, for a valuable consideration, assumed and agreed with Sackett to pay the amount due on the mortgage to Dickey. The decree then provides that Sackett and Elliott, or one of them, shall pay to Dickey, within one day from the date of the entry of the decree, the amount so due to him, with interest and costs of suit, and that, in case the payment is not made, the premises be sold by a master, and that he report any deficiency in the proceeds of sale to pay the amount due. The decree concludes with providing that in case Sackett shall pay such indebtedness, or any part thereof, he shall have leave to apply to the court, on notice to Elliott, for a further order at the foot of the decree, requiring Elliott to repay to Sackett the sum so paid on said indebtedness. Elliott has appealed to this Court. chanrobles.com-redchanrobles.com-red

Page 108 U. S. 139