Cooley v. Harris ( 1892 )

McGrath, J.

This is a bill filed to foi’eelose a mortgage dated June 11, 1886, given by defendants upon parcels A, B, O, D, and E, shown in the diagram on next page.

The bill alleges that parcels A and E were by mistake

•described in the mortgage as the E. ‡ of tbe N. W. i, and that the parcel B was described as in the S. W. i instead of the S. E. that at the time of the execution of the mortgage defendants owned no part of the E. ■of the N W. ¿, or of the S. W. but did own the E. $ of the N. E. ^ and parcel B of the S. E. £, and that the land intended to be described was the E. \ of the N. E. ¿ and said parcel B; and the prayer is for a reformation of the mortgage accordingly, as well as for the foreclosure.

The answer sets up that on April 12, 1875, defendant William H. Harris owned parcels A and B; that on that date he gave a mortgage to one Carter for $400 on said parcels; that November 12, 1877, desiring to take up the Carter mortgage, Harris, through one. Phineas Nichols, obtained a loan of $700 from one Mains, and gave a mortgage upon parcels A and B; that Mains agreed to-take up and discharge the Carter mortgage, and retained out of the consideration of the mortgage the sum of $440 for that purpose, paying to Harris but $360; that in April, 1878, defendants sold and conveyed by warranty deed, subject to the Mains mortgage of $700, parcels A and B to one Miller; that in 1878 Harris acquired parcel 0, and in November, 1879, he purchased parcel D; that on June 11, 1886, defendants went to the office of Phineas Nichols, whose business was, and for a long time prior thereto had been, the making of abstracts of titles in said county, and that Nichols told defendants that he was then the owner of parcels A, B, and E, and that he was desirous of selling the same.

“ That he then falsely and fraudulently, and with intent to deceive and defraud these defendants, and well knowing such statements to be false and untrue, informed these defendants that said lands were free and clear from any and all liens and incumbrances; that he further stated,, with like intent to deceive and defraud these defendants, that he had examined the records of the title to said lands, and had made an abstract thereof, and that the records showed said lands to be free and clear from all liens and incumbrances, whereas the facts were that the records showed, as these defendants are now informed and verily believe, and so charge the truth to be, that said lands were incumbered, and the said Phineas Nichole well knew that his statement in this respect was wholly false and untrue.

“These defendants further aver that the said Phineas Nichols made the foregoing false and fraudulent representations, well knowing the same to be false and fraudulent, and for the purpose and with the design of deceiving and defrauding these defendants; that he well knew that the mortgages hereinbefore referred to as the Carter mortgage and the Mains mortgage had not been discharged of record, and that they were still liens and incumbrances on the lands he was trying to sell to these defendants.

“ These 'defendants further aver that they relied upon the false and fraudulent statements so made as aforesaid by the said Phineas Nichols, believing him to be well qualified by his acquaintance with titles of lands in said county, and his business as a maker of abstracts, to know. as to the title to the lands he was offering for sale, and-thereupon agreed to purchase the same for the sum of fourteen hundred and fifty dollars; that the said Nichols thereupon made out a warranty deed of said lands, and had his son, one Garber A. Nichols, then present, sign and acknowledge the same, explaining to these defendants that, although he himself owned said lands, he had had the prior deed made out in his son’s name instead of his own, for convenience of transfer; that thereupon these defendants, fully relying upon the false and fraudulent representations of the said Phineas Nichols as hereinbefore set forth, and believing that they were getting full, complete, and perfect title to said lands, free and clear from all liens and incumbrances, made, executed, and delivered to the said Phineas Nichols the covenant mortgage sought to be foreclosed in this suit, covering, as they supposed, the lands so purchased of the said' Nichols as well as the lands of these defendants, situate upon section eight, and hereinbefore described; that the. said Phineas Nichols drew the said mortgage, and the same was signed and acknowledged by these defendants,’ and thereupon they received the deed, and the mortgage was delivered to the said Nichols, the mortgagee named therein. These defendants aver that the giving of said mortgage was upon the consideration that the representations of the said Nichols were true, and on no other •consideration.

The answer contains no prayer except that the bill be dismissed.

The court found the allegations of the answer to be true, and made a decree reforming complainants mortgage, finding the amount of that mortgage to be $1,847.91, deducted the amount of the Carter mortgage, and also the amount of the Mains mortgage, from the sum of complainant’s mortgage, and gave a decree for $560.36. From this decree complainant appeals.

Nichols appears to have acted for the owner of the-Carter mortgage, as all of the indorsements thereon are in his handwriting, the last of which bears date November 17, 1887. All of the indorsements on the Mains mortgage are also in the handwriting of Nichols, the last of which bears date September 6, 1888. There is no-question but that Nichols was in fact the owner of parcels A, B, and E at the time of the conveyance to Harris, and that the title stood in the son’s name for convenience merely, and it is clear that Nichols had clear knowledge of the existence of the Carter and Maine mortgages, and fraudulently misrepresented to defendants that those mortgages had been paid. In the hands of complainant the mortgage is subject to all the equities between the defendants and Nichols.¹ Dutton v. Ives, 5 Mich. 515; Nichols v. Lee, 10 Id. 526; Terry v. Tuttle, 24 Id. 213; Cooper v. Smith, 75 Id. 247; Castle v. Castle, 78 Id. 298.

It is contended that the answer contains no prayer for affirmative relief. The facts upon which the relief granted is based are fully set up in the answer, although not followed by a specific prayer for the relief to which such facts clearly entitle the defendants, and in such a case a court of equity will not hesitate to decree substantial justice, treating the prayer as amended.

We think, however, that the court erred in deducting from the amount of the complainant’s mortgage the amount of the Carter mortgage. Upon defendant’s own showing, Mains agreed to cancel and discharge the Carter mortgage, and Mains withheld §440 for that purpose. If that is true, defendants should have made that defense in the proceeding to foreclose the Mains mortgage, and were entitled to have offset in that proceeding tbe amount of tlie Carter mortgage. So far as appears, complainant is a purchaser in good faith of the Nichols mortgage. Defendants had full knowledge of the facts regarding the Mains mortgage. It does not appear that originally the duty to discharge that mortgage devolved upon Nichols, but upon Mains. So far as that mortgage was a valid one, defendants were entitled to protection against it, and to that extent only was Nichols subsequently obligated to discharge it; but to the knowledge of defendants it also was subject to the equities growing out of the agreement to discharge the Carter mortgage, and the fact that of the $700 for which it was given the mortgagors, who were the defendants, actually received but $260.

In this respect the decree will be modified; otherwise it is aflSrmed, with costs to complainant.

Long, Grant, and Montgomery, JJ., concurred.. Morse, C. J., did not sit.

1 No note was given with the mortgage, but it contains an agreement to pay the mortgage debt, and was assigned to the complainant before maturity of said debt, and the assignment duly recorded on the day of its date.