Parchen v. Chessman , 49 Mont. 326 ( 1914 )

MR. CHIEF JUSTICE BRANTLY

delivered the opinion of the court.

On December 26, 1897, the defendant executed and delivered to the plaintiff the following promissory note:

“$9,663.50. Helena, Montana, December 26, 1897.

“One year after date I promise to pay to Henry M. Parchen, or order, the sum of nine thousand six hundred and sixty-three and 50/100 dollars, for value received, together with interest thereon at the rate of ten per cent per annum from date until paid; and further agree that in the event of a suit to enforce the collection of this note a reasonable counsel fee, to be fixed and determined by the court, shall be added to and form a part of the judgment as damages. All rights and benefits conferred by the statute of limitations are expressly waived; it being expressly agreed that suit may be maintained to enforce collection hereof at any time after maturity, the provisions of the statute of limitations notwithstanding.

“Wm. A. Chessman.”

On November 26, 1902, a payment of $5,000 was made thereon, leaving a balance of $9,414.70. On March 11, 1911, plaintiff brought this action to recover this balance, with interest. The defendant answered, alleging several special defenses, vis.: (1) That plaintiff’s cause of action is barred by the limitation of eight years prescribed by section 6445 of the Revised Codes. (2) That on December 26, 1893, the defendant, having become liable to the plaintiff in the sum of $12,821.28, executed and delivered to the plaintiff his promissory note therefor due one year after date, to bear interest at the rate of ten per cent per annum; that renewals of this note were thereafter made from time to time until December 26, 1897; that on that date he executed the note in suit for the balance then remaining due; payments having in the meantime been made; that this note was intended, as a renewal pro tanto of the prior note; that it was intended by both plaintiff and defendant that it should be in the same form and of the same tenor as the original and prior renewal notes; that it was prepared by a scrivener who, by mistake, made use of a printed form containing the clause reciting the-agreement that defendant expressly waives “all rights and benefits conferred by the statute of limitations,” etc.; that none of the prior renewal notes contained this clause; that it was not the understanding or agreement or intention of the plaintiff and defendant that the clause referred to should be included in the note, but that, on the contrary, it was the understanding and agreement that the note should be of the same form, tenor and effect as all the former renewal notes, and should contain no other, further, or different obligations or promises; that defendant, believing that the note had been drawn in conformity with the understanding between himself and the plaintiff, and fully relying on the existence of such fact at the time of signing the note, signed the same when presented by the scrivener, without reading it; that, if he had been advised that the note contained the clause referred to, he would not have signed it; that immediately after' it was signed it was delivered to the plaintiff, and has never since been in the possession of the defendant nor seen by him; that the defendant had no knowledge that the clause had been inserted therein until the plaintiff’s complaint was served on him in this cause; that the preparation of the note was the personal act of the scrivener who, by his own mistake, included the said clause therein, without the knowledge or consent of either the plaintiff or the defendant, and contrary to their understanding and agreement, and that no demand was ever made by plaintiff upon the defendant that the said note should contain any agreement touching the statute of limitations. The prayer demanded that the note be reformed by striking therefrom the clause in question, and that plaintiff’s cause of action be declared barred by the statute supra. (3) After a recital of substantially all the foregoing facts, it is further alleged that neither prior to the time of the execution of the note nor at that time, nor thereafter, did any consideration pass from the plaintiff to the defendant, nor was any received by the defendant, or by any person in his behalf, on account of which he agreed to incorporate in said note the clause referred to; that the minds of plaintiff and defendant never met so as to constitute said clause a contract between them; and that said clause was and is without consideration, and of no binding force and effect. Demand was made that the clause be held void, and that plaintiff’s cause of action be declared barred by the statute. (4) It is further alleged that the clause in question is itself barred by the statute. To these several defenses, the plaintiff interposed general demurrers, which were sustained, and, defendant declining to plead further, the court rendered judgment for the plaintiff for the full amount of the balance due, together with costs, including an attorney’s fee. Defendant has appealed.

1. The first contention made by counsel presents the question —a new one in this state — whether such an agreement as that embodied in the note in suit is void because against public policy. If this contention can be maintained, of course the agreement was not effective for any purpose, and, though the note was renewed by the payment made on November 26, 1902 (Rev. Codes, sec. 6472), the statute began to run again from that date, and the right to recover was fully barred when this action was commenced.

Can it be said that the agreement contravenes the public policy of this state ? What is the public policy of a state, and what [1] is contrary to it, are questions to be determined, not by the private convictions or notions of the persons who happen for the time to be exercising judicial functions, but by reference to the enactments of the law-making power, and, in the absence of them, to the decisions of the courts. And when the legislature, exercising its constitutional powers, has spoken upon a particular subject, its utterance is the public policy of the state on that subject. (MacGinniss v. Boston & Mont. etc. Co., 29 Mont. 428, 75 Pac. 89; Vidal v. Philadelphia, 2 How. (U. S.) 127, 11 L. Ed. 205; United States v. Trans-Missouri Freight Assn., 166 U. S. 290, 41 L. Ed. 1007, 17 Sup. Ct. Rep. 540.) As to what is the policy of the law on the subject of the statute of limitations in this state in our opinion is clearly determined by [2] legislative utterance. Section 6475 of the Revised Codes declares: “The objection that the action was not commenced within the time limited can be taken only by answer. The corresponding objection to a defense or counterclaim can be taken only by reply except where a reply is not required, in order to enable the plaintiff to raise an issue of fact, upon an allegation contained in the answer.” If this provision is to be assigned the- meaning which its language clearly imports, the legislature has left it entirely optional with the party against whom a’ cause of action is alleged to avail himself of the protection of the statute or to forbear it; in other words, it has provided solely for the benefit of one who occupied the position of a defendant, as well as that of the plaintiff when the necessity arises for him to make defense to a counterclaim interposed by the defendant — a defense which he may invoke if he chooses. If he omits to invoke it at the proper time and in the proper way, it does not avail him under any circumstances, even though it appears incidentally that the cause of action alleged against him is completely barred. (Grogan v. Valley Trading Co., 30 Mont. 229, 76 Pac. 211; American Min. Co. v. Basin & Bay State Min. Co., 39 Mont. 476, 24 L. R. A. (n. s.) 305, 104 Pac. 525; Cullen v. Western etc. Title Co., 47 Mont. 513, 134 Pac. 302.) It is of no concern to the court or to the public that this is so, whether the omission is the result of oversight or of a prior agreement with the adversary party.

If this is the correct theory — and we are satisfied that it is— section 6181 of the Revised Codes is express authority for the [3] proposition that a party may waive the benefit of the statute before or after the expiration of the prescribed limit, not only by either of the acts mentioned in section 6472, supra, but also by express agreement based upon a consideration, though made contemporaneously with, and as a part of, the principal agreement or obligation out of which the action has arisen. This section provides: “Anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.” This provision does not prescribe the time when nor the mode by which the waiver may be made effective, nor does it impose any restriction or limitation upon the right of waiver. It must therefore be assumed that the party desiring to waive his right is free to do so in any way and at any time he chooses.

When we come to examine the decisions in other jurisdictions, we find them at variance with regard to the policy of the law upon the subject of waiver by contract. In Kentucky it is held that such a contract is against public policy and void. (Moxley v. Ragan, 10 Bush (Ky.), 156, 19 Am. Rep. 61; Wright v. Gardner, 98 Ky. 454, 33 S. W. 622, 35 S. W. 1116; Union Cent. Life Ins. Co. v. Spinks, 119 Ky. 261, 7 Ann. Cas. 913, 69 L. R. A. 264, 83 S. W. 615, 84 S. W. 1160.) In a later decision by the same court, however, an agreement in a contract of fire insurance limiting the time within which an action may be brought thereon to a period less than that provided by the statute is held valid. (Smith v. Herd, 110 Ky. 56, 60 S. W. 841, 1121.) The rule announced in the first three cases cited is approved generally by the courts of Mississippi, Tennessee, Maine, Texas and New York. (Crane v. French, 38 Miss. 503; Mills v. Bennett, 94 Tenn. 651, 45 Am. St. Rep. 763, 30 S. W. 748; Moore v. Taylor, 2 Tenn. Ch. App. 556; Trask v. Weeks, 81 Me. 325, 17 Atl. 162; Smith v. Gillette, 59 Tex. 86; Shapley v. Abbott, 42 N. Y. 443, 1 Am. Rep. 548; Mutual Life Ins. Co. v. United States etc. Co., 82 Misc. Rep. 632, 144 N. Y. Supp. 476.)

While expressing a doubt that an agreement made as a part of the original contract, or a subsequent agreement to waive the statute for all time, is valid, the supreme court of California has decided that an agreement for an extension for a definite or reasonable time is valid. (Wells Fargo & Co. v. Enright, 127 Cal. 669, 49 L. R. A. 647, 60 Pac. 439; State Loan etc. Co. v. Cochran, 130 Cal. 245, 62 Pac. 466, 600.) The same conclusion is announced by the courts of Missouri, Vermont, New Jersey and South Carolina. (Bridges v. Stephens, 132 Mo. 524, 34 S. W. 555; Lyndon Savings Bank v. International Co., 78 Vt. 169, 112 Am. St. Rep. 900, 62 Atl. 50; Quick v. Corlies, 39 N. J. L. 11; Lowry v. Dubose, 2 Bail. (S. C.) 425.)

The supreme court of the United States (Riddlesbarger v. Hartford Ins. Co., 7 Wall. (U. S.) 386, 19 L. Ed. 257) has declared that a stipulation in a policy of fire insurance limiting the time within which suit may be brought to a period shorter than that prescribed by the statute is not invalid as against public policy, and will be enforced as any other agreement. If such an agreement does not contravene public policy, it is difficult to understand how an agreement by which the prescribed period is extended, or by which the benefit of the statute is waived for a definite time, or for all timé, is not valid. The one as effectually sets aside the statute as does the other, and, if the one is valid, no reason can be suggested why the other is not also. Recognizing this as the logical conclusion from the premise that a waiver of the protection of the statute by agreement is not against public policy, the courts of Vermont and New Jersey both hold that the agreement may be made a part of the original contract, or during the statutory period, and that when once made it is continuous, unless by its terms it is limited to a specified time. (State Trust Co. v. Sheldon, 68 Vt. 259, 35 Atl. 177; Lyndon Savings Bank v. International Co., supra; Quick v. Corlies, supra.) In these cases the agreement of waiver was upheld on the ground that defendant, having received the benefit of it, was estopped to repudiate it. • It seems to us that, if such an agreement is enforceable at all, it is upon the broad principle that it has been so agreed by the -parties. Be this as it may, the result reached by these cases is the logical one, once the premise is admitted that such agreements do not contravene public policy.

We are not required in this case to determine definitely whether by the agreement in controversy herein the defendant bound himself to refrain from pleading the statute for all time, or whether he bound himself for a reasonable time only, viz.: Until the expiration of an additional period of eight years after the expiration of that prescribed by the statute. Nothing appearing to overcome the presumption that a sufficient consideration passed to the defendant at the time the agreement was made (Rev. Codes, see. 5010), the action commenced within three and one-half months of the expiration of the statutory limit was, upon either theory, commenced in time. Plaintiff’s demurrer to this defense was properly sustained. For the same reason the demurrer to the fourth defense was properly sustained, for, if the defendant became bound by the agreement at all, he waived his right to rely upon the statute for the full period of eight years from the date at which the cause of action would otherwise have been fully barred, viz.: Eight years after November 26, 1910.

2. The second defense alleged is not a model pleading; but we think it states a prima facie case of mutual mistake, and hence [4] is sufficient to require a reply by plaintiff. It is true that the defendant was guilty of negligence in failing to read the note before he signed it. (Rev. Codes, sec. 4983.) But if the facts alleged are accepted as true, the plaintiff was not himself free from negligence. The purpose of the parties, as shown by the allegations of the answer, was to renew a note which had been renewed from year to year since December 26, 1893, by substituting therefor one of the same form and tenor. None of the renewal notes had contained the objectionable clause. It was, moreover, the understanding of the parties that the new note should be changed only so far as to effect a change in the date of payment to a year later. If this was the fact — and for present purposes we must assume that it was — the mistake was mutual, and the new note as drawn by the scrivener did not represent the contract as actually made. If the parties to a contract agree upon terms and conditions named by them, and through mistake the writing embodying the agreement signed by them, or either of them, fails to express the agreement as made, or includes therein terms and conditions not agreed upon, the result is that there is no contract between them. Under such circumstances a court of equity will reform the written evidence of the contract so as to make it express the terms of the agreement as actually fixed by the parties. The rule thus stated was recognized by this court in Fitschen v. Thomas, 9 Mont. 52, 22 Pac. 450, and applied in American Min. Co., Ltd., v. Basin & Bay State Min. Co., supra. The facts alleged bring the case within the principle of the latter case. If nothing else [5] appears, the fact that the party seeking reformation of the contract failed to read it before signing it will preclude relief; but negligence in this behalf may be excusable under some circumstances. Otherwise no case could arise in which relief could he granted if the party asking it should appear to be open to the imputation of negligence in any degree.

The term “mistake” involves the conception that he to whom the fault expressed by it is imputed has been guilty of some degree of negligence which may or may not be excusable when viewed in the light of the circumstances of the particular case. Courts of equity are not bound by cast-iron rules. The rules by which they are governed are flexible and adapt themselves to the exigencies of the particular case. Eelief will be granted when, in view of all the circumstances, to deny it would permit one party to suffer a gross wrong at the hands of the other. So [6] it is held generally that where the parties intrust the duty of formulating a writing embodying their agreement to an attorney or scrivener, and he, hy his own mistake or fraud, embodies in it stipulations and conditions other than those agreed upon, the party against whom it is sought to be enforced may have it reformed, though it was signed by him and delivered to the other party, without reading. (Moore v. Copp, 119 Cal. 429, 51 Pac. 630; Kilmer v. Smith, 77 N. Y. 226, 33 Am. Rep. 613; Albany City Savings Inst. v. Burdick, 87 N. Y. 40; Palmer v. Hartford Ins. Co., 54 Conn. 488, 9 Atl. 248; Smelser v. Pugh, 29 Ind. App. 614, 64 N. E. 943; Story v. Gammell, 68 Neb. 709, 94 N. W. 982; Taylor v. Glens Falls Ins. Co., 44 Fla. 273, 32 South. 887; Silbar v. Ryder, 63 Wis. 106, 23 N. W. 106; Greene Bay etc. Canal Co. v. Hewitt, 62 Wis. 316, 21 N. W. 216, 22 N. W. 588.)

The ease of Hennessy v. Holmes, 46 Mont. 89, 125 Pac. 132, has been understood to declare the rule that a failure by one of the parties to read a contract before signing it, when he has had full opportunity to acquaint himself with its contents, and there has been no fraud or misrepresentation by the other party, is such negligence as will preclude relief, without regard to the attendant circumstances. So understood, the decision unduly restricts the scope of the rule, though it is fully sustained by the authorities cited. In so far as it conflicts with the views herein expressed, it is to be deemed overruled. As stated before, the term “mistake” carries with it the idea of fault in him to whom the mistake is imputed. The allegation of mutual mistake imputes negligence to both parties, and this mutuality is the basis of the rule of relief on the ground of mistake. To apply the rule in all its rigidity as it is understood to be declared by the Holmes Case would preclude relief in any case, even though the mistake is mutual, and the circumstances are such as to excuse the negligence of the complaining party.

Nor do we think that under the circumstances the defendant [7,8] is open to the imputation of laches because he did not seek to have the note reformed earlier. It appears that, after it was delivered to the plaintiff, defendant did not see it, or know that it included the agreement in question, until the present action was brought. If this is true, he had, up to that time, been justified in resting upon the assumption that the note had been drawn in accordance with the understanding and agreement had at the time it was executed. Since it had been in the possession of the plaintiff, and had not been seen by the defendant, the latter could have had no knowledge that the mistake had been made until he ascertained the fact from the copy of the complaint served upon him. Prwna facie this was sufficient to excuse his delay, for he was not required to act until he discovered that a mistake had been made. In any event mere delay is not sufficient ground for the imputation of laches. (Wright v. Brooks, 47 Mont. 99, 130 Pac. 968.)

Nor is the defendant to be denied relief because he does not [9] allege a previous demand upon plaintiff to correct the mistake. If he had no knowledge of the mistake, how could he make a demand for its correction? By commencing the action, the plaintiff manifested his intention to enforce the contract as written. A demand by defendant before filing his answer would have been an idle ceremony. ‘ ‘ The law neither does nor requires idle acts.” (Rev. Codes, see. 6200.) The demurrer to this defense should have been overruled.

3. It is contended by counsel for defendant that the court was in error in sustaining the demurrer to the third defense, because, upon the facts stated, the agreement in question was [10] without consideration. The argument proceeds upon the assumption that the agreement was wholly independent of the note, and must have been made upon a consideration other than that of the note itself. Counsel cite some cases which consider such independent agreements, as, for instance, a verbal promise not to plead the statute, or an indorsement upon the note itself pending the running of the statute. Such an agreement, of course, is not enforceable if not supported by an independent consideration. (Kellogg v. Dickinson, 147 Mass. 432, 1 L. R. A. 346, 18 N. E. 223; Shapley v. Abbott, supra; Green v. Coos Bay Wagon Road Co. (C. C.), 23 Fed. 67, 10 Saw. 625.) On this point it is sufficient to say that, if the agreement was the result of a mutual mistake of the parties, it ought to be eliminated from the contract. If it was not incorporated therein by mistake, then the pre-existing indebtedness was a sufficient consideration for the entire contract. We know of no rule by which a party may select out of a contract one stipulation and avoid it by showing that it is not founded upon a consideration, while admitting that the contract is otherwise unobjectionable. The demurrer to this defense was properly sustained.

The judgment is reversed, with directions to the district court to overrule the demurrer to the second defense.

Reversed, with directions.

Mr. Justice Sanner concurs.