Pinchback v. . Mining Co. , 137 N.C. 172 ( 1904 )

The defendant asked the court to charge the jury: "If the jury shall believe from the evidence that the defendant company contracted to sell and to convey to the Bessemer Mining Company all of its property of every description; that it was represented to Major Guthrie and Mr. Cooley, the attorneys instructed to draw the deed, that the 26 lots described in the complaint had been sold; that by reason of this representation, which was made by the secretary of the defendant company, the said 26 lots were excepted from said deed; that but for this representation the said 26 lots would have been conveyed by said deed, the jury will answer the fifth issue ``Yes.'" This instruction was refused, and the defendant excepted. From a judgment upon the verdict the defendant excepted and appealed. The defendant was entitled to the instruction asked. It was not alleged that the officers of the defendant company did not know that the lots were excepted when they signed the deed, but that the insertion of the exception was the result of Mr. Smith's mistake in saying to the draftsman that the lots had been conveyed. It is clear how the mistake was made. Mr. Smith was evidently not advertent to the difference between the status of the 26 lots as it existed and the status of those which had been in fact conveyed. Major Guthrie testifies that if he had been informed as to the real condition of the title to the lots he would not have excepted them from the operation of the (179) deed. If the jury accept his testimony there can be no question in respect to the equity for correction. If one sign a deed supposing it to convey black acre, and the insertion of white acre was purposely made by the draftsman, it is fraud in the factum. It is not the "act and deed" of the party signing. Lee v. Pearce, 68 N.C. 76. If the insertion of white acre was caused by the mutual mistake of the parties under an erroneous impression that it was included in the negotiation, equity will give relief, not upon the ground that both parties were ignorant of the fact that it was included in the description, but that it was so included by mistake. Ordinarily, the mistake will be shown by extrinsic evidence. When, however, the terms of the negotiation — the contract pursuant to which the deed is executed — are inserted in the deed as essential recitals, as for the purpose of showing the power vested in the person signing, and the description of the property is inconsistent with such recital, a court of equity will make the correction upon inspection of the deed. "When the instrument purports to carry into execution an agreement which it recites, and exceeds or falls short of that agreement, there is no difficulty in rectifying the mistake; for then there is clear evidence in the instrument itself that it operates beyond its real intent. If, however, there is no recital of any agreement, but a mistake is alleged and extrinsic evidence tendered in proof that it was made, the limits of the equity for correction are most difficult to define. The prima facie presumption of law is that the written contract shows the ultimate intention, and that all previous proposals and arrangements, so far as they may be inconsistent with that contract, have been deliberately abandoned. It seems, however, that the instrument may be corrected if it is admitted or proved to have been made in pursuance of a prior agreement by the terms of which both parties (180) meant to abide, but with which it is in fact inconsistent, or if it is admitted or proved that an instrument intended by both parties to be prepared in one form has, by reason of some undesigned insertion, or omission, been prepared or executed in another." Adams Eq., 109; Vickers v. Leigh, 104 N.C. 248; Fort v. Allen, 110 N.C. 183; (191.)

If the defendant had rested its defense upon the recitals in the deed and asked for correction, or relied upon the recitals as a defense to the plaintiff's demand, we are of the opinion that the court should have either made the Mining Company a party, so that the title should be settled before a decree was made, or dismiss the action. A court of equity will not compel a trustee to sell a doubtful title, especially where it is apparent upon the face of the bill that by bringing in other parties the title may be settled before decree. The plaintiff, however, was entitled to introduce evidence to show that in truth the recitals did not set forth the real contract, or that, as contended here, the contract set out in the recitals was modified and that the deed, taken in all of its parts, correctly expressed the purpose and intention of the parties. Certainly, either upon the face of the deed or upon Major Guthrie's testimony, if accepted by the jury, the defendant company had no beneficial interest in these lots.

The question thus arises, what effect Mr. Smith's testimony has upon the rights of the parties. He concurs with Major Guthrie in many respects, but goes further and says that he explained to the stockholders of both companies the status of these 26 lots — that the defendant company had made a contract with Runlet by which he had subscribed for certain shares, which when paid for entitled him to 26 lots; that Mr. Carrington suggested that the lots be excepted so that the company should be in a position to carry out the contract; that he gave the written contract with Runlet to the secretary of the Mining Company. It would seem clear that under the contract expressed in the (181) resolutions the purchase money due by Runlet belonged, when paid, to the Mining Company. This was recognized by Mr. Smith when he delivered the writing to the secretary. The exception of the lots from the operation of the deed, from this point of view, left the legal title in the defendant company for the purpose of conveying to Runlett, when he complied with his contract, the purchase money going to the Mining Company. Runlett having failed to carry out his contract, it would seem that they should be conveyed to the Mining Company. Mr. Smith, however, says that it was understood that he was to transfer to Runlett, when paid for, some shares belonging to himself. It is not very clear what were the terms of this understanding, or what was done by Mr. Smith. He says, however, that Runlett never took the shares. Whether the contract made by the defendant company with the Mining Company was modified by the conversations testified to by Mr. Smith is not very clear.

While it is true, as contended by plaintiffs, that unless expressly required by the by-laws, it is not necessary that a written record of the proceedings of the stockholder's meeting be made, and that they may be proven by parol, it is also true that before the solemn acts of a corporation, especially when contractual, can be set aside, it must appear that a meeting was held and that the stockholders, acting as such, voted to do so. Duke v. Markham, 105 N.C. 131; 18 Am. St., 889. It would endanger the integrity of corporate contracts if, after being solemnly made and reduced to writing in the form of resolutions, they could be changed and modified by mere conversational statements of the stockholders. We should require very strong and satisfactory proof, both as to the manner and clearness of such conduct, before giving it such effect.

The remarks of Mr. Carrington could not be given the effect of surrendering the rights of the Mining Company in the property. (182) It is true that Mr. Smith says that all parties assented to the exception of the lots. Major Guthrie says the same; but it is evident that they did not understand such consent in the same way.

It seems that the defendant corporation has gone into the hands of a receiver and its property sold. This of course, does not affect the existence of the corporation. The officers of the defendant corporation being, as they say, convinced that their corporation does not own any beneficial interest in the lots, very properly brought the facts to the attention of the court — they could not have done less when called upon by the plaintiff to sell property which they do not believe belongs to them. It is not material that Mr. Smith does not wish the defense made. They, in justice to themselves, could not have done otherwise.

There are a number of exceptions to the introduction of testimony which, in our view of the case, are not material. We are of the opinion that the judgment should be reversed and a new trial ordered.

If the defendant company wishes to have the deed corrected, we think, first, that in the absence of any parol evidence, sufficient appears on the face of the deed to entitle it to have a decree; second, that if the plaintiff seeks to repel this equity by showing by parol evidence that there was a modification of the contract by the stockholders of both corporations, he should be required to show clearly that such modification was made by the act of all of the stockholders; third, if the defendant company relies upon the equity to have the title settled before any sale is made, all parties in interest should be brought before the court. In the present condition of the title neither corporation can sell the lots for their face value. It would seem that this case is a proper one for a reference under the provisions of section 421, subsection 5, of The Code. It was one of which a court of equity had exclusive jurisdiction (183) prior to 1868. The Mining Company should be made a party, to the end that a final decree may be made settling the title. In view of the peculiar condition of the appeal neither party will recover costs.

New trial.

WALKER, J., did not sit on the hearing of this case.

DOUGLAS, J., concurs in the result only.

Cited: Printing Co. v. Herbert, post, 325.