Town of Essex v. Day

Loomis, J.

It is not necessary for us to consider in this case whether the bonds issued by the town are tobe regarded as negotiable and therefore protected in the hands of a bond fide holder against the correction which the plaintiffs seek to procure. We may assume for the purposes of this case, that, in the absence of notice on the part of the defendant of the error claimed by the plaintiffs to have intervened in the printing of the bonds, the correction could not be made.

Starting with this assumption, the questions which present themselves for consideration are the following:—

1. Have the plaintiffs, through their agents, been guilty of such negligence, either in the original execution and issuing of the bonds, or in the seeking of a correction of the error when discovered, as precludes them from the equitable relief which they seek ?

2. Did the'first purchaser of the bonds, and afterwards the purchaser from him, and finally the defendant at the time of his purchase, have such knowledge of the error in the bonds, either actual or to be imputed, as gives the plaintiffs a right, as against them, to the equitable relief which they seek ?

3. Was the error one of such a character that it can be corrected by a court of equity ?

4. Supposing the plaintiffs not to be precluded by their own negligence from the relief sought, and the defendant not to be protected by want of notice, has the town so far exercised its claimed right of option to call in the bonds at the end of ten years, as to stand in a position to assert the equitable rights which it claims ?

These are the principal questions in the case, each covering some minor questions that do not need to be stated separately; besides which there are some questions made with regard to the decree which lie wholly outside of these principal ones and which, though not of great importance, will need some notice.

1. And first—Have the plaintiffs been guilty of a fatal negligence? They had made a reasonable provision for the printing of the bonds, and for the printing of them as ten-twenty bonds. It is found that the town agent gave to Mr. Walklejq who procured the printing of the bonds for all the towns, a written memorandum of the bonds to be printed for the plaintiffs, “which called for ten-twenty bonds only,” and that Mr. Walkley delivered this memorandum to the printing companju The plaintiffs so far therefore had used reasonable care. It is only in the execution and issuing of the bonds that the negligence exists. It is found that none of the agents of the town who subscribed the bonds, namely, the first selectman, 'the treasurer and the special agent, observed the mistake, and that they were in fact all ignorant of it until several years later, when the Chelsea Savings Bank called their attention to it. It is specially found that the treasurer, who was charged more especially with the duty of vigilance in every thing affecting the finances of the town, signed the bonds without reading them, supposing that they were payable at the option of the town in ten years, and it may be assumed that none of the signers read 'them, or read them with proper attention; There is here unquestionably a reprehensible carelessness; a lack of intelligent attention to the matter that must be regarded as not only unreasonable but culpable. We have no disposition to defend, or even to excuse, such conduct. The question however, as we conceive, is not so much whether a culpable negligence existed, as it is, whether such negligence should operate to bar the plaintiffs from relief against this defendant. This negligence is not of that extremest kind which the courts sometimes characterize as the equivalent of fraud. It was not recklessness; it was mere want of care. There was no indifference to the effect; it was simply an honest assumption that all was right. It is to be classed only with those incautious and unbusiness-like acts which are constantly presenting themselves and would not have been noticed but for some mischief that, they have wrought. Thus a man carelessly signs a note for a thousand dollars which he supposed to be for a hundred dollars. Through a mistake of the scrivener it is thus written, when he had directed that it be written a hundred, and he signs it without reading it. This is certainly gross carelessness; but should it debar him from all remedy against a party who receives the note knowing of the mistake? Would not a court of equity enjoin the holder who took it with full knowledge against its collection ? Would it be good in his hands, in any court admitting of equitable defences, for more than a hundred dollars? We think therefore that the negligence of the plaintiffs in the execution and issuing of the bonds, was not of such a character as to. preclude all equitable relief against the present defendant.

But it is claimed by the defendant that, if this be so, yet the plaintiffs have been guilty of such negligence in the assertion of their equitable rights as to preclude them from relief. And it is a well settled rule that a party who discovers some fact against which he needs equitable protection, like an error in a deed or a judgment rendered against him without notice, must use diligence in seeking equitable aid. But this is required for the purpose mainly of protecting other persons against loss by reason of the un asserted right. If the records show a title in a third person, that third person, even after notice, may convey to an innocent purchaser. In all these cases delay is likely to add to the complication, and make the equitable adjustment of rights more difficult. In the present case the plaintiffs with every day’s delay ran the risk of a transfer of the bonds by the parties who held them to Iona fide purchasers. This was however tlieir risk and not that of the public; certainly not upon an assumption that the error could not be corrected against a holder who had no notice of the mistake. In this case the defendant purchased the bonds in question, not only of a holder who had notice of the mistake,'but with personal knowledge of it, and after the town had voted to call in all the bonds at the end of the ten years, and had given notice by publication in various newspapers that the bonds would be then paid and that interest upon them would cease at that time. Whatever delay the plaintiffs made after that time could not therefore injuriously affect the defendant. They of course ran the risk of a sale by him of the bonds to an innocent purchaser; but that was wholly their risk; it involved no risk to him. The public notice given by the plaintiffs of the payment of-the bonds at the end of ten years, was given on the 25th of February, 1880. The ten years expired April 1st, 1880. The defendant purchased the bonds in question on the 20th of April, 1880. The present suit was brought in May, 1882, two years later. We can not say that this delay was, in the circumstances, fatal to the plaintiffs’ right to equitable relief. It was not, we think, unreasonable for the plaintiffs to expect that, after the notice given, the holders of the bonds would accept payment without contesting the matter, and that they should have been confirmed in that expectation and so the more inclined to save the expense of a law suit, by the fact that forty-two out of the forty-eight bonds were thus brought in and cancelled.

2. Did the first purchaser of the bonds in question, and afterwards the purchaser from him, and finally the defem, dant at the time of his purchase, have such knowledge of the mistake, either actual or to be imputed, as gives the plaintiffs a right, as against them, to the equitable' relief which they seek ?

The finding upon this point is as follows:—“ Before Tiffany (the first purchaser) purchased the bonds, the then town treasurer, E. W. Redfield, told him that the bonds were ten-twenty bonds, and at the option of the town could be called in and paid at tlie expiration of ten years from their date, and that such was the vote of the town authorizing the issue of the bonds. Before Swan (the second purchaser) bought the bonds of Tiffany he called upon the then town treasurer in relation to them, and to know what the action of the town would be, and the treasurer told him what the vote of the town was in authorizing the issue of the bonds, and that the town would call them in at the expiration of ten years from their date and pay them up; and that the town had already called them in, but by mistake they had been called in a j’ear too soon. Swan sold the bonds to the .defendant April 20th, 1880. The defendant, at the time of the purchase, .had full knowledge of the vote of the town in relation to the issue of the bonds, and that the town had called them for payment.”

It is difficult to see how this information can be regarded as anything less than information of the fact of the mistake. A knowledge of the vote of the town necessarily involved a knowledge that the bonds were not drawn in accordance with the vote. It is of course barely possible that the defendant may have supposed that the town relied upon its vote as giving it the power to call in the bonds in ten years, without any provision to that effect in the bond ; thus making their mistake one, not of fact, but as to the legal effect of their action. This, however, seems to us a forced and unnatural construction. We think the only reasonable view of the matter is, that the defendant knew, or had such information that the law would impute to him knowledge, that the bonds were by mistake issued as twenty year bonds instead of ten-twenty ones.

3. Was the mistake one of such a character that it can be corrected by a court of equity ?

It is claimed by the counsel for the defendant that the mistake, in such a case, must be mutual, and the cause of the agreement, and numerous authorities are cited in support of the proposition.

This rule, within the limits of its proper application, is founded in reason. If a contract is corrected by a court of chancery to make it conform to the intention of one of the parties, it is of course forcing a contract upon the other party which he never intended to make, unless his own intent concurred with that of the other party. But this case is not of that character nor governed by that rule. A grantor by mistake embraces in his deed a parcel of land that neither party intended to have conveyed. The grantee sees his mistake, but does not call the attention of the grantor to jit, and afterwards claims the parcel thus accidentally conveyed. Or a person offers a reward of $100 for the detection and arrest of a burglar, but by mistake and without his notice it is printed $1,000. A man who knows of the mistake arrests the burglar and claims the $1,000. In each of these cases the error is nob mutual, but wholly on the one side. , What is there on the other? Not mistake, but fraud. That fraud can never stand for a moment in a court of equity. But suppose the case to be one where, instead of actual fraud, there is merely such knowledge, actual or imputed by the law, as makes it inequitable for the purchaser to retain his advantage. The court will deal as summarily with that inequitable position of the party, as in the other case with his fraud.

Kerr, in his work on Fraud and Mistake, p. 409, after speaking of the general rule that mistakes must be mutual, says:—“ The mistake of one party only is attended by different consequences, according as the other party is or is not cognizant of the mistake. * * * An agreement cannot be affected by the mistake of either party in expressing his intention, of which the other party has n'o knowledge Again he says, on the same page :—“ A man can not have relief on the ground of mistake, unless the party benefited by the mistake is disentitled in equity and conscience from retaining the advantage which he has acquired.” Numerous authorities are cited in support of this proposition which we will not take time to consider.

It is however claimed, on the part of the defendant, that the mistake must have been one that induced the contract on the part of the purchaser; that is to say, that the purchaser must have taken the bonds for the very reason that they were twenty year bonds and not ten-twenty ones. But it is obvious that the hardship attending the correction of a contract is all the greater where the other party accepted the contract for the reason that he supposed himself to be acquiring what the correction of it deprives him of. But supposing the purchasers of the bonds in question had taken them in entire indifference as to whether they were twenty year or ten-twenty bonds, and that the defendant was now endeavoring to assert rights under them to which he had before been indifferent, would there be no remedy in equity? Can it be- claimed for a moment that equity, which deals with substance and not mere form, which applies reason and not mere arbitrary rules, would see no substantial difference between the case of a party who, when he accepted the contract, was indifferent with regard to a known mistake and so remained, and one who, at first indifferent, was now trying to take an unjust advantage of the mistake ?

We conclude, therefore, that there was nothing in the nature of the mistake, or in the relation of the parties to it, that should lead a court of equity to refuse the relief sought. • .

4. Has the town so far exercised its claimed right of option to call in the bonds at the end of ten j^ears, as to stand in a position to assert the equitable rights which it claims ?

It appears by the finding that the town, at a legal meeting held on the 7th day of October, 1878, voted “to authorize the selectmen of the town (if deemed advisable) to call in the bonds,” &c. ' This vote left it to the discretion of the selectmen, and did not in itself constitute a calling in of the bonds. Nothing was done during the ensuing year under the vote, as it was discovered that the bonds could not be called in until a year later.

Another town meeting was called on the 3d and held on the 7th of February, 1880, at which the selectmen were instructed to call in the bonds. This action of the town covered the whole ground, and if legal, would have constituted, in the fullest manner, a calling in of the bonds. It was not, however, a legal meeting, having been called on the 3d of February and held on the 7th—not leaving the time required by law between the warning and the holding of the meeting. Brooklyn Trust Co. v. Town of Hebron, 51 Conn., 22. This point does not seem to have been made in the court below, and we do not feel bound to consider it for the sake of reversing a judgment. We will, however, in view of this illegality, lay this meeting out of the case. If this is done, we are compelled to fall back on that of the year before. That, it will be seen, referred the matter of the calling in of the bonds to the selectmen. The vote did not limit itself in the matter of time, or require the exercise of their discretion by the selectmen within any limited period. The action of the selectmen one year later was, of course, authorized by it. How we do not find the action of the selectmen stated in express terms in the finding, but it is found that “the town, on the 25th of February, 1880, gave notice by publication in various newspapers that said bonds would be paid at the office of the treasurer on the 1st of April, 1880, and that interest upon them would cease at that time.” The town, except in its assembled action in town meeting, acts through its selectmen, and it may be taken for granted that this notice was signed by the selectmen, and was therefore their action under the vote authorizing them to call in the bonds. Thus the bonds were called in by the selectmen under authority of the vote of the year before, their action losing none of its validity or effect by reason of its being taken under the vote of the later meeting, then supposed to be legal, but since discovered not to have been so.

It may perhaps be said that, if the selectmen acted in the belief that the vote of February, 1880, was a legal one, and therefore under it, they were merely obeying a positive order of the town, and not exercising their judgment on the question whether the calling in of the bonds was advisable. But the selectmen having in fact called in the bonds, and having clearly the power to do so, the question how far they acted according to their best judgment is one that cannot be made by an outsider like the defendant. If we look at the facts that appear, it is hardly possible to escape the conclusion that the selectmen concurred in the prevailing opinion of the people of the town that it was best to call in the bonds. But, without assuming this, it is sufficient that the selectmen acted with full power, and that no fact is found which tends in any manner to show that theji- did not act according to their best judgment, and precisely as they would have acted if the vote of October, 1878, was the only one under which they attempted to act.

This, we believe, disposes of the principal questions in the case. Certain other questions are made as to the correctness of the decree, even if the plaintiffs were entitled to relief.-

It is said that the decree does not fix the time when the correction of the mistake is to operate, whether from the date of the bonds, the commencement of the suit, or the date of the decree. But it is clear that the correction of the mistake is merely to make the bonds ten-twenty bonds, just as if they had been so printed at the outset. No particular time needed to be named. The bonds simply become changed from what, by the mistake, théy are, into what the town intended that they should be; and the rights of the defendant are just what they would have been if the bonds had been made right at first.

It is further claimed that the decree is erroneous in not making any disposition of the defendant’s counter-claim. This counter-claim was for the recovery of the amount of the several coupons that had matured since April 1st, 1880. But if the bonds are corrected so as to be ten-twenty bonds, then clearly the defendant had no right to collect the coupons maturing after the ten years had expired and the bonds had been called in.

The further claim that the decree is erroneous in not fixing the date when the town was or should be excused from paying its coupons is answered by what we have last said. The bonds becoming ten-twenty bonds,, the time when the town ceases to be liable on its remaining coupons is when the ten years have expired and the town has called in the bonds.

We ought perhaps to notice a consideration bearing upon the general question of the plaintiffs* equity, which is urged by the defendant’s counsel. They say that the plaintiffs, in delaying to bring their suit for so long a time after they learned of the mistake in the bonds, were “ watching the uncertain tides of finance,” and regulating their action accordingly. But if the bonds had originally been ten-twenty bonds the plaintiffs were not bound to call them in at the end of ten years, and had the right to watch the money market and determine their action by its condition and prospects. They were not bound to publish their intentions until such a time before the expiration of the ten years as reasonable notice to the holders of the bonds would require. And in applying to a court of equity for the correction of the bonds, they were not committing themselves at all to the policy of calling in the bonds. They were simply securing a right of option, which, when secured, they could exercise or not, wholly at their own pleasure.

There is no error in the judgment.

In this opinion Granger, and Beardsley,* Js., concurred.

* Judge Beabdslet of the Superior Court was called in to sit in the case in the place of Judge Paedee, who was absent by reason of ill health.