East River Bank v. Butterworth.

against the corporation to exercise their functions according to law.

Two things are necessary- the action of the common council and the approval of the mayor-before the law can be enacted.

If the writ had been directed to the corporation, it would have been their duty to pass the law. As it is, the remedy at best will be imperfect.

[NEW YORK GENERAL TERM, January 2, 1866. Ingraham, Justices.]

Order affirmed.

Geo. G. Barnard, Clerke and

THE EAST RIVER BANK vs. BUTTERWORTH and others.

Where a note is made for the accommodation of the indorser, without any restrictions, it may be used by him for that purpose, and the holder may recover upon it, even if he had knowledge of its origin, to any amount for which he holds it as security, not exceeding the sum named in the note. Nor will it make any difference whether the note was used before or after maturity, if it was in reality pledged as security for moneys borrowed by the indorser.

The giving of a new note, by an indorser, for the amount due upon the original note, such original note being left with the holder as security, does not amount to a payment of the latter.

A

PPEAL from the judgment of a special term.

The

action was upon a promissory note. The note sued on

was lent by the maker to the indorser for his accommodation. He had it discounted by the plaintiff. When it became due, the indorser wanted to make a partial payment, and the note in suit was to be left in the bank to be collected by them. The maker was at that time absent from the state, and a new note could not be obtained for its renewal. Instead thereof, the indorser gave his own note for the amount unpaid, which was discounted and the note in suit left as security.

East River Bank v. Butterworth.

This process was repeated several times. It is now contended that such discounts paid the original note, and that the plaintiff cannot recover.

E. E. Anderson, for the plaintiff.

S. Larocque, for the defendants.

By the Court, INGRAHAM, J. The note having been loaned to the indorser for his accommodation without any restrictions, might be used by him for that purpose, and the holder could recover upon it, even if he had knowledge of its origin, to any amount for which he held it as security, not exceeding the sum named in the note. Nor would it make any difference whether such note was used before or after maturity, if it was in reality pledged as security for moneys borrowed by the indorser.

There can, therefore, be no other question in this case than that which arises as to the renewals of the indebtedness of the indorser to the bank. If they are to be construed as a payment of the original note, then it could not be afterwards reassigned either to the same or to other parties so as to give it vitality. The evidence shows that it was not the intent of the parties that it should operate as payment. The indorser says, when the note came due, he waived the notice of protest, and made a payment on it and gave a new note, but he nowhere affirms that such note was made or accepted as payment. On the contrary, when he waived notice. of protest, he could only have intended thereby to hold himself liable for its payment.

Jenkins says: The maker was absent or could not be found when the note became due, and the indorser paid a part on account, left his own note for the balance, and this note in suit was to be left in the bank to be collected when they could.

The fair construction of this transaction and of the subse

Botsford v. McLean.

quent ones is, that it was not the intent of the parties to discharge the liabilities on the original note, but that the same was to remain in possession of the bank until the debt was paid. The transactions as to the notes of the indorser were merely memoranda as to the amount remaining due.

Where it is clear that the parties did not contemplate payment, and that the holder did not accept the new note as payment, no such legal consequence can follow as the defendant's counsel has urged upon the argument. He has furnished no authorities to sustain the position he assumed, and we think the law to be otherwise.

The judgment should be reversed and new trial ordered; costs to abide the event.

[NEW YORK GENERAL TERM, February 19, 1866. Geo. G. Barnard, Clerke and Ingraham, Justices.]

45 478 79h 72

BOTSFORD vs. MCLEAN and MCPHERSON.

When parties have entered into a written contract it must be presumed to express their common intention, and to speak their actual agreement. But if it be clearly shown that such is not the case, and that such written contract is untrue, and misrepresents or misstates their real agreement and intentions, as made and understood by both parties, in some essential particular, then such contract is a mistaken one, and the mistake may be corrected, in a court of equity.

A mutual mistake which will afford a ground for relief from a contract, by reforming it, means a mistake reciprocal and common to both parties, where each alike labors under the same misconception in respect to the terms of the written instrument.

Upon a sale of personal property the purchasers agreed to pay therefor the sum of $6000, viz. $2000 in cash, and the balance in four equal annual payments, with interest, for which they were to execute their four several promissory notes, for $1000 each, with interest, payable in one, two, three and four years, and to secure the payment thereof by a chattel mortgage upon the property. The $2000 was paid down, and a chattel mortgage was executed, conditioned for the payment of the said notes, with interest. Four several promissory notes were also executed by the purchasers, for $1000

Botsford v. McLean.

each, payable at the times agreed, but two of them were so drawn as not to bear interest. The vendor, seeing that two of the notes were on interest, assumed that the other two were also on interest, and accepted the same, believing that all were properly drawn. The purchasers, knowing that two of the notes were so drawn as not to bear interest, purposely abstained from calling the vendor's attention to the fact.

Held that this was a case where the contract as executed and evidenced in the written papers was not carried out according to the agreement as the same was understood by both parties; and that the error in the two notes presented a clear case of mistake on both sides, for which equity could afford relief.

And the purchasers having been trusted to draw the notes, and they procuring their attorney to draw them, and then executing and delivering the same to the vendor as the notes required by the contract, although aware that two of them did not bear interest; Held that this was a clear case of fraud, for which the vendor was entitled to have the notes reformed. When a bargain is fairly made and concluded and its terms clearly understood, the rule of caveat emptor ceases, and both parties, thereafter, are bound to exercise good faith in carrying out the contract and executing its provisions. If one party is trusted to reduce the contract to writing he is bound to do it truly, and any variation from it, either by omitting some of its terms, or by inserting provisions not embraced in it, if not known to the other party and distinctly assented to by him, is a clear fraud.

HIS was an appeal from a judgment entered upon the

THIS

report of a referee upon a second trial. The action was brought to reform two certain promissory notes given by the defendants to the plaintiff, so as to make them bear interest. The grounds on which the relief was sought were mistake. and fraud. When the case was formerly before the court, the judgment in favor of the plaintiff was set aside because the referee had not found that certain facts existed. (See 42 Barb. 445, S. C.) On the second trial before the referee, the plaintiff rested on the pleadings, and claimed to be entitled to judgment for the relief demanded in the complaint. The defendants thereupon moved to dismiss the complaint, which was denied by the referee, who held that the defendants' answer "does not deny the facts stated in the complaint on which the plaintiff bases his allegations of fraud, mistake and omission; and that if these facts not thus denied make out a case of fraud, mistake or omission,

Botsford v. McLean.

the plaintiff is entitled to judgment without introducing evidence." The referee further held that, under the defendants' second answer, they might give evidence on their part as to the facts stated in the complaint on which the plaintiff's allegations of fraud, omission or mistake, were based. The referee found, substantially, all the facts stated in the complaint, except the agreement to pay interest, and on that point he found that in the parol agreement, made before the execution of the writings, "nothing was said by either party on the subject of interest upon that part of the consideration not paid down, or upon the notes to be given by the defendants." He also found "that the defendants knew or believed, before the notes were delivered, that the plaintiff expected that they were all to bear interest, but that nothing was said or done by the defendants to mislead the plaintiff." His conclusion of law was that the plaintiff was not entitled to the relief demanded in the complaint, and that the complaint should be dismissed, with costs; and judgment was ordered accordingly.

Edward Harris, for the appellant.

W. F. Cogswell, for the respondent.

By the Court, E. DARWIN SMITH, J. It is a familiar and well settled doctrine that where, through mistake or fraud, a contract or conveyance fails to express the actual agreement of the parties, it will be reformed by a court of equity so as to conform to such agreement and carry into effect the real intent of the contracting parties. This doctrine was fully established in this state in the case of Gillespie v. Moon, (2 John. Ch. 585,) in an opinion of Chancellor Kent, which Chief Justice Spencer, in Lyman v. The United Insurance Co. (17 John. 377,) in the Court of Errors, said "commanded his entire assent and would remain a land mark for future decisions."