Opinion
Opinion delivered February 10, 1930.
1. REFORMATION OF INSTRUMENTS — MISTAKE AS TO CONTENTS. — Parties signing a guaranty on the assurance of a kinsman or when they relied that it expressed the agreement already made between them were not barred from relief by negligence in failing to read the guaranty. 2. REFORMATION OF INSTRUMENTS — LACHES. — Laches can not he imputed to persons signing a guaranty for not sooner moving to reform the contract where they had no knowledge that the instrument was improperly drawn until a few days before the suit was brought. 3. REFORMATION OF INSTRUMENTS — EVIDENCE. — The ground relied on for reforming an instrument must he established by clear, unequivocal and decisive evidence.
Appeal from Lonoke Chancery Court; Frank H. Dodge, Chancellor; affirmed.
Chas. A. Walls, for appellant.
Trimble, Trimble McCrary, G. E. Morris and J. W. Barron, for appellee.
STATEMENT OF FACTS.
This appeal is prosecuted from a decree of reformation of a written contract of guaranty executed by certain of the England heirs and assigned to the Exchange National Bank.
Hallie E. Barron, on October 28, 1927, in her own right, and as executrix of the estate of Mrs. Eleanor M. England, deceased, J. R. England, in his own right, and as executor of the estate of Mrs. Eleanor M. England, deceased, Gladys E. Farrell, Nellie C. England, and Louise E. Tebbets filed a complaint against the Exchange National Bank, assignee of the England National Bank and A. F. Rawlings, receiver for the England National Bank.
These people brought suit to reform the contract of guaranty under which appellant's bank as assignee claimed a liability against some of them alleging all the indebtedness had not been, paid. As all of the indebtedness had been paid, except that of Hallie E. Barron and J. R. England, the other guaranties are not involved in this proceeding. In addition to asking for a reformation of the guaranties, appellees asked that the defendants be enjoined and restrained from bringing any suit against plaintiffs on the guaranties, or progressing further with the probation or attempted probation of the demand against the estate of Eleanor M. England, deceased, who had departed this life some time in 1925. The complaint alleged among other things, that the defendant, Exchange National Bank, had filed its demand against the estate of Eleanor M. England, deceased, upon the two guaranties in question and that a hearing was then pending in the probate court on the merits of the demand.
Defendants answered, setting up the guaranty as a justification for probating the demand against the estate of Eleanor M. England in the probate court, and alleged that said demand had been presented to Hallie E. Barron and J. R. England, executors of the estate, but said executors had refused to allow or disallow said claim and demand, and that it was necessary to file same with the probate court and ask for its allowance by that tribunal. The answer further alleged that the Exchange National Bank was the purchaser of all the assets of the England National Bank, and that it was the holder of the guaranty set forth for a valuable consideration in due course of business, and asked that the instruments be not reformed and that it be permitted to probate their demands against the estate of Eleanor M. England, upon the two guaranties signed by her for Hallie E. Barron and J. R. England, the sum of $7,000 each.
No other issues of merit were presented in the chancery court, and the chancellor upon final hearing entered an order reforming the instruments, holding that the guaranties were intended to guaranty existing debts of the said Hallie E. Barron and J. R. England and were not intended to cover future advances; also, that any payments that had been made since the execution of the guaranties should be credited upon said guaranties, and that said guaranties were not intended to operate as a continuing guaranty or for other advancements than the $7,000 existing indebtedness. It is from this order that the Exchange National Bank has appealed.
(after stating the facts). Appellants insist that the court erred in decreeing a reformation of the guaranty contract, which it contends was clear and free from ambiguities and a continuing guaranty binding each of the signers to the payment of the sum of $7,000 in accordance with its terms.
Appellees seek no construction of the contract and attempt no explanation of its meaning varying from its terms or contradictory thereof by the production by parol testimony, but only a reformation of it in accordance with the agreement of the parties. In Phoenix Assur. Co. v. Boyette, 77 Ark. 41, 90 S.W. 284, the court said:
"Whatever be the effect of a mistake, pure and simple, there is no doubt that equitable relief, affirmative or defensive, will be granted when the ignorance or misapprehension of a party concerning the legal effect of the transaction in which he engages, or concerning his own legal rights which are to be affected, is induced, procured, aided, or accomplished by inequitable conduct of the other parties. It is not necessary that such inequitable conduct should be intentionally misleading much less that it should be actual fraud; it is enough that the misconception of the law was the result of, or even aided or accompanied by, incorrect or misleading statements or acts of the other party." See also Stewart v. Fleming, 96 Ark. 371, 131 Ark. 955: Graham v. Thompson, 55 Ark. 296, 18 S.W. 58; Conn. Fire Ins. Co. v. Wiggington, 134 Ark. 152, 203 S.W. 844; Adcox v. James, 168 Ark. 842, 271 S.W. 980; Galloway v. Russ, 175 Ark. 659, 300 S.W. 390; Nicholson v. Hayes, 166 Ark. 112, 265 S.W. 640; see also Griswold v. Hazzard, 141 U.S. 260, 11 S.Ct. 972, 31 L.ed. 378; Philippine Sugar Estate Development Co., Ltd., v. Gov't of Philippine Island, 274 U.S. 385, 38 Sup. Ct. 513, 62 L.ed. 513.
In Nicholson v. Hayes, supra, the rule is laid down as follows:
"The rule in this State is that, to justify a reformation of a written instrument, there must have been a mutual mistake on the part of one party coupled with the fraud on the part of the other, and that, if parol evidence is relied upon to establish the ground of reformation, it must be clear, unequivocal and decisive. Welch v. Welch, 132 Ark. 227, 200 S.W. 139, and Cain v. Collier, 135 Ark. 293, 205 S.W. 651."
Appellees showed the circumstances and explained their reason for not reading the guaranty when presented for their signature because of the assurance of their kinsman, in whom they had the utmost confidence, that it expressed the agreement as already made between them, and, being lulled into security in such belief, were not barred from relief by any negligence in failing to carefully read the instrument. St. Louis, I. M. S. Ry. Co. v. McConnell, 110 Ark. 306, 161 S.W. 496. See also Stewart v. Fleming, supra.
Laches cannot be imputed to appellees for not sooner moving to reform the contract of guaranty since they had no knowledge or information that it had not been drawn in accordance with their understanding of the agreement, in which Mr. Lloyd England, who presented it for their signatures, appeared to concur, as shown by his letters relative thereto, until the Exchange National Bank presented its claim for probate under said guaranty against the estate of one of the guarantors in September, 1927. This suit was instituted in October thereafter. Rozelle v. Chicago Mill Lumber Co., 76 Ark. 525, 89 S.W. 469; 23 R.C.L. 516.
The finding of the chancellor is not against the preponderance of the testimony, which established the ground relied on for reformation of the guaranty, in accordance with the rule requiring it to be established by clear, unequivocal and decisive evidence.
It follows that the judgment of the court is correct, and it will be affirmed. It is so ordered.