p. 140The facts appear in the opinion.
Wingate & Cullen, attorneys, and George W. Wingate, of counsel for appellants, argued:
I. The complaint alleges, that when the plaintiffs objected to the omissions before the lease of the covenants agreed upon (as to repairs and steam), the defendants stated “that this was a matter of no importance; that as it had been previously agreed upon it would not be affected by the execution of the lease presented.” This justifies a court of equity in reforming the contract (Maher v. Hibernian Insurance Co., 67 N. Y. 289 ; Warren v. Sandborn, 82 Ib. 604). The rule is, that equity will reform a written instrument in cases of mutual mistake, and also in cases of fraud, and also where there is a mistake on one side and fraud on the other (Hay v. State Fire Insurance Co., 77 N. Y. 240 ; Welds v. Yates, 44 Ib. 525). The rule that there must be a mutual error to authorize the interposition of a court of equity, only applies where the element of honesty exists on the part of the one correctly understanding the contract. It does not apply where there is a fraud (Gillon v. Borden, 6 Lans. 219 ).II. It is immaterial that the statements made by the plaintiff in regard to the effect of the omissions of the clauses in question from the lease were as to matters of law (Cook v. Nathan, 16 Barb. 342 ; Johnson v. Hathorn, 2 Abb. Ct. App. Dec. 469 ; 2 Keyes, 484; Barker v. Clark, 12 Abb. U. S. 115). Fraud, in the sense of a court of equity, properly includes all acts, omissions and concealments which involve a breach of legal or equitable duty, trust or confidence, justly reposed, and which are injurious to another, or by which an undue and unconscientious advantage is taken of another (Gale v. Gale, 19 Barb. 249 ).III. The defendant cannot allege that the plaintiffs were guilty of laches in believing his statements (Albany City Savings Bank v. Burdick, 87 N. Y. 404 ; Mead v. Bunn, 32 Ib. 280).
p. 141IV. The action was properly brought for a reformation of the lease, and for the recovery at the same time upon it, when reformed (Maher v. Hibernia Insurance Co., 67 N. Y. 293 ; N. Y. Ice Co. v. Northwestern Insurance Co., 23 Ib. 357).V. The court below erred in holding that the preliminary contracts were merged in the lease, (a.) The agreement to furnish steam being upon an independant consideration, i. e., the payment of the cost for what was used, was an independent agreement, and not within the rule (Lewis v. Seabury, 74 N. Y. 409 ; Erskine v. Adams, L. R. 8 Ch. App. 736 ; Morgan v. Griffith, 6 Exch. 70). (b.) The same principles apply to the claim for damages caused by the landlord’s failure to fix the steam pipes.L. H. Babcock, attorney, and of counsel for respondents, argued:
I. There is no ground for the intervention of a court of equity to reform this lease. This is not a case of mutual mistake, or mistake on one side and fraud on the other. There was no mistake on either side, but both parties éxecuted the lease with full knowledge of its contents. “The parties having agreed to the form of the lease as it was, no action for its reformation lies ” (Wilson v. Deen, 74 N. Y. 531 ; Johnson v. Oppenheim, 55 Ib. 280 ; Bryce v. Lorillard Fire Ins. Co., 55 Ib. 240).ITT. The stipulations set forth in the complaint as having been made by the respondents prior to or at the time of the lease, furnish no grounds which this court can take cognizance of for its reformation, by inserting such stipulations therein. This is settled in the case of Wilson v. Deen ( 74 N. Y. 531 ), where the court says: “ The current of our authorities sustains the proposition that both at law and in equity, one who sets his hand and seal to a written instrument, knowing its contents, cannot be permitted to set up that he did so in reliance upon some ver
p. 142bal stipulation, made at the time, relating to the same subject, and qualifying or varying the instrument which he thus signs. The very purpose of the rule which excludes evidence of such declarations is to avoid the uncertainties attendant upon such evidence, and equity will not set aside that important and well settled rule, for the purpose of relieving a party against a risk, which, upon his own showing, if it be true, he has voluntarily incurred. It is only when, through fraud or mistake, a party has executed an instrument which he believes to be in accordance with the real agreement, but which is in fact different, that equity will relieve ; and even then the mistake, as well as the agreement, must be made out by clear proof.”IY. There is no charge of fraud which would justify, under any circumstances, the interference of a court of equity. The principle of Long v. Warren ( 68 N. Y. 426 ), applies. This is not like the case of the Albany Savings Institution v. Burdick ( 87 N. Y. 40 ), cited by plaintiffs at special term. There the person to whom the plaintiff had intrusted the drawing of a deed had, without her knowledge or consent, inserted a clause by which she assumed the payment of a mortgage. The court held that she was not chargeable with negligence in not reading the deed, because she had a right to confide in her agent. But Monné Bros, do not stand in such a position. They were one of the parties to a business transaction, viz., the purchasers of a lease, and were governed by the rules laid down in Long v. Warren (supra).The complaint alleges that plaintiffs and defendants had had negotiations relating to plaintiffs’ hiring a certain building from defendants ; that during the negotiations, plaintiffs promised to take a lease of the building, provided the defendants would do certain repairs, and would furnish plaintiffs with steam for the building ; that defendants agreed to do the repairs and to furnish the steam ; that defendants presented plaintiffs a lease which did not contain the
p. 143covenant to make the repairs and furnish the steam ; that plaintiffs called defendants’ attention to that fact; that defendants said that it was a matter of no importance, because the matter had been previously agreed upon between the parties, and such previous agreement would not be affected by the execution of the lease ; that plaintiffs relied upon said statement and executed the lease ; that defendants refuse to do the repairs and furnish the steam, that plaintiffs have done the repairs at an expense to them of $500, and that they have been damaged to a large amount by the neglect and refusal of the defendants to furnish steam ; and the complaint demands that the lease be reformed by inserting therein provisions for the repairs and steam, and that plaintiffs recover damages for defendants’ breach of the lease, as it will be after it has been reformed.
To this complaint the defendants demurred, on the ground that it does not state a cause of action. The demurrer was sustained by the special term.
The acts of the defendants in representing to plaintiffs that it was not necessary that the lease should contain a covenant relating to repairs and steam, may be looked at in two lights. It may be that defendants really believed that it was not necessary that the lease should contain the covenant, or it may be that they knew that the lease must contain the covenant in order to bind them, and that they misled plaintiffs for the purpose of obtaining a more advantageous leasing of the premises.
If the lease was entered into because of the belief first above stated, it was a mutual mistake which would warrant the court in reforming the contract. If it was entered into because of the reason last above stated, it was a fraud on the plaintiffs, and the contract should be reformed (Welles v. Yates, 44 N. Y. 525 , and cases there cited ; Waring v. Somborn, 82 Ib. 604).
This case is to be distinguished from Wilson v. Deen ( 74 N. Y. 531 ). In that case, the covenant on the part of the landlord was not inserted in the lease, because the plaintiff did not think it necessary to have it inserted. In
p. 144this he was mistaken ; but the defendant did nothing to deceive or mislead him. While in the case at bar, plaintiffs relied upon the erroneous information given by defendants.
It is true, the defendants did not induce plaintiffs to believe that the deed, as a matter of fact, contained the agreement to make repairs and furnish steam, but they did induce plaintiffs to believe that it was not necessary that the lease should contain such an agreement. There was mistake on both sides, or there was mistake on one side and fraud on the other. Either is ground enough for reforming the agreement (Waring v. Somborn, supra). A false declaration of the legal purport and effect of a deed will render it voidable, whether the misstatement had its origin in a wish to deceive, or in the mistaken belief of him who made it (Broadwell v. Same, 1 Gilman, 899 ; Tyron v. Passmore, 2 Barr, 122 : Snyder v. May, 7 Harr. 239 ; Edwards v. Brown, 1 Tyrwhit, 182 ; Chesnut Hill Reservoir Co. v. Chase, 14 Conn. 123 ; Jordan v. Stevens, 51 Me. 78 ; Fillman v. Curtis, 15 Ib. 140 ; Cooper v. Phibbs, L. R. 2 H. L. 149 ; Broderick v. Same, 1 P. Wms. 239).
It is settled in this state that one may bring an action to reform a contract, and in the same action may recover damages for the breach of the contract as it is after it has been reformed (New York Ice Co. v. N. W. Ins. Co., 23 N. Y. 357 ; Maher v. Hibernia Ins. Co., 67 Ib. 283 ; Welles v. Yates, 44 Ib. 531, and cases there cited).
The order and judgment appealed from are reversed with costs, and the demurrer is overruled with costs, with leave to the defendants to withdraw demurrer and answer on payment of costs.
O’G-ormar, J., concurred.