On November 2, 1936, Paul Steenberg Construction Company, a Minnesota corporation, was the owner of certain industrial property in the city of St. Paul and certain machinery, tools, and equipment located in the building on the real estate. On that date, the Steenberg company entered into a contract with one John H. Anderson under which it sold and agreed to convey the real and personal property to Anderson for the sum of $45,000, with interest on the unpaid balance at the rate of six percent per annum, principal and interest to be payable in monthly installments. Anderson made certain payments on the contract, but the payments were not sufficient to pay the accrued interest. On June 14, 1939, the principal sum of $45,000 was still due, together with a part of the accrued interest. On that date, Anderson, realizing that he would be unable to make good on the contract he then had, wrote a letter to the Steenberg company offering two alternatives, one that he give up possession and turn the property back to the company, and the other that the company cancel the old agreement and enter into a new arrangement. The new arrangement, as stated in Anderson's letter, was as follows:
"A sample of the first note and a sample of the last note are hereto attached."
These notes read as follows:
to pay Paul Steenberg Construction Co. in twelve monthly instalments as specified on the back of this note. The sum of Twelve hundred thirty nine Dollars. $1239.00 with interest at the rate of 6% per annum after maturity. If any payments are made before maturity a discount at the rate of 6% per annum is to be allowed.
to pay Paul Steenberg Construction Co. in twelve monthly instalments as specified on the back of this note. The sum of Twenty one hundred seventy five Dollars $2175.00 with interest at the rate of 6% per annum after maturity. If any payments are made before maturity a discount at the rate of 6% per annum is to be allowed."
On the back of each note appears a list of the monthly payments. The first note was to be paid in equal monthly installments, each in the sum of $103.25, and the last note in monthly installments of $181.25. Thereafter followed a list of the intervening notes, showing the amount of each. The letter then continued as follows:
"The 25 notes to be secured by mortgage on the property.
* * * * *
"The real estate and the personal property [taxes] to be paid by you up to the time that the deed is recorded. After that the taxes are to be paid by me."
"For value received, I promise to pay to the order of
PAUL STEENBERG CONSTRUCTION COMPANY
"The Sum of Twelve hundred thirty nine & 00/100 Dollars In monthly installments of One hundred three & 25/100 Dollars Each on the last day of each month, beginning with the last day of October 1939, with interest after the due date on each instalment until paid at six [6%] per cent per annum. The maker of this note has the privilege of paying the whole or any part of this note before the due date of either or any instalment and shall receive a credit equal to interest at the rate of six [6%] per cent per annum from the time of payment to the due date on all payments made before the due date.
Each of the other printed notes reads exactly the same, except that the amounts differ.
The mortgage given to secure the indebtedness contains these provisions:
"* * * That the said mortgagors, in consideration of the sum of Thirty Thousand ($30,000.00) Dollars, to them in hand paid by the said Mortgagee, the receipt whereof is hereby acknowledged, do hereby Grant, Bargain, Sell, and Convey unto the said Mortgagee," the property involved herein.
It then further provides:
"* * * That if the said mortgagor J.H. Anderson, his heirs, administrators, executors or assigns, shall pay to the said mortgagee,
On October 18, 1939, Anderson wrote the Steenberg company as follows:
"Referring to the `New Deal' of October 1st, 1939, for the property at 473 North Cleveland Avenue, St. Paul, Minnesota, by which the agreement of November 2, 1936 is cancelled, and the new deal of October 1st, 1939 is in effect.
"The understanding between us is that when I have reduced the purchase price of $30,000.00 to $28,000.00, you will then at that time give me a bill of sale to the machine equipment and that you will now give me a warrenty [sic] deed to the Real Estate (Lots and Buildings). It is understood that you pay the first half and I pay the second half of taxes due in 1940."
In answer to this letter, the Steenberg company wrote Anderson on October 23, 1939, the pertinent portion of which letter is as follows:
"In consideration of your having accepted a warranty deed from us to the real estate at the above described address and your having executed to us your notes secured by a mortgage on said real estate in the sum of Thirty Thousand ($30,000.) Dollars, which represents the purchase price due us from you for said real estate and the machine equipment now situated upon said premises, we agree that when you have paid Two Thousand ($2,000.) Dollars on the principal of said purchase price together with interest due to that date,
Thereafter, a bill of sale was given to Anderson covering the machinery. Certain portions of the machinery were sold from time to time, and the proceeds thereof were applied toward the reduction of the debt. In so doing, Anderson computed discounts on the notes and applied the proceeds of such sales toward the discharge of the last notes.
On December 30, 1940, the mortgage in question was assigned by the Paul Steenberg Construction Company to Paul Steenberg, the plaintiff herein.
Anderson died August 27, 1941, and the executors of his estate continued with the contract.
On August 31, 1946, the executors of Anderson's estate tendered a check for $4,389.73, representing the same to be the balance due on the contract, and enclosed a form of satisfaction of mortgage, which they requested Steenberg to sign and return. Up to that time, Anderson and the executors of his estate had made payments aggregating $20,480.29. Upon receipt of the above check, Steenberg objected to accepting the same, contending that there was much more due. Correspondence followed between the parties, and both recomputed the amount which had been paid and the amount which they claimed to be due. On April 16, 1947, Steenberg, through his attorney, wrote the Anderson estate claiming that there was due $8,412.34. At that time, notes Nos. 8 to 13, inclusive, remained in the hands of Steenberg. The other notes had been returned to Anderson or to his representatives and had been marked paid in full or in some other manner cancelled. In his letter of April 16, Steenberg's attorney declared that a default had been made in the installments due on note No. 8 and that he elected to declare the amount of notes Nos. 8 to 13 due and payable, and he made a demand for the sum of $8,412.34.
Subsequent to the receipt of that letter, both parties proceeded to have the account audited. The Anderson estate then came to
This action followed to determine the amount due and to foreclose the mortgage securing the indebtedness. Defendants answered and interposed a counterclaim wherein they deny that anything is due and allege:
"Said mortgage by the mutual mistake of the parties describes the principal indebtedness as thirty thousand ($30,000) dollars instead of forty-two thousand six hundred and seventy-five ($42,675) dollars, and mistakenly described the twenty-five (25) principal promissory notes of October 1, 1939, as drawing interest at the rate of six per cent (6%) per annum from date, instead of after the due date of each installment until paid."
As affirmative relief, defendants demand that plaintiff take nothing and that they recover of plaintiff the sum of $345, which they claim to have overpaid on the indebtedness, and they also demand that notes Nos. 8 to 13, inclusive, be delivered up and cancelled and that the mortgage be satisfied of record.
The trial court found in favor of plaintiff and against defendants, and, the court having denied a motion for amended findings or for a new trial, the matter comes here on appeal by defendants.
1. Principally, it is the contention of plaintiff that in preparing and drafting the notes involved a mistake was made in computing the amount of interest that was added to each note and that the discount provision was intended to apply only to unpaid interest and not to the principal of the note. Defendants contend that the notes should be interpreted literally as they read and that the mistake was made in the mortgage and not in the notes. The trial court found that in drafting the notes Anderson failed properly to compute the interest that was added to the principal of each note, and proceeded to determine the amount due had the notes been drawn
Defendants challenge the sufficiency of the evidence to sustain the court's finding in this respect.
At the outset, it is evident that a mistake was made in either the notes or the mortgage. It can hardly be doubted that the evidence sustains the court's finding that the parties contracted on the basis of $30,000 as the principal amount. The mortgage so states. Anderson's letter of October 18, 1939, written only a few days after the agreement was entered into, states unequivocally:
"The understanding between us is that when I have reduced the purchase price of $30,000.00 to $28,000.00, you will then at that time give me a bill of sale to the machine equipment * * *." (Italics supplied.)
In answer to that letter, the Steenberg company said in its letter of October 23, 1939:
"In consideration of your having accepted a warranty deed from us to the real estate at the above described address and your having executed to us your notes secured by a mortgage on said real estate in the sum of Thirty Thousand ($30,000.) Dollars, which represents the purchase price due us from you for said real estate and the machine equipment now situated upon said premises, * * *." (Italics supplied.)
Twenty-five notes in the principal sum of $1,200 each total $30,000. Interest on the first note was computed properly and correctly at the rate of six percent per annum.
"* * * The maker of this note has the privilege of paying the whole or any part of this note before the due date of either or any instalment and shall receive a credit equal to interest at the rate of six [6%] per cent per annum from the time of payment to the due date on all payments made before the due date." (Italics supplied.)
Defendants' contention respecting the construction that should be placed upon this discount provision as applied to the notes as drawn would lead to an absurd result. It would mean that notes Nos. 18 to 25 could have been discharged on the day they were executed without any payment at all. The discount would have far exceeded the amount due on each of these notes. As to the other notes, they
Both parties now claim that there was a mistake in drafting the notes or the mortgage. They differ as to what the mistake was. That they were both confused as to how the discount should work out is equally evident. Defendants, after the dispute arose and after tendering a check in the sum of $4,389.73 in payment of the balance which they then claimed was still due, came to the conclusion that they owed nothing, but, to the contrary, that the contract had been overpaid in the sum of $345. Plaintiff, on the other hand, after offering to accept $8,412.34 as the unpaid balance, found by audit that there was still $20,841.25 due. Both parties concede that the amount actually paid on the obligation totals $20,480.29, or slightly more than two-thirds of the principal stated in the mortgage without adding any interest. Had interest been computed at the rate of six percent per annum and added to the notes, the discount would then have offset the unearned interest to the date of payment, and Steenberg would have received the principal, plus interest at six percent per annum to the date of payment. Obviously, that was what the parties had in mind. The evidence amply sustains the court's finding to that effect, and it is difficult to see how any other conclusion could be sustained.
2. Defendants contend that even though there was a mistake in drawing the notes plaintiff's action is barred by laches. Where a party seeks to enforce a right based upon a mistake, he is not chargeable with laches until he discovers the mistake, or until he is chargeable with knowledge of facts from which, in the exercise of proper diligence, he ought to have discovered it. Lindquist v. Gibbs, 122 Minn. 205, 142 N.W. 156. Plaintiff acted with diligence after
3. It is doubtful whether the defense of laches is open to defendants at all. By their counterclaim, defendants ask for affirmative relief by way of cancellation of the notes remaining in plaintiff's hands and judgment against plaintiff for the amount they contend has been overpaid. The defense of laches is not available where each of the parties seeks affirmative relief against the other in reference to the same transaction. In that case, neither may assert that the other was guilty of laches. Here, both parties failed to discover the mistake until about the same time. When it was discovered, plaintiff claimed that a great deal more was due than defendants had computed. Defendants, on the other hand, claimed that nothing was due. Under these circumstances, laches is available to neither. 30 C.J.S., Equity, § 114; In re Estate of Palm, 210 Minn. 77, 297 N.W. 765; Southern Pine Lbr. Co. v. Ward, 208 U.S. 126, 28 S.Ct. 239, 52 L. ed. 420; Kimberly-Clark Co. v. Patten Paper Co. Ltd. 153 Wis. 69, 140 N.W. 1066.
4. Still another essential element to the doctrine of laches is prejudice to the other party. 4 Dunnell, Dig. & Supp. § 5351. Defendants contend that they have been prejudiced here, in that Anderson is now dead. However, if we rely entirely upon the documentary evidence, which has not changed by the lapse of time, still it would be difficult to hold other than as the trial court did. Defendants are asked to do no more than to pay the amount which the parties clearly contemplated at the time the transaction was consummated. No showing of prejudice has been made.
We have carefully examined all other assignments of error, but the above are determinative of the issues of the case. We find no grounds for reversal.
Affirmed with leave to defendants to apply to trial court for disposition in accordance with this opinion.
MR. JUSTICE THOMAS GALLAGHER took no part in the consideration or decision of this case.
$100 due November 30, 1939, two months at six percent, $1;
$100 due December 31, 1939, three months at six percent, $1.50;
$100 due January 31, 1940, four months at six percent, $2;
$100 due February 29, 1940, five months at six percent, $2.50;
$100 due March 31, 1940, six months at six percent, $3;
$100 due April 30, 1940, seven months at six percent, $3.50;
$100 due May 31, 1940, eight months at six percent, $4;
$100 due June 30, 1940, nine months at six percent, $4.50;
$100 due July 31, 1940, ten months at six percent, $5;
$100 due August 31, 1940, eleven months at six percent, $5.50;
$100 due September 30, 1940, twelve months at six percent, $6.