Davenport v. Beck
576 P.2d 1199 (1977)
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Rule of Law:
A court of equity has the power to reform a written instrument, such as a promissory note, to correct a scrivener's mutual mistake when the instrument's terms are contrary to the clear common intention of the parties, as evidenced by other related documents or admissions in pleadings.
Facts:
- On September 21, 1964, Claud Davenport and others (plaintiffs) contracted with Rosa Beck, W. H. Beck, Winona Smith (now Holliday), and Clifford Holliday (defendants) to purchase an Oklahoma City lot for $13,500.
- The contract stipulated a 'contract for deed,' requiring $100 per month at 6% interest included, and that after 10 payments, the sellers would convey the property and take a first mortgage for the unpaid balance, to be liquidated by continued payments 'as above'.
- On October 15, 1964, the Davenports received a deed and executed a promissory note and securing mortgage in favor of the Becks and Hollidays.
- The promissory note stated a principal of $13,500, to be paid in '135 installments' of $100 each, with '6% per cent, [sic] per month, included in each payment,' also stating interest on each installment and the unpaid balance was due at maturity of each installment.
- The accompanying mortgage, however, recited that it secured a note with '6% per cent, [sic] interest per annum from date, payable monthly.'
- For over 11 years, until January 5, 1976, the Davenports made monthly payments of $100 to the Becks and Hollidays.
- On January 5, 1976, after making 135 payments, Claud Davenport sent a check for $100, claiming it was the final payment, and requested a release of the mortgage.
- The Becks and Hollidays declined to execute a release, asserting that the note was not fully paid.
Procedural Posture:
- Claud Davenport and others (plaintiffs) filed an action in trial court against Rosa Beck and others (defendants), asking the court to quiet their title against the mortgagees and grant a penal judgment for failure to release the mortgage.
- Defendants denied the note was fully paid and filed a cross-petition, alleging a clerical error in the note (it should have called for more payments instead of 135), and asked the court to reform the note and grant judgment for the remaining balance.
- At a pretrial conference held October 7, 1976, the trial court found there was no issue as to any material fact, and set the case for a non-jury trial.
- On October 28, 1976, defendants filed an 'Offer of Evidence' asking the court to consider additional evidence before trial.
- On November 3, 1976, the trial court adjudicated the case without hearing evidence, denying plaintiffs' requested relief, reforming the note by deleting the number '135' therefrom, and decreeing a remaining balance due of $7,318.68 to be paid at $100 a month.
- Plaintiffs appealed this judgment to the Oklahoma Court of Appeals, arguing it was a premature conclusion reached 'without hearing evidence'.
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Issue:
Does a court of equity have the power to reform a promissory note containing a clerical error (like an incorrect number of payments or interest calculation) when the error is contrary to the parties' original agreement and the accompanying mortgage and contract of sale?
Opinions:
Majority - Brightmire, Presiding Judge
Yes, a court of equity has the power to reform a promissory note containing a clerical error, like an incorrect number of payments or interest calculation, when the error is contrary to the parties' original agreement and the accompanying mortgage and contract of sale. The court found that defendants sufficiently pleaded grounds for reformation by alleging a clerical error that resulted in a mutual mistake, where the scrivener inserted '135' payments instead of the number implicitly required to fully amortize the debt with interest, contrary to the parties' true agreement. The law dictates that where a scrivener's mistake causes an instrument to omit or contain terms contrary to the common intention of the parties, equity will correct it to place the parties in their intended position, viewing such an error as a mutual mistake common to both parties (citing Cunnius v. Fields and Dennis v. American-First Title & Trust Co.). The court determined that additional evidence was unnecessary because plaintiffs' admissions in their petition, coupled with the attached note and mortgage, established the essential facts: a principal debt of $13,500, monthly payments of $100, and 6% interest on the unpaid balance. The note itself contained obvious drafting errors (e.g., 6% 'per month' interest, 135 payments equaling only the principal) that sharply departed from the intention manifest in the contract of sale and the mortgage, which clearly specified '6% interest per annum'. The court concluded that equity will correct such unintentional drafting mistakes, and the trial court's construction, which avoided absurdity and aligned with the parties' clear agreement for annual interest, was valid. The ambiguity regarding total monthly payments became a matter of mathematical calculation, not a disputed fact requiring evidence, and the trial judge's method of reformation (implicitly substituting 226 payments for 135 and allowing continued $100 monthly payments) was deemed fair and equitable.
Analysis:
This case significantly clarifies the equitable doctrine of reformation for mutual mistake, particularly when the mistake is a scrivener's error. It establishes that courts can rely on admissions within pleadings and other contemporaneous documents (like a contract of sale and mortgage) to ascertain the true intent of the parties, even without a formal evidentiary hearing. This precedent strengthens the principle that the substance of an agreement, clearly evidenced, should prevail over flawed form, impacting cases involving promissory notes, mortgages, and other transactional documents with drafting errors. It also underscores that a party's failure to plead specific defenses, such as usury, can waive them, further shaping how such cases are litigated.
