Davenport v. Beck
576 P.2d 1199 (1977)
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Rule of Law:
A court of equity may reform an instrument, such as a promissory note, based on a scrivener's mistake that results in terms contrary to the parties' common intention, treating such an error as a mutual mistake, and can do so without a formal evidentiary hearing if the true agreement is evident from other documents and admissions in the pleadings.
Facts:
- On September 21, 1964, Claud and Mary Davenport (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 that the Davenports would take the property under a 'contract for deed,' paying '$100 per month at 6% interest included,' and build a house on the land.
- As per the agreement, after 10 payments, the Becks and Hollidays would convey the property to the Davenports and take a first mortgage for the unpaid balance, to be liquidated by continued $100 monthly payments.
- On October 15, 1964, the Davenports executed a promissory note and securing mortgage in favor of the Becks and Hollidays.
- The promissory note contained errors, including stating '135 installments' of $100 (equaling the principal without accounting for interest over time) and specifying interest at '6% per cent, per month,' while the accompanying mortgage stated '6% per cent, interest per annum from date, payable monthly.'
- The Davenports took possession of the lot and made $100 monthly payments as agreed for many years.
- On January 5, 1976, after 135 payments, Claud Davenport sent the final $100 check, requesting a release of the mortgage, believing the note was fully paid.
- The Becks and Hollidays declined to execute a release, contending the note was not fully paid due to a clerical error in the original drafting.
Procedural Posture:
- Claud and Mary Davenport (plaintiffs) filed an action in trial court against Rosa Beck, W. H. Beck, Winona Smith, and Clifford Holliday (defendants), seeking to quiet their title against the mortgagees and requesting a penal judgment against the defendants for failure to release the mortgage.
- The Becks and Hollidays (defendants) filed an answer denying the note was fully paid and a cross-petition alleging a clerical error in the note's preparation, requesting reformation of the note and a judgment for the remaining balance.
- A pretrial conference was held on October 7, 1976, where the parties waived identification of various exhibits, and the judge found 'there is no issue as to any material fact,' setting the case for a non-jury trial.
- On October 28, 1976, the Becks and Hollidays (defendants) filed an 'Offer of Evidence' for the court's consideration.
- On November 3, 1976, the trial court adjudicated the case without hearing additional evidence, denying the Davenports' requested relief, reforming the note by deleting the number 135, and decreeing a remaining balance of $7,318.68 due on the note.
- The Davenports (plaintiffs), as appellants, appealed this judgment to the Court of Appeals of Oklahoma.
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Issue:
Does a court of equity have the authority to reform a promissory note due to a scrivener's error to reflect the parties' true intent, even when the defendants' cross-petition only alleges a 'clerical error' rather than an explicit 'mutual mistake,' and can such a reformation occur without a formal evidentiary hearing if the parties' intentions are clear from other documents and admissions?
Opinions:
Majority - Brightmire, Presiding Judge.
Yes, a court of equity does have the authority to reform a promissory note due to a scrivener's error to reflect the parties' true intent, even when the defendants' cross-petition alleges a 'clerical error' rather than explicitly stating 'mutual mistake,' and such a reformation can occur without a formal evidentiary hearing if the parties' intentions are clear from other documents and admissions. The court held that the defendants' cross-petition, in alleging a clerical error that resulted in 135 payments instead of 226, effectively pleaded a mutual mistake. Under controlling law, where a scrivener's mistake causes an instrument to omit or contain terms contrary to the common intention of the parties, a court of equity will consider it a mutual mistake common to both parties and correct the error to place the parties in their intended position, citing Cunnius v. Fields, Okl., 449 P.2d 703 (1969) and Dennis v. American-First Title & Trust Co., Okl., 405 P.2d 993 (1965). The court gave a liberal construction to the pleading, finding sufficient grounds for reformational relief. Furthermore, the court found that a formal evidentiary hearing was not necessary because the plaintiffs' admissions in their petition, which attached the note and mortgage, established the essential facts: that they owed $13,500, promised to pay $100 monthly, and promised to pay 6% interest on the unpaid principal balance annually. The note itself contained gross errors and ambiguities, such as the '6% per cent, per month' clause, which sharply departed from the intention manifested in the contract of sale and the securing mortgage, both of which clearly indicated an annual interest rate. The reformation was therefore validly predicated on the agreement revealed by the note, mortgage, and contract of sale, specifically that interest would be 6% per annum, paid monthly. The trial court's method of reforming the note by deleting '135' and effectively substituting '226' payments, with the balance to be paid at $100 per month, was deemed fair and equitable.
Analysis:
This case significantly clarifies the equitable power of courts to reform contracts, particularly when dealing with scrivener's errors. It establishes that courts will liberally construe pleadings to identify a mutual mistake, even if the term 'clerical error' is used, as long as it implies a deviation from the parties' common intent. The ruling also underscores that formal evidentiary hearings are not mandatory for reformation if the true agreement is unambiguously ascertainable from admissions in the pleadings and supporting documents. This precedent streamlines litigation by allowing courts to rely on clear documentary evidence, thereby potentially reducing the need for costly and time-consuming trials in cases involving evident drafting mistakes in instruments like promissory notes.
