Jack Nelson Jones Professional Association
February 12-18, 2018
Toney v. Burgess, 2018 Ark. App. 54 (January 31, 2018)
This appeal comes from the Saline County Circuit Court, honorable Bobby D. McCallister presiding. This case concerns reformation of an agreement based on mutual mistake.
Tabitha Toney filed a complaint for absolute divorce from Jerry Burgess on January 5, 2016. The parties negotiated a property-settlement agreement and signed it on July 11, 2016. The circuit court signed the Decree for Divorce incorporating but not merging the Property Settlement Agreement (Agreement) on July 29, 2016. In its order, the circuit court reserved general jurisdiction over the case to ascertain and enforce all rights and obligations of the parties under the decree. The Agreement provided that “Wife agrees to pay the 2014 personal property tax debt.” On September 8, 2016, Burgess filed a “Motion to Correct Scrivener’s Error,” and the circuit court held a hearing on the motion on November 22, 2016.
At the hearing, Burgess testified that the Agreement should have read “Wife agrees to pay the 2014 income tax debt” instead of “Wife agrees to pay the 2014 personal property tax debt.” The 2014 personal property taxes were $225.36, and the 2014 income taxes were $12,500. Burgess testified that he did not discover the error in the Agreement until Toney mentioned to him on the phone that she did not have to pay the income taxes according to the paperwork and laughed at him. Toney testified that she did not laugh at Burgess and that she believed the settlement properly reflected the agreement of the parties that she would pay the personal property taxes. Burgess’s attorney, George Ellis, stated to the circuit court that it was an overlooked error on his part and that the agreement was supposed to read “income tax debt” rather than “personal property tax debt.” The circuit court stated that, based on everything it had seen and heard, the parties intended to settle the income tax debt. The circuit court found a mutual mistake and reformed the decree to reflect this correction. Toney appealed, arguing that the circuit court lacked jurisdiction to modify the decree; that the parol-evidence rule barred evidence barred Burgess’s testimony on mutual mistake; and that the circuit court erred in finding a mutual mistake. This article discusses Toney’s parol-evidence and mutual mistake arguments.
On appeal, the Court first analyzed Toney’s argument on the parol-evidence rule. The parol-evidence rule bars introduction of evidence that adds or varies the parties’ written contract that is unambiguous in the absence of fraud, duress, or mutual mistake. The Court pointed out, however, that parol evidence is admissible in reformation cases based on mutual mistake. In the present case, Burgess argued a mutual mistake to the circuit court and argued mutual mistake on appeal. The circuit court found a mutual mistake at the hearing. Therefore, the Court explained that the parol-evidence rule did not bar the introduction of Burgess’s testimony because the circuit court based its reformation on a mutual mistake. Therefore, the circuit court did not err in ruling that the parol-evidence rule did not apply.
The Court next addressed Toney’s argument that the circuit court clearly erred in finding a mutual mistake between the parties. The Court explained that reformation is an equitable remedy that is available when the parties have reached a complete agreement but, through mutual mistake, the terms of their agreement are not correctly reflected in the written instrument purporting to evidence the agreement. A mutual mistake is one that is reciprocal and common to both parties, each alike laboring under the same misconception in respect to the terms of the written instrument. According to the Court, in order to show a mutual mistake occurred, it must be demonstrated that, at the time the agreement was reduced to writing, both parties intended their written agreement to say one thing and, by mistake, it expressed something different. Whether a mutual mistake warranting reformation occurred is a question of fact. Even in reformation cases, where the burden of proof is by clear and convincing evidence, the Court defers to the superior position of the trial judge to evaluate the evidence, and the proof need not be undisputed.
In Mauldin v. Snowden, the appellant argued that the reformation was clearly erroneous because the evidence supported only a finding of unilateral mistake on the issue of whether the appellee was to receive mineral rights under the contract. There, the parties disputed whether mineral rights were intended to be conveyed when there was no mention of the mineral rights. In that case, the Court ruled that the finding of a mutual mistake was a credibility determination for the circuit court and upheld the reformation. The Court held that a party’s testimony that mineral rights were never discussed allowed the court to give credibility to the testimony and conclude by clear and convincing evidence that a mutual mistake occurred between the parties.
In the Court’s view, the present case was similar to Mauldin because the circuit court heard testimony from Burgess about the intent of the parties. The circuit court based its ruling on its knowledge of the proceedings between the parties and determined that Burgess’s testimony was credible. Although Toney disputed Burgess’s testimony, the Court noted that this dispute alone did not make the circuit court’s findings clearly erroneous. The circuit court made a credibility determination and found that the parties intended the decree to read “2014 income tax debt” instead of “2014 personal property tax debt” based on testimony it heard. The appropriate remedy for the circuit court upon finding a mutual mistake based on testimony before it was to reform the decree to reflect what the parties intended. Therefore, the Court found that the circuit court’s reformation of the decree was not clearly erroneous and affirmed the circuit court’s order. Affirmed.