M. L. Resources, Inc., et al. v. Myrtle M. Miller--Appeal from 87th District Court of Limestone County

IN THE

TENTH COURT OF APPEALS

No. 10-99-241-CV

M.L. RESOURCES, INC., ET AL.,

Appellants

v.

MYRTLE M. MILLER,

Appellee

From the 87th District Court

Limestone County, Texas

Trial Court # 24,744B

O P I N I O N

Mark Loyd is the sole shareholder of M.L. Resources, Inc. In May 1996, Loyd went to see then-95-year-old Myrtle Miller at the retirement home in which she resided. Miller had agreed to sell Loyd a part of her mineral interests in some property, but he brought with him a deed which conveyed all of her mineral interests to him. She signed the deed, selling to Loyd for $600 a royalty-income stream then yielding $3,000 a year. In this suit, the trial court declared that she was entitled to a judgment reforming the deed so that it conveyed less than her entire mineral estate. Loyd appeals, asking us to reverse the judgment, arguing (1) the deed could never be subject to reformation because it was drafted before Miller agreed to sell her interests, and (2) the evidence is insufficient to support the court s judgment. Rejecting both of his contentions, we affirm the judgment.

Background

Miller owned a .007374 fractional interest of the Miller Gas Unit located in Limestone County. The mineral estate in the Unit had been divided horizontally into two parts: the shallow horizon rights, covering minerals up to 7,500 feet below the surface and the deep horizon rights, covering minerals found 7,500 feet and further below the surface.

In the early part of 1994, Loyd was the operator of the Miller Gas Unit. In October, he attempted to purchase Miller s shallow horizon royalty rights by mailing her a bank draft and a deed conveying those rights to him. At that time, Miller told Loyd that she was not interested in selling her rights.

In 1996, Loyd again contacted Miller in an attempt to purchase her mineral rights. As before, he initiated the offer to buy her property by sending her a deed and a check. This time, though, the deed was not limited to her shallow horizon rights, but had the effect of conveying her entire mineral estate to him. In a follow up phone call, Miller rejected his offer, but agreed to sell him some rights for $600, although exactly what rights she agreed to sell was disputed at trial. According to Miller, she told Loyd on the phone that she would sell him only her shallow horizon rights. Loyd went to see Miller, bringing with him a deed which conveyed all of her mineral rights to him. Although Miller tried to read the deed, she could not find either her glasses or the magnifying glass that she used to help her read. Nevertheless, she signed the deed, and Loyd paid her $600.

After Mitchell Energy Company, the Miller Unit s operator in 1996, stopped sending Miller royalty payments some two months later, Miller attempted to contact Loyd to have the deed corrected. Loyd refused to speak with her about it, and she filed this suit seeking to have the deed reformed by the court to show that she conveyed only her shallow horizon rights. After a bench trial, the court found that Miller s vision was limited, she had relied on the representations by Loyd as to what the deed she signed conveyed, she believed that Loyd was seeking to purchase the shallow horizon rights, she mistakenly believed that she had conveyed only those rights to Loyd by the deed, and that her mistake was accompanied by fraud or other inequitable conduct by Loyd in his representations to Miller regarding the deed. Based on these findings, the court ordered the deed reformed to convey only the shallow horizon rights and awarded Miller $7,500 in attorney s fees.

Can a preprinted deed ever be reformed?

In his first issue, Loyd claims that the trial court erred because the deed was drafted before any negotiation between Miller and Loyd and it was signed without alteration[,] and so could never be reformed to convey only the shallow horizon mineral rights. He relies on Cherokee Water Co. v. Forderhouse, 741 S.W.2d 377, 380-81 (Tex. 1987) (Cherokee Water II). In Cherokee Water II, the plaintiffs signed a preprinted deed and later sought to reform the deed to delete a right of first refusal to purchase the oil, gas and other minerals in the property. Id. at 378. According to the Supreme Court, any discussion, much less agreement, concerning [the right of first refusal] occurred after the deed was signed. Id. at 380. Thus, in Cherokee Water II there was no agreement other than that expressed by the language of the deed, and that language unambiguously conferred the right of first refusal of all minerals on Cherokee Water Company. Id. at 381 ( All that we have in this case is a form deed which contained the total agreement between the parties. ); see also Cherokee Water Co. v. Forderhouse, 641 S.W.2d 522, 525 (Tex. 1982) (Cherokee Water I) (holding that the language of the deed at issue unambiguously covered leases of the mineral rights). Because reformation of the deed would result in making and enforcing a contract the parties never agreed to[,] the Court refused to uphold the lower court s orders doing so. Cherokee Water Co., 741 S.W.2d at 380-81.

Thus, the determinative fact in Cherokee Water II was not that the deed was preprinted, but that the parties only agreement was found in the terms of the deed. In our view, Cherokee Water II does not stand for the proposition that a preprinted deed can never be subject to reformation, as Loyd contends.

Loyd sent Miller an offer and a proposed deed. They negotiated an agreement over the phone, but Loyd did not draft a new deed. Loyd argues that he should prevail because he did not modify the deed he initially proposed to reflect the agreement he and Miller actually reached. We do not believe that the law requires such a result. If there is an agreement which is not correctly memorialized in the writing by which the parties intend to record their agreement, it is subject to reformation regardless of when the actual instrument was physically produced. See Davis v. Grammar, 750 S.W.2d 766, 767-68 (Tex. 1988). Thus, Loyd s first issue is without merit.

Is the evidence sufficient?

In his second issue, Loyd argues that the evidence is legally insufficient to support the judgment. // He appears to argue that Miller was required to prove her right to reformation by clear and convincing evidence in the trial court, citing Oldaker v. Travelers Ins. Co., 497 S.W.2d 402, 404 (Tex. Civ. App. El Paso 1973, no writ), and Reliance Ins. Co. v. Pruitt, 94 S.W.2d 833, 836 (Tex. Civ. App. Texarkana 1936, writ dism d). However, these two cases represent examples of the outdated use of clear and convincing as an appellate review standard, not as a burden of proof in the trial court. See Bill Vance, The Clear and Convincing Evidence Standard in Texas: A Critique, 48 Baylor L. Rev. 391, 392 (1996). We know of no statute or decision by a Texas court imposing the clear and convincing burden of proof at trial in an action to reform a deed, and Loyd has not cited us to one. We decline to do so here. See id. 405-09; see also Ellis County State Bank v. Keever, 888 S.W.2d 790, 792-93 (Tex. 1994). //

In reviewing a "no evidence" complaint, we consider only the evidence supporting the judgment and draw all inferences in the light most favorable to the judgment. Southwestern Bell Mobile Systems, Inc. v. Franco, 971 S.W.2d 52, 54 (Tex. 1998); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965). If there is more than a scintilla of evidence supporting the findings, the no-evidence challenge fails. See Texarkana Memorial Hosp., Inc. v. Murdock, 946 S.W.2d 836, 838 (Tex. 1997). "More than a scintilla of evidence exists when the evidence supporting the finding, as a whole, 'rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.'" Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995) (quoting Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 25 (Tex. 1994)). We will sustain a no evidence point of error when: (1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998), cert. denied, 526 U.S. 1040, 119 S. Ct. 1336, 143 L. Ed. 2d 500 (1999).

A party is entitled to reformation of a deed upon proving the party had reached an agreement with the other party but the deed did not reflect the true agreement[.] Davis, 750 S.W.2d at 768. Typically, the basis for the error in the deed must be a mutual mistake. Id. However, the deed may also be reformed due to a [u]nilateral mistake by one party, and knowledge of that mistake by the other party[.] Id. In such a situation, knowledge of the mistake by one party and his failure to reveal it to the other party amounts to such inequitable conduct as will justify reformation. Hill v. Spencer & Son, Inc., 973 S.W.2d 772, 775 (Tex. App. Texarkana 1998, no pet.).

The court found that the deed should be reformed because Miller intended to convey her shallow horizon rights to Loyd, mistakenly believed that the deed conveyed only those rights, and her mistaken belief was accompanied by inequitable conduct by Loyd in the form of his representations to her concerning what the deed actually conveyed at a time when she was unable to read the deed herself. All of these findings are supported by some evidence.

Miller testified repeatedly that she told Loyd that she would sell only her shallow horizon rights. According to Miller, several times when [Loyd] called over the telephone, [she] said now you understand that the only thing [she] want[ed] to sell was her shallow horizon rights. When Loyd came to see her, the first thing [she] told him was that she only wanted to sell the shallow horizon rights.

In keeping with this agreement, she believed that the deed conveyed only the shallow horizon rights. She testified, I thought from our conversation and all that it was just a contract for the [shallow horizon rights]. It didn t dawn on me that it was anything but that. She also testified that [she] reminded him that [she] was selling only [her shallow horizon rights], and [Loyd] understood that, he said yes.

Finally, Miller described her lack of vision and her reliance on Loyd to tell her the contents of the deed. She said that she had been declared legally blind fifteen years before trial. She had to have both her glasses and a magnifying glass to read. When she and Loyd met, however, she was unable to find her glasses and, so, could not read the deed that she signed. She testified that she told Loyd she did not have her glasses and wanted to make sure that the deed related to only her shallow horizon rights. According to Miller, when she said this to Loyd, [h]e said I understand that.

To succeed in having the deed reformed, Miller was required to show that the agreement between herself and Loyd was not correctly reflected in the deed and that Loyd knew of the mistake while she did not. The court found she established that she had agreed to sell her shallow horizon rights, that she was mistaken about what the deed she signed actually conveyed, and that Loyd engaged in inequitable conduct by his representations concerning the true contents of the deed. These findings are all supported by some evidence. Thus, the evidence is legally sufficient to support the court s judgment, and Loyd s second issue is without merit.

Conclusion

We have rejected Loyd s first issue because there was an agreement that was not correctly reflected in the written deed, thus, the fact that the deed was physically produced before the agreement was reached does not bar Miller from having the deed reformed to reflect the actual agreement. We have rejected his second issue because the evidence is legally sufficient. Having rejected both of his complaints, we affirm the judgment.

BILL VANCE

Justice

Before Chief Justice Davis

Justice Vance, and

Justice Gray

Affirmed

Opinion delivered and filed December 6, 2000

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