Durham v. Creech

231 S.E.2d 163 (1977)

32 N.C. App. 55

Delmas DURHAM and wife, Irene W. Durham v. Margie M. CREECH (Widow) et al.

No. 7611SC605.

Court of Appeals of North Carolina.

January 5, 1977.

*166 L. Austin Stevens and E. V. Wilkins, Smithfield, for plaintiffs-appellants.

James A. Wellons, Jr., and William R. Britt, Smithfield, for Willie Floyd Smith and Mildred Parrish Smith, defendants-appellees.

ARNOLD, Judge.

Plaintiffs assign error to the directed verdict in favor of defendants. Defendants' motion for directed verdict measures the sufficiency of the evidence according to this test: is the evidence, when considered in the light most favorable to plaintiffs, sufficient as a matter of law to support a jury verdict in plaintiffs' favor. If it is, the jury must be given the evidence for its consideration and decision. If it is not, the court must enter a directed verdict. Summey v. Cauthen, 283 N.C. 640, 197 S.E.2d 549 (1973); American Personnel, Inc. v. Harbolick, 16 N.C.App. 107, 191 S.E.2d 412 (1972).

Where a deed fails to express the true intention of the parties, and that failure is due to the mutual mistake of the parties, or to the mistake of one party induced by fraud of the other, or to the mistake of the draftsman, the deed may be reformed to express the parties' true intent. Parker v. Pittman, 18 N.C.App. 500, 197 S.E.2d 570 (1973). According to plaintiffs, it was the true intent of the parties here to reserve a life estate to plaintiffs.

Defendants correctly assert that there is no evidence of fraud in this case. It does not appear that Jesse or Margie Creech made a statement which he or she knew to be false or which was in reckless disregard for the truth. No purpose is served by a discussion of the elements of fraud in this opinion. However, see, Cofield v. Griffin, 238 N.C. 377, 78 S.E.2d 131 (1953).

When, due to the mutual mistake of the parties, or perhaps a mistake by their draftsman, the agreement expressed in a written instrument differs from the agreement actually made by the parties, the equitable remedy of reformation is available. However, reformation on grounds of mutual mistake is available only where the evidence is clear, cogent and convincing. Parker v. Pittman, supra. Whether the evidence is clear, cogent and convincing is for the jury. Insurance Co. v. Hylton, 7 N.C. App. 244, 172 S.E.2d 226 (1970).

Executed contemporaneously with the deed which plaintiffs seek to reform was a written instrument purporting to reserve a life estate to plaintiffs. Defendants argue that there has been no judicial determination as to whether this instrument created a life estate, and that the plaintiffs have not shown any evidence of mutual mistake because the instrument was drafted and then changed at plaintiffs' request. We hold as a matter of law that this instrument referred to did not reserve or create a life estate in plaintiffs. (No opinion is expressed with respect to whether it constitutes color of title.)

In order to reform the deed to the true intent of the parties plaintiff has the burden of showing that the deed fails to express the actual agreement because of the mutual mistake of the parties, or the mistake of their draftsman. There is evidence that the failure to reserve plaintiffs' *167 life estate resulted from the draftsman's mistake. Testimony by the Durhams, Harold Creech and Raymond Atkins indicates that plaintiffs and Jesse Creech agreed that the plaintiffs were to retain a life estate to their house and an acre of land surrounding it. Testimony by plaintiffs and Harold Creech, as well as the instrument which purports to reserve a life estate, show that the Durhams would sell their property only on the condition that their life estate was perfected. The jury could conclude that there was clear, cogent and convincing evidence of a mistake by the draftsman. The deed and the contemporaneously executed instrument fail to express accurately the agreement of the parties as alleged in the complaint.

It is immaterial whether the mistake arose out of the attorney's ignorance. This is not a case where reformation is sought of a bare mistake of law. A bare mistake of law generally affords no grounds for reformation. Trust Company v. Braznell, 227 N.C. 211, 41 S.E.2d 744 (1947). There is evidence that the parties agreed and intended to reserve a life estate. The instrument purporting to reserve the life estate, executed along with the deed, was ineffectual, which may be a mistake of law as to the legal efficacy of the transaction. However, the failure to accomplish the intention of the parties, to reserve a life estate, was a mistake of fact which will afford reformation. (See, Trust Company v. Braznell, supra.)

Evidence which tends to show the draftsman's error also tends to show that the parties were mistaken in their beliefs. The evidence would support a finding of mutual mistake by the parties.

Reformation is not barred because Margie Creech conveyed the land to third parties, the Smiths. In Archer v. McClure, 166 N.C. 140, 144, 81 S.E. 1081, 1083 (1914), our Supreme Court said:

". . . where, because of mistake, an instrument does not express the real intention of the parties, equity will correct the mistake, unless the rights of third parties, having prior and better equities, have intervened."

A third party's equities are not great enough unless he is a bona fide purchaser, i. e., one who purchases without notice, actual or constructive, and who pays valuable consideration. Morehead v. Harris, 262 N.C. 330, 137 S.E.2d 174 (1964); Crews v. Crews, 210 N.C. 217, 186 S.E. 156 (1936); Dobbs, Remedies, § 11.6 (1973). There is evidence that the Smiths were not bona fide purchasers. Plaintiffs, Harold Creech, Margie Creech, and Albert Holland all testified concerning the Smiths' actual knowledge of plaintiffs' claim to a life estate. Willie F. Smith was actually shown the instrument purporting to preserve the plaintiffs' life estate. There is ample evidence that the Smiths were not innocent purchasers of the property in question.

Margie Creech, not Jesse Creech, was the sole grantee in the deed from the Durhams. This fact does not bar reformation because there is also evidence that Jesse Creech was acting as agent for Margie Creech. He conducted the negotiations, and, in his own name, purported to reserve the plaintiffs' life estate. Margie Creech's own testimony presents evidence that he was her agent. She said, "On this occasion in [the attorney's] office, my husband had authority from me to act in my behalf in regards to the Durham property, to act as he saw fit." If the jury finds that Jesse Creech was Margie Creech's agent, then his intentions and knowledge are imputed to her.

There is evidence of a mutual mistake by the parties and their draftsman. The record reflects nothing which bars reformation as a matter of law. Directed verdict was improper.

Reversed and remanded.

VAUGHN and MARTIN, JJ., concur.