Opinion ID: 2622577
Heading Depth: 3
Heading Rank: 4

Heading: There Is a Genuine Issue of Material Fact as to Whether the Parties Made a Mutual Mistake of Fact.

Text: The Corporations also assert that they presented evidence establishing a material issue of fact as to whether both parties made a mutual mistake regarding the Exxon claim's absence from the settlement agreement. A mutual mistake of this kind, according to the Corporations, would have justified reformation of the settlement agreement and release. The Corporations' argument is persuasive. In order to reform a contract because of a mutual mistake, the party urging reformation must show: (1) the mistake relates to a `basic assumption on which the contract was made,' (2) the mistake has a material effect on the agreed exchange of performances, and (3) the party seeking relief does not bear the risk of the mistake. [26] The first prong of this test requires that the mistake be related to a basic assumption on which the contract was made. In Stormont v. Astoria, Ltd ., we held that a mistake regarding assumptions . . . [that] went to the heart of the contract[ ] satisfied this requirement. [27] There, the issue was whether acknowledged mistakes about the extent of a building's deterioration were central to a sales contract between a commercial seller and buyer. Noting that the property was listed as `income property,' and [the buyer] was interested in it for its rental value we held the mistake related to a basic assumption of the contract. [28] Here, the settlement agreement, by its own terms, purported to resolve all of the [Joint Venture] and [the Corporations'] rights arising from [the Corporations'] withdrawal from the [Joint Venture]; yet it failed to mention the Exxon claim. The Joint Venture admits that [t]he parties did not address this issue in the Settlement Agreement or during settlement discussions, and that it never specifically considered the effect of the Settlement Agreement on the [Joint Venture's] [Exxon] claim. By contrast, Old Harbor presented evidence that it expected, as early as February 8, 1990, to receive its approximately twelve percent interest of the Exxon claim. And Akhiok's attorney attested that [a]t no time [during the settlement negotiations] did anyone from the [Joint Venture] advise us that the [Joint Venture] intended to claim and retain for itself the Exxon claim. The settlement agreement purported to settle all claims, yet it failed to address or account for the allocation of a significant Joint Venture asset. This situation leads us to conclude that the mistake that the Corporations allege as a basis for reformation relates to a basic assumption of the settlement agreement. The second prong of the mutual mistake test requires that the mistake be material to the transaction. We discussed this requirement in Diagnostic Imaging Center Associates v. H & P , where we held that an undisclosed profit of $45,000 in a transaction between partners cannot be immaterial. [29] By comparison, the Joint Venture stood to gain more than $22 million from the partial settlement of the Exxon claim-of which Old Harbor and Akhiok claim 12.38% and 5.99%, respectively. This amount is certainly material to a transaction in which Akhiok paid $62,429 and Old Harbor paid $128,941 to the Joint Venture as their shares of the Joint Venture's purported negative value. Finally, nothing in the settlement agreement transferred the risk of a mutual mistake to the Corporations  the third prong of the mutual mistake test. Therefore, the evidence, when viewed in the light most favorable to the Corporations, supports the contention that the Corporations and the Joint Venture made a mutual mistake as to the effect the settlement agreement had on the Exxon claim. [30]