Opinion ID: 1721674
Heading Depth: 1
Heading Rank: 2

Heading: reformation of the brown deed

Text: Havard, Benson, and Gill also contend that if the deed is found to reserve an interest in ½ of royalties, this was not the intent of the parties and the deed was the result of an accident or mistake. They argue that as present owners of the property they are entitled to a claim for reformation that the Kings might have asserted. Generally, the terms of an instrument may not be avoided merely by showing that it is contrary to a prior agreement and one party was mistaken about its contents. National Resort Communities v. Cain, 526 S.W.2d 510, 513-14 (Tex.1975). The terms may be avoided, however, upon proof that the writing fails to state the agreement of the parties because of a mutual mistake. A one-sided mistake may also give rise to a right of reformation if accompanied by fraud, misrepresentation, concealment, or misleading conduct on the part of the other party. See Stegall v. Fulwiler, 423 S.W.2d 182, 186 (Tex.Civ.App.Amarillo 1967, no writ). See also Holchak v. Clark, 284 S.W.2d 399 (Tex.Civ.App.San Antonio 1955, writ ref'd). This suit was filed in 1976, thirteen years after the deed from the Browns to the Kings. A suit for reformation is governed by the four-year statute of limitations. McClung v. Lawrence, 430 S.W.2d 179, 181 (Tex.1968); Tex.Rev.Civ.Ann. art. 5529 (Vernon 1958). Several recent cases have rejected the rule that a grantor or grantee is to be charged with immediate knowledge of a mistake contained in a deed and that limitations on an action to reform it begins to run on that date. In Sullivan v. Barnett, 471 S.W.2d 39 (Tex.1971), this court held: [E]quity and justice being the ultimate aims of all rules of law, this and other courts have not been so rigid in their application of this rule. Numerous exceptions are as well established as the rule itself. As shown by the cases hereinafter cited, this presumption that a grantor or grantee has immediate knowledge of a mutual mistake contained in a deed is rebuttable, and there are various circumstances, such as subsequent conduct of the parties as though the deed had not contained the error, which will excuse a delay in discovery of the mutual mistake. This Court has never permitted the rule to blindfold it to the true facts concerning actual discovery of the mutual mistake and subsequent conduct of the parties with respect thereto. The weight of authority is that once the presumption of immediate knowledge is rebutted, the statute of limitation will commence to run when the mutual mistake was, or in the exercise of reasonable diligence should have been, discovered.... Id. at 45; see McClung v. Lawrence, supra at 181-82; Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62, 69 (1959). Thus, a determinative question in this case is when the alleged mistake was, or should have been, discovered. A contract of sale signed by the Browns and King before the execution of their deed states that the deed was to contain an exception of an undivided 1/16th now outstanding non-participating royalty interest. An attorney selected by Brown assisted in the preparation of the deed. C. Arleigh King testified that he accepted the deed, but believed it had been prepared in accordance with the contract. King further testified that he had no actual knowledge of the Browns claim to ½ of royalties until 1976. The jury made several findings pertinent to the claim for reformation. They found that any language in the deed attempting to reserve more than a 1/16 royalty would be the result of an accident or mistake. They also refused to find that King knew or should have known as of 1964, the year he sold the property, that the Browns had reserved a one-half non-participating royalty interest. The trial court, however, granted the Browns' motion for judgment non obstante veredicto, concluding that the claim for reformation was barred by the four-year statute of limitations. In deciding whether the motion was correctly sustained this court is governed by the determination whether there is any evidence to raise an issue of fact. King's testimony is evidence of his lack of actual knowledge of a mistake, but there is no evidence to excuse his, or his successors', thirteen-year delay in bringing suit to reform the deed. To the contrary, the evidence in this case establishes that within a year after King accepted the deed, it was apparent to him that the reservation in the deed differed from the contract of sale. King testified that he believed the deed complied with the contract of sale by conveying to him the entire property except a 1/16 royalty. One year later, in 1964, King conveyed the same property to Kenneth Loyd. King's deed to Loyd contains an exception, which King testified was intended to reflect the royalty interest previously created by the Wuensche assignment and carried forward as a reservation to the Browns in the Brown deed. King's deed described this interest as follows: LESS, HOWEVER, THEREFROM an undivided one-half (½) non-participating interest in and to all of the royalties on oil, gas and other minerals, it being the intent of the Grantors herein to convey to Grantee all of the minerals and an undivided one-half (½) interest in and to all of the royalties on the minerals. This description of the Browns' reservation contains no language indicating that it is to be limited to a 1/16 royalty. King testified that his conveyance to Loyd was of all he understood he owned as a result of his deed from the Browns. This evidence, King's own deed to Loyd, demonstrates that King believed he owned all the property except ½ of royalties. Nor is there evidence that King was lulled into a sense of security by acts consistent with his belief that the Browns had reserved only a 1/16 royalty. In this respect this suit is distinguishable from other reformation cases in which diligence in discovering a mistake has been discussed. See Sullivan v. Barnett, supra ; Miles v. Martin, supra . In each of these cases the evidence suggests that conduct of the parties subsequent to the execution of the instrument was consistent with the reformation-seeking party's mistaken belief as to its contents or effect. In Sullivan v. Barnett, 471 S.W.2d 39 (Tex.1971), the parties did not dispute that approximately 240 acres were included in a conveyance by mutual mistake. The grantors sought reformation against the defense that the reformation claim was barred by the statute of limitations. This court recognized that the grantors' delay in bringing suit could be excused when they had remained in possession as though the mistake had not been made. The court noted that upon discovery of the mistake the grantors were fraudulently told that a reconveyance would be executed. Meanwhile, they continued to live on the land and exercise dominion over it with the knowledge of [defendants' predecessor] .... Id. at 46-47. In this case the alleged mistake concerns the amount of a royalty interest, as distinguished from the size of a tract in the possession of the grantor. In Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62 (1959), the plaintiff sought reformation because of mistake as to the legal effect of a royalty reservation in a deed. This court held that a fact issue was raised on the issue of plaintiff's diligence in discovering the mistake because he had received delay rentals consistent with his claimed interest. He claimed a ¼ interest in minerals; the court noted that he had received ¼ of delay rentals from the land for five of the six years from the date of the conveyance to the date the suit was filed. Id. at 69-70. In this case, however, there is no evidence that the Kings received royalties in an amount consistent with their claim. The Browns continued to receive shut-in royalties from the 1950 lease until 1965. There is evidence that the Kings received a share of these shut-in payments, but no evidence that their share was calculated on the basis of 1/16 of anything. Havard, Benson, and Gill have failed to show that King would be entitled to reformation of the deed. The evidence establishes that King knew or should have known that the Browns had reserved ½ of royalties when he conveyed the property in 1964. In 1964, limitations began to run against the reformation claim and four years later the claim was barred. Havard, Benson, and Gill acquired the property in 1972 subject to a valid limitations defense. Therefore, they are now barred from asserting the Kings' alleged right to reform the deed. For the reasons stated, I would affirm the judgment of the trial court awarding ½ of the 3/8 royalty under the M-Tex lease to the Browns. GREENHILL, C. J., and POPE, J., join in this dissent.