Opinion ID: 2068637
Heading Depth: 2
Heading Rank: 2

Heading: The Degree of Proof in Reformation Actions

Text: As the Court of Appeals pointed out in its opinion, reformation is an extreme equitable remedy to relieve the parties of mutual mistake or of fraud. Board of Comm'rs of Hamilton County v. Owens (1894), 138 Ind. 183, 186, 37 N.E. 602. Reasor, 615 N.E.2d at 136. See also Citizens Nat'l Bank v. Judy (1896), 146 Ind. 322, 340, 43 N.E. 259, 265; Kruse, Kruse & Miklosko, Inc. v. Beedy (1976), 170 Ind. App. 373, 396-97, 353 N.E.2d 514, 529; Pearson v. Winfield (1974), 160 Ind. App. 613, 618, 313 N.E.2d 95, 99. The remedy of reformation is extreme because written instruments are presumed to reflect the intentions of the parties to those instruments. Casa D'Angelo, Inc. v. A & R Realty Co. (1990), Ind. App., 553 N.E.2d 515, 521, trans. denied; Ethyl Corp. v. Forcum-Lannom Assoc's, Inc. (1982), Ind. App., 433 N.E.2d 1214, 1217. [4] In cases involving mutual mistake such as this one, the party seeking reformation must establish the true intentions of the parties to an instrument, that a mistake was made, that the mistake was mutual, and that the instrument therefore does not reflect the true intentions of the parties. Judy, 146 Ind. at 344-45, 43 N.E. at 266; Pearson, 160 Ind. App. at 618, 313 N.E.2d at 99. As the Court of Appeals in Pearson explained: The primary purpose of reformation is to effectuate the common intentions of all parties to an instrument which were incorrectly reduced to writing. It follows that a grant of reformation is necessarily predicated upon a prior understanding between all parties on essential terms. Otherwise, there would be no standard to which an instrument could be reformed. Id. at 618-19, 313 N.E.2d at 99. In Indiana, historically, a party seeking reformation of a written instrument has had to show the intent of the parties to the instrument and the mistake that was made in the instrument by proof that is clear and satisfactory. Judy, 146 Ind. at 347, 43 N.E. at 266; [5] Pearson, 160 Ind. App. at 618, 313 N.E.2d at 99. [6] The parties in this case dispute the meaning of clear and satisfactory, and the interpretation of this phrase is critical in this case because the trial court explicitly made its findings based on a preponderance of the evidence. The Court of Appeals determined that clear and satisfactory means that more than a preponderance of the evidence is required, and held that the party seeking reformation must show by clear and convincing evidence that a mistake has been made. Reasor, 615 N.E.2d at 137. As the Court of Appeals noted, the Seventh Circuit required clear and convincing evidence of a mutual mistake when applying Indiana law in a reformation case. [7] Also, other jurisdictions require more than a preponderance of the evidence. [8] And indeed, there is direct Indiana precedent for requiring clear and convincing evidence in reformation actions. Stack v. Commercial Towel & Uniform Service (1950), 120 Ind. App. 483, 492, 91 N.E.2d 790, 794 (The law is well recognized that courts of equity will allow reformation for any substantial mistake of fact when established by clear and convincing evidence.). In Travelers Indem. Co. v. Armstrong (1982), Ind., 442 N.E.2d 349, we decided that only clear and convincing evidence of malice, fraud, gross negligence or oppressiveness will support an award of punitive damages. Justice Prentice, writing for the Court, discussed in more general terms when a standard of proof higher than a preponderance of the evidence ought to be required: Clear and convincing evidence, a stricter degree of proof than a mere preponderance of the evidence is required in some jurisdictions with respect to such issues as fraud, specific performance, forfeiture, etc. In ordinary civil actions a fact in issue is ... sufficiently proved by a preponderance of evidence. However, clear and convincing proof is a standard frequently imposed in civil cases where the wisdom of experience has demonstrated the need for greater certainty, and where this high standard is required to sustain claims which have serious social consequences or harsh or far reaching effects on individuals to prove willful, wrongful and unlawful acts to justify an exceptional judicial remedy... . So, in a number of cases where an adverse presumption is to be overcome, or on grounds of public policy and in view of peculiar facilities for perpetrating injustice by fraud or perjury, the degree of proof required is expressed in such terms as `clear,' `clear and conclusive,' `clear precise and indubitable,' `convincing,' `clear and convincing,' `satisfactory,' `entirely satisfactory,' `strong,' `clear, strong and convincing,' `clear, distinct and convincing,' `clear, positive and credible,' and `unequivocal,' and the phrase `preponderance of evidence' has been expressly disapproved as an insufficient measure of the proof required, as has also the phrase, `a fair preponderance of the evidence.' ... . Preponderance of the evidence, when used with respect to determining whether or not one's burden of proof has been met, simply means the greater weight of the evidence. To say, then, that in some cases the evidence must overcome opposing presumptions as well as opposing evidence is to acknowledge that more persuasive evidence may be required in some cases than in others. 442 N.E.2d at 360-61 (emphasis in the original) (citations omitted). Reformation, when granted in equity, overcomes the presumption that the written instrument expresses the parties' intentions; it overcomes the Statute of Frauds, Colbo v. Buyer (1956), 235 Ind. 518, 528, 134 N.E.2d 45, 50; and it has the potential to affect others beyond any immediate dispute via the recording system. The Court of Appeals was entirely correct to hold that to succeed in a reformation action a party must show either mutual mistake or fraud by clear and convincing evidence. We approve that holding and add that a party seeking reformation must also show the original intent or agreement of the parties by clear and convincing evidence. Because the trial court explicitly made its findings by a preponderance of the evidence, those findings cannot support its conclusions of law; and its judgment with respect to the reformation of the deeds in question is clearly erroneous. We will not reweigh the evidence. We must remand the entire reformation portion of this case to the trial court so that it may determine which of its findings are supported by clear and convincing evidence and whether it is necessary to supplement what is already a thirteen volume record with additional evidence from the parties. Although we are in no position to reweigh the evidence in this case, we will offer several observations about the facts as they come to us. First, the trial court found that the deed for Reasor Hills Drive from the Reasors to the County was inadequate on its face and that all parties agreed that it needed reformation. Finding of Fact No. 6. In Conclusion of Law No. 7, the trial court said that the Bryant and Ypma boundaries [Lots No. 2 & No. 3] as shown on plaintiff's exhibit No. 37 should be redrawn to be adjacent to the road. We do not find anywhere in the record that the trial court specifically orders the reformation of the deed to the road. There are two conflicting surveys in this case, neither of which shows Lots No. 2 and No. 3 adjacent to the road. The Stanley survey shows the boundaries north of the road; the Shartle survey shows them overlapping the road. The trial court specifically found by a preponderance of the evidence that Reasor Hills Drive is in the same location as when Putnam County accepted it from the Reasors. Conclusion of Law No. 11. If the trial court finds the evidence clear and convincing not only that a mistake was made in the deed for Reasor Hills Drive, but also that the intent of the parties was that road be where it is today, then it should order the deed reformed to reflect that fact. [9] If the trial court then finds the evidence clear and convincing that the other deeds are also inadequate and that the parties intended that all lots be bounded to the south by the road, reformation of the legal descriptions in the appropriate deeds either by resurvey or on the basis of existing information should pose little difficulty. With respect to the fifty-foot easement between Lots No. 5 and No. 6, the trial court determined by a preponderance of the evidence: That in spite of the fact that Walker H. Reasor and Page Cotton, Jr. set the stake at the southwest corner of the Cotton lot [Lot No. 6] approximately 35 feet from the southeast corner of the Terry lot [Lot No. 7], it was the responsibility of Alan Stanley and Alan Stanley & Associates, Inc. to provide for a 50 foot access strip for the Reasors. Conclusion of Law No. 8. The Court of Appeals affirmed the trial court's decision requiring Stanley to purchase from Cotton the land necessary to create a 50 foot easement between Lots No. 5 and No. 6 since the deed for Lot No. 6 reflects the 50 foot easement but Cotton paid for land up to the 35 foot mark. We disagree with the Court of Appeals and the trial court on this issue. In a reformation action, it is the intent of the parties that controls. If Walker Reasor told Stanley to make a deed reflecting a 50 foot easement, that is evidence that Reasor intended that there be a 50 foot easement, but it is not the controlling fact establishing that the problem is not with the deed to Lot No. 5 but with the land occupied. Similarly, that the deeds to Lots No. 7 and No. 8 assume a 50 foot easement between Lots No. 5 and No. 6 may be additional evidence of Reasor's intent. However, if the trial court finds the evidence clear and convincing that Reasor and Cotton intended that Cotton receive land up to the 35 foot mark, any duty owed to Reasor by Stanley is irrelevant, and the trial court should order that the deed for Lot No. 6 be reformed to reflect the 35 foot easement and that the deeds for Lots No. 7 and No. 8 be reformed correspondingly.