Opinion ID: 2207716
Heading Depth: 1
Heading Rank: 2

Heading: The Reformation.

Text: In reviewing the trial court's determination that the language referring to discounted notes should be deleted from the guaranty instrument, we review the whole record, adjudicating anew the parties' rights on the issue presented. We give weight to the trial court's findings of fact, but are not bound by them. In re Marriage of Steenhoek, 305 N.W.2d 448, 452 (Iowa 1981). The bank has the burden of proving by clear, satisfactory, and convincing evidence that the contract does not reflect the true intent of the parties, either because of fraud or duress, mutual mistake of fact, mistake of law, or mistake of one party and fraud or inequitable conduct on the part of the other. See Kendall v. Lowther, 356 N.W.2d 181, 187 (Iowa 1984). The remedy of reformation of an instrument lies within the sound discretion of the equity court and depends on whether the remedy is essential to the ends of justice. Id. at 188. In reforming the instrument, the court does not change the agreement between the parties, but changes the drafted instrument to conform to the real agreement. Baldwin v. Equitable Life Assurance Soc'y of United States, 252 Iowa 639, 643, 108 N.W.2d 66, 68-69 (1961). In reviewing the facts, then, we seek to determine whether the insertion of the terms relating to discounted notes was the result of a mutual mistake on the part of both parties, as the bank contends. We note at the outset that except for the typed names of the parties, the amount of the guarantee, and the last typewritten clause, the instrument is a standard form document. At the very least, the evidence shows that Adams intended to guarantee the $25,000 loan Dumont took out in June of 1983, and Adams admits as much. Furthermore, the parties agree that there was no discussion regarding whether or not the guaranty agreement applied solely to notes discounted by the bank. At hearing, Adams admitted that she did not know that a special legal significance attached to the term discounted note, and believed that the terms of the guaranty applied to the $25,000 loan that Dumont was negotiating. For its part, the bank asked for the guaranty because it was unwilling to loan Dumont the money without that protection. It subsequently relied upon Adams' guaranty in making additional loans to Dumont, and kept her informed of Dumont's indebtedness to the bank. It asked for and secured from Adams a second financial statement. Finally, and perhaps most tellingly, none of the notes executed by Dumont to the bank was a discounted note. Adams' argument leads inexorably to the conclusion that the guaranty instrument did not even guarantee the June 1983 note that prompted the bank to ask Dumont to secure a guarantor. Consequently, Adams' argument is that the bank's request of Dumont to secure a guarantor was meaningless and the guaranty worthless from its inception. We conclude that it was not the intent of the parties that the guaranty instrument apply only to discounted notes, and that the language relating to discounted notes was a mutual mistake.