Opinion ID: 1533620
Heading Depth: 1
Heading Rank: 2

Heading: Mutual Mistake and Reformation

Text: As to the 40 acres mistakenly included in the instruments in excess of the constitutionally protected rural homestead (SE/2 of Tracts No. 6 and No. 7), plaintiffs necessarily rely upon their contention that equitable right and title to the entire 240 acres remained in them by reason of their continued possession of and dominion over the property and grantees' conduct recognizing their ownership as though the 240 acres had never been included in the 1956 deed and the 1959 deed of trust. Plaintiffs contend, and the trial court held, that the jury findings and undisputed facts entitle them to reformation of the instruments and the quieting of their title to all of the six numbered tracts which comprise the 240 acres generally referred to throughout the trial and in the special issues as their homestead property. The defendants do not dispute, and neither did their predecessor W. M. Barnett dispute, the fact that this land was included in the instruments by mutual mistake. Their only defense is that they should be allowed to keep the portion of the 240 acres which Barnett failed to reconvey to plaintiffs because the action by plaintiffs to quiet their title and reform the instruments is barred by the four-year statute of limitation. Article 5529, V.A.T.S. The Court of Civil Appeals so held, basing its decision solely upon a rule frequently stated by intermediate courts that a grantor is charged with knowledge of the contents of his deed from the date of its execution, and that limitation begins to run on such date against any action to correct it. The Court of Civil Appeals relied principally on the decisions most often cited for this rule, Kahanek v. Kahanek, 192 S.W.2d 174 (Tex.Civ.App., 1946, n. w. h.) and Kennedy v. Brown, 113 S.W.2d 1018 (Tex.Civ. App., 1938, writ dism.). However, equity 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. See McClung v. Lawrence, 430 S.W.2d 179 (Tex.Sup.1968), involving reformation of an alleged mutual mistake in the legal effect of a royalty reservation made nearly 16 years prior to filing suit, in which this Court reversed a court of civil appeals decision based upon the Kahanek and Kennedy decisions; [3] Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62 (1959), in which this Court remanded for a trial of grantor's right to equitable relief of reformation because of possible mutual mistake in the legal effect of the royalty reservation in a deed executed almost six years prior to filing suit; Gilmore v. O'Neil, 107 Tex. 18, 173 S.W. 203 (1915), approving reformation of a deed which conveyed 1.35 acres instead of the intended 1 2/3 acres in suit filed five years after the date of the deed; Clopton v. Cecil, 234 S.W.2d 251 (Tex. Civ.App., 1950, writ ref. n. r. e., cited with approval on this point in Miles v. Martin, supra), in which a royalty deed whose decimal description covered 1.86 royalty acres instead of the intended 18.6 acres was reformed in a suit filed 10 years after the date of deed; Texas Osage, etc. v. Garcia, 176 S.W.2d 798 (Tex.Civ.App., 1943, writ ref. w. m., also cited with approval in Miles v. Martin, supra) affirming reformation of a grantor's deed made 11 years before suit on account of a mutual mistake in the amount of mineral acres conveyed; Hutchins v. Birdsong, 258 S.W.2d 218 (Tex.Civ.App., 1953, writ ref. n. r. e.), in which a grantor's deed omitting an intended mineral reservation was reformed in a suit filed 12 years after date of the deed; Luginbyhl v. Thompson, 11 S.W.2d 380 (Tex.Civ.App., 1928, writ dism.), in which a grantor's deed omitting an intended mineral reservation was reformed in a suit filed more than six years after date of the deed; and Marshall v. Hutchinson, 358 S. W.2d 675 (Tex.Civ.App., 1962, n. w. h.), affirming reformation of a grantor's deed which conveyed all of a tract instead of an undivided half interest in a suit filed six years after the date of deed. See also Sims v. Haggard, 162 Tex. 307, 346 S.W.2d 110 (1961), in which the judgment of the trial court was modified to reform two deeds executed 11 years prior to institution of suit, because there was a mutual mistake conveying more acreage than intended; Ramsey v. McKamey, 137 Tex. 91, 152 S.W.2d 322 (1941), in which it was held that reformation of a partition decree because of mutual mistake was not barred by a 23 year delay in discovering the error, where rights of third parties had not intervened; and Riggs v. Polk, 3 Tex.Civ.App. 179, 21 S.W. 1013 (Tex.Civ.App., 1893, n. w. h.), in which it was held that grantors' action to correct mutual mistake in a series of deeds describing more acreage than intended was not barred by stale demand even though made over a period of 30 years prior to suit, when conduct of all grantees recognized that deeds covered only the tract intended. Six of the seven court of civil appeals opinions cited by the El Paso Court of Civil Appeals (458 S.W.2d at 852) in support of its rigid adherence to the rule charging plaintiffs with knowledge on the date of their deed, and commencing the running of the statute of limitation on that date, recognize that there are exceptions to the rule, especially where the party claiming advantage of the statute had recognized the ownership of the party seeking reformation as though the mistake had not been made, thus lulling him into a sense of security and excusing his delay in actually discovering the mistake. In the present case, there is evidence to support the findings of the jury that plaintiffs did not discover the erroneous inclusion of the tract numbers which constituted their homestead 240 acres in the 1956 deed more than four years prior to the filing of this suit and that they did not fail to use due diligence in discovering same. Further, it is undisputed that plaintiffs first learned that the mutual mistake had been repeated in the 1959 deed of trust after being informed of same in 1962 by W. M. Barnett and Barnett's attorney. Plaintiffs were assured by Barnett that the mistake would be corrected after the trustee's sale in 1962. With this assurance, Barnett asked plaintiff, J. H. Sullivan, to attend the sale, and thereafter proposed that the Sullivans convey him one-fourth of the minerals on 40 acres of the land in consideration for Barnett clearing up the mistake by reconveying the 240 acres to plaintiffs. This was agreed to. Plaintiffs delivered the mineral deed on the 40 acres and Barnett assured them that his attorney had prepared the reconveyance of the remainder. Plaintiffs testified they did not see it but completely trusted their friend Barnett and believed that it had been accomplished. Mr. Sullivan had a stroke and other serious illnesses which incapacitated him during this period. It was not until 1966, two years before filing this suit, that plaintiffs learned that Barnett had reconveyed to them the legal title only to forty acres (NW/2 of Water Tracts 3 and 4 of Section 201) and one-half interest in the remainder of the 240 acres. In the meantime, the evidence heretofore recited shows that the plaintiffs had no reason to doubt the representations of Barnett that he had reconveyed all of the land to them, because they continued to live on the land and exercise dominion over it with the knowledge of Barnett, and he never brought to their attention or notice that he was claiming any interest in the property other than the one-fourth of the minerals which they had conveyed him on 40 acres. Under these circumstances, the undisputed evidence concerning the mutual mistake, and the jury finding that the failure of W. M. Barnett to convey all of the homestead property back to them was for the purpose of defrauding plaintiffs, plaintiffs contend that any legal title held by Barnett at the time of his death by reason of the 1959 deed of trust and 1962 trustee's deed was impressed with a constructive trust for their benefit as the rightful owners and holders of the equitable title. In support of this point they cite Binford v. Snyder, 144 Tex. 134, 189 S.W.2d 471 (1945); Carl v. Settegast, 237 S.W. 238 (Tex.Com.App. 1922, jdgt. adopted); and Biggs v. Poling, 134 S.W.2d 801 (Tex.Civ.App.1939, writ dism. jdgt. cor.). See also Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62, 67 (1959); Hall v. Miller, 147 S.W.2d 266 (Tex.Civ.App.1941, writ dism., jdgt. cor.); and Restatement on Restitution § 163. Because of our disposition of this phase of the case on other points, it is unnecessary for us to pass on this point. That portion of the trial court's judgment with which we agree is supported by an established rule of law applicable to grantors who remain in possession of land which was inadvertently included in a deed by mutual mistake. As long as no rights of bona fide innocent purchasers have intervened, actions or defenses by such persons in peaceable possession based upon mutual mistakes in deeds and removal of clouds from title are not barred by the four-year statute of limitation. Strong v. Garrett, 148 Tex. 265, 224 S.W.2d 471 (1949); State Mortgage Corp. v. Ludwig, 121 Tex. 268, 48 S.W.2d 950 (1932); Terry v. Baskin, 44 S.W.2d 929 (Tex.Com. App., 1932, holding approved); Gilmore v. O'Neil, 107 Tex. 18, 173 S.W. 203 (1915); Texas Co. v. Davis, 113 Tex. 321, 254 S. W. 304 (1923). See also the following cases cited with approval by the Supreme Court in the Ludwig case, supra: Reese v. Granau, 27 S.W.2d 591 (Tex.Civ.App., 1930, writ dism.); Luker v. Anderson, 10 S.W.2d 149 (Tex.Civ.App., 1928, n. w. h.); Pannell v. Askew, 143 S.W. 364 (Tex.Civ. App., 1912); and the following cases cited with approval by the Court in Strong v. Garrett, supra: Howard v. Young, 210 S. W.2d 241 (Tex.Civ.App., 1948, writ ref. n. r. e.); Payne v. Ross, 10 Tex.Civ.App. 419, 30 S.W. 670 (Tex.Civ.App., 1895, n. w. h.). We recognize that there was a contrary holding in Cleveland State Bank v. Gardner, 286 S.W. 173 (Tex.Com.App., 1926, holding approved). However, as to this point it has been overruled, implicitly at least, by the subsequent holdings of this Court cited above, and it is now explicitly overruled.