Opinion ID: 2456652
Heading Depth: 1
Heading Rank: 3

Heading: The Contention of Mutual Mistake

Text: In support of the contention that the insertion of the allocation formula actually contained in the written contract was the result of a mutual mistake, Champlin requested the submission of two issues, inquiring if (1) the parties intended that the liquid content of the gas from the Chastain wells should be determined by the same allocation method as the Champlin plant was using to determine the liquid content of the gas from all other wells producing to the plant, and if (2) the parties as a result of mutual mistake, believed, at the time they signed it, that the contract language correctly described the allocation method being used to determine the liquid content of the gas from all wells producing to the plant. For the purpose of deciding the point of mutual mistake, we may consider (despite respondent's argument to the contrary) that Champlin actually made a mistake in the technical sense of the term when it prepared its contracts and inserted therein a discarded measuring formula rather than that set forth in the letter contract with the Panola County Royalty Owners Association. We may also assume that both Champlin and Chastain intended that Chastain should receive all of the liquid hydrocarbons which his gas contained and that the use of the Panola County Royalty Owners' formula (the plant formula) would accomplish this purpose with accuracy. It may well be that Chastain assumed or believed that the formula contained in Paragraph 8 of the contract was the allocation formula being used at the time the contract was negotiated. This would be a natural assumption. It would be unusual, to say the least, for a processing company to offer to contract upon an allocation basis different from that in actual use at the time such offer was made, particularly when there was no discussion of a proposed change in plant operation. It further seems self-evident that a uniform method of measurement and allocation of liquid hydrocarbons is highly desirable if not essential to a processing operation of the kind Champlin was conducting. The use of two or more different formulae could and probably would result in the allocation of more or less than 100 per cent of the liquid hydrocarbons taken from the gas processed at the plant. However, Champlin's claim of mutual mistake must necessarily fall because of a failure to prove that Chastain agreed that the liquid hydrocarbons in his gas should be measured by the plant formula. The equitable reformation of a written contract is based upon the premise that a contract was actually made, but the written memorandum thereof, because of a mutual mistake, does not truly reflect the actual agreement of the parties. Reformation is a proper remedy when the parties have reached a definite and explicit agreement, understood in the same sense by both, but, by their mutual or common mistake, the written contract fails to express this agreement. Black on Rescission and Cancellation, Sec. 11, cited with approval in Marlin Associates v. Trinity Universal Ins. Co., 226 S.W.2d 190 (Tex.Civ.App. 1950, no wr. hist.) and Continental Casualty Co. v. Bock, 340 S.W.2d 527 (Tex.Civ.App. 1960, ref. n. r. e.). See also 49 Tex.Jur.2d Reformation of Instruments, § 9. In Indemnity Ins. Co. of North America v. W. L. Macatee & Sons, 129 Tex. 166, 101 S.W.2d 553 (1937), this Court held that: One is presumed to intend what he does or undertakes to do by the terms of a written instrument voluntarily signed by him. We are therefore required to start with the presumption that Chastain intended to contract with reference to the allocation formula contained in paragraph 8 of the contract which he signed. He examined the contract. He and his associates had others examine it for him. It is undisputed that the method of liquid hydrocarbon allocation was not discussed between Johnson and Chastain. Every species of belief and assumption will not afford a basis for relief by way of reformation. Many contracts are made and enforced despite some collateral misapprehension which may have an important bearing upon the contractual situation. Despite hardship, relief by reformation will be denied in the absence of proof of a definite agreement between the parties which has been misstated in the written memorandum because of a mistake common to both contracting parties. In our opinion the evidence was legally insufficient to show a mutual mistake on Chastian's part and further the form of submission requested by Champlin was defective in that it failed to submit the basic issue of whether or not Champlin and Chastain agreed that the plant formula should measure the liquid hydrocarbons contained in Chastain's gas. A definite agreement, a meeting of the minds, is basic to the remedy of reformation. Cf. Pegues v. Dilworth, 134 Tex. 169, 132 S.W.2d 582 (1939); Sun Oil Company v. Bennett, 125 Tex. 540, 84 S.W.2d 447 (1935).