Court Opinion

ID: 9754028
Source: CourtListenerOpinion
Date Created: 2023-08-28 19:39:08.819502+00
Date Added: 2024-06-11T07:27:46.804162
License: Public Domain

HANDLER, J.,
dissenting.
I am satisfied that the written contract of sale between the primary parties in this litigation, the Salvatorians and the Diocese of Camden, contained a mutual mistake concerning the particular tracts to be included in the land conveyance. As I read the record in this case, the parties never intended that the sale include the noncontiguous tract known as “2H”, which the Salvatorians had previously sold in an unrecorded transaction and, thus, could no longer legally convey. The written agreement erroneously included this tract and did not express the true intention of the parties on this particular term. Moreover, the acreage added to the transaction by the mistaken inclusion of this tract had no bearing whatsoever on the contract price. Consequently, the contract should be reformed to conform with the parties’ actual understanding. The Diocese should relinquish title to lot 2H, with no abatement of the purchase price or imposition of money damages. Therefore, I dissent from the opinion of the Court.
There is little dispute concerning the basic facts in this case. As the majority notes, the Salvatorians owned and operated the Pius X House of Retreats in Blackwood, Gloucester Township, Camden County, N.ew Jersey. The Retreat House complex consisted of the residential retreat building, a maintenance building and a storage building, all situated on five contiguous tracts of land composing one 150-acre plot, which included part of a lake. The Salvatorians had also owned a noncontiguous tract of land north of that lake, designated as “2H” on the Gloucester County Tax Map. The Salvatorians sold that 8.6-acre tract to the DiSalvios in 1966 under a long-term installment contract which the parties agreed not to record.
In late 1968 the Salvatorians encountered severe financial difficulties which necessitated the sale of their remaining hold*593ings in Blackwood. On November 20 Father Edward DeBruin, the Salvatorians’ provincial superior, and Father Peter Eltink, the Salvatorians’ provincial treasurer, delivered a letter to and met with Bishop George H. Guilfoyle of the Diocese of Camden to discuss the Salvatorians’ financial plight and their desire to sell their real estate holdings. The Salvatorians viewed the Diocese as not only a potential buyer for their property but also an understanding ally with whom they might make arrangements for the continued service of several of their members who wished to remain in Blackwood. The Diocese considered the Salvatorians as friends in need for whom the Diocese was ready and able to provide assistance. Even the majority acknowledges that the Diocese’s motivation was its desire to aid the Salvatorians, rather than to turn a good business deal.
At the very outset the purpose of the Salvatorians was made clear. As Father DeBruin later testified: “[Our] intention was to sell all the land that we had left.” The Diocese fully understood this intention. As Bishop Guilfoyle explained, the Salvatorians were offering “everything they owned and held in ... Blackwood.” According to Bishop Guilfoyle, at no time did the Diocese intend to purchase land which the Salvatorians did not own. On November 25, Bishop Guilfoyle posted a letter to Father DeBruin indicating the Diocese’s willingness to assist the Salvatorians.
The parties proceeded immediately with implementation of this early basic understanding. Although it was intended that the sale would involve all the legal holdings of the Salvatorians, neither party could state with any certainty the specific tracts included or the total acreage involved.1 This uncertainty, how*594ever, had no major effect upon the parties. As noted, the primary concern of the Diocese was to purchase the Blackwood operation, rather than a particular amount of land. As Father Herron confirmed in his trial testimony, the Diocese would have made the same offer regardless of the inclusion of lot 2H. Thus, the exact acreage involved was of minimal importance.
Both parties then undertook to have appraisals made to assist in setting a price. In December 1968 the Salvatorians engaged E. Guy Elvey to appraise the property. . He was supplied with lot numbers, in which 2H was included. However, at that point, no one, including Elvey, knew that the property was not then owned by the Salvatorians or that it was situated north of the lake and noncontiguous to the Blackwood retreat. His report estimated the total acreage to be approximately 150 acres but did not attribute any acreage for lot 2H. Elvey appraised the property at $807,500.
Father Herron then engaged Samuel E. Gilbert to appraise the land for the Diocese. Gilbert was told that his evaluation was to “involve all of the real estate owned by the House of Retreats at that location.”2 Even though Gilbert claimed to have included lot 2H in his calculations, he was unaware that lot 2H was no longer owned by the Salvatorians. Moreover, while he did not receive a copy of the Elvey appraisal that had been submitted by the Salvatorians, Gilbert nevertheless reached exactly the same conclusions as Elvey concerning total acreage and price.
It was upon reading the tax map attached to Gilbert’s appraisal that Father Herron first discovered that the Salvatorians’ *595holdings included a noncontiguous tract of land. He visited the Retreat House for the purpose of viewing the additional property. While Father Herron became aware that two separate tracts of land were involved, there is not the slightest indication that he had any knowledge that the Salvatorians did not own this additional, noncontiguous parcel.
The parties then met on January 23, 1969 to set a purchase price and soon thereafter agreed on a price of $810,000, almost mirroring the appraisal figures. The purchase price was strongly influenced by the fact that an outsider had offered the Salvatorians $800,000 for their Retreat House holdings. Although the approximate amount had been calculated by the assumed acreage involved, the final price was not pegged to acreage as such.
Father Herron then ordered a survey of the property, primarily to remove the survey exception for title insurance purposes. However, the written agreement between the parties was executed on February 26, 1969, before the survey was apparently completed. The contract provided for the transfer of approximately 150 acres, reflecting the appraisals.3
It should be reemphasized that throughout these negotiations and discussions leading to the signing of a contract, at no time did the parties waiver from their original understanding on the most basic aspect of their proposed agreement. The Salvatorians’ clear intention was simply to liquidate all of the property which they still owned in Blackwood. The Diocese sought to purchase no more than the property which the Salvatorians had the legal capacity to sell. Father DeBruin and Father Eltink both testified that they thought the Salvatorians’ Blackwood holdings included only the buildings and the immediately sur*596rounding land. They were totally unaware that the holdings included another tract legally encumbered; and they never envisioned that, physically, a noncontiguous tract was part of the Retreat House property being transferred in the written agreement of sale.
The Diocese received its survey shortly after March 6, 1969. The survey indicated that the property in question consisted of two plots of land, one of 8.59 acres and the other of 151.12 acres, with a total acreage of 160.576. It was at this point that Father Herron realized the true extent of the acreage. Nevertheless, there is no suggestion that he was aware of the legal infirmity of the Salvatorian’s ownership of this extra parcel. Father Herron did not know that the inclusion of lot 2H was a mistake. He focused only upon the change in acreage and immediately sent a memorandum to the bishop indicating that the purchase included 160 acres, rather than the 150 indicated in the agreement. However, the discrepancy was never called to the attention of the Salvatorians, nor were the Salvatorians furnished with a copy of the survey.4
The mistake as to the inclusion of lot 2H was a mutual one. Those who were aware of the inclusion believed that it was part of the lands that the Salvatorians were legally able to convey and sought to liquidate. This mutual mistake was perpetuated through the closing of the transaction. The Salvatorians retained attorney Fred Gravino on or about March 5 to represent them at the closing. Father Herron sent Gravino the description, which included Lot 2H and the acreage figure of 160. Gravino did not suspect an error or a mistake, nor did he believe the general references to acreage were significant. He simply *597incorporated the legal description into the deed. The Retreat House received a copy of the deed a short time before the settlement. However, no one compared the deed to the agreement, and the 10-acre discrepancy was never noted.
With settlement on March 20,1969, title to the Retreat House, surrounding lands and the noncontiguous lot 2H passed to the Diocese. The fact that lot 2H was the subject of the 1966 agreement with the DiSalvios apparently went unnoticed for five years. In November 1974, with the DiSalvios about to make final payments on 2H, Gravino finally realized the error. The mistake surfaced, and the present litigation ensued.
The misunderstanding between the parties in this instance seems to me a clear case of mutual mistake for which reformation is not only an available remedy but a desirable one as well. As noted, the parties had a basic agreement on an essential aspect of the transaction — that the Salvatorians would sell all of their legal holdings in Blackwood and the Diocese would buy all of those holdings. In putting this agreement on paper, a small, noncontiguous tract (lot 2H) was inadvertently and erroneously included in the contract, even though the parcel was no longer within the Salvatorians’ legal power to convey, having already been sold in an earlier unrecorded transaction. Equity demands and affords a remedy for such mutual errors to vindicate the true intentions of the parties.
The doctrine of mutual mistake in its typical applications is expressed in the Restatement of Contracts as follows:
[W]here both parties have an identical intention as to the terms to be embodied in a proposed written conveyance, ... and a writing executed by them is materially at variance with that intention, either party can get a decree that the writing shall be reformed so that it shall express the intention of the parties. [Restatement of Contracts § 504 (1932) ]
See also Restatement (Second) of Contracts § 155 (1979). As the commentary to the Restatement (Second) explains: “The province of reformation is to make a writing express the agreement that the parties intended it should .... [Reformation is available when the parties, having reached an agreement and *598having then attempted to reduce it to writing, fail to express it correctly in the writing.” In addition, the “mistake must be one that is mutual, material, and not induced by negligence.” Santamaria v. Shell Eastern Petroleum Products, Inc., 116 N.J.Eq. 26, 29 (Ch.1934).
Since the remedy of reformation applies to a written contract, by necessity, there must have been some agreement between the parties prior to that writing to serve as a basis for reformation. See generally Malone, “The Reformation of Writings for Mutual Mistake of Fact,” 24 Geo.L.J. 613 (1936). However, that “prior agreement need not ... be complete and certain enough to be a contract.” Restatement (Second) Contracts § 155, Comment (a). As the commentary accompanying the Restatement explains:
[I]t is essential for reformation that the parties shall have had the same intention. But it is not necessary that they should have carried out that intention and actually entered into a legal transaction before they made the writing. It is enough that they both intended when the writing was made that its terms should be of a certain character and that this intention was not expressed. Sometimes where parties enter into a written agreement, an oral contract precedes the formation of the writing. . .. Sometimes, however, there is no such oral contract prior to the execution of a written instrument, and it is not essential for reformation that there should have been. All that is necessary is that the parties have come to a complete mutual understanding .... [Restatement Contracts, § 504, Comment (a) ]
The trial court below, in ruling that reformation was not available in this case, proceeded on the assumption that the determination of the presence of a mutual mistake must be made only as of the time that a completed agreement existed between the parties, and not before. The majority makes the same assumption, concluding that at or about the time the parties executed this agreement, lot 2H already appeared in relevant documents. Hence, if there was a mistake regarding the tract’s inclusion, it was, by that time, not mutual, since the Diocese, or at least Father Herron, was aware of its presence in the transaction.
The flaw in this analysis lies in its failure to understand that a mutual mistake justifying reformation entails two elements — an agreement on a contract term and an error in expressing that *599agreement — and that these can, and usually do, occur sequentially. Thus, the antecedent agreement can take place in the formative stages of a contract before the parties settle other terms.
The majority assumes, as apparently did the trial court, that a mutual mistake can come into existence only when there is a mutual agreement embodied in a completed and enforceable contract. This is perhaps the typical situation in which reformation is available. However, the equitable remedy of reformation is not limited to this obvious or usual class of cases. There is no reason in logic or common sense why a mutual mistake which makes its way into a final completed contract concerning a particular term that was resolved at an early stage in contract negotiations cannot be corrected through reformation. Reformation should be available to correct this kind of error if it would serve to effectuate the true intention of the parties and would not otherwise defeat or distort their intent as to other terms of their contract.
In this case the parties were basically committed to negotiating a land sale as early as November 1968. And at that time they both understood that if such a sale were successfully negotiated, it would include all the legal holdings of the Salvatorians. Thus, the parties, on or about November 25, 1968, reached a mutual understanding on one basic proposition — that any proposed conveyance of property would involve all the Salvatorians’ legal land holdings. Throughout the discussions which followed and led to the signing of a contract in February 1969, the parties never wavered from that initial and basic understanding. Yet the writing which expressed that understanding was in error. Therefore, reformation is the appropriate remedy.
The majority notes that terms usually deemed “essential” in a land sale contract, such as total acreage involved, lots included and purchase price, had not yet been established when the parties to this transaction reached their mutual understanding *600in November 1968. I agree with the majority that in most circumstances all of these provisions or terms would be essential to the enforceability of a land sale agreement. However, what is an essential term for purposes of reforming a contract on grounds of mutual mistake is another matter. While the remedy of reformation, by definition, cannot be invoked in point of time until there exists a contract to reform and all essential terms are agreed upon and reduced to writing, there is no obstacle to its application to a particular term which was mutually agreed upon prior to the formation of the final contract. The only requisite to reformation is that the particular, mutually agreed upon term be mistakenly expressed in the final contract.
I am satisfied that the parties in this case reached basic agreement on a particular fundamental term of their contract in November 1968. The undisputed intention of both parties was to effectuate a transfer of all the Salvatorians’ legal land holdings, yet the writing which ultimately expressed that intention mistakenly included a lot which the Salvatorians no longer had the legal right to convey. Therefore, reformation is the appropriate remedy under these unusual circumstances.
This was precisely the conclusion reached by the Maine Supreme Court under almost identical circumstances. See Perron v. Lebel, Me., 256 A.2d 663 (1969). In that case the parties had arranged the sale of a farm. One lot was to have been excluded from the transaction so that the original owners could retain it in their possession. However, the contract of sale called for the transfer of all the' farm holdings. The court found the doctrine of mutual mistake applicable and reformed the contract to express the true intention of the parties. Cf. Scult v. Berger Valley Builders, Inc., 76 N.J.Super. 124 (Ch.Div.1962), aff’d 82 N.J.Super. 378 (App.Div.1964) (real estate contract reformed on mutual mistake grounds to reflect parties’ intention that four lots be conveyed after scrivener mistakenly described five tracts); D’Antoni v. Goff, 52 A.D.2d 973, 383 N.Y.S.2d 117 (App.Div.1976) (vendor entitled to recission where parties mutu*601ally believed that 15 acres of land were being conveyed but later learned that 68.3 acres were transferred under the contract).
It is asserted that there was no mutual mistake because Father Herron became aware of the existence of the noncontiguous tract. As pointed out, however, he was not aware that the Salvatorians did not own this parcel. Whether or not both parties suffered under an erroneous conviction that there was no separate tract involved, it is certain that neither party intended that the transaction include land which had already been sold to someone else. Thus, the 1969 agreement, signed on February 26, did not conform to that prior meeting of the minds. Since that conformity was lacking, reformation is an appropriate remedy. Toth v. Vazquez, 8 N.J.Super. 289 (App.Div.1950). See 13 Williston On Contracts § 1547 (1970); Restatement of Contracts § 504 (1932).
To reform a written instrument, the party seeking relief must make out its case by “clear and convincing” evidence. See, e.g., Asbestos Fire Inc. v. Martin Laboratories, Inc., 12 N.J. 233, 240-241 (1953); Scult, 76 N.J.Super. at 130. The instant case presents three possible areas of misconception — the prior sale, noncontiguity and the total acreage involved. In my view, the existence of a mutual mistake concerning the prior sale is undeniable. This fact, taken in conjunction with the confusion concerning acreage and contiguity, more than satisfy the “clear and convincing” standard.
Moreover, while a shared misconception is usually mentioned as a requisite to invocation of the reformation remedy for mistake, see Sardo v. Fidelity & Deposit Co., 100 N.J.Eq. 332, 335 (E. & A. 1926), it is not necessary that the mistakes be absolutely identical. See Corbin on Contracts, § 608 at 672 (1960). In this case, the combination of misconceptions on the part of both parties concerning the ownership, location and acreage of the lots described in the agreement indicated with a reasonable degree of certainty that the inclusion of lot 2H was unintended. It is clear that had the parties not been laboring *602under erroneous convictions concerning 2H, they would have omitted that lot number in the written agreement. Therefore, reformation of the 1969 agreement is appropriate to excise the reference to lot 2H so that the contract conforms with the prior intentions of the parties.
The question remains whether this mistake was the product of the Salvatorians’ negligence. As a general rule reformation on grounds of mistake will not be granted when the mistake was the result of the complaining party’s own negligence. Riggle v. Skill, 9 N.J.Super. 372, 379 (Ch.Div.1950), aff’d 7 N.J. 268 (1951). Relief is thus precluded when the mistake “is wholly caused by the want of that care and diligence in the transaction which should be used by every person of reasonable prudence, and the absence of which would be a violation of a legal duty.” Riggle, 9 N.J.Super. at 379.
The trial court found that the Salvatorians did not conform to the standard of reasonable prudence because they transferred 2H to the Diocese when they had already contracted to convey it to the DiSalvios. However, negligence is bound to accompany every case of mistake. “ ‘Mistake,’ by its very definition, implies some degree of negligence.” Crane v. Bielski, 15 N.J. 342, 348 (1954). The trial court believed that because the Salvatorians made a mistake, they were negligent.
A more appropriate approach would require consideration of whether the Salvatorians’ negligence goes beyond mere misjudgment and falls so far below the standard of reasonable prudence that reformation “would be inequitable and fundamentally unjust.” Id. This is essentially the approach adopted in both Restatements. The Restatement (Second) § 157 provides: “A mistaken party’s fault in failing to know or discover the facts before making the contract does not bar him from avoidance or reformation . .. unless his fault amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.” See also Restatement of Contracts § 508 (1932).
*603The Salvatorians were aware of the unrecorded 1966 agreement, and perhaps they were careless in failing to bring the agreement to the attention of their attorney. Had they realized that the 1969 agreement included a noncontiguous plot of land, their memories may have been aroused, and perhaps they would have made further inquiries. However, comparison of the 1966 and 1969 agreements would probably have provided little assistance because the 1966 agreement described 2H in terms of metes and bounds, while the 1969 agreement described it in terms of lot and block. The priests were unskilled in reading land descriptions of any kind and had hired an attorney (Gravino) to protect their interests. They naively relied on him to discover any problems. The Salvatorians themselves had failed to appreciate the potential impact of an unrecorded agreement to sell land, which is unfortunate because that knowledge would have been crucial to alerting them of impending problems.
Moreover, the Diocese itself was a partial contributor to this misunderstanding. Father Herron, for one, became aware of the existence of lot 2H, yet he failed to share that information with anyone. The Gilbert appraisal and land survey requisitioned by the Diocese further revealed the existence of a non-contiguous tract and a discrepancy in total acreage. Nevertheless, the Diocese made no attempt to inform the Salvatorians of these apparent problems.
Under these circumstances, while meticulous care would have prevented the inclusion of 2H in the 1969 agreement, it appears that the Salvatorians acted in good faith and with reasonable prudence. The mistaken inclusion resulted from a combination of factors: the unrecorded nature of the 1966 agreement, the lack of a previous survey of all the Retreat House property owned by the Salvatorians and the unclear land references in the appraisals, as well as both parties’ lack of awareness concerning the proper lot and block numbers of the property to be conveyed. In my view, the Salvatorians’ carelessness does not rise to such a level that reformation “would be inequitable and fundamentally unjust.” Crane v. Bielski, 15 N.J. at 348. See *604Cataldo Construction Co. v. County of Essex, 110 N.J.Super. 414, 422 (Ch.Div.1970).
The remedy of reformation is the fairest way to resolve this controversy and makes the most sense under these circumstances. The majority decision allows the transaction between the Salvatorians and the Diocese to stand, yet this leads to several inequitable results. First, the Diocese will get a windfall of sorts, having paid for only the 150-acre tract on which the Retreat House was situated yet receiving the additional property erroneously included in the contract. The DiSalvios will be denied the land which they had legally contracted to purchase years earlier. However, the majority gives the DiSalvios the right to move against the Salvatorians for “benefit of the bargain” damages. The irony of this approach is that the party so destitute that it was forced to sell all its holdings may end up the big loser. Moreover, the Diocese, which supposedly only entered into this transaction out of its desire to ease the Salvatorians’ financial plight, may actually hasten their demise by retaining this noncontiguous tract which was never intended to be transferred in the first place. Reformation leaves all of the parties exactly where they ought to be.
The majority recognizes the inequity of visiting damages upon the Salvatorians and attempts to rectify this inequity by making Gravino, the attorney, a legal scapegoat. It remands the case for further factfinding on the question of whether Gravino committed legal malpractice, requiring him to indemnify the Salvatorians for their losses on the theory that his negligence was the proximate cause of the errors. Even if Gravino is eventually found negligent, this result would impose the entire burden of liability upon one individual, yet still leave in place the erroneous conveyance of lot 2H. It is manifestly unfair to place the entire blame for this incident on Gravino when both the Salvatorians and the Diocese contributed to the error.
I am, therefore, convinced that reformation on grounds of mutual mistake is not only the proper way to resolve this case *605but also the most equitable resolution to the conflicts between all parties concerned. The contract of sale between the Salvatorians and the Diocese should be reformed to omit any reference to lot 2H, and the Diocese should relinquish title to that tract.5
Justice PASHMAN joins in this opinion.
For affirmance in part, reversal in part and remandment in part — Chief Justice WILENTZ and Justices CLIFFORD, SCHREIBER, POLLOCK and O’HERN — 5.
Dissenting — Justices PASHMAN and HANDLER — 2.

Although Father DeBruin did not recall the precise extent of the Retreat House holdings, he initially underestimated the property to be 120 acres. In his November 25 letter, Bishop Guilfoyle mentioned 160 acres. And Father Herron, who entered the negotiations as administrative secretary of the Diocese, indicated that he was only vaguely aware of the acreage involved when the parties first embarked on the project.

Because he had no other description, Gilbert consulted the Gloucester Township tax maps for the various lot numbers. Those tax maps showed the Salvatorians’ holdings to be 157.94 acres. Gilbert also worked with two earlier surveys of the area, both of which were intended to portray all of the land involved in the transaction. One included only 131 acres, and the other did not depict any Salvatorian property north of the lake, where 2H should have been located.

Although Bishop Guilfoyle had thought the total acreage was 160 acres, he did not note the 10-acre discrepancy in the agreement or consider it to be material. Without reading the document, he signed it, relying on Father Herron’s review. Father DeBruin signed on behalf of the Salvatorians after scanning the writing only briefly.

Father Herron, as noted, was not aware that the inclusion of lot 2H was a mistake. Further, although at some point during this phase of the transaction, Father Eltink became aware of the involvement of two tracts of land, he also believed the second lot was still owned by the Salvatorians, and moreover, was part of a contiguous tract which had been purchased earlier (along with 2H) as a buffer for the Retreat grounds.

 I see no need to adjust the purchase price in this instance because the price agreed upon by the Salvatorians and the Diocese was based on a transfer of 150 acres, which, excluding lot 2H, is essentially what was conveyed. Both appraisals estimated the total acreage to be approximately 150 acres and valued the property at $807,500. The purchase price was $810,000. Moreover, Father Herron testified that the Diocese would have consummated exactly the same deal, even if lot 2H had not been included in the contract.