Court Opinion

ID: 9776880
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:47:54.60193+00
Date Added: 2024-06-11T07:32:44.384328
License: Public Domain

HAMILTON, Justice
(concurring).
I agree with the court’s holding on the question of estoppel and agree with the judgment the court entered in this case. However, I am in disagreement with its holding on the question of mutual mistake. I would reverse the judgments of the courts below on the additional ground that the courts erred in holding that petitioners failed to make out a case to go to the jury on the question of mutual mistake. The petitioners are seeking relief by way of reformation of the contract in question on the ground of mutual mistake. This of course is an equitable remedy which is designed to give relief where grave injustice would result from the enforcement of a contract by reason of a provision included therein which does not express the intention of the parties but was contrary and at variance with the real and mutual intention of the parties.
According to this record if respondents were allowed to enforce the contract as written the result will be that the petitioners will be required to pay to respondents $118,-076.25 for products never produced from respondents’ wells from the period of November 30, 1957, to August 25, 1961, and will be required to continue paying respondents for products not produced from their wells in the same proportion from 1961 to 1977, the termination date of the contract in question. At the past rate of production, by the end of the contract period petitioner will be required to pay respondents well over one-half million dollars for liquid products allocated to respondents’ wells in excess of the liquid products produced therefrom.
Since the trial court ruled as a matter of law that Champlin failed to make out a case of mutual mistake the evidence on the question must be viewed in the light most favorable to Champlin. Therefore the court may make certain assumptions where there is supporting evidence.
The assumption that Champlin and Chas-tain intended that Chastain should receive all of the liquid hydrocarbons which his gas contained (no more, no less) after deduction of an agreed percentage for processing fee is supported by provisions of the contract about .which there is no question. The contract is clear that the over-all purpose is that Chastain should get back the liquid hydrocrabon products contained in his gas, plus the residue gas, less the processing fee. It is further clear from the contract that the formula contained in paragraph 8 was designed to accurately allocate the liquid hydrocarbon products to the gas produced from Chastain’s wells. It may be further assumed that the formula contained in paragraph 8 did not accomplish this purpose. There is ample evidence in the record that the use of this formula caused an allocation of more hydrocarbon liquid products to Chastain’s gas than was therein contained. It is uncontradicted that the formula described in paragraph 8 was at variance with the allocation formula in actual use at the plant. The evidence showed, and the jury so found, that the formula in use at the plant resulted in an allocation to Chastain’s gas of all the liquid hydrocarbons contained therein.
*392At the time of entering into the contract both parties thought that the plant formula would accomplish the purpose of accurately allocating the liquid hydrocarbon products to Chastain’s gas. Both parties intended that the plant formula be used in the allocation of the hydrocarbon products. At the time the contract was signed both parties thought that the formula described in paragraph 8 was in fact the allocation formula in use at the plant. We then have both parties having an identical intention as to what the contract should contain with reference to the allocation formula. We have both the parties mutually mistaken in thinking that the contract did contain the formula in use at the plant. The contract did not contain the formula actually intended by the parties, but contained a different formula, the enforcement of which would result in a windfall to one party and severe loss to the other, so the mistake is therefore material. This is all that is necessary to make out a case of mutual mistake.
We quote from the Restatement of the Law of Contracts, Sec. 504 (1932), as follows:
“Sec. 504. Reformation for Mutual Mistake.
“Except as stated in §§ 506 and 509-511, where both parties have an identical intention as to the terms to be embodied in a proposed written conveyance, assignment, contract or discharge, 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, if innocent third persons will not be unfairly affected thereby.

“Comment:

“a. The remedies allowed for mutual mistake are reformation and, where reformation is not allowable, rescission and restitution as allowed in the case of all other voidable contracts.
“b-. The right to have reformation is ordinarily limited to written agreements (but see § 507). As to them it 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 (see § 26). 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 of all essential terms of their bargain. This is necessary; otherwise there would be no standard in accordance with which the writing could be reformed.
“c. The province of the remedial right of reformation is to make a writing express the bargain which the parties desired to put in writing. * * *” (Emphasis added.)
See Texas Annotations, Restatement of the Law, par. 504, p. 301, for citation of Texas cases following this section.
This not only seems to be the law in Texas, but also in most all other jurisdictions. From 76 C.J.S. Reformation of Instruments § 25 a, p. 348, we quote:
“In order to establish a mistake in an instrument, it is not necessary to show that particular words were agreed on by the parties as words to be inserted in the instrument; it is sufficient that the parties had agreed to accomplish a particular object by the instrument to be executed, and that the instrument as executed is insufficient to effectuate *393their intention.” (Emphasis added.) 76 C.J.S. Reformation of Instruments § 25 a, p. 348.) Accord: Franz v. Franz, 308 Mass. 262, 32 N.E.2d 205, 135 A.L.R. 1448 (1941); 5 Williston on Contracts (Rev. ed.), secs. 1585, 1586, p. 4424 and p. 4426; 135 A.L.R. 448.
The parties never discussed the question of an allocation formula. Consequently, there could not have been any specific oral contract between the parties, to the effect that Champlin agreed with Chastain, in so many words, that the liquid hydrocarbons contained in Chastain’s gas should be measured by the allocation formula in use at the plant. For failure to make proof of such an agreement the court says that Champlin’s claim of mutual mistake must fall.
What the court fails to consider is that the parties may be in agreement on a particular matter without having formally stated the agreement in specific words. Of course if the party claiming mutual mistake is relying on a prior oral agreement to establish mutual mistake, then certainly such an agreement must be proved. This was the situation in the case of Pegues v. Dilworth, 134 Tex. 169, 132 S.W.2d 582, where the plaintiff below relied on an oral agreement which through mutual mistake was not incorporated in the contract. The question before the Supreme Court on a no evidence point was whether there was some evidence to support the jury’s finding of mutual mistake. This court held that there was.
The court in the instant cause cites no case in support of its position. In addition to the above case it does invite attention to Sun Oil Co. v. Bennett, 125 Tex. 540, 84 S.W.2d 447, but this casé makes no such holding as the court here has made. There the court held as a matter of law that the description in an oil and gas lease covered and included the 2.59 acres in question. The jury was asked if the parties mutually intended that the 2.59-acre tract be included in the description. The answer was “no”. The court simply held that an answer of “no” was not a finding that both parties mutually intended that the 2.59-acre tract not be included. One of the parties could have intended for it to be included, the other not, still the jury would have had to answer “no”.
I would hold that the Court of Civil Appeals and the trial court were in error in holding that Champlin did not make out a case of mutual mistake sufficient to go to the jury.
SMITH, J., joins in this opinion.