Court Opinion

ID: 9771562
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:47:16.250736+00
Date Added: 2024-06-11T07:31:33.046213
License: Public Domain

BLEIL, Justice,
dissenting.
I differ with the majority on three fundamental issues: (1) whether evidence of statements made by G.W. Sharp about the agreement between the Rogers and Clyde Hall constitutes hearsay, (2) whether sufficient evidence exists to show that Sharp, as Hall’s agent, had actual or apparent authority to negotiate and enter into an agreement which had the exact opposite meaning of the words used in the deed prepared by Hall, and (3) whether reformation is appropriate under the circumstances of this case. I also disagree on other legal *618issues, and on the sufficiency of the evidence to support the verdict.
The majority camouflages the real issues.1 While the numerous authorities referred to by the majority do support the various propositions put forth by the majority, these propositions relate only to the general issues before the Court.
Undoubtedly, the majority arrives at what it considers to be a just result in this case. After all, the result is exactly the same as the result reached in this Court’s previous decision in this case, Forderhause v. Cherokee Water Co., 623 S.W.2d 435 (Tex.Civ.App.—Texarkana 1981), rev’d, 641 S.W.2d 522 (1982), although that decision was reversed because of legal errors. Cherokee Water Co. v. Forderhause, 641 S.W.2d 522 (Tex.1982). I believe that the majority’s decision today is as incorrect as was this Court’s prior decision.
THE HEARSAY
The majority treats the hearsay issue in such a manner as to make it blend into the background of the opinion. Although Cherokee raises this issue in its first point of error, the majority deals with this key issue only after it has used this hearsay evidence, along with other evidence and the jury findings, to determine that Sharp was an agent acting within the scope of his employment.
In dealing with the hearsay issue, the majority apparently holds that: (1) all the evidence concerning what Sharp said to anyone is not hearsay because it is an admission by a party-opponent pursuant to Tex.R.Evid. 801(e)(2)(E); (2) the testimony is admissible to show “operative acts” and is not hearsay because it was not introduced to show the truth of the matter stated; and (3) the testimony was admissible as a state of mind exception to the hearsay rule pursuant to Tex.R.Evid. 803(3).

Admission by Party-Opponent

The majority concludes that the testimony by others about what Sharp said was not hearsay because it was an admission by a party-opponent. This conclusion assumes that Sharp was either an agent or a servant of Cherokee speaking on a matter within the scope of his agency or employment during the existence of the relationship. There is no evidence that Sharp was a servant or agent of Cherokee. Not only was there no evidence of this type of relationship between Sharp and Cherokee, there was no mention of this type of relationship during the entire trial. Further, there was not even a hint of the existence of this type of relationship between Sharp and Cherokee by either party on appeal. There is not even an inkling that Sharp had ever heard of Cherokee or that it had heard of him. The best evidence that the majority finds to support its conclusion is that Sharp purported to be Hall’s agent and that Hall had served in various capacities as both attorney and trustee for Cherokee. There are missing links in any chain that purports to show that Sharp was an agent or servant of Cherokee; thus the majority’s logic fails.

Operative Acts

As another ground to support the admission of testimony by various witnesses about what Sharp said, the majority concludes that Sharp’s statements were “operative acts.” The majority states that the testimony of what Sharp said is admissible because Sharp’s statements were not introduced to show the truth of the matter asserted, but rather to show “operative acts.” The majority’s reasoning is somewhat flawed. The cases the majority cites do not support its conclusion that Sharp’s statements are admissible as “operative acts.” Those cases hold that in mutual mistake cases, parol evidence is admissible to go behind the agreement as written to show the true intent of the parties. Pegues v. Dilworth, 134 Tex. 169, 132 S.W.2d 582 (1939); State v. Wales, 271 S.W.2d 728 *619(Tex.Civ.App. — Beaumont 1954, writ ref’d n.r.e.). This is, of course, correct. However, the cases do not say that hearsay parol evidence is admissible; in each of the majority’s cases, testimony as to intent was supplied by the actual party whose intent was in question. Here, the Rogers seek to prove Sharp’s intent by testimony as to what Sharp said. Neither the majority’s parol evidence cases nor a bare assertion that the statements are “operative acts” can change the ultimate hearsay nature of this testimony. For the principle of operative acts to apply, the statements must not be offered to prove the truth of the matter asserted; rather, the statements must be offered to show the mere making of the statement, rather than its truth. 1A R. Ray, Texas Law of Evidence Civil and Criminal § 795 (Texas Practice 3d ed. 1980). For example, in United States Fire Ins. Co. v. Skatell, 596 S.W.2d 166 (Tex.Civ.App.—Texarkana 1980, writ ref’d n.r. e.), the fact that a theft was reported was held admissible, not for the truth of the statement made in reporting the theft, but to show that such a report was made, which was an operative act.
When the principle of operative acts is applied to our case, it becomes apparent that Sharp’s statements of intent cannot be considered operative acts. It is not the act of his making the statements, but rather the content of the statements themselves which is essential to the cause of action for reformation of a contract on the ground of mutual mistake. To show that both parties were mistaken in their intent, it is obviously necessary to show both parties’ intent. The proof of Sharp’s intent lies in the testimony of others of what Sharp said his intentions were. The testimony is clearly offered to prove that Sharp’s intentions were, in fact, what the witnesses say he said they were and is thus hearsay. The mere fact that Sharp made the statements has no relevance in a suit for reformation of a contract based on mutual mistake. The only way these statements are relevant is if they are offered to prove Sharp’s beliefs and intent.
Typical of the statements complained of as being hearsay is the following testimony by Fairy Rogers concerning what Sharp said:
Q Now, let me ask you this. Did Mr. Sharp, in your presence, say anything about whether what you’ve just read to the Jury did or did not apply to oil and gas leases?
A He said we could lease it when we wanted to — any time we wanted to to anybody. He said that [referring to the option clause in the lease which she had just read] didn’t apply to it, and we taken it that way because we had a chance to lease several times and we didn’t ask them because we didn’t think we had to ask them.
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Q Did you folks tell Mr. Sharp anything about the sale of minerals, whether or not you intended to sell the minerals?
A Oh, yes. We told him we never aimed to sell them throughout our lifetime. It was ours to keep, never to sell. We didn’t want to sell them to Cherokee Water Company or anybody else. We were just keeping them to lease.
Q All right. What, if anything, did you say about wanting to lease the property? What did you tell Mr. Sharp about that?
A Well, we wanted to lease it, of course. We’d love to lease it.
Q And do I understand that he told you that what you read to the Jury wouldn’t affect that right?
A Right.
Tex.R.Evid. 801(d) provides that hearsay is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted. Tex.R.Evid. 801(c) defines the term “matter asserted” to include “any matter explicitly asserted, and any matter implied by a statement, if the probative value of the statement as offered flows from declarant’s belief as to the matter.” (emphasis added). Clearly, the majority errs in concluding that the testimony concerning Sharp’s statements was not hearsay when the only value of his *620statements was that they asserted his belief as to the meaning of certain language in the contract.

State of Mind Exception

The majority also concludes that even if the testimony concerning Sharp’s statements is hearsay, it may still be admissible as an exception to prove Sharp’s state of mind pursuant to Rule 803(3). On its face, that rule is inapplicable. It provides that the statement of a declarant’s then-existing state of mind does not include a statement of “belief to prove the fact remembered or believed unless it relates to the execution, revocation, identification, or terms of declarant’s will.” (emphasis added). Tex.R.Evid. 803(3). Nothing that the witnesses testified that Sharp said would be admissible under this exception because that testimony was offered to prove what Sharp believed.
THE AGENCY
In deciding the questions concerning hearsay, as well as in several other areas of its opinion, the majority deals with the questions of whether there was any evidence, and if so, whether that evidence was sufficient to support determinations that Sharp was an agent for Hall, who served as attorney and trustee for Cherokee. The majority concludes that Sharp was an agent or subagent of Cherokee, even though neither the trial court nor the attorneys before that court or this Court have ever made this claim.
In response to the majority’s loose reference to Sharp’s serving as an agent of Cherokee, I will do no more than point out that there is not even a suggestion of this relationship in the evidence. The majority can point to no such evidence because there is none.
I find no support for the conclusion that Sharp was a subagent of Cherokee, either. The Restatement (Second) of Agency § 5(1) (1958) defines a subagent as follows:
A subagent is a person appointed by an agent empowered to do so, to perform functions undertaken by the agent for the principal, but for whose conduct the agent agrees with the principal to be primarily responsible.
There is no evidence that Hall was Cherokee’s agent. But, even if there were, there still would be no evidence that Hall was empowered to appoint an agent. Subagen-cy is a contractual relationship that depends on the terms of the agreement of parties. See 2A C.J.S. Agency § 35 (1972). There is no showing of any agency agreement between Hall and Cherokee, much less the terms of such agreement. Thus, Sharp is not a subagent..
The majority addresses the agency questions in various areas of its opinion. It recites that Hall was a lawyer and that he had worked as a lawyer for Cherokee in various capacities. It then adds that he purchased property for Cherokee as trustee. From this point the majority jumps to the conclusion that Hall was therefore an agent for Cherokee. The majority opines that “The fact that Hall is called a trustee in the deed does not prevent a determination that he was in fact an agent.... Furthermore, it is possible for the role of trustee and agent to coexist.” The majority observes that the fact that Hall is called a trustee does not prevent a determination that he was an agent, and that it is “possible” for the role of trustee and agent to coexist. Based on these possibilities, and in the absence of any evidence whatsoever, the majority concludes that Hall was an agent of Cherokee. The majority then refers to Hall as Cherokee’s “trustee/agent.” This conclusion seems to be an exercise of a novel fact-finding power not normally possessed by a court of appeals.
Cherokee specifically asserts a lack of evidence to support the jury findings that Sharp had actual or apparent authority to negotiate and enter into an agreement with the Rogers to the effect that the words in the deed were to have an effect precisely the opposite of the legal meaning of those words.2
*621The majority notes that it is undisputed that Sharp was sent out by Hall to obtain signatures on the deeds, highlighting the fact that the dead or the absent rarely are able to refute the allegations of a witness in court. The majority then appears to recognize that the doctrine of apparent authority cannot apply to this case because that doctrine has no application to transactions involving real estate, citing Bugh v. Word, 424 S.W.2d 274 (Tex.Civ.App.—Austin 1968, writ ref'd n.r.e.) and Goode v. Westside Developers, 258 S.W.2d 844 (Tex.Civ.App.—Waco 1953, writ ref’d n.r.e.). However, it concludes that the jury was instructed not only concerning apparent authority but also concerning express or implied actual authority, and finds the circumstantial evidence sufficient to support a finding of actual and implied authority.
No evidence shows that Sharp had actual authority to represent, on behalf of Hall, that the words in the deed, which had been prepared and completed by Hall, had a meaning exactly the opposite of those words. The majority’s holding that he had such authority is absurd.
Also, the holding that Sharp had actual authority to make that representation conflicts with Hall v. F.A. Halamicek Enterprises, Inc., 669 S.W.2d 368 (Tex.App.—Corpus Christi 1984, no writ). In that case, Halamicek sent a certified public accountant to solicit investments in an oil and gas lease. The accountant went out with charts and maps pertaining to the oil and gas well covered by the lease and indicated that he was acting on behalf of Halamicek. The court there, under circumstances more favorable to the establishment of an agency relationship than those in this case, concluded that the agency was not established by any express agreement and if it existed at all, the agency relationship had to arise by implication and the doctrine of apparent authority. Here, no actual authority is shown and there cannot be any apparent authority. Yet the majority holds that there might have existed some undefined implied authority.
THE USE OF REFORMATION
Reformation of an instrument based on mutual mistake is limited by the principle that the Court cannot create an agreement that the parties themselves did not make. Continental Oil Company v. Doornbos, 402 S.W.2d 879 (Tex.1966). The purpose of reformation is to conform the mistaken instrument to antecedent expressions on which the parties had already agreed. Brinker v. Wobaco Trust Ltd., 610 S.W.2d 160 (Tex.Civ.App.—Texarkana 1980, writ ref'd n.r.e.); see also 3 A. Corbin, Corbin on Contracts § 614 (1960). The antecedent oral agreement of the parties is normally treated as the binding contract; the written agreement then is conformed by the court to the oral agreement. An acknowledged authority on equity puts it this way:
Reformation is appropriate, when an agreement has been made, or a transaction has been entered into or determined upon, as intended by all the parties interested, but in reducing such agreement or transaction to writing, either through the mistake common to both parties, or through the mistake of the plaintiff accompanied by the fraudulent knowledge and procurement of the defendant, the *622written instrument fails to express the real agreement or transaction. In such a case the instrument may be corrected so that it shall truly represent the agreement or transaction actually made or determined upon according to the real purpose and intention of the parties.
3 J. Pomeroy, Equity Jurisprudence § 870 (5th ed. 1941). Reformation based on mutual mistake is proper when the mistake was made in reducing the contract to writing, and not if the mistake was made in the making of the contract which the writing evidences. There can be no reformation unless the minds of the parties met in a prior contract, agreement, or understanding to which the instrument can be conformed. See 76 C.J.S. Reformation of Instruments §§ 18, 25(c) (1952); 10 Tex. Jur.3d Cancellation and Reformation (1980). The Second Restatement of Contracts announces this same rule:
Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effects of the writing, the court may at the request of a party reform the writing to express the agreement. ...
Restatement (Second) of Contracts § 155 (1981). Texas follows this rule. Sun Oil Co. v. Bennett, 125 Tex. 540, 84 S.W.2d 447 (1935).
The majority acknowledges that the reasoning behind the requirement of a mistake in the integration of an agreement is that expressed in 10 Tex.Jur.3d Cancellation and Reformation § 121 (1980): the Court is without power to make a contract that the parties did not make and that an actual agreement reached prior to the drafting of the instrument involved is essential to reformation. However, the majority, after noting this rule, goes on to hold that the fact that the instrument had been prepared before the agreement makes no difference and should not bar reformation. Although the majority cites six cases in support of this novel concept, not one of them lends support to the majority’s holding.
The two Supreme Court cases cited by the majority do not support its holding. Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62 (1959), holds that a person who, because of a mistake of law as to the effect of words used in a conveyance, has transferred to another more than he intended and more than the parties mutually agreed he should, is entitled to restitution of the excess. This clearly implies the existence of an antecedent agreement, the very element which the majority seeks to delete from the law.
The other Supreme Court case cited is Gammage v. Moore, 42 Tex. 170 (1875). This case holds that when there is a mistake made in preparing an instrument embodying a contract, and the mistake is properly alleged and proven, the instrument may be conformed to correspond with the real contract. Once again we see the necessity for an antecedent agreement with which the contract is reformed to comport.
Neither do the Courts of Civil Appeals cases cited by the majority lend any support to the majority’s thesis. Typical of these cases is Weaver v. First National Bank of Amarillo, 532 S.W.2d 416 (Tex. Civ.App.—Waco 1976, no writ). It holds that:
[Wjhere the parties to an instrument are in clear agreement as to the factual and legal result they wish to accomplish by it, but, by mutual mistake, the legal effect of the words they use does not produce that result, the case is a proper one for reformation of the instrument to make it conform to the antecedent intention of the parties; and parol proof is admissible to show the mistake and its mutuality.
The facts of our case do not lend themselves to reformation because no agreement existed with which the instrument could be conformed.
Martin v. Snuggs, 302 S.W.2d 676 (Tex.Civ.App.—Fort Worth 1957, writ ref’d n.r.e.), holds that a mistake in an instrument caused by the parties or a draftsman employed by them phrasing the instrument in terms not apt to express the actual agreement will support reformation, provided *623that the mistake is embodied in the instrument and was not made subsequent to it. It further states that equity will grant relief against the mistake of both parties, when, in the effort to reduce an agreement to writing, they mistake its terms so that the writing does not represent the real contract.
The majority’s search for authority also leads it to cite Markum v. Markum, 210 S.W. 835 (Tex.Civ.App.—Amarillo 1919, writ dism’d), and Zieschang v. Helmke, 84 S.W. 436 (Tex.Civ.App.—1904, no writ). Markum cites 3 J. Pomeroy, Equity Jurisprudence § 843 (5th ed. 1941), for the following:
If an agreement or written instrument or other transaction expresses the thought and intention which the parties had at the time and in the act of concluding it, no relief, affirmative or defensive, will be granted with respect to it, upon the assumption that their thought and intention would have been different if they had not been mistaken as to the legal meaning and effect of the terms and provisions by which such intention is embodied or expressed, even though it should be incontestably proven that their intention would have been different if they had been correctly informed as to the law.
This is no support for the majority’s position because it presupposes the existence of an agreement of the parties before the existence of a written document evidencing that agreement. Finally, the majority relies on Zieschang v. Helmke, supra. It holds that if, after making an agreement, the instrument through a mistake of law made during the process of reducing it to writing, fails to express the contract which the parties actually entered into, equity will intervene with appropriate relief. In such a case there is no mistake as to the legal import of the contract actually made, but rather the mistake is one of law which prevents the real contract from being embodied in the written instrument.
The case before us does not involve an antecedent agreement, but rather an antecedent writing. There was no clear prior agreement between the parties as to the factual and legal result desired. Rather, Hall prepared and had printed a deed form, then caused the blank spaces in the form to be completed with a typewriter. Only after that did Hall seek the execution of the completed deed. The intent underlying this written document, expressed by its unambiguous terms, was that Hall was granted the first option to lease the oil, gas and other minerals reserved by the Rogers in that deed. Cherokee Water Co. v. Forderhause, 641 S.W.2d 522 (Tex.1982). The majority, far from conforming the document to an antecedent agreement, thwarts the parties’ intent as expressed by the written contract.
The majority additionally errs by not following the principle that ignorance of the law is no excuse. When parties reach an agreement and then draw up a document embodying this agreement, but in error use words, the legal effect of which is different from the result intended, the parties’ ignorance of the legal effect of the language used will not bar a reformation of the contract as written to conform with the actual intent. Kelley v. Ward, 94 Tex. 289, 60 S.W. 311 (1901); Weaver v. First National Bank of Amarillo, supra. Reformation is allowed because the antecedent intent of the parties controls over the language used to reduce this antecedent intent to writing. The majority cites no case holding that ignorance of the meaning of a term in a document already prepared, without any antecedent agreement, can be grounds for reformation. Indeed, such a holding would result in a gratuitous reversal of the centuries-old presumption of knowledge of the law. This presumption has recently been reaffirmed in Texas, see Gulf Oil Corp. v. Southland Royalty Co., 478 S.W.2d 583 (Tex.Civ.App.—El Paso 1972), aff'd, 496 S.W.2d 547 (Tex.1973), holding that courts must presume that contracting parties are knowledgeable of law and contract accordingly. Cf. Morris v. Reaves, 580 S.W.2d 891 (Tex.Civ.App.—Houston [14th Dist.] 1979, no writ).
SUFFICIENCY OF THE EVIDENCE
Excluding the hearsay evidence, I would hold that there is no evidence to support *624the jury’s findings concerning Sharp’s authority as an agent and concerning mutual mistake. However, Cherokee also attacks each of the jury findings as not having sufficient evidentiary support.
Even if all of the testimony about what Sharp said was admissible or not objected to, I would find insufficient evidence to support the agency relationship to the extent that Sharp could represent that the words in the deed meant the opposite of what they said. And, I would find insufficient evidence to support a mutual mistake finding.
The deed in question was given in 1947. This reformation suit was tried in 1986— thirty-nine years later. The evidence tending to prove the extent of an agency relationship and the existence of a mutual mistake as to the legal effect of the language used was of marginal probative value. Corbin has observed that “human memory is less reliable than are written records, especially when it is influenced by disappointment in results. This is the chief reason for reducing agreements to written form.” 3 A. Corbin, Corbin on Contracts § 607 (1960). There was little evidence from those directly involved to show that the parties entered into an agreement after negotiation but then signed a deed which had the exact opposite legal effect.
Clyde Hall did not testify. G.W. Sharp did not testify. Paul Rogers did not testify, nor did his wife. C.E. Rogers did not testify, nor did his wife. J.E. Rogers did not testify, but his wife, Fairy Rogers, did. She said that:
[W]e wanted to keep our mineral rights. We were not giving no sale to our minerals. We were keeping them, and we better put it in writing because they might try to take it from us. And so we definitely didn’t want to let our minerals (sic) rights go. That was ours. We was selling them the surface right only.
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We told him we never aimed to sell them throughout our lifetime. It was ours to keep, never to sell. We didn’t want to sell them to Cherokee Water Company or
anybody else. We were just keeping them to lease.
[[Image here]]
Well, we wanted to lease it, of course. We’d love to lease it.
Reviewing this and the other evidence, the majority, after a passing glance, finds the evidence sufficient. I disagree and feel that the majority’s decision desanctifies the written word.
In several other less significant respects I differ with the majority in its treatment of the issues raised in this appeal. Because of all my differences with the majority, I respectfully dissent.

. Even the plethora of footnotes seems more to disguise rather than to support the Court’s holdings.

. When the other portion of this case was before the Court, the majority noted in passing that in the "technical legal sense” an oil and gas lease amounts to a defeasible conveyance, cit*621ing, by footnote, Mills v. Brown, 159 Tex. 110, 316 S.W.2d 720 (1958). But the majority then proceeded to ignore that law because of what it termed "common knowledge in the area of real estate transactions and in the oil and gas business in particular...." Forderhause v. Cherokee Water Co., 623 S.W.2d 435, 439 (Tex.Civ.App.—Texarkana 1981), rev'd, 641 S.W.2d 522 (1982). The Supreme Court reversed the decision of this Court in a unanimous opinion. Now the majority says that:
The language of the instrument lends itself to misinterpretation by laymen, who generally do not think of the term sale as encompassing the term lease.
Whatever laymen may generally think, the only evidence of record indicates that Clyde Hall was not a layman, but was in fact a lawyer who, to some extent, specialized in land transactions and oil and gas matters. And he would have known that the law in 1938, as it does today, holds that an oil and gas lease is a sale of an interest in land. W.T. Waggoner Estate v. Sigler Oil Co., 118 Tex. 509, 19 S.W.2d 27 (1929). The majority appears to go to great lengths to avoid the mandates of the Supreme Court’s decision in Cherokee Water Co. v. Forderhause, 641 S.W.2d 522 (Tex.1982).