Court Opinion

ID: 9652778
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:31:54.666455+00
Date Added: 2024-06-11T18:12:54.055077
License: Public Domain

Melvin Mayfield, Judge, dissenting. I cannot agree with the majority decision in this case. To explain my view, it will be necessary to consider three points: (1) the law relative to reformation, (2) the standard by which we review the trial judge’s factual determination, and (3) the evidence presented to the trial judge. The law relative to reformation The majority decision states that parties seeking reformation “must present evidence which ‘clearly and convincingly’ warrants a finding that a mutual mistake occurred.” While this statement is not incorrect, it is not as descriptive as the language actually used by the appellate courts in Arkansas. First, we note that there are two dimensions to this statement — there must have been a mutual mistake and this must be established by clear and convincing evidence. Second, let us consider the actual language used in some cases. In DeLone v. United States Fidelity & Guaranty Co., 17 Ark. App. 229, 233-34, 707 S.W.2d 329 (1986), the Arkansas Court of Appeals said: Reformation is an equitable remedy which is available when the parties have reached a complete agreement but, through mutual mistake, the terms of their agreement are not correctly reflected in the written instrument purporting to evidence that agreement. A mutual mistake is one shared by both parties at the time their agreement is reduced to writing and it must be shown clearly and decisively that the parties intended their written agreement to say one thing and, by mistake, it expressed a different thing. Yeargan v. Bank of Montgomery County, 268 Ark. 752, 595 S.W.2d 704 (Ark. App. 1980); Corey v. Mercantile Ins. Co. of America, 205 Ark. 546, 169 S.W.2d 655 (1943). An order reforming a written instrument cannot be based upon a unilateral mistake unless there is a mistake on one side and fraud or inequitable conduct on the other. Arnett v. Lillard, 245 Ark. 939, 436 S.W.2d 106 (1969). . . . Furthermore, reformation deals with the reforming of written instruments to conform to the intent of the parties at the time they are executed. In Birch-Brook, Inc. v. Ragland, 253 Ark. 161, 165, 485 S.W.2d 225 (1972), the Arkansas Supreme Court quoted from a prior decision as follows: In explaining the meaning of the rule of “the proof must be clear, unequivocal and decisive,” the court said in Hicks, Special Admx. v. Rankin, 214 Ark. 77 . . . “In cases of asserted mistake in written instruments, it is not denied that a court of equity has authority to reform the instrument. But such a court is very slow in exerting such an authority, and it requires the strongest and clearest evidence to establish the mistake. It is not sufficient that there may be some reason to presume a mistake. The evidence must be clear, unequivocal and decisive; not evidence which hangs equal, or nearly in equilibrio.'''’ The standard of review Rule 52(a) of the Arkansas Rules of Civil Procedure contains the statement that, in cases tried without a jury, “findings of fact shall not be set aside unless clearly erroneous (clearly against the preponderance of the evidence), and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.” It is common knowledge that this language was taken from Rule 52 of the Federal Rules of Civil Procedure. However, the reporter’s notes to our rule states that the rule “does not alter the fact that in some cases an issue must be proved by clear and convincing evidence.” The majority decision in the case at bar recognizes that our standard of review is whether “the chancellor’s finding that the disputed fact was proved by clear and convincing evidence is clearly erroneous” but, again, those words no not describe the appellate process as well as does the language actually used by the appellate courts. In RAD-Razorback Ltd. v. B.G. Coney Co., 289 Ark. 550, 553, 713 S.W.2d 462 (1986), the Arkansas Supreme Court adopted the language of the Untied States Supreme Court in United States v. U.S. Gypsum Co., 333 U.S. 364 (1947), that under Rule 52(a) of the Federal Rules A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. Neither court was concerned, in the above cases, with the review of a trial judge’s decision which required a finding based upon clear and convincing evidence. That situation has been before the Arkansas Supreme Court, however, and the test used on appeal was whether the trial judge’s decision that the evidence was clear and convincing was clearly erroneous. See Thompson v. Arkansas Social Services, 282 Ark. 369, 669 S.W.2d 878 (1984); Festinger v. Kantor, 272 Ark. 411, 426-27, 616 S.W.2d 455 (1981). This is also the test used by the court in Turner v. Pennington, 7 Ark. App. 205, 646 S.W.2d 28 (1983), cited in the majority opinion. Thus, I see no reason why the meaning of “clearly erroneous” given in RAD-Razorback Ltd., supra, should not apply where the question is whether the trial judge’s decision was based upon clear and convincing evidence. The evidence presented to the trial judge As stated in the majority opinion, the only testimony presented was from Tommy Sanson, a vice-president of the appellee bank, and Larry Grady, an attorney for the appellee bank. Sanson testified that the appellant never came to Conway; that they did business over the telephone or by mail. Sanson said that, before the receipt of the guaranty agreement, it was his “understanding” the appellant would be a co-borrower with Yarbrough. He testified as follows: He told me he was going to co-sign and be a co-owner with William Boyd Yarbrough, who was a friend of his. He was in the dog business, the way I recall — had poodles or something like that in Texas. And, of course, him being a judge, you know, uh, not only added to the net worth on making this loan, being a judge .... The guaranty agreement was signed by the appellant on August 26,1980. Before that, on July 20,1980, the appellant and Yarbrough both signed a loan application. Under the line on which the appellant signed it was plainly printed “Co-borrowers Signature.” Although the subsequent note and mortgage was from Yarbrough only, this was not inconsistent with Sanson’s “understanding.” He testified: Mr. Akin told me on the phone — that was seven years ago — that he was going to be a co-owner of this property. They were in the dog business together down in Texas. He wanted this property up here for him to raise dogs, but did not want the title in his name. The appellee bank contends that the guaranty agreement, which states that its purpose is to enable “Ted Martin Akin” (appellant) to obtain credit from the appellee, was supposed to have Yarbrough’s name where appellant’s name appeared. The appellee contends the agreement was incorrectly typed through an error made by Sanson’s secretary. However, the guaranty agreement was signed by three persons in addition to the appellant. This is not inconsistent with the “understanding” Sanson said he had that appellant would be a co-borrower and co-owner of the property with Yarbrough. This is also not inconsistent with the statement Sanson says appellant made to the effect that he did not want the title to the property in his name. There is simply no evidence in the record, and none is mentioned in the majority opinion, that the appellant made any mistake in signing the guaranty agreement. There must be clear and convincing evidence of mutual mistake to warrant reformation of the agreement. In Mizell v. Carter, 255 Ark. 960, 504 S.W.2d 743 (1974), the court relied upon an earlier case which stated: Courts of equity do not grant the high remedy of reformation upon a probability, nor even upon a mere preponderance of the evidence, but only upon a certainty of the error. 255 Ark. at 962-63. But even if we were to indulge in probability, it seems clear to me that we would have to assume that the appellant, who the parties agree was an appellate court judge in Texas, would know what he signed. At the time the guaranty agreement was signed, it was contemplated that appellant would be a co-borrower. There is no evidence to the contrary. All the evidence up to that point is consistent with that situation. If there was a mistake in the name of the person whose debt was to be guaranteed, there is no evidence to show it was made by the appellant. Reformation deals with the reforming of a written agreement to make it conform to the intent of the parties at the time the agreement is executed. DeLone v. United States Fidelity & Guaranty Co., supra. Therefore, what occurred after the guaranty agreement was signed in this case is immaterial unless it sheds some light on what the agreement between the parties was at the time the guaranty agreement was signed. The appellee relies upon a conversation that Sanson and the bank’s attorney, Grady, had with appellant in Dallas in 1983, about three years after the guaranty agreement was signed. They say that appellant told them that he was going to pay the debt to the appellee bank. But they also testified that the appellant told them that he had a deed to the property from Yarbrough and that he might want to retire to the property. The appellee also relies upon the fact that appellant had listed the debt to the bank when he filed a Chapter 11 bankruptcy. Appellant’s intention to pay the debt was consistent with having acquired the deed from Yarbrough. There was a debt to the appellee bank made by Yarbrough and a mortgage by him on the property to secure the debt. If appellant wanted his deed to be good, the mortgage debt would have to be paid. Likewise, appellant was required to list all claims, even potential claims, against his estate, which included the property deeded to him by Yarbrough. See 11 U.S.C. §§ 521,541 and 11 U.S.C. §§ 1101 et seq. So, neither his statement that he was going to pay appellee nor the fact that he listed appellee’s debt in his bankruptcy proceedings is inconsistent with the “understanding” Sanson had from the first — that appellant was going to be a co-borrower. We do not need to speculate on why appellant did not sign the notes to appellee with Yarbrough. We know, however, that he did not. The majority opinion correctly reversed the trial judge’s reformation of the notes because there was no agreement with appellee that appellant would sign the notes. The trial judge correctly granted judgment against Yarbrough who did not answer and correctly foreclosed the mortgage against the property. But I would reverse the judgment against the appellant because, after reviewing the entire evidence, I am left with a definite and firm conviction that the trial judge made a mistake (was clearly erroneous) in holding that there was clear and convincing evidence that the guaranty agreement should be reformed. Corbin, C.J., and Cooper, J., join in this dissent.