Daily Development for
Wednesday, April 2, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

DEEDS; REFORMATION; MUTUAL MISTAKE: Reformation of a deed may be justified if, by mutual mistake, the deed does not conform to the understanding that the parties had with each other, but party arguing for reformation has a high duty to overcome presumption of merger.

Groff v. Kohler, 922 P.2d 870 (Alaska 1996).

Plaintiffs sought to reform a deed to a property that they sold to defendants to add language reserving an easement, arguing that the easement mistakenly was omitted from the deed. The contract had provided that the easement would be reserved, and there was evidence that loss of the easement would cost the plaintiffs $260,000.

The court noted the general rule that rights under a contract to convey property are merged into the subsequent deed and extinguished. However the Supreme Court of Alaska quoting Corbin on Contracts §604, stated that the doctrines of "merger" and "estoppel by deed" have not prevented reformation of the deed if the language of the deed tries to correctly convey the land or interest agreed upon, but fails to do so by mutual mistake.

Mutual mistake is a mistake shared by both parties to the deed. The evidence showing that there was mutual mistake must be related to the time when the deed was executed and must show that at the time of the execution of the deed the parties had an identical intention to be bound by certain conditions but that by mistake the deed states something else. The Supreme Court, however, elected to affirm the trial court, which had found for defendants. It concluded that there was insufficient evidence the overrule the trial court's interpretation of the facts that the parties had not intended that the easment be reserved.

The case was decided on a 3-2 vote. The dissenting opinion found that the trial court's decision was clearly erroneous, noting that the escrow company, originally recommended by the buyer's lender, had admitted in court that it had made a "clerical error" in the preparation of the deeds and that it's instruction was to follow the contract and include the easement in question

Comment: As we don't have the record, it is difficult to "second guess" the view of the facts taken by the trial court and three justices on the Supreme Court. Nevertheless, it is difficult to accept the court's application of the notorious "merger" doctrine here. Where the deed is at odds with the contract, and there is little or no evidence that the parties know that, it seems absurd to contend that they should be bound by the final instruments. The only justification for it is that the rule provides a "hardball" environment that ought to lead parties to hire competent professionals who will get things right the first time.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.