Bailey v. Hovde

• Decision Date: 21 December 1973
• Docket Number: No. 307,307
• Citation: 61 Wis.2d 504,213 N.W.2d 69
• Parties: Harold R. BAILEY, Respondent, v. Ray HOVDE et al., Appellants.
• Court: Wisconsin Supreme Court

Page 69

213 N.W.2d 69

61 Wis.2d 504

Harold R. BAILEY, Respondent, v. Ray HOVDE et al., Appellants.

No. 307.

Supreme Court of Wisconsin.

Dec. 21, 1973.

Axley, Brynelson, Herrick & Gehl, Frank J. Bucaida, Madison, for appellants.

William L. McCusker, Madison, for respondent.

BEILFUSS, Justice.

The appellants' principal assertion is that the proof is not sufficient to support a finding of fraud or mutual mistake by clear and convincing evidence.

The record in this case is quite extensive. All of the parties to the disputed document, including the attorneys who represented Bailey, testified as to their version and many exhibits consisting or contracts and proposals for contracts were offered and received into evidence. Thus the issue becomes one primarily of the credibility of witnesses and the weight of the evidence.

'Reformation is an equitable action and the main object of equitable jurisdiction is to effectuate the intentions of the parties to the instrument in question. . . .' Krause v. Hartwig (1961), 14 Wis.2d 281, 284, 111 N.W.2d 138, 140.

"This court in Chicago, St. P., M. & O.R. Co. v. Bystrom (1917), 165 Wis. 125, 161 N.W. 358, laid down the rule with respect to when it is proper for a court to reform a contract for mistake as follows (p. 133):

"'In order to reform a contract on the ground of mistake the general rule is that the mistake must be mutual, or mistake on one side and fraud on the other."' Clark v. Moru (1963), 19 Wis.2d 503, 506, 120 N.W.2d 888, 890.

In its written findings of fact and conclusions of law the trial court found that:

'17. There was no mutual agreement to terminate plaintiff's right of repurchase under Exhibit 5 (the 1968 Conditional Acceptance of Option). There is clear and convincing evidence that defendants' present contention that Exhibit 8 (extension option of June 4, 1970) terminated the right to repurchase under Exhibit 5 constitutes either the use of deceptive practices on June 4, 1970 or an after-thought expressed to the plaintiff for the first time over a year later, which such after-thought, although profitable to the defendants, would constitute a mutual mistake between the parties on June 4, 1970.

'18. A portion of the consideration to Bailey under the prior integrated agreements, namely, the right of plaintiff to repurchase 9,450 square feet of adjacent property, is still due and owing the plaintiff and remains executory. Prior to September 30, 1972, plaintiff served defendants with timely Notice of Election of Option to repurchase the adjacent property (described in Exh. 5).

'19. Exhibit 8, the option dated June 4, 1970, does not correctly express the real and complete agreement between the parties. The real agreement contemplated by the parties by Exhibit 8 was intended to include the provision, as previously stated in Exhibit 5, that Bailey would have an option to repurchase expiring 90 days after the Taff-Hovde option to purchase the Spanish Village property expired. To accomplish the intent of the parties, the Court finds that the option (Exh. 8) should be reformed to give Bailey the option to repurchase upon the terms described in Exhibit 5, on or before 90 days after Judgment herein, or, in the event of appeal and affirmance of the Judgment herein, within 90 days after the Judgment of the appellate court.'

From the memorandum opinion it is clear that the trial court concluded the extension option of June 4, 1970, was not an indpendent contract but only a part of the integrated agreement between the parties for the sale of the land which included as a part of the consideration the repurchase rights of Bailey. We believe this finding and conclusion is amply supported by the evidence. Throughout the negotiations it is apparent that Bailey could not sell all of his land available for parking if Hovde-Taff did not buy the Spanish Village. The commercial value of the Spanish Village would obviously be greatly reduced without an adequate parking area.

The trial court further concluded that because the extension agreement of June 4, 1970, was only a modification of the entire integrated agreement, that Hovde-Taff had the burden of proof to show that the modification was mutually intended to curtail or abolish Bailey's right of repurchase. We believe this to be a correct statement of the law. ¹

The appellants, Hovde-Taff, claim the record does not clearly reveal that the court properly imposed the burden of proof. They correctly state that burden of proof in an action to reform a written instrument is upon the person claiming a right to reformation to prove by clear and convincing evidence that the contract as written was entered into by mutual mistake or by mistake on the part of the person claiming a right to reformation and fraud by the other party. However, as stated above, the trial court concluded the extension agreement was only a supplemental addition or part of the integrated agreement between the parties and that the burden of proof was upon Hovde-Taff to show the parties mutually agreed that Bailey relinquished his repurchase rights.

Even if the extension agreement of June 4, 1970, was construed to be an independent agreement standing alone, Bailey has met the burden of proof for reformation of such an instrument. The trial court found (in Finding 17):

'. . . There is clear and convincing evidence that defendants' present contention that Exhibit 8 terminated the right to...