Bentley Ranches, Inc. v. Borgerson

• Decision Date: 09 May 1984
• Docket Number: 83-3895,Nos. 83-3860,s. 83-3860
• Parties: BENTLEY RANCHES, INC., a California corporation, Plaintiff-Appellee, v. John BORGERSON, an Oregon resident, Defendant-Appellant. BENTLEY RANCHES, INC., a California corporation, Plaintiff-Appellant, v. John BORGERSON, an Oregon resident, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1395

732 F.2d 1395

BENTLEY RANCHES, INC., a California corporation, Plaintiff-Appellee, v. John BORGERSON, an Oregon resident, Defendant-Appellant.

BENTLEY RANCHES, INC., a California corporation, Plaintiff-Appellant, v. John BORGERSON, an Oregon resident, Defendant-Appellee.

Nos. 83-3860, 83-3895.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 4, 1984.

Decided Jan. 27, 1984.

As Amended on Denial of Rehearing and Rehearing En Banc May 9, 1984.

Richard A. Hayden, Kirk R. Hall, Stoel, Rives, Boley, Fraser & Wyse, Portland, Or., for plaintiff-appellee.

John Faust, Ridgway K. Foley, Jr., P.C., Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., for defendant-appellant.

Appeal from the United States District Court for the District of Oregon.

Before WALLACE and CANBY, Circuit Judges, and CRAIG, ^* District Judge.

PER CURIAM:

Borgerson appeals from a district court judgment reforming a contract to reflect an antecedent agreement between him and Bentley Ranches, Inc. (Bentley). Bentley filed a cross-appeal. District court jurisdiction was based upon diversity of citizenship, 28 U.S.C. Sec. 1332, and we have jurisdiction under 28 U.S.C. Sec. 1291. We affirm.

Borgerson contends that we should employ a de novo standard in reviewing this appeal, relying on ICN Medical Laboratories, Inc. Employees' Profit Sharing Plan v. ICN Medical Laboratories, Inc., 682 F.2d 1326 (9th Cir.1982); Frick v. Hoag, 277 Or. 135, 559 P.2d 879 (1977); Carlson v. Pryor, 262 Or. 131, 497 P.2d 202 (1972). Bentley argues that Federal Rules of Civil Procedure rule 52 applies in this diversity case involving issues of equity, and cites Lundgren v. Freeman, 307 F.2d 104 (9th Cir.1962). There, we applied the clearly erroneous standard of review, as prescribed in rule 52, to an Oregon contract dispute which resulted in the fashioning of an equitable remedy. Id. at 113. See also Dierks Lumber & Coal Co. v. Barnett, 221 F.2d 695 (8th Cir.1955).

Lundgren reflects the correct rule and controls here. In ICN Medical Laboratories, we merely stated in dicta that "Under Oregon law, this determination is subject to a de novo standard of review." 682 F.2d at 1329. We do not read this statement as establishing a conflict with the settled law of this circuit requiring our review to be under the clearly erroneous standard.

Under Oregon law, in order to justify reformation of the Borgerson-Bentley contract, a three-prong test must be satisfied. First, an antecedent agreement must be shown. Second, mutual mistake (in executing the contract) or a unilateral mistake (with the other party taking advantage of the mistake) must be proven. Third, it must be shown that Bentley (the person who seeks reformation of the contract) was not guilty of gross negligence. Seloover v. Columbia County Administrative School District No. 5, Joint, 42 Or.App. 461, 600 P.2d 931 (1979); Jensen v. Miller, 280 Or. 225, 570 P.2d 375 (1977).

Here, two contracts were involved: Bentley selling part of its land to Borgerson and Bentley selling the remainder of its land to Uniland Realty. The transaction with Uniland Realty was not completed because Uniland Realty never made its initial payment. The district judge found that pursuant to an antecedent agreement, the closing of the Uniland Realty-Bentley sale was a concurrent condition to the Borgerson-Bentley contract. She also found that the three requirements for reformation of an...