City of Fargo v. D.T.L. Properties, Inc., 960272

• Decision Date: 03 June 1997
• Docket Number: No. 960272,960272
• Citation: 564 N.W.2d 274
• Parties: CITY OF FARGO, North Dakota, a Municipal Corporation, Plaintiff and Appellee, v. D.T.L. PROPERTIES, INC., Defendant and Appellant. Civil
• Court: North Dakota Supreme Court

Page 274

564 N.W.2d 274

1997 ND 109

CITY OF FARGO, North Dakota, a Municipal Corporation Plaintiff and Appellee, v. D.T.L. PROPERTIES, INC., Defendant and Appellant.

Civil No. 960272.

Supreme Court of North Dakota.

June 3, 1997.

Thomas P. Martin (argued) and Garylle B. Stewart (appearance), of Solberg, Stewart, Miller & Johnson, Fargo, for plaintiff and appellee.

Jeff A. Bredahl (argued) and Tracy A. Gompf (appearance), of Bredahl Hill, P.C., Fargo, for defendant and appellant.

MARING, Justice.

¶1 D.T.L. Properties, Inc. appealed from a judgment reforming a quit claim deed from the City of Fargo. We hold Fargo's reformation action was not barred by the ten-year statute of limitations in N.D.C.C. § 28-01-15(2). We also hold the trial court's finding of a mistake in the execution of the quit claim deed was not clearly erroneous. We affirm.

¶2 The issues raised in this appeal involve a dispute between Fargo and D.T.L. regarding their respective interests in the Vanity Parking Lot in Fargo. Their dispute stems from a MIDA bond financing project, see N.D.C.C. Ch. 40-57, to renovate the Black Building, a commercial office building in Fargo. The statutory scheme for MIDA bond financing authorizes a private developer to finance an industrial development project with tax free municipal bonds. Under the procedure, a municipality holds the record title to the project as a conduit for the developer and leases the property back to the developer with an option to purchase for a nominal sum after the MIDA bond is repaid.

¶3 In October 1986, Jordahl and Associates negotiated the MIDA bond financing for the Black Building. At that time, Dr. Georgie Burt, Helen Dillard, and Fargo each owned separate tracts of land which collectively comprised the Vanity Parking Lot. To provide additional parking for the MIDA bond project, Fargo leased its parcel of the Vanity Lot (the City Lot) to Jordahl, and Jordahl assigned its interest in that lease to Black Building Associates, the MIDA bond developer for the project.

¶4 A MIDA bond document defined the "project" as the acquisition and renovation of land and buildings and included an attached exhibit that described the property as the Black Building, the Elm Tree Parking Lot, and the Vanity Parking Lot. The property described in that attached exhibit, including the Vanity Parking Lot, was copied in subsequent MIDA bond documents describing the project and is the source of the mistake in this action.

¶5 Although Jordahl only had a leasehold interest in the Vanity Parking Lot, Jordahl executed a warranty deed which copied the property description from the MIDA bond documents and purported to convey the Black Building, the Elm Tree Parking Lot, and the Vanity Parking Lot to Black Building Associates. As required by law for MIDA bond financing, Black Building Associates then executed a warranty deed purporting to convey the same property to Fargo, and Fargo leased the property back to Black Building Associates with an option to purchase after the MIDA bond was retired.

¶6 In April 1990, Black Building Associates defaulted on the MIDA bond and assigned its interest in the project to the mortgage holder, First Trust Company. In September 1993, D.T.L. purchased First Trust's interest in the project. In November 1993, Fargo executed a quit claim deed, which was prepared by an officer of D.T.L., conveying Fargo's interest in the project to D.T.L.

¶7 In September 1994, Fargo sued D.T.L. to reform the quit claim deed. Fargo alleged the Vanity Parking Lot was mistakenly included in the description of the project's real property. Fargo sought reformation of the quit claim deed and back rent for the City Lot from November 1993. The trial court reformed the quit claim deed and ordered D.T.L. to pay Fargo $35,337.50 in back rent and $1,250 in monthly rent for the remainder of the lease of the City Lot. D.T.L. appealed.

¶8 D.T.L. contends Fargo's action for reformation accrued when the MIDA bond financing documents were drafted in 1986 and is barred by the six-year statute of limitations in N.D.C.C. § 28-01-16.

¶9 Fargo sought reformation of a quit claim deed involving an interest in real property. In Diocese of Bismarck Trust v. Ramada, Inc. et al., 553 N.W.2d 760, 764-766 (N.D.1996), we recently held the ten-year statute of limitations in N.D.C.C. § 28-01-15(2) applies to contract actions affecting the title to real property. That decision controls the statute of limitations issue in this case. We hold Fargo's 1994 lawsuit against D.T.L. is governed by the ten-year statute of limitations in N.D.C.C. § 28-01-15(2) and is timely, regardless of whether the limitation period began to run in 1986 when the MIDA bond documents were prepared or in 1993 when the quit claim deed was executed.

¶10 D.T.L. raises several issues regarding reformation of the quit claim deed. D.T.L. asserts the trial court erred in considering parol evidence about mistake, because, as a condition precedent to the introduction of parol evidence, Fargo failed to prove by clear and convincing evidence the quit claim deed did not express the parties' intent.

¶11 Section 32-04-17, N.D.C.C., provides the statutory framework for the equitable remedy of reformation:

When, through fraud or mutual mistake of the parties, or a mistake of one party which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved so as to express that intention so far as it can be done without prejudice to rights acquired by third persons in good faith and for value.

¶12 In Ell v. Ell, 295 N.W.2d 143, 149-50 (N.D.1980) (citations omitted), we discussed the application of the parol evidence rule to a reformation action:

The parol evidence rule is not a rule of evidence, but rather, it is a rule of substantive law.... The parol evidence rule is codified, in part, in ... Section 9-06-07 [N.D.C.C., which] provides that a written contract supersedes all prior or contemporaneous oral agreements or conditions concerning the subject matter of the contract, even though the contract is not required to be in writing.... [I]t is well-established that parol evidence is admissible in a suit to reform a written instrument on the grounds of fraud or mutual mistake of the parties. Parol evidence is admissible not only to establish the alleged fraud or mistake, but also to correct the instrument to conform to the agreement or intention of the parties....

Thus, reformation is a limitation on the parol evidence rule which is necessary to reach a just result. Any evidence which tends to show the true intention of the parties, whether it be evidence of conduct or declarations of the parties extrinsic to the contract or documentary evidence, is admissible.

... parol evidence is admissible in an action for reformation of a contract to establish fraud or mutual mistake as well as to show the true intention of the parties. To hold otherwise would render the parol evidence rule an instrument of the very fraud or mistake it was designed to prevent. In the absence of such a salutary exception to the parol evidence rule, it would be virtually impossible to establish the grounds relied on for reformation....

¶13 We reject D.T.L.'s argument about parol evidence. Under Ell, in a reformation action any parol evidence which tends to show a mistake or the parties' true intent is admissible.

¶14 D.T.L. argues Fargo was not entitled to reformation of the quit claim deed because it failed to prove a mistake by clear and...