Dumais v. Gagnon

• Decision Date: 11 August 1981
• Citation: 433 A.2d 730
• Parties: Bernice DUMAIS v. Leo James GAGNON and Nicole Gagnon and Spruce Enterprises, Inc.
• Court: Maine Supreme Court

Page 730

433 A.2d 730

Bernice DUMAIS v. Leo James GAGNON and Nicole Gagnon and Spruce Enterprises, Inc.

Supreme Judicial Court of Maine.

Argued March 17, 1981.

Decided Aug. 11, 1981.

Robert R. Michaud, Fort Kent (orally), for plaintiff.

Rudolph T. Pelletier, Madawaska (orally), for Gagnons.

Barnes & Sylvester, Torrey A. Sylvester (orally), Houlton, for Spruce Enterprises, Inc.

Before McKUSICK, C. J., and GODREY, NICHOLS, GLASSMAN ^* and CARTER, JJ., and DUFRESNE, A. R. J.

GODFREY, Justice.

Spruce Enterprises, Inc. appeals from a judgment of the Superior Court granting Bernice Dumais' prayer for reformation of a deed from her to Leo and Nicole Gagnon. Spruce challenges the judgment on three grounds: first, that there was no competent evidence supporting the trial justice's conclusion that Spruce Enterprises was not a bona fide purchaser for value without notice; second, that the trial justice erred in rescinding certain curative conveyances between Spruce and the Gagnons; and, third, that, as a matter of law, Spruce Enterprises was entitled to recover against Dumais for breach of the covenants in her deed to Spruce. We deny the appeal and affirm the judgment of the Superior Court.

On October 17, 1973, Rose Anna Roy deeded to Bernice Dumais a tract of land in Frenchville, Maine. The deeded land was roughly an indented rectangular parcel that was bordered on the northeast by U.S. Route 1. The highway frontage, which measured about 730 feet, was bounded on the west by a lot belonging to Joel Bellefleur and on the east by a lot owned by Roger Dumais. The tract acquired by Bernice Dumais appears schematically as the blank area in Figure 1 below.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Next, on July 26, 1974, Bernice Dumais conveyed to Roger Dumais a portion of the tract she acquired from Rose Roy. One effect of that conveyance was to reduce the amount of highway frontage in Bernice Dumais' parcel to 605 feet, as shown schematically in Figure 2.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

On October 8, 1975, Bernice Dumais attempted to convey another part of her property to Leo and Nicole Gagnon as joint tenants. If the conveyed land had been described in the deed as the parties intended, the Gagnons would have received a plot adjoining the southeasterly boundary line of Joel Bellefleur's land. That conveyance would have reduced Bernice Dumais' road frontage to 455 feet, as shown schematically in Figure 3. (The dotted area shows the lot that the parties intended to be conveyed to the Gagnons.)

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

In fact, Bernice Dumais' deed to the Gagnons described a plot adjoining Joel Bellefleur's northwesterly boundary line (as shown schematically by the dotted area in Figure 4):

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Mrs. Dumais owned only the lower third of that plot. Unaware of the error, Leo Gagnon staked out a plot adjoining Joel Bellefleur's southeasterly boundary line and installed a culvert.

The last of Bernice Dumais' conveyances occurred on January 26, 1976, when she conveyed by warranty deed the remaining portions of the tract to Spruce Enterprises, Inc. The deed described the entire tract Bernice Dumais had originally received from Rose Anna Roy, and then excepted from that description the parcels conveyed out to Roger Dumais and to the Gagnons. All the deeds in question were duly recorded.

In February of 1976, the Gagnons became aware of the error in their deed from Bernice Dumais when a bank refused to mortgage the land for a construction loan. When the Gagnons asked Robert Michaud, the president of Spruce Enterprises, to deliver to them a corrective deed, Michaud refused to do so without compensation. After some negotiation Michaud agreed to give the Gagnons a deed to the land they had intended to purchase from Bernice Dumais in exchange for $1500 plus a deed to the land the Gagnons had mistakenly purchased.

On September 9, 1976, Bernice Dumais filed in Superior Court a complaint for reformation of her deed to the Gagnons. The complaint named both the Gagnons and Spruce Enterprises as defendants. According to the complaint, both parties to the deed intended that the Gagnons would receive a parcel immediately to the east of Joel Bellefleur's lot. Because the deed mistakenly described a parcel to the west of Bellefleur's lot, Bernice Dumais prayed that the deed be reformed nunc pro tunc to reflect the parties' true intentions.

The Gagnons concurred in Bernice Dumais' description of the mistake in the deed. Because they now believed that Spruce Enterprises had falsely claimed ownership of their land, the Gagnons filed a cross-claim against Spruce Enterprises seeking restitution of the $1500 they had paid for the corrective deed. Spruce Enterprises denied any knowledge of a mistake in the deed from Bernice Dumais to the Gagnons and disputed the Gagnons' entitlement to restitution of their $1500. Furthermore, Spruce Enterprises filed a counterclaim against Bernice Dumais for breach of the covenants in her warranty deed to Spruce.

After a trial in the Superior Court, Aroostook County, sitting without a jury, the presiding justice issued his decree in the matter on February 15, 1979. First the justice found as a fact that Bernice Dumais and the Gagnons were mutually mistaken about the land description in the deed from Bernice Dumais to the Gagnons and that the parties intended that the Gagnons should receive a parcel adjoining Joel Bellefleur's southeasterly boundary. Although that mutual mistake afforded ground for reforming the deed, the justice ruled that reformation would be barred if Spruce Enterprises were a bona fide purchaser from Bernice Dumais for value and without notice of mistake.

The justice found that Spruce Enterprises, through its president, had implied actual notice of the mistake in the deed from Bernice Dumais to the Gagnons. Although Robert Michaud, the president of Spruce Enterprises, may not have known the precise location of the Gagnons' lot, the evidence showed that he knew the lot reduced the highway frontage of the larger tract. The justice found also that Michaud had viewed the premises at a time when he must have seen the stakes Leo Gagnon had placed around the lot he thought he had purchased. Under the circumstances Michaud was under a duty to inquire into the possibility that the Gagnons' lot was misdescribed in the deed from Bernice Dumais. Because Spruce Enterprises was charged with knowledge of that mistake, it lacked the status of bona fide purchaser for value without notice. Therefore, the justice held, reformation was appropriate.

Finally, the justice found that because Spruce Enterprises had notice of the mistake, it had no interest in the Gagnons' lot and hence nothing to convey to the Gagnons by the corrective deed. Concluding that there was no consideration for the Gagnons' payment of $1500, the justice ordered Spruce Enterprises to reimburse the Gagnons for the $1500. Without comment, the justice ordered Spruce Enterprises' counterclaim against Bernice Dumais dismissed.

I. The Propriety of Reformation

On appeal, Spruce Enterprises does not dispute the existence of a mutual basic mistake of fact by Bernice Dumais and the Gagnons that would ordinarily be ground for reformation of the deed from Bernice Dumais to the Gagnons. See, e. g., Wolff v. Gibney, Me., 386 A.2d 325, 328 (1978). Nor does Spruce Enterprises contest the trial court's ruling that reformation should be granted unless Spruce Enterprises took from Bernice Dumais as a bona fide purchaser for value without notice of the Gagnons' claim. See, e. g., Farley v. Bryant, 32 Me. 474 (1851). Rather, Spruce Enterprises challenges the factual conclusion that the corporation, through its president, purchased the tract from Bernice Dumais with notice of the Gagnons' rights in their lot. Because Spruce's president, Robert Michaud, never wavered in his assertion that he did not know where the Gagnons' lot was located, Spruce Enterprises argues that the evidence showed conclusively that Spruce had no notice of the Gagnons' claim. We disagree.

Actual knowledge of an adverse claim of ownership is not the only form of notice that will deny a purchaser the protected status of bona fide purchaser for value without notice. One who has "knowledge of such facts as would lead a fair and prudent man, using ordinary caution, to make further inquiries" is chargeable with notice of "the facts which by ordinary diligence he would have ascertained." Gagner v. Kittery Water Dist., Me., 385 A.2d 206, 207 (1978), quoting from Knapp v. Bailey, 79 Me. 195, 204, 9 A. 122, 124 (1887). See also Hopkins v. McCarthy, 121 Me. 27, 115 A. 513 (1921).

In the present case there was competent evidence supporting the justice's conclusion that Robert Michaud had sufficient knowledge of the circumstances surrounding Bernice Dumais' conveyance to the Gagnons to create a duty on him to inquire further into the location of the Gagnons' property. The recorded deeds in Spruce Enterprises' chain of title showed that Bernice Dumais had conveyed to the Gagnons a parcel most of which she did not own. Since Michaud testified that he knew that the Gagnons' lot reduced the amount of the tract's highway frontage, he should have...