First Federal Sav. and Loan Ass'n of Nevada v. Racquet Club Condominiums

• Decision Date: 28 November 1990
• Docket Number: No. 20363,20363
• Citation: 801 P.2d 1360,106 Nev. 758
• Parties: FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF NEVADA, Appellant and Cross-Respondent, v. RACQUET CLUB CONDOMINIUMS, Respondent and Cross-Appellant.
• Court: Nevada Supreme Court

Page 1360

801 P.2d 1360

106 Nev. 758

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF NEVADA Appellant and Cross-Respondent, v. RACQUET CLUB CONDOMINIUMS, Respondent and Cross-Appellant.

No. 20363.

Supreme Court of Nevada.

Nov. 28, 1990.

Rehearing Granted. ^*

Stephens, Knight & Edwards, Reno, for appellant and cross-respondent.

Margo Piscevich, and Kimberley Palmer Fenner, Hale, Lane, Peek, Dennison & Howard, Reno, for respondent and cross-appellant.

OPINION

PER CURIAM:

This case arises out of a dispute between appellant First Federal Savings and Loan (First Federal) and respondent Racquet Club Condominiums (RCC) as to the legal ownership of two condominiums, units 49 and 50. Prior to September 14, 1982, Western Camino Leasing (Western Camino), a partnership comprised of Philip and Karen Benner and Stephen and Judy Sampaulesi, owned units 49 and 50. On September 14, 1982, Western Camino conveyed unit 49 to the Benners and unit 50 to the Sampaulesis. Deeds of trust identifying First Federal as the beneficiary were executed on both conveyances. These deeds, however, mistakenly described the encumbered units. The deed of trust recorded pursuant to the conveyance on unit 49 encumbered unit 50. The deed of trust recorded pursuant to the conveyance of unit 50 encumbered unit 49.

On November 8, 1985, First Federal Savings commenced foreclosure proceedings on units 49 and 50, when both the Benners and the Sampaulesis defaulted on their obligations to First Federal under the terms of the loan. RCC, however, had already foreclosed on units 49 and 50 due to the owners' failure to pay their association fees. Because First Federal had a deed of trust describing incorrect units, RCC claimed that First Federal had no interest in the property. First Federal thus filed an action against RCC alleging that First Federal was the legal owner of units 49 and 50, and that its foreclosure extinguished all of RCC's rights, title, and interest in units 49 and 50. ¹ After several motions and the trial judge reversing his orders on at least two occasions, RCC was granted summary judgment. The district court ruled that First Federal, as a matter of law, acquired no interest in units 49 and 50. The district court also stated that since First Federal had no interest in units 49 and 50, it lacked any standing to reform the deeds.

On appeal, First Federal contends the following: 1) that the district court erred when it determined that it could not reform the deeds because the original parties to the transaction were not before the court; 2) that the necessary and proper parties to an action of reformation do not necessarily include the original parties to the transaction; 3) that those persons having a legal or equitable interest in the property and who would be affected by a decree reforming the deed are necessary parties to a claim for a deed reformation; and 4) that the only necessary and proper parties to the issue of reformation are First Federal and RCC because they are the only parties claiming an interest in units 49 [106 Nev. 761] and 50. We agree with First Federal's position and reverse the judgment of the trial court.

Courts in this state will reform contracts and deeds in accordance with the true intention of the parties when their intentions have been frustrated by a mutual mistake. Lattin v. Gray, 75 Nev. 128, 335 P.2d 778 (1959); Roberts v. Hummel, 69 Nev. 154, 243 P.2d 248 (1952); Holman v. Vieira, et al., 53 Nev. 337, 300 P. 946 (1931); Ruhling v. Hackett, 1 Nev. 360 (1865). Reformation is available to a party seeking to alter a written instrument which, because of a mutual mistake of fact, fails to conform to the parties' previous understanding or agreement. Helms Constr. v. State ex. rel. Dep't Hwys., 97 Nev. 500, 634 P.2d 1224 (1981). Reformation is an equitable remedy and should be available when fairness demands such relief. See Anderson v. Weise, 95 Nev. 540, 598 P.2d 1144 (1979).

A case similar to the instant case is Johnston v. Sorrels, 21 Ark.App. 87, 729 S.W.2d 21 (1987). In Johnston the Sorrels sought a loan from Central Arkansas Production Credit Association (also a respondent). When the Sorrels defaulted, Central Arkansas Production Credit Association foreclosed. The Johnstons bought the property at the foreclosure sale. Approximately two years after the foreclosure, the Johnstons discovered that the legal description contained in the mortgages, the foreclosure documents, and the commissioner's deed did not include a 29.41 acre tract of land which the Johnstons thought had been part of the land sold at the foreclosure sale. The Johnstons sought reformation of all relevant documents, claiming that it had been the clear intent of the Sorrels to include the 29.41 acre tract as part of the land being mortgaged and that the tract had been omitted by mutual mistake from the legal description in the mortgages and all subsegment documents. The lower court...