Gethsemane Lutheran Church v. Zacho, 37855

• Decision Date: 22 July 1960
• Docket Number: No. 37855,37855
• Citation: Gethsemane Lutheran Church v. Zacho, 258 Minn. 438, 104 N.W.2d 645 (Minn. 1960)
• Parties: GETHSEMANE LUTHERAN CHURCH, Respondent, v. Leo J. ZACHO and Alice K. Zacho, Respondents. George T. ZACHO, Defendant and Third-Party Plaintiff, Appellant, v. LUTHERAN HIGH SCHOOL ASSOCIATION OF GREATER ST. PAUL and Paul M. Krause, Third-Party Defendants, Respondents.
• Court: Minnesota Supreme Court

Page 645

104 N.W.2d 645

258 Minn. 438

GETHSEMANE LUTHERAN CHURCH, Respondent, v. Leo J. ZACHO and Alice K. Zacho, Respondents.

George T. ZACHO, Defendant and Third-Party Plaintiff, Appellant, v. LUTHERAN HIGH SCHOOL ASSOCIATION OF GREATER ST. PAUL and Paul M. Krause, Third-Party Defendants,

Respondents.

No. 37855.

Supreme Court of Minnesota.

July 22, 1960.

Syllabus by the Court.

1. In a case tried to court without a jury, the findings of the court are entitled to the same weight as the verdict of a jury.

2. Unilateral mistake is not a ground for reformation of a contract.

3. Ordinarily specific performance of a contract to transfer interest in land will be granted as a matter of right, and denial is tantamount to granting rescission.

4. A court has the right to rescind a contract for purely unilateral mistake not induced and contributed to by the other party.

5. Relief from contractual obligations for unilateral mistake alone is granted only when enforcement would impose an oppressive burden on one, and rescission would impose no substantial hardship on the other.

6. Disappointment of expectations or frustration of hopes is not a legal injury or oppressive burden, and does not justify denial of specific performance of contract for deed.

7. Under Minnesota Nonprofit Corporations Act, corporation organized to promote religious education has authority to convey real estate interest to a church.

William W. Essling and Thomas Malone, St. Paul, for appellant.

Fred N. Peterson, George L. Siegel, St. Paul, for respondents.

LOEVINGER, Justice.

This is a suit for specific performance of a contract for deed.

The land involved here was owned from 1926 to 1948 by Margaret Zacho, a widow. In 1948 she conveyed the land to her son Leo to be held by him in trust as her agent for purposes of convenience.

Subsequent to this, there were negotiations between Margaret Zacho, George Zacho, also Margaret's son, and Paul M. Krause, pastor of Gethsemane Lutheran Church, regarding a proposal to erect an intersynodical Lutheran high school on this land. Others became interested, and the Lutheran High School Association of Greater St. Paul was formed as a nonprofit corporation. At the direction of Margaret Zacho, her son Leo executed a contract for deed to the land with the association on September 30, 1949. The contract for deed contained restrictions that, with immaterial exceptions, 'no part of said described land shall be used by said party of the second part, its successors or assigns, for any other than religious, educational and recreational purposes in connection therewith, for a period of twenty-five (25) years'; that any recreation field should be known as 'Zacho Field'; and that during the 25-year period the land should not be used for any commercial purposes.

The association made the payments called for by the contract. However, its membership dwindled and it was unable to secure the backing required to permit it to construct and operate a high school. Consideration was then given to assigning the contract to some Lutheran synod or church which could construct and operate a school. The Zachos objected to any assignment of the contract and brought two abortive suits for reformation and rescission on the claim the contract was nonassignable. ¹ On November 25, 1955, the association assigned the contract to Gethsemane Lutheran Church, subject to all the covenants of assignor.

Gethsemane tendered the balance due under the contract together with proposed plans for a Lutheran grade school and a contract for construction of the school and demanded conveyance of the land. Leo Zacho refused to convey and stated he had conveyed the land to George Zacho. George Zacho took the position that the contract had been breached, that it did not represent the true agreement between the parties, and that Gethsemane had no interest in the land. Thereupon Gethsemane brought the present action, praying that the conveyance to George Zacho be set aside and that Leo Zacho and his wife be required to perform the agreement and convey the land. George Zacho filed a third-party complaint against the association and Paul M. Krause, as officer of the association and pastor of Gethsemane, praying that the contract be reformed and canceled. Two persons claiming to be members of the association were permitted to intervene. Intervenors also sought to contest the validity of the assignment.

The district court granted summary entitled to enforcement of the contract and entitled to enforcement of the contract to that the intervenors had no capacity to appear. Appeals were taken to this court which held that there were issues of fact for trial and therefore reversed the summary judgment in favor of Gethsemane but affirmed the judgment denying the right of intervenors to appear. Gethsemane Luthern Church v. Zacho, 253 Minn. 469, 92 N.W.2d 905. Additional details are set forth there.

The case was thereafter fully tried in the district court. The court found that the contract set forth the true agreement of the parties; that it was not based upon any misrepresentation of fact, deceit, or fraud; and that the plaintiff was entitled to specific performance. The court ordered that the complaint of George Zacho be dismissed and that Gethsemane have a decree of specific performance against Leo Zacho, his spouse, and George Zacho. George Zacho appeals. He claims, first, that the contract fails to express the true agreement of the parties, because of mistake by one and inequitable conduct by the other, and should be reformed; second, that the contract is not assignable; and, third, that specific performance should not be granted because the contract does not set forth the agreement which the vendor intended to make. The conditions claimed to be part of the agreement and not included in the contract as executed are that the association should construct and operate an intersynodical high school on the land, that the building should be constructed within 3 years, and that the high school should be operated for a period of 25 years, during which time title to the land should not be transferred.

There was extensive testimony concerning the conversations and negotiations preceding the drafting of the contract. There is no dispute that the parties discussed construction of an intersynodical Lutheran high school, the period of time required for construction, and operation of the school by the association. There is sharp controversy as to what was actually agreed upon. It is reasonably clear that the contract was drafted by the attorney for Margaret and George Zacho, pursuant to their instructions, and was executed in his office. Leo Zacho testified he signed the contract without reading it, and Margaret and George Zacho testified that they did not see the contract or learn of its provisions until some years later. The attorney who drafted the contract was a reputable and competent member of the bar, was available, and appeared at the trial. No attempt was made to explain the alleged discrepancy between the intentions of the Zachos and the contract drafted by their attorney. The learned judge who tried the case specifically found that there was no misrepresentation of fact, deceit, or fraud inducing the contract, and that the contract contains the intentions and agreement of the parties.

In a case tried to the court without a jury, the findings of the trial court are entitled to the same weight as the verdict of a jury and will not be reversed on appeal unless they are manifestly contrary to the evidence. ² We have reviewed the record here and are satisfied that the findings are amply supported by the evidence.

In any event, appellant does not claim that there was mutual mistake of the parties, but that Reverend Krause took advantage of the Zachos by signing the contract as presented to him without advising them that it did not contain the covenants now claimed to be part of the agreement. However, unilateral mistake is not a ground for reformation of a contract. ³ To justify a court in reforming, or rewriting, a contract, there must be clear and convincing evidence, beyond a mere preponderance, of mutual mistake or of mistake by one induced or known to, and taken advantage of by, the other contracting party. ⁴ The most that can be said for appellant's evidence is that it suggests that the Zachos either were ignorant of or misunderstood the provisions of the contract. There is not a scintilla of evidence that anyone induced them to execute the contract by misrepresentation or knew and sought to take advantage of any misunderstanding that they may have had as to the contract. Thus there is no showing to justify reformation of the contract.

In addition to seeking reformation, appellant asks rescission of the contract and also resists specific performance on the ground that vendor's misapprehension regarding the contract makes enforcement inequitable. As damages are ordinarily an inadequate remedy for breach of a promise to transfer interest in a specified tract of land, specific performance will normally be granted as a matter of right if the contract is enforceable. ⁵ Where exceptional circumstances make specific performance inequitable or inappropriate, the court may award compensation or damages in lieu thereof. ⁶ Similarly, in a suit for rescission of a contract, the court should award any relief to defendant to which he may equitably be entitled. ⁷ Thus to deny specific enforcement of such a contract on equitable grounds is tantamount to granting rescission, and should rest on the same basis and result in the same substantive relief.

Rescission of a contract for mistake, like reformation, is ordinarily founded upon either mutual mistake of the parties or a mistake by one induced or contributed to by the other. ⁸ It is clear, nevertheless, that the court, under its equitable power, does have the right to rescind a contract for a purely...