In re Callier
| Decision Date | 17 August 2000 |
| Docket Number | No. 00-6009.,00-6009. |
| Citation | 251 BR 850 |
| Parties | In re Leo Joseph CALLIER, Debtor. Donna Callier, Plaintiff/Appellee, v. Leo Joseph Callier, Defendant/Appellee, Charles H. Gray, Defendant/Appellant. |
| Court | U.S. Bankruptcy Appellate Panel, Eighth Circuit |
Andrew Burton Mayfield, St. Louis, MO, for appellant. Thomas B. Weaver, St. Louis, MO, appeared on the brief.
Robert Emil Eggmann, St. Louis, MO, for appellee.
Before: KRESSEL, SCOTT and O'BRIEN1, Bankruptcy Judges.
Defendant Charles H. Gray appeals from a bankruptcy court judgment reforming a deed to certain real property, which originally named Defendant Debtor Leo Joseph Callier as sole grantee, to reflect Plaintiff Donna Callier and Defendant Leo Joseph Callier owners as joint tenants by the entirety. For the following reasons, we reverse the bankruptcy court's judgment.
Charles H. Gray obtained a judgment in state court against Debtor Leo Joseph Callier in the amount of $1.3 million on May 15, 1997. On August 8 1997, Mr. Callier filed bankruptcy under Chapter 11. In his bankruptcy schedules, Mr. Callier listed property, which is the subject of these proceedings, known as the Crawford County Farm. He identified his wife (Plaintiff Donna Callier), along with his son and daughter-in-law, as potentially claiming an interest in the property.
The Crawford County Farm was acquired in Leo Callier's name alone in 1990 or 1991, in a transaction that involved an exchange of another property known as the Christian County property. Sometime prior to acquisition of the Crawford County Farm property, Mr. Callier made a loan to an unidentified friend, and took title to the Christian County property from the friend as security for repayment of the loan. Mr. Callier held the Christian County property in his name alone, and he intended to return the property to the friend upon repayment of the loan. The friend later repaid the loan by purchasing a portion of the Crawford County Farm from the seller for the loan amount. The Calliers paid the seller an additional $150,000 for the purchase. Apparently, the Crawford County Farm property was then deeded to the friend, who then deeded it to Leo Callier in exchange for a deed to the Christian County property. The transaction was structured in this manner for tax purposes. The seller of the Crawford County Farm is not identified in the record, and the deed to Callier was not made part of the record.
During the course of the bankruptcy case, Mr. Gray learned that Mr. Callier executed a contract to sell the Crawford County Farm to his son and daughter-in-law on March 30, 1997, less than two months before Mr. Gray's judgment was entered against him. Mr. Gray thereupon filed an adversary proceeding to avoid the transfer as fraudulent. Subsequently, the bankruptcy court ordered Mr. Callier to sell his interest in the property by a date certain. Plaintiff Donna Callier then filed this adversary proceeding against Leo Callier seeking a declaratory judgment that the Crawford County Farm is owned by the Colliers as tenants by the entirety and requesting reformation of the deed based on mutual mistake in the conveyance, to reflect joint tenancy by the entirety ownership.
Leo Callier did not contest the declaratory judgment proceeding. Charles Gray sought to intervene, and, both adversary proceedings were called for trial on the same day, December 20, 1998. At the trial, the parties agreed, and the bankruptcy court permitted Mr. Gray to be joined as a defendant in this declaratory judgment proceeding and that it be tried first. Following the trial, the bankruptcy court made oral and written findings of fact entered on January 19, 2000, concluding that "there was a mutual mistake in the execution of the deed in the failure to reflect that the Crawford County Farm was to be owned jointly by Plaintiff and Defendant in tenancy by the entirety."
The conclusion was based on findings by the bankruptcy court that Donna Callier and Leo Callier intended to receive and hold the Crawford County Farm property as joint tenants by the entirety. No findings or conclusions were made regarding the intention or understanding of the grantor in the deed. The bankruptcy court ordered reformation of the deed based on the court's findings and conclusions, and, judgment was entered accordingly.
Mr. Gray asserts on appeal that the bankruptcy court erred in reforming the deed for the Crawford County Farm, based on mutual mistake, because: (1) there was no evidence of mistake in the conveyance on the part of the grantor of the property; and (2) the evidence was insufficient to support a finding of mistake by Leo Callier, grantee party to the instrument, and Donna Callier, in the conveyance. Alternatively, Gray claims that the bankruptcy court erred in applying the equitable remedy of reformation because the equities in the case heavily favor him, not the Calliers. We agree that the bankruptcy court erred in reforming the deed because there was no finding or evidence of mistake in the conveyance on the part of the grantor, and we reverse the judgment without considering the other alleged errors.
We review the bankruptcy court's findings of fact for clear error, and we review the trial court's application of the law de novo. Bailey v. Amsted Indus., Inc., 172 F.3d 1041, 1044 (8th Cir.1999); In re Waugh, 95 F.3d 706 (8th Cir.1996). When faced with a question of substantive state law, a federal court is bound by decisions of the state's highest court. Bass v. General Motors Corp., 150 F.3d 842, 847 (8th Cir.1998). The issue here is whether, under Missouri law, a deed conveying real property can be reformed upon a showing of mistake in the original conveyance by only one of two parties to the instrument. We conclude it cannot. In reviewing Missouri law on reformation of contracts, we conclude that the bankruptcy court misapplied the law to the facts and the judgment must be reversed.
There were two parties to the deed sought to be reformed in this case: an unidentified grantor friend of Leo Callier and Leo Callier, grantee. In general, Missouri law regarding reformation of contracts based on mutual mistake, requires that an alleged mistake be mutual and common to both parties to the instrument in order to justify reformation of a contract. J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261 (Mo.1973). Quoting from an earlier Missouri Supreme Court case, the Hathman court said:
We have concluded from examination of the record that a reformation of the contract on the basis of mutual mistake of fact was not justified. In Allan v. Allan, 364 S.W.2d 578, 581 (Mo.1963), this court said:
The Missouri Supreme Court has consistently applied these principles to reformation of deeds conveying real estate for the past one hundred years. Allan v. Allan, 364 S.W.2d 578, 581 (Mo.1963); Wilhite v. Wilhite, 284 Mo. 387, 224 S.W. 448 (1920); Benn v. Pritchett, 163 Mo. 560, 63 S.W. 1103 (1901).
In 1901, the Missouri Supreme Court held, in Benn v. Pritchett, 163 Mo. 560, 63 S.W. 1103 (1901), that a petition in a suit to set aside a deed on the ground of mistake, which merely alleged mistake on the part of one of the parties, did not state a cause of action, since equity will provide relief from mistake only when mutual to both parties to the instrument, or when induced by fraud.
The petition charges simply a mistake of Geary in making the deed to the Pritchetts. The decree finds that there was a mutual mistake of both parties, notwithstanding no mutual mistake was alleged in the petition. The petition did not state facts sufficient to constitute a cause of action. The decree supplied the substantial fact whose omission made the petition insufficient. Equity will only relieve against mutual mistakes. The mistake of one party to a contract will not entitle him to relief, unless the other party induced him to act under such mistake, which is not this case. Mathews v. Kansas City, 80 Mo. 231; Cassidy v. Metcalf, 66 Mo. 519, loc. cit. 531; Henderson v. Beasley, 137 Mo. 199, 38 S.W. 950; Steinberg v. Phoenix Insurance Co., 49 Mo.App. 255; Bartlett v. Brown, 121 Mo. 353, 25 S.W. 1108; Adkins v. Tomlinson, 121 Mo. 487, 26 S.W. 573; Koontz v. Bank, 51 Mo. 275. A mistake of a conveyancer will not constitute a mutual mistake as a ground for a reformation of the instrument, unless he acted for both parties. Brocking v. Straat, 17 Mo.App. 296, loc. cit. 305. The justice of the peace in this case acted for Geary alone. Mistake on one side, without fraud of some kind on the other side inducing the mistake, will not be sufficient to relieve the party making the mistake. Norton v. Bohart, 105 Mo. 615, 16 S.W. 598.
In 1920, the Missouri Supreme Court, in Wilhite v. Wilhite, 284 Mo. 387, 224 S.W. 448 (1920), again held that reformation of deeds, based on mistake, must involve a mutual mistake of both parties to the instrument.
It may be conceded for the purpose of this discussion that, where an instrument is drawn in language the legal effect of which the parties misunderstand, and which expresses what the parties did not intend to express, a court of equity will reform the contract so as to conform to the intention of the parties. Williamson v. Brown, 195 Mo. loc. cit. 331, 195 Mo. 313, 93 S.W. 791; Corrigan v. Tiernay, 100 Mo. loc. cit. 280, 281, 100 Mo. 276, 13 S.W. 401; McKim v. Met. St. Ry. Co., 196 Mo.App. loc. cit. 547, 548, 196 Mo.App. 544, 196 S.W. 433. However, before a court of equity will entertain a bill to reform a contract on the ground of...
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