Stillwater Nat. Bank and Trust Co. v. Woolley

• Decision Date: 27 August 1991
• Docket Number: No. 72809,No. 2,72809,2
• Parties: 1991 OK CIV APP 81 STILLWATER NATIONAL BANK AND TRUST COMPANY, Stillwater, Oklahoma, a national banking corporation, Plaintiff, v. Veldon WOOLLEY a/k/a Veldon L. Woolley a/k/a Veldon Wooley, individually and d/b/a the Kaleidoscope, Defendant/Appellee, Diana Sue Woolley a/k/a Diana Sue Wooley a/k/a Diana Woolley a/k/a Diana S. Woolley; Eldred M. Harmon, individually and d/b/a the Kaleidoscope; Rosalie Harmon a/k/a Rosalie H. Harmon; James B. Whiting a/k/a James R. Whiting, individually and d/b/a the Kaleidoscope; Robert F. Ahrberg a/k/a Robert Fred Ahrberg; the Federal Deposit Insurance Corp., individually and as receiver for the Security State Bank of Mooreland, Oklahoma; the State of Oklahoma ex rel. the Oklahoma Employment Security Commission; the State of Oklahoma ex rel. the Oklahoma Tax Commission; the United States of America By and Through the Internal Revenue Service; the United States of America, By and Through the Small Business Administration; and the Board of County Commissioners of Payne County, State of Oklahoma, Defendants, Salt Fork Development Corporation, Intervenor/Appellant, Verlin Wooley and Shirley Wooley, husband and wife, Third-Party Defendants/Appellees. Court of Appeals of Oklahoma, Division
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

Page 374

823 P.2d 374

1991 OK CIV APP 81

STILLWATER NATIONAL BANK AND TRUST COMPANY, Stillwater Oklahoma, a national banking corporation, Plaintiff, v. Veldon WOOLLEY a/k/a Veldon L. Woolley a/k/a Veldon Wooley individually and d/b/a the Kaleidoscope, Defendant/Appellee Diana Sue Woolley a/k/a Diana Sue Wooley a/k/a Diana Woolley a/k/a Diana S. Woolley; Eldred M. Harmon, individually and d/b/a the Kaleidoscope; Rosalie Harmon a/k/a Rosalie H Harmon; James B. Whiting a/k/a James R. Whiting, individually and d/b/a the Kaleidoscope; Robert F. Ahrberg a/k/a Robert Fred Ahrberg; the Federal Deposit Insurance Corp., individually and as receiver for the Security State Bank of Mooreland, Oklahoma; the State of Oklahoma ex rel. the Oklahoma Employment Security Commission; the State of Oklahoma ex rel. the Oklahoma Tax Commission; the United States of America By and Through the Internal Revenue Service; the United States of America, By and Through the Small Business Administration; and the Board of County Commissioners of Payne County, State of Oklahoma, Defendants, Salt Fork Development Corporation, Intervenor/Appellant, Verlin Wooley and Shirley Wooley, husband and wife, Third-Party Defendants/Appellees.

No. 72809.

Released for Publication by Order of the Court of Appeals of Oklahoma, Division No. 2.

Court of Appeals of Oklahoma, Division No. 2.

Aug. 27, 1991.

Rehearing Denied Sept. 23, 1991.

Certiorari Denied Jan. 23, 1992.

Appeal from the District Court of Payne County; Charles H. Headrick, Trial Judge.

Intervenor brought action for reformation of legal description of real property to enlarge the quantity of land conveyed by sheriff's deed. Mortgagors objected to reformation and moved for summary judgment. Trial court granted motion. Intervenor appeals.

AFFIRMED.

Larry L. Bays, Alva, for third-party defendants/appellees.

William J. Baker, Hert, Baker & Kistler, Stillwater, for intervenor/appellant.

BRIGHTMIRE, Judge.

The dispositive issue here is whether a court of equity may--at the request of the purchaser of property at a sheriff's sale--reform a sheriff's deed to include property which was not expressly included in the foreclosed mortgage or mentioned in the sheriff's advertisement of the property. We hold that it may not and affirm the order of the trial court.

I

On September 7, 1978, appellee Veldon Woolley, together with other individuals, secured a commercial loan for $150,000 from the Stillwater National Bank and Trust Company. The loan proceeds were to be used in the construction of a nightclub to be known as "The Kaleidoscope." As security for the repayment of the loan, Woolley and the other borrowers executed and delivered to the bank a real estate mortgage to a certain five-acre tract located in Payne County, Oklahoma. The property pledged was legally described in the mortgage as:

"East Half of Northeast Quarter of Northwest Quarter of Northeast Quarter (E/2NE/4NW/4NE/4) of Section Fifteen (15), Township Twenty (20) North, Range Two (2) East of Indian Meridian, Payne County, Oklahoma, Containing Five (5) acres more or less."

On November 5, 1980, Woolley and one Eldred M. Harmon, borrowed $126,260 from the Security State Bank of Mooreland, Oklahoma. The loan proceeds were used to pave the Kaleidoscope parking lot. To secure repayment, Woolley and Harmon executed and delivered a real estate mortgage to an eighty-acre tract, which included the five acres subject to the Stillwater National Bank mortgage. This property was described in the Security State Bank mortgage as:

"[T]he North Half of the Northeast Quarter (N 1/2NE 1/4) of Section Fifteen (15), Township Twenty (20) North, Range Two (2) East of the Indian Meridian, containing 80 acres more or less."

Woolley and the other mortgagors subsequently defaulted on their loans and foreclosure proceedings were instituted. On January 19, 1984, Stillwater National Bank and the Federal Deposit Insurance Corporation, as liquidating agent and receiver of Security State Bank, were awarded judgments against the mortgagors. The trial court ordered that the mortgaged premises be sold at sheriff's sale.

The five-acre tract was noticed for sale, and on May 1, 1984, John Pounds, as agent for Salt Fork Development Corporation, was the high bidder at $225,000. The sale was subsequently confirmed on May 17, 1984, and the sheriff executed and delivered a deed to the five acres to Salt Fork.

On March 22, 1985, Salt Fork filed a petition to intervene in the foreclosure action seeking to reform the sheriff's deed to include that portion of the Kaleidoscope's parking lot which extended beyond the boundaries of the five-acre tract mortgaged to Stillwater National Bank. Salt Fork alleged in its petition that:

"[B]y reason of the mutual mistake of fact on the part of all parties to the said Mortgage, and ... the representations made by the Defendants during the course of the foreclosure proceedings ... it is now necessary to reform the ... Mortgage and Sheriff's Deed and each of them, to reflect the true description of the five (5) acre tract which fully encompasses all of the buildings and improvements which are a part of the Kaleidoscope."

The appellees filed a motion for summary judgment. Salt Fork objected to the motion claiming that there existed substantial controversy as to material facts, or in the alternative, that it was entitled to judgment as a matter of law.

On January 13, 1989, the trial court entered an order granting the appellees' motion for summary judgment. The trial court subsequently denied Salt Fork's motion for new trial and made the following findings of fact and conclusions of law:

"1. The title taken by [Salt Fork] at the foreclosure sale relates back to the title of [Stillwater National Bank] as such title was originally conveyed by [Woolley];

2. That there is no issue as to the regularity of the foreclosure proceedings;

3. The Defendants Wooley [sic ] were to use the proceeds of the Plaintiff, Stillwater National Banks' loan to construct a club known as the Kaleidoscope, and that at the time of construction a gravel parking lot was contemplated and later constructed by said defendants;

4. Said Defendants later determined to pave the parking lot and a Note and Mortgage covering an 80 acre tract of land, including the five acre tract of land in question, were executed in favor of another Mortgagee, Security National Bank of Mooreland, Oklahoma, and the proceeds of that loan were used for the purpose of paving said parking lot;

5. It is undisputed that portions of the parking lot extend beyond the boundaries described in the Mortgage granted in favor of the Plaintiff, Stillwater National Bank;

6. That based upon the above and foregoing, there is no dispute regarding the issue of mutual mistake or fraud by the Defendants Wooley [sic ] and mistake by the Plaintiff, Stillwater National Bank abd Trust Company."

From this adverse ruling Salt Fork appeals.

II

While courts of equity have jurisdiction to reform written instruments, they are wont to exercise it with utmost caution. In general, the equitable power of reformation is limited to correcting a written instrument to reflect that which the signatories had actually agreed to. Equity will not create a new or different contract for the parties. Dennis v. American-First Title & Trust Co., 405 P.2d 993 (Okl.1965); Tuloma Pipe & Supply Co. v. Townsend, 182 Okl. 321, 77 P.2d 535 (1938).

Salt Fork contends that there are disputed issues of fact concerning a mutual mistake on the part of Stillwater National Bank and Woolley; a unilateral mistake on the part of the bank; and fraud committed by Woolley with regard to the legal description contained in the Stillwater National Bank mortgage. For this reason, Salt Fork says that Woolley is not entitled to a summary judgment.

Assuming such issues exist, they do not reach or affect the pivotal or dispositive legal issue which is this: Whether equity will reform the description of property set out in a sheriff's deed issued to a purchaser at a foreclosure sale when the description in the deed agrees with that in the bank's mortgage. We hold it will not.

In Trachtenberg v. Glen Alden Coal Co., 354 Pa. 521, 47 A.2d 820 (1946), the Pennsylvania Supreme Court addressed this issue. In denying the purchaser's request to reform a sheriff's deed to correct a mutual mistake which failed to include two lots in a mortgage instrument, the Trachtenberg court cited three reasons why it would be inequitable to allow the reformation of the sheriff's deed:

"First, it would be unfair to the mortgage debtor. He is entitled to have the entire property of which he is to be divested advertised for sale so that it will bring a price higher than will the mere portion advertised for sale. Second, the judgment creditor is entitled to have the entire property which he claims is covered by the mortgage advertised and sold to the end that a higher price may be obtained from the successful bidder.... Third, the public is entitled to be correctly informed by advertisement of the size and nature i.e. of the exact identity, of the property to be sold at the sheriff's sale so that possible purchasers may bid with exact information as to what they are bidding on. That there should be no concealment or misrepresentation, intentional or otherwise, of a fact which if known would affect bidding at a public sale conducted by an official representative of the Commonwealth is incontestable."

Trachtenberg, 47 A.2d at 824.

Other jurisdictions have also declined to reform legal descriptions to enlarge the quantity of land conveyed by sheriffs' deeds. See Stephenson v. Harris, 131 Ala. 470, 31 So. 445 (1901); Hull v. Calkins, 137 Cal. 84, 69 P. 838 (1902); Fisher v. Villamil, 62 Fla. 472, 56 So. 559 (1911); Alfalfa Lumber Co. v. Mudgett, 199 S.W. 337 (Tex.Civ.App.1917); Miller v. Kolb, 47 Ind. 220 (1874); Schwickerath v. Cooksey, 53 Mo. 75 (1873); Marks v. Taylor, 23 Utah 470, ...