Goodall v. Monson, 2017 ND 92

Background

In 1980 George and Dorothy Hoffman executed a mineral deed conveying to Francis and Alice Goodall language stating an "undivided 508.26/876.26 interest" under four tracts; two weeks earlier the parties signed an unrecorded "Contract and Receipt."
The Hoffmans previously had conveyed various mineral parcels (1955–1965) and, after those conveyances, retained a total of 508.26 mineral acres of 876.26 acres across the four tracts.
The Goodalls (successors to Francis and Alice) sued in 2013 to quiet title, asserting the parties intended to transfer the Hoffmans’ entire retained 508.26 mineral acres, not a 508.26/876.26 fractional interest in each tract.
The Monsons (successors to the Hoffmans) defended, arguing the deed’s fractional language was unambiguous and left the Monsons with the retained interest they later leased to oil companies.
The district court admitted the unrecorded Contract and Receipt and expert title testimony, found a mutual mistake between the parties, reformed the deed to convey the Hoffmans’ full 508.26 mineral acres to the Goodalls, and quieted title; the Monsons appealed.
The Supreme Court affirmed: although the deed was unambiguous on its face (the court rejected the district court’s latent-ambiguity rationale), extrinsic evidence was properly considered to show mutual mistake, and the reformation findings were not clearly erroneous.

Issues

Issue	Goodall's Argument	Monson's Argument	Held
Whether extrinsic evidence could be admitted	Contract and Receipt and title chain show parties intended transfer of all 508.26 mineral acres, so extrinsic evidence should be allowed to show mutual mistake	Deed language is plain and unambiguous; extrinsic evidence inadmissible to alter deed	Court: extrinsic evidence admissible for reformation (parol evidence rule does not bar proof of mutual mistake), though not because of a latent ambiguity in the deed
Whether the deed was latently ambiguous	The fractional expression applied to the ground creates under/overconveyances and thus a latent ambiguity	The fractional 508.26/876.26 interest can be applied to the ground and is unambiguous; overconveyance does not create latent ambiguity	Court: deed unambiguous as applied to the ground; district court erred to the extent it relied on latent ambiguity, but result stands on mutual mistake grounds
Whether mutual mistake (or fraud) justified reformation under N.D.C.C. § 32-04-17	The Contract and Receipt plus title history and expert testimony clearly show both parties intended to convey the entire 508.26 mineral acres; deed should be reformed	Insufficient proof of mutual mistake; deed should be enforced as written	Court: clear-and-convincing evidence supported district court’s findings of mutual mistake; reformation affirmed
Whether any third-party good-faith purchaser defense bars relief	Not argued by Goodalls; evidence shows Monsons not good-faith purchasers for value	Monsons argued they inherited retained interest; but did not claim good-faith purchaser status	Court: Monsons did not claim or prove good-faith purchaser status; reformation limited by statute but permitted here

Key Cases Cited

Nichols v. Goughnour, 820 N.W.2d 740 (N.D. 2012) (standard for deed/contract interpretation and when extrinsic evidence is admissible)
Gawryluk v. Poynter, 654 N.W.2d 400 (N.D. 2002) (latent ambiguity and limits on using overconveyance to create ambiguity)
Harney v. Wirtz, 152 N.W. 803 (N.D. 1915) (parol evidence admissible to explain latent ambiguity but cannot create a new contract)
Duhig v. Peavy-Moore Lumber Co., 144 S.W.2d 878 (Tex. 1940) (rule construing deeds when grant and reservation cannot both be given effect)
Ell v. Ell, 295 N.W.2d 143 (N.D. 1980) (equitable reformation available for mutual mistake; parol evidence admissible)
Spitzer v. Bartelson, 773 N.W.2d 798 (N.D. 2009) (reformation as equitable remedy; burden is clear and convincing evidence)
Heart River Partners v. Goetzfried, 703 N.W.2d 330 (N.D. 2005) (parol evidence admissible in reformation to show parties’ intent)