242 P.2d 557 | Ariz. | 1952
This action arose out of the alleged breach of the conditions and undertakings of a farm lease. E. C. Lane and Millie Lane, appellants and defendants below, hereinafter styled lessors, own a farm near McNeill, Arizona. Sometime during the month of February, 1948, Bob Mathews, appellee and plaintiff below, hereinafter styled lessee, entered into negotiations with lessors to lease the farm on a percentage basis of the crop grown. The terms to be incorporated in the written lease were dis
Lessee brought this action for damages to the cotton crop as a result of lessors’ refusal to keep the water pumps and engines in good repair as they were required to do under the terms of the written lease as changed by lessee. Due to lack of irrigation, approximately 200 acres of cotton were damaged. Lessors answered and counterclaimed praying for reformation of the agreement and for damages to their farm machinery. Their defense was fraud or mutual mistake. The trial was before a jury in two phases, the first, on the issues of fraud or mutual mistake, and the second on the question of the breach of the lease. The court instructed the jury to return a verdict in favor of the lessee on the issue of mutual mistake and submitted the following interrogatories on the issue of fraud:
“Did E. C. Lane and Millie Lane know that the last page of the farm lease had been changed before they signed it?”
Answer — No.
“If your answer to the above interrogatory numbered one (1) is no, then: did E. C. Lane and Millie Lane act as reasonably prudent persons in failing to read the last page of the Farm Lease?”
Answer — Yes.
“Under the instructions of the court, did E. C. Lane and Millie Lane sign and execute the farm lease as the result of fraud on the part of Bob Mathews ?”
Answer — No.”
The issue to be determined is whether reformation is allowable in view of the fact that the answers to the interrogatories established that lessors were not negligent and acted as reasonable and prudent persons in signing the lease without re-reading it. It is elementary that equity will reform an agreement where there is mutual mistake or mistake on one side and fraud or inequitable conduct on the other.
“A written instrument may be reformed where there is a mistake on one side and fraud or inequitable conduct on the other, as where one party to an instrument has made a mistake and the other knows it and conceals the truth from him. Some cases distinctly state that a court of equity can reform instruments in but two cases, namely, where there is mutual mistake and where there is a mistake of one party accompanied by fraud or inequitable conduct of the other. * * * ” 45 Am.Jur., Reformation of Instruments, Sec. 62, page 621.
Fraud or inequitable conduct is defined in 45 Am.Jur., Reformation of Instruments, Sec. 57, page 619, from which we quote: “Fraud practiced in drawing and executing an instrument so that it does not speak the real terms of the contract which the parties, have agreed on, or unconscionable conduct amounting to fraud, constitutes ground for a reformation of the instrument, if it is-essential to protect from injury the innocent party thereto. The fraud which will entitle a party to relief is fraud at the time of execution of the instrument and not in a subsequent and distinct transaction. If the misrepresentation is prejudicial, it is of no importance whether it was wilful or accidental. Whether the deviation from the agreement entered into is the result of intentional or unintentional misstatement is. immaterial, for equity has power to grant relief by way of reformation in one case as-well as the other.”
It is true, as lessee points out, that he-made no affirmative representation, false or otherwise, concerning the lease to lessors. It will be seen, however, that mere silence may amount to a false representation in the proper case. We quote from 37 C.J.S., Fraud, § 16, pages 244, 245: “An exception to the rule that mere silence is not fraud exists where the circumstances impose on a person a duty to speak and he deliberately remains silent. It is well settled that the-suppression of a material fact which a party is bound in good faith to disclose is. equivalent to a false representation. Where
' This court, in Batty v. Arizona State Dental Board, 57 Ariz. 239, 112 P.2d 870, 877, stated that: “Fraud may be committed by a failure to speak, when the duty of speaking is imposed, as much as by speaking falsely.”
We believe that a duty to speak was imposed upon lessee when he undertook to change the terms of the agreement. His silence amounted to a representation that the lease had not been changed. The jury found lessors were not negligent in failing to re-read the lease under this set of circumstances. The evidence in this case clearly shows that there was mistake on one side and constructive fraud or inequitable conduct on the other. We believe lessors have established grounds for reformation, but have they clearly and convincingly shown the true agreement? The court ■erred in not submitting that all important question to the jury. In the trial of equity cases where a jury has been demanded, the court may not withdraw the determination of controverted facts from the jury. Haynie v. Taylor, 69 Ariz. 339, 213 P.2d 684. We must assume that .the trial court found that lessee’s interpretaion of the true agreement was correct, otherwise the court would not have ordered the trial to proceed on the issue of the breach of that written agreement. Reformation may be granted only when the party seeking reformation has established the grounds and clearly and convincingly proven the true agreement. The basic issue before the lower court in the first phase of the trial was the determination of the true agreement between the parties. This issue was not submitted to the jury for their determination and we hold this was reversible error.
Lessors contend that the court erred in not submitting the issue of mutual mistake to the jury. We find no merit in that contention. Although the jury found mistake on the part of the lessors, a study of lessee’s testimony discloses his full knowledge of the changes that were made in the agreement before he signed it. The mistake, therefore, was not mutual. There were no controverted questions of fact on the issue of mutual mistake.
Judgment reversed and remanded for a new trial.
