Summary
holding that an error in the legal description of a property in a deed of trust was scrivener's error and, in the absence of fraudulent or inequitable conduct by a party to the deed, the trial court properly reformed the legal description in the deed of trust
Summary of this case from Sender v. Cygan (In re Rivera)Opinion
No. 75-380
Decided February 13, 1976.
In foreclosure action on a deed of trust on 900-acre parcel of real property securing a promissory note, the trial court awarded plaintiff interest on the note, reformed the deed, and ordered sale of the property. Plaintiff appealed.
Affirmed in Part, Reversed in Part.
1. FORECLOSURE — Action to Foreclose — Memorandum of Agreement — Foreclosure Provision — Default — Secured Chattels — Right to Immediate Possession. Where memorandum of agreement between two parties provided for foreclosure on personal property items under the Uniform Commercial Code in the event of default, the secured party was entitled to immediate possession of the chattels upon such default.
2. DEEDS — Scrivener — Party to Agreement — Drafting Error — Mutual Mistake — Reformation Proper. Although, in action to foreclose a deed of trust, the scrivener who drafted erroneous description of real property contained in that deed was also a party to the agreement, nevertheless, there was no showing of fraud or inequitable conduct; and thus, since scrivener's errors are a form of mutual mistake, the trial court did not err in reforming that description.
Appeal from the District Court of the County of Summit, Honorable Charles R. Casey, Judge.
Martin, Knapple Johnson, James G. Martin, for plaintiff-appellant. Pendleton, Sabian Guthery, P.C., Alan C. Friedberg, D. Craig Lewis, for defendants-appellees David A. Ray Susan B. Ray.
Division II.
Alexander Dawson, Inc., sued the defendants for foreclosure of a deed of trust on a 900-acre parcel securing a promissory note executed by Susan B. and David Ray, the only defendants who are parties to this appeal. The trial court entered judgment in favor of Dawson for the interest due on the note, reformed the description of the property subject to the deed of trust, foreclosed the deed of trust as reformed, and ordered sale of the property to satisfy the judgment. A foreclosure sale of personal property, which was the subject of a separate security agreement, was ordered in the event the judgment remained unsatisfied.
Dawson appeals, contending, among other things, that it should have been given immediate possession of the personal property subject to the security agreement, that the mistake in the property description was unilateral, not mutual, and that the trial court should have entered judgment for the full amount of principal and interest due on the note. We affirm in part and reverse in part.
In December 1970, the Rays executed a $700,000 promissory note and a deed of trust, in accordance with a prior memorandum of agreement entered into between the Rays and Dawson. The note provided for semi-annual interest payments on December 1 and June 1. It required payment of the principal in full on December 1, 1975.
The memorandum of agreement prohibited the Rays from transferring or encumbering the real property subject to the deed of trust. It also provided that, in the event the Rays breached the agreement, Dawson's security interest in certain chattels was to be foreclosed under the provisions of the Uniform Commercial Code, if Dawson had at that time advanced sufficient funds to retire existing obligations against the chattels.
In August 1973, Dawson discovered that a 40-acre parcel subject to the deed of trust had been transferred by the Rays. Accordingly, it commenced this action to foreclose the deed of trust, and, in a second claim for relief, sought immediate possession of the chattels. Shortly before the trial in January 1975, the Rays amended their answer to include the affirmative defense that the legal description of the 40-acre parcel had been included in the deed of trust by mutual mistake. Dawson also amended its complaint, adding a third claim for relief based on nonpayment of the interest installments due on December 1, 1973, and thereafter.
[1] We agree with Dawson's contention that it should have been granted immediate possession of the chattels which were subject to the security agreement. The memorandum of agreement between the parties provided for foreclosure under the Uniform Commercial Code, and Dawson, in its second claim for relief, elected to proceed thereunder, as authorized by § 4-9-501(4), C.R.S. 1973. Thus, although the trial court, in its judgment, was correct in limiting Dawson's recovery on foreclosure to the amount of the judgment only, the court should have granted Dawson's prayer for immediate possession of the chattels and authorized Dawson to proceed under the provisions of § 4-9-501 et seq., C.R.S. 1973.
We do not agree, however, with Dawson's contention that the trial court erred in reforming the description of the real property subject to the deed of trust. The trial court's finding that the parties had "no technical description of the property in mind" when they entered into the agreement is supported by the record, which shows that the parties agreed that approximately 900 acres, without reference to any specific boundaries, would serve as security for the loan.
David Ray, who was both a party to the deed of trust and the scrivener, testified that he had erroneously included the 40-acre parcel, which had been previously included in a contract for deed with Blue Valley, Ltd. He also said that he had erroneously omitted an 18-acre parcel which should have been included in the deed of trust.
[2] Scrivener's errors are a form of mutual mistake, see Gullion v. Plymale, 168 Colo. 245, 450 P.2d 650, and under, the circumstances of this case, we see no reason to apply a different rule merely because the scrivener was also a party to the instrument. Hence, in the absence of any showing of fraudulent or inequitable conduct by Ray, see Smith v. Whitlow, 129 Colo. 239, 268 P.2d 1031, the trial court properly reformed the description to exclude the 40-acre parcel and to include the 18-acre parcel.
While it was proper for the trial court to reform the deed of trust, we note that the legal description of the 18-acre parcel in the judgment does not conform with the evidence in the record. On remand, therefore, the trial court should correct the legal description of the 18-acre parcel, and, if necessary, take additional evidence for this purpose.
Although the note provides for acceleration of the principal amount upon default in payment of interest, Dawson's contention that the trial court erred in failing to accelerate the note and enter judgment for both principal and interest has now become moot, since, as the record discloses, the full amount of the principal of the note became due on December 1, 1975. Accordingly, Dawson should have judgment against the Rays for the full amount of the principal and interest due on the note, and should be granted the right to foreclose under the provisions of § 38-39-101 et seq., C.R.S. 1973.
In view of our conclusions, it is unnecessary to consider Dawson's other contentions.
That part of the judgment reforming the legal description of the property subject to the deed of trust is affirmed, except that the trial court shall, on remand, correct the legal description of the 18-acre tract, as we have directed above. That part of the judgment in favor of Dawson for the interest due on the promissory note and for attorney's fees is affirmed, and shall bear interest at the rate of six percent per annum commencing February 25, 1975, the date of entry of judgment by the trial court. See § 5-12-102, C.R.S. 1973.
That part of the judgment authorizing foreclosure of the personalty is reversed, and the cause is remanded with directions to the trial court to enter judgment in favor of Dawson for immediate possession of the chattels covered by the security agreement, subject to the provisions of § 4-9-501 et seq., C.R.S. 1973. The trial court is further directed to enter judgment for Dawson for the full amount of the principal of the promissory note, together with any interest installments due and unpaid after February 25, 1975, and this portion of the judgment shall bear interest at the rate of eight percent per annum from the date of entry of judgment by the trial court after remand. See Colo. Sess. Laws 1975, ch. 61, 5-12-102 at 257.
JUDGE ENOCH and JUDGE PIERCE concur.