Opinion
No. 04-05-00075-CV
Delivered and Filed: April 12, 2006.
Appeal from the 229th Judicial District Court, Jim Hogg County, Texas, Trial Court No. CC-03-55, Honorable Alex W. Gabert, Judge Presiding.
Reversed and Rendered.
Sitting: Alma L. LÓPEZ, Chief Justice, Catherine STONE, Justice, Phylis J. SPEEDLIN, Justice.
MEMORANDUM OPINION ON REHEARING
This case is before us on appellants' motion for rehearing. We grant the motion for rehearing, withdraw our opinion and judgment dated January 25, 2006, and substitute the following in their place.
Jose Ramirez, Jr. and Anabel Ramirez-Manning appeal the directed verdict granted in favor of Jose Flores and the denial of their directed verdict motion in their suit for reformation of a warranty deed. Because we believe the evidence conclusively establishes the Ramirezes' right to reformation of the warranty deed as a matter of law, we reverse the judgment of the trial court and render judgment reforming the warranty deed to reflect the true agreement of the parties.
Background
Jose Ramirez, Jr. and Anabel Ramirez-Manning (collectively the "Ramirezes") owned 240.305 acres of real property in Jim Hogg County, Texas. They agreed to sell the property and 1/16 of the mineral estate to Jose Flores on January 12, 1999 for $144,000. After the sale closed, the Ramirezes learned that because of a mistake by the title company, Border Title Group, the warranty deed transferred to Flores the surface estate and the entire mineral estate. The Ramirezes attempted to get Flores to reform the deed to reflect the parties' agreement that only the surface estate and 1/16 of the mineral estate were being sold. Flores refused, and the Ramirezes filed suit for reformation of the deed.
After the close of the evidence in the jury trial, both parties moved for a directed verdict. The Ramirezes claimed they were entitled to a judgment as a matter of law because the evidence conclusively showed that the warranty deed did not reflect the true agreement of the parties due to a mutual mistake. By contrast, Flores maintained that he was entitled to a directed verdict because the evidence did not raise a fact issue as to the elements the Ramirezes had to establish to be entitled to judgment. The trial court considered the parties' motions and concluded the evidence presented did not raise a fact issue on the elements that the Ramirezes had to establish to be entitled to judgment. Accordingly, the trial court denied the Ramirezes' motion for a directed verdict and instead directed a verdict in favor of Flores. The Ramirezes appeal, claiming the trial court erroneously denied their motion for a directed verdict and improperly granted Flores a directed verdict.
Standard of Review
A party is entitled to a directed verdict only when reasonable minds can reach but one conclusion under the available evidence. Vance v. My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480, 483 (Tex. 1984). A directed verdict is proper when: (1) the opponent's pleadings are insufficient to support a judgment; (2) the evidence conclusively proves a fact that establishes a party's right to judgment as a matter of law; or (3) the evidence offered on a cause of action is insufficient to raise an issue of fact. Koepke v. Martinez, 84 S.W.3d 393, 395 (Tex.App.-Corpus Christi 2002, pet. denied); Rudolph v. ABC Pest Control, Inc., 763 S.W.2d 930, 932 (Tex.App.-San Antonio 1989, writ denied). An appeal from the denial of a motion for a directed verdict is essentially a challenge to the legal sufficiency of the evidence. Kershner v. State Bar of Tex., 879 S.W.2d 343, 346 (Tex.App.-Houston [14th Dist.] 1994, writ denied).
When reviewing the granting of a directed verdict, we must view the evidence in a light most favorable to the non-moving party and disregard evidence that is contrary to the verdict. Porterfield v. Brinegar, 719 S.W.2d 558, 559 (Tex. 1986). As the supreme court recently clarified, this means we must "credit favorable evidence if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not." City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). "If there is any conflicting evidence of probative value on any theory of recovery, a [directed] verdict is improper and the case must be reversed and remanded for jury determination of that issue." Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994). "Where no evidence of probative force on an ultimate fact element exists or where the probative force of [certain] testimony is so weak that only a mere surmise or suspicion is raised as to the existence of essential facts, the trial court has the duty to instruct the verdict." Univ. Nat'l Bank v. Ernst Whinney, 773 S.W.2d 707, 709-10 (Tex.App.-San Antonio 1989, no writ).
Discussion
On appeal, the Ramirezes maintain that the trial court erroneously denied their motion for a directed verdict and improperly directed a verdict in favor of Flores when the record evidence proves their right to reformation as a matter of law. The Ramirezes argue that the only evidence presented at trial is evidence that conclusively proves the warranty deed does not embody the true agreement of the parties due to a mutual mistake. We agree.
A party is entitled to reformation of a deed upon proving the party reached an agreement with the other party, but the deed does not reflect the true agreement due to a mutual mistake. Thalman v. Martin, 635 S.W.2d 411, 413 (Tex. 1982). A mutual mistake is "one common to both or all parties, wherein each labors under the same misconception respecting a material fact, the terms of the agreement, or the provision of a written instrument designed to embody such an agreement." Allen v. Berrey, 645 S.W.2d 550, 553 (Tex.App.-San Antonio 1982, writ ref'd n.r.e.). "A mutual mistake is generally established from all the facts and circumstances surrounding the parties and the execution of the instrument." Henderson v. Henderson, 694 S.W.2d 31, 34 (Tex.App.-Corpus Christi 1985, writ ref'd n.r.e.). It is well settled that a scrivener's "failure to embody the true agreement of the parties in the written [instrument] is such mistake as to afford ground for reformation for mutual mistake." Louviere v. Power, 389 S.W.2d 333, 335 (Tex.Civ.App.-Waco 1965, writ ref'd n.r.e.); see also Henderson, 694 S.W.2d at 34.
At trial, Leticia Perez, a senior escrow officer at Border Title Group, testified that her company insures title to real estate and handles closings for real estate transactions. She explained that in a typical real estate transaction, her company usually receives a copy of the earnest money contract together with the earnest money from the parties. Once received, Border Title Group escrows the earnest money, examines the title to the property, and issues a title commitment. The company then forwards the title commitment to one of its attorneys, who will prepare a warranty deed for the property. If there are any specific reservations that are to be included in the warranty deed, the company will also furnish the attorney preparing the deed a copy of the relevant documentation explaining the parties' reservations. For example, Perez indicated that if the parties made specific reservations in the earnest money contract, the company would forward the earnest money contract along with the title commitment to the attorney preparing the warranty deed.
Perez stated the earnest money contract in this case reflects that the Ramirezes agreed to convey to Flores the surface estate and 1/16 of the mineral estate. The document noted that the parties agreed the remaining 15/16 of the mineral estate were specifically reserved to the Ramirezes. Perez stated that the warranty deed should have included this 15/16 mineral estate reservation to the Ramirezes; however, due to a mistake on the part of Border Title Group the warranty deed failed to include the Ramirezes' 15/16 mineral estate reservation. Perez testified that due to an oversight, her company failed to furnish the attorney responsible for preparing the warranty deed with a copy of the earnest money contract when the title commitment was forwarded to the attorney. As a result, the warranty deed was prepared to convey the entire mineral estate to Flores rather than just 1/16 of the mineral estate. Perez further stated that nothing in her company's file reflects that either the parties or their representatives ever instructed Border Title Group to deviate from the terms of the earnest money contract when drafting the warranty deed.
Anabel Ramirez-Manning testified only the surface estate and 1/16 of the mineral estate were to be conveyed to Flores, nothing more. Anabel testified she did not know of any subsequent agreements between the parties which would have changed the terms of their original agreement. Anabel's brother, Jose Ramirez, likewise testified that he and his sister agreed to convey only the surface estate and 1/16 of the mineral estate to Flores. Ramirez testified that he and his sister did not enter into any subsequent agreements with Flores to change the terms of the earnest money contract. He further testified that Border Title Group's mistake led to the omission of the 15/16 mineral estate reservation from the warranty deed.
Finally, Jose Flores testified that he signed the earnest money contract reflecting that he was purchasing the surface estate and 1/16 of the mineral estate from the Ramirezes on January 12, 1999. Flores stated that, pursuant to the terms of the contract, he gave the Ramirezes' agent, John Smith, $2,500 in earnest money after he signed the agreement. He testified that the parties were supposed to close on the property on January 15, 1999; however, the parties did not close on that date because the Ramirezes lacked certain signatures needed to complete the transaction.
John Smith was unavailable to testify at trial because he passed away before the case was tried.
After the parties did not close, Flores continued to speak with the Ramirezes' agent over the next six months regarding the status of the Jim Hogg County property. Flores informed Smith that he was losing interest in the Ramirezes' property and intended to begin searching for other property. According to Flores, if he located other property, he intended to apply the earnest money held in escrow for the Jim Hogg County property to the new property. Flores, over the Ramirezes' objection, testified that he became reinterested in the Jim Hogg County property when the Ramirezes offered him all of their mineral estate interest in the property. According to Flores, the Ramirezes' agent orally communicated the Ramirezes' new offer to him, which he accepted. Flores further testified that the warranty deed is consistent with the oral agreement the parties had reached, which provided the Ramirezes would convey the surface estate and 100% of the mineral estate to Flores in exchange for $144,000.
The Ramirezes objected to Flores's testimony on various grounds, including on the basis that the no oral modification clause found within the parties' original agreement precluded Flores from testifying regarding an alleged oral modification of the agreement.
It is evident from the record that Flores's testimony is the only evidence that the parties entered into a subsequent oral agreement where the Ramirezes agreed to convey to Flores 100% of their interest in the mineral estate. Flores's testimony concerning the alleged oral agreement, however, has no probative value. The record reveals that the earnest money contract signed by the parties, and submitted to Border Title Group, contains a clause prohibiting oral modification of the agreement. Paragraph 21 of the earnest money contract expressly provides, "This contract contains the entire agreement of the parties and cannot be changed except by their written agreement." This contract language essentially precluded Flores from asserting at trial that the terms of the original agreement were changed by an alleged oral modification to the agreement. Flores's testimony regarding the alleged oral modification must therefore be disregarded.
Texas law permits a written contract, not required by law to be in writing, to be modified by a subsequent oral agreement even though the written contract includes a clause prohibiting oral modification of the agreement. Hyatt Cheek Builders-Engineers Co. v. Bd. of Regents, 607 S.W.2d 258, 265 (Tex.Civ.App.-Texarkana 1980, writ dism'd). The Ramirez-Flores written contract, however, could not be modified by a subsequent oral agreement because it was required by law to be in writing. See Tex. Bus. Com. Code Ann. § 26.01(b)(4) (Vernon 2002) (stating a contract for the sale of real estate must be in writing to be enforceable).
Flores maintains that the parties were no longer bound by the terms of the earnest money contract when the parties orally agreed for the Ramirezes to convey 100% of the mineral estate to Flores. According to Flores, the earnest money contract automatically terminated when the parties did not timely close on the property. We are unpersuaded by this argument, however, because the parties' earnest money contract does not include a provision providing for the automatic termination of the contract.
Flores acknowledged this fact when he testified at trial. Although the parties' contract does specify remedies available if either party defaults on their obligations, Flores did not pursue any remedies under the default provisions of the contract. As a result, he remained obligated to comply with the terms of the parties' original agreement, including the clause prohibiting oral modification of the agreement.
After reviewing the relevant evidence, we must conclude that reasonable minds could reach but one conclusion under the available evidence: The parties' warranty deed does not embody the true agreement of the parties due to a mutual mistake. There is no evidence of probative value to rebut the testimony of Perez, Anabel, and Jose that a scrivener's error caused the parties' warranty deed not to reflect the true agreement of the parties. As such, we hold the Ramirezes were entitled to reformation of the warranty deed as a matter of law.
Conclusion
Because the only probative evidence admitted at trial shows the warranty deed does not embody the true agreement of the parties due to a mutual mistake, we conclude that the trial court should have directed a verdict in favor of the Ramirezes, not Flores. Accordingly, we reverse the judgment of the trial court and render judgment in favor of the Ramirezes.