When Rocky Lawrence saw the rig move onto his property to drill a gas well, he checked his deed. Sure enough, nothing on the deed indicated that the seller of the property reserved the mineral rights.
Patsy Barnes saw the same drilling rig and went to Conway Title Company to make sure that she had reserved the mineral rights when she signed the deed conveying that property to Lawrence. She was certain that the contract for sale stated that the mineral rights would not be conveyed to Lawrence.
Sarah at Conway Title had one of those awful moments, realizing that the reservation of mineral rights was not in the deed that Patsy signed, though the purchase contract stated that the mineral rights would be reserved to the seller. Sarah asked Lawrence to sign a correction deed, but he refused. Then Lawrence filed a quiet title suit, hoping to affirm that he and his wife owned the mineral rights and would receive royalties from natural gas produced from the well on their land.
People ought to be bound by what they sign, especially when it comes to real estate. Otherwise, what would be the point of putting the contract or deed in writing or reading a contract before signing it?
Mistakes are inevitable, and it would be unfair to allow someone to benefit from a mistake at the expense of another. Courts have developed the equitable remedy of reformation for the correction of mistakes and have also developed some strict rules for determining whether to reform a contract or a deed. Though the exact rules vary a bit from state to state, the basic rules are these:
- the mistake must be mutual, not just on one side of the transaction
- the evidence must show that the parties’ intent was the same at the time the contract or deed was signed
- the evidence of the mistake must be clear and convincing
In its opinion in the case Lawrence v. Barnes, the Arkansas Court of Appeals reviewed the evidence before the trial court. The real estate contract stated clearly that the minerals were not to be conveyed. The real estate agent testified that he told Lawrence that he was not getting the minerals and that the agent put the exclusion of mineral rights in the contract before Lawrence signed it. Lawrence testified that he asked about mineral rights at the closing and was told (apparently by the closer at Conway Title) that if he closed with the paperwork as presented, Lawrence would receive the mineral rights.
Courts of appeal generally defer to the trial court’s evaluation of the credibility of those who testify. This case was tried before a judge, not a jury, and the judge took the purchase contract as credible evidence of the intent of the parties, and it plainly stated that minerals were not included.
There was nothing in writing, such as an amendment to the contract, to show that the deal had changed. Under the contract, Lawrence did not purchase the minerals. The title insurance commitment prepared by Conway Title stated that the minerals were not included. Nobody disputed Sarah’s testimony that she or someone at Conway Title simply made a mistake in not following the contract when preparing of the deed. The deed was inconsistent with the purchase contract and the title insurance commitment.
The Arkansas Court of Appeals affirmed the decision of the trial court to reform the deed so that Lawrence would not share in any royalties from the gas well. Conway Title was spared from the consequences of its mistake.
Ozarks Law & Economy 