(Orig. Code 1863, §§ 3050, 3053; Code 1868, §§ 3062, 3065; Code 1873, §§ 3117, 3120; Code 1882, §§ 3117, 3120; Civil Code 1895, §§ 3973, 3977; Civil Code 1910, §§ 4570, 4574; Code 1933, §§ 37-202, 37-203.)
Cross references.- Form of complaint for money paid by mistake, § 9-11-107.
Law reviews.- For note, the voluntary-payment doctrine in Georgia, see 16 Ga. L. Rev. 893 (1982).
JUDICIAL DECISIONSANALYSIS
A mistake, either of law or fact, is cognizable in equity and affords a remedy therein by reformation of the instrument so as to make it express the true intention of the parties, on a proper cause being made; but such a jurisdiction will always be cautiously exercised, and to justify it the evidence must be clear, unequivocal, and decisive. Yablon v. Metropolitan Life Ins. Co., 200 Ga. 693, 38 S.E.2d 534 (1946); Prince v. Friedman, 202 Ga. 136, 42 S.E.2d 434 (1947).
Reformation as applied to a contract is remedy cognizable in equity for the purpose of correcting an instrument so as to make it express the true intention of the parties, when from some cause, such as fraud, accident, or mistake it does not express such intention. The remedy is not available for the purpose of making a new and different contract for the parties, but is confined to establishment of the actual agreement. Deck v. Shields, 195 Ga. 697, 25 S.E.2d 514 (1943).
Equity exercised with caution.
- The power in equity to relieve mistakes should be exercised with caution, and the evidence shall be clear, unequivocal and decisive as to the mistake. Thomaston v. Fort Wayne Pools, Inc., 181 Ga. App. 541, 352 S.E.2d 794 (1987).
Mistake defined.
- Mistake, within the meaning of equity, is an erroneous mental condition, conception, or conviction, induced by ignorance, misapprehension, or misunderstanding of the truth, but without negligence and resulting in some act or omission done or suffered erroneously by one or both of the parties to a transaction, but without its erroneous character being intended or known at the time. Callan Court Co. v. Citizens & S. Nat'l Bank, 184 Ga. 87, 190 S.E. 831 (1937); Whipple v. County of Houston, 214 Ga. 532, 105 S.E.2d 898 (1958).
Mistake is internal and essentially ignorance.
- Mistake is internal; it is a mental condition, a conception, a conviction of the understanding; erroneous indeed, but nonetheless a conviction which influences the will and leads to some outward physical manifestation. Its operation is ordinarily, though not always, affirmative the doing of some act which would not have been done in the absence of the particular conception or conviction which influenced the free action of the will. Its essential requisite is ignorance. Callan Court Co. v. Citizens & S. Nat'l Bank, 184 Ga. 87, 190 S.E. 831 (1937).
The essential element of a mistake is a mental condition or conception or conviction of the understanding. This mental condition may be either a passive state or an active conviction. When merely passive, it may consist of an unconsciousness, an ignorance, or a forgetfulness; when active, it must be a belief. In the first of these two conditions, the unconsciousness, ignorance, or forgetfulness may be either of a fact which is present and now existing, or of a fact which is past and has existed; they must always concern a fact material to the transaction. In the second condition, the belief may be either that a certain matter or thing exists at the present time which really does not exist; or that certain matter or thing existed at some time which did not really exist. All possible forms of mistake of fact are embraced within this description; and all particular errors which fall under any of these conditions are mistakes of fact which furnish an occasion for equitable relief. Callan Court Co. v. Citizens & S. Nat'l Bank, 184 Ga. 87, 190 S.E. 831 (1937).
Mistake of fact is a mistake not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in, an unconscious ignorance or forgetfulness of a fact, past or present, material to the contract; or belief in the present existence of a thing material to the contract which does not exist, or in the past existence of such a thing which has not existed. Callan Court Co. v. Citizens & S. Nat'l Bank, 184 Ga. 87, 190 S.E. 831 (1937).
Mistake is distinguished from fraud, fraudulent representations, or fraudulent concealments, by the absence of knowledge and intention, which in legal fraud are actually present, and in constructive fraud are theoretically present, as necessary elements. It is also distinguished from that inattention or absence of thought which are inherent in negligence. The erroneous conception or conviction of the understanding which constitutes the equitable notion of mistake has nothing in common with negligence; equity will not relieve a person from the person's own erroneous acts or omissions resulting from the person's own negligence. Callan Court Co. v. Citizens & S. Nat'l Bank, 184 Ga. 87, 190 S.E. 831 (1937).
If equity can reform a contract for sale of land, it can also reform the deed to the land. West Lumber Co. v. Moore, 179 Ga. 302, 175 S.E. 642 (1935).
Question of fact as to whether reformation warranted.
- Trial court erred in granting summary judgment to the borrowers on the bank's claim for equitable reformation of the security deeds because evidence included the fact that a portion of the 2003 loan paid off a joint debt previously secured by the property and the borrowers subsequently represented to the bankruptcy court that the debt secured by the property was jointly owed, which created a question of fact as to whether the debt was secured by the real property at issue. Bank of Am., N.A. v. Cuneo, 332 Ga. App. 73, 770 S.E.2d 48 (2015).
Reformation of lease agreement denied.
- In an action seeking reformation of a lease agreement to include an option to purchase, the trial court properly granted the defendant's motion for directed verdict at the close of the plaintiff's evidence, when there was no evidence of mutual mistake, there was likewise no evidence of fraud or inequitable conduct in the record, it was undisputed that the plaintiff did not read the lease agreement until months after the plaintiff signed the lease, and the record did not demonstrate that a confidential relationship existed between the parties, but rather showed that they were friends engaged in an arms' length transaction. A.J. Concrete Pumping, Inc. v. Richard O'Brien Equip. Sales, Inc., 256 Ga. 795, 353 S.E.2d 496 (1987).
No mutual mistake because contract addressed disputed subject.
- Parties to a business buyout agreement failed to show mutual mistake regarding the validity of a proposed lease assignment because the parties specifically contemplated that the original office building lease or assignment might have to be changed, that the assignment might never occur even with the best efforts of the parties, and that any risk in that regard would be assumed by the buying parties. Extremity Healthcare, Inc. v. Access to Care America, LLC, 339 Ga. App. 246, 793 S.E.2d 529 (2016).
Cited in Sapp v. Ritch, 169 Ga. 33, 149 S.E. 636 (1929); West Lumber Co. v. Moore, 179 Ga. 302, 175 S.E. 642 (1935); Bender v. Randall Bros., 189 Ga. 197, 5 S.E.2d 889 (1939); Gibbs v. H.T. Henning Co., 189 Ga. 675, 7 S.E.2d 238 (1940); Sawyer Coal & Ice Co. v. Kinnett-Odom Co., 192 Ga. 166, 14 S.E.2d 879 (1941); Deck v. Shields, 195 Ga. 697, 25 S.E.2d 514 (1943); Lane v. Howard, 201 Ga. 616, 40 S.E.2d 537 (1946); McCullough v. Kirby, 204 Ga. 738, 51 S.E.2d 812 (1949); Hood v. Connell, 204 Ga. 782, 51 S.E.2d 853 (1949); Minor v. Fincher, 206 Ga. 721, 58 S.E.2d 389 (1950); Scurry v. Cook, 206 Ga. 876, 59 S.E.2d 371 (1950); Altman v. Strouse, 210 Ga. 282, 79 S.E.2d 801 (1954); Miller v. Shaw, 212 Ga. 302, 92 S.E.2d 98 (1956); Whipple v. County of Houston, 214 Ga. 532, 105 S.E.2d 898 (1958); White County v. Wooten, 219 Ga. 236, 132 S.E.2d 653 (1963); Tripp v. Conner, 220 Ga. 2, 136 S.E.2d 744 (1964); Farmers Whse. of Pelham, Inc. v. Collins, 220 Ga. 141, 137 S.E.2d 619 (1964); Finch v. McAloney, 222 Ga. 174, 149 S.E.2d 100 (1966); Bonner v. Cotton, 223 Ga. 843, 159 S.E.2d 61 (1968); Hartford Accident & Indem. Co. v. Walka Mt. Camp No. 565, Woodmen of the World, Inc., 224 Ga. 194, 160 S.E.2d 833 (1968); William H. Benton Co. v. Irvindale Dairies, Inc., 224 Ga. 780, 164 S.E.2d 819 (1968); B.L. Ivey Constr. Co. v. Pilot Fire & Cas. Co., 295 F. Supp. 840 (N.D. Ga. 1968); Lewis v. Williford, 235 Ga. 558, 221 S.E.2d 14 (1975); Martin v. Heard, 239 Ga. 816, 238 S.E.2d 899 (1977); Roberts v. Gunter, 251 Ga. 276, 304 S.E.2d 369 (1983); Atkinson v. Atkinson, 254 Ga. 70, 326 S.E.2d 206 (1985); Fulghum v. Kelly, 255 Ga. 652, 340 S.E.2d 589 (1986); Mag Mut. Ins. Co. v. Gatewood, 186 Ga. App. 169, 367 S.E.2d 63 (1988); Rose v. Cain, 247 Ga. App. 481, 544 S.E.2d 453 (2001).
Mutual Mistake
Equity will not reform a contract on the ground of mistake, unless it be a mutual one or unless there be a mistake on one side and fraud on the other. Rawson v. Brosnan, 187 Ga. 624, 1 S.E.2d 423 (1939); Yablon v. Metropolitan Life Ins. Co., 200 Ga. 693, 38 S.E.2d 534 (1946).
Equity will not decree the reformation of an instrument because of mistake of one of the parties alone unmixed with any fraud or knowledge on the part of the other equivalent to mutual mistake. For a mistake to be relievable in equity by reformation, it must be mutual, or else mistake on the part of one to the contract and fraud on the part of the other. Yablon v. Metropolitan Life Ins. Co., 200 Ga. 693, 38 S.E.2d 534 (1946); Prince v. Friedman, 202 Ga. 136, 42 S.E.2d 434 (1947).
A court of equity will reform a contract of sale when, from mutual mistake or mistake common to both parties, an instrument does not express the true agreement of the parties. Equity will also reform an instrument when there is mistake on one side, and fraud or inequitable conduct on the other. Prince v. Friedman, 202 Ga. 136, 42 S.E.2d 434 (1947).
To enable a court to reform an agreement evidenced by writing on the ground of mistake, it must affirmatively appear that the mistake was common to both parties, and that the writing, as executed, expresses the contract as understood by both parties. Prince v. Friedman, 202 Ga. 136, 42 S.E.2d 434 (1947).
If a writing has been executed with a view of obtaining a particular object, and by mistake it has been so drawn as not to have the contemplated operations at law, chancery (now equity) will reform the instrument, so that it will fulfill the intention of the parties. Agreements, whether executed or executory, within or without the statute of frauds, whether for the conveyance of real or personal property, will be reformed by courts of equity, on the ground of mistake. Head v. Stephens, 215 Ga. 184, 109 S.E.2d 772 (1959), later appeal, 218 Ga. 191, 126 S.E.2d 623 (1962).
"An honest mistake of the law as to the effect of an instrument on the part of both contracting parties, when such mistake operates as a gross injustice to one, and gives an unconscientious advantage to the other, may be relieved in equity." Fidelity & Deposit Co. v. State Hwy. Dep't, 174 Ga. 443, 163 S.E. 174 (1932).
Simple mistake not ground for relief.
- The rule is well settled that a simple mistake by a party as to the legal effect of an agreement which one executes, or as to the legal result of an act which he performs, is no ground for either defensive or affirmative relief. Callan Court Co. v. Citizens & S. Nat'l Bank, 184 Ga. 87, 190 S.E. 831 (1937).
When a defendant has been served and a judgment is rendered against the defendant by fraud, accident, or mistake, without fault or negligence on the defendant's part, a petition in equity to set aside the judgment will lie. Dollar v. Fred W. Amend Co., 184 Ga. 432, 191 S.E. 696 (1937).
When, due to a mistake of fact unmixed with negligence, the condemnation proceeding for a public road was conducted throughout upon the theory that the road would be paved at approximately grade level, thus improving rather than damaging the remaining abutting property, and there was nothing to indicate that a fill of from 25 to 40 feet would be made in front of the remaining property which would damage it in the amount of approximately $20,000.00, a petition in equity, alleging these facts and alleging that the mistake prevented the owners from proving this consequential damage, alleged a cause of action to set aside the award and the judgment of condemnation and to recover the full damages. Whipple v. County of Houston, 214 Ga. 532, 105 S.E.2d 898 (1958).
Because the plaintiff had opportunity to examine a second written tolling agreement before the plaintiff executed it, and because there was no suggestion that the alleged mistake in the agreement was anything other than a unilateral mistake on the part of the plaintiff, the plaintiff's own negligence resulted in there being no basis for reforming the parties' second written tolling agreement. Frame v. Hunter, Maclean, Exley & Dunn, P.C., 236 Ga. App. 226, 511 S.E.2d 585 (1999).
Mistake of draftsman acting by direction of only one party as unilateral mistake.
- In some jurisdictions it is held that the mistake of a draftsman or scrivener, acting by direction of only one of the parties, is a unilateral mistake, and is one which will not warrant reformation. Such appears to be the rule in this state. Yablon v. Metropolitan Life Ins. Co., 200 Ga. 693, 38 S.E.2d 534 (1946).
Plea of the defendant to action on note given by the defendant to the former partner on dissolution of the partnership, alleging mutual mistake in calculating the earnings of the business, failed to allege a mistake as contemplated by law, and the court did not err in dismissing the plea and in directing the verdict for the plaintiff. Hargrove v. Bledsoe, 78 Ga. App. 107, 50 S.E.2d 223 (1948).
Wrong property foreclosed upon.
- Because a mutual mistake of law was not a valid reason to nullify the parties' choice of Delaware law in order to uphold a right of first refusal, the parties' settlement agreement was not subject to reformation due to an alleged mutual mistake. Thus, under Delaware law, the right was properly declared invalid under the rule against perpetuities. CS-Lakeview at Gwinnett, Inc. v. Simon Prop. Group, Inc., 283 Ga. 426, 659 S.E.2d 359 (2008).
Trial court properly reformed security deed and declared that suing lender had first priority over certain tract of land since there was no doubt that parties intended for the tract to have been subject to the security deed alone; trial court also properly directed verdict in favor of suing lender as to its claim for rescission and cancellation of the deed it obtained when it mistakenly foreclosed on the wrong tract, as such relief was the proper remedy. DeGolyer v. Green Tree Servicing, LLC, 291 Ga. App. 444, 662 S.E.2d 141 (2008).
Issue of fact in loan documents as to parties' mutual mistake.
- In a lender's suit for reformation of a security deed to reflect that a different parcel owned by the borrower was the collateral, rather than the parcel described in the deed, the trial court erred in granting summary judgment for the borrower because inconsistencies in the loan documents raised an issue of fact as to whether there was a mistake. JPMorgan Chase Bank v. Cronan, 355 Ga. App. 556, 845 S.E.2d 298 (2020).
No specific mutual mistake alleged.- Plaintiff's claim for reformation of a settlement agreement failed since the claim did not allege fraud by the defendants and did not identify any specific mutual mistake. Rohrig Invs., LP v. Knuckle P'ship, LLLP (In re Rohrig Invs., LP), 584 Bankr. 382 (Bankr. N.D. Ga. 2018).
Reformation of a bond was warranted based on mutual mistake.- Reformation of a bond was warranted based on mutual mistake since it was clear that a bank of which a bankruptcy debtor was the parent company was intended to be a named insured under the bond which named only the debtor as an insured; the bank was a named insured on a prior bond which the current bond was intended to replace, the bank was a named insured on the bond application, and the bank paid the bond premium. Lubin v. Cincinnati Ins. Co., F. Supp. 2d (N.D. Ga. Dec. 17, 2010), aff'd, 677 F.3d 1039 (11th Cir. 2012).
Summary judgment improper if questions of fact remained regarding whether quitclaim deed was contrary to parties' agreement.
- Trial court erred in granting a son's motion for summary judgment as to a parent's counterclaim seeking to eject the son from a home and to have a quitclaim deed rescinded or reformed because material questions of fact remained regarding whether the terms of the quitclaim deed were, by mutual mistake, contrary to the agreement of the parties; the parent's deposition testimony could reasonably be construed to signify that the parent expressed the parent's willingness to convey the property only if the parent retained a life estate and that the son accepted the conveyance subject to that condition. Hall v. Hall, 303 Ga. App. 434, 693 S.E.2d 624 (2010).
Ignorance of Fact
Ignorance of fact will not justify the recission of a contract. Prince v. Friedman, 202 Ga. 136, 42 S.E.2d 434 (1947).
Reasonable Diligence
Reasonable diligence of complainant required.
- Equity will relieve against mutual mistake, but only at the instance of a complainant who moves with reasonable diligence. What is a reasonable time must necessarily depend upon the peculiar facts and environments of the particular case. Parker v. Fisher, 207 Ga. 3, 59 S.E.2d 715 (1950).
Equity will grant no relief to one who by the exercise of ordinary diligence, could have prevented the injury complained of. Prince v. Friedman, 202 Ga. 136, 42 S.E.2d 434 (1947); Barham v. United States, 715 F. Supp. 1091 (M.D. Ga. 1989).
Failure of insured to read policy insufficient as proof of lack of ordinary diligence.
- A mere failure of an insured to read the insured's policy of insurance does not amount to such laches as will debar the insured from having such policy reformed for mistake therein. A policy of insurance is issued by the insurer and signed by the insurer or the insurer's agent. It is not contemplated that the insured shall sign it. In the insurer's promise to deliver an accurate policy, according to the insurer's oral agreement with the insured, the insured has a just expectation that there will be no designed variance. Georgia Farm Bureau Mut. Ins. Co. v. Wall, 242 Ga. 176, 249 S.E.2d 588 (1978).
Pleading and Practice
Grounds of mistake must be fully alleged.
- When a defendant, in a court of law, seeks to avoid the defendant's contract on the ground of mistake, the defendant must, by the defendant's pleadings, allege the grounds of the mistake, as fully as the defendant is required to do in a court of equity to entitle the defendant to relief. Hargrove v. Bledsoe, 78 Ga. App. 107, 50 S.E.2d 223 (1948).
Rules of pleading in this state require that allegations of mistake should be set forth with considerable definiteness and certainty, and that such general allegations as that certain matters were left out of or included in the contract as written "by mutual mistake of the parties" are not sufficient. Wheeler v. Poole, 204 Ga. 477, 50 S.E.2d 326 (1948).
Evidence of mistake must be clear, unequivocal and decisive.
- To authorize a verdict reforming a deed upon the ground of mutual mistake, the evidence, like the petition, should at least by inference show the particular mistake and illustrate how the mistake occurred; and the evidence must be clear, unequivocal, and decisive as to the mistake. Helton v. Shellnut, 186 Ga. 185, 197 S.E. 287 (1938).
Jury charge on evidential standard.
- Where the court did charge in language identical to that of this section, it is not subject to the criticism that it erred in its charge to the jury that they must decide the question of mistake by a preponderance of the testimony, whereas the law provides that the evidence must be clear, unequivocal, and decisive as to the mistake. Fidelity & Deposit Co. v. State Hwy. Dep't, 174 Ga. 443, 163 S.E. 174 (1932).
Preponderance of evidence is not correct standard.
- It was error for the court to instruct the jury that the party seeking reformation of the description in a deed could establish the party's right thereto by a preponderance of the evidence only. Carroll v. Craig, 214 Ga. 257, 104 S.E.2d 215 (1958).
Evidence has to be clear, unequivocal and decisive.- In a diversity based suit in equity to set aside or deny res judicata effect to a prior state court judgment on the grounds of fraud and mutual mistake, the plaintiffs had to prove their claims by something more than a mere preponderance of the evidence. The evidence had to preponderate in the plaintiffs' favor, but it also had to be of "clear, unequivocal, and decisive" quality. Ahrens v. Katz, 595 F. Supp. 1108 (N.D. Ga. 1984).
Insufficient evidence of legal mistake.
- In an action seeking cancellation of a warranty deed to a trustee, the beneficiary's testimony that the beneficiary could not remember the execution of the deed did not demand a finding that the deed should be cancelled on the ground of legal mistake. Ivey v. Ivey, 266 Ga. 143, 465 S.E.2d 434 (1996).
Evidence failed to show mistake of present or past fact.- Court would not construe an agreement and a deed together as creating a fee simple subject to a condition subsequent because a month-long gap between the execution of the agreement and the deed was too great of a gap in time to deem the documents as being executed contemporaneously. Nor would the court reform the documents to do so as the creditor failed to demonstrate a mistake of present or past fact relievable in equity, either by rescission or reformation. Kelley v. McCormack (In re Mitchell), 548 Bankr. 862 (Bankr. M.D. Ga. 2016).
Parol evidence.
- Before decreeing reformation, a court requires that the parol evidence of a mistake and of an alleged modification of a contract must be most clear and convincing. Georgia Farm Bureau Mut. Ins. Co. v. Wall, 242 Ga. 176, 249 S.E.2d 588 (1978).
In a suit for reformation of contract based upon alleged mutual mistake, the parol evidence rule does not bar introduction of testimony as to the oral agreement reached by the parties which the writing was intended to reflect. Georgia Farm Bureau Mut. Ins. Co. v. Wall, 242 Ga. 176, 249 S.E.2d 588 (1978).
Parol evidence can be offered to prove mistake. Vann v. Williams, 165 Ga. App. 457, 299 S.E.2d 908 (1983).
Creation of true writing to prevent unconscionable advantage.
- When petition alleges that parties to a deed orally agreed that the consideration was to be $850.00 cash for the plaintiff's equity and that the defendants were to assume and pay certain loans on the property, and that, due to a mutual mistake of law as to the effect of a recital of a nominal consideration in a deed, the deed fails to state the true consideration agreed upon by the parties, the fact that the agreement is not in writing will not bar a recovery, since what is sought to be enforced is not an oral agreement barred by the statute of frauds, but to reduce to writing the true agreement between the parties to prevent an unconscionable advantage to one of the parties to a contract. Head v. Stephens, 215 Ga. 184, 109 S.E.2d 772 (1959), later appeal, 218 Ga. 191, 126 S.E.2d 623 (1962).
A docketing error made in the clerk's office amounts to an accident or mistake relievable in equity so far as the defendant is concerned, provided the failure to answer is attributable thereto, without fault or negligence on its part. Dollar v. Fred W. Amend Co., 184 Ga. 432, 191 S.E. 696 (1937).
A mere mistake in judgment or opinion as to the value of property does not authorize interference by the courts. Hargrove v. Bledsoe, 78 Ga. App. 107, 50 S.E.2d 223 (1948).
RESEARCH REFERENCES
Am. Jur. 2d.
- 27 Am. Jur. 2d, Equity, §§ 29, 30.
C.J.S.- 30 C.J.S., Equity, § 44 et seq.
ALR.
- Relief from contract of sale because of mistake as to amount of commodity which it calls for, 31 A.L.R. 384.
Recovery back of public money paid by mistake, 63 A.L.R. 1346.
Misrepresentation or mistake as to whether corporate stock is assessable as one of law or of fact, 65 A.L.R. 1256.
Mistake as to law of another state or country as one of law or of fact, 73 A.L.R. 1260.
Good faith in receiving payment made under mistake of fact as affecting its recovery, 87 A.L.R. 649.
Conscious ignorance of fact, as distinguished from mistake of fact, as ground for reformation of contract, 137 A.L.R. 908.
Mistake by one party to contract as to identity of other party who acted in good faith, 147 A.L.R. 1171.
Right to refund or recovery back of taxes paid on property not owned by taxpayer, 165 A.L.R. 879.
Reformation of property insurance policy to correctly identify the person or interest insured, 25 A.L.R.2d 580.
What constitutes change of position by payee so as to preclude recovery of payment made under mistake, 40 A.L.R.2d 997.
Compensation for improvements made or placed on premises of another by mistake, 57 A.L.R.2d 263.
Right of tenant to recover rentals previously paid to one mistakenly believed to be owner of property, 57 A.L.R.2d 350.
Recovery back by employer of compensation paid to employee as result of mistake or the employee's fraud, 88 A.L.R.2d 1437.
What constitutes mistake in the identity of one of the parties to warrant annulment of marriage, 50 A.L.R.3d 1295.