Beynon Building Corp. v. National Guardian Life Insurance Co.

Brief Fact Summary.

Beynon Building Corp. (plaintiff) sued National Guardian Life Insurance Co. (defendant) asking to be released from their mortgage.

Synopsis of Rule of Law.

When asserting a defense of mutual mistake, the defendant must introduced clear and convincing evidence of the parties’ real intention and then the court can reform the contract to reflect the actual intention of the parties.

Facts.

The plaintiff entered into a mortgage with a third party and the mortgage was ultimately assigned to the defendant. The plaintiff alleged that in 1965 they received a new installment schedule and they would pay $649 in installments over a period of 180 months as oppose to 200 as the note stated, but the plaintiff never confirmed this with the defendant. After 180 months, the plaintiffs asked to be released from the mortgage but the defendant realized their mistake that the payments should have been for $694 instead of 649$ and the mortgage had not been paid off. They refused to release the plaintiff from the mortgage. The defendant argued mutual mistake and the plaintiff countered contending the defendant knew of the mistake in 1965 based on an installment update sent by the plaintiff and that their claims were therefore barred by the 10-year statute of limitations. Defendant argued they only discovered the mistake after the last payment was made.

Issue.

Whether when asserting a defense of mutual mistake, the defendant must introduced clear and convincing evidence of the parties’ real intention and then the court can reform the contract to reflect the actual intention of the parties.

Held.

Yes. When asserting a defense of mutual mistake, the defendant must introduced clear and convincing evidence of the parties’ real intention and then the court can reform the contract to reflect the actual intention of the parties.

Discussion.

Generally, under contract law, the best tool that reflects the parties true understanding in a contract is a writing. Thus, when asserting a defense of mutual mistake, the burden of proof is clear and convincing evidence. Also, the party asserting the defense of mistake must show that the mistake was mutual. Here, there was clearly a mistake because the supposed 180 moth installment schedule would not allow the mortgage to be fully paid off. Thus, the court my reform the contract and change the 180-month payment schedule to 200 months to allow the plaintiff to fully pay off the mortgage. Furthermore, the claims are not barred by the statute of limitations as a matter of equity because the defendant had no knowledge of the mistake despite the fact that generally the statute of limitations begins at the time the parties execute their contract.