Ann McGruder v. Curators of the University of Missouri ( 2021 )

IN THE MISSOURI COURT OF APPEALS
WESTERN DISTRICT
ANN McGRUDER, )
Appellant, )
)
v. ) WD83719
)
CURATORS OF THE ) FILED: January 19, 2021
UNIVERSITY OF MISSOURI, )
Respondent. )
Appeal from the Circuit Court of Boone County
The Honorable Kevin Crane, Judge
Before Division One: Alok Ahuja, P.J., and
Thomas H. Newton and Thomas N. Chapman, JJ.
Ann McGruder sued the Curators of the University of Missouri (the
“University”) in the Circuit Court of Boone County, alleging sex discrimination and
retaliation in employment. The circuit court entered judgment on the pleadings in
favor of the University, finding that McGruder had released it from liability.
McGruder appeals. She argues that the pleadings presented disputed factual issues
concerning whether the release on which the University relied was the product of a
mutual mistake by the contracting parties. We agree that the circuit court should
not have resolved McGruder’s mutual mistake claim based solely on the pleadings.
We accordingly reverse the circuit court’s judgment, and remand for further
proceedings.
Factual Background
Because this appeal involves the grant of judgment on the pleadings, we
presume that the following facts alleged in the pleadings are true for purposes of
our review. See State Conference of Nat’l Ass’n for Advancement of Colored People v.
State, 563 S.W.3d 138, 142 n.2 (Mo. App. W.D. 2018).
From May 2001 through January 2018, McGruder was employed at the
University of Missouri-Columbia. McGruder began working in the School of
Medicine in August 2016, as the Associate Director of Administration in the
Department of Surgery at the Ellis Fischel Cancer Center. While in this position,
McGruder alleges she was subjected to sex discrimination and retaliation.
When she was terminated as part of a “departmental reorganization,” the
University offered McGruder the opportunity to participate in its Layoff and
Transition Assistance program. Participating in this program would have provided
McGruder with severance pay and continued access to certain employee benefits.
To participate, McGruder would have been required to release any employment-
related claims against the University, including claims under the Missouri Human
Rights Act. Because she believed she had been the victim of sex discrimination and
retaliation in her employment with the University, McGruder refused to execute the
release and therefore did not participate in the Layoff and Transition Assistance
program.
McGruder filed a charge of discrimination with the Missouri Human Rights
Commission on July 2, 2018, in which she alleged that she had been discriminated
against in her employment with the University on the basis of her age and sex, and
that she had also been the victim of unlawful retaliation.
In January 2018, McGruder accepted a position with the Alfred Friendly
Foundation, a not-for-profit corporation physically located within the University of
Missouri-Columbia’s School of Journalism. The Foundation is an independent legal
entity, and is neither owned nor controlled by the University.
Some of the Foundation’s staff were joint employees of the Foundation and of
the University, with part of their salary being paid by each institution. McGruder
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worked exclusively for the Foundation, however, and was paid exclusively by the
Foundation. The Foundation provided McGruder with the same level of employee
benefits she had received while employed by the University, and it recognized her
accumulated annual leave from her prior University employment. The Foundation
outsourced its payroll and employee benefits administration to the University,
much like a third-party human resources vendor. McGruder thus received her
paychecks and benefits through the University system, but her salary and benefits
were paid exclusively from the Foundation’s budget.
In the Fall of 2018, McGruder met with the Foundation’s Chief Executive
Officer, Randy Smith, and with several members of the Foundation’s Board. Smith
and the Board members informed McGruder that the Foundation was experiencing
financial difficulties. They told McGruder that, if the Foundation ceased its
operations, McGruder would likely be laid off, since she was not a joint University
employee, but was paid and employed exclusively by the Foundation. Smith and
the Board members told McGruder that if her employment was terminated, the
Foundation would pay her severance benefits similar to what the University paid
its employees, and that they would calculate her severance based on McGruder’s
tenure both with the Foundation and with the University. McGruder was told that
the Foundation was setting aside $40,000 out of its budget to pay her severance
benefits.
McGruder was laid off by the Foundation in March 2019. Smith told
McGruder that she would receive her full severance benefits in exchange for her
release of the Foundation from any claims she might have. Smith contacted human
resources personnel at the University and requested a standard severance contract
that he could use for McGruder. He received a document entitled “University of
Missouri Layoff and Transition Assistance Agreement.” This was the same
document which the University had requested that McGruder sign in 2018, and
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which she had refused to execute. The standard-form agreement was written as if
McGruder’s employment with the University were being terminated; it made no
reference to the Foundation, or to the fact that McGruder was a full-time
Foundation employee at the time she executed the agreement. The severance
agreement stated that the University would provide McGruder with severance pay
and benefits, and that in exchange McGruder would release any employment-
related claims she had against the University, including any claims under the
Missouri Human Rights Act.
McGruder signed the severance agreement on March 1, 2019.
In April 2019, the Missouri Human Rights Commission issued McGruder a
right to sue letter concerning her discrimination and retaliation claims against the
University. McGruder sued the University for sex discrimination and retaliation in
the Circuit Court of Boone County on July 19, 2019.
In addition to answering McGruder’s petition, the University filed a
counterclaim, seeking specific performance of the severance agreement which
McGruder had signed on March 1, 2019. The University contended that the
severance agreement had the effect of releasing it from McGruder’s claims of sex
discrimination and retaliation.
On November 6, 2019, the University filed a Motion for Judgment on the
Pleadings on its counterclaim, alleging that it was entitled to judgment as a matter
of law because the plain language of the severance agreement released the
University from liability to McGruder for any employment-related claims.
In response to the University’s Motion for Judgment on the Pleadings, and
with leave of court, McGruder filed an Amended Reply to the University’s
counterclaim on March 6, 2020. In her Amended Reply, McGruder admitted that
she had executed the severance agreement in March 2019. The Amended Reply
alleged, however, that when she signed the severance agreement it was McGruder’s
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understanding, and the understanding of the Foundation’s Chief Executive Officer
Randy Smith, that the severance agreement was entered only between McGruder
and the Foundation; that the Foundation was the only entity which would be paying
severance and benefits to McGruder; that the Foundation was the only entity which
would be released of liability by the severance agreement; and that the severance
agreement had no effect on any claims McGruder may have against the University
for her prior employment with the University. McGruder alleged that the
University was not a beneficiary of the release contained in the severance
agreement and was not entitled to enforce that release, based on the affirmative
defenses of mutual mistake, lack of standing, and unilateral mistake coupled with
fraud and unclean hands on the part of the University.1
On March 16, 2020, the circuit court held a hearing, and sustained the
University’s Motion for Judgment on the Pleadings. The court dismissed
McGruder’s claims of sex discrimination and retaliation.
McGruder appeals.
Standard of Review
A circuit court’s ruling on a motion for judgment on the pleadings is reviewed
de novo. Woods v. Mo. Dep’t of Corr., 595 S.W.3d 504, 505 (Mo. 2020). “The position
of a party moving for judgment on the pleadings is like that of a movant on a motion
to dismiss; i.e., assuming the pleaded facts to be true, the facts are, nevertheless
insufficient as a matter of law.” Barrett v. Greitens, 542 S.W.3d 370, 376 (Mo. App.
W.D. 2017) (citation omitted). “A motion for judgment on the pleadings should be
1 Along with her Amended Reply, McGruder attempted to file a Third-Party
Petition against the Foundation, in which she sought reformation of the severance
agreement based on a mutual mistake between herself and the Foundation, or
alternatively, rescission based on a unilateral mistake. McGruder did not obtain leave of
court to file her Third-Party Petition, and she acknowledges that she did not effect service
on the Foundation prior to the circuit court’s entry of final judgment.
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sustained if, from the face of the pleadings, the moving party is entitled to judgment
as a matter of law.” Woods, 595 S.W.3d at 505 (citation and internal quotation
marks omitted). “Before a motion for judgment on the pleadings may be granted,
all averments in all pleadings must show no material issue of fact exists; that all
that exists is a question of law.” RGB2, Inc. v. Chestnut Plaza, Inc., 103 S.W.3d
420, 424 (Mo. App. S.D. 2003) (citation omitted).
Discussion
McGruder argues that judgment on the pleadings was improper because she
properly pleaded an affirmative defense of mutual mistake. McGruder’s affirmative
defense alleges that, to the extent the severance agreement purports to release
employment-related claims she may have against the University, that result was
not intended by McGruder or by the Foundation (whom she claims were the only
parties to the severance agreement). McGruder contends that her affirmative
defense created a material factual dispute concerning an issue which would bar
enforcement of the release.
A “[m]utual mistake exists when both parties have memorialized in writing
what neither actually intended.” Cardinal Partners, LLC v. Desco Inv. Co., 301
S.W.3d 104, 110 (Mo. App. E.D. 2010) (citation omitted). Though an “extraordinary
equitable remedy,” a party to a contract may be entitled to reformation where, due
to a mutual mistake, “the writing fails to accurately set forth the terms of the actual
agreement or fails to incorporate the true prior intentions of the parties.” Lunceford
v. Houghtlin, 170 S.W.3d 453, 464 (Mo. App. W.D. 2005) (“Lunceford I”) (quoting
Elton v. Davis, 123 S.W.3d 205, 212 (Mo. App. W.D. 2003)); see also RESTATEMENT
(SECOND) OF CONTRACTS § 155 (1981). Relief should be granted for a mutual
mistake where “a written instrument fails to express the intention the parties had
in making the contract that the instrument purports to contain . . . although the
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failure may have resulted from a mistake as to the legal meaning and operation of
the terms or language used in the writing.” Cardinal Partners, 301 S.W.3d at 110.
Whether a mutual mistake occurred is normally a question of fact. Husch &
Eppenberger, LLC v. Eisenberg, 213 S.W.3d 124, 134 (Mo. App. E.D. 2006); accord
Brown v. Mickelson, 220 S.W.3d 442, 448 (Mo. App. W.D. 2007). In determining
whether a mutual mistake occurred, a court may consider such factors as “the
wording of the contract as signed by the parties, the relationship of the parties, the
subject matter of the contract, the usages of the business, the circumstances
surrounding the execution of the contract, and its interpretation by the parties.”
Traweek v. Smith, 607 S.W.3d 779, 786 (Mo. App. W.D. 2020) (quoting Lunceford v.
Houghtlin, 326 S.W.3d 53, 64 (Mo. App. W.D. 2010) (“Lunceford II”)).
In showing “a valid prior agreement evidencing a meeting of the minds,”
“[t]he party . . . need not show agreement on any particular words or language but
must only show agreement to accomplish a particular objective.” Everhart v.
Westmoreland, 898 S.W.2d 634, 637 (Mo. App. W.D. 1995) (citations omitted). “In
order to show a mistake in an instrument, it is sufficient that the parties agreed to
accomplish a particular object by the instrument to be executed, and that the
instrument as executed is insufficient to effectuate their intention.” US Bank, N.A.
v. Smith, 470 S.W.3d 17, 25 (Mo. App. W.D. 2015) (citation and internal quotation
marks omitted). The mistake may be proved by circumstantial evidence, as well as
by statements and conduct of the parties that occurred after the making of the
written instrument. Lunceford II, 326 S.W.3d at 64, 67.
A contracting party may assert mutual mistake even if the language of the
written agreement is clear and unambiguous. Duenke v. Brummett, 801 S.W.2d
759, 765 (Mo. App. S.D. 1991) (“the remedy is not barred by the fact that the
instrument sought to be reformed is unambiguous”; collecting cases). The
University itself acknowledges that, while “[a] plain and unambiguous release will
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be enforced as written,” “a party to such a release may be able to avoid enforcement
by showing that the agreement was based on a mutual mistake.”
A contracting party may rely on extrinsic evidence to establish that a mutual
mistake occurred, notwithstanding the parol evidence rule, or the existence of a
merger or integration clause in the agreement. The rationale is that in the context
of a mutual mistake argument, “[p]arol or extrinsic evidence is not received for the
purpose of varying the contract of the parties” – which the parol evidence rule
prohibits – but is instead used “to show what their contract really was. The thing
being reformed is the writing, not the contract.” Duenke, 801 S.W.2d at 766; see
also CMI Food Serv., Inc. v. Hatridge Leasing, 890 S.W.2d 420, 422-23 (Mo. App.
W.D. 1995) (“a contract may be reformed if substantial evidence, including parol
evidence, establishes a scrivener's mistake – even if the contract is unambiguous”).
McGruder properly pleaded the affirmative defense of mutual mistake in her
Amended Reply to the University’s counterclaim. To adequately plead her
affirmative defense, McGruder was only required to provide “a short and plain
statement of the facts showing that [she] was entitled to the defense or avoidance.”
Rule 55.08. McGruder satisfied this pleading burden. She alleged that the
severance agreement was intended to memorialize an agreement which was solely
between her and the Foundation, in connection with the termination of her
employment with the Foundation. McGruder alleged that she and the Foundation’s
Chief Executive Officer both contemplated that severance benefits would be paid
solely by the Foundation, that McGruder would release claims only against the
Foundation, and that the agreement would have no effect on McGruder’s pending
discrimination and retaliation claims against the University. She also alleged that
the mistake arose because the Foundation’s Chief Executive Officer requested a
standard-form severance agreement from the University, but failed to modify that
form to reflect the agreement McGruder and the Foundation had actually reached.
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The fact that McGruder went forward with her sex discrimination suit against the
University after signing the release also supports her mistake claim. See Lunceford
II, 170 S.W.3d at 64, 67.2
McGruder’s allegations were sufficient to put in issue whether the written
severance agreement inaccurately memorialized the agreement she reached with
the Foundation, despite its clear language. This was sufficient to raise a “mutual
mistake” defense. See Lunceford II, 326 S.W.3d at 64-65 (finding sufficient evidence
of mutual mistake where settlement agreement between injured parties and insurer
was not intended to release the injured parties’ claims against the alleged
tortfeasors); Everhart, 898 S.W.2d at 638-39 (finding sufficient evidence of mutual
mistake where parties to settlement agreement did not intend that general release
would operate to extinguish liability of an additional alleged tortfeasor).
The University argues that McGruder failed to adequately plead a mutual
mistake claim because her “defense was not based on a mistake that allegedly was
shared by her and the University, the two parties to the plain, unambiguous
Transition Assistance Agreement. Instead, McGruder pleaded an alleged mistake
between her and the Foundation, which McGruder identifies as a ‘third party.’” The
University contends that, to be mutual, the mistake must be shared by “‘both
contracting parties,’” meaning “‘both parties to the instrument.’”
The University’s argument begs the question. It assumes that the parties to
the severance agreement were McGruder and the University. The University’s
argument is contrary to the fundamental premise underlying McGruder’s mutual
mistake claim: that the University is not a party to the relevant agreement, but
2 A fact-finder could also conclude that it would have been unusual for the
Foundation to insist that McGruder execute a severance agreement releasing claims
against a separate legal entity (but not claims against the Foundation itself), as a condition
for her to receive severance benefits from the Foundation.
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was mistakenly named in the writing which memorializes her agreement.
McGruder alleges that her agreement was with the Foundation, not the University.
McGruder seeks to vindicate the terms of her true agreement with the Foundation,
and to avoid the consequences flowing from the writing which imperfectly records
this agreement. According to the allegations of McGruder’s Amended Reply (which
we must assume to be true for purposes of this appeal), only her intent, and that of
the Foundation, are relevant to her “mutual mistake” claim. According to
McGruder’s allegations, the University’s intent is irrelevant, since it is a stranger to
the agreement, on whom neither McGruder nor the Foundation intended to confer
any benefit.
The University claims that Silver Dollar City, Inc. v. Kitsmiller Construction
Co., 931 S.W.2d 909 (Mo. App. S.D. 1996), holds that alleged mistakes concerning
the identity of a contracting party can only be addressed as a matter of unilateral
mistake. In Silver Dollar City, one of the contracting parties claimed that it had
only executed a contract because it understood that it was contracting with two
construction companies operating as a joint venture – even though only one of the
two construction companies actually signed the contract and intended to be bound.
Id. at 915. Thus, in Silver Dollar City, the contracting party alleged that it was
mistaken as to the party with which it was contracting.
Here, by contrast, McGruder does not contend that she was mistaken as to
the identity of the other contracting party. She alleges that she entered into a
severance agreement with the Foundation, in connection with the termination of
her employment with the Foundation. Rather than alleging a mistake as to the
identity of a contracting party, McGruder alleges a mutual mistake as to the
manner in which a contracting party’s identity was expressed in the writing she
executed. This is a fundamentally different claim from that presented in Silver
Dollar City. In addition, Silver Dollar City discussed the unilateral mistake
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doctrine because that was the doctrine invoked by one of the contracting parties in
that case. Nothing in the decision suggests that a claim that a writing incorrectly
names the true contracting parties can only be addressed as a matter of unilateral
mistake.
The University also relies on RESTATEMENT (SECOND) OF CONTRACTS § 153,
comment g, to argue that a mistake as to the identity of a contracting party can be
addressed only as an issue of unilateral mistake. But the University’s reliance on
§ 153, comment g, is misguided for much the same reason as its reliance on Silver
Dollar City. Like Silver Dollar City, § 153, comment g, of the RESTATEMENT
addresses “[m]istakes as to the identity of a party.” But again, McGruder does not
allege such a mistake; she instead alleges a mistake concerning the manner in
which a contracting party was identified in the written memorialization of the
agreement. The RESTATEMENT clearly distinguishes between mistakes as to
underlying facts (such as the issue addressed in § 153), and mistakes in the written
expression of the parties’ agreement (such as we have here). See Introductory Note
to ch. 6.
In addition, the comment on which the University relies itself states:
Mistakes as to the identity of a party have sometimes been
treated as distinct from other mistakes, but the modern trend is to
apply the rules applicable to other mistakes. Such a mistake is
therefore subject generally to the rules stated in this Chapter.
§ 153, comment g. And among “the rules stated in this Chapter” is § 155, which
provides:
Where a writing that evidences or embodies an agreement in
whole or in part fails to express the agreement because of a mistake of
both parties as to the contents or effect of the writing, the court may at
the request of a party reform the writing to express the agreement,
except to the extent that rights of third parties such as good faith
purchasers for value will be unfairly affected.
Comment a to § 155 explains:
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The province of reformation is to make a writing express the
agreement that the parties intended it should. Under the rule stated
in this Section, reformation is available when the parties, having
reached an agreement and having then attempted to reduce it to
writing, fail to express it correctly in the writing. Their mistake is one
as to expression – one that relates to the contents or effect of the
writing that is intended to express their agreement – and the
appropriate remedy is reformation of that writing properly to reflect
their agreement.
Nothing in the RESTATEMENT forecloses the mutual mistake claim which McGruder
makes here.
We recognize that the entity which McGruder claims is the other party to the
severance agreement – the Foundation – is not a party to this action. We
specifically held in Lunceford II, however, that the presence of the other party to a
disputed release was not required. Instead, we explained that the injured party
could raise a mutual mistake claim “as a part of their defense of [the defendant’s]
affirmative defense of release.” 326 S.W.3d at 60 n.4. That is exactly what
McGruder has done here: she raised the mutual mistake issue as a defense against
the University’s claims that McGruder has released it from liability. While
McGruder may seek leave of the circuit court on remand to implead the Foundation,
such impleader is not required.3
Because McGruder’s pleadings raised a genuine factual dispute concerning
the applicability of the release to her claims against the University, the circuit court
erred in granting the University judgment on the pleadings based on that release.
3 Notably, in the circuit court, the University resisted McGruder’s attempt to
add the Foundation as a party, arguing that McGruder was not asserting a “proper third
party claim[ ],” because her “reformation claim is a defense to [the University’s]
enforcement of the agreement. It’s not an affirmative claim against [the] Foundation.”
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Conclusion
We reverse the circuit court’s grant of judgment on the pleadings to the
University, and remand the case for further proceedings consistent with this
opinion.
____________________________________
Alok Ahuja, Judge
All concur.
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