Mailliard, T. v. Edgewood Development

J-S03002-22
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
TIMOTHY J. MAILLIARD AND : IN THE SUPERIOR COURT OF
SABRINA L. MAILLIARD : PENNSYLVANIA
:
:
v. :
:
:
EDGEWOOD DEVELOPMENT, LLC :
: No. 833 WDA 2021
Appellant :
Appeal from the Order Entered June 17, 2021
In the Court of Common Pleas of Crawford County Civil Division at No(s):
No. AD 2016-722
BEFORE: LAZARUS, J., SULLIVAN, J., and PELLEGRINI, J.*
DISSENTING MEMORANDUM BY PELLEGRINI, J.: FILED: MAY 26, 2022
I respectfully dissent from the majority’s holding because I would find
that the record supports the trial court’s conclusion that a mutual mistake
justified the reformation of the quit claim deed that Edgewood Development,
LLC purchased from the Mailliards.
I.
A.
The following facts are undisputed. The Mailliards initially entered into
a non-written land installment contract with a third party for $35,000 as to a
16-acre piece of property identified herein as “Parcel 1.” When the third party
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-S03002-22
defaulted, a writ of execution was entered, authorizing a sheriff’s sale of an
interest in a land contract as to Parcel 1. However, at the sheriff’s sale on
June 20, 2016, an erroneous metes and bound description in the sheriff’s deed
included both Parcel 1 and an additional 54-acre parcel of land identified
herein as “Parcel 2.”
Edgewood successfully bid $42,000 at the sheriff’s sale, ostensibly
believing that this was the accepted price for both properties.1 However, as
a matter of law, a valid conveyance of Parcel 2 could not have taken place at
the sheriff’s sale because the property was not subject to the writ of execution.
See CSS Corp. v. Sheriff of Chester Cty., 507 A.2d 870, 872 (Pa. Super.
____________________________________________
1 The sheriff’s mandate only to sell Parcel 1 remained intact despite the
incorrect property description in the sheriff’s deed. The Mailliards had initially
acquired Parcel 1 and Parcel 2 simultaneously through a quit claim deed
following the death of a relative. Subsequently, the Mailliards formed a non-
written contract with a third party, Carl Sterling, agreeing to sell him Parcel
1. After Sterling’s default, the Mailliards foreclosed, but erroneously described
the subject property in terms that included both Parcel 1 and Parcel 2. Sterling
passed away, and a writ of execution was entered as to his interest in Parcel
1. A sheriff’s deed was entered erroneously describing Parcel 1 and Parcel 2,
but still clarifying that the sheriff’s sale was “under and by virtue of a writ of
Execution . . . at the suit of [the Mailliards] against: [Sterling].” See Answer
and New Matter to First Amended Complaint, 3/24/2017, Exhibit 2. Since
Sterling had no interest in Parcel 2, and the foreclosure action did not concern
Parcel 2, that property could not be subject to the sheriff’s sale.
-2-
J-S03002-22
1986) (“If the debtor had no rights in the property at the time of the sheriff’s
sale . . . no title passes to the purchaser.”).2
Edgewood asked the Mailliards to provide it with a quit claim deed as to
the property it had acquired at the sheriff’s sale. Under the impression that
only Parcel 1 had been conveyed, the Mailliards acquiesced to Edgewood’s
request for a quit claim deed which, in turn, reiterated the erroneous property
description contained in the sheriff’s deed. In exchange for this quit claim
deed, the Mailliards were paid $1.00.
B.
The Mailliards first realized the problem with the sheriff’s sale and the
quit claim deed once they noticed on September 5, 2016, that no tax bill had
been issued as to Parcel 2. They then contacted Edgewood about the incorrect
inclusion of Parcel 2 in the sheriff’s sale, and Edgewood responded by offering
to sell back Parcels 1 and 2 (all 70 acres) for $210,000.00.
The Mailliards declined the offer and instead filed suit against Edgewood,
asserting four separate claims for relief based on unjust enrichment, recission,
fraud and reformation. The Mailliards stated in their unjust enrichment count
that Edgewood should not be permitted to acquire Parcel 2 for $1.00 via quit
claim deed because it would be an inequitable result. They also claimed in
____________________________________________
2 Edgewood has rightfully conceded that “the general law does support the
trial court’s position that the Sheriff’s deed conveyed only Parcel [1] as a
matter of law.” Appellant’s Brief, at 9.
-3-
J-S03002-22
relevant part that the sheriff’s deed and quit claim deed purporting to convey
Parcel 2 should be reformed to exclude the description of that property and
thereby conform to the writ of execution predicated on the underlying
foreclosure matter regarding only Parcel 1.
The Mailliards moved for summary judgment and the trial court ruled in
their favor as to the unjust enrichment and reformation counts. The trial court
ordered that the subject deeds would be corrected by amending their property
descriptions so as to encompass only Parcel 1. Edgewood appealed,
contending that the sheriff’s deed and the quit claim deed should remain intact
because Edgewood had reasonably acted in reliance on the Mailliards’ actions
and misunderstandings about the property subject to the sheriff’s sale.
The majority now vacates the trial court’s grant of summary judgment
as to the Mailliards’ reformation count after analyzing the claim in the context
of a unilateral mistake, explaining that “it is undisputed that the mistake –
incorrectly listing Parcel 2 in the sheriff’s and quit claim deeds – was one-sided
and, admittedly, made by the Mailliards.” In doing so, however, I believe the
majority focuses too narrowly on the underlying cause of the parties’
respective mistakes rather than what the parties understood and intended
when the quit claim deed was executed, resulting in a mutual mistake.
II.
“A mutual mistake occurs when the written instrument fails to set forth
the true agreement of the parties.” Voracek v. Crown Castle USA, Inc.,
-4-
J-S03002-22
907 A.2d 1105, 1107-08 (Pa. Super. 2006). A mutual mistake of fact “serves
as a defense to the formation of a contract and occurs when the parties to the
contract have an erroneous belief as to a basic assumption of the contract at
the time of formation which will have a material effect on the agreed exchange
as to either party.” Murray v. Willistown Township, 169 A.3d 84, 90 (Pa.
Super. 2017) (quoting Voracek, 907 A.2d at 1107-08).
A contract may be reformed or rescinded based on a mutual mistake if
“(1) the mistake relates to an essential fact which formed the inducement to
[the contract], and (2) the parties [can be] placed in their former position with
reference to the subject-matter of [the contract].” Id. (quoting Voracek, 907
A.2d at 1107-08).
In addition, “the mistake must not be one as to which the party seeking
relief bears the risk.” Step Plan Servs., Inc. v. Koresko, 12 A.3d 401, 410
(Pa. Super. 2010) (emphasis & citation omitted).3 A party seeking
reformation or recission based on a mutual mistake must present clear and
____________________________________________
3 A party may bear the risk of a mistake when the risk is allocated by
agreement of the parties, the party is aware of having limited knowledge of
fact to which the mistake relates, or the risk is allocated to the party by the
court where it is reasonable under the circumstances to do so. See Hart v.
Arnold, 884 A.2d at 316 (Pa. Super. 2005) (citing Restatement (Second) of
Contracts § 154 (1981)). A party may be barred from avoiding a contract “if
the mistake was the result of his failure to act in good faith and in accordance
with fair dealing.” Id.
-5-
J-S03002-22
convincing evidence of the mistake. See Smith v. Thomas Jefferson Univ.
Hosp., 621 A.2d 1030, 1032 (Pa. Super. 1993).
Here, the inclusion of Parcel 2 in the sheriff’s sale was a legal nullity
because the sheriff lacked authority to sell that property. The transaction we
must evaluate for a mutual mistake is Edgewood’s purchase of a quit claim
deed for $1.00, as this is the transaction that effectively conveyed Parcel 2 to
Edgewood.
At the time the quit claim deed was entered, the Mailliards and
Edgewood both wrongly assumed that the sheriff’s sale was completed based
on a true and accurate property description relating to the underlying
foreclosure action. The Mailliards incorrectly thought that the sheriff’s deed
only described Parcel 1. Edgewood incorrectly thought that the underlying
foreclosure action concerned Parcel 1 and Parcel 2. The trial court, therefore,
correctly found, based on the uncontradicted evidence, that the execution of
the quit claim deed was based on the parties’ mutual mistake, stating:
The Mailliards’ and Edgewood[’s] intention, as unambiguously
stated in the Quit Claim Deed, was to supplement [the Sheriff’s
Deed] to convey any remaining interest in the property as the
sheriff’s sale was on an interest in a land contract.” In setting
forth the description of both Parcels 1 and 2, the Quit Claim Deed
thus did not conform to the parties’ stated intentions.
Trial Court Opinion, 6/17/2021, at 5 (footnote omitted).4
____________________________________________
4The trial court cited Murray v. Willistown Township, 169 A.3d 84, 90 (Pa.
Super. 2017), for the proposition that “[r]eformation is an available remedy
(Footnote Continued Next Page)
-6-
J-S03002-22
Accordingly, the record establishes that Edgewood paid the Mailliards
$1.00 to ratify a sheriff’s sale that had, unbeknownst to either side, exceeded
the mandate of the writ of execution. If both parties had known at the outset
that the invalid conveyance of Parcel 2 had taken place at the sheriff’s sale,
then neither side would have transacted for the quit claim deed. Obviously,
the Mailliards would not have intentionally given away Parcel 2 for nominal
consideration, and had it known of the defects in the sheriff’s sale, Edgewood
no doubt would have declined to engage in bad-faith or fraud by then inducing
the Mailliards to sell Parcel 2 for $1.00.
Necessarily, a mutual mistake was established because a fundamental
misunderstanding as to a basic assumption of the contract at the time of
formation would have had a material effect on the agreed exchange as to
either party. Reformation was proper because (1) the mutual mistake related
to an essential fact which formed the inducement to the quit claim deed, and
(2) a reformation of the property descriptions in the subject deeds can place
the parties in their former position with reference to the subject-matter of the
____________________________________________
when the deed fails to conform to the parties’ intentions.” The Murray
decision involved an application of the principles of mutual mistake. See
generally Murray, 169 A.3d at 90. No finding was made by the trial court
as to alleged fraud on the part of Edgewood because it is an element of
unilateral, but not mutual, mistake. See id.
-7-
J-S03002-22
contract – the foreclosed land that was properly subject to the sheriff’s sale.5
Accordingly, because I would find that the trial court’s order is supported by
undisputed evidence establishing a mutual mistake warranting reformation, I
must respectfully dissent.
____________________________________________
5 As Edgewood only paid nominal consideration ($1.00) for Parcel 2, and it
had not actually purchased Parcel 2 in the sheriff’s sale, reforming the deeds
in this manner would place Edgewood in its former position prior to the
transaction for the quit-claim deed.
-8-