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Larson v. Burton Construction, Inc.

Supreme Court of Wyoming

July 6, 2018

JUSTIN JAMES LARSON, Petitioner,
v.
BURTON CONSTRUCTION, INC., a Wyoming corporation, Respondent.

          Original Proceeding Petition for Writ of Review District Court of Johnson County The Honorable William J. Edelman, Judge

          Representing Petitioner: Christopher M. Wages, The Wages Group, LLC, Buffalo, Wyoming.

          Representing Respondent: Anthony T. Wendtland, Wendtland & Wendtland, LLP., Sheridan, Wyoming.

          Before, DAVIS, C.J., and BURKE [*] , FOX, KAUTZ, and BOOMGAARDEN, JJ.

          FOX, Justice.

         [¶1] After a bench trial, the circuit court cancelled the mobile home sale between Respondent, Burton Construction, Inc., and Petitioner, Justin James Larson, finding that the parties made a mutual mistake in drafting their contract. On appeal, the district court reversed the circuit court's decision and found that Mr. Larson breached the contract. We granted Mr. Larson's petition for a writ of review. We affirm in part, reverse in part, and remand for further proceedings.

         ISSUES

         [¶2] We reframe the parties' issues as follows:

         1. Did the district court erroneously overturn the circuit court's application of the doctrine of mutual mistake?

         2. Did the district court err when it found that Mr. Larson breached the contract before Burton Construction, Inc.'s performance was due by making a clearly erroneous finding of fact, and as a matter of law?

         FACTS

         [¶3] In December 2015, Ken Burton, on behalf of Burton Construction, Inc., [1] and Mr. Larson entered into a written contract (the Contract) in which Mr. Larson agreed to purchase from Burton a 2015 Skyline mobile home for $43, 000. The Contract was a "form" contract, consisting of boilerplate provisions and blank lines on which parties could enter information. Mr. Larson's agent completed the form by hand, obtained Mr. Larson's signature, and delivered the document to Burton with $500 in earnest money. Burton went through the Contract carefully, made a few minor changes, and countersigned it.

         [¶4] Although the Skyline mobile home was new and the parties intended to convey a new mobile home, the form was designed for the sale of a used mobile home. Thus, the Contract required Burton, as the "Owner" of the mobile home, to execute and deliver a Wyoming title at closing (handwritten portions in italics):

6. At closing, Owner shall execute and deliver a Wyoming title and Bill of Sale free and clear of all liens and encumbrances except: all will be free and clear.
7. Title shall be conveyed to the following named purchaser(s): Justin James Larson as Sole Owner. Title and the Bill of Sale shall be executed but escrowed if sold under contract.
8. Title shall be merchantable in the Seller, except as stated in this paragraph. Subject to payment or tender as above provided and compliance with other terms and conditions hereunder by Purchaser, the Seller shall execute and deliver a good and sufficient title in favor of those persons named in Paragraph 7 above, and a good and sufficient Bill of Sale, and deliver the same to said Purchaser at closing, which shall occur on or before January 15, 2016, conveying said personal properties free and clear of all liens and encumbrances, except:
(a) Personal property taxes for 2016, which shall be prorated to date of closing;
(b) Purchaser shall be responsible for sales tax, if any.

         [¶5] Despite the Contract's clear language, Burton testified that it was not his custom to deliver a Wyoming title to purchasers of new mobile homes at closing. As a reseller, Burton did not take title himself. Burton would purchase the mobile home from the manufacturer with borrowed funds, and the manufacturer would deliver the mobile home with a Manufacturer's Certificate of Origin (MCO). The lender held the MCO as collateral until the mobile home was sold. At closing, Burton would use the purchaser's funds to repay the lender, and the lender would return the MCO. Burton would collect sales tax from the purchaser, submit it to the state, and record the taxes as paid on the Bill of Sale. Under his reseller's tax exemption, Burton would pay no sales tax on his initial purchase from the manufacturer so long as he resold the mobile home directly to the consumer. After closing, Burton or the purchaser would bring the MCO and the Bill of Sale to the County Treasurer to issue a Wyoming title in the purchaser's name as the first assignee of the mobile home.[2]

         [¶6] Accordingly, Burton never intended to deliver a Wyoming title to Mr. Larson at closing because "[t]hat's not how you do it." Burton testified that he "couldn't" deliver the Wyoming title at closing for three reasons. First, he would have to repay his lender in full to obtain the MCO necessary to issue title, which he presumably could not do before receiving Mr. Larson's purchase money. Second, if Burton obtained a Wyoming title before closing, he would become the first "owner" of the mobile home, which would require him to pay sales tax on his initial purchase of the mobile home from the manufacturer, and, because the State of Wyoming taxes only the first sale of a mobile home, Mr. Larson would pay no sales tax on his purchase from Burton.[3] Third, Burton testified that the manufacturer's warranty extended only to the first titleholder. Mr. Larson, as the second titleholder, would be deprived of the warranty.

         [¶7] Burton's realtor, however, did not know the difference between an MCO and a Wyoming title. Thus, each time the escrow officer inquired, the realtor confirmed that Burton would deliver a Wyoming title for the closing. Based on the language of the Contract, confirmed by the realtor's assurances, the escrow officer expected Burton to deliver a Wyoming title at closing and therefore prepared settlement statements indicating that no sales tax was due from Mr. Larson.

         [¶8] When the parties agreed to move the closing date forward by two days, the escrow officer and the parties' agents rushed to assemble the paperwork. Shortly before closing, for the first time, Burton instructed his realtor to pick up the MCO from his lender and bring it to the escrow officer. When Mr. Larson's agent arrived at closing, she discovered that Burton had provided an MCO instead of a Wyoming title, which added $1, 806 in sales tax to Mr. Larson's purchase obligation. She called Mr. Larson, who was outside the building:

A. [Mr. Larson] . . . She actually called me and told me what the deal was; that I was required to pay $1, 800 more for sales tax that was never agreed upon anywhere, or had ever showed up on anywhere, even in our closing paper that we had. And, I said, "Well, that's not what we agreed to. We agreed to the 43, 000-something.
Q. [Burton's counsel] Well, did you ever look at the Contract and ask her about Page 2, Line 61, that said you promised to pay the sales tax at that point?
A. No, because I saw up here on the -- What line is it? -- like, 49 and 50, it says all will be free and clear. She'll deliver a Wyoming Bill of Sale and a, and a Title, and it will all be free and clear, meaning, to me, that there was nothing above and beyond after what we had agreed upon the price of the house.
I had to pay the closing cost and whatever. The only thing I would have to pay after that would be the ten or $15 at the Courthouse to transfer the Title from Mr. Burton's name to my name.

         [¶9] Mr. Larson never entered the building. He cancelled the closing before Burton arrived, refusing to complete the sale upon the delivery of an MCO instead of a title. That same day, Mr. Larson sent a letter to Burton requesting the return of his earnest money and declaring the Contract null and void due to, among other things, Burton's failure to deliver a Wyoming title. Burton's attempts to reschedule the closing before the January 15 deadline failed. Mr. Larson would not close the sale without Burton providing a Wyoming title, which Burton would not do.

         [¶10] Burton brought suit in circuit court for breach of contract, seeking either specific performance or damages, as well as attorney fees and costs. After a bench trial, the circuit court found that the parties made a mutual mistake, cancelled the Contract, and ordered Burton to return Mr. Larson's earnest money. On appeal, the district court reversed, ruling that the circuit court erroneously applied the doctrine of mutual mistake, that it was "factually unknown" whether Burton delivered a Wyoming title at closing, and that Mr. Larson breached the Contract when he refused to attend closing and to pay sales tax. Pursuant to W.R.A.P. 13, we granted Mr. Larson's petition for writ of review.

         DISCUSSION

         I. Did the district court erroneously overturn the circuit court's application of the doctrine of mutual mistake?

         [¶11] The district court held that the circuit court erred as a matter of law when it applied the doctrine of mutual mistake. We review a court's conclusions of law de novo. Ohio Cas. Ins. Co. v. W.N. McMurry Constr. Co., 2010 WY 57, ¶ 14, 230 P.3d 312, 320 (Wyo. 2010). A court may reform or cancel a written contract that, due to a "mutual mistake" of the parties, does not accurately reflect the parties' true intentions. 66 Am. Jur. 2d Reformation of Instruments § 20 (May 2018 update); Lawrence v. City of Rawlins, 2010 WY 7, ¶ 14 n.4, 224 P.3d 862, 868 n.4 (Wyo. 2010); Hansen v. Little Bear Inn Co., 9 P.3d 960, 964 (Wyo. 2000). To establish a claim of mutual mistake, the proponent must prove three elements by clear and convincing evidence: (1) there was a prior agreement that the written instrument undertook to evidence; (2) a mistake occurred in the drafting of the instrument; and (3) there was no fraud or inequitable conduct on the part of a party. Gumpel v. Copperleaf Homeowners Ass'n, Inc., 2017 WY 46, ¶ 75, 393 P.3d 1279, 1299 (Wyo. 2017) (citing Mathis v. Wendling, ...


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