Real property (auction, merger, and reformation of deed): PRICE V. GODBY (COA 9/5/2008)

REAL PROPERTY:  Auction, merger, and reformation of deed
TO BE PUBLISHED: Reversing and Remanding
PANEL:  Stumbo Presiding; Dixon, Nickell concur
COUNTY:  Pulaski Cir. Ct.

The appellant/vendor entered into an auction sales contract with Godby wherein he would sell at auction Appellant’s forty-acre farm.  The initial contract provided that all the property was to be sold except some dairy equipment and Godby was to receive six percent commission.

After signing the initial contract, but prior to the auction, Appellant decided to reserve from sale the house located on the property. Godby accepted this and noted the reservation in the written auction instructions. The reservation of the house and dairy equipment was also announced at the auction.

At the auction, the Childers purchased the property upon which the house was located. Appellant orally agreed to have the house moved off the property within 60 days.

Godby then had a deed prepared which conveyed the land from Appellant to the Childers. The deed was signed by Appellant on or about June 10, 2003. However, the deed was silent as to the reservation of the house. Around the same time, Godby gave Appellant a closing statement setting forth the outcome of the auction and sales, to include how much the appellant was ultimately going to receive. Additionally, the statement contained a statement which released Godby from any future claims arising from the transaction. Appellant was directed to sign the closing statement as an acknowledgement that she received it.

Appellant had trouble finding someone to move the house off the property and entered into a lease agreement with the Childers to rent the land until she could get the house moved. Appellant missed some rent payments and the Childers moved to evict her from the land by filing a forcible detainer action against her. On the day of the hearing of the detainer action, the house burned down.

Appellant had the house insured by Shelter Mutual Insurance, another party in the underlying cause of action. However, because the deed did not reserve the house for Appellant, the insurance company denied her coverage. Appellant then filed suit against Godby for negligence, against the Childers for reformation of the deed, and against Shelter Mutual Insurance for breach of contract.

The Court of Appeals held that a genuine issue of material fact as to whether additional contract term removing house from auction was in exchange for auctioneer’s release from liability precluded summary judgment; the purchaser of the auctioned property waived requirement that vendor move house within 60 days; and the merger doctrine did not apply to deed which mistakenly included house as well as land and deed would be reformed.

Reversed and remanded.

Digested by Michael Stevens

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