Court Attempts To Resolve Boundary Dispute Between Brothers
This case involves a boundary dispute between two brothers. Before the dispute erupted, a father and his three sons formed a farming corporation. In 1993, the farming corporation was dissolved and the farming operation was divided between the three brothers. Each brother formed their own farming corporation. The brothers, through their respective corporations, entered into a written “Agreement and Plan of Reorganization” that detailed the division of the original corporation’s assets. One brother agreed to purchase the cropland. Another agreed to purchase the pastureland.
A boundary dispute developed when the landowner brothers could not agree on the boundary between the parcels. The brother who owned the pastureland to the south argued that the family had orally agreed that the fence line would serve as the boundary. The brother who owned the cropland to the north argued that the written agreement governed the situation. That agreement contained a provision specifying that the legal description of the property indicated the location of the property line.
The written agreement contained a few common provisions. The first was that the entirety of the brothers’ agreement was contained in the written document and could not be amended by oral agreements. The second was that prior negotiations and discussions between the brothers were to be merged into the written agreement.
According to the cropland owner, he and his brother began an arrangement whereby he was allowed use of the pastureland. In exchange, the brother that owned the pasture rented the cropland. There was no exchange of rent- this was merely an oral arrangement. The pasture-owning brother disputed that any rental arrangement existed and that paperwork he filed with the USDA indicating otherwise was because “they had it all tangled up.”
In 2008, the cropland brother filed notice to terminate the rental agreement with his pastureland brother. In response, the pastureland brother filed suit asking the trial court to quiet title to the fence line boundary on the theory of adverse possession and to reform the contract on the basis of “mutual recognition and acquiescence.” His claim was that the fence was intended to divide the two tracts of land at the time of sale and that the contract incorrectly divided the property according to legal description. The owner of the cropland responded stating that there was no mutual mistake. There was some dispute between the brothers that the theory of mutual mistake was not properly pled. However, the trial court allowed the mutual mistake arguments, and found in favor of the pastureland brother on the basis that he adequately established that a mutual mistake had occurred which necessitated reformation of the written agreement.
The cropland brother appealed and the Nebraska Supreme Court agreed to hear the case. The cropland brother argued that the theory of mutual mistake was improperly pled at the trial court and that the court erred in admitting extrinsic evidence of the parties’ negotiations outside of the agreement in violation of the Parol Evidence Rule. The brother further argued that there was not enough evidence of mutual mistake presented at trial to reform the contract.
The court first addressed the improper pleading issue. According to Nebraska’s procedural court rules “when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.” Thus, the court was tasked with determining whether the opposing party gave implied consent to proceed with the mutual mistake theory at trial. The court held that the theory of mutual mistake, even if the words weren’t specific used in the pleading, was sufficiently pled and the cropland brother had sufficient notice that he would have to defend on that issue.
Next, the court addressed the issue of whether extrinsic evidence was improperly admitted. The court held that evidence reflecting the true intention of the parties outside of the agreement was vital to show mutual mistake and the written agreement did not properly reflect the intentions of the parties.
Finally, the court addressed whether reformation of contract should have been allowed based on evidence of mutual mistake. In Nebraska, the right to reform a contract hinges on whether the written agreement accurately reflects the intentions of the parties. There must be clear and convincing evidence that the written agreement does not reflect the intent of the parties to reform the contract. To prevail on a theory of mutual mistake evidence must be presented that the mistaken belief was shared by both parties and the agreement in its written form does not accurately express the mistaken belief. According to the court, the pastureland-owning brother did not present enough evidence that both parties intended the fence line to mark the property boundary. Thus, the court remanded the case to the trial court with instructions that a written agreement may only be reformed if the mistake was mutual, or there was fraud or inequitable conduct. R & B Farms, Inc., v. Cedar Valley Acres, Inc., 281 Neb. 706, 798 N.W.2d 121 (2011).
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