Opinion
No. 98-2331.
Opinion filed March 3, 1999.
An appeal from the Circuit Court for Dade County, Robert P. Kaye, Judge, L.T. NO. 98-135.
Catlin, Saxon, Tuttle Evans, P.A.; Ross Tilghman and Lauri Waldman Ross, for appellant.
Koppen, Watkins, Partners Associates, P.A. and R. Daniel Koppen, for appellee.
Before COPE, GREEN, and SORONDO, JJ.
Appellant, Jennie C. Kolski, the mother-in-law of appellee, Patricia M. Kolski, filed a four count amended complaint for unjust enrichment and restitution, repayment of a loan, imposition of a constructive trust and reformation of a writing. This is an appeal from a final order dismissing the complaint with prejudice as being barred by the statute of frauds and for failing to state a cause of action for reformation. We reverse.
Jennie C. Kolski sued her daughter-in-law, Patricia, individually and in her capacity as trustee for two trusts established for the benefit of her two sons, Patrick and Alexander II. As alleged in the second amended complaint, Jennie orally loaned $40,000 to her late son, Alexander and his wife, Patricia, for them to purchase and capitalize a mortuary business. Jennie's son and daughter-in-law operated this business until her son's death. The terms of this loan were that it was payable on demand with an interest rate of ten percent (10%) per annum payable on a semi-annual basis. The interest rate was later reduced to six percent (6%) per annum. After Alexander's death, Patricia continued to operate the business and induced her mother-in-law, Jennie to forbear collection of the loan by ratifying and assuming the repayment obligation in full and continuing to make the scheduled semi-annual interest payments. Thereafter, Patricia continued to make the semi-annual interest payments on checks written on her personal checking account as well as on checks written on the trust accounts for her minor sons. As evidence of this oral loan agreement, Jennie attached a copy of her Last Will and Testament dated May 17, 1988, which states in Article VIII that:
I hereby advise my personal representative and children that there is owing to me, and is to be included in my estate, the sum of forty thousand dollars ($40,000.00) from my late son ALEXANDER KOLSKI, to whom I loaned this amount, at six percent (6%) annual interest, for the purpose of his purchasing the mortuary business in which he was engaged at the time of his death. I have discussed this loan with his widow, PATRICIA KOLSKI, who has acknowledged her obligation to repay the loan in full. She has requested, and I have agreed that, for the present, she will be required to make interest payments only, on a semi-annual basis, so that the business will not be adversely affected during the period of transition following my son's recent death.
Jennie further attached copies of canceled checks made payable to her and signed by Patricia which indicated that they were for loan interest and copies of Patricia's tax returns which reflect that the interest deductions taken by her in various years corresponded with her interest payments to Jennie.
The amended complaint also alleges that at some point, Patricia sold the mortuary business and converted the cash to her benefit and/or the benefit of the Alexander Patrick Kolski 1990 Special Trust and/or the Joseph Alexander Kolski 1990 Special Trust. In October 1995, Jennie made her first demand for the repayment of the principal of the loan. On or about September 9, 1997, Patricia denied, for the first time, her obligation to repay the $40,000 dollars to Jennie. This lawsuit was then filed and Patricia moved to dismiss the same on the grounds that it was barred both by the statute of frauds and the statute of limitations and that the equitable claim for reformation failed to state a cause of action. The motion was granted with prejudice on the grounds that it was barred by the statute of frauds and that it failed to state a cause of action for reformation. This appeal followed.
Although the trial court did not dismiss the amended complaint on the additional grounds that this action was barred by the statute of limitations, the appellees have commendably conceded on appeal that this action was not subject to dismissal on these grounds. A cause of action on a contract does not accrue for purposes of the statute until the breach or in this case, upon Patricia's first refusal to repay the loan in 1997.See State Farm Mut. Auto. Ins. Co. v. Lee, 678 So.2d 818, 821 (Fla. 1996) (citing Fradley v. County of Dade, 187 So.2d 48, 49 (Fla. 3d DCA 1966)).
On review of a motion to dismiss for failure to state a cause of action, we are "`required to treat the factual allegations of the complaint as true and to consider those allegations in the light most favorable to plaintiffs.'". Dee v. Sea Ray Boats, Inc., 702 So.2d 1349, 1349 (Fla. 3d DCA 1997) (quoting Hollywood Lakes Section Civic Ass'n, Inc. v. City of Hollywood, 676 So.2d 500, 501 (Fla. 4th DCA 1996)). Viewing the allegations of the amended complaint in this light, we conclude that they were sufficient to take this action outside of the statute of frauds and sufficient to state a cause of action for reformation.
The statute of frauds, section 725.01, Florida Statutes governs oral promises to repay the debts of another. It provides that:
No action shall be brought whereby to charge . . . the defendant upon any special promise to answer for the debt, default or miscarriage of another person . . . unless the agreement or promise upon which such action shall be brought, or some note or memorandum thereof shall be in writing and signed by the party to be charged therewith[.]
§ 725.01, Fla. Stat. (1997) (emphasis added). To satisfy the statute, a note or memorandum may take almost any possible form.See Bader Bros. Transfer Storage, Inc. v. Campbell, 299 So.2d 114, 115 (Fla. 3d DCA 1974) (holding settlement sheets were sufficient to constitute memorandum under statute of frauds); Rank v. Sullivan, 132 So.2d 32, 36 (Fla. 2d DCA 1961) (holding statement in will of person being charged constituted a sufficient memorandum to satisfy statute of frauds); Heffernan v. Keith, 127 So.2d 903, 904 (Fla. 3d DCA 1961) (finding that telegram constitutes note or memorandum confirming prior agreement). All that the statute requires is written evidence from which the whole contract may be made out. Further, "[f]or purposes of the statute of frauds, several writings, only one of which is signed by the debtor, may be aggregated to satisfy the statute provided that the signed writing expressly or implicitly refers to the unsigned document.". Cook v. Theme Park Ventures, Inc., 633 So.2d 468, 471 (Fla. 5th DCA 1994); see also Middlethon v. Crowder, 563 So.2d 94, 95 (Fla. 3d DCA 1990); Rohlfing v. Tomorrow Realty Auction Co., Inc., 528 So.2d 463, 465 (Fla. 5th DCA 1988) (holding real estate terms of sale together with buyer's guide and check constituted sufficient writings to satisfy statute); First Guaranty Corp. v. Palmer Bank and Trust Co. of Fort Myers, N.A., 405 So.2d 186, 189 (Fla. 2d DCA 1981) ("[S]ince no reference is made to the mortgage itself or to any obligation owing to Palmer Bank or to any other financial institution, the mortgage document cannot be interrelated with the joint venture agreement to satisfy the statute of frauds."). "An implied reference may be established by either the fact that the documents relate to the same subject matter or by physical annexation." Id. at 188. Moreover, in certain instances, parol evidence may be admissible to clarify the writing. Id.
We find that the specific reference to the terms of the alleged loan made by Jennie in her will together with the canceled checks signed by Patricia in the precise amount of the semi-annual interest payments on the $40,000 dollar loan and with notations that they were for "loan interest", were sufficient writings to take the oral agreement out of the statute of frauds. Here, Patricia Kolski, the party to be charged, at least made an implicit reference on her checks to the terms of the loan as spelled out in Jennie Kolski's will. Based upon such implicit references, parol evidence may be admissible to clarify the canceled checks and connect them to the particular provision in Jennie's will. See Jackson v. Parker, 153 Fla. 622, 15 So.2d 451, 460 (1943) ("Parol evidence is admissible to connect several written instruments and show that they were all parts of one transaction."); Northwestern Bank v. Cortner, 275 So.2d 317, 319 (Fla. 2d DCA 1973) (same);see also, First Guar. Corp., 405 So.2d at 188. Thus, specifically as to count II for the repayment of a loan, we conclude that it was error to dismiss this cause based upon the statute of frauds.
As to counts I and III for unjust enrichment/restitution and the imposition of a constructive trust respectively, we agree that the statute of frauds is simply inapplicable to such claims.See Harrison v. Pritchett, 682 So.2d 650, 652 (Fla. 1st DCA 1996) (holding that statute of frauds inapplicable to quantum merit action which is common law variety of restitution); Zanakis v. Zanakis, 629 So.2d 181, 183 (Fla. 4th DCA 1993) (holding that constructive and resulting trusts can be based on parol evidence which is consistent with statute of frauds which specifically excepts these equitable trusts); Varnes v. Dawkins, 624 So.2d 349, 351 (Fla. 1st DCA 1993) (finding that statute of frauds inapplicable to trusts arising by operation of law). Thus, the trial court erred in dismissing these counts as well.
Our decision here is based solely on the application of the statute of frauds and in no way addresses the merits of this action. See Harrison, 682 So.2d at 652-53 n. 2.
On the remaining count IV, Jennie seeks a reformation of one of Patricia's canceled checks to reflect the parties' alleged agreement that the $40,000 dollar loan was payable upon demand. In this count, Jennie alleges the existence of a "writing which acknowledges a majority of the material terms of an oral demand loan agreement" between the parties and that the subject check is missing the demand payment term as a result of a unilateral mistake on her part and due to Patricia's inequitable conduct. We conclude that these allegations are sufficient to state a cause of action for reformation. Reformation is an equitable remedy,see Smith v. Royal Automotive Group, Inc., 675 So.2d 144, 151 (Fla. 5th DCA 1996), which "acts to correct an error not in the parties' agreement but in the writing which constitutes the embodiment of that agreement." Id. at 150. Thus, where the alleged mistaken writing is the "product of the parties' mutual mistake, or unilateral mistake on the part of one party and inequitable conduct by the other, the writing should be reformed to accurately reflect the parties' agreement." Id. (emphasis added) (citations omitted). The underlying rationale is that in reforming the instrument the agreement of the parties is in no way altered but merely corrects the defect in the written document to reflect the true terms of the parties' agreement.See Providence Square Ass'n Inc. v. Biancardi, 507 So.2d 1366, 1369-70 (Fla. 1987). We find that the well-pled allegations contained in this count were sufficient to withstand the motion to dismiss and we reverse the trial court's dismissal of this count as well.
The dissent apparently takes position that a check may not be the subject matter of a reformation action. The right of reformation is ordinarily limited to written instruments,See 9 Fla. Jur.2d, Cancellation, Rescission, and Reformation of Instruments, § 54 (1997), but it "is not restricted in its application to any class or kind of conventional instruments". 66 Am. Jur. Reformation of Instruments, 29 (1973) (emphasis added). Thus, an action for reformation does extend to negotiable instruments, Id, at § 34, and a personal check, without question, is a negotiable instrument. See § 673.1041(1)(3)(6) (1995); Kehle v. Modansky, 696 So.2d 493, 494 (Fla. 4th DCA 1997) (personal check is a negotiable instrument);Medina v. Lamonica, 492 So.2d 809, 810 (same).
In so holding, of course, we express no opinion as to the merits of this count at this juncture.
We note in passing that the statute of frauds does not bar an action for reformation. "As reformation does not `charge' the other party with enforcement of the agreement, the statute of frauds has no effect on an action to reform a written document."Smith, 675 So.2d at 153. (citations omitted).
Reversed and remanded.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DISPOSED OF.
I concur on all except the reformation claim. Reformation is not a proper remedy here.
Plaintiff-appellant Jennie Kolski has asked the trial court to perform the legal equivalent of turning a frog into a prince, by reforming — really, transforming — defendant-appellee Patricia Kolski's canceled checks into a legally binding promissory note. Jennie explains, "Plaintiff merely sought reformation of the checks to reflect the parties agreement — that this was a loan payable `on demand.' In sum, the checks were writings which could be reformed, and dismissal of Count IV for lack of a writing was thus also erroneous." Initial brief at 26-27.
As Jennie concedes, there never was a promissory note between these parties. That being so, there was no promissory note to be reformed. The trial court ruled that this was not a proper reformation case, and on this score, the trial court was entirely correct.
As Judge Griffin has explained:
Reformation is an equitable remedy. The Supreme Court of Florida summarized the doctrine [in] the 1905 case of Jacobs v. Parodi, 50 Fla. 541, 39 So. 833 (Fla. 1905), stating:
Where an agreement has been actually entered into, but the contract, deed, or other instrument in its written form does not express what was really intended by the parties thereto, equity has jurisdiction to reform the written instrument so as to conform to the intention, agreement, and understanding of all the parties.
Id. (citation omitted). Reformation, at its essence, acts to correct an error . . . in the writing which constitutes the embodiment of that agreement. Thus the Florida courts have consistently held that where a mistaken writing is the product of the parties' mutual mistake, or unilateral mistake on the part of one party and inequitable conduct by the other, the writing should be reformed to accurately reflect the parties' agreement.
Smith v. Royal Automotive Group, Inc., 675 So.2d 144, 150 (Fla. 5th DCA 1996); Alexander v. Kirkham, 365 So.2d 1038, 1040 (Fla. 3d DCA 1978). "[R]eformation only corrects the defective written instrument so that it accurately reflects the true terms of the agreement actually reached."Providence Square Association, Inc. v. Biancardi, 507 So.2d 1366, 1370 (Fla. 1987).
If in the present case the parties had drafted a note or loan agreement and there was some error which in equity and good conscience should be corrected, then reformation would be a proper remedy. But there never was a note or loan agreement, and thus there was no document which can properly be the subject of reformation. Whatever else a check might be, it is neither a note nor a loan agreement. A reformation claim on these facts is impermissible. See Southern Lead Corp. v. Glass, 103 Fla. 657, 138 So. 59, 61 (1931).
The reformation claim states, in its entirety:
64. This is an equitable action for reformation of a writing which acknowledges a majority of the material terms of an oral demand loan agreement between Plaintiff and Defendant.
65. On September 3, 1995, Defendant executed her check number 442, Payable to the order of Plaintiff in the amount $1,200.00. A copy is attached as Exhibit "A." The check expressly provides the interest rate of the loan is 6%. By reasonable inference, the check provides it is a semi-annual installment. Based upon the amount of the check, the rate of interest and the fact the payment was + of the interest due, the principal amount of the loan is $40,000.00.
66. Plaintiff failed to insist Defendant note in her check that the loan was a demand obligation as a result of a unilateral mistake on the part of Plaintiff, and Defendant's conduct was inequitable because Defendant contemporaneously represented to Plaintiff, Defendant's elderly mother-in-law, that Defendant would repay the $40,000.00 upon Plaintiff's demand.
67. Section 673.1081(1), Fla. Stat., provides as follows:673.1081 Payable on demand or at definite time.
(2) A promise or order is "payable on demand" if it:
(c) States that it is payable on demand or at sight, or otherwise indicates that it is payable at the will of the holder; or
(d) Does not state any time of payment.
(Emphasis added.)
68. Plaintiff requests that the Court equitably reform the check to reflect the agreed upon terms of the loan and the following missing language: "$40,000.00 demand obligation."
69. Reformation of this check is a condition precedent to Plaintiff's action to enforce the parties' loan agreement.
70. Plaintiff is without an adequate remedy at law.