## Facts

- A decedent’s estate owned property that was divided into two lots for auction.
- Before the auction on October 1, 1977, the auctioneer showed Guy Ewing (defendant) the premises and represented that the property line ran about thirteen feet from the house, near a lilac bush.
- Ewing purchased the lot containing the house with the understanding that the boundary was near the lilac bush, consistent with the auctioneer’s representation.
- Fred Bailey (plaintiff) purchased the neighboring lot.
- After the sale, Ewing maintained the land up to the lilac bush line.
- In June 1978, Ewing built a fence at the lilac bush line.
- Bailey brought an action to quiet title to the strip of land between the recorded boundary and the lilac bush line.
- Ewing counterclaimed seeking reformation of both his deed and Bailey’s deed, asserting the deeds failed to reflect the parties’ intended boundary because of mutual mistake.
- The trial court ruled for Bailey, concluding Ewing’s misunderstanding was unilateral rather than shared, and denied reformation.
- Ewing appealed.

## Issues

1. Whether the evidence showed a mutual mistake about the location of the boundary line such that equity could reform the deeds to reflect the parties’ intended conveyances.
2. If mutual mistake supported reformation, whether reformation could be enforced against Bailey depending on Bailey’s status as a bona fide purchaser for value without notice.

## Decision

- The appellate court reversed the trial court’s judgment and remanded.
- The court concluded the trial court erred in treating the boundary error as solely Ewing’s mistake where the record supported a shared mistaken belief about the line’s location at the time of sale.
- The court held that mutual mistake, proven by clear and convincing evidence, may justify reformation of the deeds to match the agreement the parties thought they had made at the auction.
- The court directed the trial court on remand to address limits on reformation as to Bailey, including whether Bailey qualified as a bona fide purchaser for value without notice, and to grant relief consistent with equity if reformation was not barred.

## Legal Principles

- A court of equity may reform a deed when clear and convincing evidence shows the written instrument does not express the parties’ actual agreement due to mutual mistake.
- A mistake is mutual when both sides share the same materially incorrect belief about a basic fact that shaped the transaction, including the assumed location of a boundary line.
- Extrinsic evidence, including pre-sale statements and the parties’ conduct after the sale, may be considered to determine whether the deed matches the agreement actually intended.
- Reformation is generally unavailable to the extent it would prejudice the rights of a bona fide purchaser for value who took without notice of the mistake or the competing claim.

## Conclusion

Bailey v. Ewing holds that where an auction sale proceeds on a shared but incorrect understanding of a boundary line—supported by the auctioneer’s representation and the buyer’s post-sale possession consistent with that line—the resulting deeds may be reformed for mutual mistake, subject to the separate question on remand whether the neighboring purchaser’s bona fide purchaser status prevents reformation against him.


Bailey v. Ewing, 671 P.2d 1099 (1983)