## Facts

- Douglas A. VanderPloeg operated a Nashville chiropractic practice and, in the mid-1990s, affiliated with an integrated medical–chiropractic venture that later performed poorly.
- In 1999 VanderPloeg ended the affiliation, decided to sell the practice, and retained a broker to appraise and market it; the appraisal valued the practice at $200,000, emphasizing transferable professional goodwill.
- Xavier Sikora agreed to purchase the practice under a written agreement prepared by Sikora’s attorney.
- VanderPloeg provided billing information showing total billings of $257,952 for June–December 1999; Sikora’s notes reflected that same date range.
- The final agreement’s warranty clause mistakenly stated that $257,952 represented billings from July–December 1999, creating a six-month period inconsistent with the source data; the mistake arose from the drafting.
- After closing, VanderPloeg left and Sikora made significant changes to the practice; the practice later performed poorly.
- Sikora sued for breach of warranties, asserting the agreement warranted $257,952 in billings over six months and that material business information had not been disclosed.
- VanderPloeg denied breach, sought reformation of the billing-date warranty to June–December 1999, and counterclaimed for unpaid lease payments.
- After a bench trial, the trial court awarded Sikora $34,443 in damages and $52,592 in attorney’s fees and costs, and awarded VanderPloeg $18,294 on the lease counterclaim as an offset.

## Issues

1. Whether equity required reformation of the purchase agreement’s billing warranty to correct the date range from July–December 1999 to June–December 1999 based on mutual mistake (or unilateral mistake known to the other party).
2. Whether VanderPloeg breached a contractual warranty to disclose all material or significant information regarding the practice.
3. Whether the trial court’s damages and attorney’s fee awards to Sikora could stand given the proper interpretation and enforcement of the agreement.

## Decision

- The appellate court held the trial court erred by refusing to reform the billing warranty; the contract was reformed to state that $257,952 represented June–December 1999 billings.
- The court held the evidence did not support a finding that VanderPloeg breached the warranty to disclose material or significant information about the practice.
- The judgment for Sikora on breach of warranty and the associated attorney’s fee award were reversed in relevant part, and the case was remanded for proceedings consistent with the opinion.
- The judgment in VanderPloeg’s favor on the lease counterclaim remained supported by the record.

## Legal Principles

- Reformation is an equitable remedy available when the parties reached a complete understanding on essential terms, but the written instrument fails to reflect that understanding due to mutual mistake or unilateral mistake coupled with inequitable conduct by the other party.
- Courts determining reformation focus on the parties’ actual agreement and objective evidence of intent (including contemporaneous financial documents and the parties’ own notes), not on drafting mechanics.
- A general disclosure warranty in a business sale requires disclosure of material facts about the business at the time of sale, but does not operate as a guaranty of future profitability or insulate a buyer from post-closing business decisions.
- Contract damages require proof of contractual breach and causation; where alleged losses stem from the buyer’s post-closing changes rather than a proven breach, recovery is not warranted.

## Conclusion

The appellate court reformed the purchase agreement to correct a drafting error in a billing warranty to match the parties’ actual understanding and reversed the trial court’s findings that the seller breached a disclosure warranty, thereby undoing the buyer’s damages and fee awards while leaving the seller’s lease counterclaim recovery intact.


Sikora v. VanderPloeg, 212 S.W.3d 277 (Tenn. Ct. App. 2006)