Chimart Associates v. Paul, 66 N.Y.2d 570 (1986)

To reform a contract based on mistake, a plaintiff must plead and prove fraud by the defendant and unilateral mistake on the plaintiff’s part.

Summary

Chimart Associates sought reformation of a lease agreement, alleging the lease was incorrectly drawn due to the defendant’s fraud and the plaintiff’s mistake. The New York Court of Appeals reversed the lower court’s decision, holding that to state a cause of action for reformation, a plaintiff must allege both fraud by the defendant and unilateral mistake on the plaintiff’s part. Because the plaintiff’s pleadings failed to sufficiently allege their own mistake independent of the defendant’s alleged fraud, the cause of action for reformation was dismissed. The court emphasized the need for specific pleadings to justify reformation of a written agreement.

Facts

Chimart Associates entered into a lease agreement with Paul. Chimart later sued to reform the lease. The complaint alleged the lease was incorrectly drawn, implying a mistake on Chimart’s part, and asserted fraud by Paul. The specific nature of the fraud and mistake were not clearly delineated in the pleading.

Procedural History

The Supreme Court, Special Term, sustained the cause of action for reformation. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal and reversed the Appellate Division’s order, remitting the case to Special Term for further proceedings consistent with its opinion.

Issue(s)

Whether a cause of action for reformation of a contract requires the plaintiff to specifically plead both fraud by the defendant and unilateral mistake on the plaintiff’s part.

Holding

No, because the plaintiff’s pleadings failed to distinctly allege a unilateral mistake separate and apart from the defendant’s alleged fraud. The cause of action for reformation was insufficient because the plaintiff’s mistake was not adequately pleaded.

Court’s Reasoning

The Court of Appeals emphasized the high burden required to reform a written agreement. The court stated, “Because a written agreement signed by the parties is a jural act of great significance, ‘neither party should be relieved of its strictures unless there is a showing of fraud, mutual mistake or excusable unilateral mistake’.” The court clarified that where reformation is sought based on mistake, the pleading must allege fraud by the defendant to induce the mistake and a resulting mistake on the plaintiff’s part. The court found that the plaintiff’s allegation that “the lease was incorrectly drawn” was insufficient to specifically plead a unilateral mistake. The court reasoned that the pleading lacked the necessary specificity to demonstrate a distinct mistake by the plaintiff independent of the alleged fraud by the defendant. The court distinguished reformation based on fraud/unilateral mistake from reformation based on mutual mistake, where the pleading requirements are different. Chief Judge Fuld dissented in part, arguing that the allegation that “the lease was incorrectly drawn” was sufficient to imply a unilateral mistake and that dismissing the cause of action based on a technicality was unwarranted.