Superior Court: Deed Merges With Agreement Of Sale

Written by: Alan Nochumson



In In re Trust of Mihordin, 2017 Pa. Super. LEXIS 345 (May 16), the Superior Court of Pennsylvania recently ­addressed whether a deed should be reformed to reflect a life estate that had been referenced in the underlying written agreement of sale entered into by the parties.

In 1995, Lynda and Michael Pozzuto, as sellers, executed a written agreement of sale with Richard and Marilyn Mihordin, as buyers, of a parcel of land located in Armstrong County, Pennsylvania, the opinion said. According to the opinion, the Mihordins are the parents of Lynda Pozzuto.

At the time, the Pozzutos retained the services of legal counsel who drafted the written agreement of sale, the opinion sad.

According to the opinion, under the ­written agreement of sale, the Mihordins agreed to pay a total of $20,000 in installments over the course of several years.

The written agreement of sale further ­provides that “upon the death of the Mihordins, the land is to revert back to the Pozzutos” and “if the Pozzutos sell the complete parcel of land, they will deed over the property of the Mihordins to the Mihordins,” the opinion said.

When the Mihordins paid the $20,000 due under the written agreement of sale, the same attorney who drafted the written agreement of sale prepared a deed transferring the property from the Pozzutos to the Mihordins. Noticeably absent from the deed was any reference to the written agreement of sale executed by the parties or, more specifically, that the property would revert back to the Pozzutos upon the death of the Mihordins.

Nonetheless, the Pozzutos executed the deed transferring the property to the Mihordins.

When Richard Mihordin died in 2011, Marilyn Mihordin created an irrevocable trust and transferred the property to the trust by way of a deed.

The trust provided that, upon Marilyn Mihordin’s death, any remaining income and principal or corpus of the trust would go to her two daughters, Vicki Mihordin and Lynda Pozzuto, equally, and they were also named as co-trustees and beneficiaries of the trust.

Neither the trust nor the deed transferring the property to the trust referred to any reversionary ­interest in favor of the Pozzutos.

After Marilyn Mihordin died ­several years later, the Pozzutos initiated a lawsuit against the trust seeking to reform the deed ­originally transferring the property to the Mihordins to reflect their ownership of the property via a reversionary interest.

In the lawsuit, the Pozzutos asserted that the deed should be so reformed as a result of a scrivener’s error or mistake made by the Pozzutos’ attorney when he prepared the deed transferring the property to the Mihordins without the benefit of the revisionary interest set forth in the underlying written agreement of sale entered into by the parties.

The trial court ultimately agreed with the Pozzutos and directed the reformation of the deed to reflect the asserted reversionary interest.

The trust then appealed the trial court’s ruling to the Superior Court.

On appeal, the Superior Court ­addressed whether the trial court committed an error in ordering that the deed should be reformed due to such a ­scrivener’s error.

The trust ­essentially argued that the deed should not be reformed due to the merger doctrine.

Citing to Dobkin v. Landsberg, 116 A. 814 (Pa. 1922), the Superior Court noted that, in the absence of fraud or mistake, and of a clear and manifest intent by the ­parties to the ­contrary, “when a deed has been executed in pursuance of a prior agreement, it is prima facie evidence the latter has so merged that no action could be maintained on any of its covenants.”

Quoting the Supreme Court in Carsek v. Stephen Schifter, 246 A.2d 365 (Pa. 1968), the Superior Court also pointed out that “merger is said to be the rule, except when the intention of the parties is otherwise, or where the stipulations in the contract sought to be enforced are collateral to the functions performed by the deed” and that “a covenant has been said to be collateral, and therefore one which survives delivery of the deed, if it bears no relation to title, possession, quantity or emblements of the transferred property.”

The Superior Court emphasized that, in Pennsylvania, mistake of a scrivener in preparing a deed may be established by parol evidence and such evidence must be “clear, precise, convincing, and of the most satisfactory character.”

In Mihordin, the Superior Court ­ultimately agreed with the trust that the Pozzutos failed to prove a scrivener’s error by clear and convincing evidence.

The Superior Court first interpreted the language set forth in the written agreement of sale between the parties.

According to the Superior Court, the written agreement of sale specified that the property would be transferred by way of a deed from the Pozzutos to the Mihordins upon the completion of the installment ­payments totaling $20,000.

The Superior Court stated that the ­written agreement of sale makes no mention of a life estate or reversionary interest relative to the deed. In doing so, the Superior Court excused the existence of the following language in another section of the written agreement of sale: “upon the death of the Mihordins, the land is to revert back to the Pozzutos,” and instead cited to the following language set forth in another section of the written agreement of sale: “If the Pozzutos sell the complete parcel of land, they will deed over the property of the Mihordins to the Mihordins.”

The Superior Court openly questioned “how can a life estate be created … or the Pozzutos retain the ability to sell the ‘complete’ property and ‘deed over the property of buyers to buyers.'”

In the Superior Court’s opinion, the ­language set forth in the written agreement of sale “is better understood as creating a reversionary interest in the land in favor of the Pozzutos until the sale was complete upon final payment of the annual sums, at which time the Mihordins would own the parcel in fee simple.”

The Superior Court also found the ­testimony of the Pozzutos’ attorney, who drafted the written agreement of sale and the subsequent deed, as unconvincing.

The Superior Court pointed out that the Pozzutos’ attorney testified that he had not ever met the Mihordins and did not know them and, thus, lacked any personal ­knowledge of the Mihordins’ intent ­regarding the deed.

Additionally, the Superior Court indicated that the record lacked any contrary manifest signs of the Mihordins’ intent with respect to the deed.

The Superior Court emphasized that the only record evidence of the Mihordins’ intent is the transfer of the property to the trust in 2011, which, in the Superior Court’s opinion, showed Marilyn Mihordin’s ­understanding of her ownership of the ­property in fee simple.

The Superior Court was also swayed by the failure of the Pozzutos offering any ­evidence of the value of the property compared to how much they charged the Mihordins for it. If, for instance, the ­property was valued significantly higher than the $20,000 the Mihordins paid for it, the Superior Court implies that it may have found that they purchased an ­interest of life estate, not fee simple, in the property.

The Superior Court also pointed out that Lynda Pozzuto was a party to the ­written agreement of sale entered into by the parties, the deed transferring the property from the Pozzutos to the Mihordins, the trust documents, as well as the deed transferring the property to the trust and, thus, had ample time and opportunity to discover any potential discrepancy ­concerning these various legal documents, but did nothing until her mother died.

The Superior Court also concluded that any life estate with reversionary interest ­allegedly created by the written agreement of sale could not be deemed ‘collateral’ to the functions of the deed transferring the property from the Pozzutos to the Mihordins, as a reversionary interest bears a direct relation to “title, possession, quantity or emblements of the transferred property.”

Since the Pozzutos’ evidence did not overcome the merger doctrine, the Superior Court held that the reversionary interest supposedly created in the written agreement of the sale executed by the parties did not survive the deed so transferring the property and merged with the deed.

Reprinted with permission from the June 13, 2017 edition of The Legal Intelligencer © 2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.

Alan Nochumson