Where, owing to a mutual mistake, a written contract fails to
express the intention of the parties, it may be reformed to express
their true intention, although the mistake was one of law
respecting its interpretation and construction.
Reformation will be granted only where the evidence of mistake
is clear and satisfactory.
Relief in such cases may be obtained by a defendant under
Philippine Code of Civil Procedure, § 285, upon appropriate
pleadings, without resort to an independent suit for reformation of
In this case, it is established by proof of the clearest and
most satisfactory character that certain rails and sugar-mill
machinery were intended not to go with a sale and conveyance of
land to the Philippine government, and that the failure of the
written contract and deed to except them was due to a mutual
mistake of law.
The Court cannot accept a construction placed upon a Philippine
statute by the Supreme Court of the Islands when it is clearly
Upon an appeal from a decree of the Supreme Court of the
Philippine Islands erroneously reversing the trial court solely on
a question of
Page 247 U. S. 386
law, this Court, to dispose finally of the case, may decide the
facts when all evidence proffered was admitted and is in the record
and when the appellant in the court below sought to renew the trial
court's finding, under § 497, par. 2, of the Philippine Code of
Where, in an action at law on a contract, the answer set up was,
in effect, a bill in equity, seeking reformation and incidentally
to enjoin the action at law, the proceeding was converted into an
equitable one, and hence ca be reviewed only by appeal, and not by
writ of error.
30 Phil.Rep. 27 reversed.
The case is stated in the opinion.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
When Spain ceded the Philippine Islands to the United States,
large tracts of agricultural lands were owned by the great
religious orders. For political reasons, it was deemed advisable
that our government should acquire the Friar lands and sell them to
tenants in small holdings on easy terms. Lengthy negotiations
conducted to that end by the Civil Governor were concluded in 1903.
Most of the lands owned by the Dominicans, amounting to 60,461
hectares, had been conveyed to the Philippine Sugar Estates
Development Company, Limited, and with that corporation a contract
of sale and purchase was executed by the government of the
Philippine Islands under date of December 22, 1903. The agreement
covered eight haciendas, including that of Calamba in the
Page 247 U. S. 387
Province of Laguna, said to contain 16,424 hectares and 14
acres. Owing to delays incident to resurveys and perfecting of
titles, the deed of the Calamba Estate was not delivered until
October, 1905, when the purchase price, 1,385,443.29 pesos, was
paid and possession taken by the grantee. [Footnote 1
] Later, the Philippine government learned
that the grantor had removed certain sugar mill machinery and the
rails of a light railroad which had formerly been upon the estate.
The contract made no mention of sugar mills, machinery, or
railroad, but it contained, after the description of the estates
and specified properties to be conveyed, the words, "and all other
improvements," and these words were also in the deed. The
government, claiming that the machinery and railroad were covered
by this and other clauses and passed as part of the realty, brought
suit, in 1906, against the company [Footnote 2
] in the Court of First Instance of Manila for
their value, alleged to be 50,000 pesos.
The Code of Civil Procedure of the Philippine Islands (§ 285)
permits to be introduced, in case of written contracts,
"evidence of the terms of agreement other than the contents of
the writing, . . . where a mistake or imperfection of the writing,
or its failure to express the true intent and agreement of the
parties is put in issue by the pleadings. [Footnote 3
The defense was rested, under appropriate
Page 247 U. S. 388
pleadings, on the ground, among others, that the contracting
parties understood that the sugar mills or machinery and the
railroad were not to be included as a part of the real estate and
that they did not come under any of the terms used in the contract
or the deed, and that, for this reason, the instrument did not
express the intention and actual agreement of the parties. The
trial court held this defense good in law and sustained by the
evidence, and entered judgment for the defendant. The Supreme Court
of the Philippine Islands reversed the judgment of the trial court
solely on the ground that, where parties to a written contract have
deliberately adopted the language therein used, a court of equity
will not reform the instrument because the parties were "mistaken
as to its legal interpretation and effect, nor will such a mistake
be recognized as any defense to a suit upon the contract or
instrument," and that relief against such a mistake cannot be
afforded under § 285 of the Code. Upon the evidence which had been
introduced below, the Supreme Court also entered a judgment of
50,000 pesos for the government. 30 Phil.Rep. 27. The case comes
here under § 248 of the Judicial Code.
The case is brought here both by writ of error and by appeal.
The complaint set forth a cause of action at law on the contract.
The answer was, in effect, a bill in equity for reformation, and
incidentally to enjoin the
Page 247 U. S. 389
action at law. Compare Bradbury v. Higginson,
553. The proceeding became thus an equitable one. See Surgett v.
8 How. 48, 49 U. S. 64
Clark v. Mosher,
107 N.Y. 118; Turner v. Johnson,
29 Ky.Law Rep. 543. The proper method of review by this Court is
therefore by appeal, and the writ of error is dismissed. Gsell
v. Insular Collector of Customs, 239 U. S.
; Montelibanoy Ramos v. La Compania General de
Tabacos de Filipinas, 241 U. S. 455
241 U. S.
It is well settled that courts of equity will reform a written
contract where, owing to mutual mistake, the language used therein
did not fully or accurately express the agreement and intention of
the parties. The fact that interpretation or construction of a
contract presents a question of law, and that therefore the mistake
was one of law, is not a bar to granting relief. Snell v.
Insurance Co., 98 U. S. 85
98 U. S. 88
Griswold v. Hazard, 141 U. S. 260
141 U. S.
] This rule of equity was adopted in the Philippine Code
without restriction, and the relief is afforded, under appropriate
pleadings, without resort to an independent suit for reformation of
the contract. The language of § 285 is clearly broad enough to
include relief for such mistakes of law, and the earlier decisions
of the Supreme Court of the Philippine Islands to which that court
refers in its opinion are not inconsistent with this conclusion.
Some of them are instances of the futile attempt to vary,
supplement, or contradict a written contract by parol evidence. In
none of them was evidence offered under appropriate pleadings with
a view to reforming the instrument. [Footnote 5
] It is urged that § 285 was
Page 247 U. S. 390
borrowed from § 1856 of the Code of Civil Procedure of
California, and that the courts of that state deny relief under
circumstances like those here under consideration. No case
sustaining this assertion was cited by counsel, and none has been
found by us. Furthermore, the provisions of the two sections differ
materially; the significant clause of § 285, namely, "or its
failure to express the true intent and agreement of the parties,"
is not contained in § 1856 of the California Code. It is also urged
that, since the construction of § 285 is a matter of purely local
concern, we should not disturb the decision of the Supreme Court of
the Philippine Islands. This Court is always disposed to accept the
construction which the highest court of a territory or possession
has placed upon a local statute. Phoenix Railway Co. v.
Landis, 231 U. S. 578
that disposition may not be yielded to, where the lower court has
clearly erred. Carrington v. Unites States, 208 U. S.
. Here, the construction adopted was rested upon a
clearly erroneous assumption as to an established rule of equity.
The Supreme Court erred in refusing to consider the evidence of
mutual mistake, and its judgment must be reversed.
It remains to consider the further proceedings which should be
taken. The judgment of the trial court was reversed by the Supreme
Court solely on the ground that the defense of mutual mistake
relied upon was not good in law, but the case had been taken to
that court on a bill of exceptions which contained the whole record
in the trial court, including all the evidence introduced, and the
refusal of the trial judge to grant a new trial on the ground that
the evidence did not justify the findings of the court had been
duly excepted to. This exception
Page 247 U. S. 391
was apparently insisted upon before the Philippine Supreme
Court, and the same contention is made by the government here. Its
purpose was obviously to seek a review of those findings under §
497, par. 2, of the Code of Civil Procedure, which provides that,
where a motion was made in the trial court for a new trial
"upon the ground that the evidence was insufficient to justify
the decision, and the judge overruled said motion, and due
exception was taken to his overruling the same, the Supreme Court
may review the evidence and make such findings upon the facts by a
preponderance of the evidence, and render such final judgment as
justice and equity may require."
We might require that the review of the evidence to which the
government is entitled should be made by that court. But, as the
case is here on appeal and all proffered evidence was admitted
below and is in the record before us, we may now finally dispose of
The burden of proof resting upon the appellant cannot be
satisfied by mere preponderance of the evidence. It is settled that
relief by way of reformation will not be granted unless the proof
of mutual mistake be "of the clearest and most satisfactory
character." Snell v. Insurance Co., 98 U. S.
, 98 U. S. 89
Baltzer v. Raleigh & Augusta Railroad, 115 U.
, 115 U. S. 645
Maxwell Land Grant Case, 121 U. S. 325
121 U. S. 381
Simmons Creek Coal Co. v. Doran, 142 U.
, 142 U. S. 435
Campbell v. Northwest Eckington Co., 229 U.
, 229 U. S. 584
The evidence introduced by appellant meets this stringent
The following, among other facts, were established by
uncontradicted evidence: prior to May, 1903, the sugar mills had
been in part destroyed by revolutionists, and the mills and
machinery had fallen into disrepair. In that month, the company
gave orders to remove the machinery and the rails from the hacienda
and store them elsewhere. In October, 1903, the company contracted
to sell all the
Page 247 U. S. 392
machinery and rails to one Rueda. They were not included in the
detailed appraisal of the property which the government caused to
be made. Before the contract with the government was executed, all
the rails and a part of the machinery had been removed from the
hacienda. In the typewritten draft of this contract with the
government which its counsel prepared and which was submitted by
Governor Taft to the company's representative for consideration, it
was expressly stated that "sugar and rice mills and machinery,"
together with "irrigation work, dams, tunnels, ditches, and all
other improvements thereon," should be included in the "sale and
conveyance." The company's representative corrected the draft of
agreement by striking out with a pen the words "sugar and rice
mills and machinery." This correction was acquiesced in by the
government's representatives, and in the final draft of the
contract which was executed December 22, 1903, there was no
reference to sugar mills, machinery, or tramway, although the
paragraph, as modified, contained the following explicit and
"This sale and conveyance shall include all the dwelling houses,
farm houses, warehouses, camarines and other buildings, irrigation
works, dams, tunnels, ditches, and all other improvements, together
with all water and other rights and all hereditaments belonging to
the company on every part of the estates hereby agreed to be
The words "sugar mills" were also included in the draft of the
final deed of conveyance, but they were stricken out after a
conference between the company's representative and the Civil
Governor, so that the words do not appear in the final deed of
This clear and uncontradicted testimony as to the agreement
actually made is supported by the production of the original draft
of the agreement. in which the words
Page 247 U. S. 393
"sugar and rice mills and machinery" were stricken out in ink,
and also by production from the files of the Executive Bureau of
the stenographic report of the interview with Governor Wright above
referred to. As against this strong evidence, the government can
point only to the fact that, in the deed, the hacienda is first
described as "the description, area and boundaries" thereof "appear
in the title deeds," then as it appears from the recent government
surveys, and that, in the description according to the title deeds,
the several sugar mills are named, and following them is the
clause, "though it is believed that these mills were destroyed in
part at least, by the revolutionists." This recital, itself of
ambiguous import, is of no significance. This description was in no
way relied upon by the Supreme Court of the Philippine Islands.
Their decision was based entirely upon the alleged inclusion of
sugar mills and machinery in the phrase, "improvements and
accessories." As found by the trial judge, the evidence
"shows without the slightest doubt that the parties, on striking
out said words [the sugar mills] from the document, agreed not to
include them in the sale, as demanded by the representative of the
vendor, because they were not legally part of the hacienda for the
reason that they had already been sold to Enrique Rueda prior to
the preliminary agreement."
The judgment entered in the Supreme Court of the Philippine
Islands is reversed, and that entered by the Court of First
Instance of Manila is affirmed.
U.S. Philippine Commission Reports (1901) vol. 2, Part 1, p. 24;
(1902) Part 1, p. 24; (1903) Part 1, pp. 38-44; (1904) Part 1, p.
16; Part 2, p. 477; (1905) Part 1, p. 65; (1906) Part 1, p. 58. A
hectare equals 2.471 acres; two pesos equal one dollar, gold.
The Dominican Order of Friars was joined in the complaint as a
Party defendant, but it was not mentioned in the judgments entered
in either of the lower courts, and it did not become a party to the
proceedings in this Court.
"Written Agreement Presumed to Contain All the Terms of the
When the terms of an agreement have been reduced to
writing by the parties, it is to be considered as containing all
those terms, and therefore there can be, between the parties and
their representatives or successors in interest, no evidence of the
terms of agreement other than the contents of the writing, except
in the following cases:"
"(1) Where a mistake or imperfection of the writing, or its
failure to express the true intent and agreement of the parties, is
put in issue by the pleadings;"
"(2) Where the validity of the agreement is the fact in dispute.
But this section does not exclude other evidence of the
circumstances under which the agreement was made, or to which it
relates, or to explain an intrinsic ambiguity, or to establish its
illegality or fraud. The term 'agreement' includes deeds and
instruments conveying real estate, and wills as well as contracts
See also Stockbridge Iron Co. v. Hudson Iron Co.,
Mass. 290, 319-320; Maher v. Hibernia Insurance Co.,
N.Y. 283, 291; Wisconsin Marine & Fire Ins. Co. Bank v.
100 Wis. 596, 617-620.
Pastor v. Gaspar,
2 Phil.Rep. 592; Icaza v.
5 Phil.Rep. 166; Sanz v. Lavin &
6 Phil.Rep. 299; Testagorda v. Commanding
6 Phil.Rep. 573; Muguruza v. International
10 Phil.Rep. 346; De Guzman v.
11 Phil.Rep. 503; United States v. Macaspac,
12 Phil.Rep. 26; Jose v. Damian,
14 Phil.Rep. 104; Sy
Joc Lieng v. Sy Quia,
16 Phil.Rep. 137; Lozano v. Tan
23 Phil.Rep. 16.