James L. Ingles, 17-00018

Background

Debtor James Ingles executed a mortgage in 2004 to secure a $59,000 loan from U.S. Bank on his Maquoketa, Iowa home; the bank prepared the documents and Debtor signed and paid for ~10 years.
The mortgage’s legal description omitted the word “feet,” reading “West 60 of Lot 8” instead of “West 60 feet of Lot 8.”
U.S. Bank sued in state court in 2015 seeking reformation and foreclosure; the Iowa district court denied summary judgment because the missing unit left a triable issue about the measurement.
Debtor filed Chapter 7 in January 2017 and received a discharge in April 2017; Debtor had scheduled the property at $55,000 while U.S. Bank’s claim was about $66,694.55.
U.S. Bank moved in bankruptcy court for relief from the automatic stay to continue state-court reformation/foreclosure or, alternatively, asked the bankruptcy court to reform the mortgage; Debtor argued the omission invalidated the mortgage making U.S. Bank unsecured and discharged.

Issues

Issue	Debtor's Argument	U.S. Bank's Argument	Held
Does the omission of the word “feet” in the legal description invalidate the mortgage?	The missing unit renders the description indefinite; mortgage invalid, so U.S. Bank is unsecured.	A minor descriptive error does not void a mortgage; third parties can ascertain the property.	Error does not invalidate mortgage; mortgage is valid and secures the loan.
Did U.S. Bank forfeit secured status by not objecting to being listed as unsecured in schedules?	U.S. Bank’s failure to object means it’s bound as unsecured.	No — in a no-asset Chapter 7 creditors need not file claims; secured status survives unless formally challenged.	Failure to object did not preclude U.S. Bank from asserting its lien; secured status stands.
Does Debtor’s bankruptcy discharge eliminate U.S. Bank’s ability to enforce the lien or reform the mortgage?	Discharge extinguished the underlying debt so no debt remains for the lien to secure; reform unavailable.	Discharge does not affect valid pre-petition liens; lien survives and can be enforced/reformed.	Discharge does not defeat an existing valid mortgage lien; lien survives and reform may proceed.
Should the court reform the mortgage to correct the omitted word?	Debtor contends reformation inappropriate because bank drafted documents and discharge alters rights.	Evidence shows mutual mistake and intent to secure the home; reformation appropriate to reflect parties’ agreement.	Court finds clear and convincing evidence of mutual mistake and reforms the mortgage to read “feet.”

Key Cases Cited

First Cent. Bank v. White, 400 N.W.2d 534 (Iowa 1987) (erroneous description will not render a mortgage unenforceable)
Albia State Bank v. Smith, 119 N.W. 608 (Iowa 1909) (minor errors do not defeat ascertainability of mortgaged property)
Mid-State Homes, Inc. v. Knapp, 156 So.2d 122 (La. App. 1963) (description sufficient if extrinsic evidence can identify intended property)
Schwanz v. Farmers' Co-op. Co. of Lorimor, 214 N.W. 491 (Iowa 1927) (bankruptcy discharge does not affect valid mortgage lien)
Moad v. Neill, 451 N.W.2d 4 (Iowa Ct. App. 1989) (discharge does not prevent enforcement of valid pre-discharge liens)
Wellman Sav. Bank v. Adams, 454 N.W.2d 852 (Iowa 1990) (reformation requires clear, satisfactory, convincing evidence of mistake or inequitable conduct)
Hosteng Concrete & Gravel, Inc. v. Tullar, 524 N.W.2d 445 (Iowa Ct. App. 1994) (reformation adjusts instrument to conform to parties’ true agreement)