Stearns Bank, N.A. v. Rent-A-Tent, Inc., 468 B.R. 442

Bankruptcy adversary involving Stearns Bank vs. Rent-A-Tent, Inc. over liens on Barnes and Antioch properties.
eBank made two loans to Rent-A-Tent in 2003 secured by deeds to the Barnes and Antioch properties; Gribbens guaranteed both loans.
At loan origination, Barnes and Antioch property owners were the Gribbens, not Rent-A-Tent, so the debtor didn’t hold title to convey security interests.
Deeds and their various post-closing modifications were executed without the debtor’s corporate seal and sometimes referenced the wrong property; chain of title issues arose.
Bankruptcy petition filed in 2008; plaintiff seeks equitable reformation or subrogation to fix the security interests; trustee argues no valid liens and possible avoidance under 544/550; motion for summary judgment filed in 2011.
Court resolves whether equitable reformation or subrogation is available and whether trustee’s status as a hypothetical bona fide purchaser is a defense; Barnes Deed reformation granted, Antioch Deed reformation denied, subrogation denied.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether equitable reformation is available for Barnes Deed	eBank/Pltf contends mutual mistake allowed reformation to reflect intended security	Trustee argues no mutual ownership transfer and no intent to grant security	Barnes Deed reformation granted; lien recognized
Whether equitable reformation is available for Antioch Deed	eBank seeks reformation to reflect intended security	Trustee argues no notice and no proper chain of title	Antioch Deed reformation denied
Whether equitable subrogation applies to Antioch Property	eBank seeks subrogation to step into prior lien due to funds used to pay Regions Bank	Trustee argues lack of notice and potential rebuttal by bona fide purchaser	Subrogation denied; no enforceable first lien established against trustee
Whether section 546(a) bars trustee from asserting bona fide purchaser defense to reformation	Trustee cannot rely on 544(a)(3) if 546(a) time expired	Trustee may raise status as defense; tolling possible; no need to sue timely	Trustee may raise b.f.p. defense; 546(a) tolling may apply; not barred as a defense
Whether Trustee is a bona fide purchaser without notice in Barnes and Antioch properties	Deeds outside chain of title do not give notice; modification inside chain gives notice for Barnes	Trustee argues lack of notice for Antioch; Barnes modification created notice	Barnes: yes; Antioch: no; trustee not a BFP with respect to Antioch

DeGolyer v. Green Tree Servicing, LLC, 291 Ga.App. 444, 662 S.E.2d 141 (Ga.App. 2008) (equitable reformation permitted to reflect true intent when mutual mistake evident)
In re Hedrick, 524 F.3d 1175 (11th Cir. 2008) (constructive notice and inquiry notice principles in real property)
In re Morgan, 449 B.R. 821 (Bankr.N.D.Ga. 2010) (equitable subrogation and bona fide purchaser concepts in GA context)
National Assistance Bureau, Inc. v. Macon Memorial Intermediate Care Home, 714 F. Supp. 2d 1192 (M.D.Ga. 2009) (reformation permitted despite negligence if no prejudice)
First National Bank Of Polk County v. Carr, 260 Ga.App. 439, 579 S.E.2d 863 (Ga.App. 2003) (lack of due diligence not necessarily fatal to reformation; but context matters)
Vance v. Jackson, 233 Ga.App. 480, 504 S.E.2d 529 (Ga.App. 1998) (cannot reform to convey property when grantor had no title; limits mutual mistake)
In re Hagendorfer, 803 F.2d 647 (11th Cir. 1986) (notice and chain-of-title concepts in lien priority)
In re Hill, 2010 WL 3927060 (Bankr. S.D. Ga. 2010) (case authority on comparable title and notice issues (unreported))