339 Ga. App. 342
Ga. Ct. App.2016Background
- In 2005 Robert Garnto obtained a loan from Lending Street Mortgage (LSM) and executed a security deed to Mortgage Electronic Registration Systems, as nominee for LSM, describing a 3.56-acre tract though the Garntos owned an 18.56-acre parcel containing the residence.
- LSM assigned the security deed to Wells Fargo on June 10, 2011. The Cline Drive Land Trust (the Trust) acquired the Property in 2012 from Drusilla Garnto.
- Wells Fargo sued the Trust seeking reformation of the security deed on grounds of mutual mistake, to replace the 3.56-acre description with the legal description of the entire 18.56-acre Property.
- The Trust moved for judgment on the pleadings, arguing Wells Fargo’s reformation claim was time-barred by the seven-year statute of limitations because the cause accrued in 2005.
- The trial court denied the Trust’s motion, concluding (relying on Barron) the limitations period began when Wells Fargo acquired the assignment in 2011. The Trust appealed that interlocutory denial.
Issues
| Issue | Plaintiff's Argument (Wells Fargo) | Defendant's Argument (Trust) | Held |
|---|---|---|---|
| When did the statute of limitations on a reformation claim accrue for an assignee? | Accrual may be measured from when assignee could reasonably discover the mistake (here, after 2011 assignment). | The claim accrued in 2005 when the deed was executed, so suit filed in 2015 is time‑barred. | The trial court erred to the extent it treated accrual as necessarily beginning at assignment; assignee takes subject to assignor’s defenses, including an earlier accrual. |
| Whether the alleged mistake was discoverable with reasonable diligence by the assignor (LSM) in 2005? | Not directly disputed by Wells Fargo in the pleadings; reformation may still be allowed if no prejudice to Trust. | The mistaken legal description was apparent on the deed and should have been discovered in 2005. | Pleadings show the mistake was apparent and discoverable by LSM with reasonable diligence. |
| Whether the Trust is entitled to judgment on the pleadings because the claim is time‑barred or prejudicial to a bona fide purchaser? | The limitation defense and prejudice are factual; reformation might be allowed if Trust suffered no prejudice. | Trust contends it is a bona fide purchaser for value without notice and would be prejudiced, so relief is barred. | The pleadings do not establish as a matter of law that the Trust had no notice or would necessarily be prejudiced; judgment on the pleadings was inappropriate. |
| Whether Barron v. Wells Fargo mandates accrual at assignment for all assignee reformation claims? | Barron supports measuring accrual from when assignee could discover error after assignment. | Barron controls and supports trial court’s reasoning. | Barron did not hold accrual must begin at assignment; its holding was limited by its facts. |
Key Cases Cited
- Haffner v. Davis, 290 Ga. 753 (reformation accrues when mistake is or should have been discovered)
- Cohen v. Wachovia Mortg. Corp., 332 Ga. App. 109 (reformation not barred by limitations if non‑complaining party not prejudiced)
- Barron v. Wells Fargo Bank, N.A., 332 Ga. App. 180 (fact‑specific treatment of accrual and judicial estoppel; not a broad rule that accrual always begins at assignment)
- Pridgen v. Auto‑Owners Ins. Co., 204 Ga. App. 322 (assignee takes subject to assignor’s defenses, including statute of limitations)
- Houghton v. Sacor Financial, Inc., 337 Ga. App. 254 (assignee cannot reset limitations by asserting new demand post‑assignment)