768 S.E.2d 604
N.C. Ct. App.2015Background
- Robert and Edna Coleman refinanced in 2007; the deed of trust correctly listed the street address (the developed lots with the house) but mistakenly listed book/page and parcel ID for the adjacent undeveloped lots.
- Wachovia (later merged into Wells Fargo) ordered an appraisal referencing the developed property; loan proceeds paid off the mortgage on the developed property.
- Mr. Coleman died in 2008; the estate published creditor notice in early 2009. Wells Fargo acquired the loan by merger in 2010 and began foreclosure proceedings in December 2010, then dismissed and sued for reformation and judicial foreclosure.
- Defendants moved for summary judgment arguing the reformation claim was time-barred (statute of limitations), barred by laches, failed for lack of reasonable diligence, and barred by the non-claim statute against estates.
- The superior court granted summary judgment for Defendants; Wells Fargo appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicable statute of limitations | 10-year statute for sealed instruments applies | 3-year statute for fraud/mistake applies; suit untimely | Court finds 10-year argument waived on appeal; applies 3-year statute and rejects summary judgment because date of discovery is a factual issue |
| Whether reformation requires reasonable diligence | Reformation available despite any lender negligence; mutual mistake proven by appraisal, address, loan use | Reformation barred because Wachovia failed to exercise reasonable diligence and would have discovered mistake earlier | Court holds no separate reasonable-diligence prerequisite for reformation; negligence does not defeat mutual-mistake reformation; summary judgment on merits improper because defenses unresolved |
| Laches | Delay was reasonable given correct street address and non-obvious legal-description error | Delay was unreasonable and prejudicial; bars relief | Court holds laches is fact-dependent; genuine factual disputes preclude summary judgment |
| Non-claim statute (estate claims) | Action enforces a deed of trust; reformation is part of enforcement and thus exempt from non-claim bar | Wells Fargo failed to present claim within estate claim window; statute bars suit | Court holds statutory carve-out for actions to enforce mortgages/deeds of trust applies; non-claim statute does not bar this action |
Key Cases Cited
- Vail v. Vail, 233 N.C. 109 (explains discovery rule for fraud/mistake and when registration does not trigger limitations)
- Huss v. Huss, 31 N.C. App. 463 (refuses to foreclose fact questions about due diligence and permits reformation despite apparent mistakes)
- Dillard v. Metropolitan Property & Casualty Ins. Co., 126 N.C. App. 795 (negligence by party or draftsman does not preclude reformation for mutual mistake)
- Hice v. Hi-Mil, Inc., 301 N.C. 647 (requires clear, cogent, and convincing proof for reformation)
- Forbis v. Neal, 361 N.C. 519 (summary judgment review: draw inferences against movant; factual disputes preclude summary judgment)