Wells Fargo Bank v. Noerring
2018 UT App 232
| Utah Ct. App. | 2018Background
- Lynnette formed the OMI Trust in 2003 (trust owned the property). She repeatedly refinanced and sometimes conveyed the property between herself individually and as trustee.
- In March–August 2006, a quitclaim deed (recorded March 3, 2006) listed the grantor as “Lynnette Noerring, a married woman” (not as trustee) and a subsequent New Century trust deed (recorded August 29, 2006) was executed by Lynnette and her daughter Justine, purporting to grant a security interest to New Century Mortgage.
- The New Century loan (later assigned to Wells Fargo) secured the note, but title later showed the record owner remained ‘‘Lynnette Noerring, as trustee of the OMI Trust,’’ meaning the security interest was not effectively conveyed.
- After default, Wells Fargo sought reformation of the deeds (either the 2006 Quitclaim Deed or the New Century Trust Deed) to reflect that Lynnette, as trustee of the OMI Trust, conveyed the security interest, so foreclosure could proceed. The trial court reformed the New Century Trust Deed to make the grantor “Lynnette, as trustee of the OMI Trust.”
- Appellants (Justine and later trustee Darwin Long) appealed, arguing (1) jurisdictional bar under Utah’s nonclaim statutes, (2) statute of limitations, and (3) that the court lacked authority to reform by substituting the trust as grantor.
Issues
| Issue | Plaintiff's Argument (Wells Fargo) | Defendant's Argument (Appellants) | Held |
|---|---|---|---|
| Applicability of Utah Nonclaim Statutes | Reformation is equitable, not a "claim" that must be presented within one year; trustee/estate presentation rule does not bar equitable reformation | Reformation was a claim against the decedent’s trust/estate and was time-barred because it was not presented within one year after Lynnette’s death | Reformation is equitable relief outside the nonclaim definition; nonclaim statutes did not deprive the court of jurisdiction to hear reformation claims |
| Statute of Limitations for Mistake/Fraud (3 years) | Discovery rule: limitations runs from when lender discovered the mistake (Wells Fargo discovered via title search in Sept. 2011), suit filed within three years | Recording statutes gave constructive notice in 2006, so New Century/Wells Fargo should have discovered the mistake then and the three-year period expired before suit | Trial court’s factual finding that discovery occurred in 2011 was not clearly erroneous; recorded instruments’ contents do not necessarily equal discovery of the facts constituting the mistake |
| Power to reform deed by substituting the trust as grantor | Parties intended the trust’s interest to secure the loan; reformation corrects mutual mistake and adds words to reflect true intent; trust was not prejudiced | Reformation improperly substitutes a third party/creates a new deed and cannot add an omitted legal entity to the instrument | Reformation was proper: it corrected a mutual mistake to reflect the parties’ intent, did not create impermissible prejudice to innocent parties, and did not improperly manufacture a new document |
Key Cases Cited
- In re Estate of Ostler, 227 P.3d 242 (Utah 2009) (nonclaim statutes create a jurisdictional bar)
- Daigle v. Ingram, 634 P.2d 71 (Colo. 1981) (distinguishing nonclaim statutes from statutes of limitation)
- In re Estate of Randall, 441 P.2d 153 (Colo. 1968) (discussing nonclaim statute effects on jurisdiction)
- RHN Corp. v. Veibell, 96 P.3d 935 (Utah 2004) (reformation appropriate where instrument fails to reflect parties’ true agreement)
- Russell Packard Dev., Inc. v. Carson, 108 P.3d 741 (Utah 2005) (statute-of-limitations discovery rule and accrual principles)
- FDIC v. Taylor, 267 P.3d 949 (Utah App. 2011) (describing reformation as equitable remedy and discussing notice concepts)
- Smith v. Edwards, 17 P.2d 264 (Utah 1932) (recording notice of deed is not necessarily notice of facts constituting fraud or mistake)