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Case Law Update: "Scriveners" Error in Deed of Trust subject to Reformation by Court.

Posted Friday, August 23, 2013 by Christopher L. Thayer

alt textIn GLEPCO v. Reinstra, the Washington Court of Appeals, Division 1, held that a trial court had the authority to add the correct legal description on a trustee’s deed after a foreclosure sale where it was determined that there was an error in the description.

In GLEPCO, the Reinstra’s owned two adjacent lots in Skagit County. The county required the Reinstra’s to combine the two lots (Lot “A” and “B”) into one lot (the “Combined” Lot) in order to develop the property. In 2006 the Reinstra’s borrowed $200,000 from Peoples Bank, secured by a deed of trust on the combined lot. The Reinstra’s’ loan was sold to GMAC and they then later refinanced with GMAC in 2008. When they refinanced, the deed of trust prepared by GMAC included only the legal description for the former Lot A.

The Reinstra’s defaulted on their loan with GMAC and GMAC instituted a non-judicial foreclosure in 2010. The notice included the correct tax parcel number for the Combined Lot, but the legal description was for the former Lot A. Enter Greg and Pamela Hinton, and their company GLEPCO. The Hinton’s checked the Skagit County Assessor records, which showed the property as a 3 acre lot, including a house. They were the winning bidders at the trustee sale, believing they were acquiring the 3 acre lot.  After receiving the trustee’s deed, however, they discovered that the deed only purported to transfer title to the drain field portion of the property - former Lot A. The Hinton’s filed suit seeking quiet title to the Combined Lot. They argued that there was a “scriveners error” (basically a clerical error, such as a typographical error) and that the trustee’s deed should therefore be reformed (i.e., revised) to reflect that the Combined Lot was sold at the trustee sale. The trial court agreed and reformed the deed, providing title to the entire Combined Lot to the Hinton’s. Reinstra appealed.

The Court of Appeals noted that, although RCW 61.24.040 provides that trustee sales are made “without warranty, express or implied, regarding title….”, that this did not preclude reformation of a trustee’s deed “where a defect in the legal description is alleged as the product of scrivener’s error or mutual mistake.” Reformation is allowed as an equitable remedy only where writing is materially different than the parties’ agreement, and it can be proven by “clear, cogent and convincing evidence”. It must be shown that the intention of the parties was mutual “but the written agreement errs in expressing that intention”. Here, the Court of Appeals noted that “while there is no evidence in the record from GMAC we can discern no logical reason whatsoever, nor is any offered, as to why GMAC would have agreed to eliminate the valuable part of the security with the house on it”.  The court concluded that the trial court had properly ruled that reformation of the trustee’s deed was appropriate under the circumstances.

Reformation is an exceptional remedy that is only available in very limited circumstances, and anyone purchasing property should not count on the courts coming to the rescue if there is a material error in the underlying documents. The GLEPCO case highlights a hidden risk associated with purchasing properties at foreclosure sales. Despite their due diligence, the Hinton’s did not realize that they were only acquiring a portion of the property at the trustee sale. They had to go through lengthy and expensive litigation (including an appeal) in order to obtain the relief that they sought.

For more information, contact Pivotal Law Group, PLLC at (206) 340-2008.

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