Wells Fargo Bank, N.A. v. Coleman

Wells Fargo filed to foreclose on the Colemans’ property in 2010, due to the Colemans’ default on a 2007 deed of trust. Wells Fargo then noticed that the deed of trust referenced the book and page and tax parcel ID of the adjacent lot, and sought reformation of the deed of trust for mutual mistake. The Colemans asserted the defenses of the three-year statute of limitations under N.C.G.S. § 1-52(9), laches, the non-claim statute under N.C.G.S. § 28A-19-3(a). On the parties’ cross-motions for summary judgment, the trial court granted the Colemans’ motion “[w]ithout specifying the grounds on which it based its judgment[.]” Thereafter, Wells Fargo appealed the grant of summary judgment.

Finally, the Court held that summary judgment was inappropriate on Wells Fargo’s reformation claim. Reformation is an equitable remedy to reframe a written agreement which fails to embody the parties’ actual, origi-nal agreement either by the mutu-al mistake of the parties, or the unilateral mistake of a party in-duced by the other’s fraud, and that as a result the written agree-ment does not reflect the parties’ original intent. A party seeking reformation on that ground must show the foregoing by clear and convincing evidence.. Further, the negligence of the party seeking reformation is not a bar to relief, citing Metro Prop. & Cas. Ins. Co. v. Dillard, 487 S.E.2d 157, 159 (1997). As the court stated, “a party seeking reformation of a written instrument need not allege or prove that the mutual mistake was a reasonable or neglect-free mistake… reformation is available if there is clear, cogent, and convincing evidence that the mistake was a mutual one and that it prevents the instrument from embodying the parties’ actual, original agreement.”

As the Court noted, the Cole-mans’ basis for summary judgment was based solely on Wells Fargo’s failure to exercise “reasonable diligence” when drafting the deed of trust, which is not a requirement for a reformation on the grounds of mutual mistake. Instead, the Court held that Wells Fargo was entitled to reformation because it “presented uncontested evidence” that the parties intended that the deed of trust refer to the Colemans’ property, and not the adjacent lots, which evidence the court ostensibly found to be clear and convincing. Therefore, the only issues remaining on remand would be those necessary to resolve the Colemans’ remaining defenses.

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