Trent v. Mountain Commerce Bank
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The Supreme Court affirmed the judgments of the trial court and the court of appeals denying reformation of a quitclaim deed, holding that equitable reformation was not available when reformation would benefit parties with constructive notice of a title defect but harm the rights of creditors with recorded judgment liens.
A husband and wife quitclaimed parcels of real property. The wife, who owned the property with her husband as tenants by the entirety, was omitted as grantor on one of the quitclaim deeds. Later, two banks obtained judgments against the husband and wife. When the property was sold, the purchasers discovered that the property was subject to the wife's retained ownership interest and the banks' recorded judgment liens. The wife signed a quitclaim deed of correction. The purchasers then filed a declaratory judgment action asking to the trial court to hold, based on mutual mistake, that the corrected quitclaim deed reformed the original quitclaim deed. The court denied reformation. The Supreme Court affirmed, holding that because reforming the quitclaim deed would deprive the banks of their recorded judgment liens and benefit the purchasers and their lender, who acquired the property with constructive notice of the banks' recorded judgment liens and the wife's remaining interest in the property, the purchasers were not entitled to reformation.
Court Description:
Authoring Judge: Justice Sharon G. Lee
Trial Court Judge: Judge Jean A. Stanley
The issue presented is whether a quitclaim deed should be equitably reformed when reformation would benefit parties with constructive notice of a title defect and harm the rights of creditors with recorded judgment liens. A husband and wife quitclaimed parcels of real property to limited partnerships. The wife was omitted as a grantor on one of the quitclaim deeds even though she and her husband owned the property as tenants by the entirety. Two banks obtained judgments against the husband and wife and recorded the judgments. The property was later sold, and the purchasers and their lender discovered that the property was subject to the wife’s retained ownership interest and the banks’ recorded judgment liens. To remedy the error, the husband and wife signed a quitclaim deed of correction, referencing the wife’s omission as a grantor on the previous quitclaim deed. The purchasers and their lender then filed this declaratory judgment action asking the trial court to hold, based on mutual mistake, that the corrected quitclaim deed reformed the original quitclaim deed, vested ownership in the limited partnership, divested the wife’s interest, and removed the banks’ judgment liens. The trial court denied reformation, finding that there was no mutual mistake by the husband and the limited partnership who signed the original quitclaim deed. The Court of Appeals affirmed. After considering the equities of the parties, we decline to grant reformation of the quitclaim deed because doing so would deprive the banks of their recorded judgment liens and benefit the purchasers and their lender who acquired the property with constructive notice of the wife’s remaining interest in the property and the banks’ recorded judgment liens. Thus, we need not decide whether reformation is an available remedy to correct a quitclaim deed by adding an omitted grantor. We affirm the judgments of the trial court and the Court of Appeals, based on different reasoning.
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