Summary:
Lewis Stocks purchased a house to be owned by his daughter, Tia Stock, with a mortgage note and Deed of Trust in his name only and held originally by First Union, but then through mergers by to Wachovia and ultimately Wells Fargo. On January 12, 2005, Lewis Stocks executed a new note to Wachovia, again in his name only. Then on January 19, 2005, Tia Stocks executed a new Deed of Trust listing her as the borrower and stating that she was “indebted to [Wachovia] in the principal sum of U.S. $83034.00 which indebtedness is evidenced by Borrower’s Note dated 01/12/2005.” (Emphasis added.) As Tia Stocks was not a signatory, the Deed of Trust was secured by a non-existent debt. After Lewis Stocks’ death, Tia Stock defaulted on the Note in 2016 and Wells Fargo sought reformation of the Deed of Trust in order to foreclose.
Tia Stocks argued that pursuant to N.C.G.S. § 1-52(9), the applicable Statute of Limitations for mistake was 3 years. Relying on the recent Nationstar Mortgage, L.L.C. v. Dean, 820 S.E.2d 854 (N.C. Ct. App. 2018), the Court of Appeals held that the ten-year Statute of Limitations in N.C.G.S. § 1-47(2) for documents signed under seal was instead applicable. However, because N.C.G.S. § 1-47(2) did not, unlike N.C.G.S. § 1-52(9), run from the date the claimant “actually learns of [the mistake’s] existence or should have discovered the mistake in the exercise of due diligence”, but instead “a cause of action accrues at the time the injury occurs[,] . . . even when the injured party is unaware that the injury exists[.]" Pembee Mfg. Corp. v. Cape Fear Constr. Co., 313 N.C. 488, 492, 329 S.E.2d 350, 353 (1985) (citations omitted) (emphasis added). Accordingly, since it had been 12 years since the faulty Deed of Trust had been granted, it was too late for Wells Fargo to reform the document and foreclose.
The dissent argued that because Tia Stocks did not specifically raise N.C.G.S. § 1-47(2), the Court of Appeals should not create the argument on her behalf. The majority rejected this, as Wells Fargo raised itself N.C.G.S. § 1-47(2) as its defense and, one might suspect, Dean had only been decided shortly before the briefs were submitted in this case.
Commentary:
This is a rare example of a home owner getting the judicially despised “free house” and it only took Wells Fargo sitting on its rights for 12 years.
For a copy of the opinion, please see:
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