Metes and bounds legal descriptions are often indecipherable. Finding the points of beginning and then following the compass direction for the stated distances is difficult to translate from words to the ground. That’s why surveys and surveyors exist. I won’t even try to follow a metes and bounds legal description without first unrolling a large and detailed survey to guide me through the process. But surveys cost money, and are often impractical to acquire, especially before bidding at a non-judicial trustee’s sale. So how does a potential bidder at a nonjudicial foreclosure know exactly what’s for sale?
While this uncertainty exists, both lenders and debtors seek to maximize the prices bid at foreclosure sales, so the loans in default get paid off from the sale of the collateral. Debtors obviously want to receive as much of a credit against their debt as possible. Most lenders avoid becoming property owners. Very few banks see ownership of foreclosed property as a profit center, preferring to be repaid so they can make new loans; and uncertainty about a property’s dimensions is the enemy of robust bidding at trustee’s sales.
The Washington Court of Appeals, Division I, recently considered reforming a trial court ruling allowing a Trustee’s Deed, after a nonjudicial foreclosure, to add additional property to a legal description of property conveyed. Glepco, LLC v. Reinstra, ____ Wn App. ___, Case No. 67934-1-1 (WA Ct. App., Jul. 22, 2013). As the Court described it, the Grantee brought “a quiet title action involving property purportedly sold at a nonjudicial foreclosure sale. At the sale, the [Grantee] made a successful bid on the appellant’s property, believing, based on the address and other references in the deed of trust and notice of trustee’s sale, that they were bidding on a three-acre lot with a house. After the sale, however, the buyers discovered that the legal description of the property in those documents described only the drain filed portion of the land.”
The plaintiffs argued that the trustee’s deed, conveying title to the foreclosed property, and the underlying deed of trust upon which the foreclosure was based, were intended to include the legal description for both the drain field as well as the house and the balance of the three-acre lot. They asked the court to reform those instruments to reflect the parties’ intent based on the doctrine of mutual mistake (of the bank and the former homeowner/appellant) or because the instruments included a scrivener’s error. The plaintiffs requested equitable relief which contended was justified because they acted reasonably in relying on the street address of the house in the deed of trust, the tax parcel number with included the entire three-acre lot, and the assumption that the bank would not foreclose on a portion of a building lot.
The trial court and the Court of Appeals ruled that because the evidence was undisputed, the parties to the deed of trust intended to convey a lien on the entire combined lot including the house and not just the drain field, and that the incorrect legal description was a result of “mutual mistake.” Similarly, the evidence was substantial that the incomplete legal description constituted a “scrivener’s error.” Therefore, the trial court’s discretion in providing the equitable relief of rewriting the deed of trust and trustee’s deed was sustained.
The decision seems to go against the well established doctrine that a party should not be relieved of the obligation to understand legal documents. People have the duty to learn the meaning of their agreements. It isn't a defense, the enforcement of a contract that you didn't understand your obligations, in the absence of fraud. But in the real world, legal descriptions are different from contracts. What mere mortal can really read and understand a metes and bounds legal description without the aid of a survey?
In the context of nonjudicial foreclosures, surveys are very rarely available. Time is usually limited before a sale date, and there are typically a number of variables which make investing in a survey impractical: Will the property actually go to sale? What is the opening bid? Who else will be bidding? Due to the many unknown variables surrounding a potential foreclosure sale, a party rarely considers a bid to order a survey in advance of a sale. However without a survey, the problem faced by the bidder in the Glepco, LLC v. Reinstra case could arise again.
Fortunately, the Skagit County Superior Court ruled for the bidders, acting reasonably, to get the home that they paid for. The Court of Appeals agreed. Let’s hear it for an equitable decision which promotes the interests of a robust public auction process!
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