Bank questioning past deed

O

OceanSun

New Member
Jurisdiction
Florida
I'm asking this on behalf of my mother and her cousin who are both elderly, and about to have a figurative heart attack over this.

The cousin inherited a house, and then sold it to Mom in 2012. When they wrote up the deed, they left out some part of the property description by mistake. In the mean time, Mom used the house as a rental property, and then in 2020 sold the house. Those owners are now in foreclosure, and the bank (or I guess I should say their lawyers) have named Mom and her cousin as defendants, however, they are not being sued for the foreclosure. What they are saying is that the deed causes them uncertainty as to whether or not they would be able to get a proper deed after the foreclosure, and so they are asking the court to enter a judgment that the deed between Mom and her cousin be considered legally standing. Then when the house was sold to the current owners, they are saying the uncertainty thing again, stating that the deed did not state the martial status of the new owners, and again, asking a judgment be entered that the deed from Mom to the current owners be considered legally standing.

So, the questions are: The first sale was done 13 years ago. Wouldn't there be a statute of limitations in play here? Secondly, the bank is not suing Mom or her cousin for money, only that the deeds be considered good. So, if they did nothing and just let that get entered, is there anything that could harm them later in all of this? And if it really came down to it, couldn't they argue that the bank issued the mortgage with those deeds as they were and didn't question them then?
 
OceanSun said:
So, the questions are: The first sale was done 13 years ago. Wouldn't there be a statute of limitations in play here? Secondly, the bank is not suing Mom or her cousin for money, only that the deeds be considered good. So, if they did nothing and just let that get entered, is there anything that could harm them later in all of this? And if it really came down to it, couldn't they argue that the bank issued the mortgage with those deeds as they were and didn't question them then?
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OceanSun said:
Wouldn't there be a statute of limitations in play here?
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I wouldn't think so. It could happen 100 years from now and still need a court ruling. I'm guessing that there is a title company that won't issue a title insurance policy without clarification.

Did Mom and Cousin get title insurance when the transactions occurred? I'm guessing not.

Mom and Cousin are named as Defendants in a lawsuit. That's all it should take to require the services of an attorney.
 
OceanSun said:
and then sold it to Mom in 2012. When they wrote up the deed, they left out some part of the property description by mistake.
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When was this mistake discovered?


OceanSun said:
So, the questions are: The first sale was done 13 years ago. Wouldn't there be a statute of limitations in play here?
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I don't understand the question in the context. There is no statute of limitations that is relevant to the current foreclosure suit.


OceanSun said:
Secondly, the bank is not suing Mom or her cousin for money, only that the deeds be considered good. So, if they did nothing and just let that get entered, is there anything that could harm them later in all of this?
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Highly unlikely.


OceanSun said:
And if it really came down to it, couldn't they argue that the bank issued the mortgage with those deeds as they were and didn't question them then?
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I don't really understand the first eight words of this sentence. For what purpose do you think they would make this argument?

Your mother and cousin no longer have any interest in the property. Correct? They certainly can consult with a local attorney, but the smartest thing to do might be to contact the bank's attorney and tell him/her that they have no interest in the property or outcome and would stipulate to such as long as there is no monetary liability for them. My company finds itself in this sort of situation from time to time, and that's what we typically do.
 
I'll address what I'm guessing is the underlying question you have: why are they named the lawsuit when it (very likely) won't have any practical effect on them. The answer is to create a clear title. If the deed isn't accurate it may cloud the title, making the property difficult to sell. The bank is going through the process to correct/reform the deed to remove that cloud.

That requires the the person filing the lawsuit (present owner or the current lender) include anyone who was a seller/transferor of the property and anyone who have or had an interest in the property (including tax liens, judgment liens, etc) in order to to give them the chance to object to the change to the deed.

While most of the time, as in your mother and aunt's situation, there isn't any adverse effect on the prior owners or anyone else.. In those situations there isn't a need to respond to the lawsuit because they have no objection to it. This process is needed in the event a prior transferor might have some objection to the change. That does sometimes happen.

I had one such case when I was an officer for the IRS. The mistake in that deed would put the government at a disadvantage if it was reformed. I solved the problem by informing the taxpayers and the mortgage lender of the error and telling them I would seize the property and sell it if the tax liability was not paid. I had earlier filed a notice of federal tax lien which secured the government's position in the property. The mortgage lender's lawyers promptly responded and told me I'd have a certifed check for the entire liability in a few days. I was happy, my case was closed with that check.

The mortgage lender then rolled that amount into the mortgage so the taxpayers ended up paying the bank for those tax liabilities. If it had instead filed an action to reform the deed it'd have to file that in federal district court (which gets expensive). I then would have referred the case to IRS counsel so they could file an answer and object to the change.

The point here is that it was situation in which someone (the government in this case) would be affected by the reformation and it is that kind of situation that all those persons who had some interest in the property when the deeds had the error(s) on it that prompts the need to name all those parties.
 

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