Ann has given you some very good advice! You need to find an experienced real estate lawyer who already understands the law in this area. You cannot possibly afford to pay a lawyer to learn arcane aspects of real estate law.
That being said, the facts of the case you describe somewhat remind me of a recently decided Ohio appellate case which bears reading for sheer amusement, if for no other reason. The case is:
Wells Fargo Bank Minn. v. Mowery, Case No. 09CA3300, COURT OF APPEALS OF OHIO, FOURTH APPELLATE DISTRICT, SCIOTO COUNTY, 2010 Ohio 1650; 2010 Ohio App. LEXIS 1368, April 5, 2010, File-Stamped.
This case may be viewed for free (after free registration) at the LexisOne site:
It is also posted directly on the Ohio court site at:
(Although it is easier to just get this case at the Ohio Court site, I am a big fan of LexisOne, where almost ALL reported appellate decisions nationally from the past ten years are available for FREE.)
In Mowery, deeds for two adjacent properties were transposed in a divorce settlement. The parties to the settlement treated the separation of property as they had agreed, but the deeds did not reflect that disposition. One property was improved (had a house). The other property was a vacant lot.
Wilma McCLURG thought she was getting the house (and in fact DID occupy the house during her lifetime). Her husband was supposed to have gotten the vacant lot. But the deeds were issued incorrectly.
Later, Mrs. McCLURG obtained a mortgage on the property. The bank, its title insurer, appraiser and/or surveyor failed to note that the property for which Mrs. McCLURG actually had title and offered to mortgage was a vacant lot.
Both Mr. and Mrs. McCLURG later died, neither discovering the error and these two properties passed to their heirs (subject to the mortgage). The mortgage on the property fell into default and the bank foreclosed. It was surprised to discover that it foreclosed only on the vacant lot!
The mortgage investor sought reformation of the deeds to reflect the original intention of the parties, to enable it to foreclose on the property it THOUGHT it was securing by mortgage.
In a very well reasoned decision, the Ohio appellate court found:
In relation to the Mortgage Mistake, we find that The Money Store’s negligence was not excusable. The Mortgage included the legal description of the Undeveloped Parcel, and The Money Store was in the mortgage business. Therefore, it was not excusable for The Money Store to have believed the Mortgage actually applied to any property other than the Undeveloped Parcel. A sheriff’s deputy discovered that the Undeveloped Parcel is a vacant lot simply by visiting the property. Had The Money Store undertaken even a cursory amount of due diligence, it would have discovered the true nature of the Undeveloped Parcel. A mortgage company’s failure to learn the most basic facts about a mortgaged property cannot be excusable negligence.
As the assignee of the Mortgage, Wells Fargo stands in the shoes of The Money Store. EMC Mtge. Corp. v. Jenkins, 164 Ohio App.3d 240, 2005-Ohio-5799, at ¶20; Cleveland Trust Co. v. Elbrecht (1940), 137 Ohio St. 358, 360. Thus, Wells Fargo cannot have a greater right to reform the Mortgage than The Money Store had. See W. Broad Chiropractic v. Am. Family Ins., Franklin App. No. 07AP-721, 2008-Ohio-2647, at ¶15, citing Citizens Fed. Bank, F.S.B. v. Brickler (1996), 114 Ohio App.3d 401, 410. And because The Money Store’s own inexcusable negligence would have precluded their reformation of the Mortgage, Wells Fargo may not seek reformation of the Mortgage as The Money’s Store’s assignee.
The children of the McCLURGs, heirs to both deceased parents, found that the undeveloped parcel they thought was being bequeathed by their father was actually subject to their mother's mortgage, was subject to the lender's foreclosure judgment. But they unexpectedly found that the more valuable improved property, which they had expected would be lost through foreclosure sale, had passed to them unencumbered, free and clear!
Transactions ARE sometimes subject to rescission based upon mutual mistake of fact or reformation to reach the result intended by the parties. But the case you describe is complex. Had the mortgage investor discovered the mistake in a timely way during the lifetime of Mrs. McCLURG, it almost certainly could have sought a reformation of the mortgage to reflect the intention of the parties. Trying to belatedly reform a transaction decades after a mistake and after the death of the parties to the mistake is somewhat more problematic, particularly where the party seeking relief was negligent.