Next Generation Bar Exam Quiz
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CONTRACTS
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Section 9 of the State Reformation Act provides: "Reformation of an instrument is effective from the time of the instrument's original execution. However, a reformed instrument is not effective against a subsequent purchaser or encumbrancer who acquired an interest in the property for value and without notice of the mistake, or against a person claiming through such a purchaser or encumbrancer."
Owen and Alice signed a contract for the sale of Lot 1. Because of a scrivener's error, the deed described Lot 2, and neither Owen nor Alice noticed. Alice recorded the deed. She then borrowed money from Bank, giving Bank a mortgage on Lot 2. Bank's loan officer did not know of the mistake; a title search showed Alice as the record owner of Lot 2 and revealed no exceptions. Owen later discovered the error and sued to reform the deed to describe Lot 1 and to cancel Bank's mortgage. Under Section 9, what is the result as to Bank's mortgage?
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