U.S. Bank Trust National Association as Trustee for Treehouse Series V. Trust v. Patsy Barwick and Rocky Slaughter

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE DANIELLE GIBBS LEONARD L. WILLIAMS JUSTICE CENTER MAGISTRATE IN CHANCERY 500 NORTH KING STREET, SUITE 11400 WILMINGTON, DE 19801-3734

Date Submitted: January 6, 2026 Date Decided: July 30, 2026

Leslie Bonham Spoltore, Esquire Richard E. Berl, Jr., Esquire Obermayer Rebmann Maxwell & Hudson, Jones, Jaywork & Fisher, Hippel LLP LLC 123 S. Justison St., Suite 100 34382 Carpenter’s Way Suite 3 Wilmington, DE 19801 Lewes, DE 19958

Re: U.S. Bank National Trust Association v. Barwick & Slaughter, C.A. No. 2025-0073-DG

Dear Counsel:

Plaintiff U.S. Bank Trust National Association, in its capacity as

Trustee for Treehouse Series V Trust, seeks to reform a mortgage executed by

Defendant Patsy Barwick in 2007 to correct an alleged mistake in the legal

description that encumbered Tax Parcel Number 1.00-01.11-01-03.00

(“Parcel 3.00”) rather than the intended property: Tax Parcel Number DC-00-

010.11-03.01 (“Parcel 3.01” and, together with Parcel 3.00, the “Parcels”).1

Defendant Rocky Slaughter purchased the parcel that U.S. Bank maintains the

mortgage was supposed to encumber in 2024. Slaughter moved to dismiss

1 Dkt. 1 at Exs. 2–3. C.A. No. 2025-0073-DG July 30, 2026 Page 2 of 13

U.S. Bank’s complaint under Court of Chancery Rule 12(b)(6). The issue

pending before the Court is whether U.S. Bank’s claim for reformation may

proceed against Slaughter, who contends he is a bona fide purchaser of the

parcel, and bind him to Barwick’s 2007 mortgage. The answer is no.

I. BACKGROUND 2

The following facts are drawn from the Complaint and the documents

it incorporates by reference.

A. Barwick executes a mortgage encumbering her land.

By deed dated August 26, 1974, Hartley A. Gray and Louise R. Gray

conveyed Parcel 3.00 in Kent County to Patsy Barwick and her husband.3 In

1991 the Barwicks acquired Parcel 3.01. 4 On May 9, 2007, the Barwicks

executed a mortgage with CitiFinancial, Inc. (“Mortgage”).5 The Mortgage

was recorded in Kent County and erroneously listed the encumbered property

2 In this report, I cite to Pl.’s Verified Compl. for Reformation of Mortgage, Dkt. 1, as “Compl.”, Def. Slaughter’s Opening Br. in Support of His Mot. to Dismiss, Dkt. 24, as “OB”, Pl.’s Answering Br. in Opp. to Mot. to Dismiss, Dkt. 28, as “AB”, and Def. Slaughter’s Reply Br. in Support of His Mot. to Dismiss, Dkt. 30, as “RB”, Pl.’s exhibits as “PX”, and Def. Slaughter’s exhibits as “DX”. 3 Compl. Ex. 1. The Barwick Deed is recorded in the Kent County Recorder of Deeds, Deed Book N, Volume 29, Page 343. Id. 4 OB Ex. A. 5 Compl. ¶ 9; id. Ex. 4 (the Mortgage instrument).

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as Parcel 3.00 instead of Parcel 3.01.6 On August 30, 2016 CitiFinancial

assigned its rights under the Mortgage to Bayview Loan Servicing LLC.7

On or about July 14, 2020, the Mortgage fell into default. The

Mortgage subsequently passed to U.S. Bank through two more assignments

in July and September 2022, respectively. 8

On March 10, 2024, Barwick became the sole owner of the Parcels

when her husband passed away.9 Slaughter purchased Parcel 3.01 from

Barwick a few days later, and recorded his deed on March 14.10 At the time

of the conveyance and when Slaughter recorded his deed, the Mortgage was

recorded in the Kent County land records as encumbering Parcel 3.00.11

On January 23, 2025, roughly ten months after Slaughter recorded his

deed, U.S. Bank filed the Complaint asserting a single count for reformation

of the Mortgage.12 The matter was initially assigned to the Court’s routine

6 Compl. ¶¶ 11–12. 7 Id. Ex. 5. 8 See Compl. ¶¶ 14–15; id. Exs. 6–7. 9 Compl. ¶ 6. 10 Compl. ¶ 8; id. Ex. 2. 11 Compl. ¶ 9; id. Ex. 4. 12 Dkt. 1.

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action docket, 13 and scheduled for a hearing on May 6. 14 Slaughter’s counsel

appeared at the May 6 hearing and the Court reassigned the matter to its civil

action docket. 15

On May 28, Slaughter moved to dismiss the Complaint under Court of

Chancery Rule 12(b)(6) (“Motion”). 16 On June 3, Slaughter submitted his

opening brief. 17 On July 22, U.S. Bank filed its answering brief. 18 On July

30, Slaughter filed his reply brief. 19 The Court heard argument on the Motion

on January 6, 2026, and took the matter under advisement on that date.20

II. ANALYSIS

When evaluating a motion to dismiss under Rule 12(b)(6), Delaware

courts “(1) accept all well pleaded factual allegations as true, (2) accept even

vague allegations as ‘well pleaded’ if they give the opposing party notice of

the claim, [and] (3) draw all reasonable inferences in favor of the non-moving

13 See Dkts. 2–3. 14 Dkt. 14. 15 See Dkt. 20. 16 Dkt. 24. 17 Dkt. 26. 18 Dkt. 28. 19 Dkt. 30. 20 Dkt. 50.

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party . . . .” 21 The Court will grant a Rule 12(b)(6) motion if the “plaintiff

could not recover under any reasonably conceivable set of circumstances

susceptible of proof.”22

Although review is generally confined to the pleadings, the Court may

consider documents that are incorporated into or integral to the complaint,

together with facts subject to judicial notice. 23

Slaughter contends that the Court should dismiss U.S. Bank’s claim

against him for two reasons. First, Slaughter asserts that he is a bona fide

purchaser of Parcel 3.01 without notice of the Mortgage, so U.S. Bank’s claim

against him fails by operation of law. 24 Second, Slaughter maintains that,

even if U.S. Bank were able to reform the Mortgage, under Delaware’s

recording statute the Mortgage would not attach to Parcel 3.01. 25 I agree with

Slaughter that he is a bona fide purchaser and, therefore, cannot be bound to

21 E.g., Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011). 22 Barkan v. Exabeam, Inc., 2025 WL 1088821, at *4 (Del. Ch. Apr. 11, 2025) (quoting City of Fort Myers Gen. Empls.’ Pension Fund v. Haley, 235 A.3d 702, 716 (Del. 2020)). 23 Cent. Mortg., 27 A.3d at 535. 24 OB at 5–7. 25 Id. at 8–9.

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the Mortgage. Because I find that Slaughter’s bona fide purchaser status is

dispositive, I do not address the parties’ arguments related to the recording

statutes.

A. Slaughter is a bona fide purchaser without notice of the Mortgage, which defeats U.S. Bank’s claim.

“In Delaware, ‘a mortgage is merely a security for the payment of a

debt, or for the performance of some other condition.’”26 In other words, a

mortgage creates a lien encumbering the land used as security.27 Ordinarily,

a party who purchases a property encumbered by a mortgage will acquire the

property subject to and assume the obligations of that mortgage. 28 But, if a

party is a bona fide purchaser of a mortgaged property, the mortgagor cannot

enforce the mortgage against the purchaser.29

A bona fide purchaser is one who acquires the legal title to a property,

in good faith, for valuable consideration, and without notice of any other claim

26 Blagg v. HB2 Alt. Hldgs., LLC, 2024 WL 4836715, at *7 (Del. Super. Nov. 20, 2024) (quoting 2 Wooley on Delaware Practice § 1353 (1906)). 27 See id.; Mortgage, Black’s Law Dictionary (12th ed. 2024) (defining “mortgage” as “A lien against property that is granted to secure an obligation . . . .”). 28 Blagg, 2024 WL 4836715, at *7 (quotation omitted). 29 Restatement (Third) of Property (Mortgages) § 3.2 cmt. g. (1997); Restatement (Third) of Restitution and Unjust Enrichment § 66 (2011).

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of interest in the property.30 The law protects bona fide purchasers because

although a secured party’s equity interest may be strong, it cannot be stronger

than a purchaser who puts themselves “in peril by purchasing a title, and

paying valuable consideration, without notice of any defect in it, or adverse

claim to it.”31

Slaughter asserts that he qualifies as a bona fide purchaser of Parcel

3.01 because a search of the public records “would not have uncovered any

recorded document that would have been considered an encumbrance” on

Parcel 3.01 and U.S. Bank did not allege any facts “that would have alerted

Slaughter . . . after more than 20 years” of its purported interest Parcel 3.01.32

U.S. Bank disputes Slaughter’s contention, maintaining instead that this

argument is premature because this action is not for enforcement. And, even

if Slaughter’s bona fide purchaser status were appropriate for the Court to rule

on, U.S. Bank contends that Slaughter had constructive notice of the Mortgage

on Parcel 3.01 because Barwick listed Parcel 3.01—not Parcel 3.00—as

30 Fletcher v. City of Wilm., 2006 WL 2335237, at *2 (Del. Ch. Aug. 11, 2006). 31 Id. at *3. 32 OB at 7; RB at 6.

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“secured property” when she filed a voluntary bankruptcy petition in 2014.33

U.S. Bank’s theories are unsupported by law.

1. Slaughter’s bona fide purchaser argument is appropriate for review on the pending Motion.

U.S. Bank first contends that the Court should not consider Slaughter’s

bona fide purchaser argument because it “fast-forwards to issues related to

enforcement” that could only take place after the Mortgage is reformed.34

U.S. Bank concludes that the Court must first rule on the reformation claim

before considering Slaughter’s potential bona fide purchaser status.35 U.S.

Bank is incorrect.

The law is clear that “[a]n instrument may not be reformed as against a

subsequent bona fide purchaser for value without notice, whether the mistake

occurs in a deed or in a mortgage.”36 If Slaughter is a bona fide purchaser,

33 AB at 6–8. 34 Id. at 6–7. 35 Id. at 7. 36 76 C.J.S. Reformation of Instruments § 74. See also, e.g., Heartland Del. Inc. v. Rehoboth Mall Ltd. P’rship, 57 A.3d 917, 925 (Del. Ch. 2012) (holding that the elements of reformation require the parties who “imposed upon themselves through contract” the results); cf. NVR, Inc. v. Spring Oaks Dev. Purchaser, LLC, 2025 WL 3515356, at *6 (Del. Ch. Dec. 8, 2025) (holding that an unrecorded equitable ownership interest in several parcels of land was “extinguished . . . when [the defendant] recorded its deeds” to the properties); Eastern Sav. Bank, FSB v. CACH,

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then U.S. Bank will have “fail[ed] to state a claim for which relief can be

granted.”37 Thus, Slaughter’s status as a bona fide purchaser is ripe for

judicial determination on the Motion, and I may properly consider it in my

ruling.

2. The facts U.S. Bank alleges in the Complaint establish Slaughter’s bona fide purchaser status.

First, the factual allegations in the complaint establish two of the

elements. U.S. Bank alleged that Slaughter acquired legal title of Parcel

3.01 38 and that Slaughter acquired it for valuable consideration.39 The only

element at issue is whether Slaughter had notice of the Mortgage, which is

determinative of his bona fide purchaser status. Notice of a mortgage may be

actual or constructive. 40 “Actual notice is an awareness of the alleged

LLC, 55 A.3d 344, 349–50 (Del. 2012) (applying the race recording statute to priorities of mortgages and other liens). 37 Ct. Ch. R. 12(b)(6). 38 Compl. ¶¶ 3, 8; id. Ex. 3. 39 See Compl. ¶ 4 (“Slaughter purchased” Parel 3.01 “from Barwick . . . .”). 40 Deutsche Bank Nat’l Tr. Co. for WaMu Mortg. Pass-Through Certificates Series 2006-AR3 Tr. v. Hines, 2017 WL 5640703, at *5 (Del. Ch. Nov. 21, 2017) (quoting Handler Const., Inc. v. CoreStates Bank, N.A., 633 A.2d 356, 364–65 (Del. 1993)), aff’d sub nom 198 A.3d 723 (Del. 2018).

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restriction by the purchaser at the time of purchase.” 41 Constructive notice is

“is the legal fiction that someone actually received notice . . . whether or not

they truly” were “informed of [something] that could affect their interest.” 42

U.S. Bank does not argue that Slaughter had actual notice of the

Mortgage. Rather, it claims that Barwick’s 2014 bankruptcy filings establish

that Slaughter had constructive notice, which is fatal to his bona fide purchaser

defense. 43 U.S. Bank argues that under the precedent in DiSabatino v.

Salicete, 44 Barwick’s voluntary filing for bankruptcy “provided sufficient

constructive notice of U.S. Bank’s” claim.45 The doctrine U.S. Bank relies

on, however, has been superseded by statute since 1989.46

Generally, constructive notice in the context of a mortgage dispute

requires a properly recorded mortgage instrument containing the details of the

41 Hague v. Bay Landing POA, Inc., 2023 WL 2947453, at *5 (Del. Ch. April 14, 2023) (quotation omitted). 42 Legal Info. Inst., Constructive Notice, Corn. L. Sch., https://www.law.cornell.ed u/wex/constructive_notice [https://perma.cc/BBA9-RURR] (last visited July 23, 2026). 43 AB at 7–8. 44 695 A.2d 1118 (Del. 1997). 45 AB at 8. 46 DiSabatino, 695 A.2d at 1119 (“In 1989 . . . the Delaware General Assembly enacted 25 Del. C. ch. 16. . . . The Delaware statute expressly repealed the common law doctrine of lis pendens.”).

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mortgage that is readily accessible via a routine title search. 47 The relevant

form of constructive notice here is the doctrine of lis pendens.48 Before 1989,

“the filing of the litigation itself was sufficient constructive notice to third

parties of the claimed interest in the property. A separate recording of the

notice of the litigation with the Recorder of Deeds was not necessary.”49

But the General Assembly explicitly abolished the common law

doctrine of lis pendens and unambiguously enacted legislation that “no action

instituted after June 29, 1989, shall constitute constructive notice to any

person unless notice of such action complies with the requirements” of the Lis

Pendens Act. 50 Under the Lis Pendens Act, “[u]nless and until a notice of

pendency is filed as provided by [this statute], no action shall, before final

judgment is entered therein, be deemed to be constructive notice to a person

acquiring or having acquired a lien on or any other interest in the affected real

estate.”51 A recorded lis pendens is “effective for a term of 3 years from the

47 See Hague, 2023 WL 2947453, at *5 (quoting New Castle Cty. v. Pike Creek Recreational Servs., LLC, 82 A.3d 731, 746 n. 112 (Del. Ch. 2013)). 48 See AB at 8 (citing to DiSabatino’s discussion of the common law doctrine of lis pendens); 25 Del. C. §§ 1601, 1603; DiSabatino, 695 A.2d at 1119. 49 DiSabatino, 695 A.2d at 1119. 50 25 Del. C. § 1614. 51 Id. § 1603(b).

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date of recording with the recorder of deeds” unless the recorder receives an

extension from the Court for good cause.52

Here, U.S. Bank’s own allegations defeat its contention. U.S. Bank

does not allege that it or its predecessors-in-interest filed and recorded a notice

of pendency related to Barwick’s 2014 bankruptcy that complies with the Lis

Pendens statute. 53 It does not provide any documents or evidence that the

bankruptcy petition or its mortgage would appear on a routine title search for

Parcel 3.01. An ordinary bankruptcy filing in the federal court system is not

indexed in the land records and, therefore, would not alert a reasonably

prudent purchaser conducting a title search. 54 The filing of a bankruptcy

petition, without more, is insufficient to serve as constructive notice under the

unambiguous language in Delaware’s statute. I find that Slaughter did not

have actual or constructive notice of U.S. Bank’s purported interest in Parcel

3.01 and that he is a bona fide purchaser of the parcel.

52 Id. § 1604. 53 Even if such notice of pendency was recorded, it would have expired years before Slaughter purchased Parcel 3.01. See id. 54 See 11 U.S.C. § 549(c) (2018).

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III. CONCLUSION

I conclude that U.S. Bank has failed to state a claim on which relief can

be granted against Slaughter. Taking the allegations U.S. Bank presents to

the Court as true, I find that Slaughter is a bona fide purchaser of Parcel 3.01.

Slaughter purchased Parcel 3.01 from Barwick without actual or constructive

notice of the Mortgage for valuable consideration. Because I find that

Slaughter is a bona fide purchaser, U.S. Bank cannot attach the Mortgage to

Parcel 3.01 and bind Slaughter to it. I recommend that Slaughter’s motion to

dismiss be granted. This is a Report under Court of Chancery Rule 144, but

it is not a Final Report because it does not conclude the action. Exceptions

are stayed pending issuance of my Final Report.

Very truly yours, /s/ Danielle Gibbs

Magistrate in Chancery DG/jdb Cc: Patsy Barwick (via U.S. Mail)

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