Monday, December 10, 2012

A bit of banking leap-frog.

On December 7, 2012, the Maryland Court of Special Appeals issued it's opinion affirming a trial court decision in favor of our client, Bank of America, N.A., protecting it's $201,000 lien from attack by another lender. 

The Bank of America building, in Baltimore, MD

The other lender, Dominion Financial, loaned about $200,000 to the prior owner of a home, but just did not get around to recording a deed of trust for several months.  Meanwhile, the house was sold to a young single mom, who borrowed money from BOA to finance her purchase.  Most of this borrowed money was spent paying off the seller's open mortgage loan. BOA then won the race to the land records, and recorded it's deed of trust, first. Dominion may have made it's loan before BOA, but it recorded second.

In the Circuit Court for Baltimore City, Dominion sued for a court order declaring that it's lien on the property was in the first position, entitling it to take all of the proceeds in the event of a foreclosure sale. On behalf of Bank of America, we argued that the law of "equitable subrogation" allowed BOA to leap-frog over Dominion to the first lien position because BOA had paid of an earlier lien owed by the seller.

This case took two years to wind through the court system. First, there was discovery in the Circuit Court, and the parties followed with cross-motions for summary judgment.  The case then went to trial, before the Hon. Evelyn Cannon.  At the end of the case, Judge Cannon found in favor of BOA, and Dominion appealed. This appellate decision ends the matter.

The path to a just result is long. In this case it was a two year journey!

But this is not just a "feel good" story of bank-versus-bank. The finality of this decision benefits the single mom who needs to discuss a loan modification or refinance. Open disputes between lenders often prevent borrowers from getting relief from their bank simply because the lender's situation is unsettled.