The real attraction of magnetic North.

 You know that magnetic north shifts, over time, right? This is where the science of survey, or "boundary retracement", can confuse we ordinary folk. In our practice of real estate litigation and problem solving, this is a recurring topic of investigation.

The concept of "meridian" is generally reference to the North-South axis that forms the basis of a boundary retracement. Think of any map you have ever examined, and recall the compass rose in one of the corners of the document, telling you where to locate North in relation to the drawing. The line along that axis is your meridian, for purposes of that drawing.

But, did you know that the location of magnetic north changes, over time? Because it is based on the earthly location of magnetic north, it shifts. This can create what surveyors call an "error of closure." In short, the ending point of your legal description may not meet the beginning point. How can this happen? 

Imagine a non-professional who attempts to prepare a deed description of real property. And imagine further that this person researches all the surrounding deeds, and then borrows the written description of common boundaries (those shared by the property being described, and the neighboring parcels). If the borrowed line descriptions come from different decades, then it is almost certain that the description will not close. It will have a large error of closure that must be fixed.

In this image, the red line depicts the gap between a beginning point, and the ending point of a deed description that was prepared by a non-surveyor, using data borrowed from a range of deeds, from the 1800s to the 1970s. This created a divisive dispute among several neighbors about rights to use a shared driveway, shown running through the middle of the red line. This is a very common dispute in our legal practice of real estate and property law.

Now that you know that magnetic north can shift over time, you already understand why a non-professional can easily mess up an attempt to create a deed description:  Boundaries are all relative to the meridian of the time. The deed author must understand the meridian of the time, and make necessary adjustments to conform old descriptions with newer descriptions. 

For example, if magnetic north has shifted 5 degrees over a certain time, the angles and calls of the new deed must account for this. This adjustment is needed if the mismatched lines are to close. It's the geometry calculations you hated to do as a student.

Why is any of this important to you? Well, many of the lawsuits and neighbor disputes that arrive in our law office are based on this common misunderstanding about surveys and boundary retracement. Fights about easements, access, and building locations spin out of control where the parties simply do not understand that their deed descriptions, in whole or in part, may simply be poorly drafted.

With the help of our experts, we might help resolve your neighbor conflict, with or without litigation. It all begins with an understanding of true north.

How to make claim against a title agent's bond.

 To make a claim against a Maryland title agent's bond with the Maryland Insurance Administration (MIA), you'll need to follow a specific process. Title agents in Maryland are required to maintain bonds to protect consumers and ensure they fulfill their obligations. A lawyer can be helpful, but one is not necessary. You can go it alone before making the decision to hire counsel. Here's how you can proceed:

1. Gather Documentation: Collect all relevant documentation related to your claim. This might include contracts, invoices, correspondence, and any evidence that supports your claim.

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3. Contact the Title Agent: Before filing a claim, it's a good idea to reach out to the title agent directly to discuss the issue and see if it can be resolved amicably. Sometimes, misunderstandings or errors can be corrected without the need for a bond claim.

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5. Verify the Bond: Make sure the title agent has a bond with the MIA. You can do this by contacting the Maryland Insurance Administration or checking their website. Ensure that the bond is current and covers the specific circumstances of your claim.

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7. Complete the Claim Form: Visit the Maryland Insurance Administration's website and download the appropriate bond claim form. They may have specific forms for title agent bond claims.

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9. Provide Supporting Documentation: Fill out the claim form accurately and completely. Attach all relevant documentation that supports your claim. This may include contracts, invoices, receipts, emails, or any other evidence.

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11. Submit the Claim: Send the completed claim form and supporting documents to the Maryland Insurance Administration. Make sure you follow the submission instructions provided on their website or in the claim form.

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13. Wait for Processing: The MIA will review your claim and may conduct an investigation. They will communicate with both parties involved in the dispute and gather necessary information.

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15. Resolution: Depending on the outcome of their investigation, the MIA will determine whether the title agent's bond should cover your claim. If approved, the bond will be used to compensate you for your losses.

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17. Appeal (if necessary): If your claim is denied and you believe it was wrongfully rejected, you may have the option to appeal the decision. Check the MIA's guidelines for the appeals process.

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19. Legal Assistance (if needed): If the dispute remains unresolved and you believe you have a strong case, you may want to consider consulting an attorney with expertise in insurance or real estate law for further guidance.

Voided reverse mortgage generates free money for poor Mrs. Black.

Lien priority disputes in Maryland courts are often resolved with the almost automatic application of equitable subrogation- where a lender pays off prior liens but fails to record a new lien it will be granted the prior lien status. This operates to defeat intervening liens, including federal tax liens, other mortgage liens and judgment liens. It is predicated on fairness. The property owner is encumbered by no greater lien than he had before, and the intervening lien holders do not receive a windfall because of another's mistake.

Our appellate courts have said that negligence on the part of the lender or settlement company in conducting a title search will not bar application of equitable subrogation. Some lawyers in our office joke that the bar is low enough that settlement companies could send a blind pig to conduct a title search and the lender would still prevail over intervening liens by the application of equitable subrogation.

And so the September 30, 2015  Nutter v. Black opinion by the Maryland Court of Special Appeals arrived on my desk like a cup of black triple espresso- I was wide awake even at page thirty-five, where the court slaughtered the blind pig. Where I fully expected equitable subrogation to save the lender, the appellate court declared "no." Most surprising was that the lender in this decision paid off a prior mortgage lien, gave the borrower cash, promptly recorded its own lien and then lost it all.

James B. Nutter & Co. gave Mrs. Black a reverse mortgage. But whomever searched title failed to pick up that Mrs. Black was the subject of a guardianship dating from 1989. Not only did the title search miss the guardianship in the court dockets, but it missed reference to the guardianship in a deed and deed of trust granted by Mrs. Black's guardian to the prior lender.

Mrs. Black was allowed to back out of her reverse mortgage!

Mrs. Black's court appointed guardian found out about the reverse mortgage by accident- he received notice from Bank of America of the payoff. The guardian then discovered the reverse mortgage, and found further that over $57,000 in cash had been deposited in Mrs. Black's personal accounts.

The resulting circuit court conflict between the reverse mortgage lender and Mrs. Black's guardian centered on Mrs. Black's capacity to make a mortgage. The lender took the position that Mrs. Black may have been incompetent but that it was the guardian's duty to promptly ratify or avoid the deal.  The lender argued that the guardian waited over a year, to the great prejudice of the lender. After all, the prior mortgage was paid, its lien was released, and Mrs. Black received a lot of cash.

The guardian held firm that because Mrs. Black had been adjudicated disabled she thus had no ability to make any agreements with the lender. He refused to ratify the reverse mortgage or to even return money paid by the reverse mortgage lender to payoff the Bank of America lien. And he demanded that the lien be declared void.

As a back up legal position the lender requested application of equitable subrogation. This would have given the lender the same lien position held by the bank paid off by the reverse mortgage.  And it would have left Mrs. Black in no worse position- she had a mortgage before, and she would have a mortgage after.

The trial court and the appellate court began their analysis at the same legal point. Both started with an examination of Mrs. Black's status as a legally disabled person. Surprisingly, Maryland has very little precedent discussing whether contracts with incompetent persons are "void" (like it never happened) or "voidable" at the election of the disabled person or the guardian. In fact, we have to search back to 1926 to find another similar case. But once this appellate panel answered the question, the remaining issues fell against the lender.

This opinion makes clear that once a disabled person is adjudicated incompetent, and awarded a guardian of person and property, then a contract to make a loan in exchange for a mortgage lien is void. It is a non-event. The documents have absolutely no legal value, and the lender who mistakenly contracted for the loan has nothing to enforce against the borrower or the property.

The position follows a simple declaration contained within the Maryland Estates & Trusts Code that upon adjudication all property of the disabled person vests in the guardian.  And so, in this case Mrs. Black was deemed not to have any property rights at the time she contracted for the loan. Having no property rights, she was without any ability to pledge the real property as security for the reverse mortgage.

At this point within the appellate court's analysis a title lawyer would reasonably expect application of equitable subrogation to salvage a partial victory for the lender- the court should have awarded a partial lien for the money loaned at least to the extent of the prior payoff. The apparent negligence exhibited by the lender in not finding guardianship records, or even the signatures of the guardian on the prior lien documents, should not have barred application of equitable subrogation.

So were my expectations as I turned to page 23 of the opinion, where I fully expected the warm blanket of equitable subrogation to safely swaddle the lender.

But this appellate panel determined the lender had no rights to receive anything in exchange for paying off the prior Bank of America loan. Quoting prior cases, the panel explained that:

It is undisputed that once properly yoked with the label of "mere volunteer" or "officious payor," a plaintiff is prohibited from recovering under theories of unjust enrichment or subrogation. It is less clear, however, precisely when a plaintiff's payment to a third party satisfying the liability of the defendant renders a plaintiff a volunteer and casts him or her "into legal outer darkness."

Once again, it was Mrs. Black's status as a legally adjudicated disabled person that drove the court to cast the lender "into legal outer darkness." Having no property rights, herself, Mrs. Black was not obligated to any lender. Only her guardian had any rights to contract, and thus only he had legal obligations relating to Mrs. Black's property.

The lender argued for application of equitable subrogation, saying that it had committed a reasonable mistake, even though the court records and title documents identified the guardianship. To this the panel said:

Because a disabled person lacks he capacity to enter into contracts and cannot encumber property...no mortgage lender exercising even an iota of diligence and prudence would extend a loan to an adjudicated disabled person.

And there it is- the three judge panel drop their microphones and exit, stage right, leaving the lender with no loan, no lien, and no cash.

UPDATE:  On January 29, 2016, the Maryland Court of Appeals denied a petition for writ of certiorari (a permissive appeal to the highest appellate court on matters of public policy). The decision will thus remain, undisturbed, as the current statement of law in Maryland.

Several Maryland appellate decisions have recited that the neglect of a lender will not prevent equitable subrogation from saving at least a partial lien to the extent of the payoff to the prior lender. And within the last year a federal appellate court interpreting Maryland law correctly noted that equitable subrogation operates automatically, as a matter of law, at the very moment of payment. The lack of diligence or prudence of the lender is not the determining factor.

As the law of the land, we expect ongoing efforts by intervening lien holders to chip away at the automatic application of equitable subrogation by urging courts to more closely examine the relative lack of diligence or prudence of the lender.

Kill your ground rent! Once and for all time.

If you own or lend against property in the Baltimore metropolitan area, it is very likely that you are involved in a ground rent- where there are two chains of title for the same property, one for the leasehold (the ground rent tenant), and one for the reversion (the ground rent landlord). There are currently almost 90,000 registered with the State of Maryland, and likely thousands more that are not yet registered.

Effective July 1, 2015, there are new rules in effect for the payment, foreclosure and redemption of ground rents. All triggered by the 2014 Goldberg decision of the Maryland Court of Appeals invalidating 2007 legislation which had gutted existing rules for ground rents.

Here is a brief summary:

• .Ground rents must be registered. 
• Very strict notice requirements must be met by landlords both before and after rents become due.
• All lien holders shown in the land records must receive notice from the landlord.
• Redemptions are much easier, and can be made at several points in the process, including for six months after a court order foreclosing a ground rent.
• Claims for attorneys fees and added expenses are greatly limited.
• Secured lenders may now independently redeem a ground rent.

While the new rules largely reinstate vested property rights wrongly stripped by the Legislature, the creation of a redemption right for lenders is the most significant addition. Under the old rules a lender could not redeem a ground rent, directly. The forms submitted to the State Department of Assessments and Taxation included an affidavit from the ground rent tenant. Often, this person was either absent or in the midst of a loan default or foreclosure. And so, he rarely cooperated to redeem where it merely paved the way to his own foreclosure.

The new law permits a lender to redeem when the mortgage loan to goes to default.  The bank can now "clear the decks" of a ground rent. That's pretty handy, if you're a bank or foreclosure trustee.

But most importantly, the cost to an owner for a ground rent redemption is relatively low.  The formula is contained in the statutes, and so there is no uncomfortable negotiations. And it doesn't even require knowledge of who owns the ground rent- the statutory redemption amount can merely be paid to the State Department of Assessments and Taxation. 

And so our advice to you owners and lenders is pretty simple-- kill your ground rent.

Maryland stops frivolous foreclosure defense motions.

Maryland's intermediate appellate court provided clarity to a confusing rule, but at the same time made it more difficult to stop a residential foreclosure.

In Buckingham v. Fisher the Maryland Court of Special Appeals was asked to make clear what must be alleged in motions to dismiss filed in foreclosure cases.  Since 2009, the rules have separated motions to enjoin and dismiss foreclosures from the old rules on traditional injunctions. Among the requirements of the new rule is that the homeowner (or any other interested party seeking to dismiss or enjoin a foreclosure) must allege a defense that "on its face state[s] a valid defense." Absent this core requirement, the motion will be denied, and the foreclosure will proceed.

In Buckingham, the allegation was forgery.  The Personal Representative of one homeowner alleged that the signature of the other long-dead homeowner was forged. He alleged that the forgery made the deed of trust void from its inception.

For us lawyers, the most important part of this decision is the appellate court's direction that a motion to dismiss in a foreclosure case is scrutinized much differently than an ordinary complaint.  When a new case is filed, the complaint will survive a motion to dismiss if there is any basis from which the court may infer a valid claim. But in foreclosure cases, the allegations made against the deed of trust must be made with "particularity." And that is the highest civil pleading standard.

In short, the motion to dismiss a foreclosure case must meet the same pleading standards as cases alleging fraud.

The Buckingham decision illustrates how high the bar has been set.  Where the motion to dismiss alleged forgery, the motion failed for lack of pleading on one key element- the forger's intent to defraud.  The court did not leave open the possibility that this element could be filled in by future discovery. Instead, it upheld the trial court's outright denial of the motion.

The pendulum continues to swing away from the very liberal use of various procedural rules by those seeking to stop or delay the foreclosure process. The courthouse door still remains open to the truly aggrieved.

Maryland paints a larger target on title companies.

Maryland’s highest court has confirmed a tort duty of care for title companies that search title, prepare abstracts to be relied upon by others, and issue title insurance commitments for insurance companies. The target for claims and lawsuits against title companies has just gotten bigger.

On January 29, 2013, the Maryland Court of Appeals decided 100 Investment v. Columbia Town Center Title,No. 19, Sept. Term, 2012, 2013 WL 322663, ___ A.3d ___ (2013), holding that your title company can now be sued for negligent title searching, and for preparation of an incorrect or incomplete title commitment.

Before this decision, your title company was only really exposed to claims for breach of contract. Trial courts routinely dismissed claims for negligence because the common law did not impose this extra duty.

The Court has now held that since title companies provide “services that have historically been performed by attorneys,” the title companies should be held to the same professional standards as if a licensed attorney had provided the service.

The Court also held that a title insurance company is not automatically responsible for the negligence of the title company issuing it’s policies.  The insurance company’s own liability to it’s customer is limited by language in the title policy to claims under the insurance contract, only.

This will change how claims arising from bad title searches, and incorrect title commitments are prosecuted, defended and settled. The settlement companies that compile abstracts and prepare commitments (and their errors & omissions carriers) now have increased exposure to claims and lawsuits. The title insurance companies, however, remain shielded by the limitations in their policies.

We can help you figure how this new rule impacts your claims.

A title insurer's duty to defend may not terminate until the check is written!

A New York case feeds the debate about when a title insurer's duty to defend ends. In Busch v. Fidelity National Title Ins. Co., 2011 N.Y. Slip Op. 03948, 2011 WL 197259 (N.Y.A.D. 3 Dept.), the title insurer offered money to its insured for diminution in value caused by a neighbor's claimed easement over the insured's property.  Fidelity stopped paying for the insured's counsel, and the insured continued the litigation for several years, hiring a succession of lawyers.

Fidelity was sued by its insured, who sought recovery of fees he spent in the litigation.  Fidelity took the position that its duty to defend ended when it made an offer to pay for diminution in value.  The insured alleged that there was no such agreement made.

The appellate court said that more litigation was necessary to flesh out the terms of the offer, and whether there was a settlement.  It was important to the court that Fidelity never tendered a settlement check. But the court was clear that an offer, alone, does not terminate the duty to defend.  There must be  a tender of money, a signed agreement or a release.

So, my claim handling friends, what is the lesson?  It is sound practice, in any state, to tender a check and obtain a signed document.  And if the check is not negotiated, or the agreement is not signed, the insurer is left to either continue defending or to file a declaratory judgment action that seeks relief from the policy.