Mrs. Holliday primarily asserted that the refinance documents, on which Mr. Holliday allegedly forged her signature in granting a Deed of Trust to Cambridge Home Capital (Cambridge), were void ab initio and thus ineffective to transfer an interest in the Hollidays’ property. The Deed of Trust was ultimately assigned to BAC Home Loans. (BAC.)
The Court of Appeals restated that a “deed obtained through fraud, deceit or trickery is voidable as between the parties thereto, but not as to a bona fide purchaser. A forged deed, on the other hand, is void ab initio.” Harding v. Ja Laur Corp., 315 A.2d 132, 135 (Md. Ct. App. 1974). Under the doctrine of equitable subrogation, however, when an one entity pays a valid obligation for another, equity requires reimbursement to prevent unjust enrichment.” Hill v. Cross Country Settlements, LLC, 936 A.2d 343, 361 (Md. 2007) (internal quotation marks omitted). Here, the refinance paid off a undisputedly valid mortgage entered into by both Mr. and Mrs. Holliday. As such, BAC was entitled to subrogated to the prior mortgage, notwithstanding the alleged forgery.
If BAC is subrogated to the rights of the prior mortgage, is it bound by the terms, such as interest rate, monthly payment, etc., of the prior mortgage?
Mrs. Holliday may also have fared better in a bankruptcy case, with a Trustee seeking to avoid the mortgage. This is particularly true since the property appears to be owned as Tenants by the Entireties and, if it were proven that only Mr. Holliday forged Mrs. Holliday’s signature, the mortgage note would not be entitled to a share in the resulting equity from the bankruptcy estate.
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