Heinz and Susan Georg refinanced their home, which was owned by them as tenants by the entireties, with First Horizon. Only Mr. Georg was, however, listed as a borrower on the mortgage note and, more consequentially, as a grantor on the Deed of Trust. Old Republic, believing that both Georgs signed the Deed of Trust, issued title insurance to First Horizon.
When Mr. Georg defaulted on the mortgage in 2009 and First Horizon was unable to foreclose, Old Republic retained Morton Faller at Shulman Rogers to seek a reformation of the Deed of Trust in Maryland Circuit Court. This was denied because there was no showing that there was a mutual mistake between the parties, since Mrs. Georg was not knowledgeable about the peculiar requirements of Tenancy by the Entireties. Specifically, for mutual mistake both parties must have understood the mistake which was made. Additionally, the state court found that Old Republic lacked standing to raise equitable subrogation.
Faller filed a Notice of Appeal, which was dismissed as untimely upon the motion of the Georgs.
Old Republic then again in 2013, with new counsel, sought reformation of the Deed of Trust, which was denied based on res judicata.
In 2018, Old Republic brought suit for legal malpractice against Faller and Shulman Rogers. The district court found (and the Court of Appeals affirmed) that the untimely appeal was not malpractice, as the state court determination that there was no mutual mistake was support both by the evidence and legal precedent. As that decision was not clearly erroneous, any appeal would have been unsuccessful, even if timely filed. Then having reached the merits of the case regarding the lack of mutual mistake, Old Republic could not establish legal malpractice for the failure to preserve the question of standing on equitable subrogation.
This case is tremendously useful for showing that mutual mistake in the drafting of a Deed of Trust requires that all parties understand the consequences of the asserted intention. For unsophisticated consumers, this is almost certainly never the case.
For a copy of the opinion, please click here: