WILLIAM D. QUARLES, JR., District Judge.
The Glen Burnie Mutual Savings Bank ("the Bank") sued the United States, Anne Arundel County ("the County"), Benchworks, Inc., and others, to quiet title and establish lien priority.
This dispute involves an October 31, 2007 home Refinancing Agreement between Francis and Patricia Brewis and the Bank. See Marian K. McCormick Aff. ¶ 3. Under the Agreement, the Bank lent the Brewises $255,000; repayment was secured by a mortgage on the Brewises' home ("the Property") in Anne Arundel County, Maryland. Id. The Brewises retained John S. Smith, Esquire for a title examination. John S. Smith Aff. ¶ 3. Smith discovered that the Property was encumbered by a Purchase Money Deed of Trust, recorded on September 23, 2005, securing a $240,000 loan from the First Guaranty Mortgage Corporation. Id. ¶ 4. Smith used the October 31, 2007 loan to pay off the prior loan, and the First Guaranty Deed of Trust was released. Id. ¶¶ 6, 7. The Bank's mortgage was recorded in the Land Records of Anne Arundel County on November 20, 2007. Id. ¶ 5.
The Brewises failed to make payments under the Refinancing Agreement, and the Bank began foreclosure proceedings. Compl. ¶¶ 19-20. In anticipation of the foreclosure, the Bank retained counsel who discovered liens against the Property that
On October 22, 2009, the Bank sued the Defendants to quiet title and establish lien priority in the Circuit Court for Anne Arundel County. Paper No. 2. On December 4, 2009, the United States removed the case to this Court under 28 U.S.C. § 1442. Paper No. 1. On May 10, 2010, the Bank moved for summary judgment against the Defendants. Paper No. 27. On May 14 and 28, 2010, the County and Benchworks opposed the motion. Paper Nos. 28, 31. The United States advised the Court on May 26, 2010 that it would not oppose the motion; it conceded that the Bank's mortgage had priority over its tax liens. Paper No. 32.
Under Rule 56(c), summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, "the judge's function is not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248, 106 S.Ct. 2505.
The Court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in [its] favor," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir.2002), but the Court also "must abide by the affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial," Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 526 (4th Cir.2003).
The Bank contends that its mortgage is superior to all other liens against the Property because it is equitably subrogated to the First Guaranty Deed of Trust, which—it is undisputed—was the senior lien against the Property.
Under Maryland law, lien priority is usually determined by recording date: lienholders with earlier-recorded liens have priority over lienholders with later-recorded liens. See, e.g., May Dep't Stores v. Montgomery County., 118 Md.App. 441, 702 A.2d 988, 993 (Md.Ct.Spec.App.1997). Section 7-104 of the Real Property Article provides an exception to this rule for "purchase money mortgages," i.e., mortgages that secure a loan used to purchase the property. Md.Code. Ann., Real Prop. § 7-104; May Dep't Stores, 702 A.2d at 993. Purchase money mortgages take priority over prior recorded liens, including judgment liens. May Dep't Stores, 702 A.2d at 993. It is undisputed that the First Guaranty Deed of Trust was a purchase money mortgage and senior to the earlier-recorded judgment liens held by the County and
The Bank argues that under the doctrine of equitable subrogation, its mortgage is entitled to the same status as the First Guaranty Deed of Trust.
Id. at 1172 (quoting G.E. Osborne, Handbook on the Law of Mortgages § 277, at 561 (2d ed.1970)). The Bank maintains that because the refinance loan was (1) made for the purpose of discharging the First Guaranty Deed of Trust, (2) in reliance on obtaining First Guaranty's status as the senior lien against the Property, and (3) without knowledge of the junior liens, it is subrogated to First Guaranty's Deed of Trust.
The County and Benchworks do not dispute the Bank's factual contentions; they argue that the Bank misreads G.E. Capital. They contend that G.E. Capital holds that "one who pays the mortgage of another and takes a new mortgage as security will be subrogated to the rights of the first mortgagee as against any intervening lienholder."
G.E. Capital does not support the Defendants' argument. G.E. Capital involved lien priority between a refinance mortgagee and intervening lienholders; there were no liens that predated the original purchase money mortgage as in this case.
G.E. Capital did not address equitable subrogation and preexisting liens. However, it cited with approval Milholland v. Tiffany, 64 Md. 455, 2 A. 831 (1886), which involved the competing claims of a lienholder who had paid off a purchase money
Nothing in G.E. Capital—or in any other authority cited by the parties or found by the Court—voids Milholland. Milholland permits equitable subrogation against creditors whose liens predate the original purchase money mortgage.
The County and Benchworks also argue that the Bank should not be subrogated to the First Guaranty Deed of Trust because the Bank was negligent in failing to discover their pre-existing liens when it entered into the Refinancing Agreement, and they were harmed by this negligence. According to the County, "[d]one properly, the title examination would have revealed the existence of the County's lien, and [the Bank] would have extinguished all liens before accepting a mortgage from Brewis. The failure of the Plaintiff to adequately examine title and satisfy the County's lien has therefore damaged the County." County Opp. 5.
The Bank relies on Bennett v. Westfall, 186 Md. 148, 46 A.2d 358 (Md.1946).
Bennett, 46 A.2d at 361; see also G.E. Capital, 657 A.2d at 1176-77.
Here, it is undisputed that the Bank intended to achieve a first priority by extinguishing the First Guaranty Deed of Trust. No defendant has presented evidence that the Bank knew of the other liens against the Property; absent equitable subrogation, the County and Benchworks would be unjustly enriched by advancing in priority by virtue of the Bank's apparent mistake. Like the competing lienholders in Bennett and G.E. Capital, the County and Benchworks seek to advance in priority because of the Bank's alleged negligence. Under Bennett, this is not permitted absent a showing that the County or Benchworks has been damaged by that negligence. Permitting subrogation of the Bank's refinance mortgage to the First Guaranty Deed of Trust would not damage the County or Benchworks: each would maintain the priority it had before the refinancing.
On the undisputed facts, the Bank is entitled to judgment as a matter of law. The Bank is equitably subrogated to the First Guaranty Deed of Trust; its mortgage has priority over the Defendants' liens.
For the reasons stated above, the Bank's motion for summary judgment will be granted.
Rinn v. First Union Nat'l Bank, 176 B.R. 401, 408 (D.Md.1995) (internal citations and quotation marks omitted).
Id. at 1175 n. 1 (internal citation and quotation marks omitted).
G.E. Capital, 657 A.2d at 1176 (quoting Milholland, 2 A. 831, 834-35) (emphasis added).
G.E. Capital, 657 A.2d at 1176-77.