Hall v. JP Morgan Chase Bank NA, No. 434, Sept. Term, 2016, 2017 WL 3224881 (Md. Ct. Spec. App. July 31, 2017), is about a dispute between a loan borrower and its lender, but it makes a point about the meaning of “legal title” to real property in Maryland.
Joseph Hall, Sr. and his wife took a loan from Freedom Mortgage Corporation and secured it with a deed of trust on their house. The Halls defaulted, Freedom assigned the deed of trust to JP Morgan Chase Bank NA, and Mrs. Hall executed a deed of her interest in the property to Mr. Hall as part of divorce proceedings.
Mr. Hall believed that the deed of trust was procured by fraud or misrepresentation. Rather than proceeding in the normal course by asserting these claims as a defense to a foreclosure proceeding, Mr. Hall filed a quiet title action with the Circuit Court for Baltimore City, with the hope, presumably, that the court would rule that the property was not subject to the deed of trust. However, the circuit court dismissed the case. On appeal, the Court of Special Appeals affirmed.
The Court of Special Appeals noted that when a person executes a deed of trust (or a mortgage) in connection with a loan, that person conveys legal title to the property to the trustee under the deed of trust (or, in the case of a mortgage, to the mortgagee). Then the court applied this concept to quiet title actions. The court said the purpose of such an action is to protect the owner of legal title from being disturbed in his possession, citing Porter v. Schaffer, 126 Md. App. 237 (1999). Because the trustee under Mr. Hall’s deed of trust had legal title to the property, Mr. Hall did not. Therefore, the court held he was not a candidate to bring a quiet title action.
Commentary: Quiet title actions are not intended to resolve disputes between mortgagors and mortgagees, so Mr. Hall’s case should have been dismissed. However, the Court of Special Appeals took an approach that may have troubling ramifications in other contexts.
When Porter v. Schaffer was decided, the only statute regarding quieting title was §14-108 of the Real Property Article of the Maryland Code (“RP”). As of October 1, 2016, RP §14-601 et seq. also deals with quiet title actions. Neither RP §14-108 nor RP §14‑601 et seq. states that only the owner of legal title may bring a quiet title action. To the contrary, RP §14-605 provides that the plaintiff in a quiet title action must give notice to all mortgagees, trustees, and beneficiaries. This supports the concept that one does not have to be the legal owner of property to bring a quiet title action.
Perhaps the phrase “owner of legal title” in Porter v. Schaffer meant “owner of record title.” The trustee or mortgagee may be the owner of legal title, but such person is typically not a plaintiff in a quiet title action because, not being in possession, the trustee or mortgagee does not need protection from being disturbed. This suggested meaning avoids a strange result that might follow from the Court of Special Appeals’ decision in Hall v. JP Morgan Chase Bank -- that the equitable owner of property that is subject to a deed of trust could not bring a quiet title action against a poacher.
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