Monday, January 31, 2011

Scotch Bonnett Realty Corp. v. Matthews (Ct. of Appeals)

Filed: January 21, 2011.

Opinion by Judge Lawrence F. Rodowsky.

Held: The use of a deed that is neither a forged document, nor signed with a forged signature, but which derives its transactional vitality from forged corporate articles of amendment, does not render a conveyance of land void ab initio; rather, good title is transferred to bona fide purchasers for value without notice.

Facts: Scotch Bonnett Realty Corporation ("SBRC") is a Maryland corporation in the business of buying and selling real estate. An amendment to SBRC's articles of incorporation was filed two years after its formation. The amendment stated that "Corey Johnson is to be added as an officer of Company." At the bottom of the amendment was a signature line preprinted for "President" on which was signed "Richard Hackerman." The signature was forged.

Corey Johnson conveyed property on behalf of SBRC to a third party. The third party later entered into Chapter 13 Bankruptcy. On certification from the Maryland Bankruptcy Court, the Court of Appeals addressed whether the use of a deed which derives transactional vitality from forged articles of amendment renders a conveyance of land void ab initio

Analysis: The Court of Appeals held that such a conveyance is not void ab initio and instead transfers good title to bona fide purchasers for value without notice. The court noted that holding otherwise would inject uncertainty into a property owner's chain of title. A property owner's title, according to the court, should not be at risk simply because a grantor in the chain of title decides that a conveyance has been induced by a written misrepresentation, even if the misrepresentation includes a forged signature.

The full opinion is available in pdf.

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