Scotch Bonnett Realty Corp. v. Matthews

Scotch Bonnett Realty Corp. v. Matthews, 417 Md. 570, 11 A.3d 801 (2011) involved a deed that was obtained by a forgery but was not itself forged. Johnson, a mere acquaintance of the sole director of Scotch Bonnett Realty Corporation ("SBRC"), submitted corporate articles of amendment to the Maryland Department of Assessments and Taxation that designated him as an "officer" of SBRC. 417 Md. at 573. The articles of amendment were purportedly signed by the corporation's resident agent and attorney but the signature was forged. Id. at 572-73. Johnson then sold a property owned by SBRC to an innocent third party. Id. at 574. Johnson signed his own name to the deed purportedly as an officer of SBRC. Id. Litigation ensued and, eventually, the following question was certified to the Court of Appeals by the United States Bankruptcy Court for the District of Maryland: Does 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, render a conveyance of land void ab initio, or, is good title transferred to bona fide purchasers for value without notice? Id. at 572. The Court concluded that such a deed was not void ab initio because, among other reasons, an affirmative answer: would inject uncertainty into the law of conveyancing, beyond that already existing under the present rule under which a forged deed is void ab initio . Such a rule would turn into a jury question whether fraud in the inducement voided a deed ab initio and destabilize the predictability of result for bona fide purchasers for value. Stability of the law is particularly desirable in the field of real property law. A property owner's title should not be at risk that a grantor in the chain of title decides that the act of granting has been induced by a written misrepresentation, even if the misrepresentation includes a forged signature. (Id. at 587-88.) The Court of Appeals discussed the distinction between a deed void ab initio and a voidable deed, stating: The void/voidable distinction plays a central role in the protection under the recording acts: a person otherwise qualifying as a bona fide purchaser under the recording act receives no protection under a void deed. On the other hand, a person otherwise qualified as a bona fide purchaser for value does receive protection in purchasing from one whose title is merely voidable. Deeds which appear to be valid on their face, but turn out to be void, present insurmountable off-the-record risks for persons relying on the state of record title. . . . The two classic cases of void deeds are those involving lack of delivery and forgery. . . . The distinction between a void contract and a voidable one is especially important in situations involving deeds; once a deed is considered void ab initio or of no legal effect, there are lasting consequences to everyone in the subsequent chain of title. As a result, we have been circumspect at common law in finding a deed void ab initio and have limited our rulings regarding voidness to circumstances that go to the face of the deed, e.g., forgery.