McConaghy, D. v. The Bank of New York
192 A.3d 1171
Pa. Super. Ct.2018Background
- Dana McConaghy and her husband (Decedent) purchased a home; both signed an initial First Franklin mortgage that encumbered the property.
- Decedent later, without McConaghy’s participation, obtained multiple loans and mortgages (IndyMac, then Countrywide), some using a forged document purporting to transfer McConaghy’s interest.
- Countrywide paid off the First Franklin mortgage in 2006 (removing a $336,020.65 obligation that bound McConaghy) and acquired first-lien position; Countrywide’s mortgages were later assigned to The Bank of New York (BNY).
- Decedent was indicted for fraud related to the Countrywide mortgages and died in 2008; McConaghy, who never signed the Countrywide loan documents, sought to quiet title asserting those mortgages were procured by fraud and thus void.
- BNY counterclaimed seeking equitable relief: unjust enrichment, equitable subrogation, and an equitable lien for amounts it paid (including payoff of First Franklin). It also sought reimbursement for taxes and insurance it paid.
- Trial court granted McConaghy quiet title (holding Countrywide mortgages void), denied BNY equitable relief based on unclean hands, and denied reimbursement for taxes/insurance. On appeal, the Superior Court affirmed in part, vacated in part, and remanded.
Issues
| Issue | McConaghy's Argument | BNY's Argument | Held |
|---|---|---|---|
| Whether BNY is entitled to equitable relief (unjust enrichment / equitable subrogation / equitable lien) | Countrywide mortgages void; BNY cannot claim equitable remedies against her because mortgages procured by fraud | BNY paid First Franklin and removed McConaghy’s obligation; equity should subrogate BNY to First Franklin’s rights and impose an equitable lien | Court: McConaghy was unjustly enriched by payoff of First Franklin; BNY entitled to equitable lien; remand to determine amount (vacating unclean-hands bar) |
| Whether unclean hands bars BNY’s equitable remedies | Countrywide’s conduct was fraudulent and thus bars equitable relief to its assignee | Countrywide was deceived by Decedent and was not guilty of willful misconduct; unclean hands doctrine inapplicable | Court: Unclean hands requires willful misconduct in the matter; Countrywide was not shown to have been fraudulent — unclean hands does not bar relief |
| Whether BNY is entitled to reimbursement for taxes and insurance it paid since 2006 | McConaghy benefited from removal of First Franklin debt but did not live in property; taxes/insurance payments provided little benefit to her | BNY sought reimbursement for taxes and insurance paid after taking assignment | Court: Denied reimbursement for taxes and insurance — trial court did not abuse discretion given McConaghy’s limited benefit |
| Validity of Countrywide mortgages and quiet title claim | Countrywide mortgages were procured by Decedent’s forgery and are void as to McConaghy | BNY contested invalidity but asserted equitable remedies | Court: Affirmed trial court — Countrywide mortgages void, quiet title for McConaghy granted |
Key Cases Cited
- Gutteridge v. J3 Energy Grp., Inc., 165 A.3d 908 (Pa. Super. 2017) (elements and framework for unjust enrichment)
- Infante v. Bank of America, N.A., 130 A.3d 773 (Pa. Super. 2015) (equitable subrogation and equitable lien when assignee pays off prior mortgage binding on owner)
- Shaffer v. O’Toole, 964 A.2d 420 (Pa. Super. 2009) (appellate standard of review for non-jury cases)
- Shapiro v. Shapiro, 204 A.2d 266 (Pa. 1964) (unclean-hands doctrine confined to willful misconduct affecting the litigation issue)