101 Geneva LLC v. Wynn

WATTS, J.,

concurring and dissenting, in which BARBERA, C.J., and McDONALD, J., join.

I respectfully concur, in part, and dissent, in part.

I agree that the hearing judge abused her discretion in failing to exercise her discretion as to whether to ratify the foreclosure sale.

I also agree that the screening procedures utilized by the circuit court pursuant to Maryland Rule 14-207.1(a) are proper, but I write separately to set forth my reasoning. Rule 14-*259207.1(a) permits circuit courts to “adopt procedures to screen pleadings and papers filed in an action to foreclose a lien.” If, as a result of the screening, the circuit court “determines that the pleadings or papers filed do not comply with all statutory and Rule requirements, it may give notice” that the action will be dismissed “or that some other appropriate order will be entered by reason of the non-compliance if the plaintiff does not demonstrate within 30 days that the papers are legally sufficient or that the deficiency has been cured.” Md. R. 14-207.1(a).

Rule 14-207.1(a) broadly permits circuit courts to conduct screenings of pleadings and papers in foreclosure actions, even if no objection or exception has been filed, and to take action in accordance with the Rule thereafter if non-compliant pleadings or papers are found. Of significance, the Rule does not confine a circuit court’s screening to only those pleadings and papers filed prior to a foreclosure sale, but rather applies to all of the pleadings and papers filed in “an action to foreclose a lien.” In contrast, prior to the adoption of Rule 14-207.1 in 2010, Maryland Rule 14-207(c) provided for screening of “orders to docket and complaints to foreclose a lien.” Md. R. 14-207(c) (2009). By its very language, Rule 14-207(c) limited the screening of pleadings and papers in a foreclosure action to those pleadings and papers filed pre-sale, specifically, those pleadings and papers contained within the order to docket or complaint to foreclose. Conspicuously, Rule 14-207.1(a) does not contain such a limitation. Indeed, in proposing the new screening procedures in Rule 14-207.1(a), the Rules Committee signaled an intent to broaden the scope of a circuit court’s ability and authority to conduct screenings, with particular focus to be paid to the affidavits and certificates filed in a foreclosure action. Nothing in the placement of Rule 14-207.1 within Chapter 200, Foreclosure of Lien Instruments, indicates an intent to limit the Rule strictly to pre-sale screenings.1 Thus, a circuit court may utilize Rule 14-207.1(a) to *260screen pleadings and papers filed in a foreclosure action, whenever those pleadings and papers may be filed.

I am not persuaded by the argument that an advertisement of sale does not constitute a pleading or paper filed in a foreclosure action subject to review under Rule 14-207.1(a). The advertisement of sale was, undisputedly, filed by the Substitute Trustees with the circuit court on the day of the sale, October 17, 2011. The advertisement of sale is not a “pleading.”2 Nonetheless, the advertisement of sale is certainly a “paper” within the meaning of Rule 14-207.1(a). Although the term “paper” is not defined within the Maryland Rules, Black’s Law Dictionary defines “paper” broadly as “[a]ny written or printed document or instrument[.]” Black’s Law Dictionary 1142 (8th ed.2004). There is no colorable argument that an advertisement of sale, a printed document filed with the circuit court in a foreclosure proceeding, is anything other than a “paper” within the meaning of Rule 14-207.1(a). As such, circuit courts, as part and parcel of their screening authority, may, pursuant to Rule 14-207.1(a), review advertisements of sale.

As to Maryland Rule 14-305, concerning post-sale procedures and ratification, I am not convinced that the Rule precludes a circuit court from conducting a screening of the pleadings and papers filed post-sale pursuant to Rule 14-207.1(a).3 Although 101 Geneva, LLC and the Substitute *261Trustees are correct that Rule 14-305 does not require that a circuit court conduct a post-sale screening in order to ratify a sale, the Rule states that the circuit court shall ratify the sale only if, among other things, the court is “satisfied that the sale was fairly and properly made.” I discern no reason why, in determining and satisfying itself that a sale was fairly and properly made, a circuit court may not avail itself of the screening procedure specifically provided for in Rule 14-207.1(a) to review the pleadings and papers filed post-sale. Even absent such a screening procedure provided pursuant to Rule 14-207.1(a), a circuit court, of necessity, must review the pleadings and papers filed post-sale to ensure to its satisfaction that the “sale was fairly and properly made” prior to ratifying the sale pursuant to Rule 14-305(e). As such, I am satisfied that a circuit court may conduct a screening, or review, of the pleadings and papers filed in a foreclosure action post-sale pursuant to Rule 14-207.1(a), Rule 14-305(e), or both.

I now part company with the majority. I respectfully disagree with upholding the $750 attorneys’ fee and determining that the fee is permissible under the circumstances presented in this case. Although I agree that the permissibility of $750 attorneys’ fee at issue in the instant case is not directly controlled by this Court’s holding in Maddox v. Cohn, 424 Md. 379, 36 A.3d 426 (2012), I would have affirmed the circuit court’s judgment because the $750 attorneys’ fee and ten-day default period are inconsistent with the circuit court’s discretion under Rule 14-305(g), and because of the lack of information in the record about the origin and reasonableness of the $750 attorneys’ fee and the ten-day default period contained within the advertisement of sale. I address the points in reverse order.

First, nothing in the record explains how the terms of the advertisement of sale came to be; i.e., the record is silent as to how the Substitute Trustees selected the $750 attorneys’ *262fee or ten-day default period. At oral argument, this Court inquired specifically into the origins of the $750 attorneys’ fee and ten-day default period. Counsel for the Substitute Trustees stated that he believed the ten-day default period was an “arbitrary” time limit developed through practice over time, but that the ten-day default period typically was not enforced because trustees desire that sales go to settlement. Similarly, counsel for 101 Geneva, LLC responded that the ten-day default period arose from custom and practice based upon the operation of Maryland Rule 2-534 as to when an action became final.4 Counsel for 101 Geneva, LLC further stated that the $750 figure included in the advertisement of sale had “developed over time” from the expenses estimated to be incurred in preparing and filing a petition for resale, serving the show cause order, and obtaining the resale order. When asked by Judge McDonald whether the record contained information about the establishment of the $750 fee, counsel for 101 Geneva, LLC admitted that the record did not contain such information, and that he “candidly” did not believe that all trustees within the State of Maryland utilized the $750 figure. Thus, although counsel for both the Substitute Trustees and 101 Geneva, LLC had some explanation at oral argument concerning the origins of the $750 fee and ten-day default period, neither was able to identify any information in the record establishing either the fee or time limit as reasonable. Although the holding is not directly applicable, one of the concerns expressed in the underpinnings of Maddox, 424 *263Md. at 397-98, 36 A.3d at 437, was that the fee was “not subject to the audit process or direct court approval in the foreclosure process and the reasonableness of such fees depended] only upon the judgment of the attorneys and the lenders attempting to impose them.”

Second, but equally important, in my view, the terms of the advertisement of sale — namely, the $750 attorneys’ fee and ten-day default period — usurp the circuit court’s discretion under Maryland Rule 14-305(g). Rule 14-305(g) provides: “If the purchaser defaults, the court, on application and after notice to the purchaser, may order a resale at the risk and expense of the purchaser or may take any other appropriate action.” Here, the terms of the advertisement of sale, by already obligating a defaulting purchaser to pay attorneys’ fees “plus all costs incurred,” circumvent the circuit court’s authority to order resale under Rule 14-305(g) and to determine the expenses to be incurred by the defaulting purchaser. Counsel for the Substitute Trustees admitted that the advertisement of sale does not even specifically require that the appropriate motion for resale be made pursuant to Rule 14-305(g), and that third-party purchasers may not be familiar with post-sale procedures in a foreclosure action.

Significantly, under the plain language of the advertisement of sale, a defaulting purchaser incurs the $750 attorneys’ fee so long as the trustees have filed the appropriate motion to resell in the circuit court; ie., the payment of the $750 attorneys’ fee by the defaulting purchaser is not conditioned upon the circuit court’s grant of the motion to resell or the circuit court’s issuance of an order for resale. Moreover, the advertisement of sale calls for the defaulting purchaser to pay for “all costs incurred” in addition to the $750 attorneys’ fee, but the phrase “all costs incurred” is ambiguous at best. The phrase does not indicate whether “all costs incurred” include all costs incurred with the original sale upon which the purchaser defaulted, or all costs incurred with the resale, or both. In sum, although there may be circumstances where an advertisement of sale contains terms consistent with Rule 14-305(g), neither the plain language of the advertisement at issue nor *264the statements made at oral argument concerning the terms of the advertisement convince me that the terms of this advertisement of sale are permissible or consistent with Rule 14-305(g)' and the circuit court’s authority under that Rule to order resale.5

As a final matter, I believe that the rationale of the Court of Special Appeals in White v. Simard, 152 Md.App. 229, 831 A.2d 517 (2003), aff'd, 383 Md. 257, 859 A.2d 168 (2004), concerning the chilling effect of attorneys’ fees on bidding, is applicable. In White, 152 Md.App. at 252, 831 A.2d at 530, the Court of Special Appeals stated that a trustee’s duty in a foreclosure sale is “to ensure that the sale is made under circumstances ‘fairly calculated to bring the best obtainable price[,]’ ” and to refrain from any action “that would have a chilling effect on the bidding.” (Citation omitted). See also Maddox, 424 Md. at 397, 36 A.3d at 436-37 (“The attempt ... to impose an additional legal fee by a unilateral imposition in an advertisement of sale ... [has the] actual effect [of] the opposite of maximizing the sums bid at the sale.”). The $750 attorneys’ fee in this case would have a chilling effect on a segment of the mortgage foreclosure purchasing market; specifically, on small or single-property purchasers/homebuyers— those who use the foreclosure market as an opportunity to purchase a first home at a discounted price. In such cases, if presented with the opportunity to bid on a property where the advertisement of sale contains the $750 attorneys’ fee versus a property where the advertisement of sale does not contain such a fee in the event of default, I have no doubt that many potential small or single-home purchasers would bid on the latter property rather than risk incurring $750 in attorneys’ *265fee and “all costs” in the event of default. As such, in my view, inclusion of the mandatory $750 attorneys’ fee and the costs provision would have a chilling effect on bidding by small or single-property purchasers and runs afoul of a trustee’s duty to maximize bidding at foreclosure sales.

For all of the reasons above, I respectfully concur, in part, and dissent, in part.

Chief Judge BARBERA and Judge McDONALD have authorized me to state that they join in this opinion.

. The Rules contained within Chapter 200 of Title 14 of the Maryland Rules pertain to a variety of matters, from institution of a foreclosure *260action, to stay of a sale and dismissal of an action, to the sale itself and the proceeds of the sale.

. "Pleading” is defined in Maryland Rule l-202(u) as "a complaint, a counterclaim, a cross-claim, a third-party complaint, an answer, an answer to a counterclaim, cross-claim, or third-party complaint, a reply to an answer, or a charging document as used in Title 4.” Maryland Rule 14-207(a), concerning pleadings allowed in foreclosure cases, lists a power of sale, an assent to a decree, and a lien instrument as additional pleadings for purposes of foreclosure cases.

. In comparing the two Rules, Rule 14-207.1 applies and pertains to actions taken by a circuit court, and specifically those actions related to a circuit court’s screening of a foreclosure action, whereas Rule 14-305 *261places duties upon the person authorized to make the sale, the purchaser, the clerk, and the circuit court, to occur after a foreclosure sale.

. Maryland Rule 2-534, concerning motions to alter or amend a judgment, provides:

In an action decided by the court, on motion of any party filed within ten days after entry of judgment, the court may open the judgment to receive additional evidence, may amend its findings or its statement of reasons for the decision, may set forth additional findings or reasons, may enter new findings or new reasons, may amend the judgment, or may enter a new judgment. A motion to alter or amend a judgment may be joined with a motion for new trial. A motion to alter or amend a judgment filed after the announcement or signing by the trial court of a judgment but before entry of the judgment on the docket shall be treated as filed on the same day as, but after, the entry on the docket.

. It is a bit of a leap for this Court to relate the $750 attorneys’ fee to the anticipated expense of a resale allowed by Rule 14-305(g), especially as the advertisement itself is not clear as to whether the fee is in addition to the expense of resale and is subject to the order of the court.

It is notable that although raised at oral argument neither the Substitute Trustees nor 101 Geneva, LLC argued on brief that the advertised fee was justified by Rule 14-305(g). And, of course, the amicus curiae that we invited to participate did not brief an argument that was not made.