48 A.3d 276 (Md. 2012), 106-2011, Thomas v. Nadel

Docket Nº:106-2011.
Citation:48 A.3d 276, 427 Md. 441
Opinion Judge:McDONALD, J.
Party Name:Darnella THOMAS, et vir., v. Jefrey NADEL, et al.
Attorney:Gerard P. Uehlinger, Towson, MD, for Appellants. Bizhan Beiramee (Matthew D. Cohen of Beiramee & Cohen, P.C., McLean, Virginia; Scott Nadel and Jeffrey Nadel of Law Offices of Jeffrey Nadel, Calverton, MD), on brief, for Appellees.
Judge Panel:Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, BARBERA and McDONALD, JJ.
Case Date:June 25, 2012
Court:Court of Appeals of Maryland

Page 276

48 A.3d 276 (Md. 2012)

427 Md. 441

Darnella THOMAS, et vir.,

v.

Jefrey NADEL, et al.

No. 106-2011.

Court of Appeals of Maryland.

June 25, 2012

Reconsideration Denied Aug. 16, 2012.

Gerard P. Uehlinger, Towson, MD, for Appellants.

Page 277

Bizhan Beiramee (Matthew D. Cohen of Beiramee & Cohen, P.C., McLean, Virginia; Scott Nadel and Jeffrey Nadel of Law Offices of Jeffrey Nadel, Calverton, MD), on brief, for Appellees.

Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, BARBERA and McDONALD, JJ.

McDONALD, J.

[427 Md. 442] In the recent decision in Bates v. Cohn, this Court reiterated that a borrower challenging a foreclosure action must ordinarily assert known and ripe defenses to the conduct of the foreclosure sale in advance of the sale.1 After the sale, the [427 Md. 443] borrower is ordinarily limited to raising procedural irregularities in the conduct of the sale, although the Court left open the possibility that a borrower could assert a post-sale exception that the deed of trust was itself the product of fraud. 2

This case arises out of the foreclosure of the deed of trust for the residence of Darnella Thomas and Charles Howard Thomas, Jr. (" the Thomases" ) by Jeffrey Nadel and others, collectively the substitute trustees (" the Trustees" ). 3 In apparent hope of fitting their post-sale exceptions within the question left open in Bates, the Thomases allege certain defects in the chain of title of the note evidencing their debt and characterize them as a " fraud on the judicial system." For the reasons explained below, we hold that the alleged defects do not establish that their deed of trust was the product of fraud. Accordingly, we affirm the judgment of the circuit court denying their exceptions.

Challenging a Foreclosure Sale

A borrower's ability to challenge a foreclosure sale is in part determined by whether relief is requested before or after the sale. Prior to the sale, a borrower may file a motion to stay the sale and dismiss the foreclosure action under Maryland Rule 14-211. After holding a hearing on the merits of such a motion, the court may dismiss the foreclosure action if it finds " that the lien or the lien instrument is invalid or that the plaintiff has no right to foreclose in the pending action." Maryland Rule 14-211(e).4

[427 Md. 444] The situation is different after a foreclosure sale. Following a sale, the clerk is to publish a notice identifying the property and stating that the sale will be ratified unless " cause to the contrary" is shown within 30 days of the date of the notice. Maryland Rule 14-305(c). During that period, a borrower may file written exceptions that describe any alleged " irregularity with particularity." Maryland Rule 14-305(d). The rule further provides that the court is to ratify the sale if (1) no exceptions are filed within the 30-day period or any that were made have been overruled and (2) the court is satisfied that " the sale

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was fairly and properly made." Maryland Rule 14-305(e). If the court does not find that the sale was " fairly and properly made", it may issue an " appropriate" order. Maryland Rule 14-305(e).

In 2005, this Court explained the practical difference between a pre-sale and a post-sale challenge:

[P]rior to the sale, the debtor may seek to enjoin the foreclosure sale from proceeding by filing a motion to enjoin as provided in [the Maryland Rules]. Should a sale occur, however, the debtor's later filing of exceptions to the sale may challenge only procedural irregularities at the sale or the debtor may challenge the statement of indebtedness by filing exceptions to the auditor's statement of account.

Greenbriar Condo. v. Brooks, 387 Md. 683, 688, 878 A.2d 528 (2005). 5

In a subsequent case, the Court of Special Appeals read Greenbriar narrowly to allow a post-sale exception that attacked [427 Md. 445] the validity of the underlying lien. Bierman v. Hunter, 190 Md.App. 250, 988 A.2d 530 (2010). In Bierman, one of the borrowers alleged in a post-sale exception that her signature had been forged on the original note and deed of trust. 190 Md.App. at 254, 988 A.2d 530. The Circuit Court found her testimony to that effect to be " uncontroverted" and set aside the foreclosure sale. Id. at 255, 988 A.2d 530. The Court of Special Appeals upheld that decision despite the timing of the exception, reasoning that a circuit court exercises broad equitable powers in a foreclosure action. Id. at 269, 988 A.2d 530. It distinguished Greenbriar as involving a situation in which there was no question as to the existence of a debt, but merely a dispute as to its amount. Id. at 266, 268-69, 988 A.2d 530.

More recently, this Court affirmed the general application of the distinction between pre-sale and post-sale exceptions made in Greenbriar, reiterating that " a homeowner/borrower ordinarily must assert known and ripe defenses to the conduct of a foreclosure sale prior to the sale, rather than in post-sale exceptions." Bates v. Cohn, 417 Md. 309, 328, 9 A.3d 846 (2010). In Bates, the Court rejected the rationale of Bierman that Maryland courts sitting in equity have " broad authority" and " full power under Rule 14-305(e) to hear and determine all objections to the foreclosure sale." Id. at 324, 9 A.3d 846. Rather, the adoption of Maryland Rule 14-305 not only created a new structure for the previously existing system of post-sale inquiries, but it also limited the permissible scope of post-sale exceptions to " irregularities." Id. at 326-27 & n. 12, 9 A.3d 846. The Court looked to the minutes of the Rules Committee for confirmation that exceptions to a foreclosure sale under that rule are to relate to the validity of the sale itself. Id.

The Court in Bates thus expressly rejected the narrow reading of Greenbriar in Bierman, although it left open the question whether a post-sale exception might be based on fraud infecting the underlying debt, as was the case with the forgery in Bierman. Bates, 417 Md. at 327-28, 9 A.3d 846 (" We do not rule here on whether a homeowner may raise [427 Md. 446] under 14-305, as a

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post-sale exception, allegations that a deed of trust was the product of fraud, and, therefore, the sale was invalid and incapable of passing title" ). The Court elaborated in a footnote:

[A]n allegation of fraud, with respect to the procedure of the sale, may be asserted properly in a post-sale exception. Whether an allegation of fraud regarding the underlying mortgage or deed of trust likewise may be raised post-sale, however, is a related, but distinct question.... [W]e have not yet addressed such a question under the more restrictive version of Rule 14-305.

417 Md. at 324 n. 10, 9 A.3d 846 (emphasis added; citations omitted).

The Thomases' Deed of Trust and its Foreclosure

Refinancing Transaction— Promissory Note and Deed of Trust

On September 29, 2006, the Thomases refinanced their home in Carroll County. As part of that transaction, they signed a promissory note secured by a deed of trust against their home.6 The original lender was Corestar Financial Group LLC (" Corestar" ). Corestar subsequently indorsed the note over to Option One Mortgage Corporation (" Option One" ). Option One went out of business on April 30, 2008. According to counsel for the Trustees, as one of its final acts Option One indorsed in blank the notes it held so that they could be transferred in wrapping up the...

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