BP Real Estate Inv. Grp. v. Clarke
| Docket Number | 1903- 2021 |
| Decision Date | 07 June 2023 |
| Parties | BP REAL ESTATE INVESTMENT GROUP, LP v. JAMES E. CLARKE, ET AL. |
| Court | Court of Special Appeals of Maryland |
Circuit Court for Baltimore County Case No. C-03-CV-20-000141
Wells C.J., Graeff, Eyler, Deborah S. (Senior Judge, Specially Assigned), JJ.
This is an appeal by BP Real Estate Investment Group, LP ("BP"), appellant, of an order by the Circuit Court for Baltimore County denying its motion to abate interest and other costs in connection with its purchase of a residential property at a foreclosure sale. The appellees are the Substitute Trustees on a deed of trust for that property.[1]
BP presents two questions for review,[2] which we have combined as follows:
Did the circuit court err or abuse its discretion by denying the motion to abate?
For the reasons set forth below, we shall dismiss the appeal.
On January 13, 2020, the Substitute Trustees filed an Order to Docket foreclosure action for a residential, owner-occupied property located at 222 Long Cove Lane, Unit M in Essex Maryland (the "Property"). Seven months later, they filed a final loss mitigation affidavit, made by the lender, averring that the lender had not completed a loss mitigation analysis because the borrowers did not complete an application for review.
On January 14, 2021, the Property was sold at auction to BP, the highest bidder, for $111,000. BP paid a $10,000 deposit on the Property, and consistent with the terms of sale, it was obligated to pay interest at a rate of 6.97 percent on the balance of the sales price ($101,000). The terms of sale in the advertisement stated that there would be "no abatement of interest" "if the settlement [was] delayed for any reason." Taxes, ground rent, and other carrying costs were to be "adjusted to the date of sale and assumed thereafter by the purchaser."
On February 10, 2021, the Substitute Trustees filed a Report of Sale.
On March 16, 2021, BP and its affiliated Maryland limited liability company, Let The Good Times Roll, LLC ("LTGTR"), filed a consent motion to substitute LTGTR in place of BP as the purchaser. The court granted the motion by order entered on March 22, 2021. BP remained "primarily liable in the event of a default by [LTGTR.]" If LTGTR did not comply with the terms of sale, BP agreed to complete the sale in its name and the Substitute Trustees agreed to accept its performance.[3]
On March 26, 2021, the circuit court issued a memorandum to the Substitute Trustees advising that the sale could not be ratified because the final loss mitigation affidavit was deficient.[4] The court explained that, because there were numerous COVID-19 related forbearance programs available to borrowers, the averment in the final loss mitigation affidavit that the borrowers had not completed an application for review did not suffice. The lender needed to complete a new affidavit specifying whether the borrower had ever requested forbearance under the relevant programs, regardless of delinquency status, and, if so, the basis upon which forbearance was denied. The Substitute Trustees were directed to "have the affiant complete an amended affidavit that sufficiently addresses the status of COVID-19 related forbearance" as of the date of the amended affidavit and to do so within 30 days.
On September 30, 2021, more than seven months later, after no response from the Substitute Trustees, BP moved to abate interest and real property taxes that accrued from March 26, 2021, through the date the circuit court ultimately ratified the sale. BP asserted that the Substitute Trustees had taken no action since the court's deficiency letter, despite BP reaching out "informally" to request action. BP asserted that $4,967.01 in interest and $1,772.31 in property taxes had accrued at that point. BP argued, citing Donald v. Chaney, 302 Md. 465, 477 (1985), that the Substitute Trustees' prolonged failure to correct the deficiency amounted to trustee neglect, which was a ground upon which abatement of interest and taxes may be granted.
On December 23, 2021, the Substitute Trustees filed an opposition to the motion to abate post-sale interest, asserting that they had been "diligently working with the [l]ender to obtain an Amended Final Loss Mitigation Affidavit that [was] sufficient to cure the deficiency," and they would "file [it] as soon as it [was] available." The Substitute Trustees argued that, pursuant to the terms of the sale, BP was not entitled to an abatement of interest during any period of delay in settlement.
On January 11, 2022, the circuit court issued a line order denying the motion to abate interest and property taxes.
Two weeks later, on January 21, 2022, the Substitute Trustees filed a response to the deficiency notice and an amended final loss mitigation affidavit, dated December 29, 2021. They asserted that the borrowers had not requested a COVID-19 forbearance. The amended affidavit, like the original affidavit, averred that loss mitigation analysis had not been conducted because the borrowers never submitted a completed application. On January 25, 2022, the court ratified the sale.
This timely appeal followed.
On February 28, 2022, after the notice of appeal was filed, the Substitute Trustees conveyed the Property by a "Deed of Substitute Trustee" to LTGTR.[5] A HUD-1 settlement statement included in the appendix to the Substitute Trustees' brief reflects that LTGTR paid $7,830.52 in interest at settlement. The seller, however, paid the accrued property taxes.
In assessing the propriety of a decision to deny a motion to abate interest and property taxes, we review de novo the legal standard that the court applied. AMT Homes, LLC v. Fishman, 228 Md.App. 302, 308 (2016) (citing Fisher v. Ward, 226 Md.App. 149, 156 (2015)). The court's ultimate decision to deny abatement of interest and taxes is reviewed for an abuse of discretion. Id. (citing Baltrotsky v. Kugler, 395 Md. 468, 477 n. 7 (2006)). "We therefore ask if the challenged decision 'either does not logically flow from the findings upon which it supposedly rests or has no reasonable relationship to its announced objective.'" North Star Props., LLC v. Nadel, 253 Md.App. 164, 171 (2021) (quoting Zorzit v. 915 W. 36th Street, LLC, 197 Md.App. 91, 97 (2011)).
Ordinarily "[a]s a matter of contract and convention," a foreclosure purchaser who deposits a portion of the purchase price must "'pay interest upon the unpaid balance for the period between the time fixed for settlement and the date of actual settlement' and pay property taxes from the date of the sale." Id. at 166 (quoting Donald, 302 Md. at 477; AMT Homes, LLC, 228 Md.App. at 310). There are three equitable exceptions to that general rule in instances where settlement is delayed:
a purchaser at a judicial sale will be excused from requirement to pay interest upon the unpaid balance for the period between the time fixed for settlement and the date of actual settlement only when the delay[:] (1) stems from neglect on the part of the trustee; (2) was caused by necessary appellate review of lower court determinations[;] or (3) was caused by the conduct of other persons beyond the power of the purchaser to control or ameliorate.
Donald, 302 Md. at 477 (); see also North Star Props., LLC, 253 Md.App. at 171 ().
BP contends that foreclosure trustees owe a duty to foreclosure purchasers to timely respond and cure deficiency orders from the trial court. BP asserts that the Substitute Trustees' failure for 10 months to "file the documents the trial court demanded" was within the Substitute Trustees' control and satisfied the first exception under Donald, allowing a purchaser to avoid paying interest in the event of the trustees' neglect. It asserts that, under these circumstances, the circuit court abused its discretion in denying its motion to abate post-sale interest. Further, BP states that equitable relief is necessary to avoid rewarding trustees who create unnecessary delays that result in post-sale interest to the foreclosing lenders, "who also happen to be the foreclosure trustees' clients."
The Substitute Trustees contend that the circuit court properly denied BP's motion to abate. They argue that BP did not have standing to bring the motion for abatement because, at the time, LTGTR was substituted as the purchaser at the foreclosure sale. BP had not paid or been ordered to pay the costs for which they sought abatement. Moreover, they argue that, because LTGTR, not BP, paid the post-sale interest, and LTGTR is not a party to this appeal, the appeal should be dismissed. Finally, the Substitute Trustees argue that BP failed to prove a basis for abatement.
BP argues in its reply brief that the issue of standing has been waived because the Substitute Trustees did not raise the issue in the circuit court. In any event, it asserts that the standing argument is without merit because Maryland Rule 2-201 allows for claims to be brought by "a person with whom or in whose name a contract has been made for the benefit of another . . . without joining the persons for whom the action is brought." BP asserts that it was the "original purchaser" and that LTGTR, as the substitute purchaser, was the intended beneficiary of the contract between BP and the Substitute Trustees.
We first address the issue of standing. "[W]hen a party raises the issue of...
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