Brown v. Ward

• Docket Number: 1009
• Decision Date: 19 April 2024
• Citation: 313 A.3d 630,261 Md. App. 385
• Parties: The ESTATE OF H. Gregory BROWN v. Carrie M. WARD, et al.
• Court: Court of Special Appeals of Maryland

313 A.3d 630

261 Md.App. 385

The ESTATE OF H. Gregory BROWN

v.Carrie M. WARD, et al.

No. 1009, Sept. Term, 2023

Appellate Court of Maryland.

April 19, 2024

Circuit Court for Baltimore County, Case No. C-03-CV-23-000562, Michael J. Finifter, Judge

Argued by Phillip Robinson, Consumer Law Center LLC, Silver Spring, MD, on brief, for Appellant.

Argued by Aaron D. Neal, McNamee Hosea, P.A., Greenbelt, MD (Matthew Cohen, BWW Law Group, LLC, Rockville, MD), on brief, for Appellee.

Argued before: Arthur, Beachley, Deborah S. Eyler(Senior Judge, Specially Assigned), JJ.^*

Arthur, J.

This appeal concerns a deed of trust on residential property, securing the debt owed under a home equity line of credit agreement.In 2014, the successors to the lender obtained a personal judgment against the borrower in the amount of $88,500.00, based on the borrower’s default on his obligations under the line of credit agreement.

Nearly ten years later, a Delaware statutory trust obtained an assignment of the deed of trust and initiated an action to foreclose the lien on the property.The personal representative of the borrower’s estate moved to dismiss the foreclosure action or to stay the sale of the property.The Circuit Court for Baltimore County denied the motion.The personal representative has appealed to this Court, raising an array of challenges to the decision to allow the foreclosure action to proceed.

As explained in this opinion, we reject all but one of these challenges.The personal representative argues that the statutory trust has no right to foreclose because it has not obtained a license that is required when a credit grantor makes a revolving credit plan that is secured by a lien on residential real property.¹For its part, the statutory trust contends that this licensing requirement does not apply to an assignee of a revolving credit plan or to a foreign statutory trust.These two contentions lack merit.

Accordingly, we will vacate the order denying the motion to dismiss the foreclosure action or to stay the sale of the property.We will remand this case for further proceedings consistent with this opinion.

Factualand Procedural Background

A.The Home Equity Line of Credit Agreement and Promissory Note

During his lifetime, H. Gregory Brown owned a residential property located in Randallstown in Baltimore County.He financed the purchase of the property through a home mortgage loan.²The property served as his principal residence beginning in 2001.

On October 24, 2006, Mr. Brown entered into an agreement with GN Mortgage, LLC, titled "Home Equity Line of Credit Agreement and Promissory Note."Under this agreement, GN Mortgage agreed to give Mr. Brown an initial advance and line of credit in the maximum principal amount of $88,500.00 for a period of 15 years.Mr. Brown agreed to repay the amounts borrowed, along with certain interest and finance charges.The agreement specified that, to secure repayment, GN Mortgage had taken a security interest in the Brown property by way of a separate security instrument, also dated October 24, 2006.

The line of credit agreement provided: "This loan is made under Subtitle 9, Credit Grantor Revolving Credit Provisions of Title 12 of the Commercial Law Article of the Annotated Code of Maryland."That subtitle governs a "revolving credit plan" where a creditor grantor offers a credit plan to a borrower and makes a written election to offer the plan pursuant to that subtitle.Md. Code(1975, 2013 Repl.Vol., 2022 Supp.), § 12-913.1(a) of the Commercial Law Article("CL").

As used in that subtitle, the term "[r]evolving credit plan" describes a "plan that contemplates the extension of credit under an account governed by an agreement between a credit grantor and a borrower[.]"CL § 12-901(m).Under this type of plan, a credit grantor permits the borrower to make purchases or obtain loans from time to time; the amounts of the purchases and loans are charged to the borrower’s account; the borrower is required to pay the amounts charged to the account; and the credit grantor may charge and collect certain interest and finance charges on the amounts due.CL § 12-901(m)(1)-(4).In connection with the plan, the credit grantor may "[t]ake any security as collateral as may be acceptable to the credit grantor," including "real property[.]"CL § 12-902(a)(2)(i)-(ii).

B.Deed of Trust

On the same day that Mr. Brown and GN Mortgage entered into the line of credit agreement, they executed a separate security instrument titled the "Deed of Trust."The deed of trust named GN Mortgage as the lender, named Mr. Brown as the grantor, and named two persons as trustees.The deed of trust also named Mortgage Electronic Registration Systems, Inc.(MERS), as the beneficiary under the instrument, solely as nominee for GN Mortgage and its successors and assigns.After execution of the deed of trust, GN Mortgage recorded that document in the land records for Baltimore County.

The deed of trust included a covenant in which Mr. Brown promised to make all payments of the "Secured Debt."The deed of trust defined the "Secured Debt" as the debt incurred under the terms of the home equity line of credit agreement "and all … extensions, renewals, modifications or substitutions" of that agreement.The deed of trust provided that, if Mr. Brown defaulted on his payment obligations, the lender was authorized to accelerate the debt and to foreclose on the lien on the Brown property.In that event, Mr. Brown authorized the trustees, at the lender’s request, to sell the Brown property and to use the proceeds to repay the debt owed to the lender.

Over the next two years, Mr. Brown made payments to GN Mortgage in accordance with the line of credit agreement.As of September 2008, however, Mr. Brown stopped making the payments owed under the agreement.

C.Personal Judgment Against Mr. Brown in Favor of U.S. Bank

In November 2013, five years after Mr. Brown stopped making payments, a party identifying itself as "U.S. Bank, N.A., as Trustee for Home Equity Loan Trust2007-HSA1"(hereinafter "U.S. Bank"), filed suit against Mr. Brown in the Circuit Court for Baltimore County.U.S. Bank claimed that Mr. Brown had defaulted on his obligations under the line of credit agreement and promissory note.U.S. Bank demanded damages in the amount of $85,000.00.

Along with the complaint, U.S. Bank produced a copy of the home equity line of credit agreement and promissory note.The document included a chain of special indorsements, beginning with an indorsement from GN Mortgage and ending with an indorsement to U.S. Bank.This chain included: an indorsement from G.N. Mortgage to "Guaranty Bank, F.S.B."; an indorsement from Guaranty Bank, F.S.B., to "Residential Funding Company, LLC"; and an indorsement from Residential Funding Company, LLC, to "LaSalle Bank, N.A., as Indenture Trustee."In an allonge to the promissory note, a party named "U.S. Bank, N.A., as Successor Trustee to Bank of America, N.A., as Trustee, successor by merger to LaSalle Bank, N.A., as Indenture Trustee" specially indorsed the note to U.S. Bank.In a further allonge, U.S. Bank made a blank indorsement, which stated "PAY TO THE ORDER OF," but did not identify a party to which the instrument was made payable.

After U.S. Bank filed suit, Mr. Brown filed no answer.U.S. Bank moved for summary judgment, and Mr. Brown filed no response to the motion.On March 6, 2014, the circuit court granted the motion and entered a judgment against Mr. Brown in favor of U.S. Bank in the amount of $85,000.00.Shortly thereafter, U.S. Bank moved to revise the judgment, asserting that it had made a "clerical error" in its previous filings and that the "correct balance" of the outstanding debt was $88,500.00.Mr. Brown filed no response to the motion to revise.On April 9, 2014, the circuit court entered a revised final judgment against Mr. Brown and in favor of U.S. Bank in the amount of $88,500.00.

In August 2014, Mr. Brown filed a voluntary Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the District of Maryland.A few months later, the bankruptcy court granted Mr. Brown a discharge under 11 U.S.C. § 727.The order stated that the discharge "eliminates a debtor’s legal obligation to pay a debt that is discharged" and "prohibits any attempt to collect from the debtor a debt that has been discharged."It further stated: "However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case."

D.Proceedings for the Estate of H. Gregory Brown

Mr. Brown died on February 28, 2015.On his behalf, a petition for the administration of a small estate was filed in Baltimore City.Mr. Brown’s son, Gregory Brown, served as personal representative of the estate.

In the years since the opening of the estate, the Brown property has never been conveyed to any party.Consequently, the estate of Mr. Brown continues to own the property.Two surviving family members, Mr. Brown’s mother and his brother, have continued to reside at the property.

E.Foreclosure Proceedings Initiated by FirstKey

On September 28, 2022, a party identifying itself as "FirstKey Master Funding, 2021-A Collateral Trust, U.S. Bank Trust National Association as Collateral Trust Trustee"(hereinafter "FirstKey"), sent a notice of intent to foreclose to the personal representative of Mr. Brown’s estate.FirstKey described itself as the "secured party" under the deed of trust.

On October 4, 2022, a party named "Mortgage Electronic Registration Systems, Inc., as beneficiary, as nominee for GN Mortgage, LLC, its successors and assigns" executed an agreement assigning "all of [its] interest" in the deed of trust to FirstKey.Those parties recorded the assignment in the land records for Baltimore County.

A few months later, FirstKey appointed nine persons as substitute trust...