Citibank v. NEW PLAN REALTY

• Decision Date: 09 March 2000
• Docket Number: No. 635,635
• Citation: 131 Md. App. 44,748 A.2d 24
• Court: Court of Special Appeals of Maryland
• Parties: CITIBANK FEDERAL SAVINGS BANK, et al. v. NEW PLAN REALTY TRUST, et al.

748 A.2d 24

131 Md. App. 44

CITIBANK FEDERAL SAVINGS BANK, et al. v. NEW PLAN REALTY TRUST, et al.

No. 635, Sept. Term, 1999.

Court of Special Appeals of Maryland.

March 9, 2000.

Darin S. Levine, (Richard A. Kramer and Kramer & Gorney, Chartered, on the brief), La Plata, for appellants.

Bruce L. Marcus, (M. Celeste Bruce and Marcus & Bonsib, on the brief), Greenbelt, for appellees.

Argued before HOLLANDER, EYLER and THIEME, JJ.

THIEME, Judge.

Appellant, Citibank Federal Savings Bank ("Citibank"), appeals from an order of the Circuit Court for Montgomery County denying its exceptions to a sheriff's sale.¹ In its exceptions, Citibank requested that the court set aside the sale or, in the alternative, find that Citibank is the holder of a partial superior lien to appellee, New Plan Realty Trust ("New Plan"), by virtue of the doctrine of equitable subrogation. After a hearing, the court adopted New Plan's arguments and denied Citibank's exceptions. Citibank presents the following questions for our review, which we have renumbered and rephrased for clarity:

1. Did the court err in ratifying the execution sale when the sheriff permitted a judgment creditor to apply credit toward the deposit and purchase price even though the notice of sale specified that the deposit must be paid in cash or with a certified check payable to the sheriff?

2. Did the court err in ratifying the execution sale when an individual was not permitted to bid with a cashier's check or a certified check payable to herself, which she offered to indorse to the sheriff?

3. Did the court err in failing to address Citibank's equitable subrogation claim in its order?

4. Did the court err in failing to find that Citibank held a partial superior lien against the property?

We answer "no" to the first question and "yes" to the second question. We do not reach the third and fourth questions.

Facts

On January 24, 1974, Todd Realty Corporation ("Todd"), a Maryland corporation, purchased in fee simple the real property located at 7300 Helmsdale Road in Bethesda, Maryland. On April 25, 1991, Todd conveyed its interest in the property by deed to Robert I. Melnick and his sons, Scott L. Melnick, Richard J. Melnick, Gary N. Melnick, and Matthew R. Melnick, who were all of the original shareholders of Todd. Also on April 25, 1991, the shareholders executed a deed of trust in the amount of $500,000.00 for the benefit of Citibank ("Citibank deed of trust") to secure a promissory note of the same date for the same amount. The Citibank deed of trust was recorded on June 17, 1991, in the Land Records of Montgomery County, Maryland.

The Citibank deed of trust stated on its face that it was a refinance of a prior deed of trust recorded in the Land Records with a balance of $215,370.54. The proceeds of the Citibank deed of trust were used to the extent of $215,370.54 to pay in full the prior deed of trust. The prior deed of trust was released by an affidavit of satisfaction recorded on June 26, 1991.

Appellee, New Plan Realty Trust ("New Plan"), is a judgment creditor of Robert I. Melnick by virtue of a judgment enrolled in the Circuit Court for Montgomery County. Judgment was entered on May 10, 1982, and docketed on or about May 19, 1982. As of the date of judgment, Robert I. Melnick was indebted to New Plan in the amount of $431,143.00. According to New Plan, with the accumulation of interest, the amount of the judgment, interest, and costs was "well in excess" of $900,000.00 as of the filing date of New Plan's brief in this Court.

During the course of its attempts to satisfy the judgment, New Plan discovered that Robert I. Melnick resided in a home located at 7300 Helmsdale Road, Bethesda, Maryland, which was titled in the name of Todd Realty Corporation. In April 1991, New Plan instituted ancillary proceedings asserting that Todd was a sham corporation having conducted or transacted no business, filed no tax returns and owned no property other than the Melnick home. Thus, New Plan argued, "for all purposes, [Todd] was the alter ego of Robert I. Melnick." New Plan also learned that Todd purported to have been dissolved and conveyed its sole asset, the Helmsdale property, on June 17, 1991, by recording the previously described Citibank deed of trust.

New Plan filed suit in the Circuit Court for Montgomery County and sought to set aside the deed, described as a no-consideration deed, as a fraudulent conveyance. On August 16, 1995, the jury determined that Robert I. Melnick intended to perpetrate fraud by causing Todd Realty to convey the property to himself and his sons. The jury further found that Todd was a straw and that the real party in interest to Todd was Robert I. Melnick. As a result of the jury's special verdict, the court rendered a decision finding that the transaction and conveyance from Todd to the Melnicks was a fraudulent conveyance.

Thereafter, no appeal having been noted, New Plan requested that the Sheriff for Montgomery County seize the property and sell it pursuant to the judgment lien enrolled on May 19, 1982. As of July 26, 1996, when New Plan requested the sheriff's sale, the judgment totaled approximately $939,829.00. The Sheriff for Montgomery County seized the property pursuant to the writ of execution of property obtained by New Plan.

Prior to the sheriff's sale, however, Citibank attempted to foreclose on the property. As noted in the report of sale, the property was sold on November 12, 1996, to third-party purchasers Thomas G. Tsianakas and Loanna Stagia Tsianakas for a high bid of $513,500.00. New Plan filed exceptions to the foreclosure sale and the ratification of the foreclosure proceeding.

After a hearing, the court issued an order on April 22, 1997, stating that New Plan's judgment had priority over Citibank's lien and that Citibank was not an innocent grantee. The order further directed that the property be sold subject to New Plan's lien. Citibank appealed to this Court and we affirmed the trial court's judgment.

The sheriff's sale was eventually scheduled for January 22, 1998, at 10:30 a.m. According to the terms of the notice of sale, a $5,000.00 deposit was required at the time of the sale, with the balance of the purchase price due within ten days after ratification from the court. The advertisement further provided that both the deposit and the remaining balance be paid in U.S. currency or certified check made payable to "Sheriff of Montgomery County."

The property was sold at the sheriff's sale to New Plan for $500,000.00. New Plan was the only party to place a bid at the sale. Citibank filed exceptions to the Report of Sale on March 12, 1998, arguing that ratification should be denied due to various irregularities in the conduct of the sale. In addition, Citibank contended that under the doctrine of equitable subrogation Citibank had a partial first lien on the proceeds from any sale of the subject property. New Plan filed a response to Citibank's exceptions, and a hearing was held on July 9, 1998. The court adopted the arguments New Plan set forth in its response and denied Citibank's exceptions.

Discussion

Citibank raises two arguments on appeal. First, it argues that the sheriff's sale should not have been ratified due to irregularities in the conduct of the sale. Second, Citibank contends that the doctrine of equitable subrogation operates in this case to give Citibank a first priority lien on the property at issue. We will discuss these arguments in turn.

Sheriff's Sale

A. New Plan's Bid

In bidding on the property at the sheriff's sale, New Plan did not provide a deposit in the manner required by the notice of sale. Instead, New Plan applied its judgment to provide the deposit and pay the balance due and owing (within the required ten days). Citibank argues that, because this method of payment was not explicitly permitted by the notice of sale, accepting payment in this manner amounted to an irregularity that warrants setting aside the sale. We disagree.

According to Citibank's argument, New Plan should have paid the deposit in the form of cash or a cashier's check made payable to the sheriff and then paid the balance to the sheriff within ten days. After the auditor's report had been filed and ratified by the court, the sheriff would then have issued a check to New Plan in the amount of $500,000.00. Thus, New Plan would simply have paid itself the purchase price of $500,000.00. We do not subscribe to this circular approach, and instead adopt the view of the Court of Appeals in Van Wagoner v. Nash, 187 Md. 410, 416, 50 A.2d 795 (1947):

[Where the] claim of the purchasers was preferred, and it was much greater than the amount of the proceeds of the sale... it would have been a very useless— to say nothing of a senseless—ceremony, to have required the purchasers to pay over the money that the court had adjudged to belong to them, in order that the trustee might go through the form of paying it back.

It is well-settled in Maryland that a mortgagee may purchase the mortgaged property at a foreclosure sale by applying the mortgage debt to the purchase price, rather than by paying with cash or a certified check. See, e.g., Van Wagoner, 187 Md. 410, 50 A.2d 795; Weismiller v. Bush, 56 Md.App. 593, 598, 468 A.2d 646 (1983). In Weismiller, this Court stated that "Maryland law has long and consistently permitted a mortgagee who purchases the mortgaged property at a foreclosure to apply the debt due him by the mortgagor against the purchase price, to the same effect as if he had posted or paid cash in that amount." 56 Md.App. at 598, 468 A.2d 646 (footnote omitted). The Court then reviewed numerous Maryland cases spanning over 130 years that supported its conclusion. Id. at 598-99, 468 A.2d 646 (reviewing Murdock's Case, 2 Bland 461, 468 (1828); Lannay's Lessee v. Wilson, 30 Md. 536 (1869); Harnickell v. Orndorff, 35 Md. 341 (1872); Moss v. Annapolis Savings Institution, 177 Md. 135, 8 A.2d 881 ...