Khan v. Cohn

• Decision Date: 26 June 2015
• Docket Number: No. 2081,2081
• Citation: Khan v. Cohn, No. 2081 (Md. App. Jun 26, 2015)
• Court: Court of Special Appeals of Maryland
• Parties: JAMAL M. KHAN v. EDWARD S. COHN, ET AL.

JAMAL M. KHAN v. EDWARD S. COHN, ET AL.

No. 2081

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2013

June 26, 2015

UNREPORTED

Meredith, Leahy, Sonner, Andrew L. (Retired, Specially Assigned), JJ.

Opinion by Sonner, J.

*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

Following default on the applicable mortgage, real property, occupied by appellants, Jamal and Samina Khan ("the Khans"), at 1410 Meadowsweet Drive, Sandy Spring, Maryland ("the Property"), was sold at a foreclosure sale. The Khans filed, in the Circuit Court for Montgomery County, exceptions to the ratification of the sale; the court denied the exceptions and ratified the sale. The Khans appealed the ratification; we affirmed the ruling of the circuit court. Thereafter, appellees, trustees for the purchasers of the Property, filed a Motion for Possession. In response, the Khans filed a Motion to Vacate the foreclosure sale, in which they argued that the sale was invalid because its advertisement impermissibly mentioned that fees were applicable. The court denied the Khans' motion and granted a judgment of possession in favor of appellees. This appeal followed.

The Khans present the following question for our review:¹

Did the court err by not vacating the subject foreclosure sale on the ground that it was illegally advertised?

For the reasons which follow, we shall affirm the judgment of the circuit court.

FACTS AND PROCEEDINGS

On May 10, 2010, foreclosure proceedings were initiated after the Khans defaulted on the terms of the mortgage related to the Property. The subsequent foreclosure sale was advertised in the Montgomery Sentinel, a local weekly newspaper. The sale was conducted on August 4, 2010, at which time the Property sold for $742,500; the purchaser was Citibank, N.A., for whom appellees act as trustees.

The Khans filed exceptions to the ratification of the sale. They claimed that the Property was sold for an "inadequate sum of money" given that it was purchased in 2006 for $1,267,325, had most recently been assessed by the State Department of Assessment and Taxation as having a value of $1,012,280, and the amount owed on the mortgage was $750,000. Further, the Khans asserted, that they were misled by false representations that their mortgage would be modified in order to avoid foreclosure, that the Order to Docket the foreclosure action did not indicate that the Property was residential property as required by Maryland Rule 14-207(6), and that the note filed in the foreclosure action did not appear to be a copy of the note they executed.

A short time later, the Khans filed amended exceptions in which they contended that: (1) appellees lacked standing to pursue foreclosure; (2) "the note tendered to [the] court is unreliable and cannot be accepted [as] a basis for foreclosure action and sale"; (3) appellees did not have the right to issue a Notice of Intent to foreclose because they were not appointed as trustees until after the notice was issued; (4) the document appointing appellees as trustees was "dubious" as it did not establish that the individuals who appointed appellees had the power to do so; (5) it was "dubious" that "[a]ll documentstendered regarding the foreclosure" were notarized by the indicated notary because it was "questionable" as to whether the officers of the institutions who executed the documents were present in Baltimore County, specifically on May 6, 2010, to do so; (6) the notice that an order to docket had been filed did not include a warning in fourteen-point type as required by law; and (7) the foreclosure sale occurred only two days after the last negotiation for loan modification, despite the fact that a foreclosure sale may only proceed thirty days after notice of the denial of loan modification is sent.

On May 9, 2011, the court ratified the subject foreclosure sale. The Khans appealed the sale order on June 7, 2011. This Court, in an unreported opinion, affirmed the sale order on February 7, 2013.²

On September 11, 2013, appellees filed a motion for possession of the Property. On September 24, 2013, the Khans filed an opposition to appellees' motion for possession; they also filed a motion to vacate the sale of the Property. In the motion to vacate, the Khans contended that the sale of the Property was "contrary to public policy as enunciated in Maddox v. Cohn, [424 Md. 379 (2012)]." They asserted, specifically, that in the advertisement for the foreclosure sale of the Property, appellees "demand[ed] . . . additional legal fees" for their own benefit. As such, the Khans insisted that the sale was prejudicial because the impermissible advertisement may have "chilled would-be purchasers from bidding" and so the best price for the Property was not obtained, a violation of appellees' duty to maximize proceeds from the foreclosure sale. The Khans stated that the only wayto cure such an injustice was to vacate the sale, re-advertise, and resell the Property. In their opposition to appellees' motion for possession, the Khans contended, in pertinent part:

1. [The Khans'] Motion to Vacate is well founded in law as enunciated in Maddox v. Cohn, . This Motion is intended to cure miscarriage of justice.

2. Further proceedings in this case may complicate matters because third parties may get involved. A stay of proceedings would protect third parties from getting involved in these proceedings.

3. [Appellees] would not suffer any prejudice because they violated Maryland public policy in that they committed an impermissible abuse of discretion. [Appellees] included in the advertisement [of the foreclosure sale] a demand for additional legal fees for the benefit of [appellees] . . .

On November 18, 2013, the circuit court denied the Khans' motion to vacate and granted a judgment for possession in favor of appellees.

DISCUSSION

The Khans contend that the advertisement for the foreclosure sale of the Property was "clearly illegal" because it noted several impermissible fees as being conditions of the sale. They point out that similar fees led to the invalidation of a foreclosure sale in Maddox, supra, and assert that the same result is required in this case. The Khans insist that "[a]t a minimum," a remand is necessary so that "the Circuit Court [may] actually determine which rule or contract permits [the type of fee found in the subject foreclosure sale advertisement]."

By contrast, appellees contend that because the Khans did not note an exception to the foreclosure sale on the ground that the related advertisement was improper, that claimis now precluded by res judicata.³ Appellees assert that res judicata serves to bar the instant appeal because the Khans already appealed the ratification of the subject foreclosure sale and this Court affirmed the sale. Appellees note that although the holding in Maddox, supra, applies retroactively, "retroactively-applicable case law does not break the barriers imposed by res judicata." They insist that if it were concluded that retroactivity superseded res judicata in cases such as the one at bar, it "would have the effect of undoing an unknown and substantial number of real property transfers in Maryland, thus prejudicing countless Maryland landowners." Appellees contend that even if this Court were to find that res judicata did not apply to bar the instant appeal, the circuit court would not have had the power to vacate the judgment because "[a]fter a judgment is enrolled, which occurs thirty days after its entry, a court has no authority to revise that judgment unless it determines under clear and convincing evidence that the judgment was entered as a result of fraud, mistake, or irregularity." They point out that in this case, the foreclosure sale was ratified three years before the Khans moved to vacate it, and no claim of fraud, mistake, or irregularity, under Maryland Rule 2-535(b), was made. For those reasons, appellees request that this Court affirm the judgment of the circuit court.

In rebuttal, the Khans contend that res judicata does not bar their appeal because the issue they have raised could not have been decided at the time of the ratification of the foreclosure sale because Maddox had not yet been decided.

As to whether res judicata bars the sort of challenge raised by the Khans, our recent decision in Bank of New York Mellon v. Nagaraj, 220 Md. App. 698 (2014), is instructive. Conveniently, the core facts and proceedings in that case are nearly identical to those involved in the case at bar.

In Bank of New York Mellon v. Nagaraj, the Nagarajs filed exceptions to the ratification of the foreclosure sale of the property on which they had been the mortgagors; none of the exceptions referred to the impropriety of the advertisement for the foreclosure sale. Id. at 701. The exceptions were denied and the foreclosure sale was ratified. Id. at 702. The Nagarajs appealed the ratification of the sale; this Court affirmed the circuit court's judgment. Id. at 702. After the ratification, the bank that purchased the property filed a motion for possession. Id. In turn, the Nagarajs filed a motion to vacate the ratification of the sale in which they asserted, in pertinent part, that, under Maddox, supra, the sale had been conducted contrary to public policy because the sale advertisement noted additional applicable fees for the benefit of the trustees, an act which prejudiced the Nagarajs because it violated the trustees' duty to maximize sale proceeds. Id. at 703. Bank of New York Mellon filed an opposition to the motion in which it argued that the Nagarajs had not previously raised the issue of an improper advertisement, raising it for the first time over three years after the date of the sale and subsequent ratification. Id. at 703-04. As such, Bank of New York Mellon argued, in...