Smith–Myers Corp. v. Sherill

• Decision Date: 24 January 2013
• Docket Number: No. 2034,Sept. Term, 2011.,2034
• Citation: 209 Md.App. 494,60 A.3d 90
• Parties: SMITH–MYERS CORPORATION d/b/a Smith–Myers Mortgage Group v. Ada SHERILL, et al.
• Court: Court of Special Appeals of Maryland

209 Md.App. 494

60 A.3d 90

SMITH–MYERS CORPORATION d/b/a Smith–Myers Mortgage Group

v.Ada SHERILL, et al.

No. 2034, Sept. Term, 2011.

Court of Special Appeals of Maryland.

Jan. 24, 2013.

Jason W. Shoemaker (Rolle & DeLorenzo, on the brief) Frederick, MD, for appellant.

Robert K. Epstein, Silver Spring, MD, for appellee.

Panel: KEHOE, BERGER, RONALD B. RUBIN (Specially Assigned) JJ.

KEHOE, J.

Appellant, Smith–Myers Corporation d/b/a Smith–Myers Mortgage Group (“Smith–Myers”), appeals a default judgment entered against it in favor of appellees, Ada Sherill and James Mills,¹ by the Circuit Court for Prince George's County. Smith–Myers presents two issues for our review, which we have re-phrased:

I. Did the circuit court err by entering the default judgment?

II. Did the circuit court abuse its discretion in denying Smith–Myers's motion to vacate the default judgment?

We affirm the judgment of the circuit court. We conclude that the circuit court did not err by entering the default judgment against Smith–Myers because: 1) Rule 2–613(f) requires the court to satisfy itself that notice was mailed to the defaulting party's “last known address”, and not, as Smith–Myers asserts, to the defaulting party's correct mailing address; 2) Smith–Myers failed to satisfy its continuing obligation to supply the court with its most recent address, and, therefore, failed to establish that 9200 Basil Court, instead of 9700 Basil Court, was its last known address under Rule 2–613(b); and 3) Smith–Myers had, in any event, actual notice of the order of default and the hearing on damages and yet did not move to vacate the order and did not attend the hearing. Moreover, we conclude that the circuit court did not err in denying Smith–Myers's motion to vacate the default judgment because Smith–Myers failed to establish an equitable basis to excuse its failure to attend court hearings or to move to vacate the order of default on a timely basis.

FACTUAL AND PROCEDURAL BACKGROUND

On January 4, 2007, appellees filed a six-count complaint ² against four parties—Patricia Lawson, Johnny Beans,³ Smith–Myers (appellant), and Beltway Title & Abstract, Inc.—alleging that the defendants engaged in an elaborate fraudulent scheme to deprive them of the equity value of their home. The scheme involved, among other things, fraudulent and coercive conduct by Lawson to induce appellees to enter into an unconscionable mortgage loan from Smith–Myers and conditioning the loan upon excessive fees for unnecessary and fictitious services. Appellees alleged that Lawson was a loan officer for Smith–Myers, Beans was the proxy buyer of the mortgaged property, Smith–Myers was the company that provided financing for the transaction, and Beltway Title was a real estate title insurance agency that conducted a settlement alleged to have been instrumental in the defendants' efforts. On May 30, 2007, appellees filed an amended complaint adding John J. Dwyer, the owner of Beltway Title, as a fifth defendant.

Early on in the proceedings, the circuit court dismissed the claims against Beans without prejudice. As we will explain in greater detail below, on March 16, 2009, the circuit court entered a default judgment against Smith–Myers in the amount of $627,277.68. Smith–Myers moved to vacate the judgment, without success, and then filed a motion for reconsideration, which the circuit court denied. Smith–Myers filed an appeal to this Court although the circuit court had not yet resolved the claims against Lawson, Dwyer, and possibly Beltway Title.⁴See Smith–Myers Corp. v. Sherill (“Smith–Myers I”), No. 2234, September Term, 2009, filed April 6, 2011. In Smith–Myers I, we dismissed the appeal as premature because there was no final judgment and remanded the case to the circuit court for further proceedings. On remand, the circuit court dismissed the claims against Lawson, Dwyer and Beltway Title, thus rendering the judgment against Smith–Myers final. This appeal followed.

We now turn to more a detailed description of the events that led to the entry of the default judgment and Smith–Myers's efforts to vacate the same.

Appellees' original complaint stated that the mailing address of Smith–Myers was (emphasis added):

Smith–Myers Mortgage Group

9700 Basil Court, Suite 100

Largo, MD 20774

Appellees concede that the 9700 Basil Court address was incorrect, and that Smith–Myers's mailing address is 9200 Basil Court, Suite 100, Upper Marlboro, MD 20774. The parties also agree that 9700 Basil Court does not, in fact, exist, and further, that Largo and Upper Marlboro both reference the same location for the purposes of the United States Postal Service. This notwithstanding, there is no dispute that Smith–Myers was properly served by personal service. The affidavit of service for the process server indicates that he personally served the summons and the complaint on Smith–Myers at (emphasis added):

Smith–Myers Mortgage Group

9200 Basil Court, Suite 100

Largo, MD 20774

Herbert Callihan, at the time a Maryland attorney, filed an answer on behalf of Smith–Myers but the answer did not correct or otherwise reference the complaint's use of the 9700 Basil Court address.

Approximately one year later, on February 21, 2008, Callihan filed a Withdrawal of Appearance/Substitution of Counsel indicating that he had withdrawn as counsel for Smith–Myers and that Larry N. Burch had entered his appearance on Smith–Myers's behalf. This document made no mention of an address for Smith–Myers. Burch remained Smith–Myers's attorney for about three months.

On April 14, 2008, Burch filed a request to withdraw his appearance from the case. Attached to this request was a certificate of service indicating that he had mailed a copy of his motion to Jeffrey Smith, the president of Smith–Myers, at the following address:

Jeffrey Smith

Smith–Myers Mortgage Group

9200 Basil Court, Suite 100

Upper Marlboro, MD 20774

Also attached to the request as a captioned, original document exhibit was Smith–Myers's “Consent to Withdraw” which likewise listed 9200 Basil Court as the address for Smith–Myers. The circuit court granted Burch's request on May 19, 2008 in an order which also stated, in pertinent part (emphasis in original deleted, emphasis in bold added):

ORDERED, that Defendant Smith–Myers Mortgage Group is hereby advised that pursuant to Md. Rule 2–131(a)(2) a person other than an individual may enter an appearance only by an attorney, thus as a Corporation they must be represented by a Maryland attorney;

ORDERED, this case be sent to the Office of Calender Management for a Status Hearing to be set....

The clerk's office mailed a copy of this order to Smith at the 9200 Basil Court address. There is no dispute that Smith–Myers received a copy of this order. In addition, there is no dispute that, at the time of his withdrawal, Burch advised Smith–Myers to retain new counsel and that Smith–Myers “was required to appear at court on all dates set by the Court.” ⁵

However, no attorney entered his or her appearance on behalf of Smith–Myers in the case for approximately ten months. During this period, the circuit court held three status conferences—on June 6, 2008; October 3, 2008; and December 19, 2008—all of which Smith–Myers failed to attend. Notices of these conferences were sent to Smith–Myers at the 9700 Basil Court address. Smith–Myers asserts that it never received notice of the status conferences because of the inaccurate address, and that this lack of proper notice explains its absences.It is, however, apparent that someone received these notices, as none were returned to the circuit court as undeliverable.⁶

On December 11, 2008, appellees filed what they called a “Motion for Default Judgment and Other Relief”, which was treated by the circuit court as a request for an order of default pursuant to Rule 2–613(b). In their request, appellees asserted that Smith–Myers's last known address was “9700 Basil Court, Suite 100, Largo, MD 20774”. (Emphasis added).

At the status conference held on December 19, 2008, the circuit court issued an order of default against Smith–Myers. As with the status conference notices, this order was mailed to Smith–Myers at the 9700 Basil Court address, but a copy of the order was also mailed to Callihan. According to Smith–Myers, Callihan informed the company that an order of default had been issued against it.⁷ Despite this knowledge, Smith–Myers did not move to vacate the order of default on a timely basis. SeeMd. Rule 2–613(d) (“The defendant may move to vacate the order of default within 30 days after its entry.”).

On March 6, 2009, the circuit court conducted an ex parte hearing on damages. Notice of this hearing was again sent to “Smith–Myers Mortgage Group, 9700 Basil Court, Suite 100, Largo, MD 20774”, as well as to Callihan. The record indicates that Smith–Myers also had knowledge of this hearing,⁸ but it did not attend. After an evidentiary presentation by appellees, the circuit court entered a default judgment against Smith–Myers in the amount of $627,277.68 plus costs.

On April 6, 2009, Smith–Myers, now represented by counsel, filed a Motion to Vacate Default Judgment, blaming its derelictions on an alleged lack of notice and on a disbarred attorney named Peter Maignan, and seeking to have the judgment set aside. We will discuss the grounds advanced by Smith–Myers in Part II of this opinion. The circuit court denied this motion without a hearing and without discussion on August 29, 2009.

On September 22, 2009, Smith–Myers filed a Motion for Reconsideration of Denial of Motion to Vacate Default Judgment, repeating its prior arguments. The court denied this motion without a hearing and without discussion on October 21, 2009.

On November 23, 2009, Smith–Myers noted an appeal, which, as previously explained, we dismissed in Smith–Myers I. On remand, at the request of both parties, the circuit court dismissed the claims against the remaining defendants and Smith–Myers noted this...