O'Sullivan v. Kimmett, 699, Sept. Term, 2020

CourtCourt of Special Appeals of Maryland
Citation260 A.3d 754,252 Md.App. 653
Docket NumberNo. 699, Sept. Term, 2020,699, Sept. Term, 2020
Parties Laura H.G. O'SULLIVAN, et al., v. Joan KIMMETT, et al.
Decision Date30 September 2021

Argued by: Edward W. Chang (Blank, Rome, LLP of Philadelphia, PA, Namrata Loomba, Blank, Rome, LLP of Washington, D.C.), on the brief, for Appellant.

Argued by: Emily R. Greene (Steven M. Klepper, Kramon & Graham, PA of Baltimore, MD), on the brief, for Appellee.

Panel: Leahy, Reed, James P. Salmon (Senior Judge, Specially Assigned), JJ.*

Salmon, J.

The appellees in this case are Jonathan Kimmett and his wife, Joan Kimmett. They reside at property in Anne Arundel County located at 1160 St. Stephens Church Road, Crownsville, MD ("the Property"). The Property is encumbered by a deed of trust. The appellants are Laura H.G. O'Sullivan and three other substitute trustees named by Ocwen Loan Servicing, LLC ("Ocwen"), the servicer of the Kimmetts’ loan, acting as attorney for an entity that claims to be the holder of the deed of trust Note ("the Note"). As will be explained, infra , the Kimmetts contend that Ocwen had no authority to appoint the substitute trustees.

The substitute trustees have filed an appeal from an order, dated August 10, 2020, signed by Anne Arundel Circuit Court Judge Robert J. Thompson that: 1) granted appellees’ exceptions to the report of sale of the Property; 2) struck an order that had previously ratified the sale of the Property; 3) granted the appelleesmotion to strike the deed that conveyed the Property to the foreclosure sale purchaser; 4) struck a motion filed by the foreclosure sale purchaser for possession of the Property; and 5) ordered "a Full Evidentiary Hearing pursuant to Rule 14-211." In this appeal, the substitute trustees raise one issue which they phrase as follows:

Whether the Circuit Court erred in granting the AppelleesRule 14-305 post-sale Exceptions and Ordering a Rule 14-211 Hearing where AppelleesRule 14-305 Exceptions consisted of the same Rule 14-211 pre-sale challenges to [appellants’] standing that the Circuit Court had previously dismissed.

The Kimmetts have filed a motion to dismiss this appeal based on their contention that the August 10, 2020 order is not a final judgment as defined by Md. Rule 2-602 and none of the exceptions to the rule (that this Court has no jurisdiction to consider a non-final judgment) is applicable.

I.PROCEDURAL BACKGROUND

On April 20, 2007, Jonathan Kimmett took out a $550,000 loan from America Brokers Conduit, the terms of which were included in the Note. Joan Kimmett initialed the Note below her husband's signature, although she was not named in the Note as a borrower. To secure the Note, Mr. and Mrs. Kimmett executed a deed of trust that encumbered the Property.

The deed of trust named Andrew Valentine as trustee and Mortgage Electronic Registration Systems, Inc. ("MERS") as nominee for the beneficiary of the Note – American Brokers Conduit. Thereafter, according to the substitute trustees, a deed from MERS (solely as nominee for American Brokers Conduit) transferred its beneficial interest in the Note to Deutsche Bank National Trust Company as trustee for American Home Mortgage Asset Trust 2007-4, Mortgage-Backed pass-through Certificate Series 2007-4 ("Deutsche Bank").

Mr. and Mrs. Kimmett defaulted on the loan secured by the deed of trust on May 2, 2009. They subsequently filed for bankruptcy. After a bankruptcy stay was lifted, Ocwen, the loan servicer, executed a "deed of substitution trustee," on September 23, 2016, which appointed Laura H.G. O'Sullivan, Rachel Kiefer, Jana M. Gantt and Chasity Brown as substitute trustees.

On December 28, 2016, the substitute trustees began a foreclosure action against the Property by filing an order to docket in the Circuit Court for Anne Arundel County. Attached to the Order to Docket were documents indicating that Deutsche Bank was (and currently is) the holder of the Note secured by the Property; an affidavit certifying ownership of debt instrument, default and indebtedness; and a deed of substitution of trustee. On that same date, the substitute trustees sent a Notice of Intent to Foreclose to Mr. and Mrs. Kimmett.

The substitute trustees, on June 12, 2017, filed a final loss mitigation affidavit after which the Kimmetts, on July 5, 2017, filed a request for mediation. Foreclosure mediation was held on August 23, 2017, but no agreement was reached.

The Property was advertised for sale with the sale set to take place on November 7, 2018. Two days before the sale, on November 5, 2018, the Kimmetts filed a pro se emergency motion to shorten time and to stay foreclosure. The Kimmetts, however, did not ask that the foreclosure action be dismissed. That motion was untimely because Md. Rule 14-211(a)(2)(A)(iii)(a) requires, insofar as is here pertinent, that such a motion be filed, at the latest, within 15 days after the date the "postfile mediation was held." In the subject case, the "postfile" mediation hearing was held more than fourteen months prior to the date that the Kimmetts filed their motion to shorten time and to stay foreclosure. Aside from being late, the motion was not under oath nor was it supported by an affidavit as required by Md. Rule 14-211(a)(3)(A) ; nor did the Kimmetts provide any excuse for the late filing. The motion to shorten time and to stay foreclosure asserted, inter alia , that the loan servicer, Ocwen, had proceeded in the foreclosure action using fraudulent documentation.

No stay was entered and the substitute trustees went forward with the sale of the Property on November 7, 2018. The Property was purchased by Deutsche Bank, the only bidder, for $482,000. Thereafter, on November 27, 2018, the circuit court entered an order, which had been signed on November 9, 2018; the order noted that the Kimmetts’ Md. Rule 14-211 motion did not comply with Md. Rule 1-204. That last-mentioned Rule requires, inter alia , that in order for the court to shorten or extend time, the movant must show that the failure to act in a timely manner was the "result of excusable neglect." Md. Rule 1-204(a).1 The order docketed on November 27, 2018 also stated that the motion was moot because the sale had already taken place.

On November 26, 2018, one of the substitute trustees filed a report of sale. The clerk of the Circuit Court for Anne Arundel County filed a notice of sale of the Property on December 7, 2018. The notice of sale filed by the clerk included a notice of the deadline for filing exceptions to the ratification of the foreclosure sale. The notice read:

Notice is hereby issued this Friday, December 07, 2018 that the sale of the property in the proceedings mentioned, made and reported by Rachel Kiefer, Esq. Substitute Trustee BE RATIFIED AND CONFIRMED, unless cause to the contrary thereof be shown on or before the 7th day of January 2019 [.]

(Bold emphasis in original.)

On January 6, 2019, the Kimmetts filed exceptions to the ratification of the foreclosure sale pursuant to Md. Rule 14-305. The Kimmetts raised three exceptions. The first exception was grounded on the contention that the substitute trustees were not "individuals authorized to make the sale[.]" That assertion was based on the allegations that American Brokers Conduit—the only lender identified on the Note and only beneficiary identified on the deed of trust—ceased to exist as of November 30, 2010 by virtue of liquidation by the U.S. Bankruptcy Court and therefore could not have validly assigned the deed of trust to Deutsche Bank (as the substitute trustees maintained it did) on September 17, 2013. In other words, according to the Kimmetts, the deed of trust assignment to Deutsche Bank was illegitimate and therefore the appointment of the Substitute Trustees by a servicer who was appointed by Deutsche Bank was likewise illegitimate because Deutsche Bank was not the holder of the Note and thus had no authority to appoint a servicer. The Kimmetts’ bottom-line argument was that inasmuch as the substitute trustees were not individuals authorized to make the sale, the advertisement for the sale was procedurally defective inasmuch as the advertisement was not published by "the individual[s] authorized to make the sale" as required by Md. Rule 14-210(a).

Based on the same premise, the Kimmetts’ second exception was that the advertisement of sale was "defective" because the substitute trustees represented in the advertisement that they had the power to sell even though (allegedly) they did not have such power.

A third exception was that the substitute trustees’ misrepresentation "chilled" the bidding at the foreclosure sale, which constituted a procedural irregularity.

On January 16, 2019, the substitute trustees filed their response in opposition to the exceptions. They argued that the exceptions were untimely; in the alternative, they argued that Maryland law is clear that challenges to a lender's right to foreclose must be timely raised prior to sale, pursuant to Md. Rule 14-211, and cannot be raised as the basis for post-sale exceptions under Md. Rule 14-305.

Maryland Rule 14-305(d) reads:

(d) Exceptions to sale . (1) How taken. A party, and, in an action to foreclose a lien, the holder of a subordinate interest in the property subject to the lien, may file exceptions to the sale. Exceptions shall be in writing, shall set forth the alleged irregularity with particularity, and shall be filed within 30 days after the date of a notice issued pursuant to section (c) of this Rule or the filing of the report of sale if no notice is issued. Any matter not specifically set forth in the exceptions is waived unless the court finds that justice requires otherwise.

(Emphasis added.)

A hearing on the exceptions was held in the Circuit Court for Anne Arundel County on March 4, 2019, Judge Thompson presiding. Judge Thompson did not rule on the merits of the exceptions; instead, he ruled that the exceptions were not timely filed by the Kimmetts. The judge apparently was under...

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