Yacko v. Mitchell

• Decision Date: 26 February 2021
• Docket Number: No. 1586, Sept. Term, 2019,1586, Sept. Term, 2019
• Citation: 249 Md.App. 640,246 A.3d 720
• Parties: Keith YACKO, et al. v. Rene MITCHELL
• Court: Court of Special Appeals of Maryland

249 Md.App. 640

246 A.3d 720

Keith YACKO, et al.

v.Rene MITCHELL

No. 1586, Sept. Term, 2019

Court of Special Appeals of Maryland.

February 26, 2021

Argued by: Brett L. Messinger (Duane Morris, LLP, Philadelphia, PA, Laurie G. Furshman, Jordan F. Dunham, Duane Morris, LLP, Baltimore, MD), all on the brief, for Appellant

Argued by: Carl I. Brundidge (David E. Moore, Brundidge & Stanger PC, on the brief), Alexandria, VA, for Appellee

Panel: Nazarian, Leahy, Friedman, JJ.

Leahy, J.

Like a boomerang, the mortgage transaction that was the subject of our reported opinion in Mitchell v. Yacko , 232 Md. App. 624, 161 A.3d 14 (2017), has returned. The substitute trustees for the loan servicer in this case, Keith M. Yacko, Robert E. Frazier, Thomas J. Gartner, Jason L. Hamlin, Glen H. Tschirgi, and Gene Jung (collectively, "Substitute Trustees") attempted to foreclose on a note and deed of trust pursuant to a power of sale by filing an order to docket. Ms. Renee Mitchell, the borrower and homeowner, representing herself, responded by filing a motion to dismiss the foreclosure action because the note and deed of trust were not valid and enforceable.

In round one, Ms. Mitchell's motion was denied without a hearing, and she appealed. We held "that a party cannot institute a foreclosure upon forged documents. Foreclosure is an equitable procedure, and the Substitute Trustees must demonstrate, upon remand, that this particular foreclosure has not ‘been marred by fraudulent, illegal, or inequitable conduct." ’ Id. at 641, 161 A.3d 14 (citation omitted) (cleaned up). Now, in the second round, we address the Substitute Trustees’ appeal, and Ms. Mitchell's cross-appeal, from Judge Crystal Mittelstaedt's order in which she dismissed the foreclosure after presiding over a nine-day evidentiary hearing held pursuant to Maryland Rule 14-211(b)(2).

The Substitute Trustees claim that Judge Mittelstaedt erred in her determination that the lien instrument was invalid and abused her discretion in declining their request for discovery prior to the evidentiary hearing. They also contend that the court erred in denying their request for an equitable mortgage—an issue raised for the first time in their briefing filed after the evidentiary hearing. In her cross-appeal, Ms. Mitchell avers that the judge abused her discretion in excluding Ms. Mitchell's expert.

We affirm the court's order dismissing the foreclosure on the ground that "Ms. Mitchell established that the lien and lien instruments are invalid, and that [the Substitute Trustees] have no right to foreclose on an adjustable mortgage."

Fundamentally, the current and prior appeals highlight two elemental principles underlying Maryland foreclosure procedure. First, a "power of sale foreclosure is intended to be a summary, in rem proceeding[,]" Wells Fargo Home Mortg., Inc. v. Neal , 398 Md. 705, 726, 922 A.2d 538 (2007) (cleaned up),¹ in which there should be no doubt as to the validity of the lien and the lien instruments, Md. Rule 14-207(b)(1) (requiring lien instrument be "supported by an affidavit that it is a true and accurate copy"). Second, as the action is "peculiarly within a court of equity's jurisdictional powers," the foreclosure must be free of any "fraudulent, illegal or inequitable conduct." Wells Fargo , 398 Md. at 728, 730, 922 A.2d 538. Title 14 of the Maryland Rules implements these dual precepts by providing a summary procedure for a foreclosure pursuant to a power of sale but requiring lenders to attest to the validity of their lien and lien instruments.² The remedy afforded a lender in a foreclosure is premised on the requirement that the lender submit a true and accurate copy of the lien instruments. If a lender cannot establish, for whatever reason, the validity of its lien, it must pursue another avenue to assert its rights under the mortgage.

Because of the high volume of foreclosure cases, recurrent plaintiffs often treat these matters as routine and expect our courts to rubber-stamp the foreclosure with methodical expediency. However, to the homeowner, there is nothing routine about losing a home, and, when a homeowner asserts a timely, valid challenge to a foreclosure, the Maryland Rules instruct our courts to slow the foreclosure action as necessary to protect the homeowner and ensure that the instruments are valid and that the plaintiffs otherwise have a right to foreclose.

SYNOPSIS

Before we become mired in the weeds, deeds, and documents that often obscure the big picture, we start with an overview of the case.

In June 2005, Rene Mitchell purchased residential property in the City of Bowie in Prince George's County (the "Property") and financed the $555,900.00 purchase entirely through two loans, both secured by deeds of trust. The sales contract states that Ms. Mitchell will obtain a "Conventional First Deed of Trust loan amortized over 30 years at a FIXED rate" and "a Second Deed of Trust loan amortized over 30 years at a FIXED rate[.]" The underlying case and this appeal concern the note, deed of trust, and closing on the first loan in the amount of $444,728.00.

Conflicting Accounts

Ms. Mitchell claims that she "sought a fixed[-]rate loan for the purchase of residential property and executed a sales contract specifying the same." At the closing, however, the loan documents that she executed were for an adjustable-rate mortgage. According to Ms. Mitchell, she halted the closing, had "VOID" stamped on the executed documents, and requested acknowledgement of the cancellation in a letter that she sent that same day to the lender, Fremont Investment and Loan ("Fremont"). Fremont then sent Ms. Mitchell three separate letters in which it agreed to cancel the loan transaction on the adjustable-rate loan and that, thereafter, Ms. Mitchell's loan was to be treated as a fixed-rate loan. Fremont also returned a copy of the deed of trust and note, bearing the "VOID" marks, to Ms. Mitchell. The first pages of the deed and note returned to Ms. Mitchell contained stamps reading "CANCELLED AND SATISFIED IN FULL without recourse" dated July 15, 2005 and signed by "Fremont Investment & Loan, Lizbeth Stokes, Vice President." Evidently satisfied that she would receive the fixed-rate mortgage according to the terms of her contract, Ms. Mitchell began making fixed-rate payments on the loan and continued making payments until she defaulted in January 2013.

The Substitute Trustees argued on appeal during the first round that the "record supported" the supposition that the parties did not intend to cancel the note or deed of trust but, instead, agreed to alter the interest rate (from variable to fixed). After we remanded the case, however, they shifted their theory altogether and argued during the evidentiary hearing, and now on appeal, that the loan was never modified or cancelled. They now claim that after Ms. Mitchell defaulted, and foreclosure was imminent, she conjured her story and the supporting documents.³

Procedural History

In August 2015, the Substitute Trustees filed an order to docket the foreclosure in the Circuit Court for Prince George's County. The order to docket contained copies of a note and deed of trust that included an adjustable-rate rider. None of the documents bore any void or cancellation marks. As required by Maryland Rule 14-207, the order to docket contained affidavits attesting that the note and deed of trust were true and accurate copies.

Ms. Mitchell filed a motion to stay the sale and dismiss the foreclosure on the ground that the order to docket did not contain copies of a valid and enforceable note or deed of trust. The Substitute Trustees opposed Ms. Mitchell's averments. The motion was denied without a hearing, and Ms. Mitchell appealed.

In the prior appeal, in which the Substitute Trustees argued that the mortgage had been converted to a fixed-rate loan, we noted, upon close examination of the documents in the record, that on July 14, 2005, an adjustable-rate note and deed of trust were filed in the land records for Prince George's County. Mitchell , 232 Md. App. at 626, 161 A.3d 14. The documents—filed just three days after Ms. Mitchell terminated the closing—did not have any "VOID" stamps on them; rather, "both documents donned new stamps reading simply ‘REDACTED." ’ Id. at 627, 161 A.3d 14. We determined that Ms. Mitchell had presented a "facially valid defense to the foreclosure" that the instruments were forged and remanded the case. Id. at 641, 161 A.3d 14.

On remand, the Substitute Trustees first moved for limited discovery in advance of the hearing "to test or challenge the validity and veracity of the documents" that Ms. Mitchell attached to her motion to dismiss. During the evidentiary hearing, however, counsel for the Substitute Trustees confirmed, not once, but twice, that proceeding directly with a full evidentiary hearing was "fine" and confirmed that in counsel's view their motion for discovery was then "moot."

The "summary" evidentiary proceeding before Judge Mittelstaedt ended up taking nine days and concluded on August 20, 2019. Ms. Mitchell and her real estate agent, Ms. Paula Kearney, testified that Ms. Mitchell had contracted for a 30-year fixed mortgage, but, at the closing, voided the documents that she had signed upon discovering that the loan documents were for an adjustable-rate mortgage. Of the individuals who were present at the closing, only Ms. Mitchell and Ms. Kearney testified at the evidentiary hearing. Ms. Mitchell explained that she sent a letter to Fremont and received confirmation that it had cancelled the variable-rate loan and "adjusted" the transaction to reflect the conventional, fixed-rate loan.

Witnesses for the Substitute Trustees testified that they were unable to locate any voided loan documents or related correspondence that would support Ms. Mitchell's account. According to the Substitute Trustees, the closing proceeded without incident, and Ms. Mitchell fabricated her account because it was not...