Beltway Homes, Inc. v. Hughes

Gilbert, J., delivered the opinion of the Court. Beltway Homes, Inc., appellant, purchased at a foreclosure sale in Prince George’s County, Maryland, a house represented as having four bedrooms. After ratification of sale by the court the appellant discovered that the house contained only three bedrooms. Approximately three and one-half months following the ratification of the sale appellant moved to rescind the sale.

Appellant filed its motion in the foreclosure proceeding. Appellant asserted, in effect, in the trial court, that it had purchased “a pig in a poke”, and found the “pig” was much smaller than advertised. The matter was heard in the Circuit Court for Prince George’s County. The chancellor ruled that inasmuch as the order of ratification was passed more than thirty days prior to the filing of appellant’s “Motion To Set Aside Decree”, the appellant was required to proceed under the provisions of Md. Rule 625 a.

Such a ruling was made by the chancellor because the decree was enrolled, and he believed that the court no longer possessed the authority tc revise and control it under Ventresca v. Weaver Bros., 266 Md. 398 , 292 A. 2d 656 (1972) and Travelers Indemnity Co. v. Rosedale Passenger Lines, Inc., 450 F. 2d 975 (4th Cir. 1971). Md. Rule 625 a provides: “For a period of thirty days after the entry of a ¹⁴⁸ judgment, or thereafter pursuant to motion filed within such period, the court shall have revisory power and control over such judgment. After the expiration of such period the court shall have revisory power and control over such judgment, only in case of fraud, mistake or irregularity.” (Emphasis supplied). The trial judge opined that in addition to the appellant’s having to show “fraud, mistake or irregularity”, appellant must also demonstrate that it had a meritorious claim and was acting in good faith, with due diligence.

Bowen v. Rohnacher, 15 Md. App. 280 , 290 A. 2d 560 (1972). Having determined that there was no fraud, mistake or irregularity shown, and that appellant had not acted with due diligence, the court denied the appellant’s motion, ordered the deposit money theretofore- paid by the appellant forfeited to the Trustees and authorized the Trustees “to sell the property at the risk and expense of ” the appellant. Md. Rules W74 f and BR6. In order to set the scene for a discussion of the applicable law, a brief resume of the events leading to this litigation is helpful.

As a result of a default under the terms of a promissory note, secured by a deed of trust, a foreclosure proceeding was instituted against the property known as 4214 Canyonview Drive, Upper Marlboro, Maryland. The Trustees named in the deed of trust, pursuant to a sale clause embodied in the encumbrance, advertised the property in the Prince George’s Sentinel. The advertisement read in pertinent part: “Trustees sale of valuable, improved real estate, located in Prince George’s County, Maryland, improved by premises known as 4214 Canyonview Drive, Upper Marlboro, Maryland. . . . the undersigned Trustees will sell at public auction in front of the Court House door in Upper Marlboro, Maryland, on Thursday, February 14, ¹⁴⁹ 1974, at 10:00 A.M., property described in the Deed of Trust as follows: . . . This property is improved by a U bedroom, IV2 baths, living, dining, kitchen and recreation room, 2 stories, split foyer, brick and frame house.

Terms of Sale A deposit by cash, certified check, or check acceptable to the Trustees in the amount of $2,000 will be required of the purchaser at the time of sale. The balance in cash with interest at 8 per centum per annum from the date of sale to the date of payment, payable within ten days after final ratification of sale. Compliance with the terms of sale shall be made within ten days after final ratification of sale or deposit shall be forfeited and the property resold at the risk and cost of the defaultant purchaser.” (Emphasis supplied). Mr. James Dana Johnson, an employee of the appellant, read the advertisement and on the same date or within a few days thereafter, drove to the subject property.

The house was “boarded up.” Each window and door had been covered with wood in order to prevent access. Johnson only observed the property from the exterior. He testified that he contacted the attorney for the Trustees, and the attorney refused Johnson permission to enter the premises. Neither Johnson nor any other employee of the appellant, so far as the record reveals, made any effort to contact the Trustees directly in order to obtain permission to inspect the interior of the house.

Johnson bought the property on behalf of his employer, the appellant, on a bid price of $35,600.00. A certificate of sale was filed by the customer, and the court, on April 29, 1974, ratified the sale. Following the ratification, Johnson, accompanied by a workman, went to the property and removed certain boards from the doors and ¹⁵⁰ windows. Johnson entered the house and discovered that it contained three bedrooms, not the advertised four.

Under date of June 17, 1974, counsel for Beltway wrote to the attorney for the Trustees and advised that, “Beltway ... is not interested in making another offer on this property at this time.” Beltway demanded the return of its deposit because “the house was advertised as being four bedrooms but actually contained only three bedrooms. Beltway . . . had no opportunity or privilege to inspect . . . [the] property prior to bidding . . . and acted in complete reliance upon the description of the property ... in the public notices.” Obviously, the Trustees did not return the deposit money to appellant. Thereafter, appellant, through its attorney, informed the appellees per letter of August 2, 1974, that it intended to litigate the return of the deposit unless the Trustees surrendered, the earnest money to the appellant. The Trustees apparently declined to heed Beltway’s warning, and, on August 9, 1974, the instant proceeding was commenced.

At the hearing the appellant presented testimony from an expert witness that the house was worth approximately $2,500.00 less than it would have been if it had contained four bedrooms. One of the Trustees testified that no one from Beltway had ever requested her permission to view the premises either before or subsequent to the sale. The Trustees admitted, however, that through a clerical error the property had been advertised as a four bedroom dwelling. The chancellor found, as we have previously observed, that there was no fraud, mistake or irregularity within the meaning of Md. Rule 625 a, that Beltway had not acted with due diligence, and that “the ‘misrepresentation’ or ‘mistake’ contained in the advertised notice of sale was in any event inconsequential.” In Capobianco v. Gordon, 19 Md. App. 662 , 313 A. 2d 517 (1974), this Court discussed the confusion that obviously exists in the minds of the Bench and Bar 1 relative to Md. ¹⁵¹ Rule 625 a, and the exception that has been carved from it by the Court of Appeals.

Judge Lowe, in Capobianco , pointed to the area of difficulty and stated at 668-9: “In spite of the apparent strictures of Rule 625 a, an exception granting discretionary latitude in setting aside enrolled judgments in cases not heard upon their merits continues to be given credence which misleads counsel and court alike. Were this language, usually in the form of dicta, a mere passing nod, we could limit ourselves to the rights of these litigants. Unfortunately, when such reference is made, it is given the solemnity of Moses as he carried the tablets of stone from Mount Sinai.” Judge Lowe went on to state: “This incongruity can be explained, but not justified, by the existence prior to the adoption of Rule 625 a of separate standards for setting aside judgments at law and decrees in equity.” (Footnote omitted). The Capobianco holding was limited to actions at law and it specifically held that the trial “court’s revisory power over enrolled judgments at law” is restricted “to the three grounds set forth in the Rule [625 a].” As if anticipating the factual situation now before us, Judge Lowe opined at 672: “We can offer no opinion upon enrolled judgments (or decrees) arising from cases in equity not heard upon their merits.” ¹⁵² Capobianco also notes at 671 that: “There has been no case in either law or equity, since the adoption of Md. Rule 625 a in 1957, that has turned on a ‘circumstance’ such as to ‘satisfy the court in the exercise of sound discretion’ that an enrolled decree should be set aside, that was not within the ‘fraud, mistake or irregularity’ restriction, and so stated.” (Footnote omitted).

We now apply the exception. It must be noted that the ratification of the sale was granted in a routine manner. Had the ratification been assailed and granted on its merits, the order would have become enrolled after thirty days, and then could only have been set aside for “fraud, mistake or irregularity.” Md. Rule 625 a; New Freedom Corp. v. Brown, 260 Md. 383, 385 , 272 A. 2d 401 (1971). In the instant case, however, there was originally “no determination on the merits and in such circumstances an enrolled decree may be set aside on a petition 2 filed in the original proceedings”, New Freedom Corp. v. Brown, supra, 3 if the movant can demonstrate that “the decree was entered by surprise or mistake or if the circumstances are such as to satisfy the court in the exercise of a sound discretion that the decree should be set aside.” New Freedom Corp. v. Brown, supra; Pinkston v. Swift, 231 Md. 346, 351 , 190 A. 2d 533 (1963); Cramer, Trustees v. ¹⁵³ Wildwood Co., 221 Md. 102, 107, 175 A. 2d 750 (1961); Kennard v. McKamer Realty Co., 224 Md. 490, 496, 168 A. 2d 369 (1961); Pugh v. Waclawski, 211 Md. 346, 351 , 127 A. 2d 376 (1956). “[T]he facts relied on by one seeking to have the sale set aside must be very clearly established and must be of such character as strongly appeal to the conscience of the Court.” Connaughton v. Bernard, 84 Md. 577, 590 , 36 A. 265 (1896).

An appeal to this Court from a denial of a motion to set aside a decree, or the denial of a motion to strike or rescind a decree or judgment, does not serve as an appeal from that judgment. New Freedom Corp. v. Brown, supra. The sole question presented by an appeal from such a denial is whether the trial court abused its discretion. S. & G. Realty v. Woodmoor Realty, 255 Md. 684, 692-3 , 259 A. 2d 281 (1969).

In the case now before us the chancellor said, “The description of the property to be sold at this foreclosure fairly and accurately described the location and general features of the improvements. The names of the Trustees and the name and address of their attorney was also provided. Yet it seems that Beltway made no effort to inspect the property or make any inquiries concerning it.” (Emphasis supplied). The