Buckingham v. Fisher

FRIEDMAN, J. Maryland Rule 14-211 sets out the process for determining whether to grant or deny a motion to stay and dismiss a foreclosure sale. First, the trial court will review the motion and the record and, if it sees fit, may elect to hold an initial hearing where the trial court considers the motion and hears arguments from parties to the foreclosure proceedings. 1 If the court determines that the motion on its face states a valid ⁸⁵ defense to the foreclosure, a temporary stay of foreclosure is entered and the second step, an evidentiary hearing on the merits of the defense, is scheduled. On the other hand, if the trial court determines that the motion does not raise a facially valid defense, it may deny the motion without holding an evidentiary hearing on the merits, thereby allowing the foreclosure sale to proceed. We are asked to consider what the pleading standard is for stating a facially valid defense that will require a trial court to move to that second step of holding a hearing on the merits.

FACTUAL BACKGROUND John and Elizabeth Buckingham were husband and wife who resided at 17 Darby Court, in Bethesda, Maryland. They owned the property as tenants by the entireties. On September 11, 1997, the Buckinghams purportedly executed a refinance deed of trust (“1997 deed of trust”) for the benefit of Virginia Commerce Bank. The 1997 deed of trust secured a $600,000 debt owed under a prime equity line agreement and disclosure with Virginia Commerce Bank, and was recorded in the Montgomery County land records on October 9, 1997.

The 1997 deed of trust was modified on several occasions during the subsequent years: on June 15, 1999; on November 25, 2005; on March 26, 2006; and on June 30, 2006. Each modification acknowledged the original 1997 loan and deed of trust. The Buckinghams defaulted on November 16, 2010, by failing to make the payments due under the modified loan agreement. Virginia Commerce Bank sought to foreclose the deed of trust and appointed the appellees in this case as Substitute Trustees (“Trustees”).

On December 7, 2011, before the Trustees initiated the foreclosure action, Elizabeth died, leaving John as the surviving tenant by the entireties. The Trustees filed an Order to Docket Suit in the Circuit Court for Montgomery County on September 6, 2012, seeking to foreclose the deed of trust based on the November 2010 default. John Buckingham was the sole named defendant as ⁸⁶ the surviving tenant by the entireties and sole owner of the property at 17 Darby Court. But due to John Buckingham’s poor health, he was no longer capable of acting for himself in legal proceedings.

Therefore, the Order to Docket Suit was served on John’s son, David Buckingham, who had been appointed as the guardian of his father’s property. John died on October 17, 2012, shortly after the foreclosure action was filed against him. After John’s death, two of his other children, Richard and Susan Buckingham (“the Bucking-hams”) were appointed as the co-personal representatives of John’s estate. The Trustees amended the Order to Docket Suit on July 11, 2013, to reflect the fact that John Buckingham had died and that the subject property was no longer owner-occupied, as well as to join Richard and Susan Buckingham as the personal representatives of John’s estate. 2 A foreclosure sale was scheduled for December 19, 2013.

Richard Buckingham received notice of the foreclosure sale on December 5, 2013. On December 18, 2013, Richard and Susan Buckingham filed a Motion to Stay Sale of Property and Dismiss Foreclosure Action, pursuant to Rule 14-211. They sought a temporary stay of the sale and dismissal of the foreclosure action, challenging the validity of the 1997 deed of trust and the Trustees’ right to foreclose. The Buckinghams alleged that their mother, Elizabeth’s signature on the 1997 deed of trust was a forgery.

Elizabeth’s signatures on the lien instruments attached to the Order to Docket are not hers and are forgeries, thereby rendering the lien instruments void ab initio and unenforceable. The Affidavit of John W. Hargett, III, a forensic ⁸⁷ document examiner, expressing his expert opinion that there is a strong possibility that Elizabeth S. Buckingham did not sign these lien instruments, is attached hereto. 3 In addition to this forgery defense, the Buckinghams also alleged that the notice of sale was insufficient to inform interested parties of the details of the foreclosure sale because it conflicted with the Order to Docket Suit in terms of the lien instrument upon which the foreclosure sale was based. The Buckinghams argued that (1) the notice of sale listed the 1999 modification to the 1997 deed of trust, rather than the 2006 modification referenced in the Order to Docket Suit, as the instrument being foreclosed upon, and (2) the notice of sale stated that the foreclosure sale was proceeding pursuant to an instrument executed by “John D. Buckingham, c/o David T. Buckingham, as Guardian for Person and Property,” but that John was not under guardianship at the time the instrument was obtained. Additionally, the Buckinghams claimed that notice was not served on counsel, Christopher Fogleman, despite the fact that Fogleman had been their counsel of record for over a year.

The Buckinghams claimed that they had not been aware of the scheduled sale until Richard received the notice by mail on December 5, 2013. An initial hearing on the Buckinghams’ motion was held in the Circuit Court for Montgomery County on the day it was filed. The circuit court heard arguments from the Bucking-hams and the Trustees and, at the conclusion of the arguments, denied the Buckinghams’ motion without scheduling a hearing on the merits. The circuit court ordered the Trustees to reschedule the sale and to provide Fogleman with all filings to cure the lack of service.

The sale was rescheduled for January 30, 2014 and the property was sold on that date for $1.4 million. ⁸⁸ DISCUSSION We are asked to determine whether the trial court properly denied the Buckinghams’ motion to stay and dismiss the sale, or whether Maryland Rule 14-211 required the circuit court to first hold an evidentiary hearing on the merits of the asserted defenses. We will begin by analyzing Rule 14-211 and considering what the proper pleading standard for stating a facially valid defense is under the rule. Next, we will look at the forgery defense asserted in the Buckinghams’ motion and determine whether their motion stated a facially valid defense that required the trial court to hold a hearing on the merits. Finally, we will consider whether the defense related to defective notice asserted in the Buckinghams’ motion required a hearing on the merits.

I. Maryland Rule 14-211 This case centers on the application of Rule 14-211, which allows an interested party to a scheduled foreclosure sale the right to file a motion to stay the sale and dismiss a foreclosure action. Rule 14-211 went into effect in May of 2009. This Court has explained the purpose of the rule, quoting a letter from the Rules Committee to the Court of Appeals, which stated: A number of significant changes are recommended to the Rule governing a stay of the sale (proposed Rule 14-211). The Rules Committee proposes to detach that procedure from the Rules governing injunctions and to deal with it in a Rule specific to foreclosure sales.

The Rule attempts to strike a fair balance by providing borrowers and others with sufficient standing, who have a legitimate defense to the foreclosure, a reasonable and practical opportunity to raise the defense, but not allowing for frivolous motions intended solely to delay the proceeding. Bechamps v. 1190 Augustine Herman, LC, 202 Md.App. 455, 461-62 , 32 A.3d 542 (2011). The Buckinghams filed a motion under Rule 14-211, raising two defenses: a challenge to the validity of the lien based on ⁸⁹ forgery and a challenge to the right of the Trustees to foreclose based on defects in the notice of sale. They claim that Rule 14—211(b)(2) entitled them to an evidentiary hearing on the merits of both defenses because both claims “state[d] on [their] face a defense to the validity of the lien or the lien instrument or to the right of the plaintiff to foreclose in the pending action.” The Trustees argue that although the Buck-inghams’ motion nominally raised defenses, it failed to adequately allege all necessary elements of the defenses as required by Rule 14-211(a)(3).

These arguments present the question of what pleading standard must be met before a Rule 14-211 motion cannot be denied without an evidentiary hearing on the merits. Rule 14—211(a)(3) sets out the required contents of a motion to stay sale and dismiss the foreclosure action. It provides in relevant part: (3) Contents. A motion to stay and dismiss shall: (A) be under oath or supported by affidavit; (B) state with particularity the factual and legal basis of each defense that the moving party has to the validity of the lien or the lien instrument or to the right of the plaintiff to foreclose in the pending action; (C) be accompanied by any supporting documents or other material in the possession or control of the moving party (Emphasis added).

It is clear from this provision that the factual and legal bases of a defense must be stated “with particularity” and that any available supporting documents or material must be provided. Rule 14—211(b)(1) sets out the procedures for the initial determination by the circuit court and, that if it finds one or more of the grounds for denial, that the court has the discretion to deny the motion before holding a hearing on the merits. This section provides in part: (1) Denial of Motion. The court shall deny the motion, with or without a hearing, if the court concludes from the record before it that the motion: ⁹⁰ (A) was not timely filed and does not show good cause for excusing non-compliance with subsection (a)(2) of this Rule; (B) does not substantially comply with the requirements of this Rule; or (C) does not on its face state a valid defense to the validity of the lien or the lien instrument or to the right of the plaintiff to foreclose in the pending action.

Failure to state a facially valid defense is one of the three grounds for denial at the initial determination phase and appears to have been the basis for the trial court’s denying the Buckinghams’ motion. 4 Section 14-211(b)(2), however, requires that the court hold an evidentiary hearing on the merits if none of the three grounds for denial provided in subsection (b)(1) are present. (2) Hearing on the Merits. If the court concludes from the record before it that the motion: (A) was timely filed or there is good cause for excusing non-compliance with subsection (a)(2) of this Rule, (B) substantially complies with the requirements of this Rule, and (C) states on its face a defense to the validity of the lien or the lien instrument or to the right of the plaintiff to foreclose in the pending action, the court shall set the matter for a hearing on the merits of the alleged defense. The hearing shall be scheduled for a time prior to the date of sale, if practicable, otherwise within 60 days after the originally scheduled date of sale. ⁹¹ (Emphasis added).

If the court finds that the motion was timely, complies with the requirements of the Rule, and states a valid defense, then an evidentiary hearing on the merits is required before the circuit court makes a final determination on whether to grant or deny the motion. The text of the Rule does not make explicit what level of “particularity” is required for a defense to be deemed valid on its face and trigger an evidentiary hearing on the merits. But the fact that an asserted defense must be “accompanied by any supporting documents or other material in the possession or control of the moving party,” Rule 14-211(a)(3)(C), leads us to believe that bare assertions of a broad defense to the validity of a lien instrument will not be sufficient. The requirements of