Crysopt Corp. v. Board of Savings & Loan Ass'n Commissioners

RODOWSKY, Judge. Presented here are nine interconnected appeals involving foreclosures of four deeds of trust on realty. We shall hold that, because appellants have no interest in the realty or in its proceeds, they have no standing to object to the reports of sale, to the auditor’s reports, or to an order authorizing the receiver of the insolvent lender to compromise claims asserted by the foreclosure sale purchaser. The actions before us are satellite proceedings to the receivership of Community Savings & Loan, Inc. (CSL). 1 The receiver is State of Maryland Deposit Insurance Fund Corporation (MDIF).

The CSL receivership proceeding is Civil Action No. 9276 in the Circuit Court for Montgomery County, an action initiated by the former Board of Savings & Loan Association Commissioners. The property involved in the foreclosures is in Queen Anne’s County and consists ³¹⁷ of four parcels that we shall call “Batts Neck.” Three parcels were owned by Batts Neck Corporation (BNC) and one parcel was owned by First Batts Neck Company (BN-1). BN-1 is a wholly owned subsidiary of BNC, which is a wholly owned subsidiary of Crysopt Corporation (Crysopt), which is wholly owned by Tom J. Billman (Billman). Bill-man was a principal in CSL.

In December 1984 CSL had loaned funds for the purchase of Batts Neck, secured by deeds of trust respectively from BNC and BN-1. MDIF, as receiver of CSL, asserted that Billman’s acquisition of Batts Neck through Crysopt, BNC and BN-1 diverted a corporate opportunity from CSL. The receiver in September 1986 filed a complaint in the Circuit Court for Montgomery County (Civil Action No. 18009) joining as defendants, inter alia, Billman, Crysopt, BNC, and BN-1. The defendants failed to provide discovery.

As the sanction, the court ordered that the facts alleged in the complaint be deemed admitted. An interlocutory order was entered in February 1990 against the defendants on the issue of liability. In July 1989 MDIF, through Ronald M. Mucha as substitute trustee, instituted four proceedings in the Circuit Court for Queen Anne’s County to foreclose each of the deeds of trust on Batts Neck. The foreclosure sale was held in August 1989, at which the four parcels were offered separately and as an entirety.

The high bidder was William J. Harnett (Harnett), who bid $3.5 million for the four parcels as an entirety. When the substitute trustee reported the sale, BNC and BN-1, describing themselves as owners of the parcels and grantors of the deeds of trust, filed exceptions. They principally contended that the amounts outstanding and in default under the four deeds of trust totaled $621,592.92, an indebtedness which could have been satisfied by selling only one, or at most, two of the parcels. Harnett also excepted, alleging misrepresentation by agents of the seller.

The exceptions included allegations of ³¹⁸ non-disclosure or concealment of a history of flooding in the main house at Batts Neck, with resultant damage to all major mechanical systems and equipment. There was also a dispute concerning ownership of personal property on the premises. The Circuit Court for Montgomery County heard the corporate opportunity action in March 1990 on the issue of the equitable.relief to be granted to CSL, based upon the interlocutory liability judgment. By order of March 6,1990, the Circuit Court for Montgomery County entered a final judgment against Billman, Crysopt, BNC, and BN-1 decreeing that CSL was “entitled to the proceeds of the foreclosure sales in the [four] cases now pending in the Circuit Court for Queen Anne’s County that would otherwise be paid to the mortgagors of the deeds of trust foreclosed in such cases.” The March 6, 1990, judgment further decreed that if any of the exceptions to those foreclosure sales were sustained “then the equity of redemption in and to such property shall be in [CSL], and [CSL] shall be the owner of such property.” Billman, Crysopt, BNC, and BN-1 appealed the March 6, 1990, judgment.

The Court of Special Appeals affirmed. Billman v. State of Maryland Deposit Ins. Fund Corp., 86 Md.App. 1 , 585 A.2d 238 (1991). This Court denied certiorari on May 24, 1991. 323 Md. 1 , 590 A.2d 158 .

The defendants in the corporate opportunity action petitioned the United States Supreme Court for certiorari, 60 U.S.L.W. 3161 (U.S. Aug. 22, 1991) (No. 91-319). The Court denied the writ on October 15, 1991, — U.S.-, 112 S.Ct. 304 , — L.Ed.2d-. In the mortgage foreclosure action the Circuit Court for Queen Anne’s County, by order of June 28, 1990, overruled the exceptions filed by BNC, BN-1, and Harnett to the report of sale and ratified the sale. All