Eberly v. Balducci

BISHOP, Judge. Henry and Delores Eberly (the mortgagors), appeal an order of the Circuit Court for Prince George’s County (Robert Mason, J.) which dismissed their petition for “Ex Parte and/or Interlocutory Injunction” to prohibit a deed of trust foreclosure action on the ground that the injunction was barred by the doctrine of res judicata. The basis of this holding was our February 15, 1983, unreported decision in Balducci v. Eberly, No. 822, September Term, 1982 (filed ⁸³ February 15, 1983) 1 which reversed and vacated a Circuit Court order enjoining foreclosure on the deed of trust. Appellee did not file a brief; therefore, the following factual background and procedural history is not disputed.

On February 25, 1975, the mortgagors executed a deed of trust on real property located in Prince George’s County to secure payment of two notes totaling $80,000 with an interest rate of seven percent per annum. The appellees, Larry S. Balducci and Joseph P. McMahon were named as trustees. Under the terms of that agreement, the mortgagors promised to pay the indebtedness and “all taxes, assessments, water rates and other governmental or municipal charges____” In addition, that agreement stated that should default occur in the payments or other terms, covenants or conditions of prior deeds of trust or other liens, including taxes and assessments on the herein described property then the debt described herein shall at the option of the holder of said note, immediately become due and payable in full, and the Trustees herein shall have the power to sell and convey as set forth herein; or the holder of said note may make such payments or pay such charge and the same shall be added to and be deemed to be secured by this Deed of Trust. The controversy which is the subject of this appeal began when the mortgagors received a letter, dated December 29, 1981, from trustee Joseph P. McMahon which called “for an acceleration under the existing deed of trust because of ... [their] failure to make payments as required thereunder.” The total amount claimed to be due upon acceleration was $71,524.31.

The mortgagors responded by submitting statements to Mr. McMahon which showed that their principal and interest payments were, in fact, current. Mr. McMahon then sent another letter to the mortgagors, dated January 27, 1982, in which he stated that although ⁸⁴ they were not in default regarding the payments, the taxes had not been paid for 1980-81 or 1981-82. In that letter, Mr. McMahon stated that I would immediately advise that you call me in order that we can resolve either by you paying off the trust or for modification in the terms and conditions of the trust without the need for foreclosure on my part. I would expect that this matter be resolved by February 5, 1982, or else I shall have to proceed with foreclosure.

Apparently attempting to resolve the matter by February 5, 1982, without paying off the trust or modifying its terms and conditions, the mortgagors paid the taxes due on the property on February 4, 1982. On March 24, 1982, the trustees filed in the Circuit Court for Prince George’s County an order to docket a foreclosure action. See Rule W 72 c 1. All principal and interest payments and taxes were current at that time.

On April 6, 1982, the mortgagors filed a motion for “Ex Parte and/or Interlocutory Injunction,” pursuant to Rule W 76 b, seeking to enjoin the foreclosure action. On that same date, Judge Levin signed an order enjoining the foreclosure until April 13, 1982, the date that a hearing was scheduled for the petition for interlocutory injunction. On that same date Judge Levin also signed an order granting interlocutory injunction “until such time as a hearing is held on the merits hereof.” There is no indication that an adversary hearing was held before that order was signed. See Rules BB 70 c and BB 74.

On April 13, 1982, the Circuit Court for Prince George’s County (Robert Mason, J.) held a hearing to consider the propriety of continuing the injunction. The Court heard arguments from counsel for both parties on the issues of default, cure of default, waiver, and estoppel. No testimony was taken, but the deed of trust and the letters from Mr. McMahon were submitted to the Court. The Court granted the injunction and on May 5, 1982, signed an order which ⁸⁵ made the injunction permanent as to all defaults alleged to have occurred prior to the date of the hearing.

The trustees appealed this order and we reversed because the applicants for the injunction did not “produce any evidence indicating the necessity or propriety of continuing the injunction.” Balducci v. Eberly, No. 822, September Term, 1982 (filed February 15, 1983) slip op. at 9. In that opinion we stated that the argument of counsel in the Circuit Court was “never stipulated or proven by testimony or evidence submitted,” slip op. at 6, and therefore, we could not assess the sufficiency of the evidence since no evidence was submitted, slip op. at 7. Thereafter, the trustees resumed foreclosure and the mortgagors filed another petition for “Ex Parte and/or Interlocutory Injunction” to enjoin that foreclosure. On May 2, 1983, the Circuit Court for Prince George’s County (Robert Mason, J.) held a hearing on the merits at which, according to the trial court, the mortgagors were “well armed with testimonial and documentary evidence to support their position.” Nevertheless, the trial court dismissed the petition on the ground that it was barred by the doctrine of res judicata because we had reversed the May 5th order enjoining the foreclosure action.

Now, the mortgagors appeal that order and raise the following questions: I. Did the lower court err in construing the February 15,1983, ruling of the Court of Special Appeals as final, conclusive and on the merits, thus barring the appellants from seeking injunctive relief because of the doctrine of res judicata?

II

Was there the necessary default under the terms of the deed of trust to activate an acceleration clause?

III

Did the curing of all tax deficiencies by the appellants before the appellees’ initiation of foreclosure bar the appellees from proceeding with foreclosure?

IV

Does the continued acceptance of the monthly principal and interest payments by the appellees constitute ⁸⁶ a waiver of the previously declared default, and bar the appellees from foreclosure on those grounds? I. In Maryland and elsewhere, the doctrine of res judicata has been defined in myriad cases as: [A final] judgment [on the merits] between the same parties and their privies is a final bar to any other suit upon the same cause of action, and is conclusive, not only as to all matters that have been decided in the original suit, but as to all matters which with propriety could have been litigated in the first suit, where the court had jurisdiction, proceedings were regular, and his omission was due to his own negligence. Annapolis Urban Renewal v. Interlink, 43 Md.App. 286, 290 , 405 A.2d 313 (1979). (quoting Alvey v. Alvey, 225 Md. 386, 390 , 171 A.2d 92 (1961)).

In Annapolis Urban Renewal , we held that a judgment entered after the granting of a motion raising preliminary objection on the grounds of sovereign immunity is a judgment on the merits for the purposes of res judicata. 43 Md.App. at 291 , 405 A.2d 313 . We stated that when a court dismisses an action because of jurisdictional, procedural, or venue problems, it is acting for reasons that do not go to the substance of the case. But, when a court decides that it cannot hear the case because of a legal defense such as sovereign immunity, it is deciding that, as a substantive matter, the plaintiff cannot maintain his cause of action. Id. at 294 , 405 A.2d 313 .

The order at issue in the case sub judice was reversed on appeal because the trial court did not receive any evidence. This error in procedure was subsequently explained at the hearing on the mortgagors’ second petition to enjoin the foreclosure when the trial judge said that he had treated the argument of counsel at the first hearing as ⁸⁷ based upon a “stipulation” although that “magic word” apparently was not used. The circuit court held that the mortgagors’ second petition for injunctive relief was barred by res judicata because they had been given an opportunity to litigate their claim and this court had finally decided the case in the trustees’ favor. Acting Director v. Walker, 39 Md.App. 298, 301 , 385 A.2d 806 (1978), aff'd., 284 Md. 357 , 396 A.2d 262 (1979); Whittle v. Bd. of Zoning Appeals, 211 Md. 36, 49 , 125 A.2d 41 (1956); Snodgrass v. Stubbs, 192 Md. 287, 291 , 64 A.2d 130 (1949).

We do not agree. Our decision in the prior appeal was not intended to prevent the mortgagors from presenting evidence to sustain their burden regarding the propriety of granting the injunction; we simply held that no interlocutory or permanent injunction could be issued based upon that record. Before granting the injunction, the court heard arguments from counsel for both parties. They discussed the facts of the case, reviewed the documents at issue, and indicated that there was no real dispute regarding them.

Furthermore, the parties discussed the applicable law and identified the cases which they considered to be controlling. The court then took a recess to review those cases and upon returning to the bench stated All right. I have read the cases, and I am going to make a ruling, and I will say now that I think the ruling is very appealable. I am going to grant the injunction.

In short, the court ruled before receiving any evidence in the case because it thought that the parties were proceeding upon a stipulation. The trustees appealed contending the chancellor erred by holding that (1) The mortgagors were not in default because they paid the real estate taxes after the date due but prior to the date of the scheduled foreclosure sale; and ⁸⁸ (2) The mortgagors were never notified to make payments to anyone other than the bank acting as the collection agent for the noteholders. After reviewing the record generated in the case, or the lack thereof, we nostra sponte reversed the orders continuing the ex parte injunction because “the chancellor had no facts presented to him by the moving party, upon whom the burden is placed, sufficient to support the holding.” slip op. at 1. The language in our prior opinion which indicates that the mortgagors did not sustain their burden of proof as applicants for the injunction must be considered in the context of the facts of the case and as a part of the entire opinion taken as a whole.

The basis of our reversal was that the prior hearing consisted of only argument of counsel, not testimony or evidence; we reversed the order because no evidence was submitted to the trial court, slip op. at 5-6, 7-8. We concluded, therefore, that we could not “assess evidentiary sufficiency ... when no evidence was submitted.” slip op. at 7. To hold that the reversal of that order, on the grounds that no evidence was presented below, constitutes a res judicata bar would be an unreasonable application of that doctrine. The substantive issues of this dispute have not been decided.

No final determination has been made as to whether the failure to pay taxes permits acceleration of the entire balance due under this deed of trust. Similarly, there was never a decision on the legal issue of whether the payment of the taxes prior to foreclosure cures the default and bars the foreclosure action. This issue was not even addressed by the chancellor at the first hearing who apparently determined only that the noteholders