Fagnani v. Fisher

RAYMOND G. THIEME, JR. J., Retired, Specially Assigned. This case involves a foreclosure sale at which appellant Ricardo Fagnani’s brother, Ronald Fagnani, bought the interest of appellant and his wife, appellant Carole Fagnani, in the house the two Fagnani brothers had owned with, and then inherited from, their mother. The Circuit Court for Montgomery County overruled appellants’ exceptions to the sale and ratified it.

The appellants appeal and pose five questions, 1 2 which we have consolidated into the following three questions: ⁴⁶⁷ 1. Did the circuit court err when it ratified the foreclosure sale of only a partial interest in the subject property? 2. Did the circuit court err in ratifying a foreclosure sale which yielded a purchase price of only 40% of the alleged market value of the property, which was conducted after the posting of an advertisement containing inaccurate information, and which resulted in the purchase of the property by the substitute trustees? 3. Did the circuit court abuse its discretion by denying appellant’s requests for a postponement of the hearing on appellants’ exceptions and for reconsideration of its ratification order?

We conclude that the circuit court neither erred nor abused its discretion, and we therefore affirm the ratification of the sale. FACTS AND PROCEEDINGS From 1982 until her death in 1985, Pauline W. Fagnani jointly owned a house in Silver Spring (“the Property”) with her two sons, Ricardo and Ronald Fagnani. Mrs. Fagnani left her interest in the Property to her sons, with the result that each then held a one-half interest as tenants in common. On February 13, 2003, the brothers retitled the Property to convert Ricardo’s half-interest to a tenancy by the entireties with his wife, Carole Fagnani.

On November 10, 2003, Carole borrowed $85,000 from American Residential Mortgage in a loan secured by a deed of trust for the property. Only Carole entered into the note, ⁴⁶⁸ which Ricardo signed for her as “her attorney in fact.” The note incorporates the default provisions set forth in the deed of trust. The deed of trust, recorded in Montgomery County, defines “Borrower” as “Carole Fagnani, a married woman,” and the Property as “located in the County of Montgomery ... [and] recorded among the land records of Prince George’s County....” Ricardo again signed for Carole “as her attorney in fact.” Signatures also appear over the names of Ricardo and Ronald, as “borrowers.” All three signatures were notarized. The signatories covenanted that “Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the property and that the Property is unencumbered, except for encumbrances of record.” Both documents give the lender the right to disapprove, (or approve), the transfer of “any legal or beneficial interest in the [Property....” The deed of trust provides that “Lender or its designee may purchase the [P]roperty at any sale.” The record contains Ronald’s allegations in a verified complaint for declaratory judgment in another action that his signature on the note was forged.

The record does not reflect the outcome of that litigation; the appellees’ counsel stated that it was settled. The record also does not evidence that the original lender made the loan with knowledge of any fraud. In any event, the Note was assigned to Ronald. Carole defaulted on the loan after not paying the monthly installment due on January 1, 2006.

On February 16, 2008, Ronald appointed the substitute trustees (“trustees”), who are appellees here. On February 29, 2008, the trustees initiated foreclosure proceedings. In March, 2008, Ricardo filed a petition for bankruptcy. On May 8, 2008, the bankruptcy court modified its stay to permit the foreclosure of the property, and, on May 16, 23, and 30, 2008, the trustees advertised a public auction for the Property in the Washington Times.

The advertisement bears a bold-face caption reading, Foreclosure sale VALUABLE IMPROVED DWELLING ⁴⁶⁹ 2617 Blue Ridge Avenue (Only as to Undivided \ Interest of Ricardo and Carole Fagnani) Silver Spring, MD 20902 The advertisement further stated that the sale would be conducted “in enforcement of a Security Instrument granted by Carole M. Fagnani and Ricardo L. Fagnani aka Rick Fagnani and recorded among the Land Records of Montgomery County.... ” The Property was described as: All that property described in said Security Instrument, being in the 13 Election District of Montgomery County, Maryland, and being improved by a dwelling bearing the street address of 2617 Blue Ridge Avenue (Only as to Undivided ½ interest of Ricardo and Carole Fagnani), Silver Spring, Maryland 20902. Subject to all covenants, restrictions and easements of record, if any. The auction was conducted on June 2, 2008. Sharie Thompson, acting as agent for Ronald, submitted the only bid, and the Property was sold to her for $83,800.

One of the trustees filed a report of the sale with the circuit court on that day. In that report, the trustee attested that “the [Pjroperty was fairly sold and brought a fair price.” The record also contains an illegibly-signed auctioneer’s certification attesting that Thompson “was the high bidder and that the sale was fairly made”; a Montgomery County document reflecting the assessment of the Property at $327,730 for property tax purposes; and Ricardo’s assertions in an affidavit that “the market value of the [Pjroperty is valued near ... $400,000,” and “[t]he Exceptants[’]interest ... is worth nearly ... $200,000. ... ” On June 18, 2008, the court issued a notice of proposed ratification and confirmation of the sale. The appellants filed exceptions and requested a hearing, which the court set for August 27, 2008. The trustees responded to the exceptions on August 21, 2008, and the parties appeared for the hearing on August 27.

The court preliminarily denied appellants’ request for a continuance in which to address the trastees’ response to the exceptions. After hearing the parties’ argument on the ⁴⁷⁰ fairness of the sale of only a 50% interest in the Property and the effect of the alleged forgery on that question, the court ruled: It appears in this case the Fagnanis did, in fact, sign the deed of trust, then default, and it was sold by the substitute trustees. The price received of $83,800 is not grossly inadequate. It was properly advertised as a one half interest.

It is a rather strange situation, but the only alternative the trustees had when it was in default is to protect the loan and to foreclose on the property and to foreclose against the people that signed the deed of trust. I will deny the exception to the sale and enter final ratification. The appellants filed a motion to alter or amend or for a new trial, which the court denied. DISCUSSION Standard of Review In reviewing a court’s ratification of a foreclosure sale, we disturb the circuit court’s findings of fact only when they are clearly erroneous.

Jones v. Rosenberg, 178 Md.App. 54, 68-69 , 940 A.2d 1109 (2008). In reviewing the circuit court’s findings of fact, we are mindful that the exceptant to a foreclosure sale bears the burden of proving that the sale was invalid. J. Ashley Corp. v. Burson, 131 Md.App. 576, 582 , 750 A.2d 618 (2000) (citing Ten Hills Co. v. Ten Hills Corp., 176 Md. 444, 449 , 5 A.2d 830 (1939)). The exceptant must also demonstrate that any irregularities caused “actual prejudice.” J. Ashley Corp., supra, 131 Md.App. at 586 , 750 A.2d 618 ; see also Harris v. David S. Harris, P.A., 310 Md. 310, 319 , 529 A.2d 356 (1987) (stating, “In civil cases, it is well established that the burden of demonstrating both error and prejudice is on the complaining party”).

We conduct our review on the basis of the evidence introduced into the record, and not on the basis of either the statements of counsel as to what occurred in other cases, Witt v. Zions, 194 Md. 186, 189 , 70 ⁴⁷¹ A.2d 594 (1949), or proffers not accepted by the court as evidence. Cf. J. Ashley Corp., supra, 181 Md.App. at 582, 750 A.2d 618 . We review the court’s legal determinations de novo.

Jones, supra, 178 Md.App. at 68-69 , 940 A.2d 1109 (citing Liddy v. Lamone, 398 Md. 233, 246-47 , 919 A.2d 127 (5 (2007)). I. Whether the trustees could foreclose on, the appellants’ share without also foreclosing on Ronald’s share According to the appellants, the trustees not only lacked the power to foreclose only on the appellants’ one-half interest, but also breached their duty to appellants by not foreclosing on Ronald’s interest at the same time. Appellants contend that the deed of trust did not confer upon the trustees the authority to sell the appellants’ tenancy in common separately from Ronald’s tenancy in common and that the separate sale significantly lowered the value of their interest. The trustees argue that appellants waived their objection to the sale of the half-interest by not raising it before the sale and, in any event, that appellants did not introduce evidence of the claimed effect on the value of their interest.

The trustees additionally argue that the deed conveyed only the appellants’ interest to them because, the trustees allege, Ronald’s signature on the deed of trust was forged. Appellants reply that the trustees waived the issue of waiver by not raising it in the circuit court. Disclaiming any claim that the deed of trust is void, 2 appellants further reply that the trustees did not prove the alleged forgery. We shall begin with the question of whether the appellants could wait until after the foreclosure sale to contest the trustees’ foreclosure of only their half-interest.

Initially, we hold that the trustees did not waive this issue; they argued in their response to appellants’ exceptions that debtors “may file exceptions challenging only procedural irregularities” and at ⁴⁷² the hearing that no “procedural irregularities” had occurred that would allow the court to overturn the sale. However, in light of our recent decision in Bierman v. Hunter, 190 Md. App. 250 , 988 A.2d 542 (2010), we shall reach appellants’ arguments that the Property could only be sold as an entirety, that the trustees breached their duties by selling only a one-half interest, and that the sale of a separate interest in common harmed appellants. We shall begin with the question of whether, in light of the bundle of rights attached to the tenancies in common held by these parties, appellants met their burden, both as exceptants and appellants, to establish that the alleged conduct or error caused them harm. A fundamental characteristic of a tenancy in common is the ability of each tenant to devise (or not devise) his or her separate interest separately.

For example, in Cattail Associates v. Sass, 170 Md.App. 474 , 907 A.2d 828 (2006), a developer which wished to buy a parcel of land from multiple tenants in common entered into a contract that was ineffective as to one co-tenant. Id. at 487 , 907 A.2d 828 . We held that the contract was valid as to the other tenants and that its performance would simply convey to the developer an undivided share as a tenant in common with the non-signing tenant. Id. at 488 , 907 A.2d 828 .

In Cook v. Boehl, 188 Md. 581 , 58 A.2d 555 (1947), a tenant in common who leased the property to a third party conveyed only a leasehold interest in a tenancy in common of the undivided estate. Id. at 593 , 53 A.2d 555 . In Cooper v. Bikle, 334 Md. 608 , 640 A.2d 1120 (1994), the Court of Appeals noted the ability of a tenant in common to devise his interest by will. Id. at 622, n. 3 , 640 A.2d 1120 .

Under these same principles, the separate interest of a joint tenant, once severed and converted to a tenancy in common by the entry of a lien against that joint tenant, may be sold in execution of that lien. See, e.g., Helinski v. Harford Memorial Hospital, 376 Md. 606, 615-16 , 831 A.2d 40 (2003). Here, appellants only owned a tenancy in common, with the burdens attendant to that interest, such as the other owners’ right to entry and possession. See Cook, supra, 188 Md. at ⁴⁷³ 592, 58 A.2d 555 (stating that each tenant in common “has an equal right of entry and possession.... ”).

Appellants thus never owned 50% of a wholly-owned property appraised for tax purposes at $327,730; they instead owned 100% of a 50% tenancy in common of that property, and they could not sell the Property clear of Ronald’s right to entry and possession. Appellants introduced no proof that a sale of their co-tenancy interest to a purchaser other than Ronald would have yielded more than the price realized, and they thus did not establish the prejudice requisite to both their exceptions and their appeal to this Court. We nonetheless continue with the matter of the trustees’ duties. Trustees owe duties to the owners of the secured property not only to sell the property at a fair price, but also to sell no more of the property than necessary to achieve payment of the debt.

Webster v. Archer, 176 Md. 245, 254 , 4 A.2d 484 (1989). There, the Court of Appeals defined foreclosure trustees’ duties as follows: An assignee selling mortgaged property at a foreclosure sale is a trustee for the mortgagor and persons claiming under or through him [citations omitted], and is under a duty (1) to exercise the same degree of prudence, care, diligence and judgment, that a prudent man of ordinary