Four Star Enterprises Ltd. Partnership v. Council of Unit Owners of Carousel Center Condominium, Inc.

THIEME, Judge. The appeal before us is the confluence of three disparate but interconnected streams, and rests on appellants’ hyper-technical reading of the law. This reading is intended to give actuality to appellants’ apparition that their hotel and condominium units were wrongfully wrested from them. This Court, however, is not beguiled by legal smoke and mirrors.

We shall address three appeals consolidated by order of this Court on motion of appellants, Four Star Enterprises Limited Partnership (“Four Star”) and others, with the consent and joint request of appellee, the Council of Unit Owners of Carousel Center Condominium, Inc. (“Council”). The appeals are from orders entered in the Circuit Court for Worcester County in three closely related cases: 1. A Memorandum Order of August 3, 1999, denying appellant Four Star’s objections to ratification of the foreclosure sale of the Carousel Hotel in Ocean City and reaffirming its Final Order of Ratification, which was entered in Case No. 23-C-99-230, formerly in this Court as No. 1701, September Term, 1999; 2. An Order dated August 3, 1999, denying appellant Four Star’s objections to ratification of the foreclosure sale of 22 condominium units and reaffirming its Final Order of Ratification, which was entered in Case 23-C-99-324, No. 1699, September Term, 1999; and . ⁵⁵⁵ 3.

An Order of August 9, 1999, granting appellee’s Motion for Ancillary Relief in Aid of Enforcement of a Judgment, which was entered in Case No. 97CV0458, formerly in this Court as No. 1700, September Term, 1999. Appellants raise the following questions: 1. Did the court below err when it ratified the foreclosure sale of the Carousel Hotel and 22 units of the Carousel Center Condominium without a hearing? 2. Did the court below err when it enforced a judgment allowing the receiver to exercise his full powers without an additional hearing?

We answer, “No,” and affirm the orders of the court below. Facts The instant appeal depicts but the latest subdivision and visit to this Court of counsel’s Byzantine procedural praxis involving the Carousel Hotel and condominium complex in Ocean City. Appellants — Four Star, a limited partnership; Carousel Hotel & Resort, Inc. (“CH & R”), its general partner; and Dr. Siamak Hamzavi, the sole owner of the two 1 — owned and operated the hotel and 22 units in the adjoining condominium, which were used as short-term rentals. The human face of appellee is James R. Bergey, Jr., who is the court appointed receiver for the Council.

The history of the order appointing Bergey, which we affirmed last year, see Hamzavi v. Bowen, 126 Md.App. 492 , 730 A.2d 274 (1999), comprises an earlier subdivision of the instant case. That opinion contains an effusion of facts setting forth appellants’ fraudulent activities toward the Council during the time they owned and operated the hotel and rentals. 2 ⁵⁵⁶ The foreclosure sales appealed here were based on orders imposing liens under the Maryland Contract Lien Act, Md. Code (1974, 1996 Repl.Vol., 1999 Cum.Supp.), § 14-201 et seq. of the Real Property Article. This Court affirmed those orders in an unpublished opinion, Four Star Enter. Ltd. Partnership v. Council of Unit Owners of Carousel Center Condo., Inc., No. 6579, Sept. Term 1998 (Md.Ct.Spec.App. Nov. 28, 1999), cert. denied, 358 Md. 163 , 747 A.2d 645 (2000), which deals in exhaustive detail with some issues raised by appellants here.

A The Foreclosures The first two orders on appeal involve foreclosure sales for the hotel and condominium properties of Hamzavi and his wholly-owned corporation and limited partnership. On February 22, 1999, the receiver filed a Complaint to Foreclose Lien against owner Four Star Enterprises Limited Partnership, seeking to foreclose on a lien entered against its ownership interest in the Carousel Hotel. See Council of Unit Owners of Carousel Center Condo., Inc. v. Four Star Enter. Ltd. Partnership, No. 23-C-99-000230 (Worcester County Ct. filed Feb. 22, 1999).

On March 15, he filed a Complaint to Fore ⁵⁵⁷ close Lien against owners Hamzavi and CH & R, seeking to foreclose on liens entered against the 22 units. See Council of Unit Owners of Carousel Center Condo., Inc. v. Hamzavi, No. 23-C-99-000324 (Worcester County Ct. filed Mar. 15, 1999). These liens, in the amount of $2,308,607.63 for the hotel and $715,437.16 for the units, were imposed in January 1999 because Hamzavi had failed to pay condominium fees from July 12, 1995, through December 31, 1998; a special assessment for the period of September 1 through December 31, 1998; and a fire safety assessment for his units. See Four Star, slip op. at 3-5.

On February 22, the court below ordered the sale of the hotel, appointing the receiver’s attorney as trustee to conduct the sale. Subsequently, on March 11, Four Star (but not Hamzavi or CH & R) filed a Voluntary Petition under Chapter 11 of the United States Bankruptcy Code, commencing proceedings in the United States Bankruptcy Court for the District of Maryland. In re Four Star Enter. Ltd. Partnership, No. 95-5-3200-ESD (Bankr.D. Md. filed Mar. 11, 1999).

Under the Bankruptcy Code, this filing brought into play an automatic stay of further State court proceedings related to the hotel, which was owned by Four Star. 3 On March 17, the court below ordered the sale of the condominium units, again appointing the receiver’s attorney as trustee. Because the receiver thought it was economically unworkable to sell the units without also selling the hotel, as any viable buyer would likely want both, foreclosure was postponed until the lifting of the stay. Appellants also filed in Bankruptcy Court what they described as a preference action, contending that Hamzavi only maintained bare legal title to the units for the benefit of Four Star. This action, we note, would have allowed Hamzavi to benefit personally from the bankruptcy proceedings without filing for bankruptcy. ⁵⁵⁸ Four Star sought to extend the automatic stay by filing a complaint for that purpose with the Bankruptcy Court on April 7.

It argued, relying on 11 U.S.C. § 547 (1994 & Supp. 1995), that the liens that the receiver sought to foreclose were actually preferences. In response, the Bankruptcy Court entered on April 14 an Order Conditioning the Automatic Stay, which allowed Four Star to retain its stay on the sale of the hotel if it posted a bond of $302,288. The Bankruptcy Court ordered the stay to be lifted without further court proceedings if Four Star failed to post the bond within 15 days and the receiver attested thereto in an affidavit. Four Star failed to post any bond, but before the receiver could file an Affidavit of Default, Four Star requested and got an emergency hearing on May 6.

At the hearing, the Bankruptcy Court found Four Star’s commitment letter for the payment to be insufficient, and it denied the partnership’s Emergency Motion to Stay the Effectiveness of the Order Conditioning the Automatic Stay. Foreclosure proceedings recommenced in the court below, and the hotel and condominium properties were sold at public auction on May 28, taking them out of the control of the Bankruptcy Court. 4 The receiver, Bergey, made the highest bid. The receiver also filed the Affidavit of Default on May 28, as well as reported to the court below that the properties had been sold. The Bankruptcy Court denied as moot appellants’ last-ditch effort to stop the sale, their Emergency Motion to Reinstate the Automatic Stay on May 28.

The Bankruptcy Judge noted that, but for the apparent “technical defect” that no Affidavit of Default had been filed, he would have not looked kindly upon the motion. He also observed that Four Star had failed to meet filing deadlines and to pay the $302,288 bond required by the court. He noted that Four Star was trying to extend the automatic stay to the foreclosure of the condominium units, which were not titled in its ⁵⁵⁹ name and thus not part of the bankruptcy estate, and that it had offered no evidence to support the position that the units should be included. The court below ratified the sale of the hotel and 22 condominium units on June 29.

On June 28, unbeknown to the circuit court, appellants had tried under 28 U.S.C. § 1452 (a) 5 to remove the foreclosure actions to federal court and filed there a motion objecting to the ratification of the sale of the hotel and units. See Council of Unit Owners of Carousel Center Condominium, Inc. v. Four Star Enter. Ltd. Partnership, No. S-99-1915 (D. Md. filed June 28, 1999); Council of Unit Owners of Carousel Center Condominium, Inc. v. Hamzavi, No. S-99-1916 (D. Md. filed June 28, 1999). The removal notices were not docketed in federal court until after June 29th, the date that the sales had been ratified in the circuit court.

No exceptions or objections, moreover, were filed in circuit court, although Four Star moved in the federal court on July 14 to strike the Final Orders of Ratification. On July 22, the United States District Court remanded the foreclosure of both the hotel and the 22 units back to the circuit court. Acknowledging that it could exercise jurisdiction, it nonetheless practiced “discretionary abstention” and sent back to state court “all motions that remain open in these cases, whether they were filed before or after removal.” After considering motions from both sides, the circuit court on August 8 denied appellants’ objections and reaffirmed its Final Orders of Ratification dated June 29, 1999. We note that the court below specifically found that Four Star was “neither a party nor a holder of a subordinate interest” in the condominium units and thus was “not a proper party to file exceptions” ⁵⁶⁰ in the proceeding regarding those units.

The court below denied a Motion For Reconsideration Of And To Vacate Memorandum Order in each of the foreclosure proceedings on August 26. B . The Enforcement Order The third order on appeal grants the receiver’s Motion for Ancillary Relief to enforce the provisions of a judgment under Maryland Rule 2-648. 6 The Order provided aid of enforcement for the Order of April 3, 1998, which appointed Bergey as receiver. The court acted on the basis of exhibits, including a detailed affidavit of the receiver’s property manager that documented risks to the premises and to the health and safety of its occupants under the tenure of Hamzavi’s resident staff.

The affidavit described an ongoing pattern of conduct by Hamzavi’s employees to prevent access to the hotel or condominium premises, which threatened the receiver’s efforts to protect the property. This conduct included the failure of hotel personnel to deal with several small fires and other emergencies; the staffing of security functions, if at all, with unqualified persons; and the removal of large quantities of cash from the hotel by appellants’ employees. The enforcement order was signed without a hearing on August 9, 1999, and it was served on Hamzavi’s resident staff by four Worcester County Sheriffs deputies, who evicted those persons from the premises. The court below appointed a professional management team, identified in exhibits accompanying the receiver’s motion, to manage the property from the time the resident staff was evicted.

With the eviction, the ⁵⁶¹ receiver was for the first time able to gain access to the properties to view their condition. On September 2, the court below denied a Motion to Dissolve the Order Entered on August 9, 1999, and appellants filed Notices of Appeal with this Court. The three appeals were consolidated by this Court on October 6. Discussion We note at the outset that the orders in question were discretionary rulings by the trial court, and they can be set aside only if they were an abuse of discretion.

Further, the grant or denial of a post-trial motion is within the sound discretion of the trial court, and it likewise can be set aside only in cases of clear error. See Weaver v. Realty Growth Investors, 38 Md.App. 78, 82 , 379 A.2d 193 (1977) (“The revisory power ... over unenrolled judgments is to be liberally exercised ‘lest technicality triumph over justice.’ ”) (quoting Hamilton v. Hamilton, 242 Md. 240 , 218 A.2d 684 , cert. denied, 385 U.S. 924 , 87 S.Ct. 239 , 17 L.Ed.2d 147 (1966)); Cromwell v. Ripley, 11 Md.App. 173 , 273 A.2d 218 (1971) (“ ‘After the judgment properly was entered, the question of whether it should or should not be vacated in whole or in part was within the sound discretion of the trial court ....’”) (quoting Clarke Baridon, Inc. v. Union Asbestos & Rubber Co., 218 Md. 480, 483 , 147 A.2d 221 (1958)). I The Foreclosures The first two orders on appeal ratified ex parte the foreclosure sale of the hotel and 22 condominium units. Appellants argue that the sale violated the automatic stay arising from the concurrent bankruptcy proceedings for Four Star; that a hearing should have been held to receive evidence on their objections to the sale; and that the court below should have set aside the foreclosure sale because the trustee could not convey marketable title.

We address each of these arguments in turn. ⁵⁶² A The Automatic Stay Four Star filed a Voluntary Petition to institute Chapter 11 bankruptcy proceedings on March 11, 1999. Under the Bankruptcy Code, 11 U.S.C. § 362 (a) (1994 & Supp.1999), filing a petition stays: (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; (4) any act to create, perfect, or enforce any lien against property of the estate; (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the [bankruptcy] case.... Appellants maintain that all foreclosed properties were part of the bankruptcy estate and that the automatic stay still applied to the hotel and condominium units at the point when they were sold. They are wrong on both accounts.

Without a doubt, the hotel was part of the bankruptcy estate, because Four Star, the bankrupt party, was the owner of record. Four Star argues, however, that it was also the beneficial owner of the condominium units because Hamzavi has maintained only bare legal title to the 22 Units, with all beneficial interest being preserved for the benefit of Four Star; that all income derived from the rental of the 22 Units was paid to Four Star and treated as part of the operation of the Hotel; that all expenses relating to the 22 Units were treated as expenses of the Hotel; that all tax attributes associated with the 22 Units were treated as those of Four Star; and that the 22 Units were made available to customers for rental as rooms of the Hotel. Four Star concludes that its beneficial ownership of the condominium units means that those units were also under the automatic stay. ⁵⁶³ We find no direct authority in bankruptcy law, and those cases touching on the issues in this case tend to not support appellants. In In re Geris, 973 F.2d 318 (4th Cir.1992), for example, the Fourth Circuit held that the automatic stay does not prevent foreclosure when the real estate in question is not actually owned by the debtor, even if the debtor is liable for the underlying indebtedness as guarantor or co-maker of a note: Certainly Geris has an interest, and a material one, in having the value of the Manassas property maximized, insofar as it bears directly on the size of the deficiency for which he may be obligated to Peoples National Bank.

But if we were to accept this interest as sufficient to invoke in Saratoga’s favor the automatic stay provision of 11 U.S.C. § 362 (a), we would be cutting off foreclosure rights of secured creditors in any property standing as security for a debt that happened to be guaranteed by a bankrupt. This cannot have been an intended function of the automatic stay provision.... Id. at 321; accord GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711 (5th Cir.1985) (automatic stay intended to protect assets of debtor, not those of co-debtors); Otoe County Nat’l Bank v. W & P Trucking Inc., 754 F.2d 881 (10 th Cir.1985) (same). Even if the automatic stay did apply to the condominium units, we find considerable support in the record to show that the stay had been lifted by the time the sale was made final by ratification.

Appellants argue that the sale was improper because the receiver had not yet filed an Affidavit of Default with the Bankruptcy Court before the auction took place, 7 but we think they chase chimeras. First, and most important in our view, the foreclosure sale was not final until June 29, when it was ratified by the court below. It has long been the rule in Maryland that foreclosure sales are not final prior to court approval: ⁵⁶⁴ A sale under a decree does not pass the title, unless it is ratified and confirmed. The court is the vendor, acting through its agent, the trustee who has been appointed to make the sale.

He reports to the court the offer of the bidder for the property. If the offer is accepted, the sale is ratified, and thereupon, and not sooner, the contract of sale becomes complete. Hanover Fire Ins. Co. v. Brown, 77 Md. 64, 71 , 25 A. 989 , reh’g denied, 77 Md. 64 , 27 A. 314 (1893); accord Plaza Corp. v. Alban Tractor Co., 219 Md. 570, 578 , 151 A.2d 170 (1959) (“Before ratification the transaction was merely an offer to purchase which had not been accepted....

But, when the offers were accepted and the sales to the respective bidders were ratified and confirmed (and the purchase money paid), the contracts of sale became complete and the title to the property sold passed”). Here, ratification — and finality— occurred over a month after the Affidavit of Default was filed with the Bankruptcy Court. At most, the trustee’s advertising and the auction itself were mere preparation for eventual foreclosure and not foreclosure proper. 8 Second, even if the auctioneer’s cry of “sold” had been a proper indicium of finality, the importance of the affidavit had ⁵⁶⁵ diminished significantly in light of other procedural events that occurred. The Bankruptcy Court clearly intended for the receiver’s filing of an Affidavit of Default to eliminate the need for further hearings on the stay should Four Star fail to post a bond of $302,228 or comparable security by April 29. 9 Had Four Star posted this bond, the automatic stay would have remained intact, and no foreclosure sale could have taken place.

Four Star, however, not only defaulted, but it also requested and received an emergency hearing on May 6, a week after the deadline. At this hearing, the Bankruptcy Court confirmed that default had taken place. According to the court, the commitment letter Four Star had obtained in lieu of a cash bond was inadequate to justify staying the effectiveness of the Order Conditioning the Automatic Stay issued on April 14. Although the stay remained in place on the morning of May 28, the absence of the affidavit was, as the Bankruptcy Court pointed out, a mere technical defect stand ⁵⁶⁶ ing in the way of the foreclosure action — one that was eliminated before the sale was final. 10 Third, once the stay had been lifted, Four Star made no efforts in the proper court to appeal its lifting or stay the foreclosure sale.

See Mann v. Alexander Dawson, Inc., 907 F.2d 923 (9 th Cir.1990) (where debtor neither appealed the lifting of the automatic stay nor obtained a stay of a foreclosure sale, he could not later complain about the foreclosure of his property). Rather than appealing the lifting of the stay through the federal courts or filing exceptions to the sale in State court within 30 days of the auction, 11 Four Star instead sought to remove the foreclosure actions to federal court. The United States District Court remanded these actions to the circuit court, reminding Four Star that “[fjoreclosure sales are prototypically State law bound proceedings.” In our view, Four Star sought to do by procedural sleight of hand — or in the words of the United States District Judge, by dancing “an almost Dickensian procedural minuet” — that which it could not do on the merits. By not posting adequate security, it squandered its only prospect of keeping the stay in place, and we think it now exalts form over substance when it argues that a mere technical defect renders the foreclosure sale invalid.

B Evidentiary Hearing Appellants also argue, based on their reading of Maryland Rule 14-305(d)(2), that the court below should have held ⁵⁶⁷ an evidentiary hearing on their objections to the foreclosure sale. Rule 14 — 305(d)(2) states: The court shall determine whether to hold a hearing on the exceptions but it may not set aside a sale without a hearing. The court shall hold a hearing if a hearing is requested and the exceptions or any response clearly show a need to take evidence---- Appellants’ objections are four-fold. First, they complain that the circuit court failed to address the alleged violation of the automatic stay.

Issues pertaining to the violation of the stay, they assert, were within the circuit court’s bailiwick, because “the United States District Court expressly found that the local court could competently apply ‘federal law dealing with bankruptcy stays,’ and specifically stated that it was leaving ‘for adjudication in the state court all motions that remained opened [sic ] in these cases.’ ” Second, they maintain that the circuit court erroneously refused to rule on how the foreclosure sale affected the preference issues, again acting “directly contrary to the remand of ‘all motions that remain open.’ ” Third, they contend that the circuit court incorrectly refused to consider on the basis of standing Four Star’s objections to the foreclosure sale of the 22 units. The court below found that Four Star lacked standing to object to the sale of the units, even though they had historically been used as part of the hotel. Fourth, Four Star claims that the court failed to consider its objections to selling the hotel and condominium units as a package, and such packaging eliminated potential condominium buyers from participation. In general, we find appellants’ argument to be illusory.

A hearing is by no means mandatory under Rule 14 — 305(d)(2), even if one of the parties requests it. Because this rule is written in conjunctive form, authorizing a proceeding “if a hearing is requested and the exceptions or any response clearly show a need to take