Goldberg v. Frick Electric Co.

CATHELL, Judge. On July 13, 1998, Joan C. Goldberg, petitioner, obtained an Order of Judgment by Consent against William J. Douglas and Kelly L. Douglas, judgment debtors, in the Circuit Court for Prince George’s County. The judgment was filed among the judgment records of the Circuit Court for Worcester County and petitioner filed a Request for Writ of Execution so that the Worcester County Sheriffs Office (hereinafter Sher ⁶⁸⁶ iff) would levy the property of the judgment debtors located in that county. On January 4, 1999, the real property levied upon was sold at a sheriffs sale.

Frick Electric Company, Inc. (hereinafter Frick), respondent, was the successful bidder. Thereafter, Frick filed a “Motion to Intervene and for Exceptions” to the sheriffs sale in the Circuit Court for Worcester County, alleging that there were misrepresentations in the notice of sale. On June 25, 1999, after a hearing, the Circuit Court granted respondent’s Motion for Exceptions and set aside the sheriffs sale. Petitioner appealed to the Court of Special Appeals.

In an unreported opinion, the Court of Special Appeals affirmed the Circuit Court’s decision. Petitioner then filed a Petition for Writ of Certiorari to this Court, which we granted. In her Petition for Certiorari, she presented one issue 1 for our consideration: Whether the purchaser at a sheriffs sale has the right to rely solely upon the Notice of Sheriffs Sale without making further independent inquiry or investigation. We answer yes to the question and affirm the decision of the Court of Special Appeals.

We answer that, under the circumstances here present, the purchaser had the right to rely on the affirmative information furnished in the advertisement of sale. We hold that if a sheriff exceeds the statutory requirements and makes material representations as to the status of the title of real property, then a purchaser at a sheriffs sale may reasonably rely on those representations when bidding. If a sheriff makes material representations as to the status of the title in the advertisement of sale, those representations must be substantially accurate so as not to violate the fairness of the sale. Facts On July 13, 1998, the Circuit Court for Prince George’s County signed an Order of Judgment by Consent against ⁶⁸⁷ William J. Douglas and Kelly L. Douglas (hereinafter the Douglases).

The Douglases had failed to adhere to the conditions of a Stipulation of Settlement in Lieu of Judgment that they had entered into with petitioner. The Douglases agreed to the entry of judgment both jointly and severally for their failure to adhere to the settlement. A judgment was entered in favor of petitioner for $17,000.00. On August 5, 1998, petitioner filed a “Transmittal of Judgment” and a “Request for Writ of Execution” in the Circuit Court for Worcester County.

The judgment was then entered in that county. Petitioner caused a writ of execution to be issued directing the sheriff to levy upon the property of the Douglases located at Lot # 15, Turtle Mill Road in Bishopville, Maryland. 2 On August 18, 1998, the Worcester County Sheriffs Office levied and attached the property located in Bishop-ville, an unincorporated village in the county. Prior to the sheriffs sale, an advertisement titled “Sheriffs Sale of Valuable Property Located at 12008 Turtle Mill Road, Bishopville, MD,” was published in The Maryland Times-Press. The advertisement contained the following information: a description of the real property, a list of nine encumbrances that affected the property, the time of the auction, the terms of sale, the name of the auctioneer, and whom to contact for further information.

The advertisement also stated: MORTGAGES AND OR JUDGMENTS DUE: $17,240.00 plus interest. The amount stated for mortgages and judgments due failed to include a mortgage on the property held by Severn Savings Bank, F.S.B., in the amount of $105,761.04 with accruing interest. On January 4, 1999, respondent, based upon the advertisement of sale and believing that the total amount of mortgages and judgments due was $17,240.00 plus interest, purchased the ⁶⁸⁸ real property at the sheriffs sale for the price of $18,000.00. Within a month, respondent received a letter, dated February 3, 1999, that informed respondent that Severn Savings Bank as “the holder of a Note secured by a Deed of Trust [on the property located at 12008 Turtle Mill Road] has declared the Deed of Trust in default and [Severn Savings Bank] has initiated foreclosure proceedings.” The amount due on the Deed of Trust was over $100,000.00.

This was respondent’s first notice that there was any outstanding debt on the property, other than the $17,240.00 plus interest that was represented as the amount due on mortgages and judgments in the advertisement. On March 22, 1999, respondent filed a Motion to Intervene and Exceptions to Sale in the Circuit Court for Worcester County. Respondent requested that it be permitted to intervene for the purpose of filing exceptions to the sale. In its Exceptions to Sale, respondent alleged that when making its bid at the sheriffs sale, it relied on the representations made in the advertisement as to the encumbrances and the mortgages and judgments that were due on the property. 3 Respondent contended that “[a]s a result of the misrepresentations of title contained in the notice of sale, the existence of debts in excess of that stated in the notice of sale and the subsequent foreclosure of the superior, undisclosed deed of trust, the sale should be set aside and the deposit returned to Frick Electric Company, Inc.” On April 9, 1999, petitioner filed an “Opposition to Exceptions to Sale.” Petitioner alleged that respondent was relying on the wrong Maryland Rule 4 and that respondent had failed ⁶⁸⁹ to set forth any legal basis in support of its exceptions to the sale.

On May 3, 1999, petitioner filed a second motion in opposition to the exceptions. Petitioner alleged that a sheriffs sale is a type of “no fault” sale and that the purpose of the sale is only to sell whatever right, title, and interest the judgment debtor has in the property. Petitioner also alleged that the only error in the sale was respondent’s failure to investigate in advance what security interests were held against the property. Petitioner contended that it was respondent’s duty to investigate the status of the title of the real property, not the duty of the sheriff.

On June 25, 1999, a hearing was held before the Circuit Court for Worcester County on the exceptions to the sheriffs sale. During the hearing, respondent’s counsel stated that: Now, my client, Frick Electric Company, purchased the property at the Sheriffs sale in reliance on the representations made in this ad [that gave notice of the sale]. Basically, if you look at the ad, there is an opinion of title given in the ad which says the property is subject to the following liens and encumbrances. And it makes a statement of the amount of the mortgages and judgments due.

There are representations made in the ad regarding the status of the title. These representations are incomplete and not true. Now, there is not much law on the defects in a Sheriffs sale, and the Plaintiff in the case has raised the issue of McCartney v. Frost, a Court of Special Appeals case, 37 ⁶⁹⁰ Md.App. 495, 378 A.2d 170 , 5 for the proposition that everything in an ad or everything else in the ad other than the time, place and date of the sale is mere surplusage. Now, if you read that case, the mere surplusage language comes in the discussion of the posting and placing of the advertisement, not in the contents of the ad itself.

The case goes on to say, in a sale such as this, it’s .the Sheriffs duty to follow the procedures established by law and to conduct a sale in conformity with his advertisement, it has no duty to do more, to the extent that he has discretion, it concerns how but not whether to follow the required procedures. In addition, and this is the important part, he has a duty to refrain from any conduct which may discourage competition in bidding, or may otherwise be unfair to the creditor, debtor or prospective purchaser. And it is based on that language, which my client asserts, that the making of representations in the advertisement of the sale, material representations regarding the status of the title of the property that is being sold, which make the sale improper, are grounds to have the sale set aside based on these misrepresentations. Petitioner’s counsel stated to the Circuit Court that: Your Honor, counsel would have the Sheriff do that which it cannot do.

The Sheriff sells the property based on a quitclaim deed. As Frost also says, that — the Court of Appeals making reference to the fact that the Sheriff gives no assurance of good title. The exceptions filed seem to ignore the fact that the buyer had some duty. At a minimum, the ad demonstrates two possible sources for information for the buyer to go to, the auctioneer and the attorney representing the seller.

Without quibbling with counsel about the mortgages and/or judgment language, I would represent to the Court ⁶⁹¹ that the order is disjunctive, it’s the burden upon the purchaser to determine whether or not it’s a mortgage or judgment that is being cited. The Sheriff has no duty to list any of the encumbrances. The Sheriffs sale is separate from that of a judicial sale and separate from that of a sale under a mortgage by a trustee. It has very separate rules and government.

Frost makes clear that all the Sheriff has to do is properly levy that property, place the notice where it can be seen or read in the area in which the sale is to take place, give an accurate description of the property, and basically nothing more. Here, the purchaser failed to do his duty. It wasn’t because he couldn’t, and it wasn’t because the information wasn’t available, he just did not do it before the sale. He has some obligation to know what he is buying.

Frost again says that a Sheriffs sale is selling a pig in a bag — as I would know it, it’s a pig in a poke. But that is what they say. And that’s what it is. The standard that the counsel for Frick Electric would have placed on the Sheriff is not the nature of a Sheriffs sale.

The representations can be less or more, but at a minimum, they have to be the time and place and description of the property. And that was done. At the end of the hearing, the Circuit Court, ruling for respondent, stated that: Well, I understand. This information would not have to be included, but as I have stated before, once it is included, I think there is an obligation to make sure that it’s substantially accurate.

And I don’t think this — obviously this information is not substantially accurate. Therefore, it wouldn’t be fair to a purchaser, and for that reason I am going to go ahead and grant the exceptions to the sale and set it aside. On July 9, 1999, petitioner filed a Notice of Appeal to the Court of Special Appeals. The Court of Special Appeals ⁶⁹² affirmed the decision of the Circuit Court for Worcester County.

The Court of Special Appeals stated that: In the case sub judice, the undisputed facts indicate that the sale was not fairly and impartially conducted for the benefit of all concerned. It is undisputed that Frick relied upon the unusually detailed advertisement of sale when it purchased the subject property at the sheriffs sale. While we know of no legal authority requiring the advertisement to include the detailed information that was provided in the advertisement at issue, we hold that once it was provided, the sheriff had an obligation to ensure that it was substantially accurate. We agree with the trial judge that the failure to identify the fact that there was a mortgage exceeding $100,000 rendered the advertisement substantially inaccurate.

This failure made the sale unfair to all prospective purchasers and to the ultimate purchaser, Frick. Accordingly, we hold that the trial court acted properly in setting aside the sheriffs sale. Petitioner then filed a Petition for Writ of Certiorari to this Court. Discussion We hold that if a sheriff provides more information about the property than what is required by statute or rule, and that information is of a material nature, the additional information must be substantially accurate so as not to make the sheriffs sale unfair to a purchaser, or to others, who rely on the additional information.

We will take a general look at sheriffs sales and the requirements of a sheriffs sale that apply to the case sub judice. We will then further examine the facts of the case. A. Sheriff's Sales A sheriffs sale falls into one of the three categories of forced sales under the Maryland Rules. The Court of Special Appeals examined the three categories in Fowler v. Fitzgerald, 82 Md.App. 166 , 570 A.2d 866 (1990), when Judge Wilner, then on that court, wrote: ⁶⁹³ A forced sale of real property can occur in three principal settings: through foreclosure of a mortgage or deed of trust; through a “judicial sale”; and through a sheriffs sale pursuant to a writ of execution or garnishment.

The legal bases for these respective proceedings are quite different, and so are some of the procedures attending them. In the case of a judicial sale, such as a tax sale or a sale in lieu of partition, and in the case of a foreclosure sale conducted pursuant to a power contained in the mortgage, the court itself is regarded as the vendor, and the trustee conducting the sale is considered to be the court’s agent. That is the historical, and practical, reason why the trustee must report to the court and the court must, in the end, ratify the sale. The procedures governing foreclosure sales are set forth in Ch. 1100, Subt.

W of the Md. Rules; those governing judicial sales appear in Subt. BR of that Chapter. A sheriffs sale, under traditional common law theory, arises in a different legal setting. As noted in Rorer, Judicial and Execution Sales § 46 (1873), quoted with approval in McCartney v. Frost, supra, 282 Md. 631 at 636 , 386 A.2d 784 . “ ‘In making ordinary execution sales, simply by virtue of his office, the sheriff or marshal acts as the ministerial officer of the law, not as the organ of the court.

He is not its instrumentor agent, as in judicial sales, and the court is not the vendor. His authority to sell rests on the law and on the writ, and does not, as in judicial sales, emanate from the court. The functions of the court terminate at the rendition of the judgment, except where confirmation of the sale is the practice. The court does not direct what shall be levied or sold, or how the sale shall be made.

The law is the officer’s only guide.’ ” Id. at 173-74, 570 A.2d at 869-70 (footnote omitted) (some internal citations omitted); see 91st Street Joint Venture v. Goldstein, 114 Md.App. 561, 577-78 , 691 A.2d 272, 280-81 (1997). We noted in Buckeye Development Corp. v. Brown & Shilling, Inc., 243 Md. 224 , 220 A.2d 922 (1966), that: ⁶⁹⁴ The sale of an interest in land under a writ of fieri facias[ 6 ] at common law was impossible because of the inhibitions inherent in feudal tenure. An exception was provided, in Maryland and certain other colonies, by the Statute of 5 Geo. II, e. 7, which allowed the sheriff to deliver the debtor’s land to the creditor under the writ of elegit.

The present power of sheriffs to sell land under writs of fieri facias is derived from Chap. 160, § 1 of the Acts of 1810, now Code, Art. 83, § 1 (and virtually unchanged). Hartogenis, Maryland Statutory Modification of the Common Law of Real Property, 1 M.L.Rev. 238, 244 (1937). Id. at 229, 220 A.2d at 925 . Moreover, a sheriffs sale can, and often does, convey just as strong a title as regular conveyances, and so long as there are no irregularities in the manner of the sale and the purchaser is a bona fide purchaser not involved in fraud, titles derived from sheriff’s sales have overcome actual fraudulent conduct on the part of prior record holders of title.

The old case of Boring v. Lemmon, 5 H. & J. 223 (1821), involved an unique case of land patent fraud, and the subsequent holding of a sheriffs sale on a writ of fieri facias, that apparently wiped out the taint of the prior fraud. A man named Singery, during the process of attempting to patent a portion of land, caused a survey to be made. After the certificate of survey was furnished him, he altered the metes and bounds description “(by inserting a call for the beginning of Petticoat’s Loose,) as to make it embrace the whole of the lands afterwards included in Boring’s Habitation Rock” and in 1775 used the altered certificate of survey to obtain a patent from the Lord Proprietor. Id. at 223 .

The description, as altered, and the patent as issued to Singery, erroneously included the land known as “Boring’s Habitation Rock.” Subsequently, in 1795, Boring brought an action in ejectment against Singery and, at the trial court level, received a judg ⁶⁹⁵ ment against him in 1799. Singery appealed and the judgment was reversed and the case was remanded by writ of procedendo. 7 At the retrial, Singery obtained a judgment against Boring. While the original proceeding arising out of the original trial was being addressed on appeal, Boring, in the name of the Attorney General, had filed a second suit against Singery, alleging Singery’s fraud in altering the certificate of survey to the land Singery patented. While the second case against Singery was pending, Singery obtained a judgment for costs relating to the reversal arising out of Singery’s appeal of the first case.

Singery then caused a writ of fieri facias to issue to the sheriff, based on the judgment for costs. The sheriff then levied on Boring’s property, Boring’s Habitation Rock. Boring was then living in Pennsylvania and was unaware that Singery had caused the writ to issue. The property, Boring’s Habitation Rock, was sold at a sheriffs sale in 1806.

Lemmon bought it, delivered the purchase price to the sheriff, who passed it on to Singery. The sheriff then made a return certifying that the property had been purchased at a sheriffs sale by Lemmon. Lemmon then took possession of the property. In the meantime, the second suit between Boring and Singery, brought by Boring, in the name of the Attorney General, was proceeding.

Ultimately, Boring prevailed and Singery, in 1809, was directed to convey so much of Boring’s Habitation Rock that had been included in the 1775 fraudulent certificate of survey to Boring. In 1812, Singery made the conveyance. At that point, both Boring, as a result of the 1809 decree and deed, and Lemmon, as a result of the 1806 purchase at the sheriffs sale and the sheriffs return, claimed the property. Boring filed suit to eject Lemmon.

The Court, finding for Lemmon, held that: “The Court are also of opin ⁶⁹⁶ ion, that the legal estate in Boring’s Habitation Rock being vested in Ezekiel Boring at the time the fieri facias [resulting from the assessment of costs against Boring in the first appeal, which he lost] was levied on said land, the same was transferred by the sale of the sheriff to the vendee, Thomas Lemmon, by operation of law.” Id. at 226 . This Court has further examined the duty that a sheriff has when conducting a sheriff's sale in Buckeye Development Corp., 243 Md. at 229-30 , 220 A.2d at 925 , when we stated that: While the only reason for a sale by the sheriff under the writ of fieri facias is to accomplish a satisfaction of the judgment, the sale should be so conducted as to promote competition and to secure the best price. Judge Raine (the trial judge) felt “the sheriff is entrusted "with a certain amount of discretion” in conducting execution sales and it must be conceded that this is generally true. Nevertheless, whatever may be the limits of that “certain amount of discretion” it must be fairly and impartially exercised for the benefit of all concerned.

Ordinarily the sheriff may follow the reasonable directions of the judgment creditor but he should be at all times aware that he is not merely the servant of the creditor and that the debtor may have interests which he has a duty to protect. Indeed, in some circumstances, the bidders at the sale may be drawn within the purlieus of his duty to be fair and impartial. [Emphasis added.] The procedures a sheriff is to follow in conducting a sheriff’s sale are found in the Maryland Rules and Maryland Code (1973, 1998 Repl.Vol.), sections 11-501 through 11-513 of the Courts and Judicial Proceedings Article. The relevant portions for the case sub judice are contained in Maryland Rule 2-644(b) and Maryland Code (1973, 1998 Repl.Vol.), section