Green v. Taylor

ADKINS, Judge. This case involves a longstanding lending relationship gone sour. In addition to reviewing the trial court’s finding that the borrower did not default under any loan, it requires that we interpret the scope of Md. Code (1974, 1996 Repl. Vol.), section 7-106(e) of the Real Property Article (“RP”).

This subsection provides for the award of attorney’s fees to certain persons who sue to force a real estate lienholder to release the collateral upon payment of the underlying debt. We hold that Section 7-106(e) only applies to actions brought by settlement attorneys or other agents responsible for ’the disbursement of funds in connection with the grant of title to real property. ⁴⁷ Larry and Karen Taylor, appellees, entered into a series of secured loan agreements with John Fernstrom, a private lender, beginning in 1992. When the parties’ relationship deteriorated, Fernstrom assigned the right to payment on two deeds of trust to Richard K. Green, a licensed attorney, appellant. Believing that they had fully satisfied the debt underlying these two deeds of trust, the Taylors filed a complaint against Green in the Circuit Court for Prince George’s County, requesting the court to compel release of the deeds.

After an evidentiary hearing, the trial court found in favor of the Taylors, ordered Green to release the deeds of trust, and awarded attorney’s fees to the Taylors pursuant to RP section 7-106(e). We address the following issues raised by Green: I. Did the trial court err in holding that a borrower may take direct action to obtain a release of deeds of trust and an award of attorney’s fees pursuant to RP section 7-106 when no settlement attorney or agent is involved?

II

Did the trial court err in determining that there was no default under the $65,000 promissory note?

III

Did the trial court abuse its discretion by refusing to make separate and independent findings of fact and conclusions of law, relying instead on appellees’ trial memorandum and incorporating that memorandum verbatim?

IV

Did the trial court err in granting appellees’ motion to amend the judgment without convening a hearing? We answer yes to issues I and IV, and no to issues II and III. FACTS AND LEGAL PROCEEDINGS In 1992, the Taylors, looking for a new source of financing, requested Fernstrom to purchase two secured notes representing indebtedness by the Taylors to other lenders. Pursuant to this request, Fernstrom purchased a $67,500 deed of trust note from Rubinstein and Siegel (the “Rubinstein Note”) and a $200,000 deed of trust note from Citizens Bank (the ⁴⁸ “Citizens Bank Note”).

The purchase of these notes was effectuated by assignments from these lenders to Fernstrom. 1 While the Rubinstein Note and the Citizens Bank Note were still outstanding, Fernstrom loaned money to the Taylors on three subsequent occasions. These loan agreements were documented on standard form commercial promissory notes signed by both of the Taylors on the following dates and for the following amounts: $11,500 on June 11, 1995; $13,500 on June 24, 1996; and $65,000 on April 13, 1997. The April 13, 1997 $65,000 note (the “$65,000 Note”) is at the center of the controversy in this case. The Taylors paid off the Rubinstein Note in August 1998, and the Citizens Bank Note in late December 1998.

Femst-rom, however, did not release either of those deeds of trust. The Taylors continued to make payments on the three remaining loans from Fernstrom. According to the Taylors, they were pre-paying each month’s interest on the $65,000 Note, and paying “interest only ... until [Mr. Taylor] made the $65,000 payment ... on [February 1,1999].” In late November 1998, Fernstrom and the Taylors negotiated a $200,000 loan agreement in the form of a revolving line of credit secured by a deed of trust. The purpose of this loan was to enable the Taylors to buy a house.

The loan would also replace the outstanding balances on the smaller loans directly from Fernstrom, which would become part of the total $200,000 indebtedness. Fernstrom directed Green to prepare the paperwork for this loan. Green was Fernstrom’s attorney, but also had represented the Taylors in the past in an unrelated matter. The evidence was disputed as to whether Fernstrom or the Taylors agreed to be responsible for compensating Green for his services.

Mr. Taylor testified that, although Fernstrom told him to go to Green’s office, he understood Green to be ⁴⁹ preparing the loan documents for Fernstrom. He also related that Green never discussed payment of legal fees with the Taylors until after the documents were prepared and signed. Mrs. Taylor testified similarly. In contrast, Fernstrom testified that he “explained to [Mr. Taylor] that the cost of documenting this new relationship and any legal fees or recordation costs that might be necessitated by creating this new relationship would have to be borne by [Taylor] up front.” According to Fernstrom, Taylor responded, “no problem.” The trial court resolved this dispute by finding that Fernstrom was responsible for the legal fees associated with drafting the $200,000 loan agreement.

After the Taylors signed the 1998 $200,000 note, they were presented with a bill from Green for the costs of preparing the transaction, including attorney’s fees and recording costs. This bill amounted to $5,000. 2 The Taylors refused to pay this amount, and left Green’s office without receiving the agreed-upon advance. On January 23, 1999, Fernstrom declared all of the loans in default. He subsequently assigned all of the loans to Green for consideration, via undated assignments handwritten on the notes themselves.

Green testified that this assignment occurred after Fernstrom had declared the notes in default. According to Mr. Taylor, on February 1, 1999 he “hand-delivered” to Fernstrom a check in the amount the Taylors understood to be the remaining balance due on the $65,000 Note. Green and Fernstrom, however, suggested that Taylor did not deliver this check until February 2, 1999. Although Fernstrom informed Taylor that the $65,000 Note already had been assigned to Green, Fernstrom accepted the Taylors’ check, and forwarded it to Green.

Taylor testified that he thought this check fully paid off the $65,000 Note. According to Green, however, Taylor did not pay interest for the month ⁵⁰ of January or the first two days of February 1999, so the $65,000 Note was not paid in full. The Taylors, asserting that both the Citizens Bank and Rubinstein Notes had been fully paid off, asked both Fernst-rom and Green to release the deeds of trust securing these loans. They refused.

On March 29, 1999, the Taylors filed this action against Femstrom and Green in the Circuit Court for Prince George’s County, 3 seeking to compel release of those deeds of trust. In addition, the Taylors sought attorney’s fees for the expenses of obtaining these releases. At trial, the Taylors disputed the validity of Fernstrom’s January 1999 declaration of default, claiming that Femstrom’s sole reason for doing so was the Taylors’ failure to pay Green’s $2,500 attorney’s fees bill stemming from the November 27, 1998 transaction. Fernstrom’s testimony at trial revealed the following: [Taylors’ Counsel].

Okay. Now, can you articulate what the default was on the 23rd of January? [Fernstrom]. Yes. Q. He didn’t owe any interest or anything at that point?

A. No, but he owed monies that had been incurred by the lender on his behalf that he had refused to pay. Q. So the default then would have been the $2,500? A. In essence, yes. Q. And there was no other reason to default, for there to be a default?

A. I think there was one other reason for a default, but I can’t recall it right now. ⁵¹ In a written opinion and order, the trial court ruled in favor of the Taylors. Finding the Taylors’ testimony that they never agreed to pay Green’s fees for the November 1998 transaction “fully credible,” the court concluded that there never was a default on the $65,000 Note or the other loans. The court’s order expressly incorporated the “findings of fact and conclusions of law [in] Plaintiffs [Trial] Memorandum as if fully [set forth] [t]herein.” The court further declared that the two deeds of trust were “paid in full,” appointed a trustee to “discharge and release said Deeds,” and awarded attorney’s fees to the Taylors in the amount of $9,998.00. An amended order was entered on September 13, 2000, in response to the Taylors’ motion to amend the judgment.

See infra n. 1. We will recount further facts below as they relate to the specific issues raised by Green. DISCUSSION I. The Trial Court Erred In Holding That Section 7-106(e) Authorizes The Award Of Attorney’s Fees Under The Circumstances Of This Case Green first challenges the award of attorney’s fees to the Taylors, contending that they have no standing to bring an action for fees under RP section 7-106(e). Subsections (d) and (e) of section 7-106 provide: (d) Furnishing original copy of executed release. — Any person who has a lien on real property in this State ... shall furnish to the person responsible for the disbursement of funds in connection with the grant of title to that property the original copy of the executed release of that lien....

(e) Enforcement. — If the holder of a lien on real property or his agent fails to provide the release within 30 days, the person responsible for the disbursement of funds in connection with the grant of title to the property, after having made demand therefor, may bring an action to enforce the provisions of this section in the circuit court ⁵² for the county in which the property is located. In the action the lienholder, or his agent, or both, shall be liable for the delivery of the release and for all costs and expenses in connection with the bringing of the action, including reasonable attorney fees. (Emphasis added.) Green asserts that the Taylors did not have standing to file a claim under section 7-106 because they were not “person[s] responsible for the disbursement of funds.” The Taylors respond: It is undisputed that the Appellant is a lawyer. He was assigned the notes, he said, for the purposes of collection.

Appellant, therefore, was the holder of the lien on real property as set forth in the statute. We are not persuaded by the Taylors’ argument because it ignores the requirement in subsections (d) and (e) that the person bringing the action be a “person responsible for the disbursement of funds in connection with the grant of title to the property[.]” In reaching our conclusion, we first look to the principles of statutory construction. In construing a statute, our task is to discern and effectuate the intent of the Legislature. See F.O.P., Montgomery County Lodge No. 35 v. Mekrling, 343 Md. 155, 173-74 , 680 A.2d 1052 (1996). “The words actually used in the statute, and their ‘plain meaning’ are the best indicator of that intent.” State Dep’t of Assessments and Taxation v. Maryland-Nat’l Capital Park and Planning Comm’n, 348 Md. 2 , 11 n. 9, 702 A.2d 690 (1997).

When a statute is silent with respect to an issue, we should consider its purpose in construing it to address that issue. See Papillo v. Pockets, Inc., 119 Md.App. 78, 87 , 704 A.2d 448 (1997). “[W]e construe the statute as a whole, interpreting each provision of the statute in the context of the entire statutory scheme.” Blondell v. Baltimore City Police Dep’t, 341 Md. 680, 691 , 672 A.2d 639 (1996). The statute should be construed so as to avoid an “illogical or unreasonable result, or one which is inconsistent with common sense.” Tucker v. Fireman’s Fund Ins. Co., 308 Md. 69, 75 , 517 A.2d 730 (1986). “If there is no ⁵³ clear indication to the contrary, and it is reasonably possible, a statute is to be read so that no word, clause, sentence or phrase shall be rendered surplusage, superfluous, meaningless or nugatory.” Thomas v. Police Comm’r of Baltimore City, 211 Md. 357, 361 , 127 A.2d 625 (1956).

The first principle of statutory construction, that we should look to the plain meaning of the words of the statute, guides our decision in this case. See Langston v. Langston, 366 Md. 490 , 784 A.2d 1086 , 2001 Md. Lexis 866, ³⁷ (2001) (when the legislative intent is evident from the statutory test, plain meaning governs our interpretation). Subsection 7-106(e) clearly limits who is entitled to enforce its provisions, and under what circumstances, by providing that “[T]he person responsible for the disbursement of funds in connection with the grant of title to the property ... may bring an action[.]” The plain meaning of these words tells us that subsection (e) only applies in the context of a real estate settlement, in which there is a conveyance of title and a “person responsible for the disbursement of funds” from that settlement is responsible for the payment of the deed of trust or mortgage from settlement funds. The legislative history of subsections (d) and (e) is consistent -with these plain words.

The preamble to 1984 Md. Laws, ch. 497 recites that the act is [for] the purpose of providing that under certain circumstances an agent of a person who has a lien on real property is required to furnish an executed release of lien on the property; providing that an action may be brought and liability may be assessed against a holder of a lien on real property or an agent of a holder who fails to provide an executed release of lien under certain circumstances.... (Emphasis added.) This preamble reinforces our conclusion that an action may be brought under section 7 — 106(e) and “liability may be assessed” against a lien holder only under “certain circumstances.” In other words, the provisions of section 7-106(e) allowing for an action to be brought and attorney’s fees ⁵⁴ assessed is not intended to apply to every circumstance in which a lien holder is paid off. The reason for limiting subsection (e) to situations in which the action is brought by an attorney or other person responsible for the disbursement of funds in connection with the grant of title to property was explained in Att’y Grievance Comm’n v. Lockhart, 285 Md. 586 , 403 A.2d 1241 (1979). In Lockhart , the Court of -Appeals expounded on the legislative purpose underlying section 7-106.

The Court explained that this was one of the statutes that was enacted as a result of a scandal that arose in the Washington, D.C. area involving real estate settlement attorneys and delay in real estate settlements. See id. at 588 n. 2, 403 A.2d 1241 . One of the remedial provisions enacted was the section 7 106(b) requirement that every person “who has undertaken responsibility for the disbursement of funds in connection with the grant of title to property” has