Guttman v. Wells Fargo Bank

HARRELL, J. The United States Bankruptcy Court for the District of Maryland certified, and this Court accepted, four questions pertaining to Maryland Code (1974, 2010 Repl.Vol.), Real ²³⁰ Property Article, § 4-109. 1 Secured parties, as creditors in the bankruptcy proceedings and Appellees here, are attempting, in separate cases before the Bankruptcy Court, to execute on four deeds of trust whose affidavits of considerations (and/or acknowledgments contained therein) are missing or improper. Appellants, the four trustees in bankruptcy here, argue that these defects render the deeds of trust invalid, such that the trustees possess the properties free and clear of Appellees’ interests. The creditors counter, however, that § 4-109 cures the defects at issue. The Franciscan friar William of Occam commended—transposed to modern syntax—that “the simplest of competing theories [is] preferred to the more complex....” Merriam-Webster Dictionary Online, http://www.merriam-webster.com/dictionary-tb/occam’s + razor (last visited 18 July 2011).

William of Occam’s wisdom supplies yet another reason why, in cases of statutory construction, the plain language of a statute is the first tool for which we reach. Invoking “Occam’s razor” here, we hold that—pursuant to the plain language of the statute (and as confirmed by legislative history)—§ 4-109 contemplates curing defects like those in the present case (absent a judicial challenge lodged within six months of recordation of the deeds). Thus, we answer in the affirmative each of the four certified questions. I. According to Md.Code (1974, 2006 Repl.Vol.), Courts and Judicial Proceedings Article, § 12-606, this Court, in answering certified questions, is bound by the facts set forth in the certification order.

Piselli v. 75th St. Med., 371 Md. 188, 202 , 808 A.2d 508, 516 (2002). The Bankruptcy Court provided the following factual statement in the certification order: 2 ²³¹ Numerous adversary proceedings have been filed by trustees in Chapter 7 bankruptcy cases asserting similar facts as to missing or defective affidavits of consideration contained upon recorded deeds of trust. The four adversary proceedings captioned above have been consolidated to facilitate a coordinated disposition of common issues of Maryland law as to the legal effect (or lack thereof) of deeds of trust that contain no affidavit of consideration, or that contain incomplete forms of affidavit. In each adversary proceeding, the trustee seeks to avoid the transfer of a lien by the subject deed of trust pursuant to 11 U.S.C. § 544 asserting that, as a consequence of a defective or missing affidavit of consideration, the deed of trust is void as to a subsequent bonafide purchaser.

A motion to dismiss has been filed in each adversary proceeding disputing the trustee’s cause of action upon the basis that the lack of affidavit of consideration or missing information in the affidavit is cured pursuant to Md.Code Ann. Real Property Section 4-109. In adversary proceeding no. 09-0336-NVA [“AP 1”], the Trustee alleges, and it does not appear to be seriously disputed, that the deed of trust, which was executed on or about October 27, 2004 and recorded on or about November 24, 2004, fails to contain an affidavit of consideration as required by Maryland Law. See Md.Code Real Property Ann. § 4-106 (stating that no mortgage or deed of trust is valid without an affidavit of consideration except as between the parties to it). In adversary proceeding no. 10-0221-NVA [“AP 2”], the Trustee alleges, and it does not appear seriously disputed, and the deed of trust, which was executed on or about September 16, 2004 and recorded on October 29, 2004[,] contains an imprinted form affidavit of consideration but has the borrower/grantor’s name erroneously filled in as the affiant agent for the secured party. ²³² In adversary proceeding no. 10-0364DK [“AP 3”], the Trustee alleges, and it does not appear seriously disputed, that the deed of trust, which was executed on or about June 6, 2008 and recorded on June 11, 2008[,] contains a blank imprinted form of affidavit with no information filled in (including date, state of notary public, name of affiant and expiration date of a notary public’s commission).

The blank form is unsigned and has no notary seal. In adversary proceeding no. 10-0423DK [“AP 4”], the Trustee alleges, and it does not appear seriously disputed, that the deed of trust, which was executed on or about November 27, 2006 and recorded on or about January 24, 2007[,] contains a form affidavit of consideration with the date and notary information filled in and contains a signature and seal of the notary, but with no name of an affiant set forth where required. In each adversary proceeding the defendant has moved to dismiss the Complaint and argues that the curative statute, Md.Code Real Property Section 4-109(b) renders the lack of an affidavit of consideration, or the incomplete or defective affidavit, cured and the respective deed of trust enforceable as to a subsequent bonafide purchaser. That section provides: (b) Defective grants recorded on or after January 1, 1973.—If an instrument is recorded on or after January 1, 1973, whether or not the instrument is executed on or after that date, any failure to comply with the formal requisites listed in this section has no effect unless it is challenged in a judicial proceeding commenced within six months after it is recorded.

(c) Failures in formal requisites of an instrument.—For the purposes of this section, the failures in the formal requisites of an instrument are: (1) A defective acknowledgment; (2) A failure to attach any clerk’s certificate; (3) An omission of a notary seal or other seal; ²³³ (4) A lack of or improper acknowledgment or affidavit of consideration, agency, or disbursement; or (5) An omission of an attestation. The defendants seek dismissal on the basis that the foregoing section bars the trustees’ actions against defendants because the actions were not brought within six months of recordation. Accordingly, it is argued, the actions are time-barred and any failure as to the affidavits of consideration, including its complete absence, have been cured by the passage of time and Maryland law. The following four questions were certified by the Bankruptcy Court and accepted by this Court for review: 1.

Where a deed of trust is recorded without an affidavit of consideration as required by Md.Code Ann. Real Property Section 4-106, is the defect cured by the application of Md.Code Ann. Real Property Section 4-109 if there is no judicial challenge to the validity of the deed of trust within six months? 2. Where a deed of trust is recorded with an affidavit of consideration wrongly identifying the borrower as the affiant, is the defect cured by the application of Md.Code Ann. Real Property Section 4-109 if there is no judicial challenge to the validity of the deed of trust within six months? 3. Where a deed of trust is recorded with an affidavit of consideration of affidavit [sic] printed but containing no information on [sic ] attestation, is the defect cured by the application of Md.Code Ann. Real Property Section 4-109 if there is no judicial challenge to the validity of the deed of trust within six months? 4. Where a deed of trust is recorded with an affidavit of consideration with a form affidavit that contains no identification of an affiant, is the defect cured by the application of Md.Code Ann. Real Property Section 4-109 if there is no judicial challenge to the validity of the deed of trust within six months?

We hold that § 4-109 is unambiguous, curing the type of defects identified by the trustees, i.e., missing or improper ²³⁴ affidavits or acknowledgments, unless a timely judicial challenge is mounted. The legislative history surrounding the enactment of this curative statute also supports this holding. We explain.

II

A. The Plain Language of § 4-109 Operates to Cure the Defects in the Present Case. The goal in statutory interpretation is to divine the intent of the Legislature. See Kortobi v. Kass, 410 Md. 168, 176-77 , 978 A.2d 247, 252 (2009). In this endeavor, we turn initially (and often only) to the plain language of the statute; if the Legislature resolved the present dispute through the plain words of the statute, we are not obliged to consult other sources of legislative history.

See Price v. State, 378 Md. 378, 387 , 835 A.2d 1221, 1226 (2003) (“[A]ll statutory interpretation begins, and usually ends, with the statutory text itself ..., for the legislative intent of a statute primarily reveals itself through the statute’s very words ....” (citations omitted)). We are not free to disregard clear statutory instructions and rely instead upon contrary legislative history, even where we disagree with the Legislature as to the “fairest” or “best” disposition of the case. See Stanley v. State, 390 Md. 175, 184 , 887 A.2d 1078, 1083 (2005) (“Even if it may be, to us, illogical and irrational, there is no basis for the Court to refuse to give effect to the clear direction of the General Assembly.”); Dep’t of Motor Vehicles v. Greyhound Corp., 247 Md. 662, 668 , 234 A.2d 255, 258 (1967) (“[I]f the legislative intent is expressed in clear and unambiguous language, this will be carried into effect by this Court even if this Court might be of the opinion that the policy of the legislation is unwise, or even harsh or unjust .... ” (internal quotation marks and citations omitted)). Stated another way, if a plain reading of the statute disposes of the case at hand, our “inquiry as to legislative intent ends; we do not ... resort to the various, and sometimes inconsistent external rules of construction, for ‘the Legislature is presumed to have meant what it said and said what it ²³⁵ meant.’ ” Arundel Corp. v. Marie, 383 Md. 489, 502 , 860 A.2d 886, 894 (2004) (quoting Toler v. Motor Vehicle Admin., 373 Md. 214, 220 , 817 A.2d 229, 233 (2003)).

The statute central to the certified questions states that, for instruments recorded on or after January 1, 1973, “any failure to comply with the formal requisites listed in this section has no effect unless it is challenged in a judicial proceeding commenced within six months after it is recorded.” § 4-109(b). Section 4-109(c) lists, most helpfully, the “failures in the formal requisites of an instrument” cured by the statute: (1) A defective acknowledgment; (2) A failure to attach any clerk’s certificate; (3) An omission of a notary seal or other seal; (4) A lack of or improper acknowledgment or affidavit of consideration, agency, or disbursement; (5) An omission of an attestation. (Emphasis added.) Read in accordance with an ordinary understanding of the English language, see Kortobi, 410 Md. at 176 , 978 A.2d at 252 (“[Ojrdinary, popular understanding of the English language dictates interpretation of [statutory] terminology.”), § 4-109(c)(4) identifies four curable defects: (a) a lack of an acknowledgment; (b) a lack of an affidavit of consideration; (c) an improper acknowledgment; and (d) an improper affidavit of consideration. Before deciding whether § 4-109 applies to cure these defective “formal requisites,” we must consider if and when the trustees asserted any relevant judicial challenge—if the trustees challenged the validity of the instruments within the six month window, then the statute is ineffective here.

In these four bankruptcy proceedings, the certifying court represents that no judicial challenge was made to the validity of the deeds within the prescribed time limit. The question devolves then to whether the defects in these proceedings are of the type identified and cured by the statute. The answer is “Yes.” We agree with the creditors that § 4-109(c)(4) cures the “absence of an affidavit of consideration,” as well as “missing ²³⁶ elements] of an incomplete or mistaken affidavit.” To be specific: • In AP 1, the deed lacks an affidavit of consideration (curable defect (b) supra). • In AP 2, the deed has an affidavit of consideration, but the affidavit contains an improper acknowledgment—the name of the borrower is filled in erroneously for the name of the affiant agent (who represents the secured party) (curable defect (c) supra). • In AP 3, the deed has an affidavit of consideration, but the affidavit lacks most information, including acknowledgments (curable defects (a) and (d) supra). • In AP 4, the deed has an affidavit of consideration, but the affidavit lacks an acknowledgment—the name of the affiant (curable defect (a) supra). The trustees characterize the defects in a fundamental way, describing AP 1 as “completely lacking] an affidavit,” and AP 2 through 4 as “lacking] ... [attestations] ... by the secured party.” 3 These deficiencies are “substantive” (as opposed to “formal”), the trustees argue, because another provision of the Real Property Article requires the presence of an “oath or affirmation of the ... party secured by a deed of trust that the consideration recited ... is true and bona fide ....”§ 4-106.

The affidavits are defective substantively for another reason, according to the trustees. The affidavits are false in that they “purport,” but do not in fact, contain “attestations by the secured parties.” Reply Brief of Appellants at 5 (describing Ameriquest Mortgage Co. v. Paramount Mortgage Services, 415 Md. 656 , 4 A.3d 934 (2010) as “unequivocally holding] that a false affidavit is not a formal defect that can be cured by the passage of time”). Thus, taken together, because the affidavits (1) contain no oath or affirmation by the ²³⁷ secured parties and (2) are false, they are defective substantively and, therefore, not cured by § 4-109—a provision that cures only “technical or formal” (as opposed to substantive) defects. The deficiencies identified by the trustees, of course, stem from the fact that the affidavits of consideration (and acknowledgments contained therein) are either “lacking] ... or improper....” § 4-109(c)(4).

Stated another way, the Legislature chose to define certain defects, including the ones in the present case, as curable after a period of six months. We decline to ignore or unsettle these express statutory instructions. See Fikar v. Montgomery County, 333 Md. 430, 434-35 , 635 A.2d 977, 979 (1994) (“[W]here statutory language is plain and free from ambiguity and expresses a definite and sensible meaning, courts are not at liberty to disregard the natural import of words with a view towards making the statute express an intention which is different from its plain meaning.” (internal quotation marks and citations omitted)). Although addressed in greater detail infra, our reading of § 4-109 does not render superfluous the affidavit of consideration requirement of § 4-106.

See Kortobi, 410 Md. at 177 , 978 A.2d at 252 (stating that statutes should be construed so that “no word, clause, sentence or phrase is rendered superfluous or nugatory”) (internal quotation marks and citations omitted). Rather, the General Assembly acted within its charge to require an oath or affirmation as to the bona fide nature of the consideration. Indeed, such a practice assists to “ ‘prevent fraudulent transfers of property upon false or pretended consideration,’ ” Pagenhardt v. Walsh, 250 Md. 333, 336 , 243 A.2d 494, 496 (1968) (quoting Marlow v. McCubbin, 40 Md. 132 (1874)), and, in the process, improves the reliability of land records. The Legislature was also within its realm, however, to ease the long-term, extraneous consequences of non-compliance with its procedural rules through provisions like § 4-109.

With respect to Ameriquest, we faced there an affidavit of consideration/disbursement which “stated [inaccurately] that ²³⁸ the money was disbursed not later than the ‘execution and delivery’ of the deed of trust....” Ameriquest, 415