Huertas v. Ward

Pablo Huertas, et ux. v. Carrie M. Ward, et al., No. 2929, Sept. Term 2018. Opinion by Arthur, J. FORECLOSURE PROCEEDINGS—FINAL JUDGMENT Section 12-301 of the Courts and Judicial Proceedings Article of the Maryland Code authorizes a party to appeal from a final judgment entered in a civil case by the circuit court. Under this statute, a party may appeal from an order ratifying a foreclosure sale, even if the order refers the matter to an auditor to state an account. The ratification of a foreclosure sale is a final judgment as to the in rem aspects of a foreclosure proceeding, i.e. a final judgment as to rights in real property.

The process of referring the matter to an auditor is collateral to the foreclosure proceeding. FORECLOSURE PROCEEDINGS—DEFENSES To sufficiently raise a defense in a foreclosure case, a party must plead all elements of a valid defense with particularity. General allegations are insufficient to require an evidentiary hearing on the merits. In this case, a homeowner made general allegations of forgery but offered no factual support for those allegations.

The homeowner cited a provision of the federal Fair Debt Collection Practices Act but never sufficiently alleged any violation of that Act. Because the homeowner failed to meet the minimum pleading standards, the circuit court properly declined to hold an evidentiary hearing on the merits of the alleged defenses. Circuit Court for Montgomery County Case No. 389836V REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 2929 September Term, 2018 ______________________________________ PABLO HUERTAS, ET UX. v. CARRIE M. WARD, ET AL. ______________________________________ Graeff, Arthur, Moylan, Charles E., Jr. (Senior Judge, Specially Assigned), JJ. ______________________________________ Opinion by Arthur, J. ______________________________________ Filed: October 27, 2020 This case involves a series of unsuccessful attempts to prevent a residential foreclosure. After the foreclosure sale, the Circuit Court for Montgomery County overruled a homeowner’s exceptions and ratified the sale of the property.

The homeowner appealed, contending that the circuit court erred in denying his requests to prevent the foreclosure sale and its ratification. The substitute trustees have moved to dismiss the appeal, contending that the order ratifying the foreclosure sale is not an appealable order. Alternatively, the substitute trustees argue that the circuit court’s rulings were correct, and thus that the judgment should be affirmed. For the reasons discussed in this opinion, we shall deny the motion to dismiss this appeal and affirm the judgment of the circuit court.

FACTUAL AND PROCEDURAL BACKGROUND A. Initial Foreclosure Proceedings Under the Deed of Trust On September 21, 2004, Bank of America, N.A., extended a loan to Pablo Huertas and Elsa Huertas. The loan was secured by a lien on their residence in Olney, Maryland. Mr. and Mrs. Huertas signed a promissory note and a deed of trust, which was recorded in the land records of Montgomery County. The deed of trust included a power-of-sale provision, authorizing a trustee to sell the property in the event of a default under the terms of the promissory note.

The deed of trust authorized Bank of America, “at its option, from time to time,” to replace the named trustee with one or more successor trustees. In January of 2008, Mr. and Mrs. Huertas stopped making monthly payments due under the promissory note. Several months later, a group of substitute trustees (none of whom are parties to this case) initiated an action to foreclose on the property. The docket entries from that case indicate that a bankruptcy petition by Mr. or Mrs. Huertas resulted in a lengthy stay of the foreclosure proceedings.

At the trustees’ request, the court dismissed that case without prejudice in July of 2011. Two years later, an officer of Bank of America executed a deed appointing Carrie Ward and five other persons as substitute trustees under the deed of trust. On April 17, 2014, the substitute trustees initiated a foreclosure action by filing an order to docket in the Circuit Court for Montgomery County. The exhibits to the order to docket included copies of the deed of trust, the promissory note, and the deed appointing the substitute trustees, along with affidavits affirming that those copies were true and accurate.

In affidavits, officers of Bank of America affirmed that Federal National Mortgage Association was the “owner of the debt instrument,” that Bank of America was the “servicer of the loan,” and that the substitute trustees had “the right to foreclose.” B. Counterclaim in the Foreclosure Action On May 7, 2014, Mr. and Mrs. Huertas, representing themselves, filed a pleading titled “Revised Counter Complaint to the Order of Docket Suit.” Although they styled their pleading as a counterclaim, they did not demand damages from any defendant. Rather, they requested various documents and information, including the “original note,” “proof of assignment . . . from the secured parties,” the “legal authorization” of the Bank of America officer who had appointed the substitute trustees, a “validation of loss,” and a “validation of debt.” They requested “an evidentiary hearing or jury trial to address” what they called “these fraudulent matters.” 2 Upon the filing of the counterclaim, the court filed an administrative order informing the parties that it would sever the counterclaim from the foreclosure case and that the counterclaim would proceed under a separate case number. The defendants in that separate case moved for dismissal, and no response was filed. The court granted the motion to dismiss on December 29, 2014.

Mr. and Mrs. Huertas filed no notice of appeal in that case. Meanwhile, in the foreclosure case, the substitute trustees moved to dismiss the counterclaim, arguing that it did not set forth any cognizable cause of action. Alternatively, the substitute trustees treated the counterclaim as a motion to stay the sale of the property and to dismiss the foreclosure action under Md. Rule 14-211. The substitute trustees argued that the pleading did not satisfy the formal requirements of that rule because it was not under oath or supported by affidavit.1 The substitute trustees asked the court to deny Mr. and Mrs. Huertas’s requests for relief without a hearing, arguing that the pleading did not state with particularity the basis of any valid defense in the foreclosure action.

For nearly three years, the court made no ruling regarding the counterclaim in the foreclosure case. During that time, Mrs. Huertas petitioned for bankruptcy relief. The substitute trustees filed a suggestion of bankruptcy, notifying the circuit court that the bankruptcy petition resulted in an automatic stay of the foreclosure case. The bankruptcy court eventually dismissed the bankruptcy case and terminated the automatic stay.

The 1 Mr. and Mrs. Huertas had signed the counterclaim in the presence of a notary, but their statements were not under oath or supported by an affidavit. 3 substitute trustees duly filed a notice informing the circuit court that the bankruptcy court had terminated the stay. Mr. and Mrs. Huertas then moved to strike that notice. On May 8, 2017, the circuit court granted the substitute trustees’ motion to dismiss the counterclaim and denied all relief sought in the counterclaim. One week later, the court denied the motion to strike the notice of termination of the automatic stay.

The combined effect of these rulings allowed the substitute trustees to proceed with the foreclosure sale. C. Mr. Huertas’s Additional Efforts to Prevent the Foreclosure Sale In the months that followed, Mr. Huertas made a series of attempts to prevent the sale of the property.2 First, he moved to dismiss the foreclosure action based on what he called an “element of fraud.” The court denied that motion. Mr. Huertas then moved to “strike, set aside, and vacate” the order denying his motion to dismiss the foreclosure action. The court denied that motion.

Mr. Huertas then made a second motion for reconsideration. Eventually, the substitute trustees sent a notice informing Mr. and Mrs. Huertas that an auction for sale of the property would occur on September 21, 2018. Two days before the scheduled auction, Mr. Huertas moved to “vacate and stop” the notice of impending foreclosure sale. Mr. Huertas also filed a line informing the circuit court that 2 Maryland Rule 1-311(a) requires that “[e]very pleading and paper of a party who is not represented by an attorney shall be signed by the party.” After the dismissal of the counterclaim, Mr. Huertas purported to act on behalf of “Defendants, Pablo Huertas, et al., proceeding pro se.” Frequently, he signed those papers above a line reading “Pablo Huertas, et al., sui juris.” Mrs. Huertas did not sign any of those papers.

Consequently, it appears that Mr. Huertas was litigating on his own behalf. 4 he had filed an “emergency” petition in the Court of Appeals, seeking an injunction to prevent the sale. The Court of Appeals denied the emergency petition on the day that it was filed. Despite Mr. Huertas’s objections, the auction proceeded as scheduled. The substitute trustees sold the property to U.S. Bank National Association.

The substitute trustees filed a report of sale and affidavit affirming that the sale had been fairly made. On October 19, 2018, the circuit court entered an order denying Mr. Huertas’s second motion for reconsideration. In the same order, the court denied “as moot” his other pending motions, including the motion to “vacate and stop” the notice of impending foreclosure sale. Within 30 days of the entry of that order, Mr. Huertas filed his first notice of appeal.

D. Ratification of the Foreclosure Sale After the court informed Mr. Huertas of his right to file exceptions, he made a motion “in vigorous opposition” to ratification of the sale. Among other things, he asserted that the auction was a “sham” and that the substitute trustees had submitted “forged” documents throughout the case. The circuit court treated the motion as his exceptions to the sale and scheduled an exceptions hearing. Shortly before the hearing, Mr. Huertas made another motion, asking the court to “strike” the auction at which the property had been sold.

The court heard arguments from Mr. Huertas and counsel for the substitute trustees at the exceptions hearing on January 7, 2019. At the end of the hearing, the court concluded that Mr. Huertas had not demonstrated any basis for setting aside the 5 foreclosure sale. After the hearing, the circuit court entered an order overruling Mr. Huertas’s exceptions, denying his other pending motions, and ratifying the foreclosure sale. In the same order, the court referred the matter to an auditor to determine the distribution of proceeds from the sale.

Within 30 days after the entry of that order, Mr. Huertas filed his second notice of appeal. The present case arises from his first and second notices of appeal. E. Developments During Pendency of This Appeal Shortly after Mr. Huertas filed his second notice of appeal, the auditor filed a report with the court. Mr. Huertas filed exceptions to that report.

The court overruled his exceptions and ratified the auditor’s report. Mr. Huertas moved to vacate the order ratifying the auditor’s report, and the court denied his motion. No party appealed from the order ratifying the auditor’s report or from the order refusing to vacate that order. Meanwhile, the purchaser, U.S. Bank, moved for a judgment awarding it possession of the property.

Mr. Huertas opposed that motion. After a hearing, the court granted U.S. Bank’s motion. Mr. Huertas then filed a third notice of appeal. He also moved to alter or amend the order awarding possession to U.S. Bank.

The court denied that motion, prompting him to file a fourth notice of appeal. The third and fourth notices of appeal resulted in a separate case in this Court, No. 816, September Term 2019. This Court dismissed that appeal on November 18, 2019, based on Mr. Huertas’s failure to file an appellate brief. 6 MOTION TO DISMISS APPEAL In their appellate brief, the substitute trustees made a motion to dismiss this appeal. The substitute trustees contend that this appeal was premature when it was taken and therefore must be dismissed.

Mr. Huertas submitted no response to that motion. With exceptions not implicated here, a notice of appeal must be filed “within 30 days after entry of the judgment or order from which the appeal is taken.” Md. Rule 8- 202(a) (emphasis added). Ordinarily, this Court is required to dismiss an appeal, on motion or on its own initiative, if the appeal is not allowed by law or if the notice of appeal was not filed within the prescribed time period. Md. Rule 8-602(b).3 This case arises from two separate notices of appeal.

Mr. Huertas filed his first notice of appeal within 30 days of the order entered on October 19, 2018. In that order, the circuit court denied several motions in which he had sought to prevent the sale of the property. He filed his second notice of appeal within 30 days of the order entered on January 7, 2019. In that order, the court overruled his exceptions to the sale and then ratified and confirmed the sale. 3 In Rosales v. State, 463 Md. 552, 568 (2019), the Court “recognize[d] that Maryland Rule 8-202(a) is a claim-processing rule, and not a jurisdictional limitation on this Court.” “Despite this recognition,” however, “Maryland Rule 8-202(a) remains a binding rule on appellants, and this Court will continue to enforce the Rule.” Id.

Under Rosales, it is not “inappropriate for a court to dismiss an untimely appeal,” but “the appropriate grounds for dismissal” are “for a failure to comply with the Maryland Rules,” and not “for lack of jurisdiction.” Id. “Further, as the Rule is not jurisdictional, a reviewing court must examine whether waiver or forfeiture applies to a belated challenge to an untimely appeal.” Id. 7 The substitute trustees argue that both notices of appeal were “too early.” The substitute trustees contend that, if Mr. Huertas wished to challenge the circuit court’s rulings in the foreclosure case, he needed to wait until after the court entered the order ratifying the auditor’s report. The substitute trustees further argue that, because Mr. Huertas failed to appeal from that order, it is now “too late” for him to note an appeal. By statute, “a party may appeal from a final judgment entered in a civil or criminal case by a circuit court.” Md. Code (1974, 2013 Repl. Vol.), § 12-301 of the Courts and Judicial Proceedings Article (“CJP”).

In general, an order is not a final judgment unless it fully adjudicates all claims in the case by and against all parties to the case. See Md. Rule 2-602(a). An interlocutory order, i.e. any order that is not a final judgment, ordinarily is not appealable. See, e.g., Baltimore Home Alliance, LLC v. Geesing, 218 Md. App. 375, 383 (2014).

The purpose of requiring parties to await final judgment before taking an appeal is to avoid “piecemeal appeals,” which may result in disruption and inefficiency. See, e.g., Monarch Acad. Baltimore Campus, Inc. v. Baltimore City Bd. of Sch. Comm’rs, 457 Md. 1, 42-43 (2017).4 The Court of Appeals has explained that, to qualify as a final judgment, an order “must be ‘so final as either to determine and conclude the rights involved or to deny the appellant the means of further prosecuting or defending his or her rights and interests in 4 There are only three exceptions to the final judgment requirement: (1) appeals from interlocutory orders specifically authorized by statute; (2) appeals permitted when a circuit court enters final judgment under Md. Rule 2-602(b); and (3) appeals allowed under the collateral order doctrine.

See, e.g., In re O.P., 470 Md. 225, 250 (2020) (footnote omitted) (citing Salvagno v. Frew, 388 Md. 605, 615 (2005)). 8 the subject matter of the proceeding.’” Metro Maint. Sys. South, Inc. v. Milburn, 442 Md. 289, 299 (2015) (quoting Rohrbeck v. Rohrbeck, 318 Md. 28, 41 (1989)) (emphasis in original); accord Monarch Acad. Baltimore Campus, Inc. v. Baltimore City Bd. of Sch.

Comm’rs, 457 Md. at 43 . In other words, the order “must be a complete adjudication of the matter in controversy, except as to collateral matters, meaning that there is nothing more to be done to effectuate the court’s disposition.” Metro Maint. Sys. South, Inc. v. Milburn, 442 Md. at 299 . “Such an order has been described as one that has the effect of ‘put[ting] the [party] out of court.’” Id.

(quoting McCormick v. St. Francis de Sales Church, 219 Md. 422, 426-27 (1959)). Foreclosure cases do not neatly fit the ordinary model of civil litigation in which the definition of a final judgment is usually applied. A foreclosure action under a power of sale “is ‘intended to be a summary, in rem proceeding[.]’” Wells Fargo Home Mortg., Inc. v. Neal, 398 Md. 705, 726 (2007) (quoting G.E. Capital Mortg. Servs., Inc. v. Levenson, 338 Md. 227, 245 (1995)); see also Pulliam v. Dyck-O’Neal, Inc., 243 Md. App. 134, 143 (2019) (describing foreclosure under power of sale as “a summary in rem proceeding that grants the mortgagee the power to dispose of the property”).

The primary object of the proceeding is to determine the rights of all persons as to their interests in the subject property. See Fairfax Sav., F.S.B. v. Kris Jen Ltd. P’ship, 338 Md. 1, 20 (1995). Foreclosure cases do not begin with the filing of a complaint but with the filing of an “order to docket.” Md. Rule 14-207(a)(1). The order to docket must be accompanied by copies of various documents needed to demonstrate that the plaintiff has the present 9 right to foreclose.

See Md. Rule 14-207(b). In a strict sense, “an order to docket is not a pleading,” because it does not “raise issues between the parties” and need not “contain any factual allegations.” Pacific Mortg. & Inv. Grp., Ltd. v. LaGuerra, 81 Md. App. 28, 39 (1989) (citing Saunders v. Stradley, 25 Md. App. 85, 95 (1975)). The Maryland Rules provide “two avenues by which a borrower may challenge a foreclosure sale.” Hood v. Driscoll, 227 Md. App. 689, 693 (2016). “One is a motion to dismiss the foreclosure action or stay or enjoin a threatened sale; the other is to file exceptions to a sale that already has occurred.” Id. at 693-94 . “Before a foreclosure sale takes place,” a borrower “may file a motion to ‘stay the sale of the property and dismiss the foreclosure action.’” Bates v. Cohn, 417 Md. 309, 318 (2010) (quoting Md. Rule 14-211(a)(1)).

The function of such a motion is “to raise a challenge to the foreclosure action itself[,]” i.e., a challenge “to whether there should be a sale at all.” Hood v. Driscoll, 227 Md. App. at 694 . “The borrower, in other words, may petition the court for injunctive relief, challenging ‘the validity of the lien or . . . the right of the [plaintiffs] to foreclose in the pending action.’” Bates v. Cohn, 417 Md. at 318 -19 (quoting Md. Rule 14-211(a)(3)(B)). A borrower may take an immediate appeal from an order denying a motion to stay the sale of the property and dismiss a foreclosure action, even though the order is not a final judgment. CJP § 12-303, a statutory exception to the final judgment requirement, authorizes appeals from certain types of interlocutory orders entered in a civil case. Among those interlocutory orders is an order “[r]efusing to grant an injunction[.]” CJP § 12-303(3)(iii).

Because a stay is one type of injunction, an order denying a request for a 10 stay of the sale of the property is appealable as an order refusing to grant an injunction. See Fishman v. Murphy ex rel. Estate of Urban, 433 Md. 534 , 540 n.2 (2013); Tower Oaks Blvd., LLC v. Procida, 219 Md. App. 376 , 390 n.1 (2014). Even after a purchaser buys a property at a foreclosure sale, the transaction remains incomplete until the sale is approved by the court.

See Simard v. White, 383 Md. 257, 313 (2004) (citing Merryman v. Bremmer, 250 Md. 1, 8 (1968)). Borrowers may challenge a foreclosure sale by filing exceptions, setting forth any allegations of irregularities in the sale. See Md. Rule 14-305(d)(1). Irregularities that may justify setting aside a sale include deficiencies in the advertisement of sale, conduct that inhibited bidding on the property, or an unconscionable sale price.

Bates v. Cohn, 417 Md. at 321 . When the court finally ratifies a sale, the purchaser acquires complete equitable title to the property and becomes the substantial owner of the property, retroactive to the date of the sale. Simard v. White, 383 Md. at 313 .5 Among other things, the purchaser then becomes entitled to seek possession of the property. See Empire Props., LLC v. Hardy, 386 Md. 628, 650 (2005).

The Court of Appeals has held that “[a]n order ratifying a sale is a judgment” within the meaning of the rule limiting a circuit court’s power to revise an enrolled judgment, “because it is an ‘order of court final in its nature.’” Hughes v. Beltway Homes, Inc., 276 Md. 382, 384 (1975) (citing Hersh v. Allnutt, 252 Md. 513, 519 (1969), 5 Between the time when the purchaser accepts the