Pacific Mortgage and Investment Group, Ltd. v. Horn

³¹⁶ CATHELL, Judge. Appellants, Pacific Mortgage and Investment Group, Ltd. (Pacific) and Barclay National Mortgage Group (Barclay), appeal from an order of the Circuit Court for Baltimore City denying Barclay’s motion to vacate a default judgment and Pacific’s motion for summary judgment and granting appellee’s, Annie F. Horn’s, motion for summary judgment. Appellants raise the following questions: 1. Was this action barred by the existence of an open bankruptcy case, on a petition filed by Plaintiff, upon her subsequent pursuit of this action in her own behalf? 2.

Was this loan a contract under seal, thus permitting the twelve year statute of limitations for a specialties to apply to this action? 3. Was this action otherwise barred by limitations as to any filing by the bankruptcy trustee or as to the three year limitation for actions on contract? 4. Was venue in this matter proper in Baltimore City? 5.. Was the order of default properly issued against Barclay National Mortgage Group and should that order of default have been vacated? 6.

Was this loan within the scope of Maryland’s Small Loan Law or was it exclusively governed by statutory provisions for first mortgage loans, which allow any rate of interest? 7. Was Plaintiff properly granted summary judgment? 8. Were damages properly assessed against Appellants? FACTS Appellee and her now deceased husband entered into a mortgage loan with Pacific on August 27, 1986.

The word “seal” was printed next to each of the Horns’ signatures. The $6,000 loan was secured by a first mortgage lien on the Horns’ house. Pacific charged a $750 discount fee and $536 for an appraisal, credit report, title search and recording fees. The loan was to be paid off in fifteen years with 180 equal monthly ³¹⁷ payments.

At some later point, Pacific assigned the loan to Barclay. Several months after executing the loan, appellee’s husband died. Shortly thereafter appellee defaulted on the loan. Pacific then began foreclosure proceedings.

In response to this, appellee filed Chapter 13 bankruptcy petition. In 1991, while her bankruptcy case was still open, appellee filed suit against Pacific and Barclay in the Circuit Court for Baltimore City. Appellee listed the lawsuit as an asset in her bankruptcy schedules. The bankruptcy case was closed on November 22, 1991.

Appellee has paid all the other creditors in full. Appellee failed to serve Barclay with her first complaint but did serve Pacific. Pacific filed a motion to dismiss for lack of subject matter jurisdiction and improper venue, claiming venue was proper only in Baltimore County. Pacific’s motion to dismiss was denied.

Appellee then amended her complaint two times. Pacific, after filing another motion to dismiss, which the court again denied, filed its first answer in this action to the second amended complaint and raised several affirmative defenses, including limitations, laches, and waiver. On September 22, 1992, appellee filed a third amended complaint. Appellee served Barclay for the first time with this third amended complaint.

Both Pacific and Barclay joined in a motion to dismiss for lack of subject matter jurisdiction and for improper venue. Barclay also filed a motion to dismiss for failure to state a claim against it. Appellee filed a notice of deposition, to take appellants’ depositions on December 1, 1992. Appellee’s attorney spoke with appellants’ attorney the day before the scheduled depositions and appellants’ attorney stated that appellants refused to be deposed until their motions to dismiss were heard.

On December 11, 1992, a hearing on the motions to dismiss was held. On December 15, 1992, appellee filed a motion for sanctions requesting a default judgment against both Barclay and Pacific for failure to comply with discovery. On December 16, 1992, the motion to dismiss for lack of subject matter jurisdiction and for improper venue was denied, but Barclay’s ³¹⁸ motion to dismiss for failure to state a claim was granted subject to appellee amending her complaint by December 21, 1992. On December 17, 1992, appellee deposed a representative of Pacific.

On December 21, 1992, appellee filed her fourth amended complaint. Barclay answered this complaint on January 6, 1993. On January 11, 1993, the court granted appellee’s motion for sanctions and issued an order of default against Barclay. Barclay filed a motion to vacate the order of default.

On March 3, 1993, the court held a hearing on the motion to vacate and denied it. As of March 3, 1993, a representative of Barclay had yet to attend a deposition, Barclay had yet to agree to send a representative to be deposed, and Barclay had not sought a protective order. In the meantime, appellee and appellants had filed motions for summary judgment. These motions were also heard on March 3, 1993, along with the motion to vacate the order of default.

After the court denied Barclay’s motion to vacate, the parties agreed that if Barclay was currently holding the note there was no need to address the motions for summary judgment. The only issue that would need to be addressed was the amount of damages for which Barclay was liable. Barclay and Pacific were represented by the same attorney, and the court asked the attorney whether Barclay or Pacific held the note. The attorney indicated the note was traded back and forth between the parties and he was not sure which party was then holding the note.

Because appellants would not state whether Barclay was holding the note the court heard appellee’s motion for summary judgment against Pacific and Pacific’s motion for summary judgment against appellee. Because of the order of default against Barclay, the court refused to hear its motion for summary judgment. Undaunted by the order of default against Barclay and the court’s frequent admonishments that Barclay’s liability had been determined, appellants’ attorney also presented Barclay’s motion for summary judgment. The court granted appellee’s motion for summary judgment, holding that appellants had violated Md.Code (1990 Repl.Vol.) § 12-108 of the Commercial Law Article by charging points; ³¹⁹ the terms of the loan were governed by the Maryland Consumer Loan Law (MCLL) in Title 12, Subtitle 3 of the Commercial Law Article; appellants had violated §§ 12—306(d) and 12-313(a)(l) of the MCLL by charging points; appellants had violated §§ 12-306(e)(3) and 12-313(a)(l) of the MCLL by extending the loan over 180 months where the statutory maximum length permitted for the loan was 72 months and 15 days; appellee had standing to bring the suit because the bankruptcy trustee abandoned the case; the loan was a document under seal so the 12 year statute of limitations applied to the case; and appellants acted willfully in violating the MCLL.

LEGAL ANALYSIS 1. Appellants contend appellee did not have standing to bring this suit because the suit was filed when appellee’s bankruptcy was open. While the bankruptcy was open, the estate was the owner of the suit. 11 U.S.C. § 541 (a)(1) provides that, an “estate is comprised of ... all legal or equitable interests of the debtor in property....” The bankruptcy trustee is the proper party to bring an action for injury to a person’s property while a bankruptcy case is open; the debtor does not have standing to bring a claim. Hancock Bank v. Jefferson, 73 B.R. 183, 185 (S.D.Miss.1986); In re Snyder, 61 B.R. 268, 270 (Bankr.S.D.Ohio 1986); Rounds v. Community National Bank, 454 F.Supp. 883, 889 (S.D.Ill.1978); Moore v. Slonim, 426 F.Supp. 524, 526 (D.Conn), aff'd 562 F.2d 38 (2d Cir.1977).

Appellee contends, however, that the bankruptcy trustee abandoned this suit when the bankruptcy case closed, subsequent to the filing of this suit. 11 U.S.C. § 554 , “Abandonment of property of the estate,” provides in part: (a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any ³²⁰ property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate, (c) Unless the court orders otherwise, any property scheduled under section 521(a)(1) of this title, not otherwise administered at the time of the closing of a case is abandoned to the debtor.... “Abandonment requires either a court order after a notice and a hearing or a failure to administer scheduled assets and a closing of the case.” Behrens v. Woodhaven Ass’n, 87 B.R. 971 , 973 n. 1 (Bankr.N.D.Ill.1988) (citations omitted). Appellants cite In re Schmid, 54 B.R. 78 (Bankr.D.Or. 1985) and argue that in order for there to be an abandonment of property the bankruptcy trustee must exhibit some outward manifestation of his or her intent to abandon. We disagree.

The Schmid court stated, “For property to be abandoned, the court has to make a formal determination of abandonment, or, at the least, the property deemed abandoned has to be so explicitly identified in the schedules as to be able to impute an intent to abandon.” Id. at 80 . In Schmid , the court found that the debtor’s description in the schedules of his cause of action was ambiguous and that he failed to “properly ‘schedule’ the asset.” Id. at 79 . Upon review of appellee’s description and listing of this case in her bankruptcy schedule, we find that it was properly scheduled. Indeed, appellants do not argue to the contrary.

When property is “scheduled as an asset of the estate for the benefit of creditors,” the trustee, creditors and representatives of the estate [are] put on notice of its existence and the fact it [is] a claim in favor of the estate. “[W]here the trustee has knowledge that is sufficient to put him upon diligent inquiry as to the subject asset, the abandonment is held to have been knowingly made and hence is irrevocable.” Starrett v. Starrett, 225 N.J.Super. 150 , 541 A.2d 1119, 1123 (A.D.1988) (citation omitted). Also, it is of no small significance that appellee paid her creditors in full. The trustee has a duty to protect the creditors. Since the creditors were paid in full, there would ³²¹ be no purpose for the trustee to assert and maintain control over this suit.

We thus hold that the bankruptcy trustee did abandon this suit when the bankruptcy case was closed. We next address whether appellee may still maintain the suit despite the fact that, initially, she was not the proper party to bring the suit. This issue was addressed in Barletta v. Tedeschi, 121 B.R. 669 (N.D.N.Y.1990). That court stated that it did not agree that plaintiffs premature filing of his complaint is a bar to his continuation of his action now.

When the trustee abandons estate property, “ ‘the property stands as if no bankruptcy had been filed and the debtor enjoys the same claim to it as he held previous to the filing of the bankruptcy.’ ” ... The question remains whether this reversion of title permits the plaintiff here to maintain his action when he did not have standing to sue at the time he filed his complaint____ The court believes that it does. Id. at 673-74 . Therefore, we hold that appellee has standing to bring this suit. 2. & 3.

Appellants contend that the note executed by Pacific and the Horns was not under seal and that a three-year statute of limitations applies. We disagree. Md.Code (1989 Repl.Vol.) § 5-102(a)(5) of the Courts and Judicial Proceedings Article provides that the statute of limitations for contracts under seal is twelve years. The crux of appellants’ argument is that the word “seal” was placed on a pre-printed form by Pacific, that Pacific produced uncontradicted evidence showing that it did not intend the loan agreement to be under seal and that appellee has produced no evidence showing that she intended that the loan agreement be under seal. 1 ³²² The Court of Appeals in Warfield v. Baltimore Gas & Electric Co., 307 Md. 142, 143 , 512 A.2d 1044 (1986) stated: We shall hold in this case that the inclusion of the word “seal” in a pre-printed form executed by an individual is sufficient to make the instrument one under seal.

The Court noted that the fact that one party placed the word “seal” on the instrument did not make it any less the seal of the other party whose signature appeared next to the word “seal.” Id. The Court did indicate that if there was evidence indicating that the party placing his or her signature next to a seal did not intend for the instrument to be under seal, then the instrument would not be under seal. Id. at 145 , 512 A.2d 1044 . Appellants would have us require appellee to produce evidence that by placing her signature next to the seal she intended the loan agreement to be under seal.

That is not the law in Maryland. Since there is no evidence indicating appellee did not intend that the instrument be under seal, we hold that the twelve year statute of limitations applies and that this case was timely filed. 4. Appellants contend that the circuit court erred in failing to dismiss the claim for improper venue. They claim that the only proper forum in which they may be sued is Baltimore County.

We disagree.. Md.Code (1989 Repl.Vol.) § 6-201(a) of the Courts & Judicial Proceedings Article provides that “a civil action shall be brought in a county where the defendant resides, carries on a regular business, is employed, or habitually engages in a vocation.” Appellee argued that appellants carried on a regular business in Baltimore City. “Under Maryland law, improper venue is a defense with the duty of averment and the burden of proof falling on the defendant.” Odenton Development Co. v. Lamy, 320 Md. 33, 39 , 575 A.2d 1235 (1990). To meet the burden of proving improper venue, the defendant must do more than merely raise “a bare allegation that venue was improper, unsupported by affidavit or ³²³ evidence.” Id. The defense of improper venue is a mandatory defense and must be raised by a motion to dismiss before the answer is filed.

Md.Rule 2-322(a). If the defense is not raised before the answer is filed, it is waived. Id. Pacific moved to dismiss for improper venue after appellee’s first complaint and second amended complaint.

(Barclay was not served with either of these complaints.) Neither of these motions to dismiss were supported by an affidavit or other evidence. The court denied both motions, and Pacific did not file a motion to reconsider. Appellee filed a third amended complaint. The third amended complaint raises the same claims as, and is virtually identical to, the first complaint. 2 In response to appellee’s third amended complaint (Barclay was served for the first time with this complaint), Pacific and Barclay joined in a motion to dismiss for improper venue.

Pacific, however, was precluded from raising the venue issue again. A party must raise the defense of improper venue before he or she files an answer. Md.Rule 2-322(a). Pacific had already filed an answer to appellee’s second amended complaint after its motion to dismiss for improper venue was denied.

It makes no difference that appellee filed amended complaints. Appellee’s amended complaints relate back to her original complaint because all the complaints stated the same cause of action. Crowe v. Houseworth, 272 Md. 481, 485-86 , 325 A.2d 592 (1974). Also, Pacific was not required to file a new answer to appellee’s amended complaints.

Md.Rule 2-341(a). Once Pacific filed its initial answer, it was precluded from raising the defense of improper venue in response to amended complaints that did not raise any new claims. The motion to dismiss, filed in response to appellee’s third amended complaint, did include an affidavit from Pacific claiming that it resided and had its only place of business in Baltimore County and that it did not carry on a regular business in Baltimore City. At this point, however, the court ³²⁴ had already determined that Baltimore City was a proper forum with respect to Pacific.

Barclay did not include an affidavit or any other evidence proving venue was improper in Baltimore City. Thus, Barclay failed to meet its burden to prove venue was improper in Baltimore City. In addition, appellee produced evidence that venue was proper in Baltimore City. Venue is proper in a county where the defendant “carries on a regular business.” Md. Code (1989 Repl.Vol.) § 6-201(a) of the Courts & Judicial Proceedings Article.

It is not necessary for a defendant to maintain an office or have his or her principal place of business in a certain county in order for the defendant to carry on a regular business in that county. Dodge Park, Inc. v. Welsh, 237 Md. 570, 572-73, 207 A.2d 503 (1965). Appellee submitted an affidavit from the president of Barclay, Morris Helman, in which he admitted that Barclay held the mortgages on 18 separate parcels of property in Baltimore City. Mr. Helman also stated in this affidavit that Barclay bought all of those mortgages from Pacific.

Appellants’ attorney stated it was a normal business practice for Barclay to buy mortgages from Pacific. A Maryland resident that regularly provides