Redland Genstar, Inc. v. Mahase

JAMES R. EYLER, J. This case arises from the aftermath and interplay of three prior proceedings in the Circuit Court for Montgomery Coun ⁷⁴ ty, all involving the same real property, located in Olney, Maryland (the Property). Specifically, the Property was subject to (1) a foreclosure proceeding; (2) a mechanic’s lien action; and (3) a complaint seeking to quiet title. This appeal stems from the quiet title action, whereby the present owners of the Property, Hardat and Timini Mahase, Margarita and Anri Petrosyan, and Sam Kanterman and Nataly Stolper, appellees, were granted summary judgment, quieting title to the Property in their favor. 1 Redland Genstar, Inc., appellant, is an unpaid supplier of goods and materials to the Property, which obtained a mechanic’s lien against the Property after the foreclosure sale, but prior to the sale of the Property to appellees. 2 Appellant claims that the circuit court erred in granting summary judgment in favor of appellees because, as a mechanic’s lien claimant, it held a subordinate interest in the Property and was entitled to notice of the foreclosure sale. Because no such notice was given, the foreclosure sale did not properly pass good title in the Property to appellees.

Perceiving no reversible error, we shall affirm the judgment of the circuit court. Factual Background The Foreclosure Sale On March 18,1998, a foreclosure action was filed against the Property, which was then owned by Brimar Development, Inc. ⁷⁵ (Brimar), in the Circuit Court for Montgomery County. The Property was sold at a foreclosure sale on November 4, 1998. 3 Pursuant to an order dated February 10, 1999, Design Tech Builders, Inc. (DTB) became the substituted purchaser of the Property sold at foreclosure. This sale received final ratification by the court on May 24, 1999, and title was vested in DTB, pursuant to a trustee’s deed recorded on April 14, 1999.

Thereafter, DTB transferred and sold lots to each of the appellees. 4 It is undisputed that, prior to the sale, appellant was given no actual notice of the foreclosure proceedings. The Mechanic’s Lien Following the foreclosure filing, but prior to the foreclosure sale, on June 15, 1998, appellant filed a petition in the Circuit Court for Montgomery County, seeking to establish a mechanic’s lien upon the Property. 5 A show cause hearing for the interlocutory lien was scheduled for August 5, 1998. Because the parties in interest failed to show up in court at the required date, however, no lien was entered. On May 12, 1999, appellant filed a motion for final lien in the circuit court.

On May 24, 1999, the same day as the ⁷⁶ foreclosure sale ratification, an order granting the final mechanic’s lien was signed, directing the sale of the property. This order was docketed on June 4,1999. 6 Pursuant to the final mechanic’s lien order, a sale of the Property was scheduled for March 1, 2001. This sale was halted when appellant learned of the foreclosure and eventual sale to appellees. 7 The parties agreed that a quiet title action was the best way to resolve the Property’s ownership issues. The Quiet Title Action On June 6, 2002, appellees filed suit in the Circuit Court for Montgomery County, seeking to quiet title in the Property and seeking a declaratory judgment and injunctive relief.

The quiet title suit was resolved on cross motions for summary judgment. On October 10, 2002, the court denied appellants’ motion for summary judgment without a hearing. On January 8, 2003, a hearing was held on appellees’ cross-motion for summary judgment. The court held that when the property was conveyed at the foreclosure sale on November 4,1998, “there was no established docketed subordinate interest that prevented th[e] ratification of the foreclosure which had taken place.” Moreover, the court found that the statutory and case law surrounding this case did not require that appellant receive notice of the foreclosure sale.

Thus, on January 31, 2003, the court granted appellees’ motion and declared that appellant’s mechanic’s lien was null and void with respect to the Property. This order was entered February 5, 2003. Thereafter, appellant filed a timely appeal to this Court. ⁷⁷ Contentions of the Parties Appellant claims that the circuit court erred in granting appellees’ summary judgment motion, holding that appellant was not a holder of a subordinate interest or a person otherwise entitled to notice of the foreclosure sale. Appellant argues that, absent such notice, good title did not pass to appellees through the foreclosure sale.

Appellant claims that even though the mechanic’s lien was not in existence at the time of sale, appellant still maintained a subordinate interest in the property and, therefore, had a right to notice of the foreclosure. As such, appellant requests that the judgment of the circuit court be reversed. In response, appellees argue that the circuit court correctly held that appellant was not a subordinate lien holder at the time of the foreclosure sale and, therefore, was not entitled to notice of the sale. Alternatively, appellees claim that appellant is time-barred from claiming it was entitled to notice because the statute of limitations requires that such a claim be made within three years of the date of the order ratifying the foreclosure sale, in this case, May 24,1999.

We decline to address appellees’ limitations argument because we find that the circuit court correctly held that appellant was not a subordinate interest holder at the time of the foreclosure sale and, therefore, was not entitled to notice of the sale. Discussion Appellant asserts that it was entitled to notice of the foreclosure sale because it held a subordinate interest in the Property. Because no such notice was ever received, appellant claims that the foreclosure sale failed to properly pass title to appellees, and there should be a resale of the Property under the foreclosure instruments. “[A]n appellate court’s review of the grant of summary judgment involves the determination whether a dispute of material fact exists, and ‘whether the trial court was legally ⁷⁸ correct.’ ” Underwood-Gary v. Mathews, 366 Md. 660, 685 , 785 A.2d 708 (2001) (citations omitted); see also Md. Rule 2-501. Maryland Rule 14-206(b), in pertinent part, provides the following regarding notice prior to foreclosure sale: (2) By Certified and First Class Mail.

(A) Before making a sale of the property, the person authorized to make the sale shall send notice of the time, place and terms of the sale by certified mail and by first class mail to the last know address of (i) the debtor, (ii) the record owner of the property, and (iii) the holder of any subordinate interest in the property subject to the lien. (B) The notice of the sale shall be sent not more than 30 days and not less than ten days before the date of the sale to all such persons whose identity and address are actually known to the person authorized to make the sale or are reasonably ascertainable from documents recorded, indexed, and available for public inspection 30 days before the date of sale. (3) Other notice. If the person authorized to make the sale receives actual notice at any time before the sale is held that there is a person holding a subordinate interest in the property and if the interest holder’s identity and address are reasonably ascertainable, the person authorized to make the sale shall give notice of the time, place, and terms of the sale to the interest holder as promptly as reasonably practicable in any manner, including by telephone or electronic transmission, that is reasonably calculated to apprise the interest holder of the sale.

Similarly, Md.Code, (1972, 2002 Repl.Vol.), § 7-105(c)(2) of the Real Property Article provides that “[t]he person authorized to make a sale in an action to foreclose a mortgage or deed of trust shall give written notice of any proposed foreclosure sale to the holder of any subordinate mortgage, deed of trust, or other subordinate interest, including a judgment____” 8 ⁷⁹ Appellant argues that when it filed a mechanic’s lien action on June 15, 1998, it was thereafter entitled to notice of any foreclosure action as a subordinate interest holder, under both the Maryland Rules and the Maryland Code. Simply filing a mechanic’s lien action, however, did not create a subordinate interest in the Property. A mechanic’s lien does not come into effect “until the passage