Scheve v. McPherson

Wilner, J., delivered the opinion of the Court. Theodore and Geraldine Scheve, appellants, appeal from an Order of the Circuit Court for Prince George’s County setting aside a partial decree foreclosing the right of appellees to redeem certain property purchased by appellants at a tax sale. Before reaching the question of whether the court erred in this action, however, we must consider the sticky question of whether we have jurisdiction to entertain the appeal. A short synopsis of the proceedings below will serve to place the issue in focus.

On June 29, 1978, appellants filed a bill of complaint to foreclose the equity of redemption in twelve parcels of land that had been purchased by them at a tax sale on May 9,1977. One of these parcels, designated in the bill as “A-4,” had belonged to appellees. Attached as an exhibit to the bill was a copy of a notice that had been sent by the Director of Finance to appellees the day of the tax sale notifying them of their right to redeem and warning them that a proceeding to foreclose that right could be brought at any time after May 10, 1978. Copies of the bill of complaint were properly served, either directly or constructively through an order of publication, on all parties in interest.

Pursuant to the requirement in Md. Annot. Code art. 81, § 106, the subpoenas warned the former owners to answer the bill of complaint or redeem the property within 61 days after the first Monday of October, 1978 (the ⁴⁰⁰ 61st day thus being December 2, 1978). The order of publication directed those in interest to appear in court by November 22, 1978, or suffer thereafter a final decree foreclosing all right of redemption. One of the persons served in connection with Parcel A-4 was Robert E. Quinlan, Esq., who received a summons on behalf of Chauncey A. Rice (a former, but since deceased, owner of the property) on July 19, 1978.

Although a number of people interested in other parcels included in the bill of complaint timely and successfully redeemed their properties, no action was taken with respect to Parcel A-4 until November 30,1978 — two days before the 61-day deadline. On that day, Mr. Quinlan called the attorney for appellants, Paul E. Rosenberg, Esq., advising that his clients desired to redeem Parcel A-4, and requesting a statement of the costs involved. See Md. Annot. Code art. 81, § 111.

The next day — December 1, 1978 — Mr. Rosenberg confirmed the conversation by letter to Mr. Quinlan. He advised Quinlan of his costs ($257.92), enclosed a petition to redeem the property, and said: “The taxes and interest must be paid to the Treasurer for Prince George’s County. If you will send me the Petition along with my costs and expenses, I will join in the Petition fixing the costs and sign my receipt. Thereafter I will return it to you so that you may have the taxes paid and receipted.

The Judge will then sign the Order dismissing your part of the suit and redeeming the property.” Quinlan did not respond to this letter, or take any action to implement the redemption. On December 14, 1978, Rosenberg filed with the court an affidavit of service and attempted service, and on December 20, the court signed a partial final decree foreclosing all rights of redemption in four of the parcels (including A-4) and vesting absolute and indefeasible title to them in appellants. On January 19, 1979 — 29 days after the decree was filed with the clerk — appellees filed a petition to set it aside, alleging that (1) they had tendered to the court the taxes due, ⁴⁰¹ (2) they had tendered to Rosenberg his costs of $257.92, (3) the tender was made within 30 days of the decree, 1 and (4) ‘substantial injustice would be done to the Defendants unless the Petition For Redemption filed heretofore were granted by the Court.” It is important to note that the Petition does not allege either fraud or lack of jurisdiction in entering the decree; it is also important to note that the court file fails to show any petition for redemption having been filed by appellees or anyone on their behalf. 2 Notwithstanding these omissions, the court, apparently ex parte, issued an order on January 19, staying the December 20 decree with respect to Parcel A-4, and ordering that the petition be set in for hearing. Such a hearing was held on March 12, 1979, by which time appellees had yet to apply to the court to fix the amount necessary for redemption as required by Md. Annot.

Code art. 81, § 94. The basic facts recounted above were brought out at the hearing. Appellees’ chief claim was that they relied on Rosenberg’s letter as allowing them an unspecified amount of time to complete the redemption. The court accepted that argument, concluding from the bench: “I think Mr. Rosenberg did everything more than reasonably, and from what I have heard there is nothing here done by him that the Court could criticize in any way whatsoever.

Counsel for the defendant has made that clear to me that he is not complaining. Mr. Rosenberg didn’t do anything he shouldn’t have done and did something he should have done. “What troubles me is that the offer to permit redemption is an open-ended offer. It doesn’t indicate that you must redeem on or before a certain ⁴⁰² day. Maybe you can read into this offer a reasonable time.

However, I think that the defendant may have been lulled into a situation where they felt they could come up with these funds just about any time unless further notified by Mr. Rosenberg. “It’s too bad that there was no limit in this letter that, in other words, from Rosenberg to Quinlan, indicating, ‘Yes, you may redeem up until the time I am going to submit a final decree, which will be some time in January.’ “Accordingly, the Court will conclude from the facts, as I have found them to be, that there was, in fact, a constructive fraud. Accordingly, pursuant to Article 81, Section 113, the Court will sign an order, when presented, setting aside this decree as to Lots 35 and 36, Block B, subdivision of Fairmont Heights, Maryland, upon the payment of all costs as itemized in Mr. Rosenberg’s letter of December the 1st, 1978, and in addition thereto a furthér attorney’s fee in the amount of $200.” (Emphasis supplied.) On March 16, 1979, the court made manifest this decision by signing an order setting aside the final partial decree of December 20,1978 (as to Parcel A-4), and requiring appellees to pay costs of $257.92 and an additional counsel fee of $200. On March 23,1979, this appeal was taken from the March 16 order. The record before us does not reveal that any further action was taken by the court, or by anyone else, with respect to the redemption of the property in question.

Jurisdiction Save for the statutory exceptions enumerated in Md. Ann. Code, Courts article, § 12-303, and two others established by the Court of Appeals, 3 this Court’s jurisdiction is limited to hearing appeals “from a final judgment.” Courts article, § 12-301. The initial question, then, is whether the March 16 ⁴⁰³ order setting aside the December 20 decree is a “final judgment” from which an appeal may properly be taken. The test for determining the finality — Le., the appealability — of a judgment is this: a judgment must be so final as to determine and conclude rights involved, or deny the appellant means of further prosecuting or defending his rights and interests in the subject matter of the proceeding. Peat & Co. v. Los Angeles Rams, 284 Md. 86, 91 (1978); United States Fire Ins. v. Schwartz, 280 Md. 518 (1977).

The decree entered on December 20, 1978, certainly met that standard. Under art. 81, §§ 112 and 113, that decree, had it remained in effect, would have finally and conclusively foreclosed appellees’ right of redemption and vested “absolute and indefeasible title” to the property in appellants. But what was the effect of the March order setting aside that decree? Ordinarily, an order setting aside an unenrolled decree — usually issued pursuant to Maryland Rule 625 a — does not finally adjudicate anything, and is therefore not appealable.

See Owen v. Freeman, 279 Md. 241, 249 (1977); Madison v. State, 205 Md. 425, 431 (1954); but compare First Federated Com. Tr. v. Comm’r, 272 Md. 329, 333 , concerning the appealability of an order striking an enrolled decree. It merely returns the case to the pre-decree status where all parties are again in more or less even balance and able to prosecute or defend their respective claims. Indeed, striking or setting aside an unenrolled decree is usually the logical antithesis of finality as defined by the Court of Appeals.

But tax sale foreclosure proceedings are unique in many ways. Art. 81, § 92, states that the pre-tax sale owner may redeem the property “at any time until the right of redemption has been finally foreclosed under the provisions of this subtitle....” Section 100 repeats that right: “The right to redeem shall, nevertheless, exist and continue until finally barred by decree of the court of equity in which the foreclosure proceeding is filed....” These statutes mean what they say. Heill v. Staniewski, 265 Md. 722 (1972); Brashears v. Collison, 207 Md. 339 (1955). The purpose and effect of striking the December decree, therefore, was to ⁴⁰⁴ reinstate appellees’ right to redeem the property, a right that had been terminated by the stricken decree.

The March order clearly represented a determination by the court that appellees were entitled to redeem the property, that that right should not be foreclosed, and that, if appellees followed the statutory procedure for redemption, they would be entitled to own and possess the property to the exclusion of appellants. Except for fixing the amount necessary for redemption pursuant to art. 81, § 94 — about which the parties tell us there is no dispute — there was nothing further for the court to do, and no further opportunity for appellants to protest or to prosecute their claim. See Cahn v. Prince George’s Homes, 38 Md. App. 280, 283 (1977), aff’d 283 Md. 76 (1978). Unlike the ordinary situation, a further affirmative decree (and therefore a further petition to do anything but establish the amount necessary for redemption) was unnecessary and indeed unaüthorized.

The mere striking of the December decree, reviving a right of redemption that could then be exercised merely by paying the amounts fixed by the court, was the one and final act that adjudicated the rights of the parties and, save for appellate review, terminated the justiciable controversy among them. 4 It therefore constituted a final and appealable order. 5 Constructive Fraud The court’s finding of constructive fraud was based entirely upon its perception of Mr. Rosenberg’s actions of November 30 and December 1 as an “open-ended offer” which “lulled” appellees into thinking that they could “come up with ⁴⁰⁵ these funds just about any time unless further notified by Mr. Rosenberg.” No other act, omission, or circumstance was mentioned by the court, or was apparent from the record, in support of its finding. Constructive, as opposed to actual, fraud does, of course, suffice under § 118 to reopen an otherwise final decree of foreclosure. The statute itself makes this clear. See also Jannenga v. Johnson, 243 Md. 1 (1966); Arnold v. Carafides, 282 Md. 375 (1978); Brooks v. McMillan, 42 Md. App. 270 (1979).

The question, in each case, is whether the act or omission complained about amounts, in law and in fact, to constructive fraud. Most, if not all, of the cases in which such fraud has been found have involved the failure to give proper and legally required notice of the proceedings, or of some critical stage of the proceedings, to the former owner. Where that circumstance is found and as a result of it the former owner has been prejudiced in some way, the courts have set aside the foreclosure decree whether or not the failure to give the notice was deliberate. This was the case in Jannenga, Arnold, and Brooks, supra.

See also Smith v. Watner, 256 Md. 400 (1970); Kilkenny v. Mongelli, 35 Md. App. 187 (1977). In none of these cases, however, nor in any other that we have found, have the Maryland courts attempted to define in more generic terms what constitutes constructive fraud. They have said only that it need not be vicious and deliberate (Jannenga, 243 Md. at 5 ), and that it rests more upon presumption and less upon furtive intent (Whitehurst v. Barnett, 161 Md. 444 (1932), also Jannenga at p. 5 ). To the extent that it may arise from the failure to do that which ought to be done in the course of a judicial proceeding, it seems to be somewhat akin to, though clearly not synonymous with, the traditional concept of an “irregularity”; namely, “the doing or not doing of that, in the conduct of a suit at law, which, conformable with the practice of the court, ought or ought not to be done.” Berwyn Fuel & Feed Co. v. Kolb, 249 Md. 475 (1968); Calvert Fire Ins.

Co. v. Reick, 39 Md. App. 620 (1978). ⁴⁰⁶ Perhaps the most acceptable definition of “constructive fraud” is that stated in 37 C.J.S. Fraud, § 2c (pp. 211-212): “Constructive fraud is a breach of legal or equitable duty which, irrespective of the moral guilt of the fraud feasor, the law declares fraudulent because of its tendency to deceive others, to violate public or private confidence, or to injure public interests. Neither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud.” See also 37 Am. Jur. 2d, Fraud and Deceit, § 4, p. 23. A key element in this definition is the breach of a legal or equitable duty.

In each instance in which the Court of Appeals or this Court has ordered or affirmed the reopening of a decree for constructive fraud the critical fact relied upon was the presence of a legal duty and the breach of it. Indeed, in Jannenga , the Court explained, 243 Md. at 5 : “A failure to provide [the required] notice or to make a good faith effort to do so may not amount to actual fraud in that one may not have been compelled by malicious motives to deceive the defendant, but it does, in any event, amount to constructive fraud since Jannenga, regardless of moral guilt or intent to deceive, failed to perform a legal duty.” (Emphasis supplied.) Of equivalent significance is the fact that, in nearly each instance in which constructive fraud was not found, the Court noted the absence of any breach of a legal duty. See, for example, Sanchez v. James, 209 Md. 266 (1956), and the basis upon which that case was distinguished in Jannenga, 243 Md. at 6, 7 ; also Garris v. Dickey, 22 Md. App. 618 (1974), cert. den., 273 Md. 720 (1974). Compare Walter E. Heller & Co. v. Kocher, 262 Md. 471 (1971).

It is not by accident that constructive fraud has been so limited. Constructive fraud is nonetheless fraud, a most serious charge. It is therefore “not lightly found by the courts” (Garris v. Dickey, supra, 22 Md. App. at 630 ) and ⁴⁰⁷ requires clear and convincing proof to establish. Loyola Fed. S. & L. v. Trenchcraft, 17 Md. App. 646 (1973).

Even noncompliance with a legal duty need not necessarily amount to constructive fraud. Walter E. Heller & Co. v. Kocher, supra. It is in this context that the court’s finding must be considered. There is no charge, or suggestion, that Mr. Rosenberg failed to carry out any legal duty or responsibility in connection with the foreclosure proceeding.

Indeed, as noted, the Court found as a fact that he did everything he was supposed to do and did not do anything he was not supposed to do. Mr. Quinlan, an attorney, had received the notice sent to him by Mr. Rosenberg and therefore was aware not only of the proceeding but of the deadline for responding to it. At argument on his petition to set aside the decree, Quinlan characterized his November 30 conversation with Rosenberg as follows: “On November 30th I spoke on the telephone to Mr. Rosenberg and he said, ‘You want to redeem?’ and I said, ‘Yes.’ He said, ‘Okay, I’ll send you a letter which sets forth the costs and breakdown of my costs and a petition which you ought to file.’ And I said, ‘Fine.’ ” The letter and enclosures followed the next day. As the trial court observed, no particular deadline was specified for Quinlan to respond, either in the conversation or the letter; and, had Rosenberg rushed in to court the next day, as he otherwise had a right to do, an element of unfairness and inequity would certainly have been present.

But he waited nearly three weeks before seeking a decree. As Mr. Rosenberg explained to the court: “It seems to me if there was some difficulty in raising the cash in the face of the subpoena that they had an obligation to come to me and say, ‘Hey, look, I’m short, I need another day, another week,’ and twenty days went by I heard nothing and got nothing. The obligation is upon them to come ⁴⁰⁸ forward with the cash and petition to redeem, or at least to send me something saying, ‘I’m working on it.’ “I have an obligation to my clients. The statute provides once the time runs I can proceed.

And to find a constructive fraud on that means not only do I have to serve him and send him a letter, I apparently have to knock on his door and say, The time is up.’ And I don’t think the court rules require me to go that far. Under the circumstances he has not alleged sufficient reason to find a constructive fraud to set it aside.” We agree entirely with this approach. Mr. Rosenberg was certainly under no obligation to allow any extension of time, much less to prepare the pleadings thought necessary to effectuate a redemption. He had every right to expect that if appellees truly desired to redeem at that late date, they would do so expeditiously.

At best, his obligation was to wait but a reasonable time. In light of the statutory mandate (§ 112) that “[a]t the expiration of the time limited in the order of publication, and in the subpoena, the court shall pass its decree in the proceedings, in accordance with the general equity jurisdiction and practice of said court...,” of which both Rosenberg and Quinlan were presumably aware, it was inappropriate to the point of being clearly erroneous for the court to consider Rosenberg’s offer as an “open ended” one. Mr. Quinlan had no right to assume that Mr. Rosenberg would wait forever, to his clients’ detriment, while appellees made up their mind whether they desired to redeem their property. Three weeks was long enough in the absence of any intervening communication from or on behalf of appellees.

Accordingly, we believe that the court erred as a matter of law in finding that there was constructive fraud. This, then, would preclude any relief to appellees under § 113. General Revisory Power We then are faced with the somewhat hazardous question of determining whether the court could have granted the ⁴⁰⁹ same relief under its general revisory power, notwithstanding the very limited discretion permitted under § 113. In Perryman v. Suburban Dev.

Corp., 33 Md. App. 589 (1976), this Court concluded that the broad (and discretionary) revisory power of a court over its judgments and decrees, provided for in Maryland Rule 625a, was not applicable in tax sale foreclosure proceedings. Pointing to the clear legislative mandate contained in art. 81, § 113, that “[n]o application shall ... be entertained to reopen any final decree rendered under the provisions of this subtitle except on the ground of lack of jurisdiction or fraud in the conduct of the proceedings to foreclose...,” we concluded