Sleph v. Radtke

KARWACKI, Judge. Gerald Sleph and Beverly Sleph, his wife, appeal from a deficiency decree entered against them by the Circuit Court for Baltimore City in favor of Frederick J. Radtke, Jr., the appellee. They pose these questions for our review: 1. Did the lower court err when it found that there was sufficient contact with the State of Maryland to establish personal jurisdiction over Gerald and Beverly Sleph under Maryland Courts and Judicial Proceedings Code Annotated § 6-103(b)(l)? ⁴²¹ 2.

Did the lower court err when it found that there had been sufficient notice of foreclosure proceedings to Gerald and Beverly Sleph as required by Maryland Rule W74 a.2.(c)? The Facts The appellants are, and have been during all times material to this controversy, residents of Annandale, Virginia. In June of 1981 they were persuaded by Norris Ashe, trading as Norris Properties, a Washington, D.C. real estate broker, to invest in five commercial properties known as 1404-06-08-10-12 E. Lombard Street in Baltimore City. These storefront properties were in need of extensive restoration before they could be offered for rent.

The appellants agreed to join with Ashe, his wife, and two of his associates, Richie Gaylen and Jackie Z. Woolf, in the purchase of the properties from appellee for an aggregate price of $43,000. The purchasers agreed among themselves that appellants would invest $13,000 in cash in the enterprise and that Mr. and Mrs. Ashe, Gaylen, and Woolf would be solely responsible for satisfying the payments on the mortgage securing the balance of the purchase price, in paying the real estate taxes on the properties and bearing the necessary cost of restoring the properties to a condition where they would be income producing. Under the terms of this oral agreement, appellants received a 79% interest in the five properties. Mr. and Mrs. Ashe were given a 7% interest.

Mr. Gaylen and Mr. Woolf each received a 7% share. Pursuant to this arrangement, appellants drew two checks representing their cash investment. Their $2,000.00 check accompanied the contract for the purchase of the properties, which was signed at their Virginia home. It was made payable to Kline Brothers, a listing broker for the sale of the properties.

The second check in the amount of $11,000.00 was made payable to the attorney who conducted the settlement on the sale. Appellants did not attend that settlement but delivered their $11,000 check to Norris Properties. ⁴²² Settlement was held in July of 1981. Deeds conveying the five properties to appellants and their fellow investors in the interests previously recited were executed by appellee. A purchase money mortgage to appellee in the amount of $33,000.00 had been executed by the appellants at their Virginia home prior to settlement.

Mr. and Mrs. Ashe, Mr. Gaylen and Mr. Woolf also executed the mortgage as co-mortgagors. The mortgagors covenanted to repay the principal amount of the mortgage debt together with interest in monthly installments over the next eight years. The mortgagors also agreed that upon any default in the required payments, the entire debt would become due and payable to appellee. Thereafter, appellants visited the properties sporadically and apparently were satisfied that the agreement which they had entered with their co-venturers was being performed.

Appellants never inquired as to whether the required mortgage payments were being made, but relied on the promise of their co-investors to do so. On one occasion Mrs. Sleph received a complaint from the City of Baltimore concerning a housing code violation at the properties. She referred that matter to Mr. Ashe, and it was resolved by him. In “early Fall” of 1984, Mrs. Sleph spoke with Norris Ashe by telephone.

She testified: I spoke with Norris Ashe on the phone, and asked—I finally got him on the phone, and I asked him what was happening. And he said that. Lombard Street had gone to foreclosure. And I said, “What happened?” And he started—he said, “I don’t know anything about it.

It was Jackie Wolf.” And I said, “Well, what does that mean? Where does that leave me?” And I said, “Where’s Jackie —you know, what’s going on?” And he said, “Well, Jackie Wolf’s not associated with me anymore. I don’t want to hear his name, and I don’t have anything to do with him anymore.” And I said, “But it was your company that—you know, where are we now? We’ve lost all this money that we’ve put into the money.” I said, ⁴²³ “What did it sell for?” And he said, “It sold for 31,000.” And I said, “What about the other two, because the mortgage is for 33?” And he said to me, “Well, they wanted the property back and they got it, and so why would they bother you for that, you know?” And that was the only time I ever heard the word “foreclosure,” in that conversation.

The foreclosure proceedings of which the appellants were apparently unaware were instituted by appellee on October 28, 1983. Appellee’s petition for foreclosure of the $33,-000.00 mortgage executed by appellants and their co-investors alleged a default in that mortgage. On the same day appellee filed a statement of mortgage debt which claimed a principal balance on the mortgage debt of $32,695.02 with interest from May 1, 1983. On October 31, 1983, the court ordered a foreclosure sale.

On April 2, 1984, Donald P. Mazor, appellee’s attorney and the trustee appointed by the court to conduct the sale, sent a letter jointly addressed to appellants, the Ashes, Gaylen, and Woolf “c/o Banner Realty, 2508 N. Charles Street, Baltimore, Maryland 21218” notifying them of the time, place, and terms of the sale scheduled for April 19, 1984. That letter was sent by certified mail with return receipt requested. In an affidavit of compliance with Rule W74 a.2.(c), the trustee attached a return receipt for that certified mail reflecting that it was received by S. Robinson on April 9, 1984, at the address to which it was sent. The mortgaged properties were sold at public sale on April 19, 1984, for $31,000.00.

The trustee reported the sale to the court on May 7, 1984. Thereafter, the court auditor examined the proceedings and stated his account, which reported that the net proceeds of the foreclosure sale were $15,114.20 less than the mortgage debt and accrued interest due the appellee. That account was finally ratified and confirmed by the court on September 13, 1984. On October 25, 1984, appellee moved for a deficiency decree against appellants.

Process was issued for the ⁴²⁴ appellants on that motion. When the sheriff filed his return on the summons directed to 2508 N. Charles Street, he noted that when he attempted to serve the appellants at that address, he was informed by one Shirley Robinson that the appellants were unknown at that address. On January 23, 1985, appellee reissued process on the motion. Appellant Beverly Sleph received a copy of the motion and the summons issued by the court thereon by certified mail directed to her home in Virginia on January 31, 1985.

Appellant Gerald Sleph was served with the motion and summons by a private process server at his home in Virginia on November 11, 1985. After her receipt by certified mail of the motion for deficiency decree and summons, appellant Beverly Sleph wrote to the attorney for the appellee on February 16, 1985: I have received a letter from you regarding a foreclosure filed by Frederick J. Radtke, Jr. This is the first communication we have ever received regarding any foreclosure. We are unsure as to what has occurred. Can you advise why this is our first notice and its meaning?

Looking forward to your reply. Mr. Mazor answered that letter on February 25, 1985. He advised Mrs. Sleph that his client’s mortgage on the Lombard Street properties had been foreclosed, and he informed her of the amount of the successful bid at the foreclosure sale and the amount of the deficiency between the mortgage debt due appellee and the net proceeds of the foreclosure sale. His letter continued: Under the Rules of the State of Maryland, it is necessary that notice of the sale be given to the mortgagors not more than 15 days nor less than 5 days prior to the sale by certified mail.

The only address known at that time for you was the office of Jackie Z. Woolf in Baltimore City on North Charles Street and, accordingly, notice of the sale was mailed to that address. I have subsequently learned of your address through an attor ⁴²⁵ ney who now represents Mr. and Mrs. Ashe and, accordingly, that is why you are now getting notice of the deficiency. The deficiency amounts to $15,224.20 and will be a judgment against you as entered by the Circuit Court for Baltimore City. It would be appreciated if you would be kind enough to communicate with me for the purpose of determining when and how these funds will be paid.

On December 24, 1985, when neither appellant opposed appellee’s motion for a deficiency decree, the court entered a decree in personam against them in the amount of $15,-224.20. On March 13, 1986, the appellants filed a belated answer to appellee’s motion for deficiency decree, and on April 4, 1986, they moved to strike the decree in personam entered against them. Appellants asserted that appellee’s attorney had granted their attorney an extension of indeterminate length to reply to appellee’s motion for deficiency decree. Appellee did not oppose the motion and the decree was set aside.

The court then referred the case to a master for hearing, report and recommendation pursuant to Rule 2-541(c). At the hearing before the master on June 10, 1986, the foregoing facts were established by the uncontradicted testimony of the only witness, the appellant Beverly Sleph, and documentary evidence. The master recommended that appellee’s motion for deficiency decree be denied because of appellee’s noncompliance with Rule W74 a.2.(c). Appellee filed exceptions to the master’s recommendation.

Those exceptions were sustained by the court after reviewing a transcript of the proceedings before the master and hearing argument of counsel. The court then entered the order from which this appeal has been taken. Personal Jurisdiction The Maryland long-arm statute governs the exercise of personal jurisdiction by Maryland Courts over nonresident defendants. The statute in its entirety provides: ⁴²⁶ (a) Condition.—If jurisdiction over a person is based solely upon this section, he may be sued only on a cause of action arising from any act enumerated in this section.

(b) In general.—A court may exercise personal jurisdiction over a person, who directly or by an agent: (1) Transacts any business or performs any charac- • ter of work or service in the State; (2) Contracts to supply goods, food, services, or manufactured products in the State; (3) Causes tortious injury in' the State by an act or omission in the State; (4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from goods, food, services, or manufactured products used or consumed in the State; (5) Has an interest in, uses, or possesses real property in the State; or (6) Contracts to insure or act as surety for, or on, any person, property, risk, contract, obligation, or agreement located, executed, or to be performed within the State at the time the contract is made, unless the parties otherwise provide in writing. Md.Code (1984 Repl.Vol.), § 6-103 of the Courts and Judicial Proceedings Article. The application of this statute requires two interrelated determinations: 1) whether the statute authorizes the exercise of personal jurisdiction under the circumstances of the case; and 2) whether the exercise of personal jurisdiction would be consistent with the Due Process Clause of the Fourteenth Amendment. Mohamed v. Michael, 279 Md. 653, 657 , 370 A.2d 551 (1977); Geelhoed v. Jensen, 277 Md. 220, 224 , 352 A.2d 818 (1976).

This is so because of the intent of the Legislature in enacting the long-arm statute to expand the exercise of personal