Smith-Myers Corp. v. Sherill

KEHOE, J. Appellant, Smith-Myers Corporation d/b/a Smith-Myers Mortgage Group (“Smith-Myers”), appeals a default judgment entered against it in favor of appellees, Ada Sherill and James Mills, 1 by the Circuit Court for Prince George’s County. Smith-Myers presents two issues for our review, which we have re-phrased: I. Did the circuit court err by entering the default judgment?

II

Did the circuit court abuse its discretion in denying Smith-Myers’s motion to vacate the default judgment? We affirm the judgment of the circuit court. We conclude that the circuit court did not err by entering the default judgment against Smith-Myers because: 1) Rule 2-613(f) requires the court to satisfy itself that notice was mailed to the defaulting party’s “last known address”, and not, as Smith-Myers asserts, to the defaulting party’s correct mailing address; 2) Smith-Myers failed to satisfy its continuing obligation to supply the court with its most recent address, and, therefore, failed to establish that 9200 Basil Court, instead of 9700 Basil Court, was its last known address under Rule 2-613(b); and 3) Smith-Myers had, in any event, actual notice of ⁴⁹⁹ the order of default and the hearing on damages and yet did not move to vacate the order and did not attend the hearing. Moreover, we conclude that the circuit court did not err in denying Smith-Myers’s motion to vacate the default judgment because Smith-Myers failed to establish an equitable basis to excuse its failure to attend court hearings or to move to vacate the order of default on a timely basis.

FACTUAL AND PROCEDURAL BACKGROUND On January 4, 2007, appellees filed a six-count complaint 2 against four parties—Patricia Lawson, Johnny Beans, 3 Smith-Myers (appellant), and Beltway Title & Abstract, Inc.—alleging that the defendants engaged in an elaborate fraudulent scheme to deprive them of the equity value of their home. The scheme involved, among other things, fraudulent and coercive conduct by Lawson to induce appellees to enter into an unconscionable mortgage loan from Smith-Myers and conditioning the loan upon excessive fees for unnecessary and fictitious services. Appellees alleged that Lawson was a loan officer for Smith-Myers, Beans was the proxy buyer of the mortgaged property, Smith-Myers was the company that provided financing for the transaction, and Beltway Title was a real estate title insurance agency that conducted a settlement alleged to have been instrumental in the defendants’ efforts. On May 30, 2007, appellees filed an amended complaint adding John J. Dwyer, the owner of Beltway Title, as a fifth defendant.

Early on in the proceedings, the circuit court dismissed the claims against Beans without prejudice. As we will explain in greater detail below, on March 16, 2009, the circuit court entered a default judgment against Smith-Myers in the amount of $627,277.68. Smith-Myers moved to vacate the ⁵⁰⁰ judgment, without success, and then filed a motion for reconsideration, which the circuit court denied. Smith-Myers filed an appeal to this Court although the circuit court had not yet resolved the claims against Lawson, Dwyer, and possibly Beltway Title. 4 See Smith-Myers Corp. v. Sherill (“Smith-Myers I”), No. 2234, September Term, 2009, filed April 6, 2011.

In Smith-Myers I, we dismissed the appeal as premature because there was no final judgment and remanded the case to the circuit court for further proceedings. On remand, the circuit court dismissed the claims against Lawson, Dwyer and Beltway Title, thus rendering the judgment against Smith-Myers final. This appeal followed. We now turn to more a detailed description of the events that led to the entry of the default judgment and Smith-Myers’s efforts to vacate the same.

Appellees’ original complaint stated that the mailing address of Smith-Myers was (emphasis added): Smith-Myers Mortgage Group 9700 Basil Court, Suite 100 Largo, MD 20774 Appellees concede that the 9700 Basil Court address was incorrect, and that Smith-Myers’s mailing address is 9200 Basil Court, Suite 100, Upper Marlboro, MD 20774. The parties also agree that 9700 Basil Court does not, in fact, exist, and further, that Largo and Upper Marlboro both reference the same location for the purposes of the United States Postal Service. This notwithstanding, there is no dispute that ⁵⁰¹ Smith-Myers was properly served by personal service. The affidavit of service for the process server indicates that he personally served the summons and the complaint on Smith-Myers at (emphasis added): Smith-Myers Mortgage Group 9200 Basil Court, Suite 100 Largo, MD 20774 Herbert Callihan, at the time a Maryland attorney, filed an answer on behalf of Smith-Myers but the answer did not correct or otherwise reference the complaint’s use of the 9700 Basil Court address.

Approximately one year later, on February 21, 2008, Callihan filed a Withdrawal of Appearance/Substitution of Counsel indicating that he had withdrawn as counsel for Smith-Myers and that Larry N. Burch had entered his appearance on Smith-Myers’s behalf. This document made no mention of an address for Smith-Myers. Burch remained Smith-Myers’s attorney for about three months. On April 14, 2008, Burch filed a request to withdraw his appearance from the case.

Attached to this request was a certificate of service indicating that he had mailed a copy of his motion to Jeffrey Smith, the president of Smith-Myers, at the following address: Jeffrey Smith Smith-Myers Mortgage Group 9200 Basil Court, Suite 100 Upper Marlboro, MD 20774 Also attached to the request as a captioned, original document exhibit was Smith-Myers’s “Consent to Withdraw” which likewise listed 9200 Basil Court as the address for Smith-Myers. The circuit court granted Burch’s request on May 19, 2008 in an order which also stated, in pertinent part (emphasis in original deleted, emphasis in bold added): ORDERED, that Defendant Smith-Myers Mortgage Group is hereby advised that pursuant to Md. Rule 2-131(a)(2) a person other than an individual may enter an ⁵⁰² appearance only by an attorney, thus as a Corporation they must be represented by a Maryland attorney; ORDERED, this case be sent to the Office of Calender Management for a Status Hearing to be set---- The clerk’s office mailed a copy of this order to Smith at the 9200 Basil Court address. There is no dispute that Smith-Myers received a copy of this order. In addition, there is no dispute that, at the time of his withdrawal, Burch advised Smith-Myers to retain new counsel and that Smith-Myers “was required to appear at court on all dates set by the Court.” 5 However, no attorney entered his or her appearance on behalf of Smith-Myers in the case for approximately ten months.

During this period, the circuit court held three status conferences—on June 6, 2008; October 3, 2008; and December 19, 2008—all of which Smith-Myers failed to attend. Notices of these conferences were sent to Smith-Myers at the 9700 Basil Court address. Smith-Myers asserts that it never received notice of the status conferences because of the inaccurate address, and that this lack of proper notice explains its absences. It is, however, apparent that someone received these notices, as none were returned to the circuit court as undeliverable. 6 On December 11, 2008, appellees filed what they called a “Motion for Default Judgment and Other Relief’, which was treated by the circuit court as a request for an order of default pursuant to Rule 2-613(b).

In their request, appellees asserted that Smith-Myers’s last known address was “9700 Basil Court, Suite 100, Largo, MD 20774”. (Emphasis added). ⁵⁰³ At the status conference held on December 19, 2008, the circuit court issued an order of default against Smith-Myers. As with the status conference notices, this order was mailed to Smith-Myers at the 9700 Basil Court address, but a copy of the order was also mailed to Callihan. According to Smith-Myers, Callihan informed the company that an order of default had been issued against it. 7 Despite this knowledge, Smith-Myers did not move to vacate the order of default on a timely basis.

See Md. Rule 2-613(d) (“The defendant may move to vacate the order of default within 30 days after its entry.”). On March 6, 2009, the circuit court conducted an ex parte hearing on damages. Notice of this hearing was again sent to “Smith-Myers Mortgage Group, 9700 Basil Court, Suite 100, Largo, MD 20774”, as well as to Callihan. The record indicates that Smith-Myers also had knowledge of this hearing, 8 but it did not attend.

After an evidentiary presentation by appellees, the circuit court entered a default judgment against Smith-Myers in the amount of $627,277.68 plus costs. On April 6, 2009, Smith-Myers, now represented by counsel, filed a Motion to Vacate Default Judgment, blaming its derelictions on an alleged lack of notice and on a disbarred attorney named Peter Maignan, and seeking to have the judgment set aside. We will discuss the grounds advanced by ⁵⁰⁴ Smith-Myers in Part II of this opinion. The circuit court denied this motion without a hearing and without discussion on August 29, 2009. ⁵⁰³ On December 19, 2008, the Court granted Plaintiffs' Motion for Default Judgment [i.e., the order of default].

Court docket entries indicate a copy of this Order was sent to Smith-Myers’s former attorney, Mr. Callihan. However, Mr. Callihan was no longer representing Smith-Myers in this matter.... Mr. Callihan did contact Smith-Myers to inform them of the order. ⁵⁰⁴ On September 22, 2009, Smith-Myers filed a Motion for Reconsideration of Denial of Motion to Vacate Default Judgment, repeating its prior arguments. The court denied this motion without a hearing and without discussion on October 21, 2009.

On November 23, 2009, Smith-Myers noted an appeal, which, as previously explained, we dismissed in Smith-Myers I. On remand, at the request of both parties, the circuit court dismissed the claims against the remaining defendants and Smith-Myers noted this appeal on November 10, 2011. Discussion The circuit court denied the motion to vacate and the motion for reconsideration without hearings and without any explanation of its grounds. In such circumstances, we assume that the circuit court carefully considered all of the asserted grounds and determined that all or at least enough of them merited the decisions ultimately implemented. See Piscatelli v. Smith, 197 Md.App. 23, 37 , 12 A.3d 164 (2011), aff'd, 424 Md. 294 , 35 A.3d 1140 (2012) (citations omitted).

Furthermore, as we explained in Davidson v. Seneca Crossing Section II Homeowner’s Ass’n, 187 Md.App. 601, 628 , 979 A.2d 260 (2009): The trial judge need not articulate each item or piece of evidence she or he has considered in reaching a decision. Unless it is clear that he or she did not, we presume the trial judge knows and follows the law. The fact that the court did not catalog each factor and all the evidence which related to each factor does not require reversal ... Furthermore, [i]n reviewing a judgment of a trial court, the appellate court will search the record for evidence to support the judgment and will sustain the judgment for a reason plainly appearing on the record whether or not the reason was expressly relied upon by the trial court. ⁵⁰⁵ (Quotation marks and citations omitted; emphasis added by Davidson.) I. The Entry of the Default Judgment In its brief, Smith-Myers states (citations to the record omitted): In the case sub judice, the Order of Default and subsequent default judgment were based solely on Smith-Myers’s failure to appear at three (3) status hearings.

However, the notices of all three (3) status hearings and the Order of Default were mailed to the wrong address.... Moreover, the record is clear from motions to vacate the default judgment and responses thereto that Smith-Myers never received notice of the missed status hearings or the resulting Order of Default.[ 9 ] The provisions of Rule 2-613(f) are clear that it was the Circuit Court for Prince George’s County’s responsibility to ensure that notice was properly mailed to Smith-Myers prior to entering a judgment by default.... The Circuit Court for Prince George’s County, Maryland committed reversible error when it entered a judgment by order of default pursuant to Maryland Rule 2—613(f) without having discovered that the notice required by Rule 2-613(c) was sent to the wrong address. Accordingly, the default ⁵⁰⁶ judgment against Smith-Myers must be vacated and this matter remanded for adjudication on its merits.

These arguments are unpersuasive. Contrary to Smith-Myers’s assertions, Rule 2-613 does not require the circuit court to “ensure that notice was properly mailed to Smith-Myers prior to entering a judgment.” Instead, the rule requires the court to satisfy itself that notice of the entry of an order of default was mailed to the defaulting defendant’s last known address. It is the duty of a party, not the court, to ensure that the court has the parties’ current and correct mailing address. Smith-Myers failed to do this.

We begin our analysis with an overview of Rule 2-613. Rule 2-613 governs default judgments in circuit courts. Under the rule, “If the time for pleading has expired and a defendant has failed to plead as provided by these rules, the court, on written request of the plaintiff, shall enter an order of default.” Rule 2—613(b). The defendant has 30 days from the date the order of default is entered to file a motion to vacate the order.

Rule 2-613(d). “The motion shall state the reasons for the failure to plead and the legal and factual basis for the defense to the claim.” Id. “If the court finds that there is a substantial and sufficient basis for an actual controversy as to the merits of the action and that it is equitable to excuse the failure to plead, the court shall vacate the order.” Rule 2-613(e). If no motion to vacate is filed or the motion is properly denied by the court, and the plaintiff so requests, the court may enter a default judgment against the non-responsive defendant if the court is satisfied that it has jurisdiction to enter the judgment and that proper notice was effectuated upon the defendant. Rule 2—613(f). “A default judgment entered in compliance with this Rule is not subject to the revisory power under Rule 2-535(a)[ 10 ] except as to the relief granted.” Rule 2-613(g). “ ‘[A] default judgment is considered more akin to an admission of liability than to a punitive sanction.’ ” Franklin ⁵⁰⁷ Credit Management Corp. v. Nefflen, 208 Md.App. 712 , 57 A.3d 1015 (2012) (quoting Porter Hayden Co. v. Bullinger, 350 Md. 452, 472 , 713 A.2d 962 (1998)). However, Md. Rule 2-613(d) provides an opportunity for the defendant to move to vacate an order of default and explain the legal and factual basis for any defense of the claim.

If the defendant does so, the court must then determine whether “there is a substantial and sufficient basis for an actual controversy as to the merits of the action,” and whether “it is equitable to excuse the failure to plead.” Rule 2-613(e). This is the defendant’s opportunity to have the court assess the viability of the legal claims. Nefflen, 208 Md.App. at 728 , 57 A.3d 1015 . Instead, “[i]f there is no vacation of the default order, the court ‘may enter a judgment by default’ providing it is satisfied that it has personal jurisdiction and that the requisite notice has been mailed.” Carter v. Harris, 312 Md. 371, 374 , 539 A.2d 1127 (1988). “ ‘[These rules are] a means of relief against the delay and neglect of defendants.’ ” Glass v. Glass, 284 Md. 169, 172 , 395 A.2d 485 (1978), superseded by statute as noted in Davis v. Davis, 97 Md.App. 1, 12-13 , 627 A.2d 17 (1993) (quoting Edgar Miller, Equity Procedure in the courts of Maryland § 284, at 354 (1897)).

Subsections (b), (c), and (f) of Rule 2-613 address various aspects of the notice required before a court can enter a default judgment against a defendant. These sections provide (emphasis added): (b) Order of default. If the time for pleading has expired and a defendant has failed to plead as provided by these rules, the court, on written request of the plaintiff, shall enter an order of default. The request shall state the last knoum address of the defendant.

(c) Notice. Promptly upon entry of an order of default, the clerk shall issue a notice informing the defendant that the order of default has been entered and that the defendant may move to vacate the order within 30 days after its entry. ⁵⁰⁸ The notice shall be mailed to the defendant at the address stated in the request and to the defendant’s attorney of record, if any. The court may provide for additional notice to the defendant. (f) Entry of judgment.

If a motion [to vacate] was not filed under section (d) of this Rule or was filed and denied, the court, upon request, may enter a judgment by default that includes a determination as to liability and all relief sought, if it is satisfied (1) that it has jurisdiction to enter the judgment and (2) that the notice required by section (c) of this Rule was mailed. If, in order to enable the court to enter judgment, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any matter, the court may rely on affidavits, conduct hearings, or order references as appropriate, and, if requested, shall preserve to the plaintiff the right of trial by jury. Smith-Myers does not dispute that the circuit court mailed a document containing the information required by Rule 2-613(c) to the address indicated in appellees’ request for order of default—9700 Basil Court, Suite 100. Smith-Myers asks us to interpret Rule 2-613(f) as imposing an additional requirement upon a circuit court related to notice before entering judgment; namely, to satisfy itself that the last known address designated in the request for an order of default is, in fact, the defaulting party’s correct mailing address.

There are several problems with this argument. First, Smith-Myers has offered no authority for its proposition and the plain language of the rule is contrary to its position. As the Court of Appeals summarized in In re Victor B., 336 Md. 85 , 646 A.2d 1012 (1994): The canons and principles we follow in construing statutes apply equally to an interpretation of our rules. When construing a rule, we must first look to the words of the rule, giving them their ordinary and natural meaning.

If the words of the rule are clear and unambiguous, our ⁵⁰⁹ analysis ordinarily ends. Generally, it is only when the words of the rule are ambiguous that we must look toward other sources to glean the intent of the rule. Furthermore, we must give effect to the entire rule, neither adding, nor deleting, words in order to give it a meaning not otherwise evident by the words actually used. Our mission is to give the rule a reasonable interpretation in tune with logic and common sense.

Id. at 94 , 646 A.2d 1012 . Applying these principles of interpretation to Smith-Myers’s argument, there is nothing in Rule 2-613 that suggests that the circuit court carries the burden of ensuring that the order of default was sent to the defaulting party’s correct mailing address. Indeed, in order to adopt such a position, we would be adding words to the rule, which, as just explained, we do not do. Secondly, the history of Rule 2-613 underscores that the plain language of the rule is contrary to Smith-Myers’s interpretation.

This Court recounted that history in detail in Armiger Volunteer Fire Co. v. Woomer, 123 Md.App. 580 , 720 A.2d 17 (1998), cert. denied, 352 Md. 619 , 724 A.2d 21 (1999). “As originally drafted, Md. Rule 2-613 provided that the notice of order of default be mailed to the defaulting defendant at the address provided for him in the complaint without regard for whether he might have a more current mailing address.” Id. at 590-91, 720 A.2d 17 . In 1983, the Comment Review Committee for proposed changes to the rule recommended that this requirement be amended: to take account of the fact that at the time of requesting an order of default the plaintiff may have a more recent or accurate address for the defendant than was provided in the complaint. The subcommittee suggests adding at the end of [present section (b) ] the following sentence: “The request shall state the last known address of the defendant.” Consistent with the proposed change in [present section (b) ], the subcommittee suggests amending the penultimate sentence in [present section (e)] by substituting the phrase ⁵¹⁰ “stated in the request” for “specified in the pleading” and deleting the phrase “if any” following “address.” Id. at 591 , 720 A.2d 17 . These recommendations were ultimately adopted, thereby “eliminating the possibility that a notice of order of default would be mailed to a defaulting defendant at an outdated address provided in the complaint and maximizing the likelihood that the defaulting defendant indeed would be afforded the opportunity to challenge the entry of the default order.” Id.

Nowhere does this history suggest, as Smith-Myers argues, that Rule 2-613 requires, or was intended to require, a court to independently determine whether “the last known address” supplied by the moving party is, in fact, the correct mailing address of the party in default. Finally, Smith-Myers does not explain how, at a practical level, a circuit court would be able to conduct the investigation that Smith-Myers proposes. For these reasons, we conclude that Rule 2-613(f)’s requirement that the court satisfy [itself that the appropriate notice has been mailed to the defaulting party’s last known address is met when the record is clear that the notice was mailed to the address indicated in the request for an order of default. It is incumbent upon the party seeking the order of default to supply the circuit court with the defaulting party’s last known mailing address.

Having dispensed with Smith-Myers’s suggested construction of Rule 2—613(f), we turn to whether the address to which the Rule 2-613(c) notice was sent—9700 Basil Court—was Smith-Myers’s “last known address” for purposes of the Maryland Rules. We conclude that it was. Rule 2—613(b) clearly imposes the obligation to provide the court with the defaulting party’s last known address upon the party seeking an order of default. Answering whether appellees failed in their responsibility in this case is complicated by the fact that, when the order of default was requested, there were two possible “known” addresses for Smith-Myers—9700 ⁵¹¹ Basil Court and 9200 Basil Court.

To illustrate, we recite the relevant chronology: 11 • January 4, 2007: Complaint filed by appellees, listing 9700 Basil Court as the address for Smith-Myers. • January 26, 2007: Affidavit of the process server filed, stating that the summons and complaint were served on Smith-Myers at 9200 Basil Court. • February 5, 2007: Smith-Myers filed its answer, making no reference to either the 9200 or the 9700 address. • February 21, 2008: Callihan filed his Motion to Withdraw and Substitute Burch as counsel for Smith-Myers. No reference is made to either the 9200 or the 9700 address. • April 14, 2008: Burch filed his Motion to Withdraw as counsel for Smith-Myers. The certificate of service attached to Burch’s request, as well as Smith-Myers consent to the withdraw (attached as Exhibit 1 to the motion), show the 9200 Basil Court address. Neither the certificate nor the exhibit reference the 9700 address. • May 19, 2008: The circuit court issues order granting Burch’s motion and advising Smith-Myers to (i) retain new counsel and (ii) that their case would be set in for a status hearing.

Order was mailed to 9200 Basil Court. • June 6, 2008: Status hearing held. Smith-Myers did not attend. Notice of hearing sent to 9700 Basil Court. • October 2, 2008: Status hearing held. Smith-Myers did not attend.

Notice of healing sent to 9700 Basil Court. • December 11, 2008: Motion for an order of default filed by appellees. Motion listed 9700 Basil Court as the address for Smith-Myers. • December 19, 2008: Status hearing held. Smith-Myers did not attend. Notice of hearing sent to 9700 Basil Court.

Order of default entered against Smith-Myers at healing. Order sent to 9700 Basil Court. Smith-Myers ⁵¹² subsequently concedes that it had notice of the order through Callihan, blaming its failure to file a motion to vacate on Maignan. • March 6, 2009: Hearing on damages. Notice sent to 9700 Basil Court.

Despite having knowledge of the hearing, Smith-Myers failed to attend. Subsequently blamed failure on Maignan. Judgment entered against Smith-Myers for $627,277.68. Judgment received by Smith-Myers at 9200 Basil Court. • April 6, 2009: Smith-Myers filed a motion to vacate default judgment.

Motion stated, for the first time in the litigation, that the 9700 address is incorrect. Applying the benefit of hindsight to these facts, the last use of Smith-Myers’s correct address (prior to the default judgment) was in 1) the certificate of service and the consent to withdraw attached to Burch’s motion, and 2) the May 19, 2008 order. At that time, however, nothing in the record indicated that 9700 Basil Court was not also a correct address for Smith-Myers. Indeed, Smith-Myers failed to inform the court that the 9700 address was incorrect until its motion to vacate the default judgment, which was filed approximately two years and two months after Smith-Myers was served with the original complaint.

As we explained in Estime v. King, 196 Md.App. 296 , 9 A.3d 148 (2010) (citing Gruss v. Gruss, 123 Md.App. 311 , 718 A.2d 622 (1998)), a party has “a continuing obligation to furnish the court with her most recent address.” Id. at 306, 9 A.3d 148 . This obligation may be satisfied by filing a “pleading” or a “paper” with the court listing the correct address. See Estime, 196 Md.App. at 304-07 , 9 A.3d 148 (quoting Grass, 123 Md.App. at 320, 718 A.2d 622 ). The pertinent question before us is whether Smith-Myers