Yacko v. Mitchell

Keith Yacko, et al., v. Rene Mitchell No. 1586, Sept. Term, 2019 Opinion by Leahy, J. Foreclosure Proceedings > Power of Sale > Principles Fundamentally, the current and prior appeals highlight two elemental principles underlying Maryland foreclosure procedure. First, a “power of sale foreclosure is intended to be a summary, in rem proceeding[,]” Wells Fargo Home Mortg., Inc. v. Neal, 398 Md. 705, 726 (2007) (cleaned up), in which there should be no doubt as to the validity of the lien and the lien instruments, Md. Rule 14-207(b)(1) (requiring lien instrument be “supported by an affidavit that it is a true and accurate copy”). Second, as the action is “peculiarly within a court of equity’s jurisdictional powers,” the foreclosure must be free of any “fraudulent, illegal or inequitable conduct.” Wells Fargo, 398 Md. at 728, 730 . Title 14 of the Maryland Rules implements these dual precepts by providing a summary procedure for a foreclosure pursuant to a power of sale but requiring lenders to attest to the validity of their lien and lien instruments.

The remedy afforded a lender in a foreclosure is premised on the requirement that the lender submit a true and accurate copy of the lien instruments. If a lender cannot establish, for whatever reason, the validity of its lien, it must pursue another avenue to assert its rights under the mortgage. Testimony > Credibility Determination As the factfinder, the court analyzes the evidence and decides what to credit and what to reject. Santiago v. State, 458 Md. 140, 156-57 (2018) (affirming that “the fact finder ‘may believe or disbelieve, credit or disregard, any evidence introduced, and a reviewing court may not decide on appeal how much weight must be given to each item of evidence’”) (citing Great Coastal Express, Inc. v. Schruefer, 34 Md. App. 706, 725 (1977)); Qun Lin v. Cruz, 247 Md. App. 606, 629 (2020).

Testimony > Credibility Determination Clearly, the evidence presented by the Substitute Trustees to support their revised theory of the case—that Ms. Mitchell made everything up—fell woefully short, and the validity of the lien instrument could not be established against the unrefuted evidence presented by Ms. Mitchell. Viewing all the evidence in the light most favorable to Ms. Mitchell, we hold that substantial evidence in the record supports the circuit court’s factual findings and that the court did not err in its determination that the lien instrument upon which the Substitute Trustees filed the order to docket foreclosure was invalid. Testimony > Legal Impossibility Long ago, the Court of Appeals instructed courts when to disregard a witness’s testimony as lacking in probative value: We, of course, accept the rule that the court should disregard any testimony that attempts to establish something physically impossible within common knowledge and experience, or something contrary to indisputable scientific principles or laws of nature within the court’s judicial knowledge. York Motor Exp.

Co. v. State, for Use of Hawk, 195 Md. 525, 534-35 (1950). Otherwise, “the question of a witness’s credibility is left to the [fact finder].” N.B.S., Inc. v. Harvey, 121 Md. App. 334, 343 (1998). Testimony > Legal Impossibility Unlike Ray v. Bassil, 30 Md. App. 550 (1976), and Tippett v. Quade, 19 Md. App. 49 (1973)—cases in which physical evidence precluded the fact-finder from relying on a witness’s testimony—Ms. Mitchell’s testimony can be reconciled with the evidence very easily. We conclude that the conflicts presented in this case did not present a “physical impossibility” under York Motor Express or Kucharczyk; but rather, ordinary inconsistencies that the circuit court was entrusted to resolve.

As addressed above, this is exactly what Judge Mittelstaedt did. Foreclosure Proceedings > Power of Sale > Equitable Mortgage The record supports the trial court’s decision to ignore the Substitute Trustees’ efforts to seek an equitable mortgage at the eleventh hour. They did not assert their entitlement to an equitable mortgage when they filed their order to docket, or allege any entitlement to an equitable mortgage in any pleading, or assert any such claim at any point during the nine-day evidentiary hearing, which covered two years. Instead, after the close of all evidence, the Substitute Trustees asserted, for the first time, that “U.S. Bank, as trustee[,] is entitled to an equitable lien on the property.” The impact of the Substitute Trustees’ last-minute request deprived Ms. Mitchell of any opportunity to respond and, certainly, deprived her of the ability to present her evidence at the hearing in light of this claim.

Accordingly, we hold that the circuit court did not err by not considering the Substitute Trustees’ post-hearing request for an equitable mortgage. Circuit Court for Prince George’s County Case No. CAEF15-20853 REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1586 September Term, 2019 ______________________________________ KEITH YACKO, ET AL. v. RENE MITCHELL ______________________________________ Nazarian, Leahy, Friedman, JJ. ______________________________________ Opinion by Leahy, J. ______________________________________ Filed: February 26, 2021 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2021-04-14 09:27-04:00 Suzanne C. Johnson, Clerk Like a boomerang, the mortgage transaction that was the subject of our reported opinion in Mitchell v. Yacko, 232 Md. App. 624 (2017), has returned. The substitute trustees for the loan servicer in this case, Keith M. Yacko, Robert E. Frazier, Thomas J. Gartner, Jason L. Hamlin, Glen H. Tschirgi, and Gene Jung (collectively, “Substitute Trustees”) attempted to foreclose on a note and deed of trust pursuant to a power of sale by filing an order to docket. Ms. Renee Mitchell, the borrower and homeowner, representing herself, responded by filing a motion to dismiss the foreclosure action because the note and deed of trust were not valid and enforceable.

In round one, Ms. Mitchell’s motion was denied without a hearing, and she appealed. We held “that a party cannot institute a foreclosure upon forged documents. Foreclosure is an equitable procedure, and the Substitute Trustees must demonstrate, upon remand, that this particular foreclosure has not ‘been marred by fraudulent, illegal, or inequitable conduct.”’ Id. at 641 (citation omitted) (cleaned up). Now, in the second round, we address the Substitute Trustees’ appeal, and Ms. Mitchell’s cross-appeal, from Judge Crystal Mittelstaedt’s order in which she dismissed the foreclosure after presiding over a nine-day evidentiary hearing held pursuant to Maryland Rule 14-211(b)(2).

The Substitute Trustees claim that Judge Mittelstaedt erred in her determination that the lien instrument was invalid and abused her discretion in declining their request for discovery prior to the evidentiary hearing. They also contend that the court erred in denying their request for an equitable mortgage—an issue raised for the first time in their briefing filed after the evidentiary hearing. In her cross-appeal, Ms. Mitchell avers that the judge abused her discretion in excluding Ms. Mitchell’s expert. We affirm the court’s order dismissing the foreclosure on the ground that “Ms. Mitchell established that the lien and lien instruments are invalid, and that [the Substitute Trustees] have no right to foreclose on an adjustable mortgage.” Fundamentally, the current and prior appeals highlight two elemental principles underlying Maryland foreclosure procedure.

First, a “power of sale foreclosure is intended to be a summary, in rem proceeding[,]” Wells Fargo Home Mortg., Inc. v. Neal, 398 Md. 705, 726 (2007) (cleaned up),1 in which there should be no doubt as to the validity of the lien and the lien instruments, Md. Rule 14-207(b)(1) (requiring lien instrument be “supported by an affidavit that it is a true and accurate copy”). Second, as the action is “peculiarly within a court of equity’s jurisdictional powers,” the foreclosure must be free of any “fraudulent, illegal or inequitable conduct.” Wells Fargo, 398 Md. at 728, 730 . Title 14 of the Maryland Rules implements these dual precepts by providing a summary procedure for a foreclosure pursuant to a power of sale but requiring lenders to 1 Previously, the “policy of Maryland law” was mainly “to expedite mortgage foreclosures.” Wells Fargo, 398 Md. at 726 . In response to the 2008 subprime mortgage crisis, the Maryland General Assembly enacted a series of statutes and amended existing statutes to “further protect the interests of mortgagors relating to foreclosures, especially foreclosures of residential properties.” Maddox v. Cohn, 424 Md. 379, 386-87 (2012); see also Daughtry v. Nadel, 248 Md. App. 594, 622 (2020) (noting that the General Assembly’s policy not to include mortgage foreclosure actions within three-year statute of limitations “is in accord with its general goal since the beginning of the Great Recession of ‘slowing down the foreclosure process[.]’” (quoting Maddox, 424 Md. at 387 )).

The post-2008 legislative enactments were designed, in part, to “slow down the mortgage foreclosure practices to limit the abuses of past years and to provide additional protections to homeowners.” Maddox, 424 Md. at 392-93 . Prior to these enactments, for example, a foreclosure action “could be filed . . . as soon as 15 days after default,” but the new requirements constrain a mortgage holder to wait at least 90 days from a borrower’s default to file an order to docket commencing a foreclosure. Id. at 390 n.8. 2 attest to the validity of their lien and lien instruments.2 The remedy afforded a lender in a foreclosure is premised on the requirement that the lender submit a true and accurate copy of the lien instruments. If a lender cannot establish, for whatever reason, the validity of its lien, it must pursue another avenue to assert its rights under the mortgage.

Because of the high volume of foreclosure cases, recurrent plaintiffs often treat these matters as routine and expect our courts to rubber-stamp the foreclosure with methodical expediency. However, to the homeowner, there is nothing routine about losing a home, and, when a homeowner asserts a timely, valid challenge to a foreclosure, the Maryland Rules instruct our courts to slow the foreclosure action as necessary to protect the homeowner and ensure that the instruments are valid and that the plaintiffs otherwise have a right to foreclose. 2 The relevant provisions of Title 14 of the Maryland Rules are derived from the mandates contained in Title VII of the Real Property Article (“RP”) of the Maryland Code (1974, 2015 Repl. Vol.). For example, section 7-105(b)(1) specifies: “A mortgage or deed of trust may authorize the sale of the property or declare the borrower’s assent to the passing of a decree for the sale of the property, on default in a condition on which the mortgage or deed of trust provides that a sale may be made.” RP § 7-105(b)(1).

In turn, section 7-105.1(e) requires that “an order to docket or a complaint to foreclose a mortgage or deed of trust on residential property shall” include an affidavit stating, among other things, “[t]he date on which the default occurred and the nature of the default;” to be accompanied by “[t]he original or a certified copy of the mortgage or deed of trust; . . . [a] copy of the debt instrument accompanied by an affidavit certifying ownership of the debt instrument;” and “[i]f applicable, the original or a certified copy of the assignment of the mortgage for purposes of foreclosure or the deed of appointment of a substitute trustee[.]” RP § 7-105.1(e). 3 SYNOPSIS Before we become mired in the weeds, deeds, and documents that often obscure the big picture, we start with an overview of the case. In June 2005, Rene Mitchell purchased residential property in the City of Bowie in Prince George’s County (the “Property”) and financed the $555,900.00 purchase entirely through two loans, both secured by deeds of trust. The sales contract states that Ms. Mitchell will obtain a “Conventional First Deed of Trust loan amortized over 30 years at a FIXED rate” and “a Second Deed of Trust loan amortized over 30 years at a FIXED rate[.]” The underlying case and this appeal concern the note, deed of trust, and closing on the first loan in the amount of $444,728.00. Conflicting Accounts Ms. Mitchell claims that she “sought a fixed[-]rate loan for the purchase of residential property and executed a sales contract specifying the same.” At the closing, however, the loan documents that she executed were for an adjustable-rate mortgage.

According to Ms. Mitchell, she halted the closing, had “VOID” stamped on the executed documents, and requested acknowledgement of the cancellation in a letter that she sent that same day to the lender, Fremont Investment and Loan (“Fremont”). Fremont then sent Ms. Mitchell three separate letters in which it agreed to cancel the loan transaction on the adjustable-rate loan and that, thereafter, Ms. Mitchell’s loan was to be treated as a fixed-rate loan. Fremont also returned a copy of the deed of trust and note, bearing the “VOID” marks, to Ms. Mitchell. The first pages of the deed and note returned to Ms. Mitchell contained stamps reading “CANCELLED AND SATISFIED IN FULL without 4 recourse” dated July 15, 2005 and signed by “Fremont Investment & Loan, Lizbeth Stokes, Vice President.” Evidently satisfied that she would receive the fixed-rate mortgage according to the terms of her contract, Ms. Mitchell began making fixed-rate payments on the loan and continued making payments until she defaulted in January 2013.

The Substitute Trustees argued on appeal during the first round that the “record supported” the supposition that the parties did not intend to cancel the note or deed of trust but, instead, agreed to alter the interest rate (from variable to fixed). After we remanded the case, however, they shifted their theory altogether and argued during the evidentiary hearing, and now on appeal, that the loan was never modified or cancelled. They now claim that after Ms. Mitchell defaulted, and foreclosure was imminent, she conjured her story and the supporting documents.3 3 The Substitute Trustees also accuse Ms. Mitchell of changing her account of what happened at the closing. They point out that, although Ms. Mitchell initially stated in her affidavit that the loan documents filed with the order to docket were identical to those that she signed at the closing, “except for removal of the void markings placed upon them,” at the subsequent evidentiary hearing, she denied signing the loan documents contained in the Substitute Trustees’ file.

They aver that the documents filed in the land records were copies of the loan documents contained in their file and, therefore, that Ms. Mitchell changed her story. As revealed in more detail below, Ms. Mitchell contended her signature must have been forged and sought to introduce expert testimony to prove it. She also admitted during her testimony, however, that she may not have collected all of the documents that she signed at the closing, and the trial court concluded that the version contained in the Substitute Trustees’ file must have been a set that was never voided per her instruction. 5 Procedural History In August 2015, the Substitute Trustees filed an order to docket the foreclosure in the Circuit Court for Prince George’s County. The order to docket contained copies of a note and deed of trust that included an adjustable-rate rider.

None of the documents bore any void or cancellation marks. As required by Maryland Rule 14-207, the order to docket contained affidavits attesting that the note and deed of trust were true and accurate copies. Ms. Mitchell filed a motion to stay the sale and dismiss the foreclosure on the ground that the order to docket did not contain copies of a valid and enforceable note or deed of trust. The Substitute Trustees opposed Ms. Mitchell’s averments.

The motion was denied without a hearing, and Ms. Mitchell appealed. In the prior appeal, in which the Substitute Trustees argued that the mortgage had been converted to a fixed-rate loan, we noted, upon close examination of the documents in the record, that on July 14, 2005, an adjustable-rate note and deed of trust were filed in the land records for Prince George’s County. Mitchell, 232 Md. App. at 626 . The documents—filed just three days after Ms. Mitchell terminated the closing—did not have any “VOID” stamps on them; rather, “both documents donned new stamps reading simply ‘REDACTED.”’ Id. at 627 .

We determined that Ms. Mitchell had presented a “facially valid defense to the foreclosure” that the instruments were forged and remanded the case. Id. at 641 . On remand, the Substitute Trustees first moved for limited discovery in advance of the hearing “to test or challenge the validity and veracity of the documents” that Ms. 6 Mitchell attached to her motion to dismiss. During the evidentiary hearing, however, counsel for the Substitute Trustees confirmed, not once, but twice, that proceeding directly with a full evidentiary hearing was “fine” and confirmed that in counsel’s view their motion for discovery was then “moot.” The “summary” evidentiary proceeding before Judge Mittelstaedt ended up taking nine days and concluded on August 20, 2019.

Ms. Mitchell and her real estate agent, Ms. Paula Kearney, testified that Ms. Mitchell had contracted for a 30-year fixed mortgage, but, at the closing, voided the documents that she had signed upon discovering that the loan documents were for an adjustable-rate mortgage. Of the individuals who were present at the closing, only Ms. Mitchell and Ms. Kearney testified at the evidentiary hearing. Ms. Mitchell explained that she sent a letter to Fremont and received confirmation that it had cancelled the variable-rate loan and “adjusted” the transaction to reflect the conventional, fixed-rate loan. Witnesses for the Substitute Trustees testified that they were unable to locate any voided loan documents or related correspondence that would support Ms. Mitchell’s account.

According to the Substitute Trustees, the closing proceeded without incident, and Ms. Mitchell fabricated her account because it was not supported by any documentation in the servicer’s file or in the title agent’s file. The Substitute Trustees presented the testimony of an expert who opined that the loan instruments contained in the servicer’s file, copies of which were filed in the land records, contained the genuine signature and initials of Ms. Mitchell. 7 During the February 4, 2019 hearing, Ms. Mitchell moved, for the first time, for permission to present the testimony of a forensic document expert. The court denied the motion as untimely. At the conclusion of the evidentiary hearing, the court asked the parties to submit proposed findings of fact and conclusions of law in lieu of closing arguments.

The Substitute Trustees then requested the court to consider an equitable mortgage in its submission. In her follow-on opinion and order, signed on September 5, 2019, Judge Mittelstaedt dismissed the foreclosure action and recited the basis of her decision in meticulous detail. BACKGROUND A. The Closing On June 8, 2005, Ms. Mitchell signed a sales contract listing the purchase price for the Property at $555,900.00. The sales contract lists a first loan of $444,720.00, and a second loan valued at $111,180.00—both at fixed rates and secured by deeds of trust.

In her affidavit filed in support of her motion to dismiss, Ms. Michell related that, at the closing held on July 11, 2005, she noticed, contrary to the terms of the sales contract, that the promissory note contained an adjustable interest rate and the deed of trust contained an adjustable-rate rider. She also “noted irregularities in the payments, interest rates and Truth and Lending [sic], and other documents.” Ms. Mitchell reported the error to her realtor, Ms. Kearney, and to the settlement agents who were present, identified by Ms. Mitchell as Barbara Licon and Philip Sardelis. 8 Ms. Mitchell refused to sign any more documents and requested that the closing be terminated. Although the settlement agents agreed to terminate the closing, they told Ms. Mitchell that they had to “retain any signed documents and later shred them.” Consequently, Ms. Mitchell requested that they stamp a “VOID” mark on each page of each document that she signed. Ms. Licon “then stamped ‘VOID’ on each document, including the Adjustable Rate Promissory Note, Deed of Trust and HUD-1, and placed her initials next to each ‘VOID’ stamp on the cover pages of the Adjustable Rate Promissory Note, Deed of Trust and HUD-1 documents.” Ms. Mitchell also placed her initials beside each “VOID” stamp.

Ms. Mitchell also wrote a note on one of the documents which read: “I requested this copy of Voided documents with Barbara Licon signature of Void [sic]. My Realtor is present to witness. We are to come back tomorrow to execute corrected documents. I have requested Fremont provide me a letter acknowledging cancellation of this debt loan, Deed + promissory note.

RM[.]” Ms. Mitchell attested to subsequent correspondence with Fremont, copies attached to her affidavit, starting with the following letter that she sent to Fremont on the day of the closing: I am requesting that you immediately cancel my loan and return all monies due back to me based on the Loan Documents, executed by Sandler Title & Escrow, LLC on behalf of Fremont Investment & Loan, not reflecting my sales contract[.] Upon my review of the signed loan documents prepared by Barbara Licon from Sandler Title & Escrow, LLC . . . [t]he loan package was not explained very well and was rushed. I saw many errors in the loan package mid-way through the closing and stopped the closing. Ms. Licon stated that they would correct the documents and I must immediately contact Fremont 9 Investment & Loan directly and cancel the original loan documents, which she kept in her possession, claiming she would have to shred. I kept the blank documents and requested her to draw a void line across each one.

None of the second copy documents have my signature and I am very uncomfortable with leaving the original documents for her to shred but she states this is a normal procedure. My realtor Paula [Kearney][4] was a witness to this conversation between Ms. Licon and me as was the notary Mr. Phillip Sardelis who also signed the documents as we went through them. Both can also verify that I requested the documents to this loan be destroyed. . . . The loan terms are: 1st Mortgage 30 year conventional firm fixed at an interest rate of 6.200% 2nd Mortgage 30 year conventional firm fixed at an interest rate of 9.125% Please advise on what the next course of action is to provide new accurate loan documents for review and signatures.

Again, this is my official notice to cancel the original Adjustable Rate loan documents that I did not agree to purchase and were not accurate based on the attached documents for the property at . . . [.] Fremont responded by letter on July 12, 2005, acknowledging receipt of Ms. Mitchell’s request to cancel her loan. Fremont agreed to cancel the loan “transaction” and indicated there was a “new transaction” that was adjusted to provide the “proper loan requirements.”5 4 At the time of closing in 2005, Ms. Kearney’s last name was Haynes. She has since changed her marital status and last name to Kearney. 5 The text of this letter read in pertinent part: After review of your loan and our acknowledgement of: ERRORS AND OMISSIONS IN PROCESSING YOUR LOANS, REVIEW OF YOUR SALES CONTRACT, FIRST COMMUNITY MORTGAGE UNIFORM RESIDENTIAL LOAN APPLICATION, HUD- 1 AND YOUR INTENTION TO OBTAIN A CONVENTIONAL 30 YEAR FIXED RATE LOAN. (Continued) 10 On the that same day, Fremont issued two additional notices to Ms. Mitchell.

The first affirmed that, “[a]s of the date of this Notice, the principal loan balance that is owed to Fremont Investment & Loan for 444,728.00 AT 8.6770% ANNUAL PERCENTAGE RATE AS REFLECTED ON THE FEDERAL TRUTH-IN-LENDING DISCLOSURE STATEMENT IS CANCELLED AS OF THE ABOVE REFERENCED DATE.” (Emphasis in original). The second notice stated that Ms. Mitchell’s loan was converted to a conventional fixed-rate loan: As of the date of this Notice, the principal loan balance that is owed to Fremont Investment & Loan for 444,728.00 AT 6.200% 360 MONTHS CONVENTIONAL FIXED RATE FULLY AMORTIZING LOAN. In addition, we would like to advise you that you have thirty (30) days after receipt of this Notice to dispute the validity of the above debt, or any portion thereof. If you do not do so, the debt will be assumed to be valid.

If you canceled[,] notify us in writing within this thirty (30) day period that you dispute the debt, or any portion thereof, we will obtain and mail to you verification of the debt. Furthermore, you have thirty (30) days after the receipt of this Notice to request the name and address of the original creditor, if different WE HAVE CANCELLED THIS TRANSACTION, THE MORTGAGE, LIEN OF SECURITY INTEREST IS ALSO CANCELLED AND WE HAVE ADJUSTED THE NEW TRANSACTION TO REFLECT THE PROPER LOAN REQUIREMENTS. Within 20 calendar days we must take the steps necessary to reflect that fact that the mortgage/lien/security interest on your home has been cancelled. You may keep any money or property we have given you until we have done the things we mentioned above, but you must then offer to return the money or property.

If it is impractical or unfair for you to return the property, you must offer its reasonable value. You may offer to return the property at your home or at the location of the property. Money must be returned at the address below. If we do not take possession of the money or property within 20 calendar days of your offer, you ma[]y keep it without further obligation. 11 from the current creditor.

Upon receipt of a written request from you within the thirty (30) day period, we will provide you with the name and address of your original creditor. (Emphasis in original). No new loan documents were executed. On July 15, 2005, Fremont returned the deed of trust and note—bearing the “VOID” marks and Ms. Mitchell’s handwritten note—to Ms. Mitchell.

Significantly, the first pages of the deed and note sent to Ms. Mitchell bear stamps reading “CANCELLED AND SATISFIED IN FULL without recourse” followed by a signature line dated July 15, 2005. Although it takes some deciphering, the signature line on the stamp reads “Fremont Investment & Loan, Lizbeth Stokes, Vice President.” Servicing of the loan was transferred from Fremont to HomeEq. in 2005 and then from HomeEq. to Ocwen Loan Servicing, LLC (“Ocwen”) in September of 2010. The loan itself was transferred from Fremont to U.S. Bank (“USB”). After the loan servicing responsibilities were transferred to Ocwen in the fall of 2010, Ms. Mitchell received written notice from Ocwen that her mortgage, on which she had been making payments at a fixed rate for the last five years, was actually an adjustable-rate loan.

Ms. Mitchell testified later at the evidentiary hearing, that in response, she called Ocwen and informed Ocwen that the interest rate was incorrect. Ms. Mitchell then sent an email to Ocwen on October 14, 2011, requesting Ocwen make an “adjustment to the mortgage rate.” In addition, Ms. Mitchell testified to sending correspondence but not receiving a satisfactory response. Finally, at Ocwen’s urging, Ms. Mitchell sent a “qualified written requests” for information. In total, Ms. Mitchell 12 sent six requests.

In her third, dated November 17, 2014, Ms. Mitchell sought copies of the loan documents, among other things, to understand “what I was paying for, who I was paying it to, and what the issues were” and “why [Ocwen] w[as] claiming I had an [adjustable-rate mortgage] when clearly I did not.” B. Foreclosure Proceedings On January 1, 2013, Ms. Mitchell failed to make a payment on the loan and continued to miss installment payments each month thereafter, according to the affidavit of default and indebtedness executed by an agent for Ocwen. 1. Notice of Intent to Foreclose On October 10, 2014, the Substitute Trustees, acting for USB, sent a notice of intent to foreclose to Ms. Mitchell. On August 24, 2015, the Substitute Trustees filed an order to docket foreclosure in the Circuit Court for Prince George’s County. As required by Maryland Rule 14-207, the order to docket foreclosure contained copies of a note and deed of trust as exhibits, which, as described above, revealed that 10 years earlier, a deed of trust was filed in the land records for Prince George’s County on July 14, 2005—just three days after the allegedly terminated closing.

As further required by Rule 14-207, the order to docket contained an affidavit, executed by the servicing agent, stating that the deed of trust is a “true and accurate copy.” Another affidavit, this one executed by Robert E. Frazier, affirmed the same, adding, “If applicable, any personal and/or private information has been redacted as noted on the document.” The Substitute Trustees also filed an affidavit of default and indebtedness, stating that, as of June 25, 2015, Ms. Mitchell owed $478,879.94. 13 2. Motion to Dismiss On September 25, 2015, before the Substitute Trustees filed the final loss mitigation affidavit, Ms. Mitchell, representing herself, filed a “Motion to Dismiss for Improper Service and Motion to Stay Sale and Dismiss Action for Failure to State a Claim” under Maryland Rule 14-211. In the motion, Ms. Mitchell asserted that the foreclosure action should be dismissed on several grounds. First, she stated that she was not served properly.

In regard to the order to docket, she argued that: (1) it did not include a copy of a valid and enforceable note or deed of trust because the note and deed of trust were voided; (2) the Substitute Trustees and USB failed to plead that they owned or held the note and deed of trust; and (3) the note was non-negotiable, and the indorsement was invalid. The Substitute Trustees filed an opposition, arguing that Ms. Mitchell was served properly and that the note and deed of trust were valid. They asserted that the loan documents had not been cancelled, but rather, “Fremont gave [Ms. Mitchell] a fixed[- ]rate mortgage” after the closing. They claimed that this was consistent with the fact that Ms. Mitchell never returned the proceeds of the loan and made consistent payments for almost eight years.

On February 11, 2016, the circuit court, without a hearing, entered an order denying Ms. Mitchell’s motion. Ms. Mitchell noted a timely appeal to this Court. 3. First Appeal On appeal before this Court, the Substitute Trustees averred, as they did in their opposition to the motion to dismiss, that there was a “modification of the adjustable 14 interest rate mortgage to a fixed[-]rate mortgage” and that “Ms. Mitchell and Fremont agreed to modify the interest rate (from an adjustable interest rate to a fixed[-]rate mortgage) but did not cancel the Note and Deed of Trust.” The Substitute Trustees summarized in their brief: In short, the record suggests that the parties did not intend to cancel the Note or Deed of Trust. Rather, Ms. Mitchell and Fremont agreed only to modify the interest rate.

We determined that the note and first deed of trust filed in the land records for an adjustable-rate mortgage, with “redacted” stamps and no void stamps, “suggest forgery,” and that “Ms. Mitchell’s Rule 14-211 motion to stay the sale and dismiss the action stated a facially valid defense to the foreclosure.” Mitchell v. Yacko, 232 Md. App. 624, 627 (2017). We explained that, as required by Maryland Rule 14-211, “Ms. Mitchell in her motion not only asserted that the lender and its successors ‘fraudulently attempt[ed] to assert rights that they did not possess,’ but she also attached materially altered documents evidencing ‘the fraudulent making of a false writing having apparent legal significance.’” Id. at 643 (quoting Smith v. State, 7 Md. App. 457, 460 (1969)). We held that “a party cannot institute a foreclosure upon forged documents. Foreclosure is an equitable procedure, and the Substitute Trustees must demonstrate, upon remand, that this particular foreclosure has not ‘be[en] marred by [] fraudulent, illegal, or inequitable conduct.”’ Id. at 641 (quoting Wells Fargo Home Mortg., Inc. v. Neal, 398 Md. 705, 730 (2007)).

Accordingly, on May 31, 2017, in a reported opinion, we vacated the judgment and remanded the case for a hearing on Ms. Mitchell’s motion to dismiss. Id. at 627. 15 4. Request for Limited Pre-Hearing Discovery On remand, the Substitute Trustees filed a motion requesting “limited discovery in the form of no more than ten (10) document requests and a maximum of two (2) depositions” in advance of the hearing on Ms. Mitchell’s motion. In support of their motion, the Substitute Trustees averred: In order to adequately defend themselves, and in order to test or challenge the validity and veracity of the documents that [Ms. Mitchell] presented to the [circuit court] with the Motion to Dismiss, which are solely in [Ms. Mitchell]’s possession, as well as the story of the events [Ms. Mitchell] alleges took place back in 2005, the Substitute Trustees require limited discovery.

Ms. Mitchell, through counsel, opposed on the ground that discovery is “not permitted by the rules or case law.” Specifically, citing to Maryland Rule 14- 211(a)(3)(C) and Wells Fargo Home Mortgage, Inc. v. Neal, 398 Md. 705, 726 (2007), Ms. Mitchell averred that “Title 14 of the Maryland Rules includes a special exception to the policy of Maryland law to expedite mortgage foreclosures by permitting a Defendant to request documents – strictly pursuant to a Defendant’s Motion to Dismiss.” The court heard argument on the applicability of discovery in a proceeding under Maryland Rule 14-207(a)(1). As set out further in the discussion below, the court denied the motion as moot after the parties agreed to proceed with an evidentiary hearing. 16 5. Evidentiary Hearing The evidentiary hearing extended over nine days during a two-year period.6 a. Ms. Mitchell’s Case Ms. Mitchell’s Testimony On November 21, 2017, after opening arguments, Ms. Mitchell testified first.

She explained that she provided instruction to her real estate agent, Ms. Kearney, to finance the purchase with a 30-year fixed-rate mortgage and provided a budget. At the closing, once the notary arrived, Ms. Mitchell began to sign the documents that were presented to her. She was informed that she was signing with the wrong color pen and changed to a blue pen. Then, she realized that one document “had the ARM [adjustable-rate mortgage] annotated on it” instead of the 30-year-fixed rate that she anticipated.

Ms. Mitchell notified the individuals at the settlement that “[t]hese were [the] wrong documents” and advised that she would not continue with the settlement. Ms. Mitchell further testified: Well, at first I started gathering all the documents. So, she said I couldn’t have all the documents. So, that got me uncomfortable, and so I requested that she put a void stamp on the documents because they – I was – I had signed documents.

And she told me that I would need to send a copy to [Fremont] right away and that she would be calling [Fremont] to let them know of the error. ***** So, I take the documents. I had her sign them, myself sign them and then I took that copy. I had to leave a copy, which made me a little 6 When initially discussing the amount of time needed for the evidentiary hearing, the court noted that “I want to keep [the hearing] in the context at which [Rule 14-211] is designed for. This isn’t going to be a trial.

I don’t want that.” 17 uncomfortable, but Paula and Barbara both concurred, along with the notary, that they had to keep possession and shred it. Ms. Mitchell explained that “I annotated that conversation on my documents, because it made me uncomfortable.” Ms. Mitchell’s counsel then introduced into evidence what Ms. Mitchell believed was her “complete copy of [her] settlement documents.” The first exhibit was the “Regional Sales Contract.” Paragraph 7 of the contract indicated that “Purchaser will obtain a Conventional First Deed of Trust loan amortized over 30 years at a FIXED rate bearing interest of 6.20% per year[.]” The next set of documents introduced into evidence were the “Uniform Residential Loan Applications.” The first application, for Ms. Mitchell’s first deed of trust, was an application for a conventional fixed-rate loan in the amount of $444,728 at an interest rate of 6.2%. The second application was for a conventional fixed-rate loan in the amount of $111,180.00 at an interest rate of 9.125%. Ms. Mitchell also produced copies of the voided loan documents that she and the settlement agent struck through, as well as the “Notice to Cancel Loan” dated July 11, 2005, that she sent to Fremont.

According to Ms. Mitchell, the letter’s purpose was to inform Fremont of “what happened at the closing” and to inform them “that [she] did not intend for the adjustable[-]rate loan” and would need it corrected. The Notice to Cancel stated, in relevant part: Ms. Licon stated that [Sandler Title & Escrow] would correct the documents and I must immediately contact Fremont Investment & Loan directly and cancel the original loan documents, which she kept in her possession, claiming she would have to shred. I kept the blank documents 18 and requested her to draw a void line across each one. None of the second copy documents have my signature and I am very uncomfortable with leaving the original documents for her to shred but she states that this is a normal procedure.

The three letters from Fremont dated July 12, 2005, were introduced next. Ms. Mitchell testified that the first was a letter (set out above) cancelling the loan; the second was a “NOTICE” from Fremont, also cancelling the loan; and the third thanked her for cancelling the transaction and advised that the mortgage was converted to a conventional fixed-rate loan and that she would “receive a response within ten business days under separate cover.” Ms. Mitchell affirmed that these letters were “a series of communications between [her] and [Fremont] . . . [i]ndicating an agreement . . . to cancel the note and deed of trust.” Ms. Mitchell further testified that the third “adjusted the new transaction to reflect the proper loan requirements.” Due to time constraints, the circuit court was required to reset the hearing. When Ms. Mitchell resumed her testimony on July 25, 2018,7 she explained that she thought she had reached an agreement with Fremont that “they were giving me the loan that I had a sales contract for,” and that Fremont had cancelled the adjustable-rate note. Ms. Mitchell introduced three “audit letters” that she claimed Fremont provided her in December of 2005, 2006, and 2007.

Ms. Mitchell testified that the letters confirmed that she had elected a fixed-rate loan. 7 For scheduling reasons, Ms. Kearney testified before Ms. Mitchell resumed her testimony on July 25. 19 Ms. Mitchell testified that she was first alerted to problems with the loan when she received a letter from Ocwen that it was now servicing the loan and that the loan was adjustable. In response, Ms. Mitchell submitted letters to Ocwen to clarify the terms of her first deed of trust. Ocwen responded by letter on April 27, 2016. The letter enclosed copies of the pertinent closing materials and notified Ms. Mitchell that “the loan still reflects past due” and is “in foreclosure.” Ms. Mitchell testified that she did not sign the documents provided by Ocwen and included in the Substitute Trustees’ order to docket.

On cross-examination, Ms. Mitchell confirmed that, notwithstanding the failure to close, the prior owners moved out of the residence, and Ms. Mitchell moved in. When questioned by counsel whether she ever received a deed for the Property, Ms. Mitchell testified: The documents that I have from the settlement, when [Fremont] sent me the errors and omissions letters stating that they were adjusting the note to the deed, in my knowledge, that’s what I had. No one ever sent me any other documents. Ms. Mitchell also clarified, after she saw the video-taped image of Barbara Licon, that she was mistaken because Ms. Licon was not the settlement agent who was present at the closing.

She explained that “someone, for some reason, was at the closing and identified themselves as Barbara [Licon], no it wasn’t actually Barbara [Licon].” Ms. Mitchell reiterated that she had not signed the documents attached to the order to docket but had no idea how the documents were signed. However, Ms. Mitchell confirmed that she “didn’t gather all the documents” at the closing. Counsel directed Ms. Mitchell to the documents that the Substitute Trustees claimed were the “wet ink” 20 originals. Ms. Mitchell testified that she did not sign those documents and thought they were forged.

Counsel then questioned Ms. Mitchell about whether she created a “Cancellation Notice” and purported that it had been sent by Fremont. Ms. Mitchell denied altering any documents or creating the notice. Next, Ms. Mitchell was questioned about an email exchange between her and the Officer of the Consumer Ombudsman at Ocwen. Initially, Ms. Mitchell had written to complain about the amount of escrow and taxes that were being charged and how they were being computed.

Counsel then questioned whether Ms. Mitchell had actually complained about any change in her interest rate. Ms. Mitchell responded that she was “absolutely asking [Ocwen] how [her] interest rate changed” and that she was “complaining that [her payment] went from $2,297.76 in 2005 and now they’re asking me [her] to pay $2,872.02 in 2011.” She expounded: I didn’t understand what was going on with these documents at the time and that’s why I’m inquiring because these documents have gone through a number of people’s hands and I have a fixed[-]rate and I’m being confused of why I’m paying a different rate. And Fremont had, Fremont serviced the loan, then HomeEq serviced my loan in 2007 and then Ocwen serviced it in ’11, and I’m seeing these changes and I’m not understanding them. When presented with a copy of a check, dated July 11, 2005 (the date of the closing), in the amount of $598.55, Ms. Mitchell said she did not recall receiving the check in 2005.

Ms. Mitchell also did not recall asking Ms. Kearney whether she had received her commission, but, she stated, unequivocally (and in contravention to Ms. Kearney’s testimony), that she did not attend a second closing with Ms. Kearney after the cancelled closing on July 11, 2005. 21 Ms. Paula Kearney’s Testimony In addition to offering testimony regarding the Regional Sales Contract, Ms. Kearney testified about what happened at the closing. She confirmed that Ms. Mitchell sought a fixed-rate loan and then cancelled the closing and voided the loan documents after she determined that they were for a variable-rate mortgage. Ms. Kearney witnessed the markings that were placed on the documents and confirmed that the markings were appropriate for cancelling a mortgage. Ms. Kearney did not recall seeing any documents other than the documents marked “VOID.” While Ms. Kearney testified that Ms. Mitchell had “VOID” printed on each document that she signed, she could not recall if Ms. Mitchell signed two sets of documents, left a set, or left all of the sets at the closing.

On cross-examination, Ms. Kearney testified that she and Ms. Mitchell returned to close on the loan another day, whereupon Ms. Mitchell signed corrected documents, and Ms. Kearney received her commission check.8 David Sandler’s Testimony Mr. Sandler, a practicing attorney in Maryland, is the owner of Sandler Title & Escrow, LLC. Although the company remains a legal entity, it has not been in operation since 2011 or 2012. Mr. Sandler’s company represented Ms. Mitchell and the secured creditor at the closing, although one of his employees actually conducted the closing. The only document that Mr. Sandler “probably signed” was the recorded deed of trust.

Mr. Sandler could neither affirm nor deny that he received a copy of the letter from 8 The only loan documents in the record are dated July 11, 2005. 22 Fremont, dated July 12, 2005, cancelling the loan, because his company did not maintain a mail log. Because Mr. Sandler had documents in his possession that he brought to the hearing, the parties and court postponed his testimony to another date to allow the parties a chance to review his file. Mr. Sandler continued his testimony on February 5, 2019. Mr. Sandler confirmed that, because he was not present at the July 11, 2005 closing, he did not witness the signing of any documents.

During cross-examination, he confirmed that his company had underwriting agreements with various title insurance companies and would issue title insurance policies and conduct closings. Mr. Sandler stated that he did not know anything about Ms. Mitchell’s closing transaction aside from his file. He offered, however, that he did not see “anything out of the ordinary” besides “a check from the realtor that was written to [his] office.” In Mr. Sandler’s experience, Philip Sardelis, who conducted the closing, would bring any issues that arose at closing to his attention. Nothing in the file indicated that the loan transaction had been cancelled.

He stated that the closing file did not contain copies of the loan documents with “VOID” markings; instead, the file contained executed adjustable-rate loan documents, copies of which were attached to the order to docket. The file contained “Landtech disbursement statements,” which, Mr. Sandler clarified, reflected that there were “checks written on the date of closing and disbursed,” including, to the prior owners of the home, the lenders, the real estate agent, and Ms. Mitchell. Mr. Sandler testified that had the loan been cancelled, it would not “have been 23 the practice of [his] office to provide refund checks to the purchaser.” However, on redirect, Mr. Sandler confirmed that, in his experience, a lender could agree with the borrower to cancel a loan. Exclusion of Ms. Mitchell’s Expert Following Mr. Sandler’s testimony and before the Substitute Trustees put on their case, on February 4, 2019, Ms. Mitchell sought permission to call a handwriting expert, Katherine Koptenhaver.

The Substitute Trustees objected for three reasons: (1) the expert was only disclosed three days before the hearing date; (2) Ms. Mitchell did not serve disclosures; and (3) Ms. Mitchell did not provide a report, other than a demonstrative exhibit emailed the night before. The circuit court did not allow the Substitute Trustees’ expert to testify without providing Ms. Mitchell notice and an opportunity to review his report and depose him if necessary, and the court noted that the Substitute Trustees should have had the same opportunity. In light of the delay in identifying Ms. Mitchell’s expert, the circuit court excluded the testimony. b. Substitute Trustees’ Case Shannon Childs’ Testimony The Substitute Trustees opened their case on February 4, 2019 by calling Shannon Childs, a senior loan analyst at Ocwen.

Ms. Childs testified that Ocwen maintained records “on several different platforms.” When a loan switches from a prior servicer to Ocwen, Ocwen incorporates the prior servicer’s records. Ms. Childs testified that Ocwen received the original collateral file in 2010, which contained “the original note, the original mortgage, also bailee letters showing the file 24 tracking, . . . and a title policy[.]” According to Ms. Childs, the inclusion of the final title policy in the original collateral file indicated that the “loan had closed.” She testified that there was “not anything in the original collateral file that contains anything that indicates void, strike-throughs, [or] multiple signatures” or “anything in the original collateral file that shows that there is anything peculiar or unusual[.]” Ms. Childs also stated that none of the letters exchanged between Ms. Mitchell and Fremont were in Ocwen’s records, although they were the type of records she would expect to find there. Two of the July 2005 letters sent from Fremont to Ms. Mitchell, she said, “look[ed] strange” because the margins were not justified on one of the paragraphs. In regard to the third letter, Ms. Childs observed that the margin also was not “in-lined” to reflect that “it’s coming from a template,” and, while the document indicator denoted “CANCELLATION NOTICE TG 4/13/04” as in one of the other letters, that letter did not cancel anything.

In regard to the three audit letters, each dated after the loan was transferred to HomeEq., Ms. Childs said that, to her knowledge, there would be no reason why a prior servicer would communicate to the borrower after the release of the loan. On cross-examination, counsel for Ms. Mitchell directed Ms. Childs to explain Ocwen’s record keeping systems and how loans are “boarded.” She testified that, when a new loan is boarded, “there’s nothing in your record such as an affidavit of anyone swearing that the information coming to Ocwen is true and accurate.” Khody Detwiler’s Expert Testimony The Substitute Trustees called Khody Detwiler who was admitted, without objection, as an expert witness in the field of forensic document examination. Mr. 25 Detwiler testified that he examined four original documents, including a copy of the note and deed of trust, an affidavit, and a disclosure statement, to determine whether the documents were genuinely signed by Ms. Mitchell. Mr. Detwiler opined that the “questioned documents contain the genuine signatures and initials of” Ms. Mitchell.

On cross examination, he admitted that he had not separately met with Ms. Mitchell, but he reviewed the four original documents and performed a “common authorship examination” to verify that they were “written by a common writer.” Deposition Testimony of Barbara Licon Finally, the Substitute Trustees admitted into evidence, and played for the court, the videotaped deposition of Barbara Licon, who deposed that she was not present at the July 11, 2005 closing and had no knowledge of Sandler Title or “the loan that was closed involving the borrower Rene Mitchell.” After the Substitute Trustees concluded their case, the court granted Ms. Mitchell’s request to present rebuttal testimony. c. Ms. Mitchell’s Rebuttal