Circuit Court for Montgomery County Case No. 347057
Barbera, C.J., Harrell, Battaglia, Greene, Adkins, McDonald, Watts, JJ.
We are asked, in this case, to consider the scope of this Court's decision in Maddox v. Cohn, 424 Md. 379, 36 A.3d 426 (2012). The record, as it reached this Court after issuance of a writ of certiorari, suggests that the Administrative Judge of the Circuit Court for Montgomery County may have directed a colleague, who heard what amounted to exceptions to a notice issued by the Administrative Judge proposing to dismiss the subject foreclosure action, to vacate the foreclosure sale and order a resale because the advertisement of the foreclosure sale included an impermissible fee under Maddox. The hearing judge, feeling bound by her understanding of this direction, followed suit. We conclude that the hearing judge abused her discretion in yielding deference to the Administrative Judge's apparent view.
Ordinarily, finding an abuse of discretion would lead directly to a remand for the hearing judge (or whoever might be assigned to hear this matter anew) to exercise discretion; however, this record is sufficient for us to reach the two underlying arguments regarding the scope of Md. Rule 14-207.1 and Maddox raised in this case by Appellants. Thus, we hold that the screening procedures utilized here by the Circuit Court for Montgomery County, pursuant to Md. Rule 14-207.1, are permissible. Finally, we hold Maddox inapposite to this case because here the fee was contemplated by a Maryland rule. We reverse the order vacating the foreclosure sale and remand for further proceedings.
FACTS AND LEGAL PROCEEDINGS
On 2 May 2011, Mark H. Wittstadt and Gerard Wm. Wittstadt, Jr., as Substitute Trustees under a deed of trust, initiated in the Circuit Court for Montgomery County a foreclosure action against Ethel E. Wynn and Jeffrey L. Wynn ("the Wynns"), the defaulting borrowers under the underlying deed of trust and note. The Substitute Trustees advertised the foreclosure sale of the property in a newspaper of general circulation on three occasions in late September and early October of 2011. The advertisement announced, in pertinent part, the following term of sale:
TIME IS OF THE ESSENCE. If purchaser fails to settle within the aforesaid ten (10) days of the ratification, the purchaser agrees to pay the Sub-Trustees' attorney fees of $750.00, plus all costs incurred, if the Sub-Trustees have filed the appropriate motion with the Court to resell the property.
On 17 October 2011, the property was sold at auction to the Appellant, 101 Geneva LLC, a third party purchaser, for $225, 000. On this same day, the advertisement of sale was filed. On 31 October 2011, the Substitute Trustees filed the Report of Sale and related documents.
On 24 January 2012, prior to any ratification by the Circuit Court of the foreclosure sale, Maddox v. Cohn, 424 Md. 379, 36 A.3d 426 (2012), was decided. Apparently, the Administrative Judge for the Circuit Court assumed personally, post-Maddox, the responsibility to review the papers of all foreclosure actions pending in the Circuit Court for compliance with Maddox, pursuant to the screening procedures authorized by Md. Rule 14-207.1(a). After reviewing the papers of the foreclosure action in the present case, the Administrative Judge concluded that the $750 fee included in the advertisement of sale was impermissible under Maddox and issued a notice, designated as "Notification to Plaintiff Trustee of Noncompliant Foreclosure Filing and Contemplated Dismissal" (hereinafter "Notice of Non-Compliance") on 29 February 2012. This Notice of Non-Compliance provided, in pertinent part, that the "[s]ale is invalid due to advertised demand for impermissible fees and charges per Maddox V. Cohn, Court of Appeals, January 24, 2012." The Substitute Trustees and 101 Geneva filed written responses (in the nature of exceptions) to the Notice of Non-Compliance.
A different judge of the Circuit Court presided at a hearing on 10 May 2012 to address these exceptions. The hearing judge stated, on the record, that she consulted prior to the hearing with the Administrative Judge and that "he believes it's an impermissible fee pursuant to Maddox v. Cohn." She stated that setting the case on her motions docket was a "mistake" because "[i]t is usually reviewed by, decided by [the Administrative Judge] because for the exact reason he wants consistency in these cases. And he has decided as a policy matter as he reads that case, this case would fall under the same reasoning and therefore the sale has to be rescinded." She further stated that "since that's his determination I feel bound by that, " even though she acknowledged that she thought the Substitute Trustees and 101 Geneva "do have some legitimate arguments that may be persuasive to him that this should not fall under that case. But I'm not going to make that call because he has instructed me otherwise." After the hearing concluded, an order was entered vacating the sale of the property to 101 Geneva and ordering a resale.
101 Geneva appealed to the Court of Special Appeals. On 16 November 2012, prior to any decision by the Court of Special Appeals, this Court granted a writ of certiorari based on the petition of Appellants. 101 Geneva LLC v. Wynn, 429 Md. 303, 55 A.3d 906 (2012). Because the Wynns did not participate in this case at any level, we asked the Attorney General of Maryland "to participate as an amicus curiae in this case and to file a brief on behalf of the Circuit Administrative Judge of Montgomery County as well as participate in oral arguments." On 23 July 2013 (prior to briefing or argument), the Attorney General of Maryland filed, on behalf of the Administrative Judge, a motion to vacate the decision below and remand the case to the Circuit Court for further proceedings. We denied the motion on 14 August 2013. The case proceeded with briefing and argument, with the Attorney General's Office's participation.
For purposes of condensing and simplifying the questions presented,  we reframe the questions for our possible consideration as follows:
(1)Whether the Circuit Court, in vacating the foreclosure sale without considering the parties' arguments at the motions hearing, abused its discretion?
(2)Assuming the Circuit Court abused its discretion, whether the record has a sufficient evidentiary basis for this Court to reach the merits of the underlying arguments?
(3)Whether the Circuit Court for Montgomery County's issuance of the Notice of Non-Compliance resulting from its sua sponte, post-foreclosure sale review of the pleadings and papers was proper pursuant to Rule 14-207.1(a)?
(4)Whether the Circuit Court correctly concluded that the term of sale imposing an additional fee on the successful bidder only in the event the bidder defaults is prohibited by this Court's decision in Maddox v. Cohn, 424 Md. 379, 36 A.3d 426 (2012)?
"It is well settled that a trial judge who encounters a matter that falls within the realm of judicial discretion must exercise his or her discretion in ruling on the matter." Gunning v. State, 347 Md. 332, 351, 701 A.2d 374, 383 (1997) (citing Colter v. State, 297 Md. 423, 426, 466 A.2d 1286, 1288 (1983)). "A proper exercise of discretion involves consideration of the particular circumstances of each case." Id., 347 Md. at 351, 701 A.2d at 383-84. The court's failure to exercise this discretion results in a failure to fulfill this function and "is, itself, an abuse of discretion, " G.E. Capital Mortg. Servs., Inc. v. Edwards, 144 Md.App. 449, 455, 798 A.2d 1187, 1190-91 (2002) (citing Merritt v. State, 367 Md. 17, 27, 785 A.2d 756, 762 (2001)), which "'ordinarily requires reversal.'" Gunning, 347 Md. at 351, 701 A.2d at 383 (quoting Maus v. State, 311 Md. 85, 108, 532 A.2d 1066, 1077 (1987)). See also Gray v. State, 368 Md. 529, 565, 796 A.2d 697, 718 (2002) (noting that "our cases hold that the actual failure to exercise discretion is an abuse of discretion"); Johnson v. State, 325 Md. 511, 520, 601 A.2d 1093, 1097 (1992) ("The failure to exercise discretion when its exercise is called for is an abuse of discretion.").
In determining whether the hearing judge was called upon to exercise her discretion in this case, we look to Md. Rule 14-207.1, which governs a circuit court reviewing the pleadings and papers filed in foreclosure actions for compliance with the Maryland rules and statutes. The plain language of Md. Rule 14-207.1 states that, if the court finds the papers and pleadings to be in non-compliance with the rules or statutes, the court "may" notify parties that it will dismiss the case or will issue "some other appropriate order, " unless the plaintiff shows "the papers are legally sufficient or that the deficiency has been cured." Md. Rule 14-207.1(a) (emphasis added). This language grants a circuit court discretion in these decisions. See Shepherd v. Burson, 427 Md. 541, 559-60, 50 A.3d 567, 578 (2012) (holding that the circuit court exercised properly its discretion under Md. Rule 14-207.1 to deny the motion to dismiss the foreclosure action). Moreover, the vacatur of a foreclosure sale, like the bifurcation in Turnbull, "is a judicial decision affecting the rights and interests of litigants, and, as such, it is generally within the discretion of trial judges to rule on the matter." St. Joseph Med. Ctr., Inc. v. Turnbull, 432 Md. 259, 283, 68 A.3d 823, 837 (2013). Therefore, once the exceptions to the Rule 14-207.1 Notice of Non-Compliance were assigned to the hearing judge, it was within her province to make a discretionary decision on the arguments. See Turnbull, 432 Md. at 275, 68 A.3d at 833 ("[O]nce assigned to preside over a trial, it is generally within the province of a trial judge to make discretionary decisions that affect the rights and interests of the litigants.").
Despite being vested with this discretion, the hearing judge failed to appreciate or exercise her discretion, in favor of an "unyielding adherence to [a] predetermined position, " Gunning, 347 Md. at 351, 701 A.2d at 383, and an improper deference to her understanding of the Administrative Judge's views. In this case, the record is clear that the hearing judge commenced the hearing with no intention of entertaining seriously the parties' arguments (no matter what they were), but rather indicated that she had decided prior to the hearing to defer to the Administrative Judge's opinion. Specifically, she stated, "since that's his determination [that the fee was impermissible under Maddox, ] I feel bound by that." One of the excepting parties, who was also an attorney, responded, "So it seems to me that this Court was predisposed into making that decision, " to which the judge stated, "That would be accurate." When a circuit court is vested with discretion, such predispositions are inappropriate and constitute an abuse of discretion. See id., 347 Md. at 351, 701 A.2d at 383.
Additionally, the lower court's decision to vacate the sale "was not grounded on the exercise of judicial discretion; rather the record… is clear that" the hearing judge deferred to the Administrative Judge's decision that the fee at issue was impermissible under Maddox. Id. At the hearing, the hearing judge opined that it was a "mistake" for the motions hearing to be set on her docket. She explained, "It is usually reviewed by, decided by [the Administrative Judge] because for the exact reason he wants consistency in these cases." She acknowledged that the Substitute Trustees and 101 Geneva had "some legitimate arguments, " but refused "to make that call because he [the Administrative Judge] has instructed me otherwise."
If the off-the-record colloquy between the judges occurred as the hearing judge recalled, our recent decision in St. Joseph Medical Center, Inc. v. Turnbull, 432 Md. 259, 68 A.3d 823 (2013), would be on point. An administrative judge may not infringe ...