Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Johnson v. Nadel

Court of Special Appeals of Maryland

June 25, 2014


Page 150

Appeal from the Circuit Court for Montgomery County, Steven Salant, Judge.

Argued by: Evan V. Goitein (Sarah R. Sanger, Law Office of Evan V. Goitein, LLC on the brief) all of Bethesda, MD. for Appellant.

Argued by: Bizhan Beiramee (McGinnis, Wutscher, Beiramee LLP on the brief, and of Bethesda, MD) Jeffrey Nadel (Scott Nadel, Law Office of Jeffrey Nadel on the brief and of Calverton, MD). for Appellee.

Panel: Graeff, Kehoe, Sharer, J. Frederick (Retired, Specially Assigned), JJ. Opinion by Sharer, J.


Page 151

[217 Md.App. 457] Sharer, J.

In this mortgage foreclosure case, John S. Johnson, Jr., appellant, seeks to overturn the Order of the Circuit Court for Montgomery County that overruled his exceptions to the foreclosure sale of his property. Jeffrey Nadel, and others, appellees, are the substitute trustees under the purchase money deed of trust that had been executed to secure appellant's obligation on the residential loan.

At issue is whether the circuit court erred by overruling appellant's exceptions to the foreclosure sale and the trustees' report of that sale. Appellant complains that the substitute [217 Md.App. 458] trustees violated their fiduciary duty in connection with the foreclosure sale.[1]

We are not persuaded by appellant's arguments, and shall affirm.


The salient facts are largely undisputed. In 2007, appellant purchased improved property located at 12800 Timber View Court in Silver Spring, Montgomery County. To effect this transaction, appellant borrowed $696,500, as shown by a promissory note in favor of the lender, Guaranteed Rate, Inc. This promissory note was in turn secured by a purchase money Deed of Trust and Note, dated April 30, 2007.[2] The Deed of Trust

Page 152

contained a power-of-sale provision.[3] On October 27, 2011, the Note and Deed of Trust were assigned to U.S. Bank Trust, N.A. On October 31, 2011, the current substitute trustees were appointed.

[217 Md.App. 459] Appellant defaulted under the Note and the Deed of Trust in early 2010, and on November 28, 2011, the substitute trustees initiated the instant residential foreclosure action by filing an Order to Docket Foreclosure in the Circuit Court for Montgomery County.[4] See generally Md. Code (1974, 2010 Repl. Vol., 2011 Supp.), § 7-105.1 of the Real Property Article (" RP" ) (residential property foreclosure procedures); Md. Rule 14-204.

On December 26, 2011, appellant requested foreclosure mediation. See RP § 7-105.1. This process appeared to bear fruit, for the parties agreed to stay the foreclosure action for 60 days to permit appellant to secure a purchaser. By agreement, the lender placed the foreclosure " on an internal hold for 60 days to allow the Borrower to pursue a short sale and other loss mitigation options."

After this interval passed without an accord, however, the substitute trustees invoked the power-of-sale provision of the Deed of Trust and scheduled the foreclosure sale for June 18, 2012.[5] On June 15, appellant moved to stay, or, in the alternative, to dismiss, the foreclosure action. See Md. Rule 14-211(a)(2). In support of his motion, he claimed that a short sale " will secure the best obtainable price under the circumstances and further the strong preference in Maryland to avoid foreclosures."

Appellant's motion for a stay was driven by the presence of two proposed contracts of sale. The first, submitted on June 9, 2012, offered $601,000. The offer required that the sale was to be free and clear of " liens and encumbrances." The second proposed contract, in the amount of $550,000, also required that the property be " free of liens except for any loans [217 Md.App. 460] assumed by Purchaser." Both of these proposals were executed by appellant, but had not been approved by the lender. Although each proposal insisted that the sale must be free and clear of any encumbrance, neither proposal mentioned approval by a junior lienholder or the existence of an Internal Revenue Service tax lien.

The circuit court denied appellant's motion as untimely, see Md. Rule 14-211(a)(2), and the foreclosure sale was held on June 18, 2012, as scheduled. The property was sold to the lender, the " highest and successful" bidder, for $617,605, an amount in excess of appellant's first two " offers." On June 27, 2012 the substitute trustees filed their Report of Sale. Appellant sought to overturn the sale, and on July 25, 2012, noted exceptions to the sale and report pursuant to Md. Rule 14-305(d), claiming for the first time that he had secured yet a third proposed contract for a short sale of the property, with an offer in the amount of $650,000.

Page 153

This late offer had been submitted on June 13, 2012, but was not brought to the attention of the substitute trustees until after the sale. As with the other bids, this proposed contract also required that the property be free and clear of liens, and gave the offeror the right to withdraw the contract if this condition were unmet. The offeror on this third contract was the same individual who had presented the first ($601,000) offer. Similarly, the third offer did not provide for the IRS lien, the presence of a second deed of trust, or any other encumbrances.[6] Moreover, this offeror failed to demonstrate that he had the funds to provide the down payment. Although appellant's lawyer was present at the sale, the offeror responsible for the eleventh-hour offer was not present.[7]

[217 Md.App. 461] At the exceptions hearing, appellant's counsel acknowledged that " [t]here is no argument that the price was inadequate." Nor was there an argument that the notice was deficient. He averred, however, that the trustees have the " duty to obtain the best possible price, even if that means withdrawing the [property] from the foreclosure sale." Referring to a trustee's standard of care as set forth in Fagnani v. Fisher, 418 Md. 371, 15 A.3d 282 (2011), Appellant's counsel continued:

And the " his own property" part is important here because the trustee has a duty not just to the bank, to make sure this property is sold. The trustee is a trustee, the same as we have trustees who sell property pursuant to a divorce decree or another matter. The trustee has an obligation to both parties.
And here, the trustee did not comply with that obligation, I'm sorry, the trustees did not comply with that obligation because there was another offer, a better offer available, $650,000. That offer was available. It could have been taken. A man of ordinary business judgment in selling his own property would not ignore a $650,000 offer, which was $50,000 above the, as the trustees note, the SDAT appraised value. And it was $75,000 above what the bank's BPO was at the time. So it was more than what could be expected to be achieved at a foreclosure sale and --

Counsel acknowledged that a trustee would not be required to entertain an offer well after the sale, but then posited:

But that doesn't mean the trustee can turn away from offers that are live offers at the time of the foreclosure sale, that are better than what can be expected to be received. And in fact in this case, was better than what actually was received through the subsequent action that the trustee took at the foreclosure sale.

Counsel emphasized that appellant would be left with a deficiency, and represented that appellant had been " speaking to both the trustee[s] prior to the sale, and [the] servicer as well." Again, counsel acknowledged that the sale fetched an " adequate price," but reiterated that " there are two different [217 Md.App. 462] standards by which the Court has to view a trustee sale." Not only must the price be adequate, he added, but it must also be the " best obtainable[.]"

The court had no quarrel with the proposition that a trustee must strive to secure the highest or ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.