SUSAN BUCKINGHAM, CO-PERSONAL REPRESENTATIVE OF JOHN D. BUCKINGHAM, et al.,
JEFFREY B. FISHER, et al., SUBSTITUTE TRUSTEES.
Woodward, Berger, Friedman, JJ.
Maryland Rule 14-211 sets out the process for determining whether to grant or deny a motion to stay and dismiss a foreclosure sale. First, the trial court will review the motion and the record and, if it sees fit, may elect to hold an initial hearing where the trial court considers the motion and hears arguments from parties to the foreclosure proceedings. If the court determines that the motion on its face states a valid defense to the foreclosure, a temporary stay of foreclosure is entered and the second step, an evidentiary hearing on the merits of the defense, is scheduled. On the other hand, if the trial court determines that the motion does not raise a facially valid defense, it may deny the motion without holding an evidentiary hearing on the merits, thereby allowing the foreclosure sale to proceed. We are asked to consider what the pleading standard is for stating a facially valid defense that will require a trial court to move to that second step of holding a hearing on the merits.
John and Elizabeth Buckingham were husband and wife who resided at 17 Darby Court, in Bethesda, Maryland. They owned the property as tenants by the entireties. On September 11, 1997, the Buckinghams purportedly executed a refinance deed of trust ("1997 deed of trust") for the benefit of Virginia Commerce Bank. The 1997 deed of trust secured a $600, 000 debt owed under a prime equity line agreement and disclosure with Virginia Commerce Bank, and was recorded in the Montgomery County land records on October 9, 1997. The 1997 deed of trust was modified on several occasions during the subsequent years: on June 15, 1999; on November 25, 2005; on March 26, 2006; and on June 30, 2006. Each modification acknowledged the original 1997 loan and deed of trust.
The Buckinghams defaulted on November 16, 2010, by failing to make the payments due under the modified loan agreement. Virginia Commerce Bank sought to foreclose the deed of trust and appointed the appellees in this case as Substitute Trustees ("Trustees"). On December 7, 2011, before the Trustees initiated the foreclosure action, Elizabeth died, leaving John as the surviving tenant by the entireties. The Trustees filed an Order to Docket Suit in the Circuit Court for Montgomery County on September 6, 2012, seeking to foreclose the deed of trust based on the November 2010 default. John Buckingham was the sole named defendant as the surviving tenant by the entireties and sole owner of the property at 17 Darby Court. But due to John Buckingham's poor health, he was no longer capable of acting for himself in legal proceedings. Therefore, the Order to Docket Suit was served on John's son, David Buckingham, who had been appointed as the guardian of his father's property.
John died on October 17, 2012, shortly after the foreclosure action was filed against him. After John's death, two of his other children, Richard and Susan Buckingham ("the Buckinghams") were appointed as the co-personal representatives of John's estate. The Trustees amended the Order to Docket Suit on July 11, 2013, to reflect the fact that John Buckingham had died and that the subject property was no longer owner-occupied, as well as to join Richard and Susan Buckingham as the personal representatives of John's estate.
A foreclosure sale was scheduled for December 19, 2013. Richard Buckingham received notice of the foreclosure sale on December 5, 2013. On December 18, 2013, Richard and Susan Buckingham filed a Motion to Stay Sale of Property and Dismiss Foreclosure Action, pursuant to Rule 14-211. They sought a temporary stay of the sale and dismissal of the foreclosure action, challenging the validity of the 1997 deed of trust and the Trustees' right to foreclose. The Buckinghams alleged that their mother, Elizabeth's signature on the 1997 deed of trust was a forgery.
Elizabeth's signatures on the lien instruments attached to the Order to Docket are not hers and are forgeries, thereby rendering the lien instruments void ab initio and unenforceable. The Affidavit of John W. Hargett, III, a forensic document examiner, expressing his expert opinion that there is a strong possibility that Elizabeth S. Buckingham did not sign these lien instruments, is attached hereto.
In addition to this forgery defense, the Buckinghams also alleged that the notice of sale was insufficient to inform interested parties of the details of the foreclosure sale because it conflicted with the Order to Docket Suit in terms of the lien instrument upon which the foreclosure sale was based. The Buckinghams argued that (1) the notice of sale listed the 1999 modification to the 1997 deed of trust, rather than the 2006 modification referenced in the Order to Docket Suit, as the instrument being foreclosed upon, and (2) the notice of sale stated that the foreclosure sale was proceeding pursuant to an instrument executed by "John D. Buckingham, c/o David T. Buckingham, as Guardian for Person and Property, " but that John was not under guardianship at the time the instrument was obtained. Additionally, the Buckinghams claimed that notice was not served on counsel, Christopher Fogelman, despite the fact that Fogelman had been their counsel of record for over a year. The Buckinghams claimed that they had not been aware of the scheduled sale until Richard received the notice by mail on December 5, 2013.
An initial hearing on the Buckinghams' motion was held in the Circuit Court for Montgomery County on the day it was filed. The circuit court heard arguments from the Buckinghams and the Trustees and, at the conclusion of the arguments, denied the Buckinghams' motion without scheduling a hearing on the merits. The circuit court ordered the Trustees to reschedule the sale and to provide Fogelman with all filings to cure the lack of service. The sale was rescheduled for January 30, 2014 and the property was sold on that date for $1.4 million.
We are asked to determine whether the trial court properly denied the Buckinghams' motion to stay and dismiss the sale, or whether Maryland Rule 14-211 required the circuit court to first hold an evidentiary hearing on the merits of the asserted defenses. We will begin by analyzing Rule 14-211 and considering what the proper pleading standard for stating a facially valid defense is under the rule. Next, we will look at the forgery defense asserted in the Buckinghams' motion and determine whether their motion stated a facially valid defense that required the trial court to hold a hearing on the merits. Finally, we will consider whether the defense related to defective notice asserted in the Buckinghams' motion required a hearing on the merits.
I. Maryland Rule 14-211
This case centers on the application of Rule 14-211, which allows an interested party to a scheduled foreclosure sale the right to file a motion to stay the sale and dismiss a foreclosure action. Rule 14-211 went into effect in May of 2009. This Court has explained the purpose of the rule, quoting a letter from the Rules Committee to the Court of Appeals, which stated:
A number of significant changes are recommended to the Rule governing a stay of the sale (proposed Rule 14–211). The Rules Committee proposes to detach that procedure from the Rules governing injunctions and to deal with it in a Rule specific to foreclosure sales. The Rule attempts to strike a fair balance by providing borrowers and others with sufficient standing, who have a legitimate defense to the foreclosure, a reasonable and practical ...