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Mitchell v. Yacko

Court of Special Appeals of Maryland

May 31, 2017

RENE MITCHELL
v.
KEITH YACKO, et al.

          Nazarian, Leahy, Friedman, JJ.

          OPINION

          LEAHY, J.

          The unscrupulous mortgage transaction in this case unfolded when Rene Mitchell ("Appellant") sought a fixed rate loan for the purchase of a residential property and executed a sales contract specifying the same. At the closing a month later, Ms. Mitchell, to her surprise, realized that the loan documents she had just executed were actually for an adjustable rate mortgage. She halted the closing, had the word "VOID" stamped on all executed documents, and informed the lender of the error and requested acknowledgment of cancellation in writing. Several days and notices later, the lender sent Ms. Mitchell a notice stating that her loan had been modified to a fixed rate loan at 6.2% interest. Ms. Mitchell was apparently satisfied with this and made payments on the loan for nearly eight years after moving into the residence. No new loan documents were executed.

         Ms. Mitchell defaulted in January 2013, and in August 2015, substitute trustees for the current loan servicer, Keith M. Yacko, Robert E. Frazier, Thomas J. Gartner, Jason L. Hamlin, Glen H. Tschirgi, and Gene Jung ("Appellees" or "Substitute Trustees"), filed an order to docket a foreclosure in the Circuit Court for Prince George's County. Ms. Mitchell filed a motion to stay the sale and dismiss the action, arguing, inter alia, that the order to docket did not contain copies of a valid and enforceable note or deed of trust. After her motion was denied without a hearing, Ms. Mitchell appealed.

         A close examination of the documents in the record reveals that on July 14, 2005- three days after Ms. Mitchell terminated the closing-the adjustable rate deed of trust was filed in the land records for Prince George's County with the "VOID" marks excised. This document, devoid of all "VOID" marks, was attached as an exhibit to the 2015 order to docket filed 10 years later. Also, appearing for the first time was a copy of the Adjustable Rate Note that Ms. Mitchell signed at the closing, with the "VOID" stamps removed. In place of the "VOID" stamps, both documents donned new stamps reading simply "REDACTED."

         Ms. Mitchell raises four questions in her appeal, but the first is dispositive: "Did the Circuit Court err in failing to dismiss the foreclosure action because the Note and Deed of Trust in the Order to Docket are not valid and enforceable?"[1] We hold that a foreclosure proceeding cannot be instituted upon forged documents. The aforementioned documents-clearly false and materially altered to look genuine-suggest forgery, [2] and equitable relief is not available to a party with unclean hands. Ms. Mitchell's Rule 14-211 motion to stay the sale and dismiss the action stated a facially valid defense to the foreclosure. As such, the circuit court erred in denying the motion without a hearing. We vacate the court's order and remand for a hearing.

         BACKGROUND

         A. Closing the Closing

         In June 2005, Rene Mitchell decided to purchase residential property located at 9003 Harness Way in the City of Bowie, Maryland ("the Property") from Maria and Harold J. Moxley. On June 8, 2005, Ms. Mitchell signed a sales contract, listing the purchase price at $555, 900.00.

         Ms. Mitchell desired to finance the purchase with a fixed rate 30-year mortgage from Fremont Investment and Loan ("Fremont").[3] According to an affidavit she filed in the underlying foreclosure action, Ms. Mitchell and Fremont had agreed to a conventional fixed rate loan, as documented by the terms of the sales contract. However, at the closing on July 11, 2005, Ms. Mitchell noticed, contrary to her expectations and much to her surprise, that the promissory note contained an adjustable interest rate and the deed of trust contained an adjustable rate rider.

         Ms. Mitchell then informed her realtor and the settlement agents of the error, requested that the closing be terminated, and refused to sign any further documents. She also requested the return of all documents that she had signed up to that point. E. 34.

          Although the settlement agents, Barbara Licon and Philip Sardelis, agreed to terminate the closing, they told Ms. Mitchell that they had to keep the documents and shred them. Consequently, Ms. Mitchell requested that they stamp a "VOID" mark on each page of each document that she signed. Ms. Licon complied. Ms. Mitchell also wrote a note on the adjustable rate note 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 followed-up on the same day with the following letter to Fremont:

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 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 Haynes 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 me 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 9003 Harness Way, Bowie[.]

         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."[4]

         On the same day, Fremont issued two 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 would henceforth be a conventional fixed rate loan, and provided that:

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 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 cancelled documents-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 contain 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."

         B. Foreclosure Proceedings

         Ms. Mitchell lived at the Property and made consistent payments for almost eight years. On January 1, 2013, Ms. Mitchell first 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 the loan servicing company.[5]

         On October 10, 2014, the Substitute Trustees, acting for U.S. Bank, sent a notice of intent to foreclose to Ms. Mitchell. Then, 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 revealing 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 terminated closing.[6] These documents were apparently doctored, because they do not bear the "VOID" marks. Instead, the copy of the deed of trust filed with the order to docket bears the marking "REDACTED" on each page, and contains an adjustable rate rider. Similarly, each page of the adjustable rate note bears the marking "REDACTED." The note does not contain the "VOID" marks, Ms. Mitchell's handwritten note, or the lender's cancellation mark.[7]

         As further required by Maryland Rule 14-207, the order to docket contains an affidavit, executed by the servicing agent, stating that the note is a "true and accurate copy."[8] Another affidavit, this one executed by Robert E. Frazier, affirms, in pertinent part, "[t]hat [] attached hereto is a true and accurate copy of the Deed of Trust that is the lien instrument subject to this foreclosure action. If applicable, any personal and/or private information has been redacted as noted on the document." The Substitute ...


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