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Anand v. O'Sullivan

Court of Special Appeals of Maryland

August 30, 2017

CHANDRA ANAND, et al.
v.
LAURA H. G. O'SULLIVAN, et al., SUBSTITUTE TRUSTEES

         Circuit Court for Montgomery County Case No. 413367V

          Meredith, Beachley, Zarnoch, Robert A. (Senior Judge, Specially Assigned), JJ.

          OPINION

          Meredith, J.

         In January 2007, Chandra and Renu Anand (the "Anands"), appellants, refinanced the indebtedness they owed on their home by borrowing funds from Saxon Home Mortgage ("Saxon"). Saxon advanced total funds of $729, 100, of which $500, 000 was evidenced by a promissory note secured by a first lien deed of trust on the Anands' property. Saxon subsequently transferred the first lien deed of trust note to Deutsche Bank National Trust Company ("Deutsche Bank"), as trustee for Saxon Asset Securities Trust 2007-2.

         In August 2008, the Anands defaulted on their loans from Saxon. Following the default, in an effort to avoid a foreclosure sale of their property, the Anands litigated in several proceedings, including cases with Saxon, Deutsche Bank, the previous substitute trustees, and the current substitute trustees, as well as other parties not involved in this appeal. At various points during their efforts to avoid foreclosure, the Anands alleged that they had rescinded their loans from Saxon pursuant to the federal Truth in Lending Act (sometimes referred to as "TILA"), 15 U.S.C. § 1635, via letters mailed to Saxon on March 4, 2009, and August 19, 2009.

         This appeal stems from an order to docket foreclosure of the first lien deed of trust, filed in the Circuit Court for Montgomery County on December 30, 2015, by the current substitute trustees (Laura H.G. O'Sullivan, Erin M. Shaffer, Diana C. Theologou, Chasity Brown, Lauren Bush, and Rachel Kiefer, appellees). Prior to any sale, the Anands moved to dismiss the foreclosure proceedings and sought injunctive relief to prevent further foreclosure efforts, contending that their loans from Saxon had been rescinded in 2009, and that the deed of trust lien was therefore void pursuant to the federal Truth in Lending Act. On April 18, 2016, the circuit court denied the Anands' motions, holding that their claims of rescission were barred by the doctrine of res judicata, and there was no reason to stay the foreclosure. The Anands moved for reconsideration of the circuit court's order, and that motion was denied on June 1, 2016. In the meantime, on May 27, 2016, the Anands filed an ex parte motion for a temporary restraining order and a preliminary injunction to prevent the foreclosure sale of their property during their appeal. On June 9, 2016, the circuit court denied the Anands' motion for a preliminary injunction during their appeal.

         This appeal followed.

         QUESTIONS PRESENTED

         The Anands frame their questions for our review as follows in their brief:

         Whether the Circuit Court committed errors of law and/or clearly erroneous findings of fact in its denial of Defendant's Motion to Dismiss, Motion for Reconsideration of the same, and the Preliminary Injunction aspects of the Ex Parte Motion for Injunctive Relief [and] for Preliminary Injunction for the following reasons:

A. The alleged lender, through the Substitute Trustees, is not entitled to enforce a lien previously rendered void by virtue of Defendants having tendered a notice of rescission under and pursuant to the Federal Truth in Lending Act and Regulation Z and in accordance with Jesinoski v. Countrywide Home Loans, Inc., 135 S.Ct. 790 (2015).
B. The doctrines of res judicata and/or collateral estoppel are inapplicable so as to give preclusive effect to any argument that the lien imposed by virtue of a Deed of Trust has been rendered irremediably void.

         Because we agree with the circuit court's conclusion that the Anands' present claims relative to rescission are barred by the doctrine of res judicata, we affirm the judgments of the Circuit Court for Montgomery County.

         FACTUAL & PROCEDURAL BACKGROUND

         On January 24, 1996, Chandra Anand acquired real property located at 19909 Knollcross Drive, Germantown, Maryland 20876 (the "Property"), for $308, 600. On April 8, 1997, Chandra Anand conveyed his interest in the Property to himself and his wife, Renu Anand, as tenants by the entireties. The Anands have held title to the Property as tenants by the entireties since that time.

         On January 24, 2007, the Anands refinanced the debt they owed on the Property by borrowing $729, 100 from Saxon Home Mortgage, evidenced, in part, by a $500, 000 promissory note that was secured by a first lien deed of trust. As part of the refinancing transaction, the Anands also entered into a second mortgage with Saxon in the amount of $182, 100, and received $47, 000 cash. Only the first lien deed of trust is at issue in this appeal. Saxon subsequently transferred the first lien deed of trust note to Deutsche Bank, as trustee for Saxon Asset Securities Trust 2007-2.

         In August 2008, the Anands defaulted on their loans.

         On December 30, 2008, in an effort to have the lien on the Property adjudicated to be unenforceable, the Anands filed suit in the Circuit Court for Montgomery County against Deutsche Bank, Saxon, and the predecessor substitute trustees, asserting causes of action for negligence, federal Truth in Lending Act violations, and mortgage fraud. On January 20, 2009, while the Anands' first suit was pending, the predecessor substitute trustees initiated foreclosure proceedings against the Property by filing an order to docket foreclosure pursuant to the first deed of trust.

         On March 4, 2009, Chandra Anand mailed Saxon a document captioned "Actual Notice to Rescind; Request for Accounting, Notice Pursuant to R.E.S.P.A." In the notice purporting to rescind the loans from Saxon, Mr. Anand asserted that he had not been provided certain disclosures required under TILA and Regulation Z -- the regulations promulgated pursuant to TILA -- and stated in part:

I have conducted a reasonable investigation and inquiry into this matter and concluded that SAXON MORTGAGE, INC., the originator of this transaction, provided one "acknowledge receipt of two copies of NOTICE OF RIGHT TO CANCEL" and said document is patently false. . . . The failure to provide all material disclosures correctly made as that term is defined and under 15 U.S.C. § 1635(a); Reg. Z §§ 226.23(a) in a form that I may keep subjects this transaction to the unconditional right to rescind within three days which has not yet begun to run due to your failure to provide accurate notices of my right to cancel.

         On April 2, 2009, Saxon responded to Mr. Anand's March 4 notice to rescind. Saxon asserted that the notice did not constitute a "Qualified Written Request" under the Real Estate Settlement Procedures Act, and that Saxon was not obligated to respond to the notice. Nevertheless, Saxon responded to some of the requests made in Mr. Anand's letter for additional information, and also stated: "Our review of your account indicates that the servicing of your mortgage loan has been entirely lawful and appropriate." But Saxon's letter did not specifically address Mr. Anand's allegation regarding Saxon's failure to provide the Anands with all required disclosures outlining their right to rescind their loans under TILA.

         On August 19, 2009, the Anands sent Saxon a second notice to rescind their loans. In their second notice to rescind, the Anands did not expressly contend that Saxon's failure to supply the notices required by TILA provided the basis for rescinding their loans, as the Anands had contended in their first notice to rescind. Rather, in their second notice to rescind, the Anands asserted grounds not previously outlined in their first notice as the basis for rescinding their loans from Saxon, stating in relevant part:

We hereby exercise our right to rescind the loan transaction in its entirety under the three day rule, the three year limitation, and under the usury and general claims theories and causes of action. By failing to disclose the true lender and using subterfuge to hide the fact that the "lender" at closing was paid to pose as the lender when in fact an undisclosed unregistered third party had rented the charter or lending license of the "lender, ["] the limitation on our rights to rescind was extended indefinitely. Under state and federal law, the mortgage is now extinguished and your rights under the trustee deed have terminated. We hereby rescind the above referenced loan and/or declare it to be Null and Void and demand treble damages for the face value of the note, on the grounds set forth below . . . .

(Bold emphasis and all-caps omitted.) The letter summarily set forth five "grounds" in paragraphs labeled: 1. Appraisal Fraud; 2. Fraud in the inducement; 3. Fraud in the execution; 4. Usury; and 5. PAYMENT.

         On April 22, 2010, the circuit court granted a motion to dismiss the Anands' first suit against Deutsche Bank, Saxon, and the predecessor substitute trustees, with prejudice. That judgment was not appealed by the Anands.

         The Property was scheduled to be sold at auction on June 16, 2010. But, on June 10, 2010, the Anands filed a second suit against Deutsche Bank, Saxon, and the predecessor substitute trustees, asserting negligence claims against Saxon, and mortgage fraud claims against all the defendants, in addition to seeking declaratory and injunctive relief to prevent the foreclosure sale of the Property. The Anands' second suit did not include claims under TILA or contend that the loans from Saxon had previously been rescinded.

         On June 14, 2010, two days prior to the scheduled foreclosure sale of the Property, Mr. Anand filed an ex parte motion for a temporary restraining order to prevent the foreclosure sale. On June 15, 2010, the circuit court determined that it would treat the motion as one for a preliminary injunction, and scheduled a hearing on the matter. As a result, the foreclosure sale did not occur on June 16, 2010, as scheduled. Following a hearing, during which Mr. Anand's counsel conceded that, in the Anands' second suit, the claims against Saxon for negligence and mortgage fraud were barred by the dismissal with prejudice of the Anands' first suit, the court ruled that it would grant Saxon's motion requesting that Saxon be dismissed. Further, with respect to Deutsche Bank and the then substitute trustees, the court ruled that "all of those matters which were or could have been litigated in that case [i.e., the Anands' first suit] are barred by the doctrine of res []judicata, that is to say, claim preclusion in the words of the Restatement (Second) of Judgments." The court denied the motion for a preliminary injunction. Mr. Anand appealed the circuit court's denial of the motion.

         On October 31, 2011, Renu Anand individually filed a voluntary petition for bankruptcy under Chapter 7 of Title 11 of the United States Code. Ms. Anand's bankruptcy petition did not dispute the validity of the lien on the Property or assert that it had been rescinded. As a result of Ms. Anand's bankruptcy petition, however, the foreclosure proceedings were dismissed by the predecessor substitute trustees.

         On April 3, 2012, this Court filed an unreported opinion in which we affirmed the circuit court's denial of the Anands' motion for a temporary restraining order and preliminary injunction. See Chandra Anand v. Deutsche Bank National Trust Company, etc., et al., No. 1871, Sept. Term 2010, slip op. at 11 (filed April 3, 2012) (hereinafter referred to as "Chandra Anand I"). The Anands thereafter voluntarily dismissed their second suit on February 13, 2013.

         But, in February 2013, the Anands also filed a third suit in the Circuit Court for Montgomery County regarding the Saxon loans. That suit eventually made its way to the United States Court of Appeals for the Fourth Circuit, which described the procedural history of that suit as follows:

In February 2013, the Anands brought a quiet title action in the Circuit Court for Montgomery County, Maryland. They sought a declaration that Ocwen [the loan servicer] and Deutsche Bank no longer [held] any interest in their home, and an order requiring Ocwen and Deutsche Bank to release their liens and barring them from foreclosing on the property. This relief was justified, the Anands argued, because the alleged [mortgage] insurance payments [that the Anands assumed had been paid to Deutsche Bank ...

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