The Court of Special Appeals of Maryland recently rejected a borrower's attempt to reopen a completed foreclosure case, based upon allegations of "robosigning," bad-faith, and inadequate legal representation. In doing so, the intermediate appellate court affirmed the trial court's dismissal of the borrower's motion.
A copy of the reported opinion is available at: http://www.mdcourts.gov/opinions/cosa/2013/1250s11.pdf
The borrower had previously challenged the foreclosure sale, but ultimately withdrew her efforts after she determined that she could not financially afford the loan, following discussions of loan modification and other loss mitigation options. After she withdrew this challenge, the trial court ratified the sale.
Sixty-five days after the case was closed, the borrower filed a pro se motion to dismiss the foreclosure proceeding, and requested a hearing. In her motion, she alleged that the signatures of the substitute trustees were fraudulent, the lender acted in bad faith, and that she had inadequate legal representation during the course of the foreclosure proceeding.
The trial court denied her motion without a hearing, determining that her motions were not timely filed under the Maryland foreclosure rules, and that her only avenue for relief was to assert fraud, mistake, or irregularity under Maryland Rule 2-535(b). The trial court also determined that such claims failed to establish the requisite extrinsic fraud, and therefore did not warrant reopening the case.
On appeal, the Court of Special Appeals affirmed.
As you may recall, in Maryland, a ratified foreclosure sale is res judicata as to the validity of such sale, except in the case of fraud or illegality. Once final, a court will not reopen such judgment, except in certain cases of fraud, mistake, or irregularity, which must be shown by clear and convincing evidence.
In rejecting the borrower's claims, the Appellate Court determined that the borrower failed to meet this standard. The Court explained that allegations of irregularity required something more than legal error, and that if the judgment under attack was entered in conformity with the practices and procedures commonly used by the court that entered it, there is no irregularity.
As to fraud, under Maryland precedent, the movant must show extrinsic fraud, which would have prevented an adversarial trial, rather than intrinsic fraud, which occurs in the court of the proceeding. "[O]nce parties have had the opportunity to present before a court a matter for investigation and determination, and once the decision has been rendered and the litigants, if they so choose, have exhausted every means of reviewing it, the public policy of this State demands that there be an end to that litigation . . ." Slip Op. at 5.
In addition, for a court to reopen the case due to mistake, it must involve a jurisdictional error, such as where the court lacks the power to enter judgment.
Applying these principles, the Appellate Court observed that despite the borrower's attack upon the foreclosure and foreclosure documentation, the record was "devoid of even a hint of irregularity that would warrant re-opening of this ratified foreclosure sale." Nor did the borrower present any allegations of jurisdictional mistake.
Moreover, rejecting the borrower's attack on the foreclosure due to allegations of fraudulent signatures and affidavits, the Appellate Court held that such claims did not rise to the level of extrinsic fraud. "The alleged fraud did not prevent an adversarial trial, but had such existed, would have been contained within the trial itself." Slip Op. at 6. Indeed, the Court noted that the borrower herself alleged that the fraud was discovered prior to sale, one year earlier in 2009.
Consequently, the Appellate Court held that, "[i]n narrowly construing the terms of irregularity, fraud, and mistake, and considering the public policy favoring finality of judgments, we conclude that the facts do not warrant the setting aside of the ratified foreclosure proceedings. Accordingly, the circuit court did not abuse its discretion by denying appellant's motions." Slip Op. at 6.
As a separate issue, the Appellate Court held that the borrower was not entitled to a hearing upon her motion, because Rule 2-311(f), which governed whether a hearing was required, mandated a hearing only when the court's ruling was dispositive of a claim or defense. "The dispositive action in this case was the ratification of the sale itself, not the denial of appellant's motion to re-open." Slip Op. at 7. Accordingly, the Appellate Court held that a hearing was not required and the trial court did not err by denying [the borrower's] motions without holding a hearing.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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