Saturday, September 6, 2014

FYI: Md App Ct Holds Order Forfeiting Deposit from Defaulting Foreclosure Purchaser Not a Final Order for Purposes of Appeal

The Court of Special Appeals of Maryland recently dismissed an appeal for lack of jurisdiction, determining that an order forfeiting the deposit for a defaulting foreclosure purchaser is not final, and that if fails to meet the requirements for an interlocutory appeal.


A copy of the opinion is available at:


Appellant (the “Defaulting Purchaser”) was the successful bidder at a foreclosure auction, agreeing to pay $100,000 for the subject property.  The Defaulting Purchaser furnished a deposit of $27,000, and signed a “Memorandum of Purchase at Public Auction,” in which it agreed “to complete the purchase in accordance with said conditions in the advertisement.”

The advertisement for the foreclosure sale included the following Terms of Sale, in pertinent part:


If the purchaser fails to settle within 10 days of ratification, the Sub[stitute] Trustees may file a motion to resell the property. If Purchaser defaults under these terms, deposit shall be forfeited. The Sub[stitute] Trustees may then resell the property at the risk and cost of the defaulting purchaser.


The Defaulting Purchaser failed to settle within 10 days of the sale’s ratification. The substitute trustees moved to forfeit the deposit, which the circuit court granted pursuant to an order which provided that “…the deposit of $27,000.00 paid by the defaulting purchaser…shall be forfeited and the subject property may be resold at the risk and expense of the defaulting purchaser” (the “Forfeiture Order”).  The Defaulting Purchaser appealed.


The property was resold at public auction for $193,800.  The Defaulting Purchaser did not appeal the order ratifying the second sale, nor had the auditor’s report from the second sale been filed at the time the Defaulting Purchaser appealed the Forfeiture Order.


Determining that the Forfeiture Order was neither a final order, nor appealable as an interlocutory order, the appellate court dismissed the appeal.


As you may recall, Maryland law provides that, generally, a party may only appeal from a final judgment of the circuit court.  See Md. Code, Cts. & Jud. Proc., § 12-301.  To be considered a final judgment, an order must “determine and conclude the rights involved or…deny the appellant the means of further prosecuting or defending his or her rights and interests in the subject matter of the proceeding. Moreover, the ruling must leave nothing more to be done in order to effectuate the court’s disposition of the matter.” Op. at *6 (emphasis in original).


Here, the appellate court determined that the Forfeiture Order lacked finality because it did not determine and conclude the rights of the parties.  In light of the unsettled status of the deposit, the Defaulting Purchaser’s continuing ability to assert its rights regarding the deposit, and the additional responsibilities created related to a second foreclosure sale, the Court determined that the Forfeiture Order was not final. 


Notably, the Court questioned whether the deposit would be truly forfeited in the legal sense of the term, applied toward any actual damages, or refunded, in whole or in part, to the Defaulting Purchaser. The unsettled status of the deposit was particularly apparent in light of the substitute trustees’ position that it may be applied toward any “actual damages that appellees suffer as a result of [the Defaulting Purchaser’s] default on the first sale,” as well as the fact that the second foreclosure resulted in a higher sale price for the property. 


Additionally, the Court observed that the Defaulting Purchaser “retains the ability to file exceptions to an auditor’s report on the resale of the Property if it disagrees with the auditor’s application of the deposit.”  According to the Appellate Court, a ruling on those exceptions would constitute a final determination on the fate of the deposit.  Consequently, the Court held, the Defaulting Purchaser maintains the “continuing ability to assert its rights and interests in the subject matter of the proceeding.”


The Court stated that, because the Forfeiture Order authorized the property to be resold, which in turn would obligate the circuit court to decide whether to ratify the second sale, such order did not “leave nothing more to be done in order to effectuate the court’s disposition of the matter.”


The Court also determined that the Forfeiture Order was not appealable under the exceptions to finality under Md. Code, Cts. & Jud. Proc., § 12-303.  According to the Court, the exception under Section 12-303(3)(iv) for an interlocutory order is inapplicable.  Specifically, the Court noted that statute defines an interlocutory order as one that “determin[es] a question of right between the parties and direct[s] an account to be stated on the principle of such determination.”  To that end, according to the Appellate Court, the Forfeiture Order neither determined the rights of the parties, nor directed an account to be stated.  Thus, the Court held that the Forfeiture Order did not qualify as an appealable interlocutory order.


Accordingly, the Court of Special Appeals of Maryland dismissed the Defaulting Purchaser’s appeal for lack of jurisdiction.





Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
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Chicago, Illinois 60602
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