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No. 1246

September Term, 2013






Salmon, James P.

(Retired, Specially Assigned),


Opinion by Salmon, J.

Filed: April 29, 2015

The appellant in this case is Greentree Series V, Inc. (hereafter “Greentree”); the

appellees are C. Larry Hofmeister, Jr., Craig B. Leavers, and Stephanie H. Hurley, Substitute Trustees (hereafter, collectively “the Substitute Trustees”) and Wells Fargo Bank, N.A.

The legal issue presented is one of first impression and arises because Greentree placed the winning bid on land sold by the Substitute Trustees at a foreclosure sale, then put down a $33,197 deposit, but failed to go through with the purchase after the circuit court ratified the sale. As a consequence, the Substitute Trustees sold the property a second time.

When the property was resold, Greentree was once again the high bidder, having bid $244,000, which was $72,000 more than it had bid initially. Ultimately, the court ratified that sale and Greentree, after some delay, went through with the sale.

In the auditor’s corrected amended account, he gave Greentree credit for the $33,197 deposit. The Substitute Trustees and Wells Fargo filed exceptions to the auditor’s corrected amended account and the exceptions were heard in the Circuit Court for Anne Arundel County. The circuit court overruled the auditor and held that Greentree was not entitled to the return of all or any part of its deposit, even though, after payment of all interest and expenses, Wells Fargo had substantially more money in hand than it would have had if Greentree had not defaulted initially. In this timely appeal, Greentree raises one question,

which it phrases as follows:

May a court... forfeit entirely the deposit of a defaulting purchaser at foreclosure without regard to actual loss or damage resulting from the subsequent resale?



In 2007, Joseph A. Wheeler signed a $320,000 promissory note that was secured by a deed of trust. That deed of trust encumbered property located in Anne Arundel County known as 10 River Drive, Severna Park, Maryland (hereafter “the Property”). The grantors of the deed of trust were Negar Wheeler and Joseph Wheeler. Payments were not made when due on the note and as a consequence the Substitute Trustees, on behalf of Wells Fargo, the holder of the promissory note, filed a foreclosure action in the Circuit Court for Anne Arundel County on May 12, 2011. The terms of the sale, as set forth in a newspaper advertisement that was published in Anne Arundel County prior to the sale, read, in pertinent

part, as follows:

A deposit of $33,000.00 will be required at the time of sale... [b]alance of the purchase price is to be paid in cash within ten (10) days of the final ratification of sale[.]... If payment of the balance does not take place within ten days of ratification, the deposit will be forfeited and property will be resold at the risk and expense of the defaulting purchaser.

A public sale of the Property was held by the Substitute Trustees on June 30, 2011.

Greentree’s bid of $172,000 was the highest received. Greentree then gave the Substitute Trustees a deposit in the amount of $33,197, which was $197 more than required. The sale was ratified by the Circuit Court for Anne Arundel County on August 29, 2011. Greentree, however, failed to settle on the Property within ten days as required, and as a consequence,

Wells Fargo and the Substitute Trustees, on September 26, 2011, filed a pleading entitled:

“Petition to Order Resale of Property at Defaulting Purchaser’s Sole Cost and Expense.” The circuit court judge who held the hearing on the petition provisionally denied it on January 11,

2012. The judge explained, in a footnote to his order, that Greentree had demonstrated good faith and, due to that demonstration, Greentree would have thirty additional days to “follow the appropriate course of action” and to settle on the Property. The judge’s footnote also said that if Greentree did not settle on the Property within thirty days of January 11, 2012, “the [P]roperty shall be resold at the defaulting purchaser’s cost and expense.” Thereafter, the Substitute Trustees filed an affidavit stating that Greentree, in the past thirty days, had not even established contact with them and had, once again, failed to settle on the Property.

Based on that affidavit, an order was docketed, on February 10, 2012, which directed that the Property “shall be resold at the risk and expense of” Greentree. That order also provided that “the deposit monies in the amount of $33,197.00 be and are hereby forfeited.” 1 The appellees contended in the circuit court that the February 10, 2012 order constituted a final judgment, which was binding on Greentree, because Greentree did not file an appeal within 30 days of February 10, 2012. The circuit court rejected that contention, as do we.

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.” Rohrbeck v. Rohrbeck, 318 Md.

28, 41 (1989). See also Md. Code (2006, 2013 Repl. Vol.), § 12-301 of the Courts and Judicial Proceedings Article. Moreover, the ruling must “leave nothing more to be done in order to effectuate the court’s disposition of the matter.” Remson v. Krausen, 206 Md. App.

53, 72 (2012) (citations and internal quotation marks omitted).

The order docketed on February 10, 2012 authorized the Substitute Trustees to conduct a second foreclosure sale; after the second sale the court would be obligated to consider whether to ratify that second sale. Consequently, the Order docketed on February (continued...) The Property was sold for the second time at public auction on April 12, 2012.

Greentree’s bid of $244,000 was the highest received. Greentree put down a second deposit, this time in the amount of $35,000, which was $10,000 more than the amount required in the advertisement that immediately preceded the resale. The second sale was ratified by the Circuit Court for Anne Arundel County on June 14, 2012. Once again, Greentree failed to go to settlement as scheduled. As a result, an order directing the sale of the Property for a third time was entered on August 9, 2012. That order, however, permitted the Substitute Trustees, in their discretion, to go to settlement with Greentree at any time before the resale.

On October 25, 2012, which was the date that the Property was scheduled to be sold for the third time, Greentree finally went to settlement.

The court auditor filed his first report in December of 2012. That report contained a miscalculation concerning the total amount owed on the underlying debt. Also, the first auditor’s report treated Greentree’s initial deposit of $33,197 as forfeited. Greentree filed exceptions challenging the auditor’s treatment of the $33,197 deposit. The auditor, on April 1, 2013, filed an amended auditor’s report in which he addressed the problem concerning the total debt amount. The amended report once again treated the first deposit of $33,197 as forfeited. The auditor also treated the second deposit of $35,000 as forfeited. Again, (...continued) 10, 2012 was not a final judgment because it created further steps to be completed prior to disposition of the entire matter.

Greentree filed exceptions. On April 19, 2013, the auditor filed a “corrected amended audit” in which he stated that expenses incurred by the Substitute Trustees as a result of the resale totaled $15,591.35. This time he ruled, however, that the $33,197 deposit should be returned to Greentree and that the second deposit of $35,000 be credited to Greentree.

The Substitute Trustees and Wells Fargo filed exceptions to the corrected amended auditor’s report (hereafter “the final auditor’s report”). On July 19, 2013, a hearing was held in the Circuit Court for Anne Arundel County to consider the exceptions. The main issue presented at the hearing was whether Greentree was entitled to the return of its initial $33,197 deposit. The circuit court, in a written opinion filed on August 12, 2013, ruled that Greentree was not entitled to a return of that deposit. The court noted that by virtue of Greentree’s failure to go to settlement initially, the Substitute Trustees had incurred additional expenses in the amount of $15,591.35 and interest on the debt had increased by $17,788.26, which was calculated at $61.98 per day. Therefore, “the total cost” of having to resell the Property was $33,379.61 ($17,788.26 + $15,591.35), which was considerably less than the $72,000 [$244,000 less $172,000] additional monies realized from the second sale. Put another way, even if the first deposit had been returned to Greentree, the Substitute Trustees, after the second sale, realized $38,620.39 ($72,000 - $33,379.61) more than they would have received if Greentree had gone to settlement as scheduled on the first sale.

In reaching her decision, the judge opined that she could not justify the forfeiture of the deposit based on the terms of sale that appeared in the newspaper ad. The court gave the

following explanation:

Since there were no actual damages from the resale, forfeiting the deposit pursuant to the first sale advertisement would be akin to enforcing a penalty.

Furthermore, since damages were ascertainable at the time of the resale, the deposit forfeiture provision in the first sale advertisement, which is considered a liquidated damages clause, is unenforceable. See Lee Oldsmobile, Inc. v.

Kaiden, 32 Md. App. 556 (1976) (holding that where the presence of a resale remedy under the Uniform Commercial Code rendered damages ascertainable and a liquidated damage clause thus unenforceable). Thus, the first sale advertisement alone does not provide the [c]ourt with the authority to forfeit the First Deposit.

Having decided that application of contract law principles would not justify the forfeiture of the deposit, the court then segued into a discussion of equitable principles.

Quoting from Simard v. White, 383 Md. 257, 317 (2004), the judge said that “the underlying origins of the proper priorities to be applied to sums received at any foreclosure sale, be it an initial sale or a resale, have been for over two hundred years to primarily protect the interests of mortgagors and mortgagees.” The circuit court then noted that the Court of Appeals said in Simard that “courts have sought outcomes that are equitable and fair both to the mortgagee and to the mortgagor and other creditors.” Id. The circuit court also observed that the Court noted in Simard v. White, that “[i]t is the defaulting purchaser’s exposure, on the other hand, that somewhat differs from that of the other parties.” Id. at 320. According to the circuit court, the Simard Court, 383 Md. at 320-21, “indicated that the interests of the mortgagor and the mortgagee are paramount to those of the defaulting purchaser[.]” 2 The circuit court’s written opinion stressed that if Greentree were allowed to receive back its initial deposit, the deficiency judgment that would be entered against the maker of the note would be $149,751.25, but if the defaulting purchaser were not entitled to a return of the deposit, any possible deficiency judgment would be “lowered considerably” (i.e., lowered by $33,197).

Next, the court indicated, although it did not say so explicitly, that Greentree’s request for the return of its initial deposit was barred by the doctrine of unclean hands. Citing Wells Fargo Home Mortgage, Inc. v. Neal, 398 Md. 705, 729-30 (2007), the court said that the unclean hands doctrine provides that “courts of equity will not lend their aid to anyone seeking their active interposition, who has been guilty of fraudulent, illegal, or inequitable conduct in the matter with relation to which he seeks assistance.” The judge did not explicitly find that Greentree’s conduct was “fraudulent, illegal, or inequitable,” but, implied that this was the case. The court emphasized that, due to Greentree’s default, “more than a In support of that statement, the circuit court quoted from Simard v. White, 383 Md.

at 320-21 as follows:

[T]he Court, then, has remained cognizant of the need to protect the interests of the mortgagor, who has not been relieved of his liability for deficiency on the mortgage at any time during the sale and resale in the foreclosure process, as well as the interest of the mortgagee who has invoked the power of the court in pursuit of satisfaction of the debt owed to him.

year had passed since the first sale was ratified on August 29, 2011.” The circuit court

concluded its opinion by stating:

Now Greentree is asking the [c]ourt to reconsider Judge Silkworth’s February 10, 2012, Order and return the First Deposit. The [c]ourt is not inclined to do so. Md. Rule 14-305(g) provides that “if the purchaser defaults, the court, on application and after notice to the purchaser, may order a resale at the risk and expense of the purchaser or may take any other appropriate action.” Taking into consideration Greentree’s conduct in not making it to settlement on two occasions after sales were ratified, and the paramount interests of the mortgagor and mortgagee in reducing the deficiency judgment as well as recovering outstanding debt, the [c]ourt finds that it is appropriate to forfeit the First Deposit.

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