Jour v. HSBC Bank, N.A.

DAVID POINT DU JOUR, et al. v. HSBC BANK, N.A.

No. 1864

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2016

December 19, 2017

Circuit Court for Wicomico County

Case No. 22-C-16-000139

UNREPORTED

Wright, Graeff, Arthur, JJ.

Opinion by Graeff, J.

*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

In 2007, David Point du Jour and his mother, Lourdes Point du Jour, appellants, executed a promissory note that evidenced the terms of a home refinance loan from Delta Funding Corporation ("Delta Funding"). To secure the note, appellants executed a Deed of Trust on property owned by Ms. Point du Jour. The Deed of Trust was never recorded in the Land Records Office.

In 2016, HSBC Bank, N.A. ("HSBC"), filed a complaint for declaratory judgment and other equitable causes of action in the Circuit Court for Wicomico County. It alleged that it had acquired the note from Delta Funding in 2007, and it sought an order confirming its status as a first-priority lienholder, among other equitable relief. An amended complaint subsequently was filed, adding a claim for breach of contract and requesting monetary relief.

The parties filed cross motions for summary judgment. Following a hearing, the circuit court issued an order denying appellants' motion for summary judgment and granting HSBC's motion for summary judgment.

On appeal, appellants present the following questions for this Court's review, which we have rephrased slightly, as follows:

1. Is HSBC's complaint for declaratory judgment barred by the 3-year statute of limitations?

2. Did the circuit court err in concluding that appellants had the power and intent to have a lien placed on their property in consideration for a loan?

For the reasons set forth below, we answer both questions in the negative, and therefore, we shall affirm the judgment of the circuit court.

FACTUAL AND PROCEDURAL BACKGROUND

In July 2007, appellants obtained a loan from Delta Funding in the amount of $127,980.00 to refinance an existing mortgage on property known as 104 Bridgeview Street in Salisbury ("the property"). Appellants executed a promissory note dated July 19, 2007, evidencing the terms of the loan. In pertinent part, appellants promised to repay the loan amount, plus interest, over the course of thirty years, in monthly payments of $1,019.64. The note contained a provision that "the Lender may transfer this Note," and "[t]he Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the 'Note Holder.'" The note provided that the Note Holder had the power to collect a charge for a late payment, to demand payment of the outstanding loan amount in the case of default, and to enforce its rights under the note against any guarantor, surety, or endorser. Pursuant to the following provision in the note, appellants agreed to secure the note with a deed of trust:

In addition to the protections given to the Note Holder under this Note, A Mortgage, Deed of Trust, or Security Deed (the "Security Instrument"), dated the same date as this Note, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under this Note.

The payee under the note was left blank.

The Deed of Trust that secured the note was executed by appellants on the same date as the note. It provided that MERS (the Mortgage Electronic Registration Systems, Inc.), as nominee for the Lender and Lender's successors and assigns, had the right toforeclose and sell the property in the event that appellants breached any of the terms of the note. It further provided:

This Security Instrument secures to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under this Security Instrument and the Note.

For this purpose, Borrower irrevocably grants and conveys to Trustee, in trust, with power of sale, the following described property ... 104 Bridgeview Street, Salisbury, Maryland 21801.

The Deed of Trust also contained a provision stating that "[t]he Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower."

In January 2016, HSBC filed a complaint against appellees, alleging that it was the current holder of the note, which was secured by a Deed of Trust that, for unknown reasons, had not been recorded. The complaint stated that the original Deed of Trust could not be located, and although a photocopy existed, the Land Records Office would not accept a copy for recordation.¹

The complaint included four counts. The first count, Declaratory Judgment, requested the court to determine that the photocopy of the Deed of Trust was valid and order the Division of Land Records to accept it for recordation. The second count, Specific Performance, requested the court to order the appellants to re-execute the Deed of Trust.The third count, Equitable Subrogation, requested the court to order that the Deed of Trust possessed a first-priority lien on the property. The fourth count, Equitable Lien, requested the court to order that HSBC holds an equitable first-priority lien on the property, subject to the terms and conditions in the Deed of Trust.

In March 2016, HSBC filed an amended complaint, adding a count for breach of contract. Count five alleged that appellants were in material breach of the loan, note, and Deed of Trust because they had made no payments since September 2011, and because they "fail[ed] to secure repayment of the Subject Note with a recorded first-priority lien on and against the Subject Property."

Appellants filed an Answer to the First Amended Complaint, along with a motion for summary judgment. As grounds for the motion, appellants asserted: (1) Delta Funding, the original lender, was a "forfeited business entity," and therefore, there were "no legal rights to be transferred or enforced by a third party"; (2) there was no evidence that the note had been transferred or assigned to HSBC, and therefore, HSBC lacked standing; (3) HSBC's claims were barred by the three-year statute of limitations; and (4) the circuit court lacked authority to grant the relief requested by HSBC.

Appellants filed affidavits in support of their motion. They denied having had any communication or contractual relationship with HSBC or seeing the original "note" that HSBC was attempting to enforce.

HSBC filed an opposition, along with a cross motion for summary judgment. HSBC asserted that the "primary goal" of the suit against appellants was to record the Deed ofTrust "so that proper notice is given to the public of the status of title of the Property." It stated that it would dismiss, without prejudice, its claims for specific performance, equitable subrogation, equitable lien, and breach of contract (Counts 2-5, respectively) if the circuit court granted summary judgment in favor of HSBC on its request for declaratory judgment (Count 1).

In support of its position that it was entitled to summary judgment on Count 1, HSBC asserted that it was undisputed that Ms. Point du Jour was the owner of the property, that she and her son, Mr. Point du Jour, refinanced the original mortgage with a loan from Delta Funding, and they signed the note and Deed of Trust at issue. HSBC submitted affidavits from two employees of Ocwen Loan Servicing, LLC ("Ocwen"), the loan servicer for HSBC. The affidavits stated that HSBC purchased the "Subject Loan and Subject Note" from Delta Funding on or about November 1, 2007, and that HSBC was the current holder of the note and the Deed of Trust.

The circuit court held a hearing on the parties' motions for summary judgment on September 15, 2016. At the hearing, counsel for HSBC produced the original promissory note that had been signed by appellants, and counsel for appellants conceded that HSBC is the holder of a note that is endorsed "in blank."²

On October 13, 2016, the court issued a memorandum opinion and order denying appellants' motion for summary judgment and granting HSBC's cross motion for summary judgment on Count 1. The court found that "the subject note is a negotiable instrument that is indorsed in blank and is enforceable by HSBC," "notwithstanding the current corporate status of the first holder of the aforesaid instrument." On the limitations issue, the court determined that, as HSBC had argued, the note and Deed of Trust were "specialties" within the meaning of Md. Code (2013 Repl. Vol.), Courts and Judicial Proceedings Article (CJP), § 5-102(a)(1), and therefore, the appropriate statute of limitations was 12 years. The court also agreed with HSBC's argument that the claim was not barred by the doctrine of laches, finding that appellants had not been "prejudiced by the institution of this action that substantially relates to the documents that they signed under seal." Finally, the court rejected appellants' argument that the court lacked authority to order the requested equitable relief, citing the court's "broad equity powers."

The court concluded that it was "satisfied that the [appellants] in this case had the power and the intent to have a lien placed upon their property in consideration for the loan that is evinced by the subject note," and it expressed the basis for the relief granted as follows:

In order to enforce the parties' express intention, the Court sees no other way to do equity in this case than by ordering the Clerk of Court for Wicomico County to accept a photocopy of the subject deed of trust for recordation. Therefore, consistent with this opinion, the Court will enter an

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