N. Star Props., LLC v. Nadel

253 Md.App. 164

264 A.3d 273

NORTH STAR PROPERTIES, LLC

v.Jeffrey NADEL, et al.

No. 831, Sept. Term, 2020

Court of Special Appeals of Maryland.

November 19, 2021

Submitted by: Larry H. Kirsch (Law Office of Larry H. Kirsch, on the brief), Rockville, MD, for Appellant.

Submitted by: Richard J. Rogers (Kevin Hildebeidel, Cohn, Goldberg & Deutsch, LLC, on the brief), Towson, MD, for Appellee.

Panel: Kehoe, Arthur, Paul E. Alpert (Senior Judge, Specially Assigned), JJ.

Alpert, J.

As a matter of contract and convention, foreclosure sale purchasers who deposit a portion of the purchase price commonly "pay interest upon the unpaid balance for the period between the time fixed for settlement and the date of actual settlement" and pay property taxes from the date of the sale. See Donald v. Chaney , 302 Md. 465, 477, 488 A.2d 971 (1985) ; AMT Homes, LLC v. Fishman , 228 Md. App. 302, 310, 137 A.3d 1056 (2016). Yet if ratification of the sale or the ensuing settlement is delayed, the Court of Appeals has held that equitable exceptions may be warranted under certain circumstances, including when the delay is "caused by the conduct of other persons beyond the power of the purchaser to control or ameliorate." Donald , 302 Md. at 477, 488 A.2d 971.

In this appeal, we are asked to hold that the Circuit Court for Prince George's County erred or abused its discretion in refusing to abate post-sale interest and taxes under this exception, after the Chief Judge of the Court of Appeals of Maryland temporarily stayed pending foreclosure proceedings during the COVID-19 pandemic. We decline to do so. Applying lessons from AMT Homes, 228 Md. App. at 312, 137 A.3d 1056, holding that a foreclosure purchaser was "not entitled to a reduction in the ... payments it promised to pay simply because the court exercised its oversight role over a longer-than-ideal period of time" due to a court backlog, we conclude that the circuit court did not err or abuse its discretion in denying the motion of North Star Properties, LLC ("North Star"), appellant, to abate interest and taxes based on the public health emergency stay.

BACKGROUND

At a foreclosure sale conducted on February 25, 2020, Sukhpal Singh and Rajwant S. Virk jointly purchased 901 Park Terrace, Fort Washington, Maryland 20744 (the "Property") for $222,000. During the course of the foreclosure proceedings, North Star was substituted for Singh and Virk as the foreclosure purchaser. For convenience, we shall refer to North Star as the Foreclosure Purchaser, and to Jeffrey Nadel and the other substitute trustees collectively as the Substitute Trustees.¹

The Foreclosure Purchaser deposited $46,000. In pertinent part, the Contract of Sale for the Property provides:

Balance of the purchase price to be paid in cash within ten days of final ratification of sale by the Circuit Court for Prince George's County, time being of the essence for purchaser. In the event that settlement does not occur within the said ten days, the purchaser shall be in default.... Interest to be paid on the purchase money less the stated deposit called for herein, at the rate pursuant to the Deed of Trust Note from the date of auction to the date funds are received in the office of the Substitute Trustee. There shall be no abatement of interest due from the purchaser in the event additional funds are tendered before settlement or if settlement is delayed for any reason, including but not limited to exceptions to sale, bankruptcy filings by interested parties, Court administration of the foreclosure or unknown title defects. All taxes ... are to be adjusted to the date of auction and thereafter are to be assumed by the purchaser.

(Emphasis added.)

On March 18, 2020, Mary Ellen Barbera, then Chief Judge of the Court of Appeals of Maryland, issued an "Administrative Order on Suspension of Foreclosures and Evictions during the COVID-19 Emergency" that was "effective immediately[.]" See https://mdcourts.gov/sites/default/files/adminorders/20200316restrictedoperationsduetocovid19.pdf. The order stayed all "foreclosures of residential properties ... pending in the circuit courts[.]"

On April 20, 2020, the Foreclosure Purchaser filed a Motion to Abate and Limit Interest, seeking to reduce both post-sale interest and taxes on the Property. Citing the Chief Judge's order, the Foreclosure Purchaser argued that because the "unforeseen stay of proceedings that was a response to the COVID-19 pandemic" differs from a foreseeable "court back log[,]" it "would be inequitable and contrary to the holdings and spirit of existing case law" to make foreclosure purchasers "responsible for all interest and real property taxes from the date of the foreclosure sale up to the date of settlement." The Foreclosure Purchaser acknowledged that in these circumstances, requesting abatement was "tantamount to requesting a reallocation of costs" because it "would fully shift the additional costs from the foreclosure purchaser to the lender[,]" but argued that the COVID-19 stay "was not reasonably foreseeable and is not of the type a foreclosure purchaser could or should have been aware of at the time of its bid."

The Substitute Trustees responded that the "standard language" in the Contract of Sale expressly precludes such abatement regardless of the reason for any delay in ratification. They argued that this pandemic-related delay "is most closely analogous to where the delay is caused by Court review[,]" which under AMT Homes , 228 Md. App. at 313, 137 A.3d 1056, " ‘falls within the universe of risks properly allocated to purchasers, and [a] cost of doing business[.]’ " Furthermore, the Foreclosure Purchaser cited "no authority for abating real estate taxes."

In reply, the Foreclosure Purchaser argued that AMT Homes is distinguishable because the delay at issue in that case was in the "lower court review process that included the ratification of the sale[,]" whereas this delay in the foreclosure process was caused by the Chief Judge's order staying all foreclosure proceedings. In the Foreclosure Purchaser's view, the pandemic-related delay was no different "than a delay caused [by] a neglectful trustee, a properly brought appeal or the frivolous filings by a party defendant, all of which are recognized bases for abatement[,]" because the court was "impeded from fulfilling its review obligations due to conduct of another party without fault of the foreclosure purchaser."

On June 3, 2020, Chief Judge Barbera issued an amended order lifting the stay on residential foreclosure proceedings, effective July 25, 2020. See https://www.mdcourts.gov/sites/default/files/adminorders/20200603amendedliftingsuspensionduringcovidofforeclosuresevictionsandotherejectmentsinvolvingresidences.pdf.

By written order entered August 31, 2020, the circuit court denied the Foreclosure Purchaser's motion for abatement. The court concluded that "the delay in ratifying the sale was due to an unprecedented pandemic and through no fault of any party[,]" so that abating post-sale taxes would reallocate the "well-known" responsibility that "frames everyone's expectations." See AMT Homes , 228 Md. App. at 310, 137 A.3d 1056.

The court also concluded that it did not have jurisdiction to reallocate tax obligations to "the original homeowner" under these circumstances.

The Foreclosure Purchaser moved to alter or amend the order, arguing that the "[c]ourt only ruled on Foreclosure Purchaser's request to abate real property tax and did not rule on Foreclosure Purchaser's request to abate interest." In response, the Substitute Trustees, again invoking the decision and reasoning in AMT Homes , pointed to the language in the Contract of Sale to argue that if the Foreclosure Purchaser did not accept those terms, it "could have chosen not to bid at the sale."

By written order entered September 16, 2020, the circuit court denied the motion to alter or amend. Clarifying its earlier order, the court applied the same principles governing allocation of post-sale tax responsibility to post-sale interest. In addition, the court concluded that under AMT Homes , a "court is not deemed a ‘person beyond the power of the purchaser to control or ameliorate’ " (quoting AMT Homes, 228 Md. App. at 311, 137 A.3d 1056 ).

On September 24, 2020, the court entered an order ratifying the foreclosure sale. The Foreclosure Purchaser noted this timely appeal on October 9, 2020, presenting five questions that we consolidate and address collectively, to determine whether the circuit court erred or abused its discretion in denying abatement based on the pandemic stay on foreclosure proceedings.² See generally Huertas v. Ward , 248 Md. App. 187, 205, 241 A.3d 1 (2020) ("an order ratifying a foreclosure sale is a final judgment as to any rights in the real property, even if the order refers the matter to an auditor to state an account").

STANDARD OF REVIEW

"Whether to abate the payment of interest by a [foreclosure sale] purchaser ... is a decision entrusted to the discretion of the hearing judge." Thomas v. Dore , 183 Md. App. 388, 405, 961 A.2d 655 (2008). See Baltrotsky v. Kugler , 395 Md. 468, 480-81, 910 A.2d 1089 (2006). This standard also applies to a foreclosure purchaser's request for abatement of post-sale taxes. Cf . AMT Homes, 228 Md. App. at 311, 137 A.3d 1056 ("declin[ing] to reallocate responsibility for interest and taxes when the delay results from judicial backlogs"). "Although we review de novo the legal standard that the court applied, we review the court's decision to deny abatement ... under ‘the familiar abuse of discretion standard.’ " Id. at 308, 137 A.3d 1056 (citation omitted). See Baltrotsky , 395 Md. at 477 n.7, 910 A.2d 1089. We therefore ask if the challenged decision " ‘either does not logically follow from the findings upon which it supposedly rests or has no reasonable relationship to its announced objective.’ " Zorzit v. 915 W. 36th Street, LLC , 197 Md. App. 91, 97, 12 A.3d 698 (2011) (quoting ...