In Pablo Huertas, et ux. v. Carrie M. Ward, et al., a case involving a foreclosure sale of a residential property, the Court of Special Appeals of Maryland clarified that the ratification of a foreclosure sale constitutes a final judgment as to the parties’ rights to the property. The Court further clarified that subsequent proceedings including an audit, and challenges to the auditor’s report represent a second judgment, which does not concern the sale or disposition of the property, but rather involves the expenses of the sale and distribution of the sale proceeds.
A copy of the opinion is available here.
Background
After unsuccessfully attempting to prevent a residential foreclosure under a deed of trust, pro se Borrower filed multiple notices of appeals claiming the trial court erred in its denial of numerous attempts to prevent the impending foreclosure sale and the ratification of the same. Borrower had filed a flurry of pleadings generally alleging elements of fraud, forgery, and the lack of right to foreclose. The trial court considered these pleadings as a counterclaim, and alternatively, as a motion to stay the sale of the property and to dismiss the foreclosure action. The counterclaim was severed from the foreclosure proceeding, under a separate case number, which was eventually dismissed.
In the foreclosure proceeding, to the extent that the counterclaim was considered a motion to dismiss, the Court ultimately denied it. Borrower continued to file various challenges, which were denied, and Borrower filed another notice of appeal. After the house was sold to the lender, Borrower filed “a motion in vigorous opposition” to the sale, asserting that the auction was a sham, and that the substitute trustees had submitted forged documents throughout the case. Following a hearing, the Court overruled the vigorous opposition, denied the other pending motions, and ratified the sale. In the same order, the court referred the matter to an auditor to determine the distribution of proceeds from the sale. Borrower filed another notice of appeal.
The substitute trustees moved to dismiss the appeal as untimely, and not final, in light of the ambiguity in McLaughlin v. Ward, 240 Md. App. 76 (2019), which included dicta that “identified a possibility that, in some circumstances, a final judgment might not come into being until the court has adjudicated exceptions to an auditor's report, if exceptions are filed.” Op. at 13. Since the order of ratification referred the case to an auditor, the substitute trustees asserted that the order of ratification was not a final order.
Discussion
The Court clarified lingering uncertainty about the finality of the order of ratification. Specifically, the Court explained that “an order ratifying a foreclosure sale is a final judgment as to any rights in the real property, even if the order refers that matter to an auditor to state an account. … [A] foreclosure action is principally an in rem proceeding concerning rights in real property. Even though the foreclosure case continues after the ratification of the sale, the proceeding no longer involves an adjudication of rights in the real property. The ratification of the sale has the practical effect of putting the parties out of court, as they can no longer prosecute or defend their rights with respect to the property; therefore, an order ratifying a foreclosure sale is a final judgment with respect to the in rem aspects of a foreclosure proceeding.” Op. at 14.
As to subsequent proceedings involving the audit of the sale, the Court explained “the process of referring the case to an auditor and resolving any exceptions to the auditor's report is collateral to the foreclosure proceeding, and thus it does not affect the finality of an order ratifying the foreclosure sale.” Op. at 14-15. “The function of an auditor [of a foreclosure sale] is that of a calculator and accountant for the court. . . The opportunity to file exceptions to the auditor's report is not an additional opportunity to challenge the adjudication of rights in the real property that occurs in the ratification of the foreclosure sale. … Exceptions to the auditor's report are directed not at the right to sell the property or to the conduct of the sale itself, but to the allowance or disallowance of expenses of the sale or the distribution of net proceeds. . . When a court adjudicates exceptions to an auditor's report, its decision represents a second judgment, from which any party aggrieved by that ruling can appeal.” Op. at 15.
In addressing the appeal itself, as to the sufficiency of Borrower’s pre-sale challenges based on alleged forged documents, the appellate court affirmed the trial court’s denial of Borrower’s motion without a hearing, noting that Borrower failed to plead all elements of the defense with the requisite particularity. Specifically, the Court explained, “[t]o sufficiently raise such a defense, a party must satisfy the minimum pleading standards for raising defenses in a foreclosure action. . . . [U]nder Rule 14-211, a party must plead all elements of a valid defense with particularity. In this context, particularity means that each element of a defense must be accompanied by some level of factual and legal support. General allegations will not be sufficient to raise a valid defense requiring an evidentiary hearing on the merits." Op. at 20 (citing Buckingham v. Fisher, 223 Md. App. 82, 91-92 (2015)).
As to the post-sale exceptions, the Court noted that the “the party objecting to ratification of the sale bears the burden of demonstrating that the sale was invalid. . . . Because [Borrower] failed to satisfy that burden, the court properly declined to set aside the sale.” Op. at 21. Accordingly, the appellate court affirmed the ratification of the foreclosure sale.