It is understandable that a lender whose loan went into default in 2009 would be anxious to obtain a court ruling that its 2018 foreclosure sale to enforce that loan was valid. However, as a result of a September 30, 2021 decision by the Maryland Court of Special Appeals in O’Sullivan v. Kimmett, the lender is going to have to wait for that ruling.
Jonathan Kimmett obtained a loan from American Brokers Conduit in April of 2007. The loan was secured by a deed of trust on the home that he owned with his wife.
On May 2, 2009, the Kimmetts defaulted in making their loan payments. They filed for bankruptcy, thus staying any foreclosure by the lender. However, after the automatic stay was lifted in 2016, Deutsche Bank, as trustee for an asset trust, claiming to hold the Kimmietts’ note as assignee of American Brokers Conduit, appointed substitute trustees under the deed of trust on the Kimmetts’ home and docketed a foreclosure case against them on December 28, 2016.
The Kimmetts requested mediation as was their right under Maryland law governing foreclosures of owner-occupied residential real property. The mediation was held on August 23, 2017, but no resolution was reached.
The substitute trustees scheduled a foreclosure sale of the property for November 7, 2018. Two days before the scheduled sale, the Kimmetts filed a motion to stay the sale, alleging that Deutsche Bank did not hold their note and thus had no right to foreclose. The court did not rule on the Kimmetts’ motion before the scheduled sale so the sale was held as scheduled. Deutsche Bank purchased the property. A few days later, the court denied the Kimmetts’ motion on the grounds that it was not filed within 15 days after the mediation was completed as required by the Maryland Rules.
One of the substitute trustees filed a report of the sale to Deutsche Bank on November 26, 2018. The court clerk issued a notice on December 7, 2018 stating that the sale as reported would be ratified unless exceptions were filed on or before January 7, 2019. The Kimmetts filed exceptions on January 6, 2019, alleging that Deutsche Bank could not be the holder of their note because American Brokers Conduit had been dissolved several years before the date of the purported assignment of their note by American to Deutsche.
The court held a hearing on March 4, 2019 at which it overruled the exceptions as untimely because they were not filed within 30 days after the report of sale was filed on November 26, 2018. On May 30, 2019, the court entered an order ratifying the sale to Deutsche Bank. The Kimmetts then filed an appeal to an in banc appeal to a panel of the trial court. While that appeal was pending, the substitute trustees filed a deed conveying the property to Deutsche Bank and Deutsche Bank filed a motion for possession of the property. The Kimmetts opposed that motion and filed their own motion to set aside the recorded deed.
The in banc panel reversed the denial of the Kimmetts’ exceptions to the sale because the trial judge had overlooked the fact that if a notice of the filing of a report of sale is issued, exceptions are timely if filed within 30 days after the notice, even if that date is more than 30 days after the report of sale was filed. The panel remanded the case to the trial court for further proceedings.
On remand, following a hearing on August 10, 2020, the trial court: (a) vacated the order ratifying the foreclosure sale; (b) denied Deutsche Bank’s motion for possession of the property; (c) vacated the deed to Deutsche Bank; and (d) ordered that an evidentiary hearing be scheduled on the Kimmetts’ exceptions to the sale. Notably, counsel to the substitute trustees consented to all but the scheduling of an evidentiary hearing. Before the evidentiary hearing occurred, the substitute trustees filed an appeal to the Court of Special Appeals. They argued that challenges to the lender’s right to foreclose, as distinguished from challenges to how the sale was conducted, were required to be filed before the sale and within 15 after mediation was completed, not by post-sale exceptions, and that the Kimmetts had missed that deadline. The Kimmetts moved to dismiss the appeal.
The Court of Special Appeals dismissed the appeal. It noted that, as a general rule, appeals can be taken only from final orders. An order is final if it: (a) is intended by the court as an unqualified disposition of the matter in controversy; (b) adjudicates or completes the adjudication of all claims against all parties; and (c) is set forth and recorded as required by the Maryland Rules. The order setting aside the order ratifying the sale, denying the motion for possession, and vacating the deed did not satisfy those criteria because the trial court set an evidentiary hearing that had not yet occurred to consider those matters further.
The substitute trustees argued alternatively that the setting aside of the order ratifying the sale was appealable under the “collateral order doctrine.” Under that doctrine, an order that is not a final order can be appealed if it: (a) conclusively determines the disputed question; (b) resolves an important issue; (c) resolves an issue that is entirely separate from the merits of the action; and (d) would be effectively unreviewable if review had to await the entry of a final judgment. The Court of Special Appeals held that the doctrine did not apply because the validity of the sale was not separate from the merits, but went “to the heart of the foreclosure sale process.” Whether the Kimmetts could challenge Deutsche Bank’s right to foreclose by post-sale exceptions also was not effectively unreviewable because the substitute trustees could appeal if the trial court sustained the Kimmetts’ exceptions after the evidentiary hearing and the Kimmetts could appeal if the trial court overruled their exceptions and entered an new order ratifying the sale.
An interesting side note is that, at the August 10, 2020 hearing, the trial judge noted that he would “sleep much better at night if [the Kimmetts] had been escrowing those payments so that they could be made at some point,” suggesting that the lender had gone unpaid for more than 11 years by the time of the hearing. Based upon the decision of the Court of Special Appeals, Deutsche Bank is in for a much longer wait before its litigation with the Kimmetts finally ends.