Opinion
300-2022
02-09-2023
NICOLE PETERS-HUMES, ET AL v. DIANA C. THEOLOGOU
Circuit Court for Prince George's County Case No. CAEF17-14101
Berger, Shaw, Ripken, JJ.
OPINION [*]
BERGER, J.
The primary issues before us in this appeal are whether the appellants, George Humes and Nicole Peters-Humes, were properly served with a motion for deficiency judgment in a foreclosure action. The circuit court determined that Humes waived service pursuant to Peay v. Barnett, 236 Md.App. 306 (2018), and Peters-Humes was served in accordance with the Maryland Rules. Both Humes and Peters-Humes noted appeals. The appellants present the following issues for our consideration in this appeal, which we have consolidated and rephrased for clarity:
I. Assuming arguendo that appellant Humes was not properly served pursuant to the Maryland Rules, whether the circuit court erred in determining that Humes waived service pursuant to Peay v. Barnett, 236 Md.App. 306 (2018).
II. Whether the circuit court erred by determining that appellant Peters-Humes was properly served.
III. Whether the circuit court erred by failing to give the appellants fifteen days to respond to the motion for deficiency judgment after denying the appellants' exceptions.
IV. Whether the circuit court erred by ruling on the exceptions without a hearing. V. Whether the circuit court erred by ruling on Peters-Humes's motion to dismiss without a hearing. VI. Whether the circuit court denied Peters-Humes the opportunity to present evidence.
VII. Whether the circuit court erred by ruling on the motion for deficiency judgment in light of counterclaims raised by Peters-Humes in the Circuit Court for Frederick County in a related litigation.
VIII. Whether the circuit court erred by granting the motion for deficiency.
For the reasons explained herein, we shall largely affirm the judgment of the circuit court. We shall remand for the limited purpose of permitting the appellants to file "a motion to reconsider/response to Lafayette Federal Credit Union's (LFCU) Motion for Deficiency Judgment" as specified in the magistrate's recommended order, which became a final order on April 4, 2022.
FACTS AND PROCEEDINGS
Appellants George Humes and Nicole Peters-Humes owned real property located at 14707 Jovial Court in Bowie, Maryland. The property was secured by a note and deed of trust owned by Lafayette Federal Credit Union ("LFCU"). In 2016, the appellants defaulted on the note and terms of the deed of trust. Diana Theologou, et al., the substitute trustees and appellees in the instant action, commenced a foreclosure proceeding. An Order to Docket was filed on June 15, 2017. The property was sold at a foreclosure sale on or about July 31, 2018, and the sale was ratified on November 20, 2018. After the sale, the matter was referred to the court auditor to determine the amount due under the mortgage. The auditor reported a deficiency in the amount of $290,864.18. No exceptions were filed to the audit, and the circuit court issued an order ratifying the audit on February 26, 2019.
Following the ratification of the audit, the matter was inactive for nearly two years. On February 5, 2021, LFCU filed a motion for deficiency judgment that is at the center of this appeal. In an order dated March 8 and docketed March 10, 2021, the circuit court denied the motion without prejudice because LFCU had not proved service of process pursuant to Md. Rule 2-121. LFCU filed a second motion for deficiency judgment on March 23, 2021. The motion included an advisement that "a [c]opy of this [m]otion will be served upon the defendants and an [a]ffidavit of [s]ervice will be filed thereafter." LFCU filed multiple affidavits detailing attempts to serve the appellants over the weeks that followed.
On July 28, 2021, LFCU filed a return of service providing that Peters-Humes was individually served on July 21, 2021. On July 26, 2021, Peters-Humes filed a motion to dismiss the motion for deficiency judgment on the grounds that she had not been properly served. Peters-Humes also raised additional pre-sale and post-sale objections in her motion. On August 4, 2021, LFCU filed a return of service regarding appellant Humes. The affidavit provided that, on July 28, 2021, the process server effectuated substitute service by serving Tanya Smith, who was described in the affidavit as appellant Humes's "roommate." Also on August 4, 2021, Humes filed a motion to dismiss alleging that he had not been properly served and, therefore, that the circuit court lacked personal jurisdiction over him.
On August 12, 2021, LFCU filed a third motion for deficiency judgment, which was identical to the second motion for deficiency judgment. LFCU filed two supplemental return of service affidavits on September 29, 2021. One provided that Peters-Humes was personally served. The other provided that "Tanya Smith as Roommate" was served at appellant Humes's residence.
On October 5, 2021, the circuit court denied the motions to dismiss filed by both appellants and granted the motion for deficiency judgment. On October 15, 2021, both appellants filed motions to alter or amend the circuit court's order denying their motions to dismiss. A hearing was held on February 16, 2022 before a magistrate. At the hearing, Humes and Tanya Smith testified that Smith was not Humes's roommate and did not reside at the location where the affidavit was served. The magistrate found that Ms. Smith was not a resident pursuant to Md. Rule 2-121 and, therefore, service was defective. The magistrate found, however, that the appellees made a good faith effort to serve Humes under the rules governing service of process and that Humes had actual knowledge of the commencement of the action and his duty to defend. Accordingly, the magistrate concluded that Humes waived any challenge to personal jurisdiction. The magistrate further found that Peters-Humes had been properly served.
The circuit court determined that the order granting the motion for deficiency judgment had the effect of rendering the third motion for deficiency judgment moot "as [the second motion for deficiency judgment] and the [third motion for deficiency judgment] were identical."
Humes and Peters-Humes both filed exceptions to the magistrate's recommendations. The circuit court denied the exceptions and affirmed the magistrate's recommended order in an order dated April 1, 2022 and docketed April 4, 2022. This appeal followed.
Additional facts shall be discussed as necessitated by our consideration of the issues on appeal.
STANDARD OF REVIEW
We review a trial court's denial of a motion to alter or amend an order granting a motion for deficiency judgment applying an abuse of discretion standard. Peay v. Barnett, 236 Md.App. 306, 315-16 (2018). However, "[t]he existence of a factual predicate of fraud, mistake, or irregularity, necessary to support vacating a judgment under Rule 2-535(b), is a question of law." Wells v. Wells, 168 Md.App. 382, 394 (2006). A trial court's decision as to "[w]hether a person has been served with process is essentially a question of fact." Wilson v. Md. Dep't of Env't, 217 Md.App. 271, 286 (2014) (alteration in original) (quoting Harris v. Womack, 75 Md.App. 580, 585 (1988)). "Questions of law are reviewed without according the trial judge any special deference; [and] findings of fact are assessed under a 'clearly erroneous' standard ...." Brooks v. State, 439 Md. 698, 708 (2014). "When reviewing a [magistrate]'s report, both a trial court and an appellate court defer to the [magistrate]'s first-level findings . . . unless they are clearly erroneous." McAllister v. McAllister, 218 Md.App. 386, 407 (2014).
DISCUSSION
I.
The first issue before us on appeal is whether the circuit court erred in finding that Humes waived his challenge to personal jurisdiction under Peay, supra, 236 Md.App. 306. Peay is factually analogous to the case at bar. When a private process server attempted to serve the defendant at his home, the defendant's sister answered the door. Id. at 314. The process server's affidavit provided that the defendant's "'sister and coresident' had been served with the papers at [the defendant's] . . . home address." Id. In Peay, we held that service was defective because the defendant's sister was not a "resident" pursuant to Md. Rule 2-121, but we explained that the analysis does not end with a finding of defective service because the court may find that a defendant has waived the defense of personal jurisdiction. Id. at 327-29.
Humes devotes several pages of his brief to his argument that he was not properly served with the motion for deficiency judgment because the motion was served on his employee. The circuit court agreed with Humes that the appellee did not effectively serve Humes, and the appellee does not challenge the trial court's finding that Humes was not effectively served under the Maryland Rules. That determination, therefore, is not before us on appeal. The question before us on appeal is whether Humes waived his right to challenge personal jurisdiction under the two-tier test articulated in Peay.
In Peay, we adopted the two-tier test articulated by the United States District Court for the Middle District of North Carolina in U.S. to use of Combustion Sys. Sales v. E. Metal Prod. &Fabricators, Inc., 112 F.R.D. 685, 687 (M.D. N.C. 1986) ("Combustion Systems"), to determine whether a defendant waived the right to challenge personal jurisdiction. 236 Md.App. at 330-31. The first tier considers "whether the plaintiff made a good faith effort to serve under the rules governing service of process." Id. at 330. The second tier considers whether "the defendant [had] 'actual knowledge of the commencement of the action and his [or her] duty to defend.'" Id. (quoting Combustion Systems, supra, 112 F.R.D. at 689). The circuit court applied the Peay test when considering whether Humes had waived a challenge to personal jurisdiction.
When applying the first tier of the Peay test in this case, the circuit court specifically found that "LFCU made several good faith attempts to serve Defendant Humes pursuant to Md. Rule 2-121." The circuit court explained its findings as follows:
LFCU attempted to serve Defendant Humes at his residence on three separate occasions: twice in this matter and once in another matter in Frederick County. At each attempt of service time, Ms. Smith was present at Defendant Humes['s] residence and accepted the papers. In fact, on October 20, 2020, when LFCU served Defendant Humes, in the matter filed in Frederick County, Ms. Smith accepted service on behalf of Defendant Humes. Defendant Humes did not dispute service in that matter and filed a response. As such, LFCU had no knowledge of the defect, or that Ms. Smith did not reside at the property. Moreover, despite accepting service on three separate occasions, Ms. Smith never advised the process server that she was not a resident of the home. As such, the [c]ourt finds that LFCE made good faith attempts to serve Defendant Humes. Tier one of the two tier test is met.
The circuit court further found that the second tier of the Peay test was satisfied because Humes "had actual knowledge of the commencement of this action." The court reasoned that "[b]ased on Defendant Humes['s] assertions that LFCU served the 'original' motion, instead of the 'new' motion, it's clear that Defendant Humes received the documentation and notice of the action from Ms. Smith." The circuit court further emphasized that when the court inquired as to "whether Defendant Humes had knowledge of the instant matter" during the hearing, "Defendant Humes, under oath, responded in the affirmative." The court observed that "[a]dditional evidence of Defendant Humes'[s] knowledge of this action includes the fact that Defendant Humes filed a [m]otion to [d]ismiss, less than one week after Ms. Smith accepted the papers on July 28, 2021."
Accordingly, the circuit court concluded that "both prongs of the Peay test have been met," and, "[a]s such, the [c]ourt f[ound] that Defendant Humes waived personal jurisdiction."
Based upon our review of the record, we conclude that sufficient evidence exists to support the circuit court's findings that the appellee made multiple good faith efforts to serve Humes and that Humes had actual knowledge of the proceedings. At the time, the appellee had no reason to believe that Ms. Smith was not Humes's roommate, particularly in light of the fact that Ms. Smith had accepted service on Humes's behalf in a separate proceeding. Furthermore, Humes's filing of a motion to dismiss indicated his knowledge of the matter, as did his testimony at the hearing. Accordingly, we reject Humes's assertion that the circuit court erred in finding that Humes waived his right to challenge personal jurisdiction under Peay.
II.
The next issue we shall address on appeal is appellant Peters-Humes's assertion that the circuit court erred in finding that she was properly served. The circuit court expressly found that Peters-Humes was properly served on July 21, 2021 and a second time on August 29, 2021. The court further found that "Peters-Humes was served in accordance with Md. Rule 14-216(b) and 2-121 and therefore this [c]ourt obtained personal jurisdiction over Defendant Peters-Humes." As we explained supra, the circuit court's finding that Peters-Humes was served is a question of fact that we review for clear error. Wilson, supra, 217 Md.App. at 286; Brooks, supra, 439 Md. at 708. As we shall explain, we perceive no error in the circuit court's finding that Peters-Humes was properly served.
A process server's affidavit of service is prima facie evidence of proper service. Weinreich v. Walker, 236 Md. 290, 296 (1964) ("[A] proper official return of service is presumed to be true and accurate until the presumption is overcome by proof."); Wilson, supra, 217 Md.App. at 285 ("A proper return of service is prima facie evidence of valid service of process[.]"). Although that presumption may be rebutted, "the mere denial of personal service by him who was summoned will not avail to defeat the sworn return of the official process server." Weinreich, supra, 236 Md. at 296. Rather, a denial of service will only stand if supported by strong and unrefuted "corroborative evidence by independent, disinterested witnesses[.]" Wilson, 217 Md.App. at 285 (quotation omitted).
Peters-Humes asserts that she was served with "incomplete documents . . . two times, improperly served at the wrong address, and finally after the fourth try on August 29, 2021 [served with] all documents." Peters-Humes points to no evidence in the record to support her assertion that she did not receive a copy of Md. Rule 2-321 other than her own conclusory statement. Moreover, as the circuit court observed, Peters-Humes conceded that she "received everything" when she was served again on August 29, 2021. The circuit court reasonably concluded that "assuming arguendo that Defendant Peters-Humes did not receive the notice or copy of Md. Rule 2-321 on July 21, 2021, there is no dispute that she was personally served the notice and motion for deficiency judgment on August 29, 2021." Accordingly, the circuit court found "that Defendant Peters-Humes was served in accordance with Md. Rule 14-216(b) and 2-121, therefore th[e circuit c]ourt obtained personal jurisdiction over Defendant Peters-Humes." This finding was supported by competent evidence and was not clearly erroneous. We, therefore, reject Peters-Humes's assertion that the circuit court erred in finding that she had been properly served.
III.
Both appellants contend that the circuit court erred by failing to give them fifteen days to respond to the motion for deficiency judgment. The appellants contend that pursuant to Md. Rule 2-321(c), they were entitled to fifteen days to file a response to the motion for deficiency judgment after the circuit court denied their motions to alter or amend the order denying their motions to dismiss. Md. Rule 2-321(c) provides, in relevant part, that "[w]hen a motion is filed pursuant to Rule 2-322 . . ., the time for filing an answer is extended without special order to 15 days after entry of the court's order on the motion." The appellants assert that by denying their exceptions and granting the appellees' motion for deficiency judgment simultaneously, the circuit court violated the Maryland Rules and the appellants' due process rights.
On March 17, 2022, the magistrate issued her recommendation and proposed order in which the appellants were expressly provided fifteen days to respond to the motion for deficiency judgment. The order provides that "[d]efendants shall have 15 days from the date of this order to file a motion to reconsider/response to Lafayette Federal Credit Union's (LFCU) Motion for Deficiency Judgment." Rather than file a response, the appellants instead filed exceptions to the foreclosure magistrate's recommended order. The circuit court denied the appellants' exceptions in an order dated April 1, 2022 and entered April 4, 2022. The appellants subsequently appealed to this Court.
The magistrate's order did not become final until the entry of the circuit court's order denying the appellants' exceptions on April 4, 2022. Accordingly, the appellants had "15 days from the date" the exceptions were denied "to file a motion to reconsider/response to Lafayette Federal Credit Union's (LFCU) Motion for Deficiency Judgment." During that fifteen-day period, the appellants noted an appeal. On remand, the appellants shall have fifteen days from the issuance of the mandate to file "a motion to reconsider/response to Lafayette Federal Credit Union's (LFCU) Motion for Deficiency Judgment" as specified in the magistrate's March 17, 2022 proposed order, which became final on April 4, 2022.
At oral argument, pro se appellant Peters-Humes pointed to two Certificates of Satisfaction, both dated June 25, 2021, providing that Lafayette Federal Credit Union had received full payment and satisfaction of the two mortgages for the real property at issue in this case. Peters-Humes asserted that the two Certificates of Satisfaction demonstrate that there was no deficiency for which a deficiency judgment should have been entered. Counsel for LFCU had no knowledge of the Certificates of Satisfaction and no position as to their significance to the matters at issue in this appeal. We take no position as to the significance of the Certificates of Satisfaction in this appeal.
IV.
Both appellants further assert that the circuit court erred by ruling on their exceptions without a hearing. As we shall explain, we are not persuaded that the circuit court's failure to hold a hearing constitutes reversible error.
Pursuant to Md. Rule 2-541(g), "[t]he court may decide exceptions without a hearing, unless a hearing is requested with the exceptions or by an opposing party within five days after service of the exceptions." Rule 2-311(f) prescribes the process by which a party shall request a hearing, providing that "[a] party desiring a hearing . . . shall request the hearing in the motion or response under the heading 'Request for Hearing.' The title of the motion or response shall state that a hearing is requested."
Both appellants separately filed exceptions to the magistrate's recommended order in this case. Peters-Humes's pro se exceptions did not state that a hearing was requested in the title of the motion, nor did her motion include a heading titled "Request for Hearing" or a statement expressly requesting a hearing. The exceptions filed by Humes were titled "Exceptions to Foreclosure Magistrate's Recommendation and Request for Hearing" and included a request that the circuit court "[s]et this matter for a hearing" near the conclusion of the filing. The request for the hearing did not appear under a "Request for Hearing" heading as required by Md. Rule 2-311(f). Because neither appellant requested a hearing in the precise format required by Md. Rule 2-311(f), the circuit court was not required to set the matter in for a hearing prior to ruling upon the appellants' exceptions. Accordingly, we hold that the circuit court did not commit reversible error by declining to hold a hearing on the appellants' exceptions.
V.
In addition to arguing that the circuit court erred by ruling on exceptions without a hearing, Peters-Humes asserts that the circuit court erred by ruling on her July 26, 2021 "Motion to Dismiss Plaintiffs' Motion for Deficiency Judg[]ment" without a hearing. As we explained supra in Part IV of this Opinion, Maryland Rule 2-311(f) requires that "[a] party desiring a hearing . . . shall request the hearing in the motion or response under the heading 'Request for Hearing.' The title of the motion or response shall state that a hearing is requested." Peters-Humes's motion included a subheading stating "Request for Hearing" under the title of the pleading at the beginning of the motion, but the motion did not include an express request for a hearing under the heading "Request for Hearing" as required by Md. Rule 2-311(f). Accordingly, the circuit court did not err by ruling on the motion without a hearing.
VI.
Peters-Humes further asserts that the circuit court erred by denying her an opportunity to present evidence in support of her claims of fraud, trespass, and associated claims before ruling on her motion to dismiss. The circuit court addressed these matters when ruling on Peters-Humes's motion to dismiss as follows:
In addition to improper service of the Motion for Deficiency Judgment, Defendant Peters-Humes in her motion . . . and supporting memorandum . . ., challenges the amount of the deficiency, and alleges Plaintiffs violated Md. Code, Real Prop. § 7-105. Exceptions to the auditor's report and pre-sale objections to the sale are governed by Md. Rule 2-543 and 14211, respectively. Pursuant to both Md. Rule 2-543 and Md. Rule 14-211, Defendant Peters-Humes['s] objections and motion to dismiss the sale[] are untimely. The [c]ourt does not find good reason to excuse the timeliness of Defendant Peters-Humes'[s] motion. Therefore, the [c]ourt does not address the remaining issues raised with Defendant Peters-Humes'[s] motion.
As we shall explain, we agree with the circuit court that Peters-Humes's allegations of fraud, illegality, and related claims were not properly before the circuit court at the time she filed her motion to dismiss the appellee's motion for deficiency judgment.
The circuit court ratified the foreclosure sale on November 20, 2018. When a foreclosure sale has been ratified, there has been a final judgment on the merits for res judicata purposes. Jones v. Rosenberg, 178 Md.App. 54, 72 (2008) (noting that final ratification of sale "is res judicata as to the validity of such sale, except in the case of fraud or illegality"). "Ordinarily, upon the court's ratification of a foreclosure sale objections to the propriety of the foreclosure will no longer be entertained." Manigan v. Burson, 160 Md.App. 114, 120 (2004).
The circuit court expressly determined that Peters-Humes's allegations regarding the sale were untimely, emphasizing that pre-sale and post-sale objections could have been raised years earlier in accordance with the applicable Maryland Rules. An owner of real property is "possessed of three means of challenging a foreclosure: obtaining a pre-sale injunction pursuant to Maryland Rule [14-211], filing post-sale exceptions to the ratification of the sale under Maryland Rule 14-305(d), and the filing of post-sale ratification exceptions to the auditor's statement of account pursuant to Maryland Rule 2-543(g), (h)." Wells Fargo Home Mortgage, Inc. v. Neal, 398 Md. 705, 726 (2007). Peters-Humes had the opportunity to pursue any of the above options, but the time for doing so has long since expired.
In her brief, Peters-Humes framed her arguments as allegations of fraud and irregularity, but Peters-Humes's allegations are conclusory. Moreover, Peters-Humes has not advanced sufficient facts to establish that she would be able to present a claim of fraud or irregularity by clear and convincing evidence. See Pelletier v. Burson, 213 Md.App. 284, 290 (2013) ("The existence of fraud, mistake, or irregularity must be shown by clear and convincing evidence.") (internal quotation omitted). Indeed, "Maryland courts have narrowly defined and strictly applied the terms fraud, mistake, [and] irregularity, in order to ensure finality of judgments." Id. (quoting Thacker v. Hale, 146 Md.App. 203, 217 (2002)). Accordingly, we reject Peters-Humes's assertion that she was deprived of the opportunity to present evidence of alleged fraud and illegality.
VII.
Peters-Humes further asserts that the circuit court erred in ruling on the appellees' deficiency motion when counterclaims raised by Peters-Humes in a related breach of contract case in Frederick County were still pending before the Circuit Court for Frederick County. Peters-Humes asserts that the circuit court erred by allowing the appellees to proceed with their deficiency motion when the related case was pending in Frederick County, arguing that this allowed the appellees "two bites of the apple." First, we observe that Peters-Humes acknowledges that the appellees voluntarily dismissed the claim in Frederick County, and instead proceeded in the foreclosure action in Prince George's County. Furthermore, any matters regarding the Frederick County litigation are outside the scope of this appeal.
VIII.
Finally, Peters-Humes asserts that the circuit court erred by granting the appellees' motion for deficiency "when [a]ppellee did not comply with the requirement of Md. Real Property Statutes." In support of this argument, Peters-Humes cites the case of Austraw v. Dietz, 185 Md. 245, 251 (1945), for the principle that "[i]t is true that the statute authorizing the entry of deficiency decrees should be strictly construed because it is in derogation of the common law." Peters-Humes further points to Pulliam v. Dyck-O'neal, Inc., 243 Md.App. 134, 145 (2019), which quoted language from Austraw providing that "in scanning a foreclosure proceeding the court should exact strict compliance with all the requirements of the statute." Peters-Humes does not, however, point to any specific allegations of violations of the Real Property Article that would necessitate the vacating of the deficiency judgment order. Accordingly, we are unpersuaded by Peters-Humes' conclusory allegation that the circuit court erred by granting the motion for deficiency due to alleged general noncompliance with the Real Property Article.
The Pulliam Court observed that "the statutes to which the [Austraw] Court referred were Maryland Code (1939), art. 16, § 241, art. 66, § 25, which authorized entry of a 'decree in personam' against the mortgagor for the outstanding mortgage debt. Those were predecessor statutes to current [Md. Code (1974, 2015 Repl. Vol.)] § 7-105.17 [of the Real Property Article]."
CONCLUSION
For the reasons explained supra, we largely affirm the circuit court's April 4, 2022 order denying the appellants' exceptions and affirming the magistrate's March 17, 2022 recommended order addressing the appellants' motions to alter or amend judgment. We shall remand for the limited purpose of permitting the appellants to file "a motion to reconsider/response to Lafayette Federal Credit Union's (LFCU) Motion for Deficiency Judgment" as specified in the magistrate's recommended order, which became a final order on April 4, 2022. The parties shall have fifteen days from the issuance of the mandate in this appeal to file this motion in the circuit court. Otherwise, we affirm.
JUDGMENT OF THE CIRCUIT COURT FOR PRINCE GEORGE'S COUNTY AFFIRMED IN PART AND REVERSED IN PART. THE CIRCUIT COURT'S APRIL 4, 2022 ORDER DENYING THE APPELLANTS' EXCEPTIONS AND AFFIRMING THE MAGISTRATE'S RECOMMENDED ORDER IS AFFIRMED. CASE REMANDED FOR THE LIMITED PURPOSE OF PERMITTING THE APPELLANTS TO FILE IN THE CIRCUIT COURT "A MOTION TO RECONSIDER / RESPONSE TO LAFAYETTE FEDERAL CREDIT UNION'S (LFCU) MOTION FOR DEFICIENCY JUDGMENT" WITHIN FIFTEEN DAYS OF THE ISSUANCE OF THIS MANDATE. COSTS TO BE PAID 7/8 BY THE APPELLANTS AND 1/8 BY THE APPELLEES.
[*]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.
[**]At the November 8, 2022 general election, the voters of Maryland ratified a constitutional amendment changing the name of the Court of Special Appeals of Maryland to the Appellate Court of Maryland. The name change took effect on December 14, 2022.