Zorzit v. 915 W. 36th Street (Ct. of Special Appeals)

Filed: February 2, 2011
Opinion by Judge Patrick L. Woodward

Held: The Court held that interest on the unpaid balance of the purchase price at a foreclosure sale from the date of such sale to the date of settlement is abated with respect to delays in the settlement attributed to other parties and is not abated to delays arising from the judicial process or the purchaser when the "Terms of Sale" found in an advertisement for the foreclosure sale included the payment of interest by the purchaser.

Facts: Three properties located in Baltimore City were advertised for sale at public auction by Appellant, the substitute trustee appointed by the court to preside over the foreclosure sale. The "Terms of Sale" portion of the advertisement stated: "Interest to be paid on the unpaid purchase money at the rate of 10% per year from the date of sale to the date funds are received in the office of the Substitute Trustee. In the event settlement is delayed for any reason, there shall be no abatement of interest."

Appellees purchased the properties at the foreclosure sale on June 30, 2008. The circuit court issued a notice of sale on July 16, 2008, and set August 15, 2008 as the date the court would ratify the sale of the properties. However, on August 15, 2008 the former owners of the properties filed exceptions to the foreclosure sale. The circuit court denied the former owners' exceptions on October 31, 2008, and settlement of the properties occurred on December 8, 2008. Appellees paid $47,584.71 in interest at settlement.

On January 5, 2009, appellees filed a motion for abatement of interest in the circuit court. The circuit court ruled in favor of the appellees and abated the entire interest. The Court of Special Appeals affirmed in part where delays were due to the former owners filing the exceptions to the foreclosure sale and reversed in part for all other time periods.

Analysis: The Court recited the rules governing foreclosure actions and relevant case law concerning the abatement of interest when settlement on a foreclosure sale is delayed. Before making the sale of a property subject to a lien, MD Rules require a trustee to “publish notice of the time, place, and terms of sale in a newspaper of general circulation in the county in which the action is pending once a week for three successive weeks." As soon as possible but no more than 30 days after the sale, the MD Rules require the person authorized to make the sale to file with the court a complete report of the sale and an affidavit of the fairness of the sale and the truth of the report. According to the MD Rules, once the report is received by the court, the clerk must issue a notice stating that the sale will be ratified unless cause to the contrary is shown within 30 days after the date of the notice. If, within the thirty day period, the court receives exceptions to the sale, then the court must determine the applicable judicial process, and upon a final order of ratification of sale, the settlement takes place with the foreclosure purchaser.

The Court then reviewed a number of Maryland decisions where the calculation of interest was at issue. The Court relied on Donald v. Chaney where the Court of Appeals ruled on whether purchasers at a foreclosure sale were required to pay interest on the unpaid balance of the purchase price from the date fixed for settlement to the actual date of settlement when the delay was attributed to the purchasers inability to obtain financing. In Donald, the Court of Appeals adopted the following principle: “A purchaser at a judicial sale will be excused from the requirement to pay interest upon the unpaid balance for the period between the time fixed for settlement and the date for the actual settlement only when the delay (1) stems from the neglect on the part of the trustee, (2) was caused by necessary appellate review of lower court determinations, or (3) was caused by the conduct of the other person beyond the power of the purchaser to control or ameliorate.”

In applying the foregoing principles to a purchaser where the purchase was not conditioned on financing, the Court of Appeals held that the purchasers should have been responsible for the interest accruing for the period after the fixed settlement date. In Donald, the Court of Appeals effectively granted the trial courts discretion to avoid the common law rule requiring a foreclosure sale purchaser to pay interest from the date fixed for settlement to the actual date of settlement if any of the forgoing criteria are met.

The Court also relied on its previous opinion in White v. Simard in deciding whether the terms and conditions found in any notice of sale become part of the sales agreement. The Court denied a defaulting purchaser’s claim to the excess in proceeds from the sale because the terms and conditions in the notice of sale stated that “the purchaser shall not be entitled to any surplus proceeds or profits resulting from any resale of property” became part of the contract of sale terms. The Court’s holding that the advertisement terms and conditions applied to the contract of sale overcame the common law rule that the defaulting purchaser is entitled to any surplus proceeds of a resale.

The Court also relied on the Baltrotsky decision by the Court of Appeals whereby the Court of Appeals was called upon to decide whether the trial court had the discretion under the equitable considerations articulated in Donald to set aside a binding term of sale specified in the advertisement for the foreclosure sale where it stated in the ad that the purchaser must pay interest on unpaid purchase amounts. After the sale, the defaulting owner then filed a number of claims in court that were delaying the final settlement for several months. The defaulting seller argued that the terms of the ad required the purchaser to pay the interest during the delays and the purchaser argued that the Donald factors were met and that interest was abated during such period. The Court Appeals applied public policy to rule in favor of the purchaser and against the defaulting seller.

The Court also relied on its opinion in Thomas where the Court considered again whether the terms of an advertisement requiring the payment of interest that become part of the sales agreement can be overcome by public policy and the courts discretion. The advertisement stated that the purchaser is required to pay interest regardless of the reason if the settlement is delayed. The owner of the property filed a number of exceptions that delayed the process. The Court ruled that the opinions in the previous cases hold for the principle that the contract provisions are “presumptively binding” and the presumption can be overcome by the factors of Donald and public policy.

Before applying the previous decisions to the facts in the current case, the Court established three time periods (1) the date of the foreclosure sale to the initial date for final ratification, (2) the initial date for final ratification to the actual date of final ratification, (3) the actual date of final ratification to the date of settlement.

The court then held that because the terms of sale included in the advertisement for the foreclosure sale became a part of the contract when the sale was ratified by the circuit court, the prohibition of the abatement of interest was presumptively binding upon the parties, unless appellee could show using the Donald principles that an equitable circumstance justifies abatement. The Court held that the delay in period one was necessary under the MD Rules so the abatement of interest did not apply. The Court held that the delay in period 2 was caused by the conduct of other parties beyond the control and power of the purchaser to control or ameliorate since the owner filed exceptions, and thus, interest was abated during this period. The Court held that the purchaser did not provide any explanation for the delay in period 3 (the terms of sale said 10 days after ratification and the settlement was actually 38 days) so the presumption could not be rebutted for this period.

Accordingly, the court held that the circuit court abused its discretion in abating the interest for the entire period, and remanded the case to calculate the proper interest amount to be paid.

The full opinion is available in PDF.

Cappel v. Riaso (Ct. of Special Appeals)

Filed: February 7, 2011
Opinion by Judge Timothy E. Meredith

Held: Defendants' ownership of unimproved land in Maryland, unrelated to the cause of action, did not support the exercise of personal jurisdiction over the defendant in an action to enforce a confession of judgment clause in a guaranty.

Facts: The Defendants signed a guaranty containing a confession of judgment clause. In the guaranty, the defendants agreed to appear "in any court of competent jurisdiction in the State of Virginia or any other State or Territory of the United States" to confess judgment.

Upon a default, the plaintiff filed a complaint and affidavit for confessed judgment in the Circuit Court for Montgomery County. The clerk entered judgment against the defendants. The defendants filed a motion to vacate on grounds that the court lacked personal jurisdiction because of their minimal contacts with Maryland. The plaintiff opposed the motion on grounds that the defendants owned land in Maryland, thus availing themselves of the benefits and protections of the forum state. The trial court held that owning the property was a sufficient contact to justify the exercise of personal jurisdiction under International Shoe, and it denied the motion.
Analysis: First, the Court held that lack of personal jurisdiction is an appropriate basis under Rule 2-611(d) upon which to move to vacate a confessed judgment, though it is not specified in the rule.

Regarding the merits, the Court held that an out-of-state resident's ownership of real property unrelated to the cause of action, absent other ties, is insufficient to establish jurisdiction under either the long-arm statute or the Due Process Clause. Accordingly, the Court vacated the judgment.
The full opinion is available in pdf.

Potomac Valley Orthopaedic Associates v. Maryland State Board of Physicians (Ct. of Appeals)

Filed: January 24, 2011

Opinion by Judge Joseph F. Murphy, Jr.

Held: The prohibitions against self-referrals contained in the Maryland self-referral law applies to a physician's referral of a patient for a MRI or CT scan that are to be performed another health care provider in the same group practice as the referring physician or on an imaging or scanning machine in which the referring physician or the referring physician's practice has a financial interest.

Facts: This case began when two formal petitions were issued to the Maryland State Board of Physicians by CareFirst BlueCross BlueShield and The Injury Workers' Insurance Fund requesting that the Board issue a ruling on the propriety under the Maryland Self-Referral Law (Md. Health Occ. Code Art. § 1-301, et seq.) of referrals made by physicians for MRI and CT scans when the referring physician has a financial interest in the performance of the scan. On December 20, 2006, the Board issued a declaratory ruling responding to the petitions which stated that the exceptions under Sections 1-302(d)(2), (3) and (4) of the Maryland Self-Referral Law did not apply to a physician's self-referrals of patients for MRI and CT scans that were performed by a practitioner in the referring physician's practice group or on a machine in which the referring physician's practice has a beneficial financial interest. When the Board's declaratory ruling was affirmed by the Circuit Court of Montgomery County pursuant to Md. State Govt. Art. § 10-305, the appellants of the Board's declaratory ruling, which were twelve diversified medical practices, noted an appeal of the Circuit Court's ruling to the Court of Special Appeals. Prior to any briefs being filed with the Court of Special Appeals, the Court of Appeals issued a writ of certiorari on its own initiative to address the issues presented by the Board's declaratory ruling.

Analysis: Maryland Self-Referral Law generally prohibits a health care practitioner from referring a patient to a health care entity in which the health care practitioner owns a beneficial interest, unless the referral is included in explicit exceptions which are contained in the Maryland Self-Referral Law. At issue in the Board's declaratory ruling were exceptions which were set forth in Sections 1-302(d)(2), 1-302(d)(3), and 1-302(d)(4), which the Court and the Board's referred to as the (i) group practice exception, (ii) direct supervision exception, and (iii) in-office ancillary services exception, respectively. The Court agreed with the Board's analysis of the three exceptions and found that (i) the group practice was intended for referrals that transfer professional responsibility for a patient's continued care, permanently or temporarily, from one health care practitioner to another practitioner in the same group practice and does not exempt referrals for specific services or tests that the referring practitioner has already chosen; (ii) the direct supervision exception only created an exception for referrals for services or tests to a health care entity that is outside of the referring practitioner's practice when the referring physician is personally present in the treatment area when the services or tests are performed and either personally provides or directly supervises the services or tests; and (iii) the in-office ancillary services exception did not apply to the referring MRI and CT scans because the definition of in-office ancillary services explicitly excluded MRI, CT and radiation therapy services, except for services provided by a radiologist practice group or a practice or office consisting solely of radiologists.

Conclusion: Relying upon the legislative history of Maryland's Self-Referral Law, prior opinions of the Attorney General that were consistent with the Board's declaratory ruling, and the General Assembly's rejection of numerous bills introduced during the period from 2007 through 2010 that would have changed the Maryland Referral Law to allow physician's to engage in the self-referral practices that were at issue in this case, the Court ultimately held that the Board's declaratory ruling was not premised upon an erroneous conclusion of law and affirmed the ruling of the Circuit Court.

The full opinion is available in pdf.