Opinion ID: 1903077
Heading Depth: 2
Heading Rank: 2

Heading: When is a Purchaser at Foreclosure Sale Entitled to Possession of the Purchased Property?

Text: Empire contends that it is entitled to possession of the property in question where the foreclosure sale has been ratified by the Circuit Court but before payment of the purchase price and transfer of the deed. It appears that Empire, according to a memorandum it filed in the Circuit Court on December 15, 2003, has paid the balance of the purchase money and received a Trustee's Deed for the Property. Therefore, because the purchase price has been paid and a deed of trust has been executed and delivered to Empire, this argument appears to be moot. Nevertheless, because under the strictures of foreclosure rules and statutes it is very likely that future purchasers at foreclosure sales could be faced with the same issue as to when possession may be sought, but the issue would normally be mooted before appellate review could be consummated, we shall address Empire's question in order to resolve when a foreclosure sale purchaser may seek possession of the property. See Attorney General v. Anne Arundel County School Bus Contractors Ass'n, 286 Md. 324, 328, 407 A.2d 749, 752 (1979) (stating [a] court may decide a moot question where there is an imperative and manifest urgency to establish a rule of future conduct in matters of important public concern, which may frequently recur, and which, because of inherent time constraints, may not be able to be afforded complete appellate review). We must therefore begin by examining what the law of this State provides in relation to when a purchaser at a foreclosure sale can be said to be entitled to seek possession of the purchased property. We note, first of all that there are conflicting statements in the various cases. Our review is somewhat further complicated by the fact that some of the early cases that have become landmark cases over the years involve other types of judicial sales, not mortgage foreclosures; by the fact that payment of the purchase price had in fact been paid in the seminal case, Lannay's Lessee v. Wilson, 30 Md. 536 (1869); by the fact that in some cases the documents of indebtedness contained provisions for possession, [6] etc., and in some of these cases possession was not the issue. Thus, in many instances such language might be considered as dicta, albeit persuasive dicta. Well over a century ago, in the case of Lannay's Lessee v. Wilson, 30 Md. 536 (1869) (an ejectment action at lawnot equity), [7] while considering whether a mortgagor's successor in interest could bring an ejectment action against the foreclosure sale purchaser of property where it was alleged that the trustee failed to deliver the property deed to the purchaser, this Court stated: A sale by a trustee, appointed by a decree for the purpose, is a judicial sale, and binds and concludes all the parties to the cause who may have right or claim; and the court passing the decree, has ample power to make its jurisdiction effectual by putting the purchaser in possession of the premises sold by its authority. And though the decree does not operate as a conveyance of the legal title, the purchaser, holding possession under it, does not hold wrongfully or unlawfully; and, consequently, all right of possession of those bound by the decree, and the proceedings under it, other than the purchaser, is divested and taken away, and, of course, with it the right to maintain ejectment. To determine otherwise, would be to embarrass and render insecure the larger portion of our judicial sales. A purchaser under a decree in equity becomes the substantial owner of the property from the moment of final ratification of the sale, and he is entitled to and can recover the rents and profits of the estate. He is not only entitled to the possession of the property, but it remains at his risk, notwithstanding the legal title may not be conveyed. By such sale the dry legal title, and the right of possession often become completely severed, at least for a time,the legal title remaining in some of the parties to the cause, while the equitable estate and right of possession become vested in the purchaser. And such was the case in the present instance, in relation to the 60¾ acres, the legal title to which remained in Lannay at the time of the decree. But it does not by any means follow that, because the naked legal title to such part of the land remained in him, his devisees are entitled to recover it in this action. One of the requisites is wanting, that of the right of possession. Lannay's Lessee, 30 Md. at 550 (emphasis added). See also Merryman v. Bremmer, 250 Md. 1, 8, 241 A.2d 558, 563 (1968) (stating that the judicial sale purchaser is entitled to possession of the property after the court ratifies the sale). [8] It was made quite clear in Lannay's Lessee that the foreclosure sale purchaser's right to seek possession of the purchased property arises at the moment of final ratification of the sale. In Zeller v. Silverman, 143 Md. 339, 122 A. 255 (1923), we once again contemplated when a foreclosure sale purchaser can be said to have a right to seek possession of the property, specifically where an assignee of the tenant of the mortgagors continued to remain on the property at issue in that case. In explaining the law relating to what was then a writ of possession, otherwise known as a writ of habere facias possessionem,  [9] we explained: By section 93 of article 75 of the Code, it is provided in substance that whenever any lands or tenements shall be sold by any officer named therein, or by any trustee under the decree of any court in this State,    by any mortgagee under any power in any mortgage and the debtor named in such execution or decree,    shall be in actual possession of the lands and tenements sold and shall fail or refuse to deliver possession of the same to the purchaser thereof, the judge of the circuit court for the county in which the lands or tenements may be situate . . . shall on application in writing, to be verified by the affidavit of the purchaser, unless good cause to the contrary be shown by the party or parties in actual possession, within not less than fifteen days nor more than thirty days from the filing of such application, issue a writ in the nature of a writ of habere facias possessionem reciting therein the proceedings which may have been had in said process, thereby commanding the sheriff of the county to deliver the possession of the lands or tenements to the purchaser thereof, etc. In Schaefer v. Amicable P.L. and L. Co., 53 Md. 83 [(1880)], it was said, the evil intended to be remedied by similar acts of assembly was, that debtors and those claiming under them after a sale, `held on to their possession until ousted by the tedious process of ordinary judicial proceedings, thus against every principle of law and equity without the ability of making ultimate indemnity for their wrong doings, depriving purchasers for years of all enjoyment of the lands they had honestly paid for. '  `The policy which induced the adoption of the summary proceedings at law, has engrafted the same remedies upon proceedings in equity. They are judicial in their nature, collateral to the decree under which the purchaser claims and intended to give it speedy effect.' In Applegarth v. Russell, 25 Md. 317 [(1866)], it was said, `The practice is settled in this State, that when a purchaser at a sale, under a decree has fully complied with the terms of sale, and possession of the premises purchased is withheld by a party to the suit, or by a person claiming under a party by title subsequent to the commencement of the suit, the purchaser may obtain an order under which possession will be delivered to him by proper process. ' Zeller, 143 Md. at 342-43, 122 A. at 256 (alterations added) (emphasis added). Thus, under the language of Zeller, or, to be more precise, the language quoted from Applegarth, it can be argued that a necessary precursor to having a valid right to possess property purchased at a foreclosure sale is the compliance of the purchasing party with the terms of the sale. In Union Trust Co. v. Biggs, 153 Md. 50, 137 A. 509 (1927), we further discussed the intricacies of purchaser and mortgagor rights in the foreclosure sale time line: [10] After the foreclosure sale the purchaser had the equitable interest in the land commensurate with that conveyed by the mortgage deed, and he was entitled to the legal title upon the final ratification of the sale by the court and the payment of the purchase money. The assignee, on the other hand, held the legal title in trust for the purchaser for the completion of the sale by its ratification, the satisfaction of the purchase price, and the delivery of the deed, subject to the right to enforce the payment of any of the purchase money by a resale at the risk of the buyer. So the whole beneficial ownership or estate of both the assignee and the mortgagor had passed from the land into the obligation of the purchaser to pay. In short, after the sale, equity regarded the property in the land as in the buyer, and the property or the price as in the assignee and mortgagor. It is true that the sale is incomplete until ratified by the court, and that the purchaser's title is an inchoate and equitable one from the day of sale until the final ratification, which, however, retroacts so that the purchaser is regarded by relation as the equitable owner from the time of the sale, and entitled to all the intermediate rents and profits of the estate. Union Trust, 153 Md. at 55-56, 137 A. at 512 (emphasis added). Therefore, while the purchaser of property at a foreclosure sale may not yet have legal title until ratification of the sale by the court and the purchase price paid, as well as the delivery of the deed, an inchoate equitable title does vest for the purchaser at the time of the foreclosure sale. This inchoate equitable title becomes a complete equitable title when the foreclosure sale is ratified by the court. See Simard v. White, 383 Md. 257, 313, 859 A.2d 168, 201 (2004) (stating that [o]nce the court ratifies the sale, [complete] equitable title passes to the purchaser) (alterations added). As mentioned, legal title, separate and distinct from equitable title, vests in a foreclosure sale purchaser after ratification of the sale by a court and payment of the purchase money. As Maryland Rule 14-207(f)(1) states: (f) Conveyance to purchaser. (1) When made. After a sale has been finally ratified by the court and the purchase money paid, the person making the sale shall convey the property to the purchaser or the purchaser's assignee. If conveyance is to the purchaser's assignee, the purchaser shall join in the deed. [Emphasis added.] This Court's emphasis on adherence by the purchasing party to the terms of sale was restated and further qualified in Mizen v. Thomas, 156 Md. 313, 144 A. 479 (1929), albeit as dicta: [11] It is true that, where in such a case as this the trustee reports a sale which in due course is finally ratified, the transaction is spoken of as a sale, and for many purposes it may be treated as a sale, and no mischief is occasioned by that use of the word. But strictly speaking it is not a sale, for a sale of real estate is not complete or consummate until the property has been actually conveyed, or at least until the purchaser has so far complied with the terms of sale as to entitle him to a conveyance. The bid of the purchaser, its acceptance, the report of the trustee, and its final ratification by the court, are all successive steps in the formation and completion of a perfect and binding contract of sale, but do not amount in themselves to an actual sale. Nor can the property be treated as actually sold until the terms of sale have been met or waived, and the purchaser has received or is entitled to receive a conveyance thereof. For until then the title to the property is still in the mortgagor, and the only interest acquired by the purchaser is the right to receive a conveyance of the property upon complying with the terms of sale. . . . For it would be singular indeed if a defaulting purchaser could oust the rightful owner from the possession of it, without either paying or securing the payment of the purchase price.  Mizen, 156 Md. at 322-23, 144 A. at 483 (citations omitted) (emphasis added). We note a recent decision by the Court of Special Appeals, G.E. Capital Mortgage Services, Inc. v. Edwards, 144 Md.App. 449, 798 A.2d 1187 (2002), where a purchaser at a foreclosure sale sought possession of the property prior to ratification of the foreclosure sale in the Circuit Court. In that case, the purchaser actually moved for a possession order under Maryland Rule 14-102 before ratification of the foreclosure sale in the Circuit Court. In discussing whether the purchaser was indeed entitled to possession before ratification, the intermediate appellate court initially looked to the language of Rule 14-102 and stated that [t]o invoke the rule, the purchaser must show that (1) the property was purchased at a foreclosure sale, (2) the purchaser is entitled to possession, and (3) the person in possession fails or refuses to relinquish possession. G.E. Capital, 144 Md.App. at 457, 798 A.2d at 1191. The Court of Special Appeals also noted that [t]he plain language of Rule 14-102 does not require a purchaser to wait until after ratification before filing a motion. Id. at 458, 798 A.2d at 1192. In fact, the court held that the purchaser was entitled to possession even before ratification of the foreclosure sale because the right to possession was expressly provided for in the deed of trust itself, and, [i]f for no other reason than the terms of the instrument itself, it would appear that [the purchaser] had a contractual right to possession in this case. [12] Id. at 461-62, 798 A.2d at 1194 (alteration added). While there was never a claim in the case sub judice that Empire was entitled to possession of the property prior to ratification in the Circuit Court, we agree with the intermediate appellate court that, where such language is provided in the deed of trust or mortgage, purchasers at foreclosure sales may be contractually entitled to possession prior to ratification of that sale by the court (mortgagees or their assigns may even be entitled to seek possession prior to the sale itself if the instruments so provide). Looking to other sources in regard to when a purchaser at a foreclosure sale is entitled to possession of the purchased property, a treatise on foreclosures in Maryland states:  § 25.3 RATIFICATION, RIGHT OF POSSESSION, RISK OF LOSS Upon the court's ratification of the sale, the purchaser becomes entitled to possession of the premises upon settlement ( payment of the purchase price and compliance with the terms of sale ) and the risk of loss shifts to the purchaser notwithstanding that the legal title may not have passed. . . . ALEXANDER GORDON IV, GORDON ON MARYLAND FORECLOSURES § 25.03, at 1030 (4th ed.2004) (emphasis added) (footnotes omitted). Later, the provision above is modified when the treatise again discusses a purchaser's right to possession, specifically where the purchaser seeks a judgment awarding possession:  § 26.3 JUDGMENT AWARDING POSSESSION . . . Generally, the court may, on a case-by-case basis award possession prior to ratification and prior to payment of the purchase price. The anxious buyer should be prepared to show good cause at any hearing for possession prior to ratification. Once the hammer comes down at the auction, there is a reasonable tendency for the purchaser to become very uneasy about the borrower's continued possession: waste, insurance issues, liability issues, removal of sinks, tubs, fixtures and built-in appliances, cabinets, storage sheds, pools, equipment, all seem up for grabs as a borrower, sometimes furious, malicious and hot-tempered, moves out. Then, too, a borrower facing a discharge in bankruptcy may be tempted to scorch the earth as leaving, facing no apparent liability to the deficiency. Clearly, once the sale has been ratified and the balance of the purchase price paid, the purchaser must be put in prompt possession. . . . Id. § 26.3, at 1062-64 (emphasis added) (footnote omitted). What becomes clear after examining the prior caselaw and other sources regarding when the right to possession accrues to the purchaser at a foreclosure sale is that varying answers to Empire's question to this Court have existed from our early opinion in Lannay's Lessee, but we have never explicitly declared when a purchaser is entitled to seek possession. Insofar as the law in such matters is unclear, we shall now make it clear. As stated in Union Trust, Merryman and, most recently, Simard, prior to ratification in the Circuit Court, a purchaser at a foreclosure sale has an inchoate equitable title to the property. Generally at this early stage a purchaser is not yet entitled to possession of the property absent sufficient reasons otherwise ( e.g., waste, deed of trust provides for possession before judicial sale or court ratification, i.e., upon default, etc.). [13] When the foreclosure sale is thereafter ratified by the Circuit Court (if it is ratified at all) and complete equitable title accrues to the purchaser, the purchaser may then be entitled to seek possession of the property and an equity court, on a case-by-case basis, and upon proper notice, has the discretion, unless the circumstances warrant otherwise, to grant possession. The legal title to the property is not conveyed, however, until the purchase price is paid and other terms of sale, if any, are met and a deed of conveyance delivered.