Court Opinion

ID: 216619
Source: CourtListenerOpinion
Date Created: 2011-05-12 19:37:31+00
Date Added: 2024-06-11T17:28:29.070133
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                                No. 10-1483

DENNIS LLOYD SCOTT, JR.; MARION SCOTT,

                 Petitioners - Appellants,

           v.

HOWARD BIERMAN; CARRIE M. WARD; GEORGE JACOB GEESING,
substitute trustees; CONNIE HALL; RAYMOND LEE HALL; BIERMAN,
GEESING & WARD, LLC,

                 Respondents – Appellees,

           and

JOHN C. PROUTY; TIMOTHY BRANIGAN,

                 Respondents.

Appeal from the United States Bankruptcy Court for the District
of Maryland, at Baltimore.     Thomas J. Catliota, Bankruptcy
Judge. (0:09-bk-33928; AP10-00059)

Argued:   March 22, 2011                      Decided:   May 12, 2011

Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.

Affirmed by unpublished opinion.        Judge Keenan wrote       the
opinion, in which Judge Wilkinson and Judge Diaz joined.

ARGUED: John Douglas Burns, BURNS LAW FIRM, LLC, Greenbelt,
Maryland, for Appellants.   Brent M. Ahalt, MCNAMEE, HOSEA,
JERNIGAN, KIM, GREENAN & WALKER, PA, Greenbelt, Maryland, for
Appellees.    ON BRIEF: Steven L. Goldberg, MCNAMEE, HOSEA,
JERNIGAN, KIM, GREENAN & WALKER, PA, Greenbelt, Maryland, for
Appellees.

Unpublished opinions are not binding precedent in this circuit.

                                2
KEENAN, Circuit Judge:

        In December 2009, Dennis Lloyd Scott, Jr., (Dennis Scott)

filed    a   voluntary    petition       in    the    bankruptcy    court   seeking

relief under Chapter 13 of the United States Bankruptcy Code.

He later initiated an adversary proceeding in the bankruptcy

court along with his mother, Marion R. Scott (Mrs. Scott).                       The

Scotts claimed that they retained legal title to certain real

property in Maryland, which had been subjected to a foreclosure

sale later ratified by the Calvert County Circuit Court.                        The

Scotts asserted that the property at issue was part of Dennis

Scott’s bankruptcy estate.

      The     Scotts      later     sought      a     preliminary      injunction,

prohibiting the eviction of Mrs. Scott from the property, which

the bankruptcy court denied.              In this appeal, the Scotts filed

an interlocutory challenge to the bankruptcy court’s denial of

their    request    for   preliminary         injunctive    relief.      Upon   our

review, we agree with the bankruptcy court’s determination that

the     property    was   not     part    of    the    bankruptcy     estate    and,

accordingly,       we   affirm    the    bankruptcy      court’s    order   denying

preliminary injunctive relief.

                                          I.

      Until early April 1997, Mrs. Scott was the sole owner of

certain real property, improved by a dwelling, located at 601

                                          3
Ray Road in Sunderland, Maryland (the property).                            On April 15,

1997, Mrs. Scott conveyed by deed her interest in the property

to herself and to her son, Dennis Scott, as joint tenants.

     In September 2005, the Scotts obtained a loan from Argent

Mortgage Company (the lender).                      The loan was secured by a deed

of trust on the property, which was recorded in the land records

of Calvert County.                 At some point after 2005, when the Scotts

defaulted on the loan, the lender notified the Scotts that it

was enforcing the power of sale provided in the deed of trust.

The lender appointed Howard Bierman, Jacob Geesing, and Carrie

Ward (collectively, Bierman) as substitute trustees to conduct a

foreclosure sale of the property.

     As     part        of    the    foreclosure          sale     proceedings,     Bierman

published      an        advertisement          announcing           the   sale.         The

advertisement        listed         the   property’s        street    address,     a    short

description        of        the    property,       and     referenced     the     property

description contained in the deed of trust.

     On March 31, 2009, Connie L. Hall (Mrs. Hall) purchased the

property at the foreclosure sale.                         The Scotts, who were given

notice    of   the       foreclosure       sale,      did    not     challenge    the    sale

before    or   immediately           after   it      was    conducted.      The     Calvert

County Circuit Court (the Maryland court) entered an order on

May 11, 2009, ratifying the sale of the property.                             On June 4,

2009, Bierman recorded in the land records a deed (the purchase

                                                4
deed)    conveying   the   property     to   Mrs.   Hall    and    her    husband,

Raymond L. Hall (collectively, the Halls).

     On June 11, 2009, based on Mrs. Scott’s failure to vacate

the property, Mrs. Hall filed in the Maryland court a motion for

judgment seeking      possession   of     the   property.         On   August   14,

2009, the Scotts filed an opposition to that motion and also

filed a “Motion to Reconsider, Set Aside, Vacate, and Rescind”

the Maryland court’s order ratifying the foreclosure sale (the

motion to rescind).

     In the motion to rescind, the Scotts argued for the first

time that the original deed of trust did not contain a complete

description of the property, because the deed of trust did not

reference one of the two indivisible parcels described in the

deed and lacked a “savings and excepting” clause.                        Thus, the

Scotts asserted that the entirety of the property was not sold

in the foreclosure sale.           The Scotts also asserted that the

advertisement for the foreclosure sale was deficient because it

referenced the incomplete property description contained in the

deed of trust. 1     Finally, the Scotts alleged that the lender and

Bierman failed to correct the incomplete property description by

     1
       Also in their motion to rescind, the Scotts argued that
their signatures of on the original deed were not properly
notarized, and that the “report of sale” was defective because
it excluded Mrs. Hall’s husband and referred to Mrs. Hall as
“Connie Paul” rather than “Connie Lee Hall.”

                                      5
recording an amended deed of trust after the foreclosure sale

and   ratification.                  Relying    on    these     arguments,      the    Scotts

contended        that       the        foreclosure       sale     and     the     resulting

ratification by the Maryland court were void.

      The Maryland court had not acted on the Scotts’ motion to

rescind,    or       on    Mrs.      Hall’s    motion    seeking    possession         of    the

property,       at        the    time     Dennis      Scott     filed     his    bankruptcy

petition.        Based          on    Dennis   Scott’s       bankruptcy    petition,         the

Scotts filed in the Maryland court a suggestion of stay under 11

U.S.C.    § 362(a),         requesting         that    the    Maryland    court       take   no

further action with regard to the property.

      On December 10, 2009, the Maryland court held a hearing on

the parties’ pending motions. 2                  After the hearing, the Maryland

court declined the Scotts’ request to stay the proceedings and

awarded possession of the property to Mrs. Hall.                               The Maryland

court also denied the Scotts’ motion to rescind.                                 One month

later,    the    Halls          filed    in    the    Maryland    court    a    motion       for

enforcement of the judgment of possession seeking to evict Mrs.

Scott from the property.                  As of the date of this opinion, the

Maryland court had not acted on that motion.

      2
       The record shows that counsel representing the Scotts
thought that the hearing would not take place and, therefore,
did not attend that hearing.        As explained later in this
opinion, counsel’s absence at this hearing does not affect our
ultimate conclusion in this appeal.

                                                 6
       Meanwhile, on January 29, 2010, the Scotts initiated an

adversary proceeding in the bankruptcy court against Bierman,

the Halls, and other parties (collectively, the defendants). 3                    In

the    Scotts’   amended     complaint,         they     asserted   various   claims

relating to their contention that the foreclosure sale and the

Maryland court’s ratification of the sale were invalid.                          The

Scotts sought declaratory relief, imposition of a constructive

trust, monetary damages, and attorney’s fees and costs. 4

       In their primary claim, the Scotts asked the bankruptcy

court to declare that the property was part of Dennis Scott’s

bankruptcy estate under 11 U.S.C. § 541.                     The Scotts asserted

that when the bankruptcy petition was filed, the ratification of

the foreclosure sale was not final because the motion to rescind

was    pending   in    the       Maryland       court.      Although    the   Scotts

acknowledged that they may have been divested of equitable title

in    the   property   as    a    result    of     the    foreclosure   sale,   they

nonetheless contended that that they retained legal title to the

       3
       The complaint also named as defendants, Bierman, Geesing,
Ward & Wood, LLC, John C. Prouty, and Timothy Branigan. Prouty
prepared the purchase deed, while Branigan is the appointed
trustee of Scott’s bankruptcy case.
       4
       In the other seven counts in the amended complaint, the
Scotts asserted claims of equitable subordination, disparagement
of title, negligence, violation of the automatic stay, and
requested imposition of a constructive trust. Additionally, the
Scotts sought monetary damages and attorney’s fees and costs.

                                            7
property   on    the   ground   that        the   foreclosure      sale   and   the

Maryland court’s ratification of sale were void.

       After filing their amended complaint, the Scotts also filed

a motion for a preliminary injunction in the bankruptcy court.

In that motion, the Scotts asked the bankruptcy court to enjoin

Mrs.   Scott’s   eviction   from   the       property   and   to    prohibit    the

defendants from filing further motions in the Maryland court

relating to the property.       The defendants filed an opposition to

the Scotts’ motion for preliminary injunction.

       After conducting a hearing, the bankruptcy court denied the

Scotts’ request for a preliminary injunction.                      In accordance

with 28 U.S.C. § 158(d)(2)(A)(iii), the bankruptcy court entered

an order certifying an immediate appeal to this Court. 5                         We

granted the Scotts’ motion for permission to appeal.

                                       II.

                                       A.

       In reviewing the denial of a preliminary injunction, we

consider whether the court abused its discretion in refusing to

grant such relief.        W. Va. Ass’n of Club Owners & Fraternal

       5
       The bankruptcy court also entered an order granting a stay
pending the Scotts’ appeal from the denial of the preliminary
injunction.   In that order, the bankruptcy court required Mrs.
Scott to pay the Halls each month the cost of the mortgage
payments.

                                        8
Servs. v. Musgrave, 553 F.3d 292, 298 (4th Cir. 2009).                                         We

review       factual         determinations         under         a     clearly       erroneous

standard, and we review legal conclusions de novo.                             Id.

        A    preliminary       injunction       is        an     “extraordinary        remedy,”

which       may    be   awarded      only      upon       a    “clear     showing”      that    a

plaintiff is entitled to such relief.                              The Real Truth About

Obama, Inc. v. FEC, 575 F.3d 342, 345 (4th Cir. 2009) (citing

Winter v. Nat. Res. Defense Council, 555 U.S. 7, ___, 129 S. Ct.
365, 374-75 (2008)) vacated in part on other grounds, 130 S. Ct.
2371    (2010).         Preliminary         relief        affords     a   party,      before    a

trial, the type of permanent relief ordinarily available only

after       trial.      Id.         To   obtain       a       preliminary      injunction,      a

plaintiff must establish four elements: 1) that the plaintiff is

likely to succeed on the merits; 2) that the plaintiff will

likely suffer irreparable harm in the absence of preliminary

relief;       3)     that     the    balance        of         equities     weighs     in   the

plaintiff’s favor; and 4) that a preliminary injunction is in

the public’s interest.              Id.; Musgrave, 553 F.3d at 298.

        In the present case, the bankruptcy court determined that

the Scotts failed to carry their burden of proving the first

required          element,    a     likelihood        of       success    on    the    merits.

Therefore,         in   reviewing        the   bankruptcy          court’s      decision,      we

focus our analysis on the merits of Scotts’ central claim in the

                                                9
amended complaint, namely, that the property was part of the

bankruptcy estate.

                                             B.

       Under       federal    bankruptcy          law,       the    commencement    of   a

bankruptcy action creates an estate, which is comprised of the

debtor’s      legal    and   equitable       property         interests.     11    U.S.C.

§ 541.        The federal courts apply state law to determine the

nature of the debtor’s interest in property.                           Butner v. United

States, 440 U.S. 48, 55 (1979); In re Price, 562 F.3d 618, 624

(4th Cir. 2009).

       In Maryland, foreclosure proceedings are governed by the

Maryland Real Property Code and the Maryland Rules.                            Laney v.

Maryland, 842 A.2d 773, 780 (Md. 2004).                            Before a foreclosure

sale       takes   place,    the    holder    of    the       security   interest    (the

lender)       must    fulfill      certain    notice         requirements,    including

notifying the property owner (the borrower) about the proposed

foreclosure sale. 6          Id. at 781-82; Md. Real Prop. Code § 7-105,

Md. R. 14-206(b).

       Maryland       law    requires        that        a    trustee    conducting      a

foreclosure sale advertise the sale, stating the time, place,

       6
       The parties agree that the Scotts received the required
notice at each stage of the foreclosure proceedings.

                                             10
and   terms     of    the   sale,       and    a     description       of   the    property

sufficient to identify it.               Md. R. 14-303(b).             Immediately after

a foreclosure sale, the purchaser acquires an equitable interest

in the property.         IA Constr. Corp. v. Carney, 672 A.2d 650, 654

(Md. 1996).          However, before the purchaser can acquire legal

title to the property, several additional acts must occur.

      After the foreclosure sale, the lender must submit to the

circuit court certain documents, including a report of sale.

Md. Rule 14-305(a).          The circuit court then issues a notice of

sale and, if no exceptions to the sale are filed within 30 days,

the circuit court “shall ratify the sale.”                        Md. Rule 14-305(e).

A circuit court’s ratification of a foreclosure sale certifies

that the court viewed the sale as fair, and constitutes a final

resolution of the sale.                 See id.; Manigan v. Burson, 862 A.2d
1037, 1040-41 (Md. Ct. Spec. App. 2004).                               In light of this

finality,     a      borrower     has     no        right   of   redemption        after    a

completed foreclosure sale and ratification.                       Laney, 842 A.2d at

783; Simard v. White, 859 A.2d 168, 205 (Md. 2004).                           Also after

ratification, the trustee may deliver the property by deed to

the purchaser, thereby providing the purchaser with legal title.

See Laney, 842 A.2d at 783-84; Simard, 859 A.2d at 205.

      Maryland law unambiguously provides that the combined acts

of a completed foreclosure sale, a ratification of the sale by

the   circuit     court,    and     a    conveyance         of   the    property    to     the

                                               11
purchaser “operate[] to pass all the title which the borrower

had in the property at the time of the recording of the mortgage

or deed of trust.”         Md. Real Prop. Code § 7-105(c); see Laney,
842 A.2d at 783; see also Lippert v. Jung, 783 A.2d 206, 214

(Md. 2001) (if an owner of foreclosed property fails to redeem,

purchaser acquires absolute title).             At this point, a borrower

also loses the right to possess the property.                  Laney, 842 A.2d

at 783.

       Under   Maryland     law,   objections      to    the   validity     of   a

foreclosure generally will not be entertained after a circuit

court has ratified the foreclosure sale.                 Manigan, 862 A.2d at

1040.     The law provides different ways for an interested party

to object to a foreclosure sale before ratification.

       Under Maryland Rule 14-211, a borrower may file a motion to

“stay   the    sale   of   the   property   and    dismiss     the   foreclosure

action” before the sale takes place.                   Md. Rule 14-211(a)(1).

This    Rule    provides     the   borrower       an    opportunity    to    seek

injunctive relief challenging “the validity of the lien or the

lien instrument or the right of the [lender] to foreclose in the

pending action.”      Md. Rule 14-211(a)(3)(B); see Bates v. Cohn, 9
A.3d 846, 852 (Md. 2010).

       After the foreclosure sale, an interested party may file

exceptions “to the sale” within 30 days after the circuit court

issues a notice of the sale.          Md. Rule 14-305(d).            Permissible

                                      12
exceptions include challenges of procedural irregularities, such

as     allegations       that        the    advertisement       was      insufficient         or

inaccurately         described        the    property.          Greenbriar          Condo.    v.

Brooks, 878 A.2d 528, 563-64 (Md. 2005).

       The Scotts did not object to the foreclosure sale before it

occurred, or during the 30-day time period before the sale was

ratified by the circuit court.                      Rather, three months after the

circuit court’s ratification of the foreclosure sale, the Scotts

filed    their      motion      to    rescind       under   Maryland         Rule    2-535(b).

That    Rule     permits      a      party    at     any    time    to       file    a    motion

requesting a court to exercise its power to revise a judgment.

Md. R. 2-535.          When such a motion is filed more than 30 days

after    a   judgment      is     entered,      as    occurred     in        this   case,    the

moving party must establish by clear and convincing evidence

extrinsic       fraud,    jurisdictional             mistake,      or    irregularity        of

process or procedure previously unknown to the moving party.

See Md. Cts. & Jud. Proc. Code § 6-408; Jones v. Rosenberg, 940
A.2d 1109,       1119-20     (Md.       2008);    Manigan, 862 A.2d    at    1041;

Bernstein v. Kapneck, 417 A.2d 456, 460 (Md. Ct. Spec. App.

1980).       These restrictions on a court’s discretionary authority

to   revise     a    judgment        promote    the    finality         of    judgments      and

ensure that litigation comes to an end.                         Haskell v. Carey, 451
A.2d 658, 663 (Md. 1982).

                                               13
     Applying        these      principles       and      rules       of    Maryland

jurisprudence, we conclude that the Scotts held no interest in

the property when Dennis Scott filed his bankruptcy petition and

that, therefore, the property was not part of Dennis Scott’s

bankruptcy estate.         The timeline of events relating to the sale

of the property is not disputed.                    The foreclosure sale took

place in March 2009.            Thirty days after issuing the notice of

sale, the Maryland court entered an order of ratification, which

provided      a   final   resolution     of   all     matters    relating    to   the

foreclosure sale.         The ratification order authorized Bierman to

convey the property to the Halls and to execute the purchase

deed.    Upon execution of that deed, the Halls acquired complete

title    to   the   property,    divesting      the    Scotts    of   any   interest

remaining in the property.           See Md. Real Prop. Code § 7-105(c);

Laney, 842 A.2d at 783.

     Although       the   Scotts   had    received      proper    notice     of   the

foreclosure       sale,   the   Scotts   took    no    action    in   the   Maryland

courts, as permitted under Maryland Rule 14-211, to enjoin that

sale on the basis of an invalid deed of trust or on any other

basis.     Also, despite having notice that the sale had occurred,

the Scotts did not file any exceptions under Maryland Rule 14-

305(d) objecting to the advertisement or to any other procedural

irregularity in the sale.

                                         14
       Instead, the Scotts raised their objections for the first

time in their motion to rescind under Rule 2-535, which was

filed three months after the Maryland court’s ratification of

the foreclosure sale.               The filing of that motion did not revive

the    Scotts’      legal     or     equitable       interests    in   the       property.

Rather, the motion to rescind presented the Maryland court with

the discretionary authority to reexamine its order ratifying the

sale    and    to     revise        that     order     only    under      very     limited

circumstances.         See Jones, 940 A.2d at 1119-20.                 As observed by

the bankruptcy court, the Maryland court ultimately refused to

revise its ratification order based on the Scotts’ objections.

Notably,      the    Scotts’       objections     presented       in   the    motion    to

rescind failed to include any allegation of extrinsic fraud,

jurisdictional mistake, or irregularity of process or procedure

previously unknown to them.                  See Jones, 940 A.2d at 1119-20;

Manigan, 862 A.2d at 1041; Bernstein, 417 A.2d at 460.

       In   view     of     the    Scotts’    failure     to     timely    contest     the

foreclosure         sale,     the     Maryland       court’s     ratification        order

finally resolving all matters relating to that sale, and the

conveyance of the purchase deed to the Halls, we hold that the

Scotts were divested completely of any interest in the property

before Dennis Scott filed his bankruptcy petition.                           Because the

property at issue is not part of the bankruptcy estate, the

Scotts lacked any basis for obtaining injunctive relief from the

                                             15
bankruptcy court based on the foreclosure sale.                     As this Court

stated in Rutherford Hospital Inc. v. RNH Partnership, 168 F.3d
693, 699 (4th Cir. 1999), “a bankruptcy court’s jurisdiction

does not extend to property not part of a debtor’s estate.”                    See

also In re Heath, 115 F.3d 521, 524 (7th Cir. 1997) (because

property not part of bankruptcy estate, the bankruptcy court did

not have “core” jurisdiction); In re Guild and Gallery Plus,

Inc., 72 F.3d 1171, 1181 (3rd Cir. 1996) (when action does not

involve   property    of     the    estate,   it   is    beyond   the   bankruptcy

court’s jurisdiction).         Accordingly, we hold that the bankruptcy

court    did   not   abuse    its    discretion     in    denying    the   Scotts’

request for a preliminary injunction, because the property at

issue was not part of Dennis Scott’s bankruptcy estate. 7

                                       III.

     For these reasons, we affirm the bankruptcy court’s denial

of the Scotts’ petition for preliminary injunctive relief.

                                                                           AFFIRMED

     7
        Based on our holding, we do not                     reach    the   Scotts’
remaining arguments raised in this appeal.

                                        16