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The Maryland Court of Special Appeals rules that a purchaser of property at a foreclosure sale is not entitled to abatement of interest due to a delay in ratification of sale caused by the court

AMT Homes, LLC v. Jeremy K. Fishman, et al.
No. 757 (June 2, 2016), The Court of Special Appeals of Maryland.
by Marie Claire Langlois, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdcourts.gov/opinions/cosa/2016/0757s15.pdf

The estate of Thelma Battle owned a home in Seat Pleasant, subject to a deed of trust. When the estate defaulted, the defendants as trustees petitioned the circuit court for a Decree for Sale. At the public auction, AMT Homes (“AMT”, or “the plaintiff”) made the winning bid at $108,500.00, and paid a down payment of $10,000. A Report of Sale was filed on August 1, 2014, and the circuit court issued a Notice Report of Sale, requiring anyone filing exceptions to show cause by September 11, 2014. Although no exceptions were filed, the court failed to ratify the sale until January 29, 2015.

The law states that no more than 30 days after a sale, a person authorized in the sale must file with the court a complete report of the sale and an affidavit declaring fairness of the sale and truth within the report. Md. Rule 14-305(a). Once the report is filed, the court issues a Notice of Report of Sale, allowing anyone with exceptions to file them within thirty (30) days of issuance of the notice. Md. Rule 14-305(c). Assuming that no one has filed an exception, and the thirty (30) days have passed, the court ratifies the sale if they are convinced the sale was “fairly and properly made.” Md. Rule 14-405(e). Upon ratification, the purchaser may commence settlement.

In April 2015, AMT filed a Motion for Abatement of Interest in the amount of $2,198.35, which represented the taxes and interest that accrued on the balance from September 29, 2014, sixty (60) days after the sale, to January 29, 2015, the date of ratification. The Circuit Court held that while the Maryland Rules did not create a strict time limit for ratification, a decision must be rendered within a “reasonable amount of time.” Additionally, the Court found that when a delay in ratification is not caused by either party (the debtor/seller and the purchaser), and instead “a result of judicial backlog,” then the interest should not be abated.

On appeal, AMT argued that the delay until January 2015 was unreasonably long, and because the delay was caused by no fault of the purchaser, a common law exception to payment of interest should apply. Three exemptions have been authorized to alleviate payments of interest on property acquired at a foreclosure sale: 1) when the delay stems from neglect on the part of the trustee; (2) when the delay was caused by necessary appellate review of a lower court’s decision; and (3) when the delay was caused by the conduct of other persons beyond the power of the purchaser to control or ameliorate. AMT contends that the third exception applies to the case at hand.

“With the benefits of equitable ownership come its obligations, one of which is that the purchaser pays interest from the time of sale.” While it may seem unjust that AMT was required to pay interest for a period longer than sixty (60) days, relieving AMT of such responsibility through abatement would not make the obligation disappear; it would simply pass such obligation to the debtor. For these reasons, the Appellate Court questioned, not whether it was fair to remove AMT’s liability, but whether it should shift that liability to another party.

The purchaser, as holder of equitable title, is more appropriately in the position to pay off this burden. Additionally, the Court denied use of an exception, finding that when courts have abated interest payments in the past, it has been grounded in the behavior of the former owners, stating “we have not found, any authority for the proposition that a court is a ‘person[] beyond the power of the purchaser to control or ameliorate.’”

Lastly, the court denied to set a specific timeline on when is “reasonable” time after issuing a Notice Report of Sale to ratify. But they made sure to state that “even if the law did set a strict sixty-day limit, [. . . ] neither the Code nor the Maryland Constitution guarantees a remedy. Therefore, even if the court abused its powers in waiting until January 2015, the solution would not be to pass on the burden to the trustees.