Tuesday, June 22, 2010

Maryland High Court Revives Ex-Owner's Attempt In Civil Lawsuit To Undo Metropolitan Money Store Sale Leaseback Foreclosure Rescue Home Equity Ripoff

In Baltimore, Maryland, The Maryland Daily Record reports:
  • Maryland’s top court has revived a woman’s attempt to retrieve the home she claims she lost in a foreclosure scam. The Court of Appeals said Harriette Julian can pursue her case even though she did not post a bond generally required in appeals of approved foreclosure sales. The instrument, called a supersedeas bond, stays execution of a circuit court’s approval while the appeal is pending.

  • But the bond is required only when the foreclosed home is bought by abona fide purchaser” — one who has no reason to doubt the seller had clear title to the property, the Court of Appeals said. In this case, U.S. Bank knew of an alleged defect when it bid at the foreclosure sale, the court noted.(1)

  • Julian had filed a notice of rescission in court, seeking to undo her transfer of title to the woman who took out the loan on which the bank was foreclosing. The bank admitted it knew of the notice before the foreclosure sale was held. “[B]ecause U.S. Bank, admittedly, had notice of an alleged defect prior to the foreclosure sale, its bona fide status at the time of the sale was in question,” Judge Lynne A. Battaglia wrote for the majority.

  • In remanding the case to circuit court, the high court said Julian must persuade the judge her rescission notice complied with the law and put the bank on legally sufficient notice of a potential claim.

  • Phillip Robinson, Julian’s attorney, called the court’s decision a warning to foreclosing lenders who, like U.S. Bank, take the property at a foreclosure sale. Lender-buyers must be diligent and make sure the foreclosed homeowner has no claim on the property under any consumer-protection law, or risk having a judge rule they are not a bona fide purchaser, said Robinson, executive director of Civil Justice Inc. in Baltimore.(2)If I have a statutory claim and the lender proceeds to sale, the lender does so at his own peril,” Robinson said.

  • Such statutes include the Maryland Protection of Homeowners in Foreclosure Act, which was the basis of Julian’s claim, as well as the Maryland Mortgage Fraud Act and the Maryland Consumer Protection Act, he said. U.S. Bank “had affirmative notice and chose to ignore it,” Robinson said.

  • The court’s ruling contrasts with its Feb. 16 decision in Mirjafari v. Cohn,(3) which affirmed the general requirement that owners appealing a foreclosure sale must post a supersedeas bond. That case, however, did not involve an alleged foreclosure scam and a filed objection, Robinson said.


  • Facing foreclosure, Julian agreed to convey her property to LaShawn Wilson. Wilson obtained a $482,000 mortgage from Wells Fargo Bank, N.A. The mortgage broker was Metropolitan Money Store, whose executives have been convicted of fraud in foreclosure scams, according to the Court of Appeals’ opinion. At settlement, Julian granted power of attorney to an investment firm, which was to put money from the sale in an account from which Wells Fargo would be paid. Wells Fargo assigned the loan to U.S. Bank. The lending institutions deny any knowledge of the alleged scam.

  • No mortgage payments were made and U.S. Bank initiated a foreclosure action on Aug. 27, 2007, in Charles County Circuit Court. That day, Julian filed with the court a Notice of Rescission to revoke the power of attorney and rescind the conveyance. Trustees of U.S. Bank bought the property for $480,000 at the Sept. 20, 2007, foreclosure sale.

  • Julian objected to the sale in circuit court, alleging U.S. Bank was not a bona fide purchaser because it had at least “inquiry notice” of her filed revocation notice. Circuit Judge Robert C. Nalley rejected the challenge. Julian appealed to the Court of Special Appeals, which did not address the bond issue but upheld Nalley’s ruling that U.S. Bank was a bona fide purchaser because it lacked knowledge of Julian’s objection on the date of its loan assignment from Wells Fargo.

  • But the Court of Appeals said the date of assignment is irrelevant in determining if the assignee is a bona fide purchaser. The relevant date is the purchase date(4) and by then — as U.S. Bank acknowledged during high-court arguments — the lender had discovered Julian’s filed notice, the court said.

Source: Foreclosure appeal revived by Maryland Court of Appeals despite failure to post bond.

For the court ruling, see Julian v. Buonassissi, CA No. 37 (Md. Ct. App. June 16, 2010).

(1) The Maryland high court also agreed with the state intermediate appellate court that a foreclosure rescue scam victim’s conveyance of her home by Deed of Trust is merely voidable, and not absolutely void (ie. void ab initio), upon proof of violations of Maryland's Protection of Homeowners in Foreclosure Act. Finding the conveyance to be voidable necessitates a determination of whether the foreclosure purchaser was entitled to the protections accorded to a bona fide purchaser. An earlier conveyance obtained through fraud, deceit or trickery is voidable as between the parties thereto, but not as to a subsequent bona fide purchaser for value and without notice of any unrecorded rights and equities claimed by others.

Had the court ruled that the foreclosure rescue scam victim’s conveyance to be absolutely void, no determination of the foreclosure purchaser's bona fide purchaser status would have been necessary because a subsequent purchaser who would otherwise qualify as a bona fide purchaser for value and without notice of any unrecorded rights and equities claimed by others receives no protection where an earlier conveyance in the chain of title is void ab initio (ie. as in the case where an earlier conveyance involves a forged deed).

(2) According to their website, Civil Justice Inc. is a Maryland not-for-profit corporation formed for the purpose of increasing the delivery of legal services to clients of low and moderate income while promoting a statewide network of solo, small firm and community based lawyers who share a common commitment to increasing access to justice through traditional and non-traditional means.

(3) 412 Md. 475 (Md. Ct. App. 2010).

(4) The date of the foreclosure sale at which the lender acquired title to the home.