In Fisher v. Ward, a majority of a panel of the Court of Special Appeals of Maryland affirmed the trial court’s ratification of a foreclosure sale, determining that the trustee’s constructive presence by telephone, rather than “in-person” presence at the foreclosure auction, did not warrant invalidating the sale absent a showing of prejudice. Rather, the “absence of the trustee from the sale is merely a circumstance to be considered by the court in the ultimate determination of the fairness of the proceedings.” Op. at 8. “Absent other irregular factors,” the intermediate appellate court concluded, “‘presence’ by telephone did not create unfairness or prejudice to [the borrower] to warrant reversal…” Op. at 10.
A copy of this opinion is available here.
Background
Following Borrower’s default on her mortgage payments, the lender appointed Trustees to begin foreclosure proceedings. At the sale, although none of the Trustees were physically present, one Trustee monitored the sale and was connected by cell phone to the auctioneer, who was at the sale. Auctioneer announced the initial bid, which the Trustee had offered via telephone, on behalf of the lender, which was conceded to be more than the fair market value of the property. Op. at 3. Borrower filed exceptions to the sale, claiming that the sale was unlawful because no Trustee was physically present, and that the report of sale incorrectly represented that the Trustee had directed and supervised the auction.
In response, Trustees asserted that the constructive presence of the trustee was sufficient to satisfy the “presence” requirement, and that Borrower suffered no prejudice from the alleged irregularity. The trial court overruled the Borrower’s exceptions, and Borrower appealed.
Discussion
Although the Court of Special Appeals determined that “ancient” precedent required a trustee to attend the sale, Op. at 6-7 (citing Hopper v. Hopper, 79 Md. 400 (1894)), the Court observed that case law “condoned, if not actually permitted” the concept of constructive presence. Op. at 7 (discussing Wicks v. Westcott, 59 Md. 270 (1883)). Thus, “absence of the trustee from the sale is merely a circumstance to be considered by the court in its ultimate determination of fairness of the proceedings.” Op. at 8.
“[W]hat is sufficient to constitute constructive presence will depend on the facts before the court.” Op. at 8. On the record of this appeal, the Court deemed the Trustee “readily accessible” throughout the sale via the auctioneer’s cell phone, and concluded that “[a]ny problems or concerns could have easily been addressed.” Op. at 8-9. Notably, the proceedings were “brief and uncluttered,” no competing bids or questions to the auctioneer were presented, and no objections were made by persons in attendance. Op. at 8. Consequently, the Court was satisfied that the Trustees satisfied the requirement that the “property [be] sold under such conditions and terms as to the advertisement and otherwise, as a prudent and careful man would employ, seeking to obtain the best price for his own property.” Op. at 9 (citations omitted).
Moreover, the ratification of a foreclosure sale is presumed to be valid. Op. at 9. Although the burden is on an excepting party to show prejudice caused by any irregularities in the sale, there is also a heightened scrutiny of the sale when the foreclosure sale purchaser is the mortgagee or his assignee. Op. at 9-10. “Despite the heightened standard, the burden continues to be borne by the excepting party to show both invalidity and resulting prejudice.” Op. at 10. In this case, the Borrower’s challenge was based solely on the “absentee participation” of the Trustee in the sale itself; no assertion of irregularity was asserted to any other aspect of the proceeding, and there was no challenge to the sufficiency of the price. Op. at 10. “Absent other irregular factors,” the Court concluded that, although required, the Trustee’s “presence” at the sale by telephone did not create unfairness or prejudice to Borrower to warrant reversal of the foreclosure judgment. Op. at 10. Accordingly, the appellate court affirmed the judgment of the trial court. Op. at 10.
In a concurring opinion, one judge agreed there was no prejudice, and therefore that reversal was not appropriate. Concurring Op. at 5. However, according to the concurring judge, “the failure of a trustee (or an empowered and properly supervised delegate) to physically attend the sale remains an irregularity in the sale, which, should it result in actual prejudice, would be fatal to the sale.” Concurring Op. at 1.