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Martin Baltrotsky v. Mark W. Kugler, Trustee , No. 18, Sept. Term 2006. REAL PROPERTY - DEED OF TRUST - FORECLOSURE SALE - APPEAL - FAILURE TO POST SUPERSEDEA S BOND OR OT HER SECURITY- MOO TNESS REAL PROPE RTY - D EED O F TRU ST - FOR ECLO SURE SALE - A BATEMENT OF INTEREST - ABUSE OF DISCRETION REAL PROPERTY - DEED OF TRUST - TRUSTEE'S COMMISSION - LIQUIDATED DAMAGES OR ILLEGAL PENALTY Respondent, the trustee appointed by a deed of trust held by len der a nd benef iciar y, KH Funding Company, commenced foreclosure proceedings in the Circuit Court for Montgom ery County w hen Petition er defaulte d on the deed securing his three properties. The three properties were eac h purchased by differen t third parties at a fo reclosure sa le held by Respo ndent. After the sale, Petitioner instituted a protracted series of motions and other filings directed at voiding the sale and staying further p roceeding s in the Circu it Court in light of Petitioner's pending bank ruptcy petition. Respondent and the foreclosure purcha sers repeatedly answered each of Petitioner's renewed attempts to forestall settlement over the course of approximately 11 months. Because of the delays caused by Petitioner's persistent litigation, the foreclosure purchasers moved for, and the Circuit Court granted, the abatement of interest on the foreclosure purchase prices from the proposed date of settlement to the actual settlement. Respondent distributed the proceeds from the sale of two properties, but retained an amount equal to the interest abated on the third property. The auditor's ratified report granted Respondent a five percent trustee commission as called for in the de ed of trust. Petitioner appealed to the Court of Special Appeals without posting a supersedeas bond or other security. That court affirmed the judgment of the Circuit Court in an unreported opinion. The Court of Appeals now affirms the judgment of the Court of Special Appeals. Petitioner's appea l with re spect to the two proper ties, the proceeds of which have been distributed, is moot in that Petitioner failed to post a supersedeas bond or other secur ity in order to stay the Circuit Court's judgment. Without security posted, the Court lacks jurisdiction to entert ain an a ppeal c oncern ing alrea dy distribu ted pro ceeds. With respect to the remaining property, the Court found that the abatement of interest was not an abuse of discretion. Petitioner's persistent litigation, which caused delays in achieving settlem ent, justified, under common law equitable principles, the abatement of interest for conduct outside the control of the foreclosure purchasers. Finally, the five percent commission allotted to the trustee und er the deed of trust is not a n illegal pena lty or unenforc eable liquidated damage provision. T rustee com missions reg ularly have been permitted for over a century and the five percent commission in this cas e seems to be the stand ard rate in Maryland. Further, the Estates and Trusts Article of the Maryland Code invests discretion in the trial judge to adjust trustee commissions as appropriate.

Circuit Co urt for Mo ntgomery C ounty Case # 248025V

IN THE COURT OF APPEALS OF MARYLAND No. 18 September Term, 2006

MARTIN BALTROTSKY v. MARK W. KUGLER, TRUSTEE

Bell, C.J. Raker Wilner Cathell Harrell Battaglia Greene, JJ.

Opinion by Harrell, J.

Filed:

November 13, 2006

We issued a writ of certiorari, 393 Md. 242, 900 A.2d 749 (2006), to review an unreported opinion of the Co urt of Specia l Appeals which co nsidered th e propriety of certain practices attendant to a trustee's fore closure sale of prope rties held und er a deed o f trust. In this case, Petitioner, Martin Baltrotsky, contends that the Circuit Court for M ontgomery County's abatemen t of interest on the purcha se prices fro m the fore closure sale o f his properties should be declared void as contravening the terms of the sale notice. Petitioner also posits that the five percen t trustee's commission provided for by the deed of trust between Petitioner and his lender amounts to an illegal penalty or, alternatively, an unenfor ceable liquidated damages c lause. Responden t, Mark Kugler, the trustee under the deed of trust, asserts that Petitioner's appeal was m oot as to the abatemen t of interest regarding two of the three secured properties and, further, that as to all of the properties, the abatement of interest by the Circuit Court was not an abuse of discretion. Respondent also defends his comm ission as a leg ally enforceab le term of the contract between Petitioner and his lender. I. FACTS This case presents a combination of undisputed facts flowing from a tumultuous procedural histo ry. Baltrotsky owned three properties, improved by single-family residences, and located in Montgomery County, respectively, at 1801 Arcola Avenue, 5100 Bradley Boulevard, and 9110 Georgia Avenue. All three properties were subject to a single deed of trust held by the lender and ben eficiary of the tr ust, KH Lend ing Co mpan y. On 8 December 2003, the Respondent trustee commenced an action in the Circuit Cou rt for Montgom ery

County to foreclose on th e deed of trust. The sum overdue and unp aid amou nted to $864,170.27. The fore closure sale was held on 24 December 2003, garnering successful bids totaling $1,261,000.00. The Report of Sale filed by Respondent on 16 January 2004 indicated that each of the properties sold to third-party purchasers: the Arcola Avenue property to Segal General Partnership for $296,000.00 ; the Bradle y Boulevard property to FRS, LLC for $550,000.00; and the Georgia Avenue property to Dennis J. Dyer for $415,000.00. The procedural morass arose following the foreclosure sale when Petitioner instituted pro se litigation in an effort to void the sale and preserve his ownership of the properties. Over the span of approximately 11 months (from 29 December 2003 to 6 December 2004), Petitioner filed myriad motions and lis pendens actions,1 mostly arguing that Petitioner's

Petitioner filed at least 24 separate papers during the time he rep resented him self in the instant matter. His filings included: on 29 December 2003, a Suggestion of Ban krup tcy; on 3 February 2004, a Complaint to Void the Foreclosure; on 19 February 2004, an Amendment to the Com plaint to Void th e Forec losure; o n 26 F ebruar y 2004, a Notice of Lis Pendens ; on 1 March 2004, a Second Notice of Bankruptcy; on 25 March 2004, a Line Advising Court that he has F iled a Seco nd Am endmen t Compla int to Void Foreclosure and Post Petition Transfer in the United States Bankruptcy Court; 5 April 2004, a Motion for Hearing and Notice Why Foreclosure Not Ratifiable on; 5 April 2004, a Lis Pendens Action on; on 27 Ap ril 2004 , a Reply Supporting Stay or Hearing; on 14 June 2004, a Request for Continuance; on 23 June 2004, Motion for Reconsideration of Hearing [Ra tifying Foreclosure Sale] Held on June 14, 2004 at 10am; on 23 June 2004, an Objection to Foreclosure Purchasers Motion for Writ of Possession of 9110 Georgia Avenue; on 25 June 2004, a Motion Reques ting Stay of Fo reclosure A ction; on 22 July 2004, a M otion to Stay Foreclosure Action Pending Outcome of Bankruptcy Appeal; on September 29, 2004; on 4 October 2004, a Motion to Set Aside Judge Thompson's Order and Stay Foreclosure Action; on 8 November 2004, a Motion in Opposition to Segal General Partnership's Motion for (contin ued...) 2

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collateral pending bankruptcy filing (In Re Baltrotsky, 2004 WL 2937537, D. Md., 2004) should stay the foreclosure proceedings. Respondent advised the Circuit Court on a variety of occasions, supported by documentary evidence, that the automatic stay on non-bankruptcy proceedings pursuant to 11 U.S.C.

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