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REPORTED

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND

No. 1990

September Term, 2000

RICHARD K. GREEN v. LARRY TAYLOR, ET UX.

Kenney, Eyler Deborah S., Adkins, JJ.

Opinion by Adkins, J.

Filed: December 31, 2001

This case involves a longstanding lending relationship gone sour. In addition to reviewing the trial court's finding that

the borrower did not default under any loan, it requires that we interpret the scope of Md. Code (1974, 1996 Repl. Vol.), section 7-106(e) of the Real Property Article ("RP"). This subsection

provides for the award of attorney's fees to certain persons who sue to force a real estate lienholder to release the collateral upon payment of the underlying debt. We hold that Section 7-

106(e) only applies to actions brought by settlement attorneys or other agents responsible for the disbursement of funds in connection with the grant of title to real property. Larry and Karen Taylor, appellees, entered into a series of secured loan agreements with John Fernstrom, a private

lender, beginning in 1992.

When the parties' relationship

deteriorated, Fernstrom assigned the right to payment on two deeds of trust to Richard K. Green, a licensed attorney,

appellant. underlying

Believing that they had fully satisfied the debt these two deeds of trust, the Taylors filed a

complaint against Green in the Circuit Court for Prince George's County, requesting the court to compel release of the deeds. After an evidentiary hearing, the trial court found in favor of the Taylors, ordered Green to release the deeds of trust, and awarded attorney's fees to the Taylors pursuant to RP section 7-

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106(e). We address the following issues raised by Green: I. Did the trial court err in holding that a borrower may take direct action to obtain a release of deeds of trust and an award of attorney's fees pursuant to RP section 7-106 when no settlement attorney or agent is involved? Did the trial determining that default under promissory note? court there the err in was no $65,000

II.

III.

Did the trial court abuse its discretion by refusing to make separate and independent findings of fact and conclusions of law, relying instead on appellees' trial memorandum and incorporating that memorandum verbatim? Did the trial court err in granting appellees' motion to amend the judgment without convening a hearing?

IV.

We answer yes to issues I and IV, and no to issues II and III. FACTS AND LEGAL PROCEEDINGS In 1992, the Taylors, looking for a new source of

financing, requested Fernstrom to purchase two secured notes representing indebtedness by the Taylors to other lenders.

Pursuant to this request, Fernstrom purchased a $67,500 deed of trust note from Rubinstein and Siegel (the "Rubinstein Note") and a $200,000 deed of trust note from Citizens Bank "Citizens Bank Note"). The purchase of these notes (the was

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effectuated by assignments from these lenders to Fernstrom.1 While the Rubinstein Note and the Citizens Bank Note were still outstanding, Fernstrom loaned money to the Taylors on three subsequent occasions. These loan agreements were

documented on standard form commercial promissory notes signed by both of the Taylors on the following dates and for the

following amounts: $11,500 on June 11, 1995; $13,500 on June 24, 1996; and $65,000 on April 13, 1997. The April 13, 1997 $65,000

note (the "$65,000 Note") is at the center of the controversy in this case. The Taylors paid off the Rubinstein Note in August 1998, and the Citizens Bank Note in late December 1998. Fernstrom, The

however, did not release either of those deeds of trust.

Taylors continued to make payments on the three remaining loans from Fernstrom. According to the Taylors, they were pre-paying

each month's interest on the $65,000 Note, and paying "interest only . . . until [Mr. Taylor] made the $65,000 payment . . . on [February 1, 1999]." In late November 1998, Fernstrom and the Taylors negotiated a $200,000 loan agreement in the form of a revolving line of

The trial court failed to include the August 19, 1992 Modification Agreement regarding the Citizens Bank Note in its original order. Appellees successfully moved to amend the judgment to recognize this assignment in the order. 4

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credit secured by a deed of trust.

The purpose of this loan was The loan would also

to enable the Taylors to buy a house.

replace the outstanding balances on the smaller loans directly from Fernstrom, which would become part of the total $200,000 indebtedness. for this loan. Fernstrom directed Green to prepare the paperwork Green was Fernstrom's attorney, but also had

represented the Taylors in the past in an unrelated matter. The evidence was disputed as to whether Fernstrom or the Taylors agreed to be responsible for compensating Green for his services. Mr. Taylor testified that, although Fernstrom told

him to go to Green's office, he understood Green to be preparing the loan documents for Fernstrom. He also related that Green

never discussed payment of legal fees with the Taylors until after the documents were prepared and signed. testified similarly. In contrast, Fernstrom testified that he "explained to [Mr. Taylor] that the cost of documenting this new relationship and any legal fees or recordation costs that might be necessitated by creating this new relationship would have to be borne by [Taylor] up front." According to Fernstrom, Taylor responded, Mrs. Taylor

"no problem."

The trial court resolved this dispute by finding

that Fernstrom was responsible for the legal fees associated with drafting the $200,000 loan agreement.

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After the Taylors signed the 1998 $200,000 note, they were presented with a bill from Green for the costs of preparing the transaction, including attorney's fees and recording This bill amounted to $5,000.2 costs.

The Taylors refused to pay this

amount, and left Green's office without receiving the agreedupon advance. On January 23, 1999, Fernstrom declared all of the loans in default. He subsequently assigned all of the loans to Green for

consideration, via undated assignments handwritten on the notes themselves. Green testified that this assignment occurred after

Fernstrom had declared the notes in default. According to Mr. Taylor, on February 1, 1999 he "handdelivered" to Fernstrom a check in the amount the Taylors

understood to be the remaining balance due on the $65,000 Note. Green and Fernstrom, however, suggested that Taylor did not deliver this check until February 2, 1999. Although Fernstrom

informed Taylor that the $65,000 Note already had been assigned to Green, Fernstrom accepted the Taylors' check, and forwarded it to Green. Taylor testified that he thought this check fully According to Green, however, Taylor

paid off the $65,000 Note.

did not pay interest for the month of January or the first two

Of this amount, $2,500 was for actual attorney's fees, and $2,500 was for anticipated recording costs. 6

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days of February 1999, so the $65,000 Note was not paid in full.

The Taylors, asserting that both the Citizens Bank and Rubinstein Notes had been fully paid off, asked both Fernstrom and Green to release the deeds of trust securing these loans. They refused. On March 29, 1999, the Taylors filed this action

against Fernstrom and Green in the Circuit Court for Prince George's County,3 seeking to compel release of those deeds of trust. In addition, the Taylors sought attorney's fees for the

expenses of obtaining these releases. At trial, the Taylors disputed the validity of Fernstrom's January 1999 declaration of default, claiming that Fernstrom's sole reason for doing so was the Taylors' failure to pay Green's $2,500 attorney's fees bill stemming from the November 27, 1998 transaction. following: [Taylors' Counsel]. Okay. Now, can you articulate what the default was on the 23rd Fernstrom's testimony at trial revealed the

Both Green and Fernstrom filed counterclaims against the Taylors. Green's counterclaim was later dismissed prior to the commencement of trial, pursuant to a settlement agreement. Under this settlement agreement, the Taylors agreed to drop their claim against Fernstrom if Fernstrom would agree to drop his counterclaim. Both suits were dismissed with prejudice. Thus, only the Taylors' claim against Green and Green's counterclaim against the Taylors, seeking payment of monies due under the notes assigned to him by Fernstrom, were actually litigated. 7

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of January? [Fernstrom]. Yes.

Q. He didn't owe any interest or anything at that point? A. No, but he owed monies that had been incurred by the lender on his behalf that he had refused to pay. Q. So the default then would have been the $2,500? A. In essence, yes. to

Q. And there was no other reason default, for there to be a default?

A. I think there was one other reason for a default, but I can't recall it right now. In a written opinion and order, the trial court ruled in favor of the Taylors. never agreed to pay Finding the Taylors' testimony that they Green's fees for the November 1998

transaction "fully credible," the court concluded that there never was a default on the $65,000 Note or the other loans. The

court's order expressly incorporated the "findings of fact and conclusions of law [in] Plaintiff's [Trial] Memorandum as if fully [set forth] [t]herein." The court further declared that the two deeds of trust were "paid in full," appointed a trustee to "discharge and release said Deeds," and awarded attorney's fees to the Taylors in the amount of $9,998.00. An amended

order was entered on September 13, 2000, in response to the

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Taylors' motion to amend the judgment.

See infra n.1.

We will recount further facts below as they relate to the specific issues raised by Green. DISCUSSION I. The Trial Court Erred In Holding That Section 7-106(e) Authorizes The Award Of Attorney's Fees Under The Circumstances Of This Case Green first challenges the award of attorney's fees to the Taylors, contending that they have no standing to bring an action for fees under RP section 7-106(e). (e) of section 7-106 provide: (d) Furnishing original copy of executed release.

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