Our firm recently secured a significant victory before the Supreme Court of Maryland in Hallam v. New Life Evangelical Baptist Church, Inc., et al. Attorneys Jamar Brown and Flannery Gallagher successfully represented the trustee in a foreclosure action and obtained a reversal of the decision by the Appellate Court of Maryland.
The Appellate Court had set aside a foreclosure sale, holding that the borrower was entitled to a merits hearing on post-sale allegations of fraud. The Supreme Court of Maryland rejected that approach as inconsistent with Maryland law and public policy. Instead, the state high court held that all defenses known to the borrower, including allegations of fraud, must be raised in a pre-sale motion to dismiss the foreclosure action and stay the sale, not as a post-sale exception.
The Court further clarified that where a borrower properly raises such defenses before a sale but fails to satisfy the conditions of the stay, the borrower must act to preserve the opportunity to obtain a merits hearing on the foreclosure defenses pre-sale. Otherwise, the borrower forfeits the opportunity to have those claims resolved by the court.
This decision establishes important new guidance for foreclosure proceedings in Maryland, reinforcing the distinction between pre-sale and post-sale challenges. By promoting finality in foreclosure proceedings in Maryland, this decision also embraces the important public policy goal of encouraging potential third-party purchases to bid on distressed properties in the state.
Click here to read the opinion of the Supreme Court of Maryland.