Facts
- Substitute trustees, including John S. Burson and others, sold residential property at a foreclosure sale in the Circuit Court for Baltimore County, Maryland.
- David Simard was the successful bidder at the foreclosure sale with a bid of $192,000, and the circuit court ratified the sale.
- Simard failed to complete settlement. The circuit court ordered the property resold pursuant to Maryland Rule 14-305(g), directing that the resale be conducted at Simard’s risk and expense.
- At the first resale, Stan Zimmerman purchased the property for $163,000. The circuit court ratified that resale, but Zimmerman also failed to complete settlement.
- The circuit court ordered a second resale. At the second resale, JBJ Real Estate LLC purchased the property for $130,000, and the transaction closed after ratification.
- In the foreclosure audit, the auditor charged Simard with the entire “shortage,” calculated as the difference between Simard’s original $192,000 bid and the $130,000 price obtained at the completed second resale, along with resale-related expenses.
- Simard filed exceptions to the audit, arguing that Rule 14-305(g) limited his liability to the deficiency and expenses from the first resale ordered because of his default (i.e., the difference between $192,000 and $163,000, plus the expenses of that resale).
- The circuit court overruled Simard’s exceptions, ratified the audit, and denied reconsideration, reasoning that the additional loss realized at the second resale was a foreseeable consequence of Simard’s initial default.
- Simard appealed to the Court of Special Appeals of Maryland.
Issues
- Under Maryland Rule 14-305(g), is a defaulting foreclosure purchaser liable for deficiencies and expenses from only the resale ordered because of that purchaser’s default, or also for losses from later resales caused by subsequent purchasers’ defaults?
Decision
- The Court of Special Appeals reversed the circuit court’s order ratifying the audit and remanded for further proceedings.
- The court held that, under Rule 14-305(g), Simard could be charged only with the deficiency and expenses tied to the single resale ordered at his risk and expense (the first resale), not the additional deficiency and costs arising from the later resale triggered by Zimmerman’s separate default.
Legal Principles
- Maryland Rule 14-305(g) authorizes a court, upon a foreclosure purchaser’s default, to order a resale “at the risk and expense of the purchaser,” and to hold that purchaser liable for the expenses of resale and any deficiency in price associated with that resale.
- The rule links liability to the specific court-ordered resale conducted at the defaulting purchaser’s risk and expense; it does not make the first defaulting purchaser responsible for every later resale outcome until a final sale closes.
- A later purchaser’s independent failure to settle is an intervening event that triggers its own resale order and allocates risk and expense to that later defaulting purchaser, rather than shifting those later losses back to the first defaulting purchaser.
- General damages concepts do not expand Rule 14-305(g) to impose remote losses on the initial defaulting bidder where the later deficiency results from a separate default by a later purchaser.
Conclusion
Simard v. Burson holds that Maryland Rule 14-305(g) limits a defaulting foreclosure purchaser’s liability to the deficiency and resale expenses from the one resale ordered because of that purchaser’s default; the first defaulting purchaser is not liable for additional losses caused by later purchasers’ separate failures to complete settlement.