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Opinions – Court of Special Appeals: 3/14/11

Criminal Procedure

Expungement of juvenile records

BOTTOM LINE: Where juvenile was convicted in the circuit court and then transferred to juvenile court for sentencing, juvenile court had the power to expunge the juvenile’s criminal record.

CASE: In re Nancy H, No. 1404, Sept. Term, 2009 (filed Feb. 25, 2011) (Judges Eyler, D., Kehoe & RAKER (retired, specially assigned)). RecordFax No. 11-0225-02, 12 pages.

FACTS: In 2003, Nancy H., then 16 years old, was charged as an adult in the circuit court for Baltimore City with first-degree assault, second-degree assault, and two weapon offenses. She filed a motion requesting transfer of the case to the juvenile court prior to plea or trial under CP §4-202, which permits the circuit court, under certain circumstances, to transfer a case involving a child to the juvenile court before trial or before a plea is entered. The circuit court denied the motion.

In June, 2004, Nancy H. pled guilty to second-degree assault in the circuit court. Prior to sentencing, the court transferred the case to the juvenile court for disposition pursuant to §4-202.2, which permits the circuit court, under certain circumstances, to transfer a case involving a child to the juvenile court at sentencing to conduct a disposition under the regular procedures of the juvenile court.

In January of 2009, Nancy H. filed a petition for expungement of her record under §10-106(c), which provided that a “court may grant a petition for expungement to a person when the person becomes 21 years old, if a charge transferred under §4-202 of this article resulted in the adjudication of the person as a delinquent child.” The court denied the petition on grounds that that a transfer under §4-202.2 was not within the purview of §10-106.

Nancy H. appealed to the Court of Special Appeals, which reversed.

LAW: Criminal Procedure §4-202.2 was enacted by the General Assembly in 2002, following a report to the General Assembly by the Commission on Juvenile Justice Jurisdiction. At issue in this case was whether a juvenile court has the power to expunge the records in criminal cases transferred to the juvenile court under §4-202.2, even though the language of the relevant expungement statute, §10-106(c), refers only to cases transferred from the circuit court to the juvenile court under §4-202.

In Smith v. State, 399 Md. 565, 581 (2007), the Court of Appeals examined the legislative history of the creation of §4-202.2 in some detail, noting that the legislative history reflects that the statute was enacted in order to permit the criminal court to reverse waive jurisdiction of the case to the juvenile court when the juvenile is not convicted of the offense which precluded the juvenile court from exercising jurisdiction initially. The report on the bill in the Senate explained that the bill “allows a juvenile charged as an adult, but not convicted of the charge that was the basis for being excluded from juvenile court jurisdiction, to be transferred back to the juvenile court for purposes of jurisdiction.” Id. at 582.

The waiver to juvenile court set out in §4-202.2 is limited to those cases where, had not the charge existed in the first place, there would not have been jurisdiction in the circuit court and the matter, as a matter of law, would have proceeded in juvenile court. Thus, the statute is remedial in nature, designed to protect the juvenile and to afford the juvenile the rehabilitative services of the juvenile system.

The legislative history of §4-202.2 and the report of the Commission on Juvenile Justice Jurisdiction that prompted the section’s creation indicate that the Legislature intended the law to correct the injustice of children’s being kept in the adult criminal justice system when they were not convicted of crimes that would exclude them from the Juvenile Justice System.

Prior to the enactment of this law, merely being charged with certain crimes could exclude a child from the benefits of the Juvenile Justice System. By adopting §4-202.2, the Legislature intended that the possibility of such benefits should not be denied unless a child is actually convicted of those crimes. Given the rationale and origin of this legislation, it would make little sense to interpret the Legislature’s intent as extending to this group of children all the benefits of the Juvenile Justice System available to them, except for the benefit of expungement. Nothing in the legislative history suggests that the Legislature intended to withhold any particular benefit, such as expungement, from the children aided by §4-202.2. Thus, the Legislature’s failure to amend the expungement language in §10-106 to include §4-202.2 when it was created in 2002 could only be understood as an oversight or drafting error.

The purpose of the Juvenile Justice System is, in part, to “provide for the care, protection, and wholesome mental and physical development of children coming within the provisions of this subtitle; and to provide for a program of treatment, training and rehabilitation consistent with the child’s best interests and the protection of the public interest.” Maryland Code (1974, 2006 Repl.Vol., 2010 Cum.Supp.). The Legislature has mandated that this subtitle be liberally construed to effectuate its purposes. Id. §3-8A-02(b). Inherent to the Juvenile Justice System is the cloak of confidentiality on all juvenile records. Expungement furthers the rehabilitative goals of the Juvenile Justice System by eliminating the collateral consequences of a criminal conviction.

Considering the history of the Juvenile Justice System and the waiver statutes, the Legislature could not have intended to provide the juvenile with all the benefits accorded juveniles whose cases originated in juvenile court, and yet to subject the juvenile waived under §4-202.2 to all of the collateral sanctions that accompany a criminal conviction. Therefore, the juvenile court has the power to grant expungement of the record when the juvenile is waived to juvenile court under §4-202.2. In order to effectuate the legislative policy of confidentiality and the juvenile court’s purpose of rehabilitation, §10-106 should be interpreted to permit the juvenile who has been waived to juvenile court from circuit court after a plea has been entered, but before disposition, to have the benefit of the exercise of the court’s discretion as to expungement of the proceedings.

Accordingly, the judgment of the circuit court was reversed.

COMMENTARY: In addition to finding that it lacked authority to grant the requested expungement, the circuit court found that there appeared to be no good cause for granting the petition. The Court of Special Appeals did not address this additional finding, and reversed only the circuit court’s finding that it lacked the authority to grant the expungement. The Court of Special Appeals took no position on whether the lower court, on remand, should apply the current version of §10-106 or the version of §10-106 that was in effect when Nancy H. filed her petition for expungement prior to the 2009 amendment.

Real Property

Foreclosure

BOTTOM LINE: In the context of a foreclosure sale, the first foreclosure purchaser who defaults is liable only for the deficiency between the original sale price and the immediately following resale price, not for all deficiencies occasioned by subsequent resales of the foreclosed property after successive defaults in resales of the property.

CASE: Simard v. Burson, No. 1302, Sept. Term, 2009 (filed Feb. 25, 2011) (Judges WOODWARD, Wright & Thieme (retired, specially assigned)). RecordFax No. 11-0225-01, 24 pages.

FACTS: In February 2007, John Burson, William Savage, Jason Murphy, Kristine Brown, and Gregory Britto, Substitute Trustees under a Deed of Trust covering the real property, with improvements, known as 403 Cherry Hill Road, Reisterstown (“the Property”), sold the Property at a foreclosure sale. David Simard made the highest bid of $192,000, which was accepted by Substitute Trustees and subsequently ratified by the circuit court. Simard failed to go to settlement, and the circuit court ordered the Property resold.

In October 2007, Stan Zimmerman purchased the Property at the first resale for $163,000, but he too failed to go to settlement after the court ratified the sale. The court then ordered a second resale of the Property. In June 2008, JBJ Real Estate LLC purchased the Property at the second resale for $130,000, and completed the sale after ratification by the court.

In the audit on the sale, the auditor allocated the cost of the difference between the original sale price of $192,000 and the second resale price of $130,000 to be paid by Simard. Simard filed exceptions to the audit, arguing that he should be liable for only the shortage between the original sale price of $192,000 and the first resale price of $163,000. The circuit court ultimately overruled Simard’s exceptions, ratified the audit, and denied Simard’s motion for reconsideration.

On appeal to the Court of Special Appeals, Simard presented the question of whether the first foreclosure purchaser who defaults is liable for all deficiencies occasioned by subsequent resales of the foreclosed property after successive defaults in resales of the property.

The Court of Special Appeals reversed the circuit court’s judgment.

LAW: This case called upon the court of special appeals to decide a question of first impression in Maryland regarding the extent of the liability of a defaulting purchaser at a foreclosure sale.

Maryland Rule 14-305(g), which appears in Title 14, Sales of Property, Chapter 300, Judicial Sales, addresses the procedure following a judicial sale. Section (g) specifically states: “If the purchaser defaults, the court, on application and after notice to the purchaser, may order a resale at the risk and expense of the purchaser or may take any other appropriate action.” Rule 14-305(g) thus provides that the court, upon a purchaser’s default, has the discretion to order a resale at the risk and expense of the purchaser or to take any other appropriate action. Rule 14-305(g) refers only to a single resale at the risk and expense of the defaulting purchaser, and necessarily implies that the term “a resale” must be singular and not plural.

As such, the language of the rule precludes the court from ordering a series of resales upon the occasion of the initial default. Each time the court is faced with a defaulting purchaser in a foreclosure sale, the court must use its discretion in deciding whether a resale or some other action is most appropriate. See McCann v. McGinnis, 257 Md. 499, 511 (1970). Where a court has been granted discretion by a rule, it must exercise that discretion. See, e.g., Beverly v. State, 349 Md. 106, 127 (1998). Consequently, the ordering of a series of resales upon the initial default would result in the court failing to exercise its discretion, as granted by the rule, to decide what the “appropriate action” should be after each successive default.

There is nothing in the history of Rule 14-305(g) to indicate an intention that the original defaulting purchaser should be held liable for shortages arising from all subsequent resales of foreclosed property. Nothing in the Rules Committee’s minutes, proposed changes, and approved changes on Rule 14-305(g) indicates that the Committee intended for all subsequent resales to be held at the “risk and expense” of the original defaulting purchaser. If the Rules Committee had intended to create such a significant liability potential for a purchaser, it would not have done so casually or inadvertently. Therefore, Rule 14-305(g) cannot be construed as providing that a defaulting purchaser is to be held liable for shortages arising from all subsequent resales.

In other words, Rule 14-305(g) contemplates that, when a foreclosure purchaser defaults, the court may order a singular resale, not multiple resales, and the defaulting purchaser’s “risk and expense” attaches only to the one resale resulting from his or her default.

Here, the record indicated that the parties and the court intended that the second resale of the Property be held at the risk and expense of only Zimmerman, who purchased the property at the first resale, and not at the risk and expense of Simard. The Substitute Trustees’ petition for the Second Resale listed “Stan Zimmerman by Boris Braun” as the purchaser who defaulted and asked the court to order a resale of the Property “at the sole risk and expense of the defaulting purchaser.”

In response to the Substitute Trustees’ petition, the circuit court issued a Show Cause Order on March 27, 2008, in which the court ordered Zimmerman to show cause why the Property should not be resold at the risk and expense of Zimmerman and why his deposit should not be forfeited, provided that copies of the petition and Show Cause Order were sent to Zimmerman and Betty. The court also scheduled a hearing for May 5, 2008. No objection to the Substitute Trustees’ petition or to the Show Cause Order was filed by any party.

At the conclusion of the May hearing, the trial court signed the Order Directing Resale of Mortgaged Property, prepared by one of the Substitute Trustees, in which the court ordered that the Property be resold at the risk and expense of the defaulting purchaser, Zimmerman by Braun. Therefore, under the plain language of Rule 14-305(g), the Substitute Trustees’ petition, and the trial court’s order authorizing the Second Resale, Zimmerman, and not Simard, was liable for the shortage between the First Resale price of $163,000 and the Second Resale price of $130,000.

Accordingly, judgment of the circuit court was reversed.

COMMENTARY: The trial court characterized the damages at issue as “consequential damages of the breach of contract.” Thus, it was also necessary to examine Simard’s liability for breach of contract under general contract principles. Consequential damages cover those losses suffered by the non-breaching party other than the loss in value of the other party’s performance.

Such damages must be “reasonably foreseeable” and must “fairly and reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.” Hoang v. Hewitt Ave. Assocs., 177 Md.App. 562, 594-95 (2007). However, not all damages that are “reasonably foreseeable” may be recovered as consequential damages; like general damages, consequential damages must be “caused by the breach ” of contract. Restatement (Second) of Contracts §347(b) (1981). In other words, the losses claimed by the non-breaching party must have “actually resulted from the breach.” See, e.g., Hoang, 177 Md.App. at 594.

Here, the trial court focused its analysis solely on foreseeability, noting that it was highly foreseeable when somebody breaches the contract, and there a resale occurs, it is foreseeable that person might breach the contract as well. However, while the trial court might be correct that the default on the first resale and the subsequent lower purchase price at the second resale were foreseeable, foreseeability is but one of the requirements that must be shown by the non-breaching party to be awarded consequential damages. See Hoang, 177 Md.App. at 594.

The trial court did not address whether Simard’s breach of contract caused the damages arising from Zimmerman’s default in the first resale. Although, as Simard conceded, he was responsible for the shortage between the original sale price of $192,000 and the first resale price of $163,000, the shortage between the first resale price of $163,000 and the second resale price of $130,000 did not actually result from Simard’s breach of contract; rather, the second shortage was caused by Zimmerman’s breach of contract. Because Simard’s breach of contract did not cause Zimmerman to default on the first resale, Simard is not liable for the second shortage.

The trial court erred by holding that Simard was responsible for the second shortage as consequential damages for his breach of the Original Sale.

PRACTICE TIPS: In the context of a foreclosure sale, the contract of sale is between the court and the purchaser. Thus, such a sale is not final and does not pass the title until and unless it is ratified and confirmed by the court.