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Opinions – 1/17/12: Maryland Court of Appeals

Criminal Law


BOTTOM LINE: A “firearm,” as defined in Public Safety §5-101(h), does not have to be operable in order to sustain a conviction under §5-133(c), which prohibits a person convicted of a crime of violence or offenses related to the sale and distribution of controlled dangerous substances from possessing a regulated firearm.

CASE: Moore v. State, No. 20, September Term, 2010 (filed Dec. 22, 2011) (Judges Bell, Harrell, BATTAGLIA, Greene, Murphy, Adkins & Barbera). RecordFax No. 11-1222-20, 54 pages.

FACTS: In July 2007, a robbery and shooting took place that ultimately resulted in the execution of a search warrant at Rodney Moore’s residence. During the search, officers found and seized a .32 caliber, Harrington and Richardson, Model II revolver from beneath his bed.

In 2005, Moore had been convicted of a disqualifying offense that prohibited him from possessing a regulated firearm. See PS §5-133(c)(1)(ii). Accordingly, Moore was indicted for possessing a regulated firearm after having been convicted of an offense in PS §5-133(c).

Moore filed a motion in limine prior to trial, in which he asked the court to determine whether, as a matter of law, a conviction under §5-133(c) required proof of the operability of the firearm. The judge denied the motion.

Moore entered a not guilty plea on an agreed statement of facts. He then renewed his motion regarding the operability of the firearm, again arguing that §5-133(c) requires proof that the gun was operable. The judge again denied Moore’s motion. Moore then moved for judgment of acquittal, which the judge also denied.

Moore was found guilty and sentenced to five years’ imprisonment.

The Court of Special Appeals affirmed Moore’s conviction. It held that the circuit court properly denied his motions because, based on the plain language of §5-101(h), “firearm” includes both operable and inoperable weapons.

Moore appealed to the Court of Appeals, which affirmed.

LAW: Public Safety §5-101(h) defines a “firearm” as “(i) a weapon that expels, is designed to expel, or may readily be converted to expel a projectile by the action of an explosive; or (ii) the frame or receiver of such a weapon.” There is no language in §5-101(h) that requires operability.

Thus, §5-101(h)(1)(i) contemplates three distinct levels of functionality of a firearm. The first is “a weapon that expels…a projectile by the action of an explosive.”

The word “expel” means “to force out,” Merriam-Webster’s Collegiate Dictionary 440 (Webster’s), or “to discharge from or as if from a receptacle.” The American Heritage Dictionary 625 (American Heritage). In addition, this portion of §5-101(h)(1)(i) uses the word “expel” in the present tense, indicating that a firearm includes a weapon that can presently “force out” or “discharge” a projectile by the action of an explosive.

Thus §5-101(h)(1)(i) clearly includes weapons that are presently operable.

However, the section goes on to describe a weapon that “is designed to expel … a projectile by the action of an explosive.” The word “design” is defined as “[t]o create or contrive for a particular purpose or effect,” American Heritage, at 491, or “to devise for a specific function or end.” Webster’s, at 338.

This portion clearly includes inoperable, albeit designed to be operable, firearms. See Neal v. State, 191 Md. App. 297, 308 (2010).

Third, under §5-101(h)(1)(i), a “firearm” also includes a weapon that “may readily be converted to expel a projectile by the action of an explosive.”

The word “readily” means “without much difficulty,” Webster’s at 1035; “[i]n a prompt, timely manner,” or “[i]n a manner indicating or connoting ease.” American Heritage, at 1455. The word “convert,” in turn, means “to change from one form or function to another,” Webster’s, at 273, or “[t]o change (something) from one use, function, or purpose to another.” American Heritage, at 401.

This portion of the statute, thereby, also contemplates that a firearm may be inoperable, although readily converted.

The plain-meaning analysis is further bolstered by the terms of the second portion of the statute, §5-101 (h)(1)(ii), which provides that a “firearm” may be “the frame or receiver of such a weapon.”

While “frame or receiver” is not defined, the Bureau of Alcohol, Tobacco, and Firearms defines a “frame or receiver” as “[t]hat part of a firearm which provides housing for the hammer, bolt or breechblock, and firing mechanism, and which is usually threaded at its forward portion to receive the barrel.” 27 C.F.R. §478.11. A frame or receiver that provides housing for the internal components of the weapon is clearly not capable of “expel[ling] a projectile by the action of an explosive,” absent the requisite internal components.

Thus, §5-101 (h)(1)(ii) clearly does not require operability of the weapon for its application. See Hicks v. State, 189 Md. App. 112, 136 (2009).

The interpretation of the plain meaning of the definition of “firearm” as including inoperable weapons is also supported by the legislative history of §5-101. Section 5-101 was first enacted in 1941, when the General Assembly added §531B to Article 27, under the subtitle “Pistols.” At the time, the statute did not define “firearm,” only defining “pistol or revolver” as “any firearm with barrel less than twelve inches in length.” Id.

In the 1951 Codification of the Maryland Code, §531B was renumbered as §538, without change, and then again in the 1957 Codification of the Maryland Code, as §441, again without change. In 1966 and 1979, §441 was amended wit changes not relevant here.

In 1996, the General Assembly passed the Maryland Gun Violence Act of 1996. The Bill substantially amended §441, removing the definition of “pistol or revolver” and adding several new definitions, including “firearm,” “handgun” and “regulated firearm.”

With the passage of the Maryland Gun Violence Act, the definition of “firearm” was eventually codified in §441(i) as: “(1) Any weapon (including a starter gun) which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; or (2) The frame or receiver of any such weapon.”

Finally, in 2003, the General Assembly repealed §441, recodifying it in PS §5-101, without substantive change.

The basis for the change was to further prevent weapons from being possessed by individuals who should not hold them, pursuant to §5-133. In so doing, the General Assembly chose to follow the federal model.

The federal definition of “firearm” is located in §921(a)(3) of Title 18, United States Code, and contains nearly-identical language to the definition for “firearm” located in §441(i), providing:

“The term “firearm” means (A) any weapon (including a starter gun) which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; (B) the frame or receiver of any such weapon; (C) any firearm muffler or firearm silencer; or (D) any destructive device. Such term does not include an antique firearm.”

Section §441(i) was enacted as part of the Omnibus Crime Control and Safe Streets Act of 1968. The Senate Report for the Bill iterated that inoperable firearms were swept up in the term, “firearm.”

Federal courts have overwhelmingly determined that operability is not a requirement under 18 U.S.C. §921(a)(3). See, e.g., United States v. Williams, 577 F.3d 878, 882 (8th Cir. 2009); United States v. Abdul-Aziz, 486 F.3d 471, 477 (8th Cir. 2007).

As a result, plain meaning analysis, as well as legislative history, leads to the conclusion that a weapon does not have to be operable to come within the definition of “firearm” in §5-101(h). See Nash v. State, 191 Md. App. 386, 405 n. 8 (2010). Thus, the firearm in the present case did not need to be operable to constitute a violation of the statute.

Accordingly, the judgment of the Court of Special Appeals was affirmed.

COMMENTARY: Moore relied on Howell v. State, 278 Md. 389 (1976).

In Howell, the Court of Appeals considered whether a tear gas gun was a handgun within the meaning of Art. 27, §36F(b), which defined a handgun as “any pistol, revolver, or other firearm capable of being concealed on the person, including a short-barreled shotgun and a short-barreled rifle.”

This definition pertained to offenses for wearing and carrying handguns during the commission of certain crimes, which were enumerated in §36 of Article 27.

Determining that a tear gas gun was not a handgun, the Court of Appeals concluded: “[F]or this device to be a handgun it must be a firearm or it must be readily or easily convertible into a firearm. We further conclude that to be a firearm it must propel a missile by gunpowder or some such similar explosive and that the gas here involved is not a missile within the natural and ordinary signification of the term.” Id. at 396.

The Court of Special Appeals has relied on Howell as prescribing an operability requirement, not only in use of handgun cases, but also in the carrying of a handgun context. See York v. State, 56 Md. App. 222 (1983).

Moore’s reliance on Howell fails to give proper credence to the axiom that the same word or phrase in two different statutes can nonetheless contain different meanings. See Black, Handbook on the Construction and Interpretation of the Laws 171-72. See also Price v. State, 378 Md. 378, 388 (2003). Two differing levels of operability regarding handguns and firearms can, thus, coexist.

In York, 56 Md. App. at 228, the Court of Special Appeals observed why, under §36, the use of the handgun implicitly required the operability of the handgun, as recognized in Howell. “The paramount purpose of the General Assembly in enacting §36B was to reduce the especially high potential for death or serious injury that arises when a handgun, as distinguished from some other weapon, is used in a crime of violence. That potential for major harm exists only when the weapon, at the time of the offense, is useable as a handgun.” Id. at 228-29.

In Tisdale v. State, 30 Md. App. 334 (1976), on the other hand, Court of Special Appeals determined that the definitions contained in the previous iteration of §5-101, §441, did not pertain to §36 handgun offenses, because “[d]ifferent offenses [we]re involved,” as §441 and its corresponding provisions pertained to the possession of firearms, “thus possess[ing] an altogether different objective from the handgun law [housed in §36].” Id. at 343.

Estates & Trusts

Release of liability prior to distribution

BOTTOM LINE: ET §9-111 entitles a personal representative to obtain a release when she requests one even if acting pursuant to a court-approved distribution.

CASE: Allen v. Ritter, No. 16, September Term, 2011 (filed Dec. 15, 2011) (Judges Bell, Harrell, Battaglia, Greene, ADKINS, Barbera & Eldridge (retired, specially assigned)). RecordFax No. 11-1215-21, 19 pages.

FACTS: Roy Allen (Allen) died January 28, 2005, survived by three children, Virginia Leitch, Deane Allen, and Robert Allen (hereafter Virginia, Deane and Robert). Since Allen’s death, the individual acting as personal representative of his estate has changed. After ongoing estate disputes, the Orphans’ Court named Sharon Ritter as personal representative.

Ritter filed a first and final administration account (Account) of Allen’s estate on September 17, 2008, in the Orphans’ Court. Deane and Robert excepted to portions of this Account. The Orphans’ Court approved the Account on May 5, 2009, as filed by Ritter.

Ritter mailed a request to Deane and Robert that they sign a release before Ritter would distribute money to them. Deane and Robert refused to sign the releases.

Ritter filed a petition for release, asking the Orphans’ Court to enter an Order requiring Dean and Robert to show cause why they should not be ordered to sign the Releases prior to distribution of estate funds. The Orphans’ Court ordered Deane and Robert to sign the releases. The Court of Special Appeals affirmed.

The Court of Appeals affirmed.

LAW: “Upon making a distribution, a personal representative may, but is not required to, obtain a verified release from the heir or legatee.” Estates & Trusts §9-111.

This statute was enacted in 1969 as part of a comprehensive reform of Maryland testamentary law. The language of §9-111 comes directly from the Second Report of the Governor’s Commission to Review and Revise the Testamentary Laws of Maryland, which was appointed in 1965 to help the state in “recodifying and revising the Maryland laws concerning testamentary matters[.]” Henderson, Second Report of Governor’s Commission to Review and Revise the Testamentary Laws of Maryland, Article 93: Decedents Estates i, 144-45 (1968) (Henderson Commission Report).

The comments to the Commission’s report suggest that §9-111 was designed to continue the “Maryland practice of not requiring releases, although personal representatives, out of caution, have, in the past, obtained releases in many instances.” Henderson Commission Report at 144.

“The Commission does not, however, intend to imply … that an heir or legatee does not have the right to petition a Court to compel the personal representative to make a distribution, if the personal representative is abusing his discretion in withholding any distribution.” Henderson Commission Report at 145.

Deane and Robert argued that a “release” under §9-111 does not extend to “release from liability,” asserting instead that personal representatives are only entitled to something more akin to a “receipt.”

If the Legislature had intended for §9-111 to allow only for a “receipt,” then that word would have appeared in the statute. Instead, the plain meaning of the word “release” unambiguously indicates that a release of liability is intended. See also Gibber, Gibber on Estate Administration 10-114 (5th ed. 2011).

None of the legislative history or case law indicates that an heir or legatee may refuse to sign a release before distribution when presented with one. Although the comments to the Henderson Commission Report indicate that §9-111 continued the “Maryland practice of not requiring releases,” Henderson Commission Report at 144, it is clear that this practice simply means that a release is not necessary for distribution to proceed in all cases.

Dean and Robert further argued that §9-111 does not apply when the corresponding distribution is made according to a court order. They contended that the functional need for a release, when a personal representative is acting under a court-ordered distribution, is obviated by the language of Estates & Trusts §9-112(e), which reads:

“Distribution by the personal representative in accordance with the direction of the court at the meeting protects and indemnifies the personal representative acting in obedience to it.”

It is true that “once a will has been construed by an equity court, a personal representative is bound to make distribution in accordance with that court’s order, since the personal representative is fully protected by it[.]” Webster v. Larmore, 270 Md. 351, 354 406 (1973).

The same rationale has been applied to the order of an Orphans’ Court directing distribution. Id.

Nevertheless, because the specific procedures prescribed by that §9-112 were not followed here, that section did not apply to Allen’s estate.

A personal representative is indeed “protected” when acting in a §9-112 proceeding, but this protection does not negate the personal representative’s ability to obtain a release from the legatees if he or she so desires.

A release is specifically designed to shield a personal representative, who asks for one, from the background liabilities spelled out in those sections. If Ritter could not obtain a release here, §9-111 would be stripped of meaning.

Moreover, without a release, heirs could sue the personal representative for alleged malfeasance, improper distribution, or other claims, and with all estate assets distributed, the personal representative would have no assets with which to fund a defense, or if appropriate, settle or satisfy the claim.

Accordingly, ET §9-111 allows a personal representative to obtain a release from legatees even when acting pursuant to the distribution order of an Orphans’ Court.

COMMENTARY: Under Estates & Trusts §2-102(a), the Orphans’ Court “may conduct judicial probate, direct the conduct of a personal representative, and pass orders which may be required in the course of the administration of an estate of a decedent. It may summon witnesses. The court may not, under pretext of incidental power or constructive authority, exercise any jurisdiction not expressly conferred.”

The Orphans’ Courts’ powers also include “jurisdiction over interested persons and creditors, who invoke the court’s power to determine issues within its express powers.” Kaouris v. Kaouris, 324 Md. 687, 709 (1991).

Thus the Orphans’ Courts are empowered to decide such matters as are necessarily incident to the exercise of the powers expressly granted them. The legislative intention was to confer adequate power and jurisdiction upon [o]rphans’ [c]ourts in every case in which their general powers would enable them to act. Radcliff v. Vance, 360 Md. 277, 286-87 (2000).

In Crandall v. Crandall, 218 Md. 598, 601-02 (1959), the Court of Appeals held that the “Orphans’ Court was without jurisdiction to pass upon the validity of the release[.]” Crandall, however, was inapplicable, as here the Orphans’ Court did not pass on the validity of the releases; that court merely ordered them signed, incident to its administration of Allen’s estate.

Accordingly, the Orphans’ Court had the power to mandate Deane’s and Robert’s signatures on the releases before distribution.

PRACTICE TIPS: Under ET §10-103, if no action or proceeding involving the personal representative is pending one year after the close of the estate, the personal representative is discharged from any claim or demand of any interested person, except in the case of fraud, material mistake, or substantial irregularity.

Health care

Health Care Quality Improvement Act of 1986

BOTTOM LINE: Healthcare providers who disciplined doctor for unprofessional behavior were entitled to immunity under the Health Care Quality Improvement Act; doctor’s evidence of retaliation was insufficient to permit a rational trier of fact to conclude that providers failed to satisfy the standards for immunity.

CASE: Freilich v. Upper Chesapeake Health Systems, No. 4, September Term, 2011 (filed Dec. 19, 2011) (Judges Bell, Harrell, Battaglia, Greene, Murphy, ADKINS & Barbera). RecordFax No. 11-1219-21, 33 pages.

FACTS: Between 1982 and 1997, Dr. Linda Freilich practiced medicine at Harford Memorial Hospital (Harford) and Fallston General Hospital (Fallston). The hospitals were operated by Upper Chesapeake Health System (Upper Chesapeake).

During her time at the hospitals, Dr. Freilich was the subject of numerous complaints. Although some of the complaints addressed her competence as a physician, most of them alleged unprofessional behavior and violations of ethics rules.

After Fallston suspended Dr. Freilich’s privileges, citing “unprofessional behavior,” Harford began investigating her as well. Harford’s Medical Executive Committee (MEC) convened a subcommittee to investigate her alleged misconduct in the hospital’s psychiatric unit. In response, Dr. Freilich voluntarily withdrew from the psychiatric unit but continued practicing in other parts of the hospital. The subcommittee later recommended that Dr. Freilich continue to remain off the psychiatric unit.

Incidentally, Dr. Freilich’s appointment at Harford was scheduled to expire on December 31, 1998, which required her to file an application for reappointment with Upper Chesapeake. In that application, Dr. Freilich made several incorrect and misleading statements about her suspension at Fallston.

In response to Dr. Freilich’s application, Harford’s Credentials Committee proposed a “conditional one year reappointment” during which she would be monitored for professionalism and behavior issues. Ultimate authority, however, rested with Harford’s Board of Directors, which decided to reappoint Dr. Freilich for only four months, during which time management, legal counsel and the Medical Staff were to investigate the complaints against her.

After the conditional four-month reappointment, the MEC recommended that the Board deny Dr. Freilich’s application for reappointment. The Board adopted the MEC’s recommendation.

At Dr. Freilich’s request, Upper Chesapeake convened an Ad Hoc Hearing Committee (Hearing Committee), consisting of four physicians and a hearing officer, to hear her objections to the Board’s decision. The Hearing Committee unanimously recommended a conditional one-year reappointment, as originally proposed by the Credentials Committee. The Board, however, concluding that Dr. Freilich’s behavior was not “remediable,” voted not to change its decision.

Dr. Freilich appealed to Harford’s Appellate Review Committee, which affirmed the Board’s decision not to reappoint Dr. Freilich.

Dr. Freilich filed a complaint in the circuit court against Upper Chesapeake, the Board, and individual members of the Board. She alleged breach of contract and misapplication of Harford’s bylaws and sought damages and declaratory and injunctive relief. The circuit court granted the defense motion for summary judgment on all counts, based on immunity under the Health Care Quality Improvement Act of 1986 (HCQIA), 42 U.S.C. §§11101-11152. The Court of Special Appeals affirmed.

Dr. Freilich appealed to the Court of Appeals, which affirmed.

LAW: Congress enacted HCQIA to encourage peer review and monitoring of physicians. See H.R. Rep. No. 99-903, at 2 (1986), reprinted in 1986 U.S.C.C.A.N. 6287, 6384; Bryan v. Holmes Regional Med. Ctr., 33 F.3d 1318, 1321 (11th Cir. 1994). Part of Congress’ strategy was to provide qualified immunity for those who discipline ineffective physicians. See 42 U.S.C. §11111(a)(1). “HCQIA provides participants in peer review activities with qualified immunity from liability for monetary damages in suits brought by the physicians who were the subjects of these review activities.” Goodwich v. Sinai Hosp., 343 Md. 185, 196-97 (1996).

To qualify for immunity, the disciplinary action must have been a “professional review action” that complied with the standards set forth in 42 U.S.C. §11112(a). Those standards are that the action was taken “(1) in the reasonable belief that the action was in the furtherance of quality health care, (2) after a reasonable effort to obtain the facts of the matter, (3) after adequate notice and hearing procedures are afforded to the physician involved or after such other procedures as are fair to the physician under the circumstances, and (4) in the reasonable belief that the action was warranted by the facts known after such reasonable effort to obtain facts and after meeting the requirement of paragraph (3).” 42 U.S.C. §11112(a)(1)-(4).

The burden on the issue of immunity rests with the plaintiff, as immunity is presumed unless the plaintiff rebuts it “by a preponderance of the evidence.” 42 U.S.C. §11112(a).

The presumption of immunity creates an “unusual” standard for summary judgment. “[T]he proper summary judgment standard in [a HCQIA] case is whether [the plaintiff] produced sufficient evidence of the existence of a genuine dispute as to the material fact of whether [the professional reviewer] was entitled to the qualified immunity prescribed by the HCQIA.” Goodwich, 343 Md. at 207.

Dr. Freilich claimed that she rebutted the presumption of immunity by presenting evidence that Harford retaliated against her for her reports of substandard care and attempts to improve the quality of care at the hospital.

The “objective reasonableness test” looks to the “totality of the circumstances” to determine whether a defendant has met the standards for immunity set forth in HCQIA. Goodwich, 343 Md. at 208. Therefore, any evidence is relevant if it could lead a rational trier of fact to conclude that the immunity standards were not met. This includes evidence that the action was “primarily based on…any…matter that does not relate to the competence or professional conduct of a physician,” including retaliatory animus, because such an action is not a “professional review action” and therefore cannot qualify for immunity.

However, without any evidence of a connection between a professional review action and its allegedly illegitimate basis, courts cannot presume that one exists. See, e.g., Chalal v. Nw. Med. Ctr., Inc., 147 F. Supp. 2d 1160, 1172 (N.D. Ala. 2000).

In Clark v. Columbia/HCA Info. Servs., Inc., 25 P.3d 215 (Nev. 2001), relied on by Freilich, the plaintiff presented evidence showing that “the reason for his dismissal was his apparently good faith reporting of perceived improper hospital conduct to the appropriate outside agencies, or whistleblowing.” Id. at 223. Indeed, in Clark, “the only findings the board made in support of its decision [were] related to Clark’s external reporting.” Id. Such direct evidence of retaliation could certainly have led a rational trier of fact to conclude that the hospital’s action was not based on the furtherance of quality health care.

Here, on the other hand, there was no evidence that the Board’s decision was based on impermissible factors. Dr. Freilich produced evidence that some doctors and nurses may have filed sham complaints against her because of her reporting, but she had no evidence that those allegedly sham complaints served as the basis for the Board’s decision. See also Ritten v. Lapeer Reg’l Med. Ctr., 611 F. Supp. 2d 696, 720 (E.D. Mich. 2009).

In Goodwich, the plaintiff argued that two letters from the chairman of the Obstetrics and Gynecology Department tended to prove that the hospital dismissed him because of a fear of litigation instead of a desire to further quality health care. Id. These letters, however, were not relevant because they did not bear on the professional review action in question. Indeed, the letters were written five and two years prior to Dr. Goodwich’s dismissal, which took place when the review body had more and different evidence before it. Id. The Court of Appeals held in Goodwich that a hospital’s action is not immune unless it was “undertaken in the reasonable belief that quality health care was being furthered.” Id. at 208.

Thus, evidence of retaliation is one of several factors to be considered when determining whether, in the totality of the circumstances, the professional review action satisfied the standards for immunity set forth in HCQIA.

Dr. Freilich conducted herself in a manner that caused offense to patients, nurses, other doctors, and other hospital personnel. A reasonable person on the Board, reviewing this large volume of complaints, could be persuaded that Dr. Freilich’s conduct was detrimental to the quality of health care in the hospital because it was distracting, created emotional distress, and detracted from a teamwork approach to the care of patients.

A highly significant incident of her unprofessional behavior related to her lack of honesty, as revealed in her written application for reappointment at Harford. The application required her to state whether “any hospital ever suspended, diminished, revoked or failed to renew [her] privileges.” In an effort to discount her suspension from Fallston, she stated that there were no witnesses or corroboration of any “unprofessional behavior” on her part. This was patently false.

A physician’s dishonesty in official applications is a serious matter for which discipline is appropriate. See Kim v. Md. State Bd. of Physicians,___Md.___(2011) (No. 1, September Term, 2011) (filed November 29, 2011).

Additionally, the transcript of the hearing before the Appellate Review Committee provided evidence that Dr. Freilich was untruthful during this phase of the investigation as well. She testified that the signatures on a petition to reinstate her were of her patients, only to admit under cross-examination that some of the signatures she obtained were of other people. She also testified that she was never told her behavior was inappropriate, even though she had met with the MEC and the Hearing Committee several times to discuss her unprofessional behavior.

It was clear that the hospital ultimately declined to renew Dr. Freilich’s privileges because it concluded that she had no capacity to recognize that her conduct was unduly disruptive to hospital operations, and that one more year of monitoring her, with hopes of change, was futile. There was nothing in the record to indicate that she was dismissed in retaliation for her complaints about substandard care.

Defendants are entitled to immunity under §11112(a)(1)-(4) if (1) they reasonably believed they were furthering quality health care; (2) made a reasonable effort to obtain the facts; (3) held adequate hearings; and (4) reasonably believed action was warranted by the facts.

As for (1) and (2), the hospital investigated Dr. Freilich’s conduct for over two years, holding at least twelve hearings, and the investigation garnered enough evidence to support a reasonable belief that Dr. Freilich disrupted hospital caregivers with her unprofessional conduct. Moreover, Dr. Freilich provided no evidence that the Board did not act “in the reasonable belief that the action was in the furtherance of quality health care[.]”

Nor did Dr. Freilich present evidence capable of showing that the Board failed to make a “reasonable effort to obtain the facts.” She argued that by failing to consider her reporting of substandard care, the Board demonstrated ignored those important facts. Yet there was no indication that those facts were “important,” as they did not serve as the basis for the Board’s decision. The Board had plenty of evidence supporting its decision to dismiss her based solely on the non-retaliatory complaints, her application for renewal, and her testimony during the investigation and hearings.

Although Dr. Freilich alleged retaliation generally, she did not connect it to the Board’s decision to terminate her privileges. Thus, she did not produce evidence sufficient to convince a rational trier of fact that Harford failed to satisfy the standards for immunity set forth in HCQIA. Summary judgment was warranted.

COMMENTARY: Dr. Freilich also sued for declaratory and injunctive relief. However, the question presented in Dr. Freilich’s petition for certiorari dealt only with HCQIA immunity, and HCQIA immunity applies only to claims for damages. 42 U.S.C. §11111 (a); see also Singh v. Blue Cross/Blue Shield of Mass., Inc., 308 F.3d 25, 44 (1st Cir. 2002).

Dr. Freilich also failed to raise claims for declaratory and injunctive relief in her briefs. Therefore, even though Dr. Freilich’s attorney mentioned the possibility of declaratory and injunctive relief during oral argument, those claims were not before the Court.

PRACTICE TIPS: For a plaintiff’s evidence to “survive [the] ‘totality of the circumstances’ standard on summary judgment” in a claim for sexual harassment, it must be “sufficiently specific, severe, pervasive, and harmful” to allow the fact finder to “conclude that [it] was sufficient to establish” the violation alleged. See Magee v. Dansources Tech. Servs., 137 Md. App. 527, 561-562 (2001).


Fairness of hearing

BOTTOM LINE: The Maryland Insurance Administration’s hearing on cease-and-desist order was fair and without undue “command influence,” even though the Commissioner delegated that hearing and final administrative decision-making responsibility to a subordinate.

CASE: Maryland Ins. Comm. v. Central Acceptance Corp., No. 7, September Term, 2011 (filed Dec. 20, 2011) (Judges Bell, HARRELL, Battaglia, Greene, Adkins, Barbera & Eldridge (retired, specially assigned)). RecordFax No. 11-1220-20, 45 pages.

FACTS: The Maryland Automobile Insurance Fund (MAIF) is the insurer of last resort for Maryland drivers, where automobile insurance is required statutorily for all motor vehicle owners. Transportation Code §17-103 & Insurance §20-301 (a). The MAIF is prohibited by statute from accepting installment payments on insurance premiums. Insurance §20-507(f)(ii).

Premium finance companies provide loans, through premium finance agreements, to the MAIF’s customers who are unable to pay the premium in a lump sum. They must register with the Maryland Insurance Administration (MIA) before making loans to the MAIF’s insurance customers, and must meet certain financial requirements. Insurance (IN) §§23-201 (a) & 23-202.

The Premium Financing Article regulates the interest, fees, and charges that premium financing companies may collect from consumers. Insurance §23-304 states that the rate shall not exceed 1.15 percent for each 30 days.

Eight of the largest premium finance companies (collectively, the PFCs), use the Rule of 78s to calculate the amount of interest due with each installment under the premium finance agreement.

The Rule of 78s is an arithmetic method to calculate earned interest that allows the PFCs to collect more in interest during the first half of the loan repayment term than the latter half. The Rule of 78s is not prohibited specifically by the Insurance Article.

When a premium finance agreement is cancelled early, the Rule of 78s operates to the disadvantage of consumers because the interest charges are weighted more heavily in the early months of the contract repayment period.

Two of the PFCs, Insurance Billing Services and U.S. Capital Associates, assess finance charges using the Rule of 78s, even when the underlying insurance policy is cancelled or voided ab initio.

In May 2008, the Maryland Insurance Commissioner commenced an investigation into the earned interest calculations used by the premium finance companies from November 1, 2007 to April 30, 2008.

The investigation revealed that, because of how the PFCs used the Rule of 78s, consumers who cancelled their premium finance agreements in the first five months, or whose insurance policies were declared void ab initio, paid finance charges greater than 1.15 percent for each 30 days that the loan was outstanding.

The Commissioner issued a cease-and-desist order that prevented the PFCs from collecting interest in excess of 1.15 percent for each 30-day period on any and all premium finance agreements, including those cancelled before maturity.

The order required also that Insurance Billing Services and U. S. Capital Associates identify customers who paid interest on insurance policies voided ab initio by the MAIF and for these PFC’s to refund all interest charged and pay pre-judgment interest of six percent to those consumers.

The PFCs requested a hearing on the Commissioner’s cease-and-desist order. The Commissioner delegated to an Associate Deputy Insurance Commissioner (ADIC) the responsibility to conduct the hearing and make the final administrative decision. The ADIC affirmed the conclusions of law and directions in the order.

The circuit court found “command influence” because the ADIC adjudicated the conclusions of her superior, the Commissioner; therefore, the administrative hearing violated the PFCs’ right to fundamental fairness and due process of law. The hearing judge declined to address the issue of the statutory interpretation of Insurance §23-304 and ordered the case remanded to the Maryland Insurance Administration with instructions to provide the premium financing companies with a hearing before an impartial hearing officer. The Court of Special Appeals affirmed the circuit court’s judgment.

The Court of Appeals vacated the judgment of the Court of Special Appeals and remanded.

LAW: The premium financing companies’ threshold claim, and the only one decided by the Court of Special Appeals, was that the MIA’s hearing on the Commissioner’s cease-and-desist order was under “command influence.”

In Mayer v. Montgomery County, 143 Md. App. 261 (2002), a police sergeant filed an administrative grievance challenging the results of a promotional examination resulting in his classification as “qualified,” rather than “well qualified” as required for promotion to lieutenant. Id. at 264-65. The County Director of the Office of Human Resources (OHR) denied Mayer’s grievance in a written “Step II” response, and Mayer appealed that decision by requesting a “Step III” hearing. Id. at 267-68. The hearing officer assigned to Mayer’s Step III appeal was the subordinate of the County Director who denied Mayer’s grievance at the Step II level. Id. at 268. The Step III hearing officer affirmed the Step II denial of Mayer’s grievance. Id. Both the Board of Appeals and the circuit court affirmed. Id. at 269-70.

In Mayer, the Court of Special Appeals reversed on the grounds that a subordinate of the Director would be under “command influence.” It concluded that “there is a substantial likelihood that the hearing officer’s view of the case will be tainted and that he therefore will not render an impartial decision; and if there is no actual partiality, the process appears not to be impartial.” Id. at 277. The Court of Special Appeals noted as significant that “the Step II responder and the Step III hearing officer engaged in nearly an identical adjudicatory-type function.” Id. at 280.

Unlike Mayer, the ADIC’s hearing was not an “identical adjudicatory-type function” to what the Commissioner engaged in leading to the issuance of the cease-and-desist order. The Commissioner initiated the investigation into the PFCs’ finance practices and, upon concluding the report of the investigation, issued the cease-and-desist order. The ADIC’s hearing was a contested case hearing with “trial type procedures.” See State Government §§10-208, 10-213, 10-217.

Moreover, Mayer involved a hearing officer who was obliged to resolve disputed questions of fact. Here, the ADIC was called upon to decide only questions of law. See Mayer, 143 Md. App. at 271. Thus, a theory of “command influence” did not apply to the facts here and the delegation of the hearing and final decision-making to the ADIC was proper.

The PFCs further maintained that they were not afforded a fair hearing because it is improper for an agency to conduct a hearing after the agency head issues an ex parte order. In Withrow v. Larkin, 421 U.S. 35 (1975), a physician argued that a state board violated his due process when the board conducted a hearing on charges it investigated before authorizing the bringing of charges. The U.S. Supreme Court held that the combination of adjudicatory and investigatory functions does not violate due process. Id. at 47. Instead, it must be proven that “conferring investigative and adjudicative powers on the same individuals poses such a risk of actual bias or prejudgment that the practice must be forbidden if the guarantee of due process is to be adequately implemented.” Id.

In Consumer Prot. Div. v. Consumer Publishing Co., 304 Md. 731, 753-54 (1985), the Court of Appeals upheld the Consumer Protection Division’s investigation, filing of charges, and adjudication of allegedly deceptive advertising of “diet pills” in Maryland newspapers. The Court concluded that the Consumer Protection Division’s actions did not exceed the tolerance of Withrow because the Consumer Protection Division of the Office of the Attorney General received the results of the investigation and approved the filing of charges, but did not officiate at the hearing. Consumer Publ’g, 304 Md. at 763. Conversely, the hearing officer did not participate in the investigation; therefore, there was no evidence of impropriety violative of due process. Id. at 763. See also Consumer Prot. Div. v. Morgan, 387 Md. 125, 160 (2005).

Here, there was the presumption that the ADIC conducted the Maryland Insurance Administration’s hearing with honesty and integrity, absent evidence to the contrary. The record did not reflect that the ADIC participated in the investigation or issuance of the cease-and-desist order. There also was no evidence that the Commissioner participated in the ultimate administrative decision-making process or influenced improperly the ADIC.

Thus, the PFCs did not overcome the presumption that the ADIC was a proper delagee of the hearing and decision-making responsibilities.

The next issue was the propriety of the cease-and-desist order. In Consumer Publishing, 304 Md. at 753, an advertising company argued that the Consumer Protection Division was required to proceed by rulemaking, rather than adjudication, because resolution of the dispute over alleged “deceptive” advertising practices would be industry-wide in impact. The Court of Appeals concluded that even if the practices were shown to be industry-wide, the agency would not be limited to a rulemaking remedy because courts have held generally that agencies “[are] not precluded from announcing new principles in … adjudicative proceeding[s] and that the choice between rulemaking and adjudication lies … within the [agency’s] discretion.” Id.

As in Consumer Publishing, there was no change in existing law or regulation in the present case, but rather an application of the existing law to the facts in the case. The parties were given all of the procedural rights of a contested case hearing under the State APA. The PFCs had ample time and ability to produce a full record at the administrative hearing and to cross-examine witnesses for the Maryland Insurance Administration, including the Commissioner. The decision of the ADIC was based on the record. The hearing and final order, upon judicial review, were subject generally to non-deferential standards of judicial review as to claimed errors of law.

No law or regulation was changed by the Maryland Insurance Administration. There was no benefit in a public rulemaking process for the agency to receive comments on the interpretation of a statute that is clear on its face.

The premium financing companies argued that the Commissioner has no statutory authority to issue cease-and-desist orders against the PFCs. They point to express grants of authority to issue cease-and-desist

orders in other sections of the Insurance Article as an indication that the absence of a similar enumerated power in the Premium Financing Title means that the Legislature intended that the Commissioner have no authority to issue the present cease-and-desist order to the PFCs.

Insurance §2-108 sets forth the general powers and duties of the Commissioner, one of which is to enforce this article.

Under Insurance §23-103(a), the Commissioner is given the authority to investigate and examine the books, records, and accounts of the PFCs. After an investigation, the Commissioner is required to issue a report of his/her findings under Insurance §2-209. IN § 23-103(c).

The Commissioner is also authorized to “suspend, revoke, or refuse to renew the registration” of a registered premium financing company if it fails to comply with a “lawful requirement of the Commissioner,” or if it violates a provision of the Title. IN §23-208(a)(1), (a)(2).

Further, the Commissioner is authorized to impose civil monetary penalties or restitution. IN §23-208(b)(1)(i), (b)(1)(ii).

In the cases of PFCs Insurance Billing Services and U.S. Capital Associates, the Commissioner was authorized specifically by §23-208 to order these premium financing companies to provide restitution to consumers whose underlying insurance policies were declared ultimately void ab initio, after the cease-and-desist order was issued. In the case of the remaining PFCs, the authority to issue the cease-and-desist order against them, compelling compliance with Insurance §23-304, may be implied reasonably from the overall regulatory scheme revealed in the Insurance Article.

COMMENTARY: Insurance §23-304 states: “The finance charge shall be computed: (3) at a rate not exceeding 1.15% for each 30 days, charged in advance.” The word “rate” means a “fixed ratio between two things,” “a charge, payment, or price fixed according to a ratio, scale or standard,” or “an amount of payment or charge based on another amount.” Webster’s Ninth New Collegiate Dictionary 976.

Here, the fixed charge is “not exceeding 1.15%” on the entire amount of the loan premium and the denominator of the ratio, or the standard, is “each 30 days.” The General Assembly meant what it said, and the interest charge may not exceed 1.15 percent, of the entire amount of the loan, during any 30 day period.

Even if Insurance §23-304 were ambiguous, the result would not be different. The remedial nature of the premium financing statute means that the statutory cap on monthly finance charges is designed to protect consumers. Gov’t Emps. Ins. Co. v. Taylor, 270 Md. 11, 17-18 (1973).

The premium financing companies are able to collect cancellation charges under Insurance §23-307 when a customer defaults on his/her payment obligations, and Insurance §23-304 determines the maximum monthly finance charges. Insurance 23-504 prohibits charges in excess of those authorized by the Premium Financing Title. The Rule, using the maximum allowed finance charge on a policy, when cancelled prior to maturity, violates the Title by collecting excessive charges on the front end.

Where the underlying insurance policy is void ab initio, Insurance §23-304(2) states that the “finance charge shall be computed…from the inception date of the insurance contract or from the due date of the premium.”

The plain language of Insurance §23-304(2) makes clear that there may be different dates used to calculate the length of time for calculating finance charges, one where an insurance policy comes to inception and another where the contract does not come into existence, but “the amount of the entire premium loan” has been advanced by a premium financing company. This loaned money, even if it is eventually refunded, is entitled to have finance charges assessed against it until returned to the lending premium financing company.

Therefore, it is permissible for the PFCs to assess finance charges, even where a policy is declared void, ab initio or otherwise, so long as the finance charges do not exceed 1.15 percent for each 30 days (or pro rata portion thereof) during which the money was advanced.

Real property

Foreclosure by nonholders in possession

BOTTOM LINE: Defendants, as agents of the principal, were nonholders in possession of the negotiable instrument and were, therefore, entitled to enforce the plaintiffs’ mortgage through foreclosure.

CASE: Anderson v Burson, No. 8, September Term, 2011 (filed Dec. 20, 2011) (Judges Bell, HARRELL, Battaglia, Greene, Murphy, Adkins & Barbera). RecordFax No. 11-1220-21, 25 pages.

FACTS: Hosea and Bernice Anderson refinanced their home mortgage in October 2006. In accomplishing the refinancing, only Mr. Anderson signed the promissory note (Note) and both Andersons signed the deed of trust (the Anderson Note and deed of trust are referred to collectively as the Anderson Mortgage) in favor of Wilmington Finance, Inc. Saxon Mortgage Services, Inc. serviced the Anderson Mortgage and collected payments.

Mr. Anderson defaulted on his Note obligations in 2007. The substitute trustees under the mortgage (Substitute Trustees), agents of the trustee, Deutsche Bank Trust Company Americas, commenced foreclosure proceedings on February 21, 2008 in the circuit court. The Substitute Trustees filed an order to docket, which included a motion for acceptance of lost note affidavit. The circuit court granted the motion.

The Andersons caused a temporary halt in the foreclosure action by filing for Chapter 13 Bankruptcy relief, in which they listed Saxon as a secured creditor. Mr. Anderson agreed to cure the missed payments over six equal-monthly payments of $804. A prompt default ensued under this new payment plan.

Meanwhile, investors were securitizing the Note into an investment trust. In route to being securitized, the Note was transferred, but not indorsed correspondingly, three times. First, the initial lender, Wilmington, transferred the Note to Morgan Stanley Mortgage Capital Holding, Inc. (Morgan Stanley I), who in turn transferred the Note to Morgan Stanley ABS Capital I Inc. (Morgan Stanley II). Morgan Stanley II securitized the Note, along with a multitude of others, into the Morgan Stanley Home Equity Loan Trust 2007-2 (Morgan Stanley Trust). The Morgan Stanley Trust pooling and servicing agreement (PSA) named Deutsche as trustee (and Saxon as servicer), and so the note was transferred to Deutsche as trustee.

Upon Mr. Anderson’s latest default in making payments under the bankruptcy plan, the Substitute Trustees, after reinstating the foreclosure process in the circuit court, scheduled a foreclosure sale. The Andersons filed an injunction request in the foreclosure action. The circuit court enjoined temporarily the foreclosure proceeding.

A total of three hearings took place. At the first hearing, the Substitute Trustees, despite the earlier lost note affidavit, produced a photocopy of the unindorsed Note and stated that the original note was indorsed in blank. The circuit court judge rescheduled the evidentiary hearing to determine the Substitute Trustees’ right to enforce the Note.

At the second hearing, the Substitute Trustees produced the original Note, unindorsed. The circuit court again rescheduled the evidentiary hearing.

At the third hearing, the Substitute Trustees produced an undated, unattached allonge, signed by Wilmington purported transferring the Note to Deutsche, but which did not contain indorsements from the parties that possessed intermediately the Note. An allonge is typically a “slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” Black’s Law Dictionary 88 (9th ed. 2004). The Substitute Trustees argued that the allonge made them holders of the Note.

The circuit court ruled in favor of the Substitute Trustees, finding that Wilmington indorsed successfully the Note to Deutsche via the allonge, despite acknowledging indorsement gaps in the Note’s overall transfer history. Thus, the trial judge determined that the Substitute Trustees were holders of the Note under CL §3-302(a) and denied the Andersons’ demand for an injunction.

The Court of Special Appeals disregarded the allonge because Wilmington transferred its rights in the Note to Morgan Stanley I before it purported to indorse the Note to Deutsche via the allonge. The Court of Special Appeals concluded, nonetheless, that Deutsche was entitled to enforce the instrument. Under the “shelter rule,” Deutsche was held to be a nonholder in possession with the rights of a holder, pursuant to CL §3-301(ii).

The Court of Appeals affirmed.

LAW: The grant or denial of injunctive relief in a property foreclosure action lies generally within the sound discretion of the trial court. Wincopia Farm, LP v. Goozman, 188 Md. App. 519, 52 (2009). Therefore, the trial court’s grant or denial of a foreclosure injunction was reviewed for an abuse of discretion. Id.

A reputed transferee in possession of an unindorsed mortgage note has the burden to establish its rights under that note. Rule 14-207(b)(3) requires a mortgagee to produce a copy of the note. Thereafter, the Maryland Commercial Law Article takes over and requires a person in possession of an unindorsed mortgage note to prove that note’s prior transfer history.

The Commercial Law Article governs a negotiable promissory note that is secured by a deed of trust. Silver Spring Title Co. v. Chadwick, 213 Md. 178, 181 (1957); CL §9-203(g) & cmt. 9. The deed of trust cannot be transferred like a mortgage; rather, the corresponding note may be transferred, and carries with it the security provided by the deed of trust. Le Brun v. Prosise, 197 Md. 466, 474 (1951).

Whether a negotiable instrument, such as a deed of trust note, is transferred or negotiated dictates the enforcement rights of the note transferee. A transfer has two requirements: the transferor (any person that transfers the note, except the issuer) must intend to vest in the transferee the right to enforce the instrument and must deliver the instrument so the transferee receives actual or constructive possession. CL §3-203(b). A transfer vests in the transferee only the rights enjoyed by the transferor, which may include the right to enforce the instrument. CL §3-203(a)-(b).

A negotiation, by contrast, occurs when a holder — who is either the named payee of an instrument or the transferee of a negotiated instrument — transfers possession of an instrument, payable to bearer, to another. CL §3-201 (a)-(b) & cmt. 1. A negotiation of an instrument payable to an identified person, however, requires the holder to transfer possession and indorse the instrument, i.e., negotiate the instrument. Id. Importantly, only a holder may negotiate an instrument. CL §3-203 cmt. 1. Thus, a recipient of a transferred instrument is a transferee, but a recipient of a negotiated instrument is a holder.

CL §3-301 explains that a person entitled to enforce a negotiable instrument may be either of three varieties: “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder [i.e., a transferee] or (iii) a person not in possession of the instrument who is entitled to enforce pursuant to § 3-309.”

On the record, Deutsche was not a holder of the Note. Deutsche possessed the Note, which was payable to Wilmington, but Wilmington did not indorse the Note itself. Deutsche’s role as trustee did not arise until after Wilmington had transferred its rights to Morgan Stanley I; thus, by the time Wilmington reputedly made the allonge to Deutsche, Wilmington had no right in the Note to transfer. Therefore, Wilmington did not negotiate the Note to Deutsche.

A nonholder in possession may enforce an instrument under CL §3-301(ii) if his/her transferor was a holder, because a transferee obtains the rights of his transferor/holder, which includes the right to enforce the instrument. CL §3-203, cmt. 2. A transferee obtains also the rights that his transferor obtained from his own transferor. This principle is known as the “shelter rule.” 6B Lawrence, Anderson on the Uniform Commercial Code § 3-203:5R to 16R (3d ed. 2003).

Deutsche, as transferee, obtained from Wilmington the rights of a holder from Wilmington under the shelter rule. Wilmington was a holder because Wilmington possessed the Note, which was payable to it. See CL §1-201(20).

It was conceded that Wilmington transferred the Note, which, after several intervening transfers, is now possessed by Deutsche and its agents, the Substitute Trustees. No entity in the Note’s transfer chain is claimed to have acquired possession of the Note by theft or accident. Each transferor — Wilmington, Morgan Stanley I, and Morgan Stanley II — intended to vest in its transferee the right to enforce the Note. Therefore, the successful series of Note transfers from Wilmington to Deutsche vested in Deutsche Wilmington’s rights as a holder.

A nonholder in possession, however, cannot rely on possession of the instrument alone as a basis to enforce it. The transferee’s right to enforce the instrument derives from the transferor and therefore those rights must be proved. CL §3-203 cmt. 2. If there are multiple prior transfers, the transferee must prove each prior transfer. U.S. Bank Nat’l Assoc. v. Ibanez, 941 N.E.2d 40, 53 (Mass. 2011). Once the transferee establishes a successful transfer from a holder, he or she acquires the enforcement rights of that holder. See CL §3-203 cmt. 2. A transferee’s rights, however, can be no greater than his or her transferor’s because those rights are “purely derivative.” Lawrence, § 3-203:15R.

Thus, the Substitute Trustees here, who possessed an unindorsed note and wished to enforce it, had the burden of proving their status as nonholder in possession.

At the injunction hearing, the Substitute Trustees failed to prove every prior transaction through which it acquired purportedly nonholder status. The Substitute Trustees produced no evidence to prove the Morgan Stanley I to Morgan Stanley II transfer. Even a single break in the transaction chain can be fatal to a transferee’s claim of holder status. Thus, the Substutite Trustees fell short of the proof requirements of CL §3-203(b).

Nevertheless, despite the many shortcomings of the Substitute Trustees’ evidence, the Andersons conceded that Deutsche holds the Note currently.

The Substitute Trustees may enforce the Note as nonholders in possession who have the rights of holders. Because the Note was unindorsed, the Substitute Trustees had to prove the Note’s transfer history in order to establish their rights as a nonholder in possession. The Andersons’ concessions established the Note’s transfer history, clearing the way for the Substitute Trustees to enforce the Anderson Mortgage through foreclosure.

COMMENTARY: Securitization starts when a mortgage originator sells a mortgage and its note to a buyer, who is typically a subsidiary of an investment bank. Peterson, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L. Rev. 1359, 1367 (2010). The investment bank bundles together the multitude of mortgages it purchased into a “special purpose vehicle,” usually in the form of a trust, and sells the income rights to other investors. Id. A pooling and servicing agreement establishes two entities that maintain the trust: a trustee, who manages the loan assets, and a servicer, who communicates with and collects monthly payments from the mortgagors. Id.

Mortgage-securitization investors utilize the Mortgage Electronic Registration System (MERS), a private land-title registration system created by mortgage banking companies to expedite the securitization process. See Jackson v. Mortg. Elec. Registration Sys., 770 N.W.2d 487, 490 (Minn. 2009). MERS increases the efficiency and profitability of mortgage markets by skirting the traditional land-title recording process in localities, which can be costly and time consuming, and replacing it with the industry’s own electronic tracking system. See id. at 490-91. To do so, the mortgage broker names MERS as a nominal mortgagee in the mortgage. Then, subsequent transfers of the mortgage are recorded electronically and entirely on MERS while the original mortgage, recorded in the public land title records, remains unchanged. Id. at 490.

While MERS enables investment banks to rush millions of mortgages through the securitization process at a rapid rate, the volume and profitability has come at a cost. Mortgage transferors frequently lose or misplace mortgage documents and fail to indorse mortgage notes.

PRACTICE TIPS: While all nonjudicial foreclosure statutes allow holders of mortgages with a power of sale provision to sell the property privately, 4 Powell, Powell on Real Property §37.42 (Michael Allan Wolf, ed. 2011), many nonjudicial-foreclosure statutes do not require the mortgagee to produce the mortgage note at all. See, e.g., Tina v. Countrywide Home Loans, Inc., No. 08 CV 1233 JM (NLS), 2008 U.S. Dist. Lexis 88302, *21 (S.D. Cal. Oct. 30, 2008). However, Maryland’s statute does not fall squarely within concept of nonjudicial foreclosure because Rule 14-207(b)(3) requires the mortgagee to produce a copy of the mortgage note.