Wanda and Nathaniel Daughtry borrowed $918,900 from Liberty Mortgage Corporation to refinance their house in Prince George’s County in 2007. In 2012, they defaulted on their loan. In December 2018, trustees for the lender commenced foreclosure proceedings, noting that the loan was 6½ years in default. The Daughtrys filed a motion to dismiss or stay the foreclosure, contending that the action was barred by the statute of limitations. The Circuit Court for Prince George’s County denied the motion, and the Daughtrys appealed to the Court of Special Appeals (CSA). The CSA affirmed. Daughtry v. Nadel, 248 Md. App. 594 (2020).
The Court of Appeals held in Cunningham v. Davidoff, 188 Md. 437 (1947), that there was no statute of limitations on foreclosure sales, and the CSA held that this remains the law today.
The Daughtrys raised a number of points in their argument that Cunningham is not good law now, but the CSA rejected them all. The Daughtrys argued that Courts and Judicial Proceedings Article (C&JP) §5-101 sets forth the basic rule that the statute of limitations is three years unless another law sets forth a different time period. However, the CSA noted that C&JP §5-101 provides “a civil action at law shall be filed within three years from that date it accrues . . .” (emphasis added) but foreclosure proceedings are actions in equity and not at law. The CSA held that the codification of the Courts and Judicial Proceedings Article in 1973 had not changed the general statute of limitations set forth in C&JP §5-101 or in C&JP §5-102, which states that the statute of limitations for specialties, including instruments under seal, is 12 years.
The Daughtrys contended that with the merger of law and equity in 1984, C&JP §5-101 became applicable to what were formerly categorized as equity actions. However, the CSA disagreed. It found that “merger” of law and equity was only for purposes of pleadings, parties, court sittings, and dockets, and the mergers did not abolish the distinctions between law and equity, particularly with respect to legal and equitable defenses.
Next, the Daughtrys asserted that Chapter 592 of the Laws of Maryland of 2014 carved foreclosures out of the 12 year statute of limitations. The CSA rejected this interpretation on the basis that under Cunningham foreclosures were never subject to a statute of limitations.
Finally, the Daughtrys said that even if C&JP §5-101 does not on its face apply to mortgage foreclosures, its statute of limitations should be made applicable to foreclosures by analogy because in other situations the statute of limitations that is not specifically applicable is used to determine the time period of laches. However, the CSA circled back to Cunningham which held that the period of limitations applicable to foreclosures is the period that gives rise to a presumption of payment applicable to prescriptive title.
Practice Pointer: Real Property Article (RP) §7-106(c) provides that a mortgage or deed of trust is not enforceable if an action to enforce it has not been brought within the time period set forth in that subsection. The time period is (a) 12 years from the last payment date or maturity date, if set forth in the instrument, or (b) 40 years from the date of recordation, if the instrument does not include the last payment date or maturity date. However, the applicable date is extended to 12 years after the last continuation statement is filed. Cunningham was decided before RP §7-106(c) was enacted. At common law then in effect, there was a rebuttable presumption that a mortgage had been paid if no payments were made on it for more than 20 years.
For questions, contact Edward J. Levin.
410-576-1900 • firstname.lastname@example.org