AI Generated Opinion Summaries

This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.

Facts

• In August 2004, Christine and Lucy Valerio executed a promissory note secured by a mortgage on their home. Deutsche Bank, claiming to be the holder in due course of the note and mortgagee, initiated a foreclosure complaint in May 2012 after Lucy Valerio's death. Despite initially including a copy of the Original Note with its complaint, Deutsche Bank later filed an affidavit stating the Original Note had been lost. A default judgment was entered in favor of Deutsche Bank, leading to a foreclosure sale which Deutsche Bank purchased. Christine Valerio died shortly after the sale. John Valerio, as a successor in interest, sought relief from the default judgment under Rule 1-060(B), arguing Deutsche Bank lacked standing and presented meritorious defenses and counterclaims (paras 4-6).

Procedural History

• District Court, January 29, 2014: Entered an order granting Deutsche Bank's motion for default judgment, along with a decree of foreclosure and appointment of a special master (para 5).
• District Court, July 23, 2015: Granted John Valerio's motion to set aside the default judgment without specifying the grounds for its ruling (para 6).
• District Court, April 4, 2016: Deutsche Bank moved to reconsider the order setting aside default judgment, citing concerns of prudential standing (para 7).
• District Court, December 28, 2016: Denied Deutsche Bank's motion to reconsider its order setting aside default judgment, without specifying which provision of Rule 1-060(B) it relied upon (para 9).
• District Court, February 12, 2018: Reinstated the default judgment, decree of foreclosure, and order confirming sale, basing its ruling on Johnston, Phoenix Funding, and Roybal (para 13).

Parties' Submissions

• Appellant (John Valerio): Argued that the judgment was void under Rule 1-060(B)(4) due to Deutsche Bank's lack of standing to bring a foreclosure complaint. Additionally, contended that the judgment should be set aside under Rule 1-060(B)(6) due to meritorious defenses and counterclaims, including Deutsche Bank's failure to comply with the procedures to enforce a lost Original Note (paras 6, 8-9).
• Appellee (Deutsche Bank): Contended that the Supreme Court's ruling in Johnston did not limit its holding to void judgments alone, arguing that a defendant's waiver of an attack on prudential standing cannot be overcome by a Rule 1-060(B)(6) motion to reopen a default judgment. Also argued that an attached affidavit proved its standing and fully complied with the UCC (paras 2, 11).

Legal Issues

• Whether a homeowner may raise standing as a meritorious defense when seeking to reopen a default judgment under Rule 1-060(B)(6) in mortgage foreclosure cases.
• Whether the district court has discretion to grant a motion to reopen a default judgment under Rule 1-060(B)(6) on the grounds of lack of standing.

Disposition

• The Court of Appeals reversed the district court's order granting Deutsche Bank's second motion to reconsider and remanded the case with instructions to vacate its order reinstating the default judgment, decree of foreclosure, and order confirming sale (para 28).

Reasons

• The Court of Appeals, per Henderson, J., concluded that while final judgments in mortgage foreclosure cases cannot be declared void under Rule 1-060(B) for lack of prudential standing, district courts may, in their discretion, set aside a default judgment under Rule 1-060(B)(6) if a party demonstrates grounds for reopening the judgment and a meritorious defense, even when the meritorious defense is that the plaintiff lacked standing. The court distinguished between void judgments, which must be set aside, and the reopening of judgments, which lies within the district court's discretion. It held that the district court misapprehended the law by determining it could not grant relief under Rule 1-060(B)(6) based on the Supreme Court's rulings in Johnston and Phoenix Funding, which did not preclude reopening judgments under Rule 1-060(B) to allow parties to litigate on the merits (paras 3, 22-24, 28).