Pamela L. Cutaio and Richard L. Cutaio

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
In re 	*
RICHARD L. CUTAIO, JR. and 	* 	Case No. 06-17963-JS
PAMELA L. CUTAIO,
*
Debtors
* 	Chapter 13
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
MEMORANDUM OPINION OVERRULING DEBTORS’ OBJECTION TO
CLAIM OF DOMINION FINANCIAL SERVICES, LLC
This matter was heard upon the objection of the debtor, Pamela L. Cutaio, to
the claim of Dominion Financial Services, LLC. For the reasons stated, the objection
will be overruled.
FINDINGS OF FACT
1. On December 8, 2006, the debtors, Richard L. Cutaio and Pamela L. Cutaio,
filed the instant Chapter 13 case in this Court.
Date signed September 13, 2007
Entered: September 13, 2007 Case 06-17963 Doc 35 Filed 09/13/07 Page 1 of 11

2
2. On March 1, 2007, the debtors filed an objection [P. 15] to Claim No. 5, the
claim of Dominion Financial Services, LLC (“Dominion”), in the amount of $24,657.06.
3. The claim was alleged to have originated when Jeanine C. Little, the debtors’
daughter, purchased the entire membership interest in a Maryland limited liability
company known as DP West 65, LLC (“DP West”). The sole asset of DP West was
a parcel of real property known as 3138 Normount Avenue located in Baltimore City
(the “Normount Property”).
4. On November 16, 2002, Ms. Little obtained a loan from Dominion in the
amount of $50,000 in order to purchase the membership interest in DP West. The
loan was alleged to be secured by a purchase money deed of trust on the property, a
personal guaranty signed by Ms. Little and an indemnity deed of trust (the “IDOT”)
executed by the debtors. Debtors’ Exhibit No. 1.
5. The IDOT was alleged to provide the debtors’ property, identified as 2631
Proctor Lane, Baltimore County, Maryland (the “Proctor Property”), as additional
collateral for the loan. At the hearing on the objection, the debtor, Richard L. Cutaio,
acknowledged that he and Mrs. Cutaio executed the IDOT.
6. Dominion did not file a guaranty agreement from the debtors with its proof
of claim. 	Richard Cutaio testified that he only signed one document at the loan
closing, and that document was the IDOT, not any personal guaranty.
Case 06-17963 Doc 35 Filed 09/13/07 Page 2 of 11

3
7. On February 3, 2004, the Normount Property was vandalized. Thereafter,
in settlement of the damage claim, the insurance carrier issued a check in the amount
of $5,594.36, made payable to Ms. Little and Dominion jointly.
8. Patricia Koehler, a friend of Ms. Little, testified that she delivered both the
insurance check that Ms. Little indorsed to Dominion and a personal check for one
mortgage payment to one Fred Lewis, a representative of Dominion, who refused to
accept them.
9. Ms. Koehler testified that she could not explain to Mr. Lewis whether Ms.
Little was tendering the insurance check to be applied to the loan balance or to be used
for repairs. After Mr. Lewis refused to accept either check, Ms. Koehler mailed the
checks back to Ms. Little.
10. 	After Ms. Little and DP West defaulted on the mortgage, Dominion
foreclosed on the Normount Property. On November 12, 2004, Dominion sold the
property at foreclosure and the sale was ratified by the Circuit Court for Baltimore
City. Dominion Exhibit No. 1.
11. An Auditor’s Report found that DP West was liable for a deficiency in the
amount of $17,056.24.
Case 06-17963 Doc 35 Filed 09/13/07 Page 3 of 11

4
12. No exceptions were filed to the foreclosure sale or to the audit. Richard
Cutaio testified that he did not receive a copy of the auditor’s report although he had
actual knowledge of the foreclosure through communications with his daughter.
13. After the foreclosure was ratified, Dominion sought to foreclose the IDOT
secured by the Proctor Property owned by the debtors. In response, the debtors filed
the instant Chapter 13 bankruptcy case. On Schedule D, the debtors listed the claim
of Dominion as disputed.
14. 	On February 27, 2007, Dominion filed Claim No. 5 as a secured claim
based upon the IDOT in the amount of $24,657.06.
15. 	The bases of the debtors’ objection to the claim are that they did not
execute a personal guaranty when they executed the IDOT; that they were discharged
from their obligation under the IDOT by the failure of Dominion to apply the proceeds
of the insurance check to the loan balance or to use the funds to repair the Normount
property; as guarantors, the debtors were entitled to receive notice of the foreclosure
of the Normount property, which they allege they did not receive, and therefore did
not object to its ratification; and that the sale by Dominion of the Normount property
in its damaged condition was not commercially reasonable.
Case 06-17963 Doc 35 Filed 09/13/07 Page 4 of 11

5
CONCLUSIONS OF LAW
1. This Court has subject matter jurisdiction over the instant objection to claim,
which is a core proceeding pursuant to 28 U.S.C. § 157(b).
2. 	Debtors have no personal liability because there is no evidence that they
signed a guaranty agreement. 	Dominion did not supply the court with a guaranty
agreement in its proof of claim, and Richard Cutaio testified that he and Pamela
Cutaio signed only one document, the IDOT, at the closing of the loan.
3. Under Md. Code. Ann., Cts & Jud. Proc § 5-901(1), “an action may not be
brought to charge a defendant on any special promise to answer for the debt, default,
or miscarriage of another person” unless such promises are in writing and signed by
the party to be charged. Because there is no written guaranty agreement, the Court is
precluded from finding debtors personally liable as guarantors. Bessette v. Weitz, 148
Md. App. 215, 235, 811 A.2d 812, 823 (2002).
4. Dominion cites Springhill Lake Investors, Ltd. v. Prince George’s County,
114 Md. App. 420, 690 A.2d 535 (1997), for the proposition that the IDOT “speaks
for itself,” rendering a personal guaranty unnecessary. In Springhill, the Court wrote:
An indemnity deed of trust is but one type or class of a deed of
trust. It is also a security device. The principal difference, however, is
that, under an indemnity deed of trust, some third party has agreed to act
as the guarantor of the borrower by placing its property in trust for the
Case 06-17963 Doc 35 Filed 09/13/07 Page 5 of 11

6
benefit of the beneficiary, thereby agreeing to bear the loss should the
borrower default.
Springhill, at 428.
5. Although cited by neither party, the United States District Court for the
District of Maryland recently issued an opinion further clarifying the legal status of
indemnity deeds of trust. See Mercantile-Safe Deposit & Trust Co. v. Chicago Title
Ins. Co., 2007 WL 892103 (D. Md. Mar. 20, 2007). In Mercantile-Safe Deposit, the
District Court (Blake, J.) ruled that an indemnity deed of trust secured not only the
guaranty in that case, but also the underlying promissory note. 	Mercantile Safe-
Deposit, at *5-*6.
6. In the instant case, this Court finds the IDOT does not create any personal
liability on the part of debtors. Unlike Springhill and Mercantile Safe-Deposit, the
debtors never signed a personal guaranty agreement which would have created
personal liability. 	However, the IDOT serves as security for the underlying
promissory note issued by DP West. 	Although that promissory note was not filed
with Dominion’s proof of claim, its existence is not in dispute. 	Therefore,
Dominion’s proof of claim is sufficient under Bankruptcy Rule 3001.
Case 06-17963 Doc 35 Filed 09/13/07 Page 6 of 11

7
7. 	Accordingly, Dominion has a secured claim against the Proctor Property
which is proper under 11 U.S.C. § 101(5). Johnson v. Home State Bank, 501 U.S. 78,
111 S.Ct. 2150, 115 L. Ed.2d 66 (1991).
8. In addition, Dominion’s secured claim was not diminished by any alleged
tender of payment to Dominion.
9. Debtors argue that under Md. Code Ann., Comm. Law § 3-603, Ms. Little’s
obligation to Dominion should have been either reduced or discharged when her
friend Patricia Koehler delivered the check to Fred Lewis at Dominion and Dominion
rejected it. The debtors argue that the delivery constituted tender of payment. Section
3-603 states that:
(a) If tender of payment of an obligation to pay an instrument is
made to a person entitled to enforce the instrument, the effect of tender
is governed by principles of law applicable to tender of payment under
a simple contract.
(b) If tender of payment of an obligation to pay an instrument is
made to a person entitled to enforce the instrument and the tender is
refused, there is discharge, to the extent of the amount of the tender, of
the obligation of an indorser or accommodation party having a right of
recourse with respect to the obligation to which the tender relates.
Id. However, under Maryland law, “tender” is defined as “an “an offer to perform a
condition or obligation, coupled with the present ability of immediate performance,
so that if it were not for the refusal of cooperation by the party to whom tender is
Case 06-17963 Doc 35 Filed 09/13/07 Page 7 of 11

1Similarly, Dominion is not liable for any increased risk to Debtors as
guarantors as a result of its refusal to accept Ms. Little’s check from Ms. Koehler.
Because it was unclear for what purpose the check was being offered, Dominion had
no duty to accept it.
8
made, the condition or obligation would be immediately satisfied.” 	Platsis v.
Diafokeris, 68 Md. App. 257, 262, 511 A.2d 535, 537 (1986) (quoting Chesapeake
Bay Dist. Co. v. Buck Dist. Co., 60 Md. App. 210, 214, 481 A.2d 1156, 1158 (1984).
A tender “must be either in the exact amount due, or a larger amount without requiring
the making of change.” Id.
10. The presentation of the check by Ms. Koehler does not constitute tender of
payment. It was not for the exact amount due, nor would it immediate resolve any
condition or obligation. In fact, it was unclear for what purpose the check was being
offered. Because Ms. Koehler could not tell Mr. Lewis the reason she was giving him
the insurance check, Dominion could not know whether Ms. Little wanted the check
applied to make repairs or towards the loan balance. Dominion was not obligated to
accept the check to make repairs nor was it obligated to accept early payment on its
loan. Accordingly, Dominion was not obligated to accept a check when it was unclear
for which of two possible purposes the check was being tendered, and when it would
not have been obligated to accept the check for either purpose. 1
Case 06-17963 Doc 35 Filed 09/13/07 Page 8 of 11

2The finding of res judicata resulting from the ratification of the foreclosure
sale of the Normount property is another bar to the Debtor claiming the presentation
of the insurance check constituted tender of payment under Commercial Law § 3-603.
Res judicata also bars Debtors from now claiming the foreclosure sale of the
Normount property was commercially unreasonable.
9
11. Dominion may have been obligated to accept the mortgage check which
accompanied the insurance check which Ms. Little gave to Ms. Koehler to give to
Dominion. However, the time to object to Dominion’s refusal to accept this check has
passed. Under Maryland law, the ratification of a foreclosure sale is res judicata as to
the validity of that sale. Manigan v. Burson, 160 Md. App. 114, 120 862 A.2d 1037,
1041 (2004). Neither the debtors nor Ms. Little filed any objections to the foreclosure
sale or any exceptions to the auditor’s report during the appropriate times. 	They
cannot do so now. 2
12. The debtors claim they did not receive notice of the auditor’s report. They
admit that they had actual knowledge of the foreclosure sale but deny they received
notice concerning when exceptions to the auditor’s report were due. The debtors cite
Gambo v. Bank of Md., 102 Md. App. 166, 648 A.2d 1105 (1994), for the proposition
that, as guarantors, the debtors were deprived of proper notice of the foreclosure sale.
13. In Gambo, the court held that a guarantor was equivalent to a debtor, and
was thus entitled to notice of a private sale of van equipment that was used as
collateral. Gambo, at 169. Unfortunately for the debtors, the Gambo case concerned
Case 06-17963 Doc 35 Filed 09/13/07 Page 9 of 11

10
a private sale of personal property pledged as security. Thus, Gambo was governed
by Article 9 of the Maryland Commercial Code.
14. The Maryland Rules are more clear on who is entitled to notice of a
foreclosure of real property or notice of an auditor’s report. Maryland Rule 14-204(b)
and Md. Code Ann., Real Prop. § 7-105 state that notice of the foreclosure sale must
be given only to the record owner and holders of subordinate interests. 	Maryland
Rule 14-305(b) adds that notice of the auditor’s report must be published in a
newspaper of sufficient circulation. Neither rule nor statute mentions a guarantor, and
Maryland courts have been reluctant to expand upon the parties to whom notice must
be given. See, e.g., Redland Genstar, Inc. v. Mahase, 155 Md. App. 72, 841 A.2d 413
(2004).
15. Accordingly, proper notice of the foreclosure sale was given. Therefore,
debtors may not now object to the foreclosure sale or to the auditor’s report, especially
considering that the debtors had actual knowledge of the foreclosure sale.
WHEREFORE, the debtors’ objection to the allowance of claim will be
OVERRULED.
ORDER ACCORDINGLY.
Case 06-17963 Doc 35 Filed 09/13/07 Page 10 of 11

11
cc: 	Richard L. Cutaio, Jr. and Pamela L. Cutaio
2631 Proctor Lane
Baltimore, Maryland 21234
Debtors
James L. Wiggins, Esquire
One East Lexington St. Suite 505
Baltimore, Maryland 21202
Counsel to the Debtors
Dominion Financial Services, LLC
1029 North Calvert Street
Baltimore, Maryland 21202
Claimant
Dennis W. King, Esquire
Danoff and King, P.A.
409 Washington Avenue, Suite 810
Towson. Maryland 21204
Counsel to Dominion Financial Services, LLC, Claimant
Ms. Ellen W. Cosby
P. O. Box 20016
Baltimore, Maryland 21284-0016
Chapter 13 Trustee
Office of the United States Trustee
U.S. Courthouse, Suite 2625
101 West Lombard Street
Baltimore, Maryland 21201
Case 06-17963 Doc 35 Filed 09/13/07 Page 11 of 11