Allen et al v. Bank of America Corporation et al
Filing
42
MEMORANDUM. Signed by Judge Catherine C. Blake on 8/18/11. (jnls, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
WILLIAM L. ALLEN, et al.
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v.
BANK OF AMERICA CORP., et al.
Civil No. CCB-11-33
MEMORANDUM
Plaintiffs William Allen, Ann Allen, and Denise Angles initiated this action against
Defendants Bank of America Corporation (“Bank of America”); BAC Home Loans Servicing,
LP (“BAC”); Federal National Mortgage Association (“Fannie Mae”); Western Union Company,
doing business as Equity Accelerator and Paymap, and Western Union Financial Services, Inc.
(collectively, “the Western Union defendants”1); and Edward Cohn (“Cohn”), asserting federal
and state statutory and common-law claims. The plaintiffs’ claims arose after an automatic
mortgage-payment program operated by the Western Union defendants allegedly malfunctioned
so that their monthly mortgage payments appeared delinquent. As a result, BAC, the mortgage
servicer, which allegedly acted as the “sponsor” of the mortgage-payment program, sought to
foreclose on the plaintiffs’ home. Now pending before the court are the defendants’ motions to
dismiss the plaintiffs’ amended complaint.2
BACKGROUND
1
For purposes of their motion, the Western Union defendants addressed these entities—The
Western Union Company, Equity Accelerator, Paymap, and Western Union Financial Services,
Inc.—collectively. This court will do the same.
2
Bank of America, BAC, and Fannie Mae have styled their motion as a motion to dismiss or, in
the alternative, for summary judgment. As the plaintiffs have not yet had an opportunity to
conduct discovery, this will be construed as a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6).
1
William and Ann Allen, who are married, have resided at 529 Oella Avenue, Ellicott
City, Maryland since they purchased the property in 1967. When they obtained the mortgage
relevant to the present action, Mr. and Mrs. Allen owned the property as joint tenants with their
daughter, Denise Angles, who also resides there. (Am. Compl. ¶¶ 18–21.) In 2002, the plaintiffs
sought to refinance their mortgage, and Mr. and Mrs. Allen secured a loan from GreenPoint
Mortgage Funding, Inc. (“GreenPoint”). Mr. and Mrs. Allen signed the Note, under which they
were required to make monthly mortgage payments of $901.49. (Defs. BAC Home Loans
Servicing, LP, Bank of America Corp. and Federal National Mortgage Association’s Mot.
Dismiss or, in the Alternative, Summ. J. (“BAC Defs.’ Mot. Dismiss”), Ex. 1.) All three
plaintiffs signed the Deed of Trust. (Am. Compl. ¶ 22; BAC Defs.’ Mot. Dismiss, Ex. 3.)
Fannie Mae currently holds the Note and is the secured party under the Deed of Trust. (Am.
Compl. ¶ 15.)
In January 2006, after making timely mortgage payments for three years, Mr. and Mrs.
Allen received a “Special Offer” from GreenPoint entreating them to enroll in an automatic
mortgage-payment program called Equity Accelerator (“the Program”). The solicitation stated
that GreenPoint would act as the “mortgage servicer ‘sponsor’” of the Program, which was being
offered “pursuant to an agreement with Paymap, Inc.,” the owner of the Equity Accelerator
service. The parties to the enrollment agreement would be the sponsor, GreenPoint, and the
borrowers, Mr. and Mrs. Allen. According to the letter, the Program would reduce their
mortgage debt by automatically debiting their bank account twice per month in an amount
exceeding what was necessary to satisfy their monthly mortgage payment; the surplus would be
applied towards principal at the time the monthly payment was made. The debited funds first
would be held in a Western Union bank account for up to three days. After the Western Union
2
defendants deducted their “program fees,” the funds would be transferred to a bank account held
by the sponsor. Finally, on the due date, the sponsor would apply the funds towards the
plaintiffs’ mortgage. Mr. and Mrs. Allen enrolled in the Program. (Id. ¶¶ 24–28.)
From April 2006 to November 2007, the Program made timely payments towards the
plaintiffs’ mortgage. The December 2007 mortgage payment, however, was not transmitted to
GreenPoint due to a Program error. The plaintiffs did not receive any notice of a problem, so
they believed they were up to date in their mortgage payments in October 2008, when
GreenPoint notified them that the servicing of their mortgage was being transferred to
Countrywide Home Loans Servicing, LP (“Countrywide”). The transfer was effective
November 1, 2008. (Id. ¶¶ 28–34 & Ex. 3.) Countrywide subsequently sent the plaintiffs a
notice of transfer, assuring them that the Program would continue to pay their mortgage through
automatic debits, with Countrywide acting as sponsor. (Id. ¶ 36.) The Program did not,
however, continue to function as promised. The November 2008 payment was transmitted to
GreenPoint rather than Countrywide. (Id., Ex. 3.) Then, in late November 2008, the Program
failed to debit the plaintiffs’ account despite the presence of adequate funds, so it lacked
sufficient funds to make the December payment on the due date. On December 8, 2008, Mr. and
Mrs. Allen received from Countrywide a notice of intent to accelerate, demanding payment of
three-months rent and late fees to cure the default. The Allens inquired about refinancing their
mortgage, but they learned they could not do so because their credit report showed their
mortgage in default. (Id. ¶¶ 38–40.)
Discovering for the first time that their mortgage payments were not up to date, Mr. Allen
made numerous telephone calls to Countrywide, but he was unable to determine how the
mortgage was in default despite their enrollment in the Program and the presence of adequate
3
funds in their bank account. From January to July 2009, the Program had debited the Allens’
account and paid their mortgage regularly. Mr. and Mrs. Allen, however, received additional
notices of intent to accelerate, and Mr. Allen continued to make telephone calls to Countrywide,
which became BAC in April 2009, in an unsuccessful attempt to resolve the situation.
Ultimately, in July 2009, BAC refused to accept the Allens’ mortgage payment, and, on July 22,
2009, Mr. and Mrs. Allen received a Notice of Intent to Foreclose from Cohn, Goldberg and
Deutsche, LLC, Defendant Cohn’s law firm. (Id. ¶¶ 43–56 & Ex. 2.) Because their July
payment had been refused, Mr. and Mrs. Allen began to hold their monthly mortgage payments
in a separate savings account, and they represent they are ready and willing to pay this sum to
BAC and Fannie Mae.3 (Id. ¶ 77.)
In response to the threat of foreclosure, the plaintiffs enlisted the assistance of Carrie
Corcoran, a family friend. (Id. ¶ 58.) In a letter to Cohn, dated August 1, 2009, Corcoran
reported that, through a conversation with representatives of Paymap and Bank of America, she
determined Paymap had erroneously sent the plaintiffs’ November 2008 payment to GreenPoint
and failed to make payments in December 2007 and December 2008. She requested a stay of all
foreclosure proceedings. (Id., Ex. 3.) Through Corcoran’s efforts, Mr. Allen secured letters
from Western Union stating that the Program failed to disburse the December 2008 payment on
time and requesting that no fees be assessed or negative credit notations be made as a result. The
letter stated it had been forwarded to BAC. (Id. ¶ 61 & Ex. 4.)
3
The defendants argue that the plaintiffs’ failure to make mortgage payments since July 2009
constitutes a default, so even if default did not occur when the November and December 2008
payments were not received on time, the plaintiffs cannot now claim that the foreclosure was
wrongful. The plaintiffs have alleged, however, that they ceased submitting payments only after
BAC wrongfully refused to accept the July 2009 mortgage payment. In light of BAC’s refusal
and the plaintiffs’ representation that they have segregated the funds owed in a separate account,
the court will not conclude at this stage in the litigation that the failure to pay since July 2009
resulted in a default permitting BAC to initiate a foreclosure action.
4
Cohn initiated a foreclosure action in Baltimore County Circuit Court on September 24,
2009. Corcoran continued to press the plaintiffs’ case with BAC, so, on October 7, 2009, a Bank
of America employee, Zachary Harris, sent an email to Cohn, Goldberg and Deutsche, LLC,
requesting that the foreclosure be placed “on hold.” (Id. ¶¶ 62–65.) Cohn caused the entire
filing in the foreclosure action to be posted on the plaintiffs’ front door on October 19, 2009. On
January 25, 2010, Cohn had the plaintiffs personally served. Although BAC, Fannie Mae, and
Cohn agreed to a voluntary dismissal of the foreclosure action on April 12, 2010, BAC has since
sent two notices stating Mr. and Mrs. Allen’s account is in foreclosure and demanding over
twenty-one thousand dollars to bring the account current. (Id. ¶¶ 73–79.)
In the instant action, the plaintiffs assert the following counts: (I) injunctive relief; (II)
violation of the Maryland Consumer Debt Collection Act (“MCDCA”), Md. Code Ann., Com.
Law § 14-201 et seq.; (III) violation of the Maryland Consumer Protection Act (“MCPA”), Md.
Code Ann., Com. Law § 13-101 et seq.; (IV) violation of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692 et seq.; (V) breach of contract; (VI) negligence; (VII) violation of
the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq.; (VIII)
disparagement of title; (IX) invasion of privacy—false light; and (X) defamation.
STANDARD OF REVIEW
“[T]he purpose of Rule 12(b)(6) is to test the sufficiency of a complaint and not to
resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”
Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (internal quotation marks
and alterations omitted) (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir.
1999)). When ruling on such a motion, the court must “accept the well-pled allegations of the
complaint as true,” and “construe the facts and reasonable inferences derived therefrom in the
5
light most favorable to the plaintiff.”4 Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997).
“Even though the requirements for pleading a proper complaint are substantially aimed at
assuring that the defendant be given adequate notice of the nature of a claim being made against
him, they also provide criteria for defining issues for trial and for early disposition of
inappropriate complaints.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009).
To survive a motion to dismiss, the factual allegations of a complaint “must be enough to
raise a right to relief above the speculative level, . . . on the assumption that all the allegations in
the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555,
127 S. Ct. 1955 (2007) (internal citations and alterations omitted). Thus, a plaintiff is obligated
to set forth sufficiently the “grounds of his entitlement to relief,” offering “more than labels and
conclusions.” Id. (internal quotation marks and alterations omitted). It is not sufficient that the
well-pleaded facts create “the mere possibility of misconduct.” Ashcroft v. Iqbal, --- U.S. ---,
129 S. Ct. 1937, 1950 (2009). Rather, to withstand a motion to dismiss, “a complaint must
contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its
4
A number of documents were attached as exhibits to the complaint and the defendants’
motions. It is well established that, in deciding a motion to dismiss, a court may consider any
document that is a matter of public record as well as any exhibits attached to the complaint. 5B
Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1357 (3d ed. 2004).
When an attached exhibit conflicts with the complaint’s bare allegations, the exhibit prevails.
Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991).
Exhibits attached to a defendant’s motion to dismiss, in contrast, may be considered
without converting the motion to one for summary judgment only if the document “was integral
to and explicitly relied on in the complaint and if the plaintiffs do not challenge its authenticity.”
Am. Chiropractic Ass’n, Inc. v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004)
(internal quotation marks, alterations, and citations omitted). Of the documents presented by the
defendants, only the Note and Deed of Trust fulfill these requirements. (BAC Defs.’ Mot.
Dismiss, Exs. 1 & 3.) Both are referenced in the complaint, and they are integral, as they
provide the basis for the plaintiffs’ rights to the property and define the terms of their
relationship with the lender, including when default occurs. The court will disregard the
defendants’ other exhibits. See Finley Lines Joint Protective Bd. Unit 200 v. Norfolk S. Corp.,
109 F.3d 993, 996 (4th Cir. 1997).
6
face,” meaning the court could draw “the reasonable inference that the defendant is liable for the
conduct alleged.” Id. at 1949 (internal quotations and citation omitted).
ANALYSIS
I.
Bank of America
The plaintiffs have asserted claims against both Bank of America and BAC, its wholly
owned subsidiary. Bank of America seeks dismissal on the grounds that, as a mere shareholder,
it cannot be held liable for BAC’s conduct.
Under the doctrine of limited liability, a shareholder—including a corporate parent—may
not be held liable for the acts of a corporation. Johnson v. Flowers Indus., Inc., 814 F.2d 978,
980 (4th Cir. 1987). Only where a parent corporation “dominates [its] subsidiary ‘to the extent
that the subservient corporation manifests no separate corporate interests of its own and
functions solely to achieve the purposes of the dominant corporation,’” may a court peer behind
the corporate veil and vitiate the benefits of limited liability. Id. at 981 (quoting Krivo Indus.
Supply Co. v. Nat’l Distillers & Chem. Corp., 483 F.2d 1098, 1106 (5th Cir. 1973)). In the
instant action, the plaintiffs have not pled facts showing that Bank of America dominates BAC to
such an extent that veil piercing is appropriate. At most, the plaintiffs allege BAC represents
itself to customers as “Bank of America.” This alone, however, does not show that BAC lacks
separate corporate interests and functions solely to achieve Bank of America’s purposes. Nor is
this assertion supported by the attachments to the complaint, where BAC, in its correspondence,
identifies itself as BAC Home Loans Servicing, LP, and Bank of America Home Loans. (See
Am. Compl., Exs. 7A & 7B.) These names merely reinforce its subsidiary status. Bank of
America may not be held liable for its subsidiary’s alleged wrongdoing in servicing the
plaintiffs’ loan. Accordingly, all claims against it will be dismissed.
7
BAC & Fannie Mae5
II.
A. Breach of Contract
“To prevail in an action for breach of contract, a plaintiff must prove that the defendant
owed the plaintiff a contractual obligation and that the defendant breached that obligation.”
Taylor v. NationsBank, N.A., 365 Md. 166, 776 A.2d 645, 651 (2001). BAC contends this count
fails because the complaint did not allege a contractual relationship between itself and the
plaintiffs; rather, the plaintiffs’ agreement was with Paymap. This assertion is not, however,
supported by the amended complaint, which states that the parties to the agreement enrolling the
plaintiffs in the Program were the borrowers—Mr. and Mrs. Allen—and the servicer-sponsor—
GreenPoint. (Am. Compl. ¶ 27.) The plaintiffs further allege Countrywide told them in the
notice of transfer of servicing that the Program would continue to debit their account and make
their monthly payments (Id. ¶ 36), giving rise to the reasonable inference that Countrywide
assumed GreenPoint’s obligations under this agreement. Accordingly, the plaintiffs have pled
sufficient facts to show BAC, as Countrywide is now called, owed them a contractual obligation
to make timely deductions and mortgage payments through the Program, and BAC breached this
obligation.
B. RESPA
The plaintiffs maintain BAC has violated RESPA, which regulates, inter alia, the
servicing of federally related mortgage loans. See 12 U.S.C. § 2605. The plaintiffs allege BAC
5
In general, “a mortgage servicer acts as the agent of the mortgagee to effect collection of
payments on the mortgage loan,” R.G. Fin. Corp. v. Vergara-Nuñez, 446 F.3d 178, 187 (1st Cir.
2006), and BAC and Fannie Mae have treated the plaintiffs’ allegation of an agency relationship
between them as true for purposes of their motion (Defs.’ Bank of America Corp., BAC Home
Loans Servicing, L.P., and Federal National Mortgage Ass’n Reply 9 n.4). Thus, because this
court finds the plaintiffs have stated claims as to the servicer, BAC, these claims will be
permitted to proceed as to Fannie Mae as well.
8
is liable under this Act for treating as late a payment erroneously transmitted to GreenPoint and
for failing to respond adequately when the plaintiffs disputed BAC’s assertions that their account
was in default.
Among other requirements for the servicing of federally regulated mortgages, RESPA
prohibits a servicer, following a transfer of servicing, from imposing a late fee or otherwise
treating a loan payment as late “[d]uring the 60-day period beginning on the effective date of
transfer of the servicing . . . , if the payment is received by the transferor servicer (rather than the
transferee servicer who should properly receive payment) before the due date applicable to such
payment.” § 2605(d). The amended complaint and its exhibits contain facts showing a violation
of this subsection. The plaintiffs allege the Program transmitted their November 2008 mortgage
payment to GreenPoint, the transferor servicer, rather than Countrywide, the transferee servicer.
Despite RESPA’s prohibition on the imposition of late fees for such an error, on December 8,
2008—far fewer than sixty days after the transfer became effective on November 1, 2008—the
Allens received from Countrywide a Notice of Intent to Accelerate, demanding payments and
late fees for three months, including November 2008. Accordingly, the plaintiffs have stated a
claim under RESPA.6
C. Disparagement of Title, False Light & Defamation
The plaintiffs’ claims for disparagement of title, false light, and defamation arise from the
reporting of their default to credit agencies and the filing of the foreclosure action, specifically
the posting of the foreclosure filing on the property. Neither of these events is actionable,
however, so the claims must be dismissed.
6
As the plaintiffs adequately allege BAC violated § 2605(d), the court will not at this time
determine whether they also state a claim for a violation of § 2605(e), which requires a servicer
to undertake certain actions in response to a borrower’s “qualified written request” for
information or for a correction to their account.
9
First, to the extent the plaintiffs’ common-law claims rest upon reports provided by BAC
or Fannie Mae to credit agencies, they are preempted by the Fair Credit Reporting Act
(“FCRA”), 15 U.S.C. § 1681 et seq. The FCRA provides in relevant part:
[N]o consumer may bring any action or proceeding in the nature of
defamation [or] invasion of privacy . . . against any . . . person who
furnishes information to a consumer reporting agency . . . based on
information disclosed by a user of a consumer report to or for a
consumer against whom the user has taken adverse action, based in
whole or in part on the report except as to false information
furnished with malice or willful intent to injure such consumer.
15 U.S.C. § 1681h(e). Malice may be established by showing the defendant “acted with reckless
disregard to the truth or falsity of the reported debt.” Spencer v. Hendersen-Webb, Inc., 81 F.
Supp. 2d 582, 598 (D. Md. 1999). “Reckless disregard” requires “the defendant either (1) made
the statement with a ‘high degree of awareness of . . . probable falsity’; or (2) actually
entertained serious doubts as to the truth of the statement.” Id. (quoting Foretich v. Capital
Cities/ABC, 37 F.3d 1541, 1551 n.8 (4th Cir. 1994)) (omission in original).
The plaintiffs allege they suffered harm because, when they were denied refinancing of
their mortgage in December 2008 and when their application for a reverse mortgage was rejected
before July 2009, they learned their credit report showed them to be in default. (See Am. Compl.
¶¶ 39, 54.) The plaintiffs’ allegations do not show, however, that at those times BAC and Fannie
Mae acted with reckless disregard in reporting that the plaintiffs were in default. BAC did not
receive notice from the Western Union defendants that the default was the result of Program
errors until August 2009, and the plaintiffs’ allegations regarding their earlier communications
with BAC are not sufficiently specific to show that BAC had a “high degree of awareness” of the
falsity of the report. The exception to the FCRA’s preemption provision therefore does not
apply.
10
Second, the filing of the foreclosure action and the posting of the filing at the plaintiffs’
property are protected by an absolute privilege applicable to defamatory statements made in
connection with a judicial proceeding.7 In the recent case of Norman v. Borison, 418 Md. 630,
17 A.3d 697 (2011), the Maryland Court of Appeals explored the contours of this privilege. The
court observed that “witnesses, parties, and judges” enjoy “absolute immunity from civil
liability,” for statements made in a judicial proceeding, “even if the statement is wholly unrelated
to the underlying proceeding.” Id. at 708. The privilege also extends to statements made in
connection with quasi-judicial proceedings, such as administrative proceedings, “if the
proceeding satisfies the two part test of Gersh v. Ambrose, 291 Md. 188, 434 A.2d 547 (1981).”8
Norman, 17 A.3d at 709. Gersh dictates that, in deciding whether a proceeding gives rise to an
absolute privilege, a court must consider “‘(1) the nature of the public function of the proceeding
and (2) the adequacy of procedural safeguards which will minimize the occurrence of
defamatory statements.’” Id. at 710 (quoting Gersh, 434 A.2d at 552). Additionally, the
privilege applies even “to out-of-court statements, made by witnesses, parties, or judges, when
(1) the contemplated or ongoing proceeding fulfills Gersh, and (2) the context of the statement
demonstrates that it was made during the course of the proceeding.” Id. at 713 (internal
7
For this reason, Counts VIII and IX will be dismissed as to Defendant Cohn as well. Attorneys
enjoy immunity so long as the disputed statement bears “some rational relation to the matter at
bar.” Norman, 17 A.3d at 709; see also id. at 714. The foreclosure filing is clearly related to the
proceeding, so it is privileged as to Cohn.
8
Judicial foreclosures are uncommon in Maryland; instead, “most foreclosures are accomplished
through the filing of an order to docket, which does not involve any hearings prior to, or
meaningful judicial supervision of, the sale.” Wells Fargo Home Mortg., Inc. v. Neal, 398 Md.
705, 922 A.2d 538, 550 (2007) (citations omitted). “This ‘power of sale’ foreclosure is ‘intended
to be a summary, in rem proceeding’ which carries out ‘the policy of Maryland law to expedite
mortgage foreclosures.’” Id. (quoting G.E. Capital Mortg. Servs. v. Levenson, 338 Md. 227, 657
A.2d 1170, 1178 (1995)). It may be that this type of action would be considered a judicial
proceeding for purposes of determining the existence of a privilege, but even if it is considered
quasi-judicial, it satisfies the requirements of Gersh and gives rise to an absolute litigation
privilege.
11
quotation marks omitted). In Norman, for example, an attorney’s publication of a complaint to
the press and on the internet was privileged even though the complaint had not yet been filed.
See id. at 715–17.
Although the plaintiffs contend the procedural safeguards are insufficient, this court
concludes that a foreclosure action satisfies the Gersh test. Chapter 14 of the Maryland Rules
governs the procedure of the proceeding, which takes place in the Maryland Circuit Court. The
borrower or record property owner, moreover, has an opportunity to present defenses—as did the
plaintiffs here—and may move to stay or dismiss the action. See Md. Rule 14-211. Further, the
foreclosure court filings were, by definition, made during the course of the proceeding, so their
publication is absolutely privileged. Accordingly, Counts VIII, IX, and X will be dismissed.
Finally, as the plaintiffs have stated claims against BAC at least for breach of contract
and a violation of RESPA, the motion to dismiss will be denied without prejudice as to the
plaintiffs’ claims for injunctive relief, negligence, and violations of the MCDCA, MCPA, and
FDCPA.9 The defendants may renew their arguments regarding these counts by way of a motion
for summary judgment at the close of discovery, if warranted.
9
BAC argues the FDCPA claim must be dismissed because servicers are exempt from the
requirements imposed by this statute, which addresses “the use of abusive, deceptive, and unfair
debt collection practices by . . . debt collectors.” 15 U.S.C. § 1692(a). Typically, mortgage
servicers are excluded from the statutory definition of debt collectors because at the time they
begin servicing, the loans are not in default. See Perry v. Stewart Title Co., 756 F.2d 1197, 1208
(5th Cir. 1985); Scott v. Wells Fargo Home Mortg., Inc., 326 F. Supp. 2d 709, 718 (E.D. Va.
2003). Where a servicer believes a loan to be in default at the time it commences servicing,
however, courts have found it is not exempt from the FDCPA’s definition of “debt collector.”
See, e.g., Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536–39 (7th Cir. 2003); Shugart v.
Ocwen Loan Servicing, LLC, 747 F. Supp. 2d 938, 942–43 (S.D. Ohio 2010) (“[The] exception,
which may operate to remove a loan servicer from the definition of a ‘debt collector’, does not
apply if the loan was in default at the time it was acquired by the servicing company, or if the
servicing company treated it as such.”). Plaintiffs have alleged here that in December 2008, less
than two months after the transfer of servicing became effective, Countrywide demanded
mortgage payments and late fees for three months, indicating Countrywide treated the plaintiffs’
12
III.
Western Union Defendants
The plaintiffs allege the Western Unions are liable for a violation of the MCPA, breach of
contract, and negligence.
A. MCPA
The MCPA proscribes the use of “unfair or deceptive trade practice[s]” in the “sale,
lease, rental, loan, or bailment of any consumer goods . . . or consumer services,” or the offer
thereof; “[t]he extension of consumer credit”; and “[t]he collection of consumer debts.” Md.
Code Ann., Com. Law § 13-303. The Act further provides a nonexhaustive list of prohibited
practices, including the making of false or misleading misrepresentations that have “the capacity,
tendency, or effect of deceiving or misleading consumers” and the “[f]ailure to state a material
fact if the failure deceives or tends to deceive.” Md. Code Ann., Com. Law §§ 13-301(1), (3),
(9). The plaintiffs claim the Western Union defendants violated the MCPA by falsely
representing that the Program would make timely and accurate payments, thereby reducing the
total interest paid on their mortgage; falsely representing that the Program would continue to
function properly following the transfer of servicing; and failing to disclose that the Program had
malfunctioned.10 (Am. Compl. ¶ 101.) The plaintiffs have not alleged, however, that the
Western Union defendants made any representations to them. According to the complaint, all
affirmative representations regarding the Program and its functioning during and following the
transfer of servicing were made by GreenPoint or Countrywide. In order to state a claim under
loan as in default when acquired. The typical exception therefore does not apply, and the
plaintiffs’ FDCPA claim may proceed.
10
Significantly, the plaintiffs do not assert that the Western Union defendants violated the
MCDCA, as they claim the other defendants did. A violation of the MCDCA constitutes an
“[u]nfair or deceptive trade practice[]” under the MCPA. Md. Code Ann., Com. Law § 13301(14)(iii). Hence, in order to state an MCPA claim against the Western Union defendants, the
plaintiffs must identify an actionable misrepresentation or omission of a material fact.
13
the MCPA, the plaintiffs therefore must allege the Western Union defendants failed to state a
material fact and the failure deceived or tended to deceive the plaintiffs.
To violate the MCPA, a defendant need not intend to deceive the consumer. See Golt v.
Phillips, 308 Md. 1, 517 A.2d 328, 332–33 (1986); Consumer Prot. Div. v. Morgan, 387 Md.
125, 874 A.2d 919, 970 (2005). Rather, at most, the MCPA requires that the defendant know or
have reason to know of a defect that is not disclosed. Hayes v. Hambruch, 841 F. Supp. 706, 714
(D. Md. 1994), aff’d, 64 F.3d 657 (4th Cir. 1995) (unpublished per curiam opinion) (“[T]his
Court concludes that a landlord may not be held liable under the CPA for a failure to state a
material fact . . . , unless the landlord knows or has reason to know of the defect.”); Richwind
Joint Venture 4 v. Brunson, 335 Md. 661, 645 A.2d 1147, 1157–59 (1994), overruled on other
grounds by Brooks v. Lewin Realty III, Inc., 378 Md. 70, 835 A.2d 616 (2003).11 The plaintiffs
have pled sufficient facts to show that the Western Union defendants had reason to know that the
Program malfunctioned. Unlike the landlord-tenant cases cited by the defendants, in which the
defect emerged while the property was in the tenant’s possession, see Richwind, 645 A.2d at
1159; Scroggins v. Dahne, 335 Md. 688, 645 A.2d 1160, 1163–64 (1994), in the instant action,
the Western Union defendants allegedly had control over the Program and possession of the
funds at the time the Program malfunctioned. The fact that the funds remained in their account
after the mortgage payment due date provided the defendants with a reason to know of the
defect. Accordingly, the allegations support a finding that they failed to state a fact regarding a
11
Golt appears to contradict Hayes, Richwind, and Scroggins v. Dahne, 335 Md. 688, 645 A.2d
1160 (1994) by suggesting that not even knowledge of the defect is required under the MCPA.
The Court of Special Appeals sought to reconcile this apparent contradiction in the landlordtenant context in Hartford Accident & Indem. Co. v. Scarlett Harbor Assocs. Ltd. P’ship, 109
Md. App. 217, 674 A.2d 106, 136 n.16 (Ct. Spec. App. 1996). This court need not explore this
issue because the plaintiff’s allegations meet the higher standard for scienter by showing that
Western Union had reason to know of the Program’s defect.
14
product defect about which they had reason to know. The Western Union defendants do not
contend that the fact the Program malfunctioned was not material. The plaintiffs thus have stated
a claim under the MCPA as to these defendants.
B. Breach of Contract
The plaintiffs further maintain the Western Union defendants are liable for breach of
contract. As noted by the Western Union defendants, the plaintiffs do not allege the existence of
a contract between Western Union, Paymap, or Equity Accelerator and any plaintiff. This does
not, however, defeat the plaintiffs’ claim because Maryland law permits certain third-party
beneficiaries to a contract to sue for its breach. See Shillman v. Hobstetter, 249 Md. 678, 241
A.2d 570, 575 (1968) (acknowledging Maryland’s adoption of third-party beneficiary doctrine).
Traditionally, privity of contract between the parties has been a required element for a
breach-of-contract claim. Mackubin v. Curtiss-Wright Corp., 190 Md. 52, 57 A.2d 318, 320
(1948). Third-party beneficiary doctrine permits a plaintiff to sue on a contract, despite a lack of
privity, where the parties to the contract entered into the agreement with the intent to confer a
benefit on the plaintiff. Flaherty v. Weinberg, 303 Md. 116, 492 A.2d 618, 622 (1985). In
contrast, a third party who merely receives an incidental—as opposed to intended—benefit
acquires no right enforceable in contract. See Lovell Land, Inc. v. State Highway Admin., 408
Md. 242, 969 A.2d 284, 295–96 (2009). There are two categories of intended third-party
beneficiaries who may sue to enforce a contract: (1) a donee beneficiary, where the purpose of
the contract is to confer a gift upon the beneficiary, and (2) a creditor beneficiary, where the
purpose of the contract is to satisfy a duty of the promisee to the beneficiary. Id. at 295 (quoting
Mackubin, 57 A.2d at 321).
15
The plaintiffs’ pleadings support the inference that they were the creditor beneficiaries of
a contract between GreenPoint (and, later, Countrywide/BAC) and the Western Union
defendants. The offer letter sent by GreenPoint soliciting the Allens’ participation in the
Program states that the service was offered pursuant to an “agreement” with the Western Union
defendants, indicating the existence of a contract. (Am. Compl. ¶¶ 24–26; Ex. 1.) Upon the
Allens’ enrollment, GreenPoint owed them a duty to deduct certain amounts from their bank
account and apply these funds towards their mortgage on specified dates. GreenPoint’s contract
with the Western Union defendants enabled it to fulfill this duty. Moreover, the Western Union
defendants deducted fees from the funds taken from the plaintiffs’ account, supporting a finding
that they intended to provide a service to the plaintiffs. (Id.) As intended third-party
beneficiaries, the plaintiffs may sue to recover for the breach of contract that allegedly occurred
when the Western Union defendants failed to make deductions and mortgage payments pursuant
to the Program’s terms.
The plaintiffs have, at minimum, alleged sufficient facts to state plausible claims for
relief against the Western Union defendants under the MCPA and for breach of contract. As
with BAC and Fannie Mae, the Western Union defendants’ motion to dismiss will be denied
without prejudice.
IV.
Cohn
Finally, Cohn, the substitute trustee in the foreclosure action, seeks dismissal of the
claims against him on the grounds that the plaintiffs’ allegations fail to support these claims and
the FDCPA claim is untimely. As noted above, Cohn enjoys immunity for the alleged malicious
and defamatory statements made in the filing of the foreclosure action and the posting of the
filing, so Counts VIII and IX will be dismissed.
16
A. MCDCA & MCPA
The MCDCA provides in relevant part that a debt collector may not “[c]laim, attempt, or
threaten to enforce a right with knowledge that the right does not exist.” Md. Code Ann., Com.
Law § 14-202(8). For purposes of this statute, “knowledge” has been construed to include
“actual knowledge or reckless disregard as to the falsity” of the existence of the right. Spencer,
81 F. Supp. 2d at 595. As noted previously, to establish “reckless disregard,” a plaintiff must
show “the defendant either (1) made the statement with a ‘high degree of awareness of . . .
probable falsity’; or (2) actually entertained serious doubts as to the truth of the statement.” Id.
at 598 (quoting Foretich, 37 F.3d at 1551 n.8) (omission in original).
The plaintiffs here have failed to allege facts sufficient for the court to infer that Cohn
attempted to collect a debt with a high degree of awareness of its probable nonexistence or that
he actually doubted its existence. At the time Cohn instituted foreclosure proceedings, BAC had
considered the plaintiffs to be in default for over six months. Even though Ms. Corcoran wrote
him to explain the default as a series of mistakes on the part of the Western Union defendants,
the letter itself confirmed that the servicer never received at least three monthly payments. (Am.
Compl., Ex. 3.) Although a BAC representative subsequently confirmed the debt was disputed,
the plaintiffs acknowledge that “[i]n response to these instructions, Defendant Cohn halted the
foreclosure action.” (See Pls.’ Opp’n to Def. Cohn’s Mot. Dismiss 8.) Thus, the plaintiffs have
not alleged that, when filing and pursuing the foreclosure, Cohn had access to any information
other than the servicer’s allegation of default and the plaintiffs’ protestations to the contrary.
Cohn’s reliance on the servicer’s accounting over the plaintiffs’ contentions does not rise to the
level of “reckless disregard.” Therefore, the plaintiffs have failed to properly state a claim that
17
Cohn violated the MCDCA. The plaintiff’s MCPA claim with respect to Cohn is premised on
his alleged MCDCA violation. Accordingly, both claims will be dismissed.
B. FDCPA
To be timely, a private action under the FDCPA must be brought within one year of the
date of the violation. Kouabo v. Chevy Chase Bank, F.S.B., 336 F. Supp. 2d 471, 475 (D. Md.
2004) (citing 15 U.S.C. § 1692k(d)). Where the alleged FDCPA violation involves the filing of a
collection action, the statute of limitations ordinarily begins to run at the time of service. See
Johnson v. Riddle, 305 F.3d 1107, 1113 (10th Cir. 2002) (“We hold that, where the plaintiff’s
FDCPA claim arises from the instigation of a debt collection suit, the plaintiff does not have a
‘complete and present cause of action,’ . . . until the plaintiff has been served.” (citation
omitted)). Here, service was effectuated and the plaintiffs learned of the action, at the latest,
through the posting of the foreclosure filing on the property on October 19, 2009.12 See Md.
Rule 14-209(b) (permitting, under certain circumstances, service by mailing and posting). The
plaintiffs did not initiate this suit, however, until October 26, 2010. Accordingly, the FDCPA
claims are untimely as to Cohn.13
C. Negligence
Cohn asserts he is not liable for negligence because he owed no duty to the plaintiffs.
The plaintiffs argue that Cohn may be held liable in tort because a statutory violation may be
12
The plaintiffs contend this form of service was improper, and they were not personally served
until January 2010. It is undisputed, however, that plaintiffs were aware of the posting in
October 2009. Indeed, several of their state law claims rest upon this occurrence. Thus, the
court finds they learned of all facts necessary to reveal the cause of action at that time, and this
posting is sufficient to constitute an “attempt to collect” on the debt. Thus, the statute of
limitations began to run on October 17, 2009.
13
This analysis does not apply to BAC and Fannie Mae because the plaintiffs allege they have
continued to demand payments and late fees to which they are not entitled and have sent further
notices threatening foreclosure despite the dismissal of the prior foreclosure action. (Am.
Compl. ¶¶ 79, 108–09.)
18
prima facie evidence of negligence, and Cohn allegedly violated the FDCPA, MCDCA, and
MCPA. This argument fails, first, because this court has concluded that the claims under these
statutes must be dismissed. In addition, it is well established “that where a statute expressly
provides a particular remedy or remedies, a court must be chary of reading others into it.”
Sugarloaf Citizens Ass’n, Inc. v. Gudis, 78 Md. App. 550, 554 A.2d 434, 438 (Ct. Spec. App.
1989); see also Walton v. Mariner Health of Md., Inc., 391 Md. 643, 894 A.2d 584, 599 (2006).
Each of the statutes cited by the plaintiffs provide express remedies. Accordingly, the
negligence claim against Cohn will be dismissed.
In sum, Cohn’s motion to dismiss will be granted, and the Western Union defendants’
motion will be denied. Bank of America, BAC, and Fannie Mae’s collective motion will be
granted in part and denied in part as follows: the motion will be granted on all counts as to Bank
of America; with respect to BAC, only Counts VIII, IX, and X will be dismissed; and the
plaintiffs may proceed on all claims against Fannie Mae. A separate Order follows.
August 18, 2011
Date
/s/
Catherine C. Blake
United States District Judge
19
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