116 A.3d 954 (Md. 2015), 71-2014, Windesheim v. Larocca
|Citation:||116 A.3d 954, 443 Md. 312|
|Opinion Judge:||Adkins, J.|
|Party Name:||SUZANNE SCALES WINDESHEIM, et al. v. FRANK LAROCCA, et al|
|Attorney:||ARGUED BY Daniel J. Tobin (Ballard Spahr LLP of Washington, DC) on brief; James E. Carbine (James E. Carbine, P.C. of Baltimore, MD) FOR PETITIONERS. ARGUED BY Gregory T. Lawrence (Anthony M. Conti, Eric D. Massof, Conti, Fenn & Lawrence, LLC of Baltimore, MD; G. Russell Donaldson, Rachel E. Bree...|
|Judge Panel:||ARGUED BEFORE: Barbera, C.J., Harrell, Greene, Adkins, McDonald, Watts, Wilner, Alan M. (Retired, Specially Assigned), JJ. Opinion by Adkins, J.|
|Case Date:||June 23, 2015|
|Court:||Court of Appeals of Maryland|
Argued April 9, 2015
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Certiorari to the Court of Special Appeals (Circuit Court for Howard County). Case No.: 13-C-11-089075. Richard S. Bernhardt, JUDGE.
[443 Md. 319]
In 2006 and 2007, Respondents, three married couples (collectively, " Borrowers" )1, obtained home equity lines of credit (" HELOCs" ) from Petitioners, PNC Mortgage, a division of PNC Bank, N.A. (" PNC" ), and its loan officer, Suzanne Scales Windesheim (collectively, " Windesheim and her Employer" or " Petitioners" ). Borrowers allege that these HELOC transactions were part of an elaborate " buy-first-sell-later" mortgage fraud arrangement carried out by Petitioners and numerous other Defendants.2 In December 2011, Borrowers filed a putative [443 Md. 320] class action lawsuit in the Circuit Court for Howard County, alleging numerous causes of action including, but not limited to, fraud, conspiracy, and violations of Maryland consumer protection statutes. In this case, we consider whether the Court of Special Appeals erred in reversing the Circuit Court's grant of summary judgment for Windesheim and her Employer.
FACTS AND LEGAL PROCEEDINGS3
Because the facts of this case are somewhat complex, we review them in stages.
Borrowers Encouraged to " Buy-First-Sell-Later"
In 2006 and 2007, Borrowers became interested in selling their current homes and purchasing new homes. Borrowers contracted with Realtor Defendants4 to
represent them in the real estate transactions. Realtor Defendants advised and encouraged Borrowers to " buy-first-sell-later," meaning Borrowers would use HELOCs to extract equity from their current homes that they could use to purchase new homes before their current homes were sold. By extracting the equity in their current homes, Borrowers could make offers to purchase new homes that were not contingent on the sale of their current homes. These non-contingent offers would be more attractive to potential sellers. Realtor Defendants assured Borrowers that a " buy-first-sell-later" plan was " common and appropriate."
[443 Md. 321]Borrowers Referred To Michelle Mathews At Prosperity Mortgage
To effectuate the buy-first-sell-later arrangement, Realtor Defendants advised Borrowers to simultaneously apply for two mortgage loans--a " bridge financing" HELOC against their current homes and a primary residential mortgage for their new homes. To facilitate these lending transactions, Realtor Defendants referred Borrowers to Michelle Mathews, a loan officer with Prosperity Mortgage Company (" Prosperity" )5 who worked out of the same office location as Realtor Defendants. Mathews told Borrowers that bridge loan financing was a " common lending tool at Prosperity." Borrowers provided accurate financial information to Mathews for the purpose of qualifying to purchase their new homes. After obtaining Borrowers' financial information and preparing mortgage applications, Mathews created Mortgage Approval Letters stating that Borrowers were pre-approved for primary residential mortgages for their new homes that were not contingent upon the sale of their current homes. In reality, without selling their current homes, Borrowers did not have sufficient funds to be approved for their new primary residential mortgages.
National City, Not Prosperity, Provided The HELOCs
Borrowers believed at all times that Mathews was processing the HELOCs through Prosperity. Because loan underwriting standards would not permit Prosperity to approve a HELOC secured by a home intended for sale, Mathews had to get National City Mortgage (" National City" ),6 a separate mortgage lender, to provide the HELOCs. Unbeknownst to [443 Md. 322] Borrowers, Mathews sent Borrowers' financial information to Windesheim, a loan officer for National City. Mathews then waited for National City to approve the HELOCs before she submitted Borrowers' paperwork for the primary residential mortgages.
Using the financial information that Mathews provided, Windesheim completed Uniform Residential Loan Applications (" HELOC Applications" ) on behalf of Borrowers without ever speaking with them. Windesheim falsely represented on the HELOC Applications that she had contact with Borrowers to obtain their financial information. Because National City's underwriting standards would also not permit them to approve a HELOC for a home
intended for sale, Windesheim also falsely represented on the HELOC Applications that the HELOCs would be secured by Borrowers' " primary residences." Based on this misrepresentation, National City eventually approved the HELOCs. At the HELOC closings, Borrowers signed the HELOC Applications that Windesheim had prepared.7
Prosperity Approved Primary Residential Mortgages Based On Fraudulent Rental Income
With the bridge financing arranged, Prosperity submitted Borrowers' Uniform Residential Loan Applications for the primary residential mortgages on the new homes (" Primary Mortgage Applications" ) to Prosperity's underwriters.8 Because the Primary Mortgage Applications would not be approved with the new debt created by the HELOCs and without the proceeds from the sales of Borrowers' current homes, however, Mathews needed to create additional monthly income for Borrowers. To accomplish this, one or more Defendants fabricated leases between Borrowers and fictitious [443 Md. 323] tenants and forged Borrowers' signatures.9 As alleged, one or more Defendants then surreptitiously inserted fraudulent rental income on the Primary Mortgage Applications that Borrowers signed when they settled on their new homes and closed their primary residential mortgages.10,11
Counsel Contacted Borrowers And They Filed Suit
In 2010 and 2011, after counsel contacted Borrowers to inform them that they may have been the victims of mortgage fraud, Borrowers allegedly discovered for the first time the fabricated leases on which their signatures were forged and the false rental income on the Primary Mortgage Applications. Borrowers then filed their class action lawsuit, alleging 11 Counts against Petitioners and the other Defendants.12 Borrowers alleged that the mortgage fraud caused them to incur unnecessary commissions, fees, interest, expenses, taxes, and penalties associated with the mortgage transactions; sell their old homes below market value as a result
of the financial burden imposed by the HELOC debt; and pay above-market [443 Md. 324] prices their new homes without reasonable home-sale contingencies.
Circuit Court and Court of Special Appeals Proceedings
Defendants moved to dismiss, arguing the statute of limitations barred Borrowers' suit. The Circuit Court denied the motions. After extensive discovery, Defendants moved for summary judgment on all Counts.13 Concluding that the statute of limitations barred Counts I-IX and XI and that no Defendants violated the Maryland Secondary Mortgage Loan Law (" SMLL" ), Maryland Code (1975, 2013 Repl. Vol.), § 12-403(a) of the Commercial Law Article (" CL" ) as a matter of law, the Circuit Court granted Defendants' motions. Borrowers appealed.
In a reported opinion, the Court of Special Appeals reversed the Circuit Court's grant of summary judgment as to Counts I-IX and XI against all Defendants, and as to Count X against PNC and Windesheim.14 The intermediate appellate court concluded that the Circuit Court erred in granting summary judgment on the statute of limitations issue because there was a genuine dispute as to whether Borrowers reasonably should have discovered the mortgage fraud before counsel contacted them.15 As for Count X--the SMLL Count--the Court of Special Appeals held that there was a genuine dispute as to whether Windesheim and her Employer violated CL § 12-403(a), the SMLL's prohibition against falsely advertising [443 Md. 325] secondary mortgage loans.16
Defendants appealed, and we granted the Petitions for Writ of Certiorari filed by Windesheim and her Employer only. In our Writ of Certiorari issued on October 21, 2014, we agreed to consider the following:
1. Did the Court of Special Appeals err by holding that an employee of a lender is a " lender" for purposes of civil liability under the Maryland Secondary Mortgage Loan Law?
2. Did the Court of Special Appeals err by holding that [Borrowers] stated a claim on which relief could be granted under the Maryland Secondary Mortgage Loan Law? 3. Did the Court of Special Appeals err by holding that a cause of action under the Maryland Secondary Mortgage Loan Law was " another specialty" under Section 5-102 of the Maryland Courts and Judicial Proceedings Article and therefore entitled to a 12-year statute of limitations? 4. Did the Court of Special Appeals err by holding that it was a question of fact to be decided by the jury as to whether [Borrowers'] claims against [Windesheim and her Employer] in the [c]ase [b]elow were barred by the 3-year statute of limitations under Section 5-101...
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