Blackstone v. Sharma

Decision Date02 August 2018
Docket NumberNo. 40, September Term, 2017,47, September Term, 2017,45, September Term, 2017,40, September Term, 2017
Parties Kyle BLACKSTONE, et al. v. Dinesh SHARMA, et al. Terrance Shanahan, et al. v. Seyed Marvastian, et al. Laura O'Sullivan, et al. Substitute Trustees v. Jeffrey Altenburg, et al. Martin S. Goldberg, et al. Substitute Trustees v. Martha Lynn Neviaser, et al.
CourtCourt of Special Appeals of Maryland

Argued by Hope Thai Cannon (Matthew H. Lembke and Nicholas A. Danella, Bradley, Arant Boult Cummings LLP of Birmingham, AL; T. Sky Woodward and Joshua Dhyani, Bradley Arant Boult Cummings LLP of Washington, DC; Susanna M. Buergel and Andrew J. Markquart, Paul, Weiss, Rifkind, Wharton & Garrison LLP of New York, NY), on brief, for Petitioners in No. 40.

Argued by Ava E. Lias-Booker (Emily M. Patterson, McGuire Woods LLP of Baltimore, MD; Brian E. Pumphrey, McGuire Woods LLP of Richmond, VA), on brief, for Appellants in Nos. 45 and 47.

Argued by Phillip Robinson (Consumer Law Center LLC of Silver Spring, MD; Scott Borison, Legg Law Firm LLP of Frederick, MD), on brief, for Respondents in No. 40 and for Appellees in No. 45.

Argued by Scott Borison (Legg Law Firm LLP of Frederick, MD; Phillip Robinson, Consumer Law Center LLC of Silver Spring, MD) on brief, for Appellees in No. 47.

Douglas F. Gansler, Esquire, John B. Williams, III, Esquire, Buckley Sandler LLP, 1250 24th Street NW, Suite 700, Washington, DC 20037, Fredrick S. Levin, Esquire, Buckley Sandler LLP, 100 Wilshire Boulevard, Suite 1000, Santa Monica, CA 90401, for Amicus Curiae for Mortgage Bankers Association, Maryland Mortgage Bankers and Brokers Association, Inc., Maryland Land Title Association, Maryland Bankers Association, and Maryland Realtors on behalf of Petitioners in No. 40 and on behalf of Appellants in No. 47.

Douglas F. Gansler, Esquire, Buckley Sandler LLP, 1250 24th Street NW, Suite 700, Washington, DC 20037, Fredrick S. Levin, Esquire, Buckley Sandler LLP, 100 Wilshire Boulevard, Suite 1000, Santa Monica, CA 90401, for Amicus Curiae for Mortgage Bankers Association, Maryland Mortgage Bankers and Brokers Association, Inc., Maryland Land Title Association, Maryland Bankers Association, and Maryland Realtors on behalf of Appellants in No. 45.

Emily R. Brenner, Esquire, Dentons U.S. LLP, 1900 K Street, N.W., Washington, DC 20006, Matthew S. Yoon, Esquire, Dentons U.S. LLP, 1221 Avenue of the Americas, New York, NY 10020, for Amicus Curiae for Structured Finance Industry Group, Inc. on behalf of Petitioners in No. 40 and on behalf of Appellants in No. 47.

Brian E. Frosh, Atty. Gen. of Maryland, William D. Gruhn, Chief, Consumer Protection Division, W. Thomas Lawrie, Asst. Atty. Gen., Consumer Protection Division, Office of the Attorney General, 200 Saint Paul Place, 16th Floor, Baltimore, MD 21202, for Amicus Curiae for Consumer Protection Division of the Office of the Attorney General on behalf of Petitioners in No. 40 and on behalf of Appellants in Nos. 45 and 47.

Peter A. Holland, Esquire, Holland Law Firm, P.C., P.O. Box 6268, Annapolis, MD 21401, Judith Fox, Esquire, Notre Dame Clinical Law Center, 725 Howard Street, South Bend, IN 46617, for Amicus Curiae for University of Notre Dame Clinical Law Center Economic Justice Clinic and National Association of Consumer Advocates on behalf of Respondents in No. 40 and on behalf of Appellees in Nos. 45 and 47.

Argued before Greene, Adkins, McDonald, Watts, Hotten, Getty, Glenn T. Harrell, Jr., (Senior Judge, Specially Assigned) JJ.

Getty, J.

This case is a consolidated appeal of four circuit court cases in which the parties contest the application of a 2007 departmental bill revising the Maryland Collection Agency Licensing Act ("MCALA" or "the Act"). Md. Code (1992, 2015 Rep. Vol.), Bus. Reg. ("BR") § 7-301, et seq. The overarching issue presented in these consolidated cases is whether MCALA, as revised by the 2007 departmental bill, is constrained to the original scope of collection agencies seeking consumer claims or whether the revised statutory language propels MCALA requirements across the threshold of the mortgage debt arena, requiring principal actors of Maryland's mortgage market to obtain a collection agency license.

MCALA was first enacted in 1977 to protect Maryland consumers from abusive debt collection practices employed by the collection agency industry. 1977 Md. Laws, ch. 319. The Act specifically defined "collection agencies" as entities engaged in the practice of collecting consumer debts for others, excluding those entities collecting debts they owned. Pursuant to MCALA, these third-party debt collectors were required to obtain a license as well as file a surety bond of $5,000 for the benefit of the State and any member of the public damaged by such collection agencies. BR § 7-301 ; 7-304. The State Collection Agency Licensing Board ("the Board"),1 located within the Department of Labor, Licensing, and Regulation ("DLLR" or "Department"), is responsible for enforcing the Act. BR § 7-201.

In 2007, DLLR requested a departmental bill (House Bill 1324) to revise the definition of collection agencies required to obtain the MCALA license. Specifically, the Department submitted a bill request, explaining that the legislation would allow DLLR to regulate actors in the collection industry that employ a loophole in MCALA's licensing requirement by purchasing delinquent consumer debt for goods and services by way of a purchase contract that mirrors a collection agency agreement. When enacted, the departmental bill specifically changed MCALA's definition of "collection agencies" to include a person who engages directly or indirectly in the business of "collecting a consumer claim the person owns, if the claim was in default when the person acquired it[.]" 2007 Md. Laws, ch. 472.

Each of the circuit courts below, along with the Court of Special Appeals, found that foreign statutory trusts acting as a repository for defaulted mortgage debts were required to obtain a license as a collection agency pursuant to MCALA before its substitute trustees filed a foreclosure action in the circuit court. The substitute trustees each petitioned this Court for certiorari, asserting that the circuit courts improperly dismissed the foreclosure actions because the foreign statutory trusts do not fall under the definition of "collection agencies" that are licensed and regulated by MCALA. This Court is therefore called upon to determine the scope of MCALA.2 Specifically, the limited legal issue in these consolidated cases is whether the General Assembly intended a foreign statutory trust, as owner of a delinquent mortgage loan, to obtain a license as a collection agency under MCALA before substitute trustees instituted a foreclosure action against a homeowner who defaulted on his or her mortgage. As explained below, the legislative history, subsequent legislation, and related statutes make clear that the 2007 departmental bill did not expand the scope of MCALA to include mortgage industry players seeking foreclosure actions; thus, this Court answers that question in the negative.3

BACKGROUND

This appeal constitutes two cases consolidated before the Court of Special Appeals as well as two additional actions appealed to this Court directly from circuit court foreclosure proceedings. In each of the cases sub judice , the respondents obtained a mortgage loan from a creditor to purchase, convey, or refinance their homes. The loans were evidenced by a promissory note and secured by a deed of trust. Eventually, the homeowners all missed loan payments, resulting in the banks declaring the loans to be in default. At some point after the respondents defaulted on the mortgage loans, the banks transferred the loans and all beneficial interest in the deed of trust as part of a securitized pool of mortgage loans to either Ventures Trust 2013-I-H-R ("Ventures Trust") or LSF9 Master Participation Trust ("LSF9"), both of which are foreign statutory trusts organized under Delaware law.

These foreign statutory trusts acted through trustees which in these cases were other banks. A separate loan servicer was assigned to communicate with the borrowers and collect the monthly mortgage payments. The trustees subsequently appointed substitute trustees, conveying all rights and duties under the deeds of trust, including the power of sale. The substitute trustees subsequently initiated foreclosure actions to enforce the security interest against the defaulting borrowers, meaning that the substitute trustees are the petitioners in each of the cases sub judice .

In response, the defaulting homeowners filed counter complaints arguing that the foreign statutory trusts acted as collection agencies as defined under MCALA when they obtained defaulted mortgage loans and then collected mortgage payments through communication and foreclosure actions without being licensed as required by MCALA. See BR § 7-301, et seq. The counter complaints further alleged that, by attempting to collect mortgage payments without the required license under MCALA, the foreign statutory trusts violated the Maryland Consumer Debt Collection Act ("MCDCA"). Md. Code (1975, 2013 Repl. Vol.), Com. Law ("CL") § 14-201, et seq.

In addition to filing counter complaints, the borrowers in default requested that the circuit courts dismiss or enjoin the foreclosure sales. To support the request, the borrowers argued that the foreign statutory trusts brought the foreclosure action without being licensed as a collection agency, violating MCALA and MCDCA, and that any judgment obtained by an unlicensed entity acting as a collection agency would be void. See Finch v. LVNV Funding, LLC , 212 Md. App. 748, 759, 71 A.3d 193 (2013). In response, the substitute trustees argued that the foreign statutory trusts were neither doing business in the State nor doing business as a collection agency when they filed foreclosure actions, that MCALA did not apply to the in rem...

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