Blackstone v. Sharma
Decision Date | 06 June 2017 |
Docket Number | No. 1525, Sept. Term, 2015,No. 1524, Sept. Term, 2015,1524, Sept. Term, 2015,1525, Sept. Term, 2015 |
Citation | 161 A.3d 718,233 Md.App. 58 |
Parties | Kyle BLACKSTONE, et al. v. Dinesh SHARMA, et al. Terrance Shanahan, Substitute. Trustee, et al. v. Seyed Marvastian, et al. |
Court | Court of Special Appeals of Maryland |
Argued by: Marc James Ayers (Bradley, Arant, Boult, Cummings, LLP, Birmingham, AL and Eric A. Fretchel, Marc A. Nardone, Bradley, Arant, Boult, Cummings, LLP, Washington, D.C.) all on the brief, for Appellant.
Argued by: Phillip Robinson (Consumer Law Center LLC, on the brief), Silver Spring, MD, for Appellee.
Panel: Wright, Shaw Geter, James P. Salmon (Senior Judge, Specially Assigned), JJ.
This consolidated appeal originates from two foreclosure cases filed in the Circuit Court for Montgomery County. In both cases, substitute trustees (collectively, "appellants") acting on behalf of Ventures Trust 2013–I–H–R ("Ventures Trust"), a statutory trust formed under the laws of the State of Delaware, filed orders to docket foreclosure suits against homeowners in the State of Maryland. The circuit court judges who considered the cases dismissed the actions, determining that pursuant to the Maryland Collection Agency Licensing Act ("MCALA"), codified at Maryland Code (1992, 2015 Repl. Vol.), Business Regulation Article ("B.R.") § 7–101 et seq. , Ventures Trust was required to be licensed as a collection agency and, because Ventures Trust had not obtained such a license, any judgment entered as a result of the foreclosure actions would be void. The dismissal of these foreclosure actions, without prejudice, presents us with two questions:
We shall answer "yes" to both questions and affirm the judgments entered by the Circuit Court for Montgomery County.
On August 4, 2006, Dinesh Sharma, Santosh Sharma, and Ruchi Sharma1 (collectively "the Sharmas") executed a deed of trust that encumbered real property in Potomac, Maryland, in order to secure a $1,920,000 loan. Washington Mutual Bank, FA was the lender. The Sharmas, in December 2007, defaulted on the loan by failing to make payments when due.
Ventures Trust, by its trustee MCM Capital Partners, LLC ("MCM Capital"), acquired ownership and "all beneficial interest" of the loan on October 9, 2013. The substitute trustees2 appointed by Ventures Trust filed an order to docket, initiating the foreclosure action, on November 25, 2014. The Sharmas owed $3,008,536.23 on the loan as of November 25, 2014.
The Sharmas responded to the foreclosure action by filing a counterclaim which was later severed by order of the circuit court. They also filed a motion to dismiss or enjoin the foreclosure sale pursuant to Md. Rule 14–211.3 The substitute trustees moved to strike the Sharmas' motion, which the court granted on May 7, 2015. The Sharmas filed a motion to alter or amend the May 7 th order. On June 22, 2015 the court vacated its May 7th order, denied the substitute trustees' motion to strike the Sharmas' motion to dismiss, and set a hearing date for arguments concerning the motion to dismiss.
Following a hearing, the court, on August 28, 2015, issued an opinion and order granting the motion to dismiss the foreclosure action without prejudice. In its written opinion the circuit court determined that, pursuant to the MCALA, Ventures Trust was a collection agency and was therefore required to be licensed before attempting to collect on the deed of trust. The circuit court ruled that because Ventures Trust was not licensed as a collection agency, it had no right to file a foreclosure action. In its written opinion, the court also rejected Ventures Trust's contention that it was a "trust company" and was therefore exempt from MCALA's licensure requirements. The substitute trustees noted a timely appeal.
On June 23, 2006, Seyed and Sima Marvastian executed a deed of trust on property in Bethesda, Maryland in order to secure a $1,396,500 loan. Premier Mortgage Funding, Inc. was the lender. The Marvastians defaulted on the loan by failing to make payments when due in December 2012.
Ventures Trust by its trustee MCM Capital acquired the Marvastians' loan in February 2014. On October 20, 2014, the substitute trustees filed an order to docket, initiating the foreclosure process. At the time of filing, the substitute trustees alleged that the Marvastians owed $1,632,303.26 on the loan.
The Marvastians responded by filing a counterclaim, which was severed by order of the circuit court. They also filed a motion to dismiss or stay the foreclosure sale pursuant to Md. Rule 14–211. Following extensive briefing and a hearing, the court granted the Marvastians' motion to dismiss, albeit without prejudice. The judge's reasons for dismissing the case were exactly the same as those given for dismissing the foreclosure case that is the subject of Appeal No. 1524.
[B]efore a foreclosure sale takes place, the defaulting borrower may file a motion to stay the sale of the property and dismiss the foreclosure action. In other words, the borrower, may petition the court for injunctive relief, challenging the validity of the lien or ... the right of the [lender] to foreclose in the pending action. The grant or denial of injunctive relief in a property foreclosure action lies generally within the sound discretion of the trial court. Accordingly, we review the circuit court's denial of a foreclosure injunction for an abuse of discretion. We review the trial court's legal conclusions de novo.
Hobby v. Burson , 222 Md.App. 1, 8, 110 A.3d 796 (2015) (internal citations and quotation marks omitted). See also Svrcek v. Rosenberg , 203 Md.App. 705, 720, 40 A.3d 494 (2012). In the two cases that are the subject of this appeal, the trial judges based their rulings on their legal conclusions. Thus we review those conclusions de novo.
In Finch v. LVNV Funding, LLC , 212 Md.App. 748, 758–64, 71 A.3d 193 (2013) we stated that without a license, a collection agency has no authority to file suit against the debtor. Accordingly, a "judgment entered in favor of an unlicensed debt collector constitutes a void judgment[.]" Id. at 764, 71 A.3d 193. See also Old Republic Insurance v. Gordon , 228 Md.App. 1, 12–13, 137 A.3d 237 (2016) (footnote omitted).
Maryland Code B.R. § 7–101(c) defines a collection agency as follows:
(Emphasis added.)
As used in the Business Regulations Article, "person" means "an individual ... trustee ... fiduciary, representative of any kind, partnership, firm, association, corporation, or other entity." B.R. § 1–101(g). B.R. 7–101(e) defines a "consumer claim" as meaning a "claim that: 1) is for money owed or said to be owed by a resident of the State; and 2) arises from a transaction in which, for a family, household, or personal purpose, the resident sought or got credit, money, personal property, real property, or services."
Before the law was amended in 2007, MCALA applied only to businesses that collected debts owed to another person. Old Republic , 228 Md.App. at 16, 137 A.3d 237. In 2007, the statute was broadened to include persons who engage in the business of "collecting a consumer claim the person owns, if the claim was in default when the person acquired it[.]" B.R. § 7–101(c)(1)(ii).
The legislative history of the 2007 amendment, insofar as here pertinent, was set forth in Old Republic as follows:
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