Crowder v. Master Financial

Citation933 A.2d 905,176 Md. App. 631
Decision Date12 September 2007
Docket NumberNo. 01784, Sept. Term, 2006.,01784, Sept. Term, 2006.
PartiesRalph S. CROWDER et al. v. MASTER FINANCIAL, INC. et al.
CourtCourt of Special Appeals of Maryland

E. David Hoskins(on the brief), of Baltimore, for appellant.

Ward B. Coe, III (Christopher B. Lord, Gerard J. Gaeng, James E. Cosan, Sedica Sawez on the brief), Baltimore, for appellee.

Argued before SHARER, MEREDITH, and LAWRENCE F. RODOWSKY, (Retired, specially assigned) JJ.


This case arises from the dismissal of nineteen consolidated cases brought by twenty-one plaintiffs against various finance entities ("the lenders") alleged to have violated Maryland's Secondary Mortgage Loan Law ("SMLL"), Maryland Code, Commercial Law Article ("CL"), §§ 12-401 et seq. Nine of the cases were filed as putative class actions, and the remaining ten were filed as individual lawsuits. After some defendants entered into class action settlements and others were voluntarily dismissed by the plaintiffs, the Circuit Court for Baltimore City granted several of the defendants' motions to dismiss on the ground that the plaintiffs' claims were barred by the three-year statute of limitations for civil claims. In addition, the circuit court ruled that the named plaintiffs in the putative class action suits lacked standing to assert, on behalf of unknown potential class members, claims against those defendants (the "non-holder" defendants) which had never held the loans of the named plaintiffs. Appellants, in their brief, identify the following three issues for our review:

1. Whether a named Plaintiff in a class action has standing to assert a claim on behalf of absent class members against assignee defendants who are juridically linked to the class action because they all purchased second mortgage loans that included excessive closing costs from a common originator.

2. Whether the twelve-year statute of limitations established by Maryland Code (1974, 2006 Supp.), Courts & Judicial Proceedings Article ("CJP"), § 5-102, applies to the claims asserted in the various lawsuits in circumstances where either the promissory note or the deed of trust was signed "under seal."

3. Whether the discovery rule requires that all causes of action challenging the legality of loan closing costs accrue three years after the date of the loan closing, irrespective of the date when the borrower discovered his or her injury.

We conclude that appellants lack standing to sue, on behalf of potential unnamed class members, those non-holder defendants which have never held the loans of the named plaintiffs. We further conclude that the three-year statute of limitations applies to all claims. We conclude that the circuit court properly dismissed appellants' claims under the Consumer Protection Act ("CPA"), but that the circuit court erred in dismissing in their entirety appellants' claims under the SMLL and appellants' claims for declaratory judgment. The statutory remedy that is provided in CL § 12-413 for a violation of the SMLL eliminates the lenders' right to collect any interest, costs or other charges beyond the principal amount of the loan, and such statutory remedy does not become unavailable three years from the date of closing on the loan. Consequently, although the statute of limitations will preclude the plaintiffs from seeking to recover monies they paid more than three years prior to the date on which they filed suit, the plaintiffs are not barred from seeking to recover any sums defendants collected in excess of the principal amount of the loan within three years prior to the date suit was filed and thereafter. Accordingly, we shall affirm the decision of the circuit court in part and reverse in part. We shall remand for further proceedings with respect to appellants' claims under the Secondary Mortgage Loan Laws and appellants' claims for declaratory judgment.

I. Facts and Procedural History

At various times in 2001, 2002, and 2003, the twenty-one appellants in this consolidated appeal filed a total of nineteen lawsuits against more than fifty defendant finance entities. Appellants' complaints alleged that the original lenders violated the SMLL generally in three respects: (1) by failing to obtain the state licenses for making secondary mortgage loans; (2) by charging the borrowers impermissible fees in excess of those permitted by the statute; and (3) by failing to provide loan applicants a required disclosure form. The plaintiffs sued, in addition to the originating lenders who committed the alleged violations of the SMLL, the entities that purchased the promissory notes and deeds of trust and became subsequent assignees of the loans. Plaintiffs contend that, under the Home Ownership and Equity Protection Act of 1994, 15 U.S.C. § 1641(d)(1), all such successive holders of the plaintiffs' loan obligations are subject to all claims and defenses that can be asserted against the originating lender. And in the putative class action complaints, appellants also sued various non-holder defendants, alleging that such non-holder defendants had purchased similar loans from the originating lenders notwithstanding the fact that the non-holder defendants never had any direct relationship with the named plaintiffs.

Six of the nineteen lawsuits were filed as putative class actions seeking damages, as well as declaratory and injunctive relief, upon three theories: (1) the defendants' violation of the SMLL entitled the plaintiffs to damages; (2) the defendants' conduct also constituted a violation of the Maryland CPA, such that plaintiffs were entitled to relief under that statute; and (3) because the loan agreements violated the SMLL, they were void or voidable. In three putative class action suits, the complaints alleged only violation of the SMLL and the Consumer Protection Act. In the remaining ten lawsuits filed without asserting class action claims, the complaints sought relief only on the ground that the defendants had violated the SMLL.

On July 31, 2002, the circuit court ordered the cases consolidated. Throughout the remainder of 2002, various defendants filed motions to dismiss or motions for summary judgment on the ground that appellants' claims were barred by the statute of limitations. On January 23, 2003, and January 30, 2003, the circuit court held hearings on the motions to dismiss. For reasons unclear from the record, there was no disposition of the motions for more than three years. In the meantime, various plaintiffs dismissed their claims against various defendants, either unilaterally or pursuant to settlements. On July 26, 2006, the circuit court held another hearing on the outstanding motions to dismiss.

On August 25, 2006, the circuit court issued a memorandum opinion and order granting one of the motions to dismiss. The circuit court concluded that the plaintiffs' claims were all barred by the three-year statute of limitations applicable to most civil cases in Maryland. The court ruled that the statute began to run on the date of the loan closing, and that the statute of limitations had not been tolled by the discovery rule. The circuit court further concluded that the named plaintiffs in the putative class action lacked standing to assert, on behalf of unnamed potential class members, claims against the non-holder entities that had never held loans of the named plaintiffs. In addition to granting the motion to dismiss filed jointly by PB Investment Corp. and PB REIT, Inc., the order said:

[I]t is further ordered that all defendants, in this case and other related second mortgage actions pending before this Court, who have filed Motions to Dismiss premised on the assertions that the plaintiff(s)'s [sic] claims are time-barred by the statute of limitations and/or that the plaintiff(s)'s [sic] lack standing, and whose facts are consistent with the Memorandum of Decision accompanying this order are hereby directed to submit proposed orders to which the plaintiff(s) will have twenty (20) days to file an opposition setting forth the reasons why those proposed orders are not consistent with the accompanying Memorandum of Opinion.

The remaining defendants submitted final judgment orders which were subsequently signed by the circuit court and entered on the docket on September 26, 2006. Appellants filed separate notices of appeal from each judgment.

II. Final Judgment

On May 9, 2007, this Court issued a show cause order directing appellants to file responses showing why the appeal should not be dismissed as premature. Although some of the orders purporting to be final judgment orders invoked Maryland Rule 2-602(b), certifying those judgments as final despite the fact that the orders did not apply to all defendants, others of the orders did not mention Rule 2-602(b).1

Appellants responded to this Court's show cause order with the requested documents, detailing the result as to each defendant in each of the nineteen cases. Included in the documents provided were complete docket entries, as well as copies of stipulations of dismissal and voluntary dismissals that were not previously provided to this Court in the record extract. In anticipation of the circuit court's grant of the motions to dismiss, the plaintiffs had, on September 14, 2006, filed in seven of the cases dismissals as to those defendants which had not previously filed motions to dismiss. The voluntary dismissals, although filed separately, contained identical language stating:

Plaintiffs, by their undersigned counsel, pursuant to Maryland Rule 2-506(a) voluntarily dismiss, without prejudice, all claims pending against ________ only, in order to facilitate appeal, with each party to bear its own costs and expenses.

(Emphasis in original.).

Generally, this Court reviews only final judgments of the circuit court. CJP § 12-301; Md. Rule 2-602. Neither party in this case has raised the issue of finality of judgment in their briefs to this...

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