Finch v. LVNV Funding, LLC

• Decision Date: 28 June 2013
• Docket Number: No. 704,704
• Parties: LARRY FINCH, ET AL. v. LVNV FUNDING LLC
• Court: Court of Special Appeals of Maryland

LARRY FINCH, ET AL.

v.LVNV FUNDING LLC

No. 704

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2012

Filed: June 28, 2013

REPORTED

Woodward,

Berger,

Davis, Arrie W.

(Retired, Specially Assigned),

JJ.

Opinion by Berger, J.

This case arises out of an action filed in the Circuit Court for Baltimore City by co-appellants Larry Finch ("Finch") and Kurt A. Dorsey ("Dorsey") (collectively, "appellants"), against appellee, LVNV Funding, LLC ("LVNV"). In 2008, LVNV filed debt collection suits against Finch and Dorsey in the District Court for Baltimore City. Default judgments were entered against each appellant. Appellants thereafter filed a class action in the circuit court, alleging that LVNV was not licensed as a collection agency, as required by Maryland law, when it obtained the underlying district court judgments. Appellants sought to represent a class comprised of all persons against whom LVNV had obtained a judgment for an alleged debt in Maryland state courts during the period of time in which LVNV was unlicensed. The class action complaint asserted five claims. Appellants sought declaratory and injunctive relief, damages for unjust enrichment, and damages for alleged violations of the Maryland Consumer Debt Collection Practices Act and the Maryland Consumer Protection Act. The circuit court dismissed appellants' complaint on the basis that it constituted an impermissible collateral attack on the district court judgments. This appeal followed.

Appellants present three questions for review, which we have combined and rephrased as follows:

1. Whether the judgments entered in favor of LVNV in the district court are void because LVNV was not licensed as a collection agency when it filed the actions as required under Maryland law.

2. Whether a party may collaterally attack a judgment entered in favor of an unlicensed collection agency.

For the reasons set forth below, we reverse the decision of the Circuit Court for Baltimore City.

FACTUAL AND PROCEDURAL BACKGROUND

Finch and Dorsey are consumers who accumulated credit card debts. LVNV acquired appellants' unpaid debts by assignment. In 2008, LVNV filed collection suits against Finch and Dorsey in the District Court of Maryland for Baltimore City. Both Finch and Dorsey were served, and neither contested LVNV's claims. The district court entered a default judgment against Finch on July 31, 2009 in the amount of $3,621.67. In 2011, LVNV obtained a writ of garnishment against Finch's earnings. The district court also entered a default judgment against Dorsey on April 8, 2009 in the amount of $5,838.95.

Appellants filed a putative class action in the circuit court on November 11, 2009. Appellants sought to represent a class comprised of:

Those persons sued by LVNV in Maryland state courts from October 30, 2007 through February 17, 2010 against whom LVNV obtained a judgment for an alleged debt, interest or costs, including attorneys fees in its favor in an attempt to collect a consumer debt.

In their complaint, appellants alleged that LVNV engaged in illegal collection of debts because LVNV was not licensed as a collection agency in Maryland, as required by the Maryland Collection Agency Licensing Act ("MCALA"), Md. Code Ann., Bus. Reg. § 7-301. The complaint further alleged that LVNV's unlicensed collection activities violated the Maryland Consumer Debt Collection Act ("MCDCA"), Md. Code Ann., Com. Law§§ 14-201 to 14-204, and the Maryland Consumer Protection Act ("MCPA"), Md. Code Ann., Com. Law § 13-3-1. Finally, the complaint alleged that the judgments against Finch and Dorsey were obtained based upon affidavits that were irregular in certain respects.

The appellants' complaint asserted five causes of action. In the first three counts, appellants sought a declaratory judgment and injunctive relief, both individually and as a class, based on LVNV's unlawful activities as an unlicensed collection agency. In Count IV, appellants alleged unjust enrichment and sought to recover from LVNV "all judgment sums, costs, and pre- and post-judgment interest it has collected . . . ." In Count V, appellants asserted individual and class claims for damages under the MCDCA and the MCPA.

LVNV filed a motion to dismiss appellants' circuit court complaint on the basis that it constituted an impermissible collateral attack on the existing district court judgments. After holding a hearing, the circuit court dismissed appellants' complaint, explaining that "[a]ll of [appellants]' claims are barred as an impermissible attempt to mount a collateral attack on the judgments entered by the District Court of Maryland for Baltimore City." The circuit court elaborated that "if [appellants] wish to try to reopen those cases . . . they must do so in the District Court, the only court that even possibly has revisory power over those judgments." Appellants moved to alter, amend, or revise the order of dismissal. The circuit court denied the motion. This timely appeal followed.

STANDARD OF REVIEW

The standard of review of a grant of a motion to dismiss is de novo. Reichs Ford Road Joint Venture v. State Roads Com'n of the State Highway Admin., 388 Md. 500, 509 (2005). The Court of Appeals has explained:

On appeal from a dismissal for failure to state a claim [the Court] must assume the truth of, and view in a light most favorable to the non-moving party, all well-pleaded facts and allegations contained in the complaint, as well as all inferences that may be reasonably drawn from them, and order of dismissal only if the allegations and permissible inferences, if true, would not afford relief to the plaintiff, i.e., the allegations do not state a cause of action for which relief may be granted.

Shailendra Kumar, P.A. v. Dhana, 426 Md. 185, 192 (2012).

DISCUSSION

Appellants argue that the circuit court erred by dismissing appellants' claims as an impermissible collateral attack on the district court judgments. In support, appellants contend that the district court judgments are void because LVNV was not licensed as a collection agency in Maryland when it filed the district court actions against Dorsey, Finch, and other class members. Appellants posit that the collateral attack doctrine does not apply because the district court judgments are void. LVNV asserts that the district court judgments are valid, and, therefore, the circuit court properly dismissed appellants' action as an impermissible collateral attack. We hold that judgments entered in favor of an unlicensed collection agency are void. We further hold that the collateral attack doctrine does not apply to void judgments. Accordingly, the circuit court erred by dismissing appellants' complaint.

I. THE VALIDITY OF DISTRICT COURT JUDGMENTS

We first consider whether the district court judgments are void, as urged by appellants. It appears from the record that the circuit court did not expressly consider the validity of the judgments. Rather, the circuit court analyzed whether, among other things, the request for a declaration that the judgments are void constitutes an impermissible collateral attack. In our view, the requisite analysis first requires a determination as to whether the underlying judgments are void, and only then can we consider the implications of the collateral attack doctrine. To be sure, "a void judgment is subject to attack either directly by appeal or collaterally . . . . It does not constitute res judicata." State v. Ambrose, 191 Md. 353, 369, (1948).¹ See also Green v. Ford Motor Credit Co., 152 Md. App. 32, 52 (2003) (first deciding whether district court judgments were void, and then holding that circuit court action was barred because it constituted an impermissible collateral attack on a valid district court judgment).

A. Void Judgments

Our analysis must necessarily begin by examining the distinction between a void and voidable judgment. A void judgment "is a mere nullity, which [is] disregarded entirely, and could [be] attacked collaterally, and . . . could [be] discharged by any other court of competent jurisdiction . . . ." Smith v. State, 240 Md. 464, 474 (1965). A voidable judgment"is not a mere nullity, but only liable to be avoided by a direct attack and the taking of proper steps to have its invalidity declared. Until annulled, it has all the ordinary consequences of a legal judgment." Id.

Judgments are void as a matter of law in various circumstances. For example, a judgment is void if it was obtained by a "non-lawyer" through the unauthorized practice of law.² Turkey Point Prop. Owners' Ass'n, Inc. v. Anderson, 106 Md. App. 710 (1995). Similarly, a judgment is void in proceedings where a corporation was not represented by a lawyer.³ Id. A complaint filed in the name of a corporation that has forfeited its corporate charter is a nullity. Stein v. Smith, 358 Md. 670 (2000).

In Turkey Point, we held that a non-lawyer's representation of an association rendered the complaint, and the trial proceedings, a nullity. Id. at 718-20. In so holding, we adopted the rationale of other jurisdictions, which have held that:

Proceedings in a suit by a person not entitled to practice [law] are a nullity . . . . If the cause has proceeded to judgment, the judgment is void . . . .

Turkey Point Prop. Owners' Ass'n, Inc., 106 Md. App. at 718. We explained that this "drastic remedy" was called for by "[t]he totality of the circumstances, including the longhistory of rules and legislation aimed at preventing the practice of law by nonlawyers[.]" Id. at 719.

In Stein, the Court of Appeals held that a complaint filed in the name of a corporation that had forfeited its corporate charter was a nullity. Stein, 358 Md. at 675. The Stein Court explained that, "[o]ne of the powers of [the company] that became 'inoperative, null, and void' upon forfeiture of its charter was the power to sue." Id. at 675 (citing the Maryland Code provisions governing corporate charters). The Court further observed that:

There is [] a strong analogy between the problem in the

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