Old Republic Ins. Co. v. Gordon
| Decision Date | 27 April 2016 |
| Docket Number | No. 1020, Sept. Term, 2014.,1020, Sept. Term, 2014. |
| Citation | 228 Md.App. 1,137 A.3d 237 |
| Parties | OLD REPUBLIC INSURANCE COMPANY v. Nancy GORDON. |
| Court | Court of Special Appeals of Maryland |
John T. Prisbe & Nathaniel S. Berry (Venable, LLP, on the brief) Baltimore, MD, for appellant.
Phillip Robinson (Jesse Iliff, Consumer Law Ctr., LLC, Silver Spring, MD and Scott Borison, Legg Law Firm, LLP, San Mateo, CA), all on the brief, for appellee.
Panel: GRAEFF, KEHOE, and NAZARIAN, JJ.
GRAEFF
, J.
, cert. denied, 435 Md. 266, 77 A.3d 1084 (2013), this Court held that judgments obtained by collections agencies that do not have a license are void. In this case, we must determine whether Old Republic Insurance Company (“Old Republic”), appellant, is a collection agency pursuant to Md.Code (2010 Repl.Vol.) § 7–101(c) of the Business Regulation Article (“BR”), part of the Maryland Collection Agency Licensing Act (“MCALA”), and therefore, was required to be licensed as a collection agency to pursue this action against Nancy Gordon, appellee.
Old Republic is an insurance company that offers, among other things, credit insurance.1 In December 2006, Old Republic issued a credit insurance policy to Countrywide Home Loans (“Countrywide”) to insure a mortgage that Countrywide had extended to Ms. Gordon. Ms. Gordon defaulted on her mortgage, and Old Republic paid Countrywide pursuant to the insurance policy.
Old Republic filed suit in the Circuit Court for Baltimore County against Ms. Gordon, seeking the unpaid amount of her debt. It subsequently moved for summary judgment. Ms. Gordon opposed Old Republic's motion, arguing that she was entitled to summary judgment because Old Republic was an unlicensed collection agency, and therefore, it could not obtain a judgment against her. After a hearing, the circuit court found, as a matter of law, that Old Republic was engaged in collection activity, and it granted Ms. Gordon's motion for summary judgment.
On appeal, Old Republic raises three questions for our review, which we have rephrased slightly, as follows:
1. Did the circuit court err in its construction of the phrase “collection agency” under BR § 7–101(c)
?
2. Did the circuit court err in granting an oral summary judgment request?
3. Did the circuit court err in dismissing the case with prejudice?
For the reasons set forth below, we answer the first question in the affirmative, and therefore, we shall reverse the judgment of the circuit court and remand for further proceedings.2
On July 28, 2005, Ms. Gordon purchased a property in Parkville, Maryland for $589,700. On October 26, 2006, Countrywide extended a loan to Ms. Gordon in the amount of $95,000, secured by a deed of trust in the property.
Old Republic states, and Ms. Gordon does not dispute, that Old Republic issued a credit insurance policy to Countrywide in December 2006, “providing insurance coverage for loss if a qualified loan held by Countrywide defaulted.” Although the insurance contract is not a part of the record on appeal, Old Republic stated in its motion to vacate, alter, or amend, or for other appropriate relief, and Ms. Gordon has not disputed, that the policy set forth subrogation rights, as follows:
In the event of any payment under this Policy, the Company [i.e., Old Republic] shall be subrogated to all of the Assured's [i.e., Countrywide] rights of recovery against the Borrower and any other person or organization liable under the terms of the defaulted Note and against any reserve or holdback funds in its hands, and the Assured shall execute and deliver at the request of the Company instruments and papers and do whatever else is necessary to transfer, assign and secure such rights. The Assured shall do nothing after Loss to prejudice such rights, and the execution by the Assured of a release or waiver of the right to collect the unpaid balance of a Loan shall equally release the Company from any further obligation under this Policy as to said Loan, anything in this Policy to the contrary notwithstanding.
On or around February 1, 2011, Ms. Gordon defaulted on her loan, and Countrywide submitted a claim to Old Republic.
At the time of default, $70,481.19 remained unpaid on the loan. Old Republic determined that the claim was covered and paid it. Old Republic then began to pursue repayment from Ms. Gordon.
On February 29, 2012, after negotiations with Ms. Gordon, Old Republic agreed to release the deed of trust in exchange for a payment of $9,000 and Ms. Gordon's acknowledgment that she still owed $85,541.62 on the loan, minus the $9,000 she paid. By October 2013, Old Republic had received no further payment from Ms. Gordon. It then filed a complaint for money due on accounts stated. Old Republic sought $70,481.19, as well as pre-judgment interest of $10,572 and attorney's fees of $10,572.18, plus costs. Old Republic also filed a motion for summary judgment on the ground that Ms. Gordon had no defense to the claim.
Ms. Gordon filed an answer and an opposition to the motion for summary judgment. She asserted that the collection attempt was illegal because Old Republic acquired the alleged debt when it was in default, and therefore, Old Republic was acting as a “collection agency” under BR § 7–101(c)
, but Old Republic was not licensed as a collection agency.3 Relying on Finch, 212 Md.App. at 764, 71 A.3d 193, in which this Court held that “a judgment entered in favor of an unlicensed debt collector constitutes a void judgment as a matter of law,” Ms. Gordon argued that Old Republic was not entitled to summary judgment against her because any judgment it obtained would be void. She requested that the circuit court enter judgment against Old Republic because it was not entitled to the relief it sought.
The circuit court directed Old Republic to file a reply, not to exceed five pages and limited to the argument that it was not authorized to bring the complaint because it was not licensed as a collection agency. Old Republic did so, asserting that it was not required to be licensed under MCALA because it did not engage in debt collection, but rather, it was licensed in the State of Maryland to conduct insurance business. It argued that it was pursuing the subrogation rights it obtained after paying Countrywide pursuant to its insurance policy, and therefore, it did not “acquire” Ms. Gordon's debt at a time when she was in default, but rather, it “stepped into the shoes” of Countrywide and enjoyed “the same rights that [Countrywide] enjoyed prior to filing its claim.” Moreover, Old Republic stated that it did not engage in the debt collection agency business, noting that it did not undertake debt collection for third parties or purchase defaulted debts from third parties for the purpose of collection. Citing MCALA's legislative history, it asserted that BR § 7–301(c)(1)(ii)
was targeted at “ ‘debt purchasers,’ a special subset of entities,” which did not include insurance companies pursuing subrogation rights. Consequently, it argued that it was not a collection agency, and it was permitted to obtain a judgment against Ms. Gordon.
Ms. Gordon disagreed, asserting that Old Republic was requesting the circuit court to “create a judicial exception for it that does not exist under the statute or common law.” Stating that MCALA governs businesses attempting to assert a consumer claim “if the claim was in default when the person acquired it,” Ms. Gordon asserted that, because Old Republic acquired this debt when it was in default and was trying to collect it, Old Republic was required to be licensed under MCALA, regardless of its status as an insurance company.
On March 6, 2014, the circuit court held a hearing on Old Republic's motion. Counsel for Old Republic listed three reasons why Old Republic should not be required to be licensed in this matter. First, Old Republic was an insurance company and did not do business as a collection agency. Second, MCALA was targeted toward debt purchasers, not insurance companies pursuing subrogation rights, and Old Republic did not purchase the debt at issue in this case. Third, Old Republic's rights vested prior to Ms. Gordon's default, as it was essentially stepping into Countrywide's shoes as Ms. Gordon's creditor. It argued that, because MCALA was not targeted toward a party in Old Republic's position, Old Republic did not qualify as a collection agency under BR § 7–101
, and it did not need to be licensed as such.
Counsel for Ms. Gordon argued that Old Republic acquired its interest in Ms. Gordon's debt when it was in default, and it was now pursuing a consumer claim against her. Accordingly, counsel asserted that, pursuant to the plain language of BR § 7–101
, Old Republic was acting as a collection agency. He argued that, because any judgment obtained by Old Republic, an unlicensed collection agency, would be void, Ms. Gordon was entitled to judgment in her favor.
Counsel for Ms. Gordon also noted that BR § 7–102
contains a list of persons and entities to whom MCALA is inapplicable, and insurance companies pursuing subrogation rights are not listed. He argued that this list would be essentially meaningless if the court carved out a new exception for Old Republic.
At the end of the hearing, counsel for Old Republic stated that, because the parties had been limited to five pages of argument on the issue of interpreting MCALA, it believed that the parties could “flesh out” the record more substantially with further submissions, particularly with regard to MCALA's legislative history. The court responded: “If you want to supplement the record, I am going to permit you to do that.” The court took the parties' motions for summary judgment under advisement and indicated that it would issue a written opinion at an unspecified later date.
On March 18, 2014, the circuit court issued a memorandum opinion. The court stated that there were no facts in dispute,...
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