Kemp v. Nationstar Mortgage , 248 Md. App. 1 ( 2020 )

Donna Kemp v. Seterus Inc., et al., No. 2652, September Term 2018.
Opinion by Nazarian, J.
BANKING – MORTGAGE LENDING – ASSESSMENT OF FEES
Section 12-121 of the Commercial Law Article, which prohibits a “lender” from imposing
a property inspection fee “in connection with a loan secured by residential property,”
applies to assignees of the loan and servicers as well as the original maker of the loan and
prohibits them from charging property inspection fees to borrowers.
Circuit Court for Montgomery County
Case No. 441428V
REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 2652
September Term, 2018
______________________________________
DONNA KEMP
v.
NATIONSTAR MORTGAGE ASSOCIATION
D/B/A MR. COOPER, AS SUCCESSOR BY
MERGER TO SETERUS, INC., ET AL.
______________________________________
Fader, C.J.,
Nazarian,
Kenney, James A. III
(Senior Judge, Specially Assigned),
JJ.
______________________________________
Opinion by Nazarian, J.
______________________________________
Filed: October 1, 2020
Pursuant to Maryland Uniform Electronic Legal
Materials Act
(§§ 10-1601 et seq. of the State Government Article) this document is authentic.
2020-10-22 08:37-04:00
Suzanne C. Johnson, Clerk
Donna Kemp obtained a mortgage loan from Countrywide Home Loans, Inc.,
(“Countrywide”) that later was assigned to the Federal National Mortgage Association
(“Fannie Mae”). In 2017, Ms. Kemp fell behind on her payments and the loan servicer,
Seterus, Inc. (“Seterus”),1 declared the loan in default. Ms. Kemp exchanged
correspondence with Seterus and, among other things, learned that Seterus had charged her
$180 for twelve property inspections that it ordered after she defaulted. In November 2017,
Seterus offered (on Fannie Mae’s behalf) and Ms. Kemp accepted a loan modification, and
some or all of the property inspection fees were rolled into the balance of the loan.
In December 2017, Ms. Kemp filed suit against Fannie Mae and Seterus on behalf
of herself and a class. She alleged that Section 12-121 of the Commercial Law Article
(“CL”),2 which prohibits a “lender” from imposing a property inspection fee “in connection
with a loan secured by residential property,” barred Seterus from charging property
inspection fees. The Second Amended Complaint (the “Complaint”) asserts five state law
counts, all derived to one degree or another from Seterus’s alleged violation of CL § 12-
121: (1) a claim for statutory damages under CL § 12-114; (2) a claim for declaratory
judgment and injunctive relief; (3) a common law claim for unjust enrichment;
1
Fannie Mae and Nationstar Mortgage LLC d/b/a Mr. Cooper (“Nationstar”) are the
current named appellees in this case. Seterus merged with, and into, Nationstar effective
February 28, 2019. Ms. Kemp’s allegations relate to actions taken by Seterus before the
merger. In June 2019, Nationstar was substituted by Seterus as a party, and the briefs were
filed thereafter. Accordingly, we use “Seterus” when referring to the actions underlying
Ms. Kemp’s allegations and “Nationstar” when we discuss the arguments made by the
parties in their briefs.
2
Unless otherwise indicated, all citations are to the current volume of the Commercial Law
Article, Md. Code (1975, 2013 Repl. Vol., 2019 Supp.).
(4) violations of the Maryland Consumer Debt Collection Practices Act (“MCDCA”),
CL §§ 14-201 et seq., and a derivative claim under the Maryland Consumer Protection Act
(“MCPA”), CL § 13-301(14); and (5) a claim based on violations of the Maryland
Mortgage Fraud Protection Act (“MMFPA”), §§ 7-401 et seq of the Real Property Article
(“RP”).
At all relevant times, the applicable statute defined a “lender” as a person who
“makes” loans. Md. Code (1975, 2013 Repl. Vol.), CL § 12-101(f). Fannie Mae and
Seterus moved to dismiss, contending that they aren’t “lenders” and that CL § 12-121
doesn’t preclude them from charging inspection fees. The circuit court agreed and
dismissed the Complaint primarily on that ground. We agree with Ms. Kemp that Fannie
Mae and Seterus’s construction would defeat the broader statutory purpose and lead to
absurd results, and we hold that CL § 12-121 applies to assignees. In addition, we (1) hold
that the circuit court erred in finding that Seterus waived or paid the property inspection
fees in the course of modifying Ms. Kemp’s loan; (2) affirm the dismissal of the MCDCA
and derivative MCPA claims; (3) hold that Ms. Kemp did not preserve her argument that
the Complaint supports a standalone MCPA claim; and (4) hold that Ms. Kemp waived her
challenge to the circuit court’s conclusion that the Complaint failed to state her MMFPA
claim with particularity. All told, we reverse in part, affirm in part, and remand to the circuit
court for further proceedings consistent with this opinion.
I. BACKGROUND
Because this case was decided on a motion to dismiss, we take the well-pleaded
allegations as true for purposes of our analysis, and we recount them here as alleged.
2
When Ms. Kemp bought her home in Glen Burnie in April 2007, she obtained a loan
from Countrywide. At some point after closing, the loan was assigned to Fannie Mae.
Fannie Mae conducts its business by “routinely acquir[ing] loans from others who extend
on its behalf and in accordance with its guidelines” and “publish[ing] forms, guidelines,
and more for persons to use when arranging sales of loans to Fannie Mae . . . .” The Deed
of Trust she signed was “the standard and uniform Fannie Mae Deed of Trust . . . .”
In 2017, Ms. Kemp fell behind on her payments. Seterus, which serviced the loan
on behalf of Fannie Mae at all relevant times, declared the loan in default in April of that
year. Ms. Kemp wrote to Seterus on or about July 14, 2017 and asked for more information
about her loan. Seterus responded on or about July 24, 2017 and, among other things,
informed her that “property preservation charges” had been assessed between August 26,
2016 and July 24, 2017. In another letter dated July 20, 2017, Seterus offered Ms. Kemp a
trial plan for a loan modification that required Ms. Kemp to make three payments on
September 1, October 1, and November 1. Ms. Kemp accepted the trial plan and made
those payments.
Ms. Kemp wrote to Seterus again on September 6, 2017 requesting additional
information, including information about the property preservation charges. In a September
25, 2017 letter, Seterus represented that she owed $180 in property inspection fees that
would be included as part of a “‘payoff total.’” In a September 26, 2017 letter, Seterus
again represented that it had charged Ms. Kemp $180 for twelve property inspections
conducted after Ms. Kemp’s default. Seterus averred that the inspections were “drive-by
Inspections to see if the property was occupied and in good repair” and were authorized by
3
the Deed of Trust, which states that the lender may charge fees to the borrower for services
including “property inspection” “performed in connection with” the borrower’s default.
The Deed of Trust also prohibits the lender from charging fees prohibited by law:
Lender may charge Borrower fees for services performed
in connection with Borrower’s default, for the purpose of
protecting Lender’s interest in the Property and rights under
this Security Instrument, including, but not limited to,
attorneys’ fees, property inspection and valuation fees. In
regard to any other fees, the absence of express authority in this
Security Instrument to charge a specific fee to Borrower shall
not be construed as a prohibition on the charging of such fee.
Lender may not charge fees that are expressly prohibited
by this Security Instrument or by Applicable Law.
(emphasis added).
In November 2017, Seterus, on behalf of Fannie Mae, offered Ms. Kemp a loan
modification. She accepted the offer and made the modified mortgage payments. She
alleges that the property inspection fees were added to the loan balance; she has paid some
of the property inspection fees to Seterus through her payments during the trial period and
after the loan modification but hasn’t paid them in full because they were capitalized to her
mortgage account, and the loan is not yet paid off.
In December 2017, Ms. Kemp filed this putative class action, which included a
claim under the federal Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. The defendants
removed the case to the United States District Court for the District of Maryland. In June
2018, the U.S. District Court granted the defendants’ motion to dismiss the federal claim
and remanded the action to state court.
In July 2018, the defendants moved to dismiss the remaining claims, and the circuit
4
court heard oral argument on September 13, 2018. The court granted the defendants’
motion to dismiss with prejudice in a memorandum opinion and order dated October 12,
2018. Ms. Kemp appealed. The issues are altogether legal, and we’ll address them and any
additional facts below.
II. DISCUSSION
Ms. Kemp raises three Questions Presented, but they all boil down to whether the
circuit court erred in dismissing the case.3 The operative Complaint contained five counts
3
Ms. Kemp states the Questions Presented as follows:
1. Did the circuit court err in dismissing the action in
contradiction to the precedent of Taylor and the persuasive
authority of the CPD and OCFR?
2. Did the circuit court err in concluding that a mortgage
assignee acquires greater rights in mortgage contracts than
their assignor had to give them?
3. Did the circuit court err in making an unsupported finding
of fact at the motion to dismiss stage?
Seterus states the Questions Presented as follows:
1. Whether the Circuit Court properly found that MCL 12-121
did not apply to Seterus and Fannie Mae, when that statute only
applies to “lenders,” as defined by MCL 12-101(f), and neither
Seterus nor Fannie Mae were “lenders” under the statutory
definition?
2. Whether the Circuit Court properly dismissed the Second
Amended Complaint with prejudice because Kemp failed to
state a valid claim for relief against Seterus or Fannie Mae?
3. Whether Nationstar, as successor by merger to Seterus, is
judicially estopped from arguing that the Circuit Court
properly found that Seterus was not subject to MCL 12-121,
because Nationstar did not dispute its status as a “lender” who
was subject to MCL 12-121 when it reached a settlement with
the CPD in May 2018, when Seterus did not merge with
Nationstar until February 2019, over four months after the
5
asserting state law claims, all of which depend on whether the prohibition in CL § 12-121
against property inspection fees applies to Seterus (a loan servicer) or Fannie Mae (the
assignee of the mortgage):
• A claim against Fannie Mae and Seterus under CL § 12-121, on behalf of
Ms. Kemp individually and a class, including a request for statutory damages
under CL § 12-114(b), which provides for the forfeiture of the greater of
three times the amount collected or $500 (Count IV);
• A request for declaratory judgment that, under CL § 12-121, Fannie Mae and
Seterus “are not entitled to charge and/or collect lender’s inspection fees in
connection with the loans of the State Law Class members and [Ms. Kemp]
which are secured by residential real property,” including a request that
Fannie Mae and Seterus be enjoined from doing so and a request that Seterus
“disgorge all inspection costs and fees it has collected” from Ms. Kemp or
the class members (Count I);
• An unjust enrichment claim against Seterus alleging that Seterus “knowingly
and willfully” demanded and received benefits in the form of property
inspection fees that were prohibited by CL § 12-121 (Count II);
• A claim against Seterus for violation of the Maryland Consumer Debt
Collection Practices Act, CL §§ 14-201 et seq. (“MCDCA”) and a derivative
claim under the Maryland Consumer Protection Act, CL §§ 13-301 et seq.
(“MCPA”), based on Seterus’s communications and correspondence with
Ms. Kemp and class members in attempting to collect lender’s inspection
fees that were prohibited by CL § 12-121 (Count III); and
• A claim against Seterus under the Maryland Mortgage Fraud Protection Act
(Md. Code, §§ 7-401 et seq. of the Real Property Article (“RP”))
(“MMFPA”) based on Seterus’s assertions that property inspection fees were
legal under Maryland law, when they were prohibited by CL § 12-121.
(Count V).
In reviewing a circuit court’s decision on a motion to dismiss, our task is to
“determine whether the court was legally correct.” RRC Ne., LLC v. BAA Md., Inc., 413
Circuit Court found that Seterus was not subject to MCL 12-
121, and over ten months after Nationstar’s settlement with the
CPD, and none of the requisite elements of judicial estoppel
are present?
6
Md. 638, 644 (2010). “[W]e assume the truth of all well-pleaded facts in the complaint and
reasonable inferences drawn therefrom,” and we “consider those facts and inferences in the
light most favorable” to the non-moving party, in this case Ms. Kemp. Samuels v.
Tschechtelin, 135 Md. App. 483, 515 (2000); see RRC Ne., 413 Md. at 643. And we
“determine whether the complaint, on its face, discloses a legally sufficient cause of
action.” Schisler v. State, 177 Md. App. 731, 743 (2007) (citations omitted).
The outcome of this appeal depends in large part on the interpretation of a statute, a
question of law that we review de novo. Johnson v. State, 467 Md. 362, 371 (2020). “The
cardinal rule of statutory interpretation is to ascertain and effectuate the real and actual
intent of the Legislature.” State v. Bey, 452 Md. 255, 265 (2017) (quoting State v. Johnson,
415 Md. 413, 421–22 (2010)). We “provide[] judicial deference to the policy decisions
enacted into law by the General Assembly,” and “[w]e assume that the legislature’s intent
is expressed in the statutory language and thus our statutory interpretation focuses
primarily on the language of the statute to determine the purpose and intent of the General
Assembly.” Blackstone v. Sharma, 461 Md. 87, 113 (2018) (quoting Phillips v. State, 451
Md. 180, 196 (2017)). To that end, “we begin ‘with the plain language of the statute, and
ordinary, popular understanding of the English language dictates interpretation of its
terminology.’” Id. (quoting Schreyer v. Chaplain, 416 Md. 94, 101 (2010)). And “[a]bsent
ambiguity in the text of the statute, ‘it is our duty to interpret the law as written and apply
its plain meaning to the facts before us.’” Johnson, 467 Md. at 373 (quoting In re S.K., 466
Md. 31, 54 (2019)).
But we “do not read statutory language in a vacuum, nor do we confine strictly our
7
interpretation of a statute’s plain language to the isolated section alone.” Johnson, 467 Md.
at 372 (quoting Wash. Gas Light Co. v. Md. Pub. Serv. Comm’n, 460 Md. 667, 685 (2018)).
We view the plain language “within the context of the statutory scheme to which it belongs,
considering the purpose, aim or policy of the Legislature in enacting the statute.” Johnson,
467 Md. at 113 (quoting State v. Johnson, 415 Md. at 421). In other words, we read the
statute as a coherent whole:
We presume that the Legislature intends its enactments to
operate together as a consistent and harmonious body of law,
and, thus, we seek to reconcile and harmonize the parts of a
statute, to the extent possible consistent with the statute’s
object and scope.
Johnson v. State, 467 Md. at 372 (quoting State v. Johnson, 415 Md. at 421–22).
In addition, “[o]ur search for legislative intent contemplates ‘the consequences
resulting from one construction rather than another.’” Johnson, 467 Md. at 372 (quoting
Blaine v. Blaine, 336 Md. 49, 69 (1994)). We avoid interpretations that lead to illogical or
absurd results, even where the legislation at issue is not necessarily identified as
ambiguous. See Goshen Run Homeowners Assoc., Inc. v. Cisneros, 467 Md. 74, 109 (2020)
(“When interpreting the language in a statute, our interpretation ‘must be reasonable, not
absurd, illogical, or incompatible with common sense.’”) (cleaned up). And we fulfill these
principles by considering and analyzing three factors:
[I]ssue[s] of statutory construction [are] resolvable on the basis
of judicial consideration of three general factors: 1) text; 2)
purpose; and 3) consequences. Text is the plain language of the
relevant provision, typically given its ordinary meaning,
Breslin v. Powell, 421 Md. 266, 286 (2011), viewed in context,
Kaczorowski v. City of Baltimore, 309 Md. 505, 514 (1987),
considered in light of the whole statute, In re Stephen K., 289
8
Md. 294, 298 (1981), and generally evaluated for ambiguity.
Kaczorowski, 309 Md. at 513. Legislative purpose, either
apparent from the text or gathered from external sources, often
informs, if not controls, our reading of the statute.
Kaczorowski, 309 Md. at 515. An examination of interpretive
consequences, either as a comparison of the results of each
proffered construction, Christian v. State, 62 Md. App. 296,
303 (1985), or as a principle of avoidance of an absurd or
unreasonable reading, Kaczorowski, 309 Md. at 513, 516,
grounds the court’s interpretation in reality.
Town of Oxford v. Koste, 204 Md. App. 578, 585–86 (2012).
A. The Usury Statute Prohibits The Imposition Of Property Inspection
Fees And Applies To Assignees.
1. The Usury Statute
Title 12 of the Commercial Law Article contains numerous consumer protection
laws relating to loans and credit. Title 12 covers a lot of ground not relevant to this case,
and we won’t attempt to treat it comprehensively. By way of example, though, Subtitle 4
(CL §§ 12-401 et seq.), the Secondary Mortgage Loan Law (“SMLL”), defines the interest
and fees that may be charged in association with a second mortgage. Thompkins v.
Mountaineer Invs, LLC, 439 Md. 118, 123–24 (2014) (“The SMLL is a consumer
protection measure that was designed to incorporate, complement, and prevent
circumvention of the usury laws by limiting the interest, fees, and other charges that a
lender could collect from a borrower as part of a second mortgage loan on a residential
property.”). Subtitle 3 (CL §§ 12-301 et seq.), the Maryland Consumer Loan Law
(“MCLL”), governs small consumer loans and is “part of a statutory scheme that, like the
SMLL, governs licensing, the amount of a loan, misleading advertising, discrimination,
maximum interest rates, permissible fees, attorney’s fees, and lender’s disclosure
9
duties . . . .” Price v. Murdy, 462 Md. 145, 156 (2018). Other Subtitles cover small loans
(Subtitle 2), retail credit accounts (Subtitle 5), credit grantor revolving credit provisions
(Subtitle 9), and credit grantor closed end credit provisions (Subtitle 10).
The part relevant to this case is Subtitle 1, which we’ll call the “Usury Statute.” Its
core provision limits, with some exceptions, the maximum allowable interest rate to six
percent per year:
Except as otherwise provided by law, a person may not charge
interest in excess of an effective rate of simple interest of
6 percent per annum on the unpaid principal balance of a loan.
CL § 12-102. That provision was codified as part of the Commercial Law Article in 1975,
without any substantive change from the first clause of former Art. 49 § 3 (1975 Md. Laws
380–81), and it has not been amended since. Exceptions to CL § 12-102’s six percent
maximum rate are set forth in CL § 12-103 and have been amended numerous times over
the years. For example, subsection (b) applies to residential mortgages, which at the time
that section was codified in 1975, could not exceed 10%. 1975 Md. Laws 382. The current
version of CL § 12-103(b) has no maximum allowable rate for residential mortgages so
long as certain conditions are met.
Subtitle 1 contains other restrictions beyond limits on interest rates:
• CL § 12-108 provides that a “lender”4 may not charge a borrower a point or
4
At all times relevant to this case, and as we’ll explain in greater detail below, “lender”
was defined in the general definitions for Subtitle 1 simply as “a person who makes a loan
subject to this subtitle.” Md. Code (1975, 2013 Repl. Vol.), CL § 12-101(f). As of January
1, 2019, a “[l]ender” is “a licensee or a person who makes a loan under this subtitle.” CL
§ 12-101(f); 2018 Md. Laws 346, 4065–66. A “licensee” is “a person that is required to be
licensed to make loans subject to [Subtitle 1], regardless of whether the person is actually
licensed. CL § 12-101(g).
10
a fraction of a point, with some exceptions.
• CL § 12-109 requires a “lending institution”5 that “creates or is the assignee
of” an escrow account for certain first mortgages to pay interest to the
borrower on the funds in the escrow account.
• CL § 12-109.2 prohibits a “lender and an assignee of a lender” from
collecting “a collection fee or service charge on the maintenance of an escrow
account on a first mortgage.” CL § 12-109.2(a)(3).
• CL § 12-113 prohibits a “lender” from refusing to lend money to any person
solely because of “[g]eographic area or neighborhood” or “[r]ace, creed,
color, age, sex, marital status, handicap, or national origin.”
• CL § 12-124(2) and (3) prohibit a “lender” from requiring a borrower, “as a
condition to receiving or maintaining a loan” secured by a first mortgage, to
purchase property and flood insurance coverage against risks to
improvements in an amount that would exceed the replacement cost of the
improvements.
• CL § 12-125 requires a “lender6 who offers to make or procure a loan secured
by” certain first mortgages to provide the borrower with a financing
agreement.
• CL § 12-126 allows a borrower to prepay all or part of a mortgage on the
borrower’s primary residence, unless otherwise provided in the loan contract.
CL § 12-126(a), (b). It further requires the “lender” to refund the borrower
the unearned portion of the precomputed interest charge. CL § 12-126(c).
Subtitle 1 also includes the limitation at issue in this case, CL § 12-121, which
prohibits (with exceptions not applicable here) a “lender” from imposing an inspection fee
“in connection with” a residential mortgage:
(a) In this section, the term “lender’s inspection fee” means a
fee imposed by a lender to pay for a visual inspection of real
property.
5
“Lending institution” is defined in CL § 12-109(a)(3) as “a bank, savings bank, or savings
and loan association doing business in Maryland.”
6
For the purposes of CL § 12-125 only, “lender” is defined as “a person subject to the
licensing requirements of Title 11, Subtitle 5 of the Financial Institutions Article” and
“does not include a person exempt from licensure under § 11-502 of the Financial
Institutions Article.” CL § 12-125(a)(5)(i), (ii).
11
(b) Except as provided in subsection (c) of this section, a lender
may not impose a lender’s inspection fee in connection with a
loan secured by residential real property.
(c) A lender’s inspection fee may be charged if the inspection
is needed to ascertain completion of:
(1) Construction of a new home; or
(2) Repairs, alterations, or other work required by the
lender.
(d) This section does not apply to an appraisal of the value of
real property by a lender or to fees imposed in connection with
an appraisal.
Finally, Subtitle 1 provides for both civil and criminal enforcement. Although there
is no express authorization for civil claims, CL § 12-111(b) does establish a statute of
limitations for a private action for “usury” at six months after the loan is satisfied:
A private action for usury under this subtitle may not be
brought more than 6 months after the loan is satisfied.
“Usury” is defined broadly as charging an amount in “interest” greater than what Subtitle 1
permits:
“Usury” means the charging of interest by a lender in an
amount which is greater than that allowed by this subtitle.
CL § 12-101(m). And “interest” likewise is broadly defined as including not only the
interest charged on a loan, but also other fees and charges:
“Interest” means, except as specifically provided in § 12-105
of this subtitle, any compensation directly or indirectly
imposed by a lender for the extension of credit for the use or
forebearance of money, including any loan fee, origination fee,
service and carrying charge, investigator’s fee, time-price
differential, and any amount payable as a discount or point or
otherwise payable for services.
CL § 12-101(e).
12
Subsection (b) of CL § 12-112 impliedly allows a private claim against assignees,
endorsees, or transferees who receive the debt with notice of usury, insofar as it prohibits
a civil claim or plea of usury against assignees, endorsees, or transferees of a debt if they
received the debt instrument without notice of usury in the instrument’s creation or
assignment:
A claim or plea of usury is not available against a legal or
equitable assignee, endorsee, or transferee of any bond, draft,
mortgage, deed of trust, security agreement, promissory note,
or other instrument or evidence of indebtedness, if he receives
it for a bona fide and legal consideration without notice of any
usury in its creation or subsequent assignment.
The prohibition of such a claim implies the availability of a civil remedy for usury against
an assignee, endorsee, or transferee who receives the debt instrument with notice.
Thompkins, 439 Md. at 132 n.12.
Also, CL § 12-114 references both civil and criminal enforcement.
Subsection (b)(1), the source of Ms. Kemp’s statutory damages claim,7 provides a
monetary remedy to borrowers when the usury statute has been violated:
(b)(1) Any person who violates the usury provisions of this
subtitle shall forfeit to the borrower the greater of:
(i) Three times the amount of interest and charges collected
7
In addition to challenging the applicability of CL § 12-121, Fannie Mae and Nationstar
argue that these claims should fail because “no private right of action exists for a violation
of that statute.” They argue that a private right of action is only permitted based on
violations of Subtitle 1’s “usury provisions” and that CL § 12-121 is not a usury provision.
We disagree. As we explained above, Subtitle 1 defines “usury” as the charging of
“interest,” which, in turn, is broadly defined as including “any loan fee” that includes, by
its plain terms, CL § 12-121’s property inspection fees. CL § 12-101(e). Accordingly,
contrary to Nationstar and Fannie Mae’s position, CL § 12-114’s monetary remedy for
violations of the “usury provisions” apply to violations of CL § 12-121.
13
in excess of the interest and charges authorized by this
subtitle; or
(ii) The sum of $500.
Finally, CL § 12-114(c) classifies the violation of CL § 12-106’s disclosure provisions as
a misdemeanor, and CL § 12-122 makes a knowing and willful violation of certain
provisions—including the one at issue here (CL § 12-121)—a misdemeanor.
2. Analysis
The circuit court dismissed Ms. Kemp’s claims in large part based on its conclusion
that neither Fannie Mae (the assignee) nor Seterus (the mortgage servicer and Fannie Mae’s
alleged agent) could be liable under CL § 12-121 because neither qualified as a “lender.”
As noted above, and at all times relevant to this case, CL § 12-101(f) defined “lender” in
the general definitions section of Subtitle 1 as “a person who makes a loan subject to this
subtitle.” Fannie Mae and Seterus argued before the circuit court, and they argue here, that
CL § 12-121 prohibits a “lender” from imposing a “lender’s inspection fee and that they
are not “lenders” because they do not “make” loans. Therefore, their reasoning goes:
although CL § 12-121 would prohibit the original lender from charging inspection fees,
CL § 12-121 does not prohibit them from charging inspection fees. The circuit court agreed
with their reasoning:
Ordinarily, in drafting statutes, when the General Assembly
uses the word “means” “the definition is intended to be
exhaustive.” Hackley v. State, 389 Md. 387, 393 (2005). By
contrast, when the General Assembly uses the term “includes”
in a statute, the term generally is intended to be illustrative and
not a limitation. Tribbitt v. State, 403 Md. 638, 647–48 (2008).
In this case, the meaning of the statute is plain; only “persons”
[] which make loans to “borrowers” [] are lenders and thus
covered by the statute.
14
Nowhere in the second amended complaint does Kemp allege
that either Seterus or Fannie [Mae] “makes loans,” or that
Kemp borrowed money from either defendant. According to
Kemp, “as the assignee of the maker of the loans” to Kemp and
the other putative class members, “Fannie Mae is now the
lender and the maker of the loans, and Seterus is authorized to
act as its agent.” []
The problem with the plaintiff’s theory of the case, however,
is that the facts alleged, even if true, do not fit the applicable
statute under which she has sued. Kemp does not allege that
either Seterus or Fannie Mae made any of the loans in
question[], or even makes any loans in general, within the
meaning of Section 12-101. Fannie Mae bought Kemp’s loan
in the secondary market from the financial institution which
made her the loan, Countrywide Mortgage. Just as alchemy
cannot transform lead into gold, Fannie Mae’s purchase of
Kemp’s loan from Countrywide does not make Fannie Mae a
lender under the statute.
Although we may be the first to do so,8 we disagree with that reading of the statute.
We begin with its plain language, Blackstone, 461 Md. at 113, and we read that language
“within the context of the statutory scheme to which it belongs, considering the purpose,
aim or policy of the Legislature in enacting the statute.” Johnson, 467 Md. at 113 (quoting
State v. Johnson, 415 Md. at 421). And we avoid an interpretation that has illogical or
absurd results, even where the legislation at issue is not necessarily identified as
ambiguous. See Goshen Run, 467 Md. at 109. In this instance, we conclude that the General
8
As Seterus points out, several recent federal district court decisions have reached the same
conclusion as the circuit court based on similar reasoning. Suazo v. U.S. Bank Trust, NA,
2019 WL 4673450 at *10 (D. Md. Sept. 25, 2019); Robinson v. Fae Servicing, LLC, 2019
WL 4735431 at *8–*9 (D. Md. Sept. 27, 2019); Roos v. Seterus, Inc., 2019 WL 4750418at *5 (D. Md. Sept. 30, 2019). Since the parties filed their briefs, another federal district
court decision has followed suit. Flournoy v. Rushmore Loan Servs., LLC, 2020 WL
1285504 at *5–*7 (D. Md. Mar. 17, 2020). That said, this is the first Maryland appellate
decision addressing this question of Maryland statutory interpretation.
15
Assembly did not intend for CL § 12-121’s broad prohibition against property inspection
fees to apply only to the originator of the loan and, even more to the point, to allow
assignees of the loan or their agents to charge the very fees the originators cannot.
We get to this conclusion first by examining the plain language of the statute.
“Lender” is defined, at all relevant times, as “a person who makes a loan subject to this
subtitle.” At first glance, it appears that the legislative intent was to limit “lenders” to those
entities who originate loans. But the legislative history and Court of Appeals’s case law
indicate otherwise.
We look second at the history of the statute’s definition of the term “lender.” As we
observe above, the Commercial Law Article was codified in 1975.9 The interest and usury
laws had previously been codified at 1957 Md. Code, Art. 49 (1972 Repl. Vol., 1974
Supp.). Article 49 did not define “lender” or “borrower.” Md. Code (1957, 1972 Repl. Vol.,
1974 Supp.), Art. 49. The definitions of those terms were added as part of the Usury
Statute’s recodification. “Lender” was defined as “a person who makes a loan subject to
this Subtitle.” 1975 Md. Laws 378. And “borrower” was defined simply as “a person who
borrows money under this Subtitle.” 1975 Md. Laws 376. The Revisor’s Notes for both
terms state that the definition of “lender” was “new” language added to indicate that the
terms relate only to a person that lends (or borrows) money under Subtitle 1, as opposed to
under another subtitle or law:
9
Section 12-121 was enacted in 1986, eleven years after the Commercial Law Article was
codified and the definitions of “lender” and “borrower” were enacted. 1986 Md. Laws
2207–08.
16
Revisor’s Note: This subsection is new language added to
indicate that, in this subtitle, the term [“lender”] [“borrower”]
relates only to a person who lends money under the provisions
of this subtitle and not, for example, under any other credit law.
1975 Md. Laws 376, 378. This reveals that the purpose of adding the definition of “lender”
(and “borrower”) was not to differentiate between persons who “make” loans and those
who do not, or persons who “borrow” money and those who do not. Instead, it was to
differentiate between loans made under Subtitle 1 and those that were not. The focus was
on the types of loans, not the actors making them. Indeed, when the statute does address
the actors involved in credit transactions, it supports the conclusion that the legislature
intended the statute to have a broad reach. For example, the term “person” is also defined
and includes a broad range of actors:
“Person” includes an individual, corporation, business trust,
estate, trust, partnership, association, two or more persons
having a joint or common interest, or any other legal or
commercial entity.
1975 Md. Laws 378.
Third, the Maryland case law supports our conclusion that CL § 12-121 is not
limited to the originators of loans. In Taylor v. Friedman, the only Maryland case to
interpret CL § 12-121, the Court of Appeals examined the legislative history of CL § 12-
121 and held that the prohibition against lenders charging inspection fees was not limited
to fees assessed as part of closing costs. 344 Md. 572, 583–84 (1997). Although the Court
did not address squarely whether CL § 12-121 applied to assignees of the loan, the parties
involved were the assignees, not the originators, of the loan at issue. The question of
whether those parties fell within the definition of “lender” was not raised, and the Court
17
did not consider it. Instead, the Court assumed, without discussion, that CL § 12-121 did
apply to the assignee and holder of the note, which was indisputably not the originator of
the loan. The Court also assumed, without discussion, that Larry G. Taylor, who was not
the original borrower but was instead a grantee, could bring a claim under CL § 12-121.
The precise question presented, as stated by the Court, was whether CL § 12-121 “prohibits
a mortgagee from charging the mortgagor fees for post-default, visual inspections of the
mortgaged residence’s exterior that are made to ascertain the condition of the security.” Id.
at 574. The “mortgagor” referenced was Mr. Taylor, who, in acquiring the property at issue,
assumed the grantor’s obligations under the deed of trust. Id. at 574. The “mortgagees”
referenced were assignees of the note. The Court referred to the various assignees as
“Lender” throughout its analysis.10
Mr. Taylor had, from time to time, been delinquent in making monthly payments on
the note, and when a delinquency had continued for more than forty-five days from the due
date, the Lender had assessed a $10.00 inspection fee to his account for inspections
conducted by a third party. Id. at 575. The Lender eventually instituted a foreclosure action,
10
The Court described the mortgagees as follows:
The respondents are substitute trustees under the deed of trust
who were designated by Margaretten & Company, Inc., the
holder of the note secured by the deed of trust when the
foreclosure was instituted. Margaretten & Company, Inc.
subsequently was acquired by Bank of America, F.S.B. and
renamed BA Mortgage, a division of Bank of America, F.S.B.
We shall refer to the entity that held the note at any given time
as “Lender.”
Taylor, 344 Md. at 574–75.
18
and Mr. Taylor intervened and filed a counterclaim asserting that the Lender had breached
the loan contract by unlawfully assessing inspection fees in violation of CL § 12-121. Mr.
Taylor paid off the balance of the loan, and the case proceeded to trial on the counterclaim.
The circuit court limited CL § 12-121’s prohibition to inspection fees charged as part of
closing costs. Id. at 577. Mr. Taylor appealed, and this Court affirmed. Id. at 578.
The Court of Appeals reversed, holding that the plain language of the statute—
which prohibits property inspection fees “in connection with a loan secured by residential
real property”—prohibited the Lender (again, an assignee) from assessing inspection fees
to Mr. Taylor in connection with his default. Id. at 574, 581. The Court relied on the rule
of statutory construction that where a statute expresses a general rule followed by one or
more specific exceptions, “a court ordinarily cannot add to the list of exceptions.” Id. at
581 (citing Gable v. Colonial Ins. Co., 313 Md. 701, 704 (1988); Schmidt v. Beneficial Fin.
Co., 285 Md. 148, 155 (1979)). Although the Court did not discuss its statutory
construction in great depth, its reasoning viewed CL § 12-121 as expressing a general rule
that property inspection fees may not be assessed. Two exceptions are listed: those related
to construction of a new home and those related to repairs, alterations, or other work
required by the lender. But because there is no exception that would allow property
inspection fees assessed in association with a mortgagor’s default, the Court found no
authority to add such an exception to the list.
The Court reinforced its interpretation of the statute by examining the legislative
history of CL § 12-121. Relying on the principle that “[e]ven where the language of a
statute is plain and unambiguous, [the Court] may look elsewhere to divine legislative
19
intent; the plain meaning rule is not rigid and does not require [the Court] to read legislative
provisions in rote fashion and in isolation.” Taylor, 344 Md. at 582 (quoting Blaine, 336
Md. at 64). The Court concluded that it was not the intent of the General Assembly to limit
the applicability of CL § 12-121 solely to inspection fees charged at closing. Id.
In reaching its conclusion, the Court acknowledged that the background for the
enactment of CL § 12-121 in 1986 was indeed a “concern over real property closing costs.”
Id. at 582. It explained how its enactment had been initiated by the January 1986 Report of
the Task Force on Real Property Closing Costs requested by Governor Harry R. Hughes.
Id. at 579. The Court observed that there was “no question” that the Task Force had been
created out of concerns about real property closing costs. Id. at 582. But the Report’s
recommendations went beyond closing costs, and the Court highlighted, as an example, the
enactment of CL § 12-109.2 as “a prohibition against a Lender’s imposing ‘a collection fee
or service charge on the maintenance of an escrow account on a first mortgage or first deed
of trust.’” Id. It described that prohibition as “continuing” and lasting “throughout the life
of the loan,” and it reinforced the conclusion that CL § 12-121’s prohibition is not limited
to fees associated with closing costs.11 Id.
11
What the Court did not observe was that unlike CL § 12-121, § 12-109.2 expressly
provided that an “assignee of the lender” was prohibited from imposing service fees on
escrow accounts:
12-109.2(b) A lender, or the assignee of the lender, may not
impose a collection fee or service charge on the maintenance
of an escrow account on a first mortgage or a first deed of trust.
1986 Md. Laws 2206. The current version of CL § 12-109.2, as amended, continues to
include “assignees” of lenders within its ambit:
12-109(a)(1) “Lender” includes a lender and assignee of a
20
The Court went on to compare the Task Force’s recommended text of CL § 12-121
with the text the General Assembly ultimately enacted, which struck the Task Force’s
recommended phrase “as a condition of the loan” from one of the exceptions to the
prohibition against inspection fees. Taylor, 344 Md. at 583. In the Court’s view, that
omission reinforced its reading of CL § 12-121’s plain meaning, i.e., that the prohibition
against property inspection fees is not limited to fees assessed at closing:
[P]roposed § 12-121(c)(2), as introduced, would have
permitted a fee for a lender’s inspection to ascertain
completion of “repairs, alterations or other work required by
the lender as a condition to granting the loan.” 1986 Md. Laws
at 2208 (emphasis added). The italicized language indicates
that the Commission’s focus may well have been on inspection
fees associated with a loan closing. But the General Assembly
lender.
CL §§ 12-121 and 12-109.2 were enacted at the same time. 1986 Md. Laws 2205–08. An
argument could be made that the General Assembly could have extended the definition of
“lender” to include “assignees” in CL § 12-121, just as it did in CL § 12-109.2, and chose
not to do so. Fannie Mae and Nationstar do not make that argument, although they do offer
a similar argument based on a different statute: they argue that, had the General Assembly
intended CL § 12-121 to apply to assignees and mortgage loan servicers, it knew how to
do it and could have done so, as it did when it changed the definition of “mortgage lender”
in a different title to include “any person who: (i) [i]s a mortgage broker; (ii) [m]akes a
mortgage loan to any person; or (iii) [i]s a mortgage servicer.” Md. Code (1980, 2020 Repl.
Vol.), Fin. Inst. § 11-501(j)(1).
Although we are not convinced by Fannie Mae and Nationstar’s argument—the General
Assembly’s amendments to a different law in 2009 is too remote to carry much weight to
discern its intent with respect to CL § 12-121 in 1986—we observe nevertheless that,
writing on a clean slate, we may have afforded more weight to the difference between
CL §§ 12-109.2 and 12-121. But as we explain further below, we feel we are constrained
by Taylor’s conclusion that, based on the General Assembly’s removal of the phrase “as a
condition of the loan” from CL § 12-121, the legislature intended the prohibition against
property inspection fees to extend throughout the life of the loan, regardless of whether it
was assigned. We also feel we are constrained by another Court of Appeals case,
Thompkins, that we discuss below as well. Thompkins v. Mountaineer Invs., LLC, 439 Md.
118 (2014).
21
struck the italicized language from the bill in the course of
passage.
The effect of this amendment was to expand the exception to
the prohibition so that inspection fees could be charged for
ascertaining the completion of work that had nothing to do with
granting the loan. For example, in the instant matter, Taylor
assumed the obligation in ¶ 5 of the deed of trust to “keep the
said premises in as good order and condition as they are
now . . . reasonable wear and tear excepted.” If Taylor had
violated that covenant, and Lender and Taylor agreed that
Lender would not treat the breach as a default if Taylor caused
repairs to be made within a stated time, Lender would not be
prohibited from charging an inspection fee to determine if
those repairs had been made. In terms of the issue before us,
the amendment to the Commission’s proposed statute
concerning inspection fees indicates that the General Assembly
did not consider that the prohibition against inspection fees was
limited to closing costs. Otherwise, there would have been no
need to eliminate from the exception the limitation to
conditions of granting the loan. In other words, an exception
for an inspection fee to determine if work had been done that
was a condition of the loan would have been entirely adequate
if the prohibition against inspection fees were limited to those
charged as part of closing costs. It is the intent of the General
Assembly that we must discern, not that of the Commission.
For the foregoing reasons we conclude that the legislative
history does not so clearly demonstrate a purpose to limit the
prohibition of § 12-121 to closing costs as to override the plain
language of the statute. Accordingly, we shall reverse and
remand for further proceedings.
Taylor, 344 Md. at 583–84.
Another Court of Appeals decision, Thompkins v. Mountaineer Investments, LLC,
439 Md. 118, 132 (2014), also supports our conclusion that CL § 12-121 reaches assignees.
Thompkins recognized the unlikelihood that the General Assembly intended for protective
provisions in (a different subtitle of) Title 12 to be defeated by assigning the loan. At issue
in Thompkins was Subtitle 4 of Title 12, the Secondary Mortgage Loan Law. The issue was
22
different than it is here or in Taylor—the question was “whether an assignee of a second
mortgage loan is responsible for certain statutory violations allegedly committed by the
original lender when the loan was made.” Thompkins, 439 Md. at 122. The Court held that
it was not, “even though the assignee may be liable for any violation of the SMLL that the
assignee itself commits in connection with repayment of [the] loan.” Id. at 141. In the
course of its analysis, the Court observed first that, unlike other provisions of Title 12
(including CL § 12-109.2, see n.11, above), “the SMLL does not include a specific
reference to assignments or assignees.” Id. at 131. Indeed, the definition of “lender” in the
SMLL was recodified from Art. 66, § 40(b-1) in 1975 and hasn’t changed since:
(c) Lender.
“Lender” means:
(1) a licensee; or
(2) a person who makes a secondary mortgage loan but is
exempt from the licensing requirements of the Maryland
Secondary Mortgage Loan Law – Licensing provisions.
1975 Md. Laws 436. But the Court went on to observe that even though “the SMLL does
not provide that an assignee of a lender is liable for the lender’s violations of that statute at
the time the loan was made,” Thompkins, 439 Md. at 131, the SMLL “is not entirely bereft
of the notion that a loan may be assigned,” id. at 132, and, therefore, an assignee could be
subject to the SMLL’s ongoing regulation of a loan. Id. at 132–33 (“It seems unlikely that
the General Assembly intended that key ongoing protections of the SMLL—e.g., the
prohibition against a usurious interest rate—could be defeated simply by assigning the
promissory note. Cf. Brenner v. Plitt, 182 Md. 348, 34 A.2d 853 (1943) (“no subterfuge
shall be permitted to conceal [a usurious loan]”) (brackets in original) (footnote omitted)).
23
Principles of statutory interpretation do not require us to apply the text of a statute
rigidly where that application leads to absurd or inconsistent results. And it’s inconsistent
with the purpose of Subtitle 12 to allow an assignee of a note or its agents to charge fees
that the originating lender cannot. We are not writing on a blank slate in this regard either—
to read CL § 12-121 as Fannie Mae and Nationstar do would contradict the Court of
Appeals’s application of CL § 12-121 to an assignee in Taylor. The language of the section
isn’t ambiguous in isolation, but a wooden application of the term “lender” here is
inconsistent with the structure and purpose of the legislation enacting it, and we decline to
read CL § 12-121 in a way that defeats itself.12 We reverse the circuit court’s dismissal of
Ms. Kemp’s claims under CL § 12-121.
B. Ms. Kemp’s Other Arguments.
This leaves us now to decide whether the circuit court erred in dismissing
Ms. Kemp’s claims on other grounds or in any other respect. For the reasons we’ll explain,
we hold that (1) the circuit court erred insofar as it dismissed Ms. Kemp’s unjust
enrichment and MMFPA claims based on its finding that Seterus waived or paid the
12
In light of our holding, it is not necessary for us to address the other arguments made by
Ms. Kemp, including her arguments that the resolution of proceedings before the Consumer
Protection Division of the Office of the Attorney General (“CPD”) and the Office of the
Commissioner of Financial Regulation (“OCFR”) constitute persuasive authority that
CL § 12-121 applies to assignees of loans; that the General Assembly is aware of how the
secondary mortgage market works and knew how to exempt Fannie Mae from prohibitions
or requirements related to loans or mortgages, but chose not to in CL § 12-121; that the
statutory requirements of CL § 12-121 (as opposed to contractual requirements) apply to
Fannie Mae because it “stepped into the shoes” of the assignor; and that Nationstar is
estopped judicially from arguing that it is not subject to CL § 12-121 based on an Assurance
of Discontinuance it entered with the Consumer Protection Division of the Attorney
General’s Office.
24
property inspection fees in the course of modifying Ms. Kemp’s loan, but (2) the circuit
court did not err in dismissing Ms. Kemp’s MCDCA claim, even though its reliance on the
reasoning in Lovegrove v. Brock & Scott, PLLC, 666 Fed. Appx. 308 (4th Cir. 2016) likely
was misplaced. From there, we (3) decline to decide whether Ms. Kemp stated a standalone
MCPA claim grounded in deceit, in violation of CL § 13-301(9), because she did not raise
that argument in the circuit court; and (4) find that Ms. Kemp waived her right to challenge
the dismissal of her MMFPA claim on the ground that it is not pled with the requisite
particularity.
First, the circuit court erred insofar as it found, as a matter of fact, that the property
inspection fees either were paid by Seterus or were waived as part of the loan modification
and then, relied on that finding to dismiss Ms. Kemp’s unjust enrichment and MMFPA
claims.
The circuit court made three different, inconsistent statements about Seterus’s
waiver or payment of the property inspection fees in its memorandum opinion. In its
summary of the allegations of the Complaint, the court stated that the November 2017 loan
modification offer “required [Ms.] Kemp to pay the inspection fees as part of the loan
balance.” Then, in the context of dismissing the unjust enrichment claim, the court stated
that the plain language of the loan modification agreement provided that property
inspection fees were not added to the loan balance and that they were instead “paid by
Seterus, not Kemp.” Finally, in dismissing the MMFPA claim, the circuit court stated that
the loan modification agreement “waived the property inspection fees.”
The circuit court was correct in observing in its summary of the Complaint’s
25
allegations that the loan modification agreement added the property inspection fees to the
balance of the loan. The circuit court erred, however, in finding that the language of the
loan modification agreement established that the property inspection fees were not added
to the loan balance or were paid by Seterus. The plain language of the documents does not
establish either proposition.13 Although the court’s memorandum opinion does not identify
the provision of the loan modification agreement on which it relied, it appears from the
defendants’ brief in support of their motion to dismiss that the court relied on ⁋ 8(e), which
states that Seterus would pay “[a]ll administration and processing costs” incurred by
Seterus “in connection with” the loan modification agreement. But notably, ⁋ 8(e) does not
say that Seterus would waive or pay property inspection fees:
All administration and processing costs incurred by Servicer in
connection with this Agreement, such as required notary fees,
recordation fees, title costs, and property valuation fees, shall
be paid by the Servicer, unless otherwise stipulated.
And just as ⁋ 8(e) does not establish that property inspection fees assessed to Ms. Kemp
weren’t added to the loan balance, it also does not establish that the property inspection
fees were added. The resolution of that fact dispute awaits discovery.14
13
Generally, “where matters outside of the allegations in the complaint and any exhibits
incorporated in it are considered by the trial court, a motion to dismiss generally will be
treated as one for summary judgment.” Advance Telecom Process LLC v. DSFederal, Inc.,
224 Md. App. 164, 175 (2015). But where, as here, an extraneous document merely
supplements the allegations of the complaint, and the document is not in dispute,
consideration of the document on a motion to dismiss does not convert it into one for
summary judgment. Id. That is the case whether the complaint expressly refers to it,
Margolis v. Sandy Spring Bank, 221 Md. App. 703, 710 n.4 (2015), or if it’s appended to
a defendant’s motion to dismiss. Smith v. Danielczyk, 400 Md. 98, 205 (2007).
14
Ms. Kemp also relies on language in the “Summary” of the loan modification agreement
to support her assertion that the fees were added to the loan balance. The Summary states,
26
Second, the circuit court’s reliance on Lovegrove v. Brock & Scott, PLLC, 666 Fed.
Appx. 308 (2016) in dismissing the MCDCA claim appears to have been misplaced, but
we affirm the circuit court’s dismissal of Ms. Kemp’s MCDCA claim on other grounds.
The MCDCA provides that “[i]n collecting or attempting to collect an alleged debt
a debt collector may not” engage in certain acts or methods. CL § 14-202. “The MCDCA,
and in particular § 14-202, is meant to proscribe certain methods of debt collection and is
not a mechanism for attacking the validity of the debt itself.” Chavis v. Blibaum
Assocs., 246 Md. App. 517, 528 (2020) (quoting Fontell v. Hassett, 870 F. Supp. 2d 395,
405 (2012) (emphasis in original)). The proscribed acts or methods are identified in
subsections (1) through (9) of CL § 14-202. See Fontell, 870 F. Supp. 2d at 405 (emphases
in original) (“The Act proscribes certain conduct, (1) through (9), by a collector in
‘collecting or attempting to collect an alleged debt . . . .’”).
Ms. Kemp alleges that Seterus engaged in two of the nine prohibited acts or
methods. First, she alleges that Seterus “[c]laim[ed], attempt[ed], or threaten[ed] to enforce
among other things, that “certain assessments paid on your behalf to a third party[] will be
added to your loan balance”:
NEW/UNPAID PRINCIPAL BALANCE: Any past due
amounts as of the end of the trial period, including unpaid
interest, real estate taxes, insurance premiums, and certain
assessments paid on your behalf to a third party, will be added
to your mortgage loan balance. We may waive ALL late
charges that have accrued and remain unpaid at the end of the
trial period if you fulfill the terms of the trial period including,
but not limited to, making any remaining trial period payments.
But again, this provision does not resolve the question of whether the property inspection
fees actually were added to the loan balance, a fact issue that remains unresolved.
27
a right with knowledge that the right does not exist” in violation of subsection (8) of CL
§ 14-202. Second, she alleges that Seterus “[used] a communication which simulates legal
or judicial process or gives the appearance of being authorized, issued, or approved by a
government, governmental agency, or lawyer when it is not” in violation of subsection (9)
of CL § 14-202.
We need not spend long on the question of whether the circuit court erred in
dismissing the MCDCA claim insofar as it was based on CL § 14-202(9) (and to the extent
Ms. Kemp challenges that ruling). It didn’t. Ms. Kemp’s appellate brief contains only one
reference that we could find to CL § 14-202(9) and no substantive argument supporting the
subsection (9) part of her claim, so she has waived this argument. Md. Rule 8-504(a)(5)
(requiring that an appellate brief contain “[a]rgument in support of the party’s position”);
Klauenberg v. State, 355 Md. 528, 551–52 (1999); Beck v. Mangels, 100 Md. App. 144,
149 (1994) (“[A]rguments not presented in a brief or not presented with particularity will
not be considered on appeal.”).
Even if we considered the argument on its merits, we would affirm the circuit court’s
dismissal of the MCDCA claim insofar as it arises under subsection (9). As the circuit court
observed, Ms. Kemp’s Complaint fails to identify any communication that “simulates legal
or judicial process” or purports to be “authorized, issued, or approved by a government,
governmental agency, or lawyer” when it wasn’t. In her briefing in the circuit court,
Ms. Kemp asserted that the offending “communication” at issue was the Fannie Mae Deed
of Trust that Seterus filed in the land records for Anne Arundel County. And indeed, the
Complaint alleges that the “filing of documents in the government’s and court records
28
throughout the State of Maryland indicat[es] that it has a right to collect [inspection] fees.”
She argued that because the Deed of Trust contained a provision allowing property
inspection fees, and because the Deed of Trust was filed in the land records, the Deed of
Trust “gives the wrongful appearance that the government has approved the fees.” The
circuit court rejected that argument, holding that it “is aware of no authority, and [Ms.]
Kemp has cited none,” supporting the proposition that a filed deed of trust is a
“communication which . . . gives the appearance of being authorized, issued, or approved”
by the government or a governmental agency, as required to state a claim under CL § 14-
202(9). We agree.
With respect to the CL § 14-202(8) claim, the circuit court held that it failed because
Seterus was not prohibited by CL § 12-121 from assessing or collecting property inspection
fees, and that therefore, its assessment of such fees was not a claim, attempt, or threat to
enforce a right that does not exist. But in the alternative, the circuit court also held that,
even if the property inspection fees were prohibited, Ms. Kemp still failed to allege an
MCDCA claim because the Complaint failed to allege facts to support a finding that
Seterus was collecting or attempting to collect a debt. In other words, the court implied that
the MCDCA claim should be dismissed whether or not Seterus engaged in one of the
prohibited debt collection methods because the Complaint failed to allege that Seterus was
collecting or attempting to collect a debt in the first place. As we explain, the court focused
too narrowly on whether the three letters identified in the Complaint were debt collection
attempts. But as we explain further, the claim fails nevertheless.
In dismissing the MCDCA claim, the circuit court analyzed three letters identified
29
in the Complaint:
• The July 24, 2017 letter in which Seterus first informed Ms. Kemp of the
“property preservation charges” that had been assessed between August 26,
2016 through July 24, 2017;
• The September 25, 2017 letter in which Seterus represented that Ms. Kemp
owed $180 in property inspection fees, which were included as part of a
“payoff total”; and
• The September 26, 2017 communication in which Seterus disclosed more
details about those charges, namely that it had charged Ms. Kemp $180 for
twelve property inspections that were conducted following Ms. Kemp’s
default.
Language in the footer of all three letters stated that “if you are in bankruptcy or received
a bankruptcy discharge of this debt, this letter is not an attempt to collect the debt.”15
In holding that these letters did not constitute attempts to collect a debt, the circuit
court relied on the reasoning in an unpublished Fourth Circuit case, Lovegrove v. Brock &
Scott, PLLC, 666 Fed. Appx. 308 (4th Cir. 2016). In Lovegrove, the Fourth Circuit affirmed
15
The language in the footer of the July 24 and September 26 letters stated in relevant part:
THIS COMMUNICATION IS FROM A DEBT
COLLECTOR AS WE SOMETIMES ACT AS A DEBT
COLLECTOR. WE ARE ATTEMPTING TO COLLECT A
DEBT AND ANY INFORMATION OBTAINED WILL BE
USED FOR THAT PURPOSE. HOWEVER, IF YOU ARE IN
BANKRUPTCY OR RECEIVED A BANKRUPTCY
DISCHARGE OF THIS DEBT, THIS LETTER IS NOT AN
ATTEMPT TO COLLECT THE DEBT. THIS NOTICE IS
BEING FURNISHED FOR YOUR INFORMATION AND
TO COMPLY WITH APPLICABLE LAWS AND
REGULATIONS. IF YOU RECEIVE OR HAVE RECEIVED
A DISCHARGE OF THIS DEBT THAT IS NOT
REAFFIRMED IN A BANKRUPTCY PROCEEDING, YOU
WILL NOT BE PERSONALLY RESPONSIBLE FOR THE
DEBT.
30
the district court’s summary judgment in favor of a mortgage loan servicer, holding that
the servicer did not violate the Fair Credit Reporting Act (15 U.S.C. §§ 1692(a), 1692(e),
1692(f)) when it sent communications to a debtor-mortgagor with language similar to the
letters at issue here: “[I]f the debt . . . has been discharged through bankruptcy, this
communication is not intended as and does not constitute an attempt to collect a debt.”
Lovegrove, 666 Fed. Appx. at 312 (brackets and ellipsis in original). The debtor-mortgagor
in Lovegrove had obtained a discharge of his obligation to pay the mortgage. The Fourth
Circuit reasoned that “the communications were for informational purposes only, were
non-threatening in nature, and contained clear and unequivocal disclaimers to establish that
they were not in connection with the collection of a debt under Lovegrove’s
circumstances.” Id. at 311.
The circuit court held in this case that the MCDCA claim “fails because in the three
letters identified in the complaint, Seterus made it clear that if the recipient had received a
bankruptcy discharge, as Kemp had, no collection was sought or intended.”16 We read the
court’s statement to mean that the MCDCA claim, insofar as it was based on those three
letters, fails from the start because in sending those letters Seterus was not “collecting or
attempting to collect an alleged debt” in the first place, as required by CL § 14-202. In
other words, because the disclaimers stated that no debt collection was sought, the court
didn’t need to reach the question of whether the letters sought to collect the debt by a
16
We assume, without deciding, that Ms. Kemp had indeed received a bankruptcy
discharge. Although that fact does not appear to be in dispute, we observe that the parties
did not cite, and we did not find, an allegation to that effect in the Complaint.
31
prohibited method.
As an initial matter, Lovegrove does not govern here because it is an unpublished
opinion from a federal court. That being said, even if it did govern, we are not convinced
that its reasoning applies. The MCDCA seems at least to leave open the possibility that a
mortgage servicer could be liable for violating subsection (8) (or any of the other
subsections of CL § 14-202) if it attempted to enforce a right it knew it did not possess (or
use another prohibited method of collection) in a situation, as here, where the “debt” that
the servicer was collecting or attempting to collect was payment sought in connection with
a valid lien on real property from an individual whose personal liability for the loan was
discharged in bankruptcy. We need not decide that question, though, because Ms. Kemp’s
allegations do not support a finding that Seterus used an unauthorized method in violation
of CL § 14-202(8) in its attempt to collect the property inspection fees. As we observed
above, the MCDCA makes a distinction between underlying “debt” that the debt collector
is attempting to collect and the methods used to collect that debt. It is inappropriate methods
of collection that the MCDCA targets, not the validity of the underlying debt.
In their discussion of this question in this case, the parties and the court assumed
that the underlying debt was the mortgage (or the modified mortgage) and the inappropriate
method was the attempt to enforce the right to collect illegal property inspection fees. But
their reasoning breaks down in the second half of that sentence. An attempt to collect fees—
even where they are illegal—is not a “method.” Instead, Ms. Kemp seeks to attack the
validity of the fees via the MCDCA, which she cannot. Chavis, 246 Md. App. at 529;
Allstate Lien & Recovery Corp. v. Stansbury, 219 Md. App. 575, 591 (2014).
32
This conclusion is easier to understand in the context of other acts and methods that
CL § 14-202 prohibits. For example, subsection (1) prohibits a debt collector from “[using]
or threaten[ing] force or violence” in the collection or attempt to collect a debt. Other
subsections prohibit methods such as threatening criminal prosecution (CL § 14-202(2)),
communicating with a debtor “with the frequency, at the unusual hours, or in any other
manner as reasonably can be expected to abuse or harass the debtor (CL § 14-202(6)), and
“us[ing] obscene or grossly abusive language in communicating with the debtor or a person
related to him” (CL § 14-202(7)). And Subsection 8’s prohibition against “claim[ing],
attempt[ing], or threaten[ing] to enforce a right with knowledge that the right doesn’t exist”
must be understood in terms of employing a method of collecting the underlying debt—not
in terms of an attempt to collect a debt different than the underlying one.
Two cases decided by this Court illustrate this distinction with respect to subsection
(8). Ms. Kemp relies on these cases to argue that the imposition of “unauthorized” fees can,
in fact, form the basis of a CL § 14-202(8) claim, but her reliance is misplaced. In Allstate
Lien, we held that “front-loading processing fees and including those fees” as part of a
“garageman’s lien” was an improper method of collecting the fees under CL § 14-202(8)
because the inclusion of such fees in the garageman’s lien was prohibited by statute. 219
Md. App. at 591. Similarly, in Mills v. Galyn Manor Homeowner’s Assoc., Inc., we held
that a homeowners’ association’s attempt to collect past due homeowners’ association fees
under CL § 14-202(8) by imposing a lien was an improper method of collecting overdue
association fees because the statute of limitations for filing such liens had expired. 239 Md.
App. 663, 679 (2018). Importantly, though, these cases are distinguishable because the
33
validity of the fees due in both cases—or more accurately, the validity of the debt created
by the past due fees—was not challenged.
The issue in Allstate Lien was not whether a $1,000 fee was or wasn’t authorized,
but whether such a fee could be added to a garageman’s lien. 219 Md. App. at 591. We
held that under CL § 16-202(c), such a lien “is based solely on charges incurred for repair
or rebuilding, storage, or tires or other parts or accessories” and that “[t]he lien does not
encompass ‘cost of process’ fees.” Id. at 590–91. As such, “front-loading processing fees
and including those fees as part of the lien” could be challenged under CL § 14-202(8)
because the challenge related to the method of collecting the debt, not the debt itself.
In Mills, the homeowners acknowledged that they owed several months of
delinquent assessment fees. 239 Md. App. at 679. They challenged, among other things,
the association’s right to file liens to collect fees when the statute of limitations to file such
liens had expired. Id. We held that the circuit court erred in granting summary judgment in
the homeowners’ association’s favor because that challenge had not related, as the circuit
court had found, to the validity of the debt.
In this case, Ms. Kemp identifies no improper method of collection nor any basis on
which to conclude that Seterus’s capitalization of the property inspection fees into the
modified loan was improper. She identifies no statute, like the one in Allstate Lien, that
would make it improper to include appropriately charged fees in the modified mortgage.
This case is more like Chavis (a case decided after briefing and oral argument in this case),
in which we affirmed the dismissal of a CL § 14-202(8) claim where a creditor “collect[ed]
filing fees associated with obtaining writs of garnishments by adding those fees to the
34
amounts it sought to collect through the garnishments.” 246 Md. App. at 527. The statute
on which the debtor relied “[did] not restrict the types of costs that a creditor is entitled to
receive,” and using wage garnishment to collect the filing fee for the writ of garnishment
did not violate CL § 14-202(8). So although the circuit court’s reliance on Lovegrove
appears to have been misplaced, we affirm the dismissal of the MCDCA claim to the extent
it was based on CL § 14-202(8). We likewise affirm the dismissal of the derivative claim
because Ms. Kemp’s Complaint fails to allege facts supporting a claim under that
subsection.
Third, in Count III, Ms. Kemp alleges that “Seterus’ actions in violation of the
MCDCA also constitute a per se violation of the MCPA pursuant to Com. Law § 13-
301(14)(iii).” Section 13-301(14)(iii) defines a violation of the MCDCA as an “unfair,
abusive or deceptive trade practice[]” under the MCPA. In their motion to dismiss before
the circuit court, Fannie Mae and Seterus argued that Ms. Kemp’s MCPA claim should be
dismissed because it is entirely derivative of the MCDCA claim, which, it argued, should
be dismissed. Ms. Kemp responded that because the MCDCA claim should not be
dismissed, neither should the MCPA claim.
But on appeal, as best we can discern, Ms. Kemp shifts gears and argues that the
circuit court erred in dismissing the MCPA claim because, she contends, the facts support
a standalone claim based on deceit under CL § 13-301(9). That subsection defines certain
forms of deception as an “unfair, abusive or deceptive trade practice[]”:
Deception, fraud, false pretense, false premise,
misrepresentation, or knowing concealment, suppression, or
omission of any material fact with the intent that a consumer
35
rely on the same in connection with:
(i) The promotion or sale of any consumer goods, consumer
realty, or consumer service;
(ii) A contract or other agreement for the evaluation,
perfection, marketing, brokering or promotion of an
invention; or
(iii) The subsequent performance of a merchant with
respect to an agreement of sale, lease, or rental.
As Fannie Mae and Nationstar point out, however, Ms. Kemp did not raise this argument
in the circuit court and, therefore, she has waived it. Md. Rule 8-131(a) (“Ordinarily, the
appellate court will not decide any other issue unless it plainly appears by the record to
have been raised in or decided by the trial court . . . .”). Because we affirmed the dismissal
of the MCDCA claim in toto, Ms. Kemp’s MCPA claim does not survive.
Fourth, and finally, Ms. Kemp also has waived her right to challenge the dismissal
of the MMFPA claim on the ground that it is not pled with the requisite particularity. The
MMFPA prohibits “mortgage fraud.” Md. Code (1974, 2015 Repl. Vol.), § 7-402 of the
Real Property Article (“RP”) (“A person may not commit mortgage fraud.”). RP § 7-401
defines “mortgage fraud” as an action made “with the intent to defraud” that involves any
of six enumerated actions, including misrepresentations or omissions or receiving proceeds
that resulted from making a misrepresentation or omission.17
17
RP § 7-401 states:
(d) “Mortgage fraud” means any action by a person made with
the intent to defraud that involves:
(1) Knowingly making any deliberate misstatement,
misrepresentation, or omission during the mortgage
lending process with the intent that the misstatement,
misrepresentation, or omission be relied on by a mortgage
36
Claims sounding in fraud must be pled with particularity:
The requirement of particularity ordinarily means that a
plaintiff must identify who made what false statement, when,
and in what manner (i.e., orally, in writing, etc.); why the
statement is false; and why a finder of fact would have reason
to conclude that the defendant acted with scienter (i.e., that the
defendant either knew that the statement was false or acted
with reckless disregard for its truth) and with the intention to
persuade others to rely on the false statement.
McCormick v. Medtronic, Inc., 219 Md. App. 485, 528 (2014); accord Buckingham v.
lender, borrower, or any other party to the mortgage
lending process;
(2) Knowingly creating or producing a document for use
during the mortgage lending process that contains a
deliberate misstatement, misrepresentation, or omission
with the intent that the document containing the
misstatement, misrepresentation, or omission be relied on
by a mortgage lender, borrower, or any other party to the
mortgage lending process;
(3) Knowingly using or facilitating the use of any
deliberate misstatement, misrepresentation, or omission
during the mortgage lending process with the intent that
the misstatement, misrepresentation, or omission be
relied on by a mortgage lender, borrower, or any other
party to the mortgage lending process;
(4) Receiving any proceeds or any other funds in
connection with a mortgage closing that the person knows
resulted from a violation of item (1), (2), or (3) of this
subsection;
(5) Conspiring to violate any of the provisions of item (1),
(2), (3), or (4) of this subsection; or
(6) Filing or causing to be filed in the land records in the
county where a residential real property is located, any
document relating to a mortgage loan that the person
knows to contain a deliberate misstatement,
misrepresentation, or omission.
37
Fisher, 223 Md. App. 82, 92 (2015).
The circuit court’s primary ground for dismissing the MMFPA claim was its
mistaken factual finding that Seterus waived the fees. But the circuit court also stated that
Ms. Kemp failed to plead the claim with particularity:
To be legally sufficient under the MFPA, the factual
allegations must be tantamount to alleging deceit, i.e., at the
very least an alleged false statement of material fact made with
the intent to deceive and intended to be relied on by the
borrower or other party to the lending process. In re Blackston,
557 B.R. 858, 873 (Bkrtcy, D. Md. 2016); see also Thomas v.
Nadel, 427 Md. 441, 450–51 & n.18 (2012) (definition of fraud
under Maryland law). According to Kemp, Seterus
misrepresented that it was authorized to impose property
inspection fees in its July 24, 2017, September 25, 2017, and
September 26, 2017 correspondence, and that Kemp relied on
those misrepresentations when she accepted her Loan
Modification Agreement. In other words, Kemp is claiming
that Seterus committed a fraud when it modified Kemp’s loan,
to Kemp’s benefit, and lowered her monthly payment. The
problem with Kemp’s argument is that the Loan Modification
Agreement waived the property inspection fees. She could not,
therefore, have relied on a material misrepresentation about
property inspection fees because, at the end of the day, none
were charged. In short, Kemp has failed to plead, with the
requisite particularity, a claim of fraud under the
MMFPA. See Amenu-El v. Select Portfolio Services, No. CV-
RDB-177-2008, 2017 WL 4404428 at *5 (D. Md. Oct. 4,
2017).
(emphasis added).
Ms. Kemp argues here that she did plead the MMFPA claim with particularity. But
this is the extent of her argument—a reference to a footnote in another section of her brief:
[A]s summarized in FN 14 supra, Kemp put the Appellees on
sufficient notice of the details of her claim and there is no
plausible suggestion that either Appellees [sic] does not know
and understand the claims against them. Despite the lower
38
court’s conclusory statement to [the] contrary, Kemp pled her
MMFPA claim with more than enough particularity.
Footnote 14, in turn, addresses the circuit court’s observation that some claims under the
MCPA (e.g., if based on deceit) must be pled with particularity, and that Ms. Kemp’s
MCPA claim fails under either the regular or heightened pleading standard. But footnote
14 doesn’t explain her theory of fraud or deceit. Instead, it refers to paragraphs of the
Complaint and takes issue with the circuit court’s purported cursory approach to this
question:
The Circuit Court’s holding in this regard is made with no
analysis and belies the record it had before it. See e.g. E. 18-
21, 24-25, 27-30, SAC at ⁋⁋24-26, 28, 36 (identifying dates of
the illegal imposition of inspection fees), 22, 24, 28 (dates of
correspondence), 34-37 (Kemp’s reliance), 2, 5, 7, 9-11, 41-46
(details of Nationstar’s knowledge). Respectfully, this
conclusion by the Circuit Court simply demonstrates it had
reached a conclusion without conducting the appropriate
analysis of the record before it.
In other words, Ms. Kemp is critical of the circuit court’s approach, but at the same time
fails to explain how the alleged facts in her Complaint fit together to support her theory of
fraud.
And as she does before us, her circuit court briefing cited to paragraph numbers of
the Complaint without actually explaining the theory:
Ms. Kemp has properly pled her MMFPA claim with
particularity so that the Defendants know the details of the
claim (i.e. the who, what, where, when, and why). . . .
Here, Ms. Kemp has notified the Defendants of the following
parts of her MMFPA claim:
• The dates of the illegal imposition of property
inspection fees onto Ms. Kemp’s mortgage account by
39
Seterus. SAC at ⁋⁋ 24-26, 28, 36.
• The dates of the relevant, written communications
where Seterus disclosed to Ms. Kemp that it had
imposed the illegal property inspection fees on Ms.
Kemp’s mortgage account and when she became aware
of the illegal charges. SAC at ⁋⁋ 22, 24, 28.
• The well-pled facts identifying Ms. Kemp’s reliance to
Seterus’ illegal imposition of property inspection fees.
SAC at ⁋⁋34-36, 37.
• Detailed facts concerning Seterus’ knowledge that it
has no right to impose the illegal property inspection
fees but it did so anyway. SAC at ⁋⁋ 2, 5, 7, 9-11, 41-
46.
Based on the foregoing, there simply is no merit to Seterus’
conclusory allegation that Ms. Kemp has not pled her
MMFPA claim with particularity. It is aware of all the key
facts related to Ms. Kemp’s MMFPA claim and can prepare
whatever argument it[] wishes to present to the fact-finder
about its illegal activities.
Although it is not our (or the circuit court’s) role to reconstruct Ms. Kemp’s theory
of fraud, we acknowledge that the circuit court and the parties appeared to be working from
the theory that in both assessing the property inspection fees and in sending her the three
letters, Seterus had misrepresented to Ms. Kemp that the fees were permitted by Maryland
law when in fact they weren’t. From there, we assume, she claims that Seterus knowingly
made those misrepresentations with the intent of inducing Ms. Kemp to agree to the trial
period for the loan modification in July and to the actual loan modification in November,
and that she relied reasonably on those misrepresentations when she decided to enter into
the trial period and the loan modification.
But without an explanation by Ms. Kemp of how, exactly, the different elements of
the theory (e.g., intent to defraud, reasonable reliance) are connected to facts alleged in the
40
Complaint, it is impossible for us to evaluate her assertion that her Complaint pleads
mortgage fraud with particularity. She has, therefore, waived her right to challenge the
circuit court’s dismissal of the MMFPA claim on appeal. Md. Rule 8-504(a)(5) (requiring
that an appellate brief contain “[a]rgument in support of the party’s position”); Klauenberg,
355 Md. at 551–52; Beck, 100 Md. App. at 149.
JUDGMENT OF THE CIRCUIT COURT
FOR MONTGOMERY COUNTY
AFFIRMED IN PART AND REVERSED IN
PART AND CASE REMANDED FOR
FURTHER PROCEEDINGS CONSISTENT
WITH THIS OPINION. COSTS TO BE
DIVIDED EQUALLY.
41
The correction notice(s) for this opinion(s) can be found here:
https://mdcourts.gov/sites/default/files/import/appellate/correctionnotices/cosa/2652s18cn.pdf