Opinion
No. 01988, September Term, 2008.
Filed: August 24, 2010.
On July 9, 2007, Thomas G. Ramsburg, one of the two appellants in this case, filed a complaint against Litton Loan Servicing, L.P. ("LLS"), appellee, in the Circuit Court for Baltimore City, arising out of LLS' servicing of Ramsburg's home mortgage loan. The circuit court granted LLS's motion for summary judgment. In addition, the circuit court granted LLS's motion for an award of attorney's fees under Maryland Rule 1-341 against Ramsburg's erstwhile counsel, Jason A. Ostendorf, Esquire, the other appellant. Appellants now appeal those judgments and present the following issues:
I. Did the circuit court err, as a matter of law, in granting summary judgment in favor of LLS?
II. Did the circuit court err in sanctioning Mr. Ostendorf pursuant to Rule 1-341?
In this Court, LLS has also filed a motion for an award of attorney's fees pursuant to Rule 1-341 for the expenses it incurred in preparing its brief.
We conclude that the circuit court erred in granting summary judgment to LLS on two of the counts in Ramsburg's amended complaint. We further determine that the circuit court erred in awarding LLS attorney's fees. We will deny LLS's motion for attorneys' fees incurred in the preparation of its brief.
FACTUAL AND PROCEDURAL BACKGROUND
In June, 1999, Ramsburg and his then wife, Faith Ramsburg, purchased a home located at 4349 Winners Circle, Belcamp, Maryland. The Ramsburgs refinanced their home in May, 2006 with a mortgage loan in the principal amount of $274,400. At this time, Ramsburg states, without contradiction from LLS, Mrs. Ramsburg handled the couples' finances. Although the loan documents are not part of the record, we conclude that they contained a grace period for late payments. The Ramsburgs failed to make their first payment, which was due on July 1, 2006, as well as the September and October payments. Ramsburg blamed his wife; they separated and, we gather, eventually divorced. Mrs. Ramsburg plays no further role in this case.
"In mortgage business vernacular, [a grace period is] a time interval specified by the lender that begins the day after the official mortgage due date and typically runs for one or two weeks. When a borrower fails to make the scheduled payment by the conclusion of the grace period, a late fee is imposed." Freddie Mac, Glossary of Finance and Economic Terms (G-M), http://freddiemac.com/finance/smm/g_m.htm (last visited August 4, 2010).
LLS is a mortgage loan service company. It began to service Ramsburg's loan on October 23, 2006. At that time, Ramsburg was already delinquent for three months of mortgage payments.
In a telephone conversation on November 28, 2006, Ramsburg and a representative of LLS agreed to a repayment plan to bring the loan current ("the agreement"). The parties agree that the plan required Ramsburg to make an initial payment of $2,180.20, to be followed by six monthly payments in the amount of $3,052.28, to commence on December 28, 2006. They also agree that Ramsburg made the initial payment on that date.
The parties disagree, however, about another term. LLS claims that the repayment payment plan included a condition that each monthly payment was required on the 28th day of every month without a grace period for late payment. LLS prepared a writing to document the repayment plan which contained that provision. LLS claims that it mailed Ramsburg this agreement for execution on November 28th. Ramsburg asserts that there was no mention made of the grace period in the November 28th conversation, that he did not receive the written agreement until February 7, 2008 and that, before receiving the written document, he was unaware that LLS had abrogated the grace period provision of his loan documents.
Ramsburg did not make a payment on December 28, 2006, as required under the plan. He contacted LLS on January 9, 2007, in order to make a payment in the amount of $3,052.28 using a transfer from his father's home equity line of credit. This payment was intially credited by LLS but was ultimately rejected, apparently due to insufficient funds. At the heart of the dispute between the parties is how and when LLS notified Ramsburg that the January payment failed.
Ramsburg's version is that he had several telephone conversations with LLS employees in January and February and was never told that the payment had failed and, indeed, was affirmatively informed that the loan was in good standing. He claims he did not learn until late February, 2007 that the January payment failed.
LLS argues that Ramsburg was notified in writing in January that the January payment failed so that, even if LLS's employees gave Ramsburg erroneous information by telephone (a fact that LLS does not challenge for the purposes of the summary judgment proceeding), Ramsburg was on notice.
LLS's position is based on the contents of its January 15, 2007 account statement. It asserts that Ramsburg received the statement shortly after its date. Ramsburg does not contest this. The following entries on that document are pertinent to its argument:
01/12/07 Reverse Fee Payment 9.99 9.99 01/12/07 Reverse Suspense 872.08 872.08 01/12/07 Reverse Payment 2,180.20 2,180.20
Transaction Suspense/Other Transaction Date Transaction Description Amount Principal interest Escrow Fee 01/09/07 Payment 2,180.20 54.85 2,105.35 0.00 0.00 01/09/07 Forbearance/Suspense 872.08 0.00 0.00 0.00 872.08 01/09/07 Fee Assessment 8.99 0.00 0.00 0.00 8.99 01/09/07 Corporate Fee Payment 9.99 0.00 0.00 0.00 9.99 01/10/07 County Tax Payment 1,424.02 0.00 0.00 1,424.02 0.00 01/10/07 Other Tax Payment 1.00 0.00 0.00 1.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 01/12/07 (Illegible) 0.00 0.00 0.00 0.00 (Illegible)(Emphasis added.)
The statement did not contain an explanation of the meaning of the terms "reverse payment," "reverse fee payment," or "reverse suspense."
Ramsburg did not make a timely payment on January 28, 2007. He made a payment on February 9, 2007, which was applied to his December 28th payment. On February 27, 2007, LLS referred Ramsburg's loan to the law firm of Friedman MacFayden, P.A. to initiate foreclosure proceedings. Ramsburg attempted to make a payment on February 28, 2007, but attests that he was told that LLS would not accept the payment. On March 12, 2007, Ramsburg mailed a check to LLS in the amount of $6,104.56, which LLS refused to accept.
On March 26, 2007, LLS, through its attorneys, initiated foreclosure proceedings in the Circuit Court for Harford County. During March and April, 2007, representatives from Friedman MacFayden and counsel for Ramsburg discussed resolution of Ramsburg's default. On or about May 14, 2007, LLS and Ramsburg entered into a binding stipulation under the terms of which Ramsburg agreed to pay $15,261.40 to LLS in order to reinstate the loan and to enter into a new payment plan. LLS agreed to cancel the foreclosure sale and dismiss the proceedings without prejudice. Ramsburg paid the money and the foreclosure proceeding was dismissed.
On July 9, 2007, Ramsburg, represented by Ostendorf, initiated the instant action against LLS and Friedman MacFayden, claiming intentional infliction of emotional distress, punitive damages for intentional infliction of emotional distress, negligence, punitive damages for negligence, malicious use of civil process, punitive damages for malicious use of civil process, violations of the Maryland Consumer Protection Act ("MCPA"), civil conspiracy, punitive damages for civil conspiracy, defamation and punitive damages for defamation. LLS filed a motion to dismiss all counts for failure to state a cause of action. The trial court granted LLS' motion with regard to the counts for intentional infliction of emotional distress and punitive damages on November 19, 2007 and denied it as to the other counts.
The MCPA is codified at MD. CODE ANN., COM. LAW § 13-101, et seq.
Eventually, Ramsburg and Friedman MacFayden entered into a confidential settlement agreement. As Friedman MacFayden is not a party to this appeal, we will not discuss its part in the proceedings before the circuit court.
Ramsburg filed an amended complaint on March 24, 2008. The amended complaint added a fraud count against LLS. LLS filed a motion to strike the complaint for failure to state a cause of action. As additional relief, the motion sought an award of attorney's fees pursuant to Rule 1-341 on the grounds that the amended complaint "was filed in bad faith and for no purpose other than to harass" LLS. The circuit court did not rule on the motion.
On April 9, 2008, Ramsburg filed a motion for default judgment as a sanction for what he asserted was LLS's intentional destruction of critical evidence. LLS opposed the motion and, additionally, filed a second motion for attorney's fees pursuant to Maryland Rule 1-341 based on appellants' filing of the motion for default judgment.
LLS filed a motion for summary judgment regarding each count in the amended complaint on April 28, 2008. The trial court held a hearing on LLS's motion for summary judgment and Ramsburg's opposition thereto on June 11, 2008. Following the hearing, the trial court granted LLS' motion on June 17, 2008 "for the reasons noted in [LLS'] Memorandum in Support of Motion for Summary Judgment and its arguments at the hearing of June 11, 2008."
As a housekeeping measure, the circuit court later denied both LLS's and Ramsburg's motions to dismiss as moot.
The circuit court held a hearing on LLS's Rule 1-341 motions and awarded LLS attorney's fees in the amount of $1,000; the court specifically provided that the fees were assessed against Ostendorf, not Ramsburg.
Ramsburg appeals the trial court's entry of summary judgment and Ostendorf the court's order requiring him to pay $1,000 to LLS.
Ostendorf, who is represented by other counsel, filed a motion with this Court to withdraw as Ramsburg's counsel in this appeal. The motion was granted on August 24, 2009. Although Ostendorf and his current counsel prepared the appellants' joint brief, Ramsburg now represents himself pro se.
We will discuss additional facts as necessary in the opinion.
DISCUSSION I. The Motion For Summary Judgment
Appellate courts review the grant of a motion for summary judgment de novo. Chesek v. Jones, 406 Md. 446, 458 (2008); Dashiell v. Meeks, 396 Md. 149, 163 (2006). When there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law, the entry of summary judgment is appropriate. Md. Rule 2-501(f); Pines Point Marina v. Rehak, 406 Md. 613, 618 (2008).
Our first step is to determine whether there is a genuine dispute as to a material fact. Harford County v. Saks Fifth Ave. Distribution Co., 399 Md. 73, 82 (2007); United Servs. Auto. Ass'n v. Riley, 393 Md. 55, 66 (2006). A fact is material if the resolution of it will affect the outcome of the case in some way. Riley, 393 Md. at 67; Robb v. Wancowicz, 119 Md. App. 531, 536 (1998). If we find that there is a genuine dispute of a material fact, then we must reverse the circuit court's grant of summary judgment. If, in weighing the factual allegations of the parties, we conclude that conflicting inferences can be drawn from one or more facts, we utilize the inference most favorable to the non-moving party. Harford County v. Saks, 399 Md. 73, 82 (2007). If we find that there is no genuine dispute of a material fact, we must then determine whether the moving party was entitled to judgment as a matter of law. Myers v. Kayhoe, 391 Md. 188, 203 (2006).
When reviewing a trial court's grant of summary judgment, we are generally confined to the basis relied on by the trial court. Sadler v. Dimensions Healthcare Corp., 378 Md. 509, 536 (2003) (citing Volcjak v. Washington County Hosp. Ass'n, 124 Md. App. 481, 495 (1999)). As we noted, the trial court based its decision to grant summary judgment on "the reasons noted in Defendants' Memorandum in Support of Motion for Summary Judgment and its arguments at the hearing of June 11, 2008." LLS's arguments to the circuit court were the same as the arguments set out in its brief to this Court. Thus, when we summarize LLS's arguments to this Court, we are also explaining the basis of the circuit court's decision.
However, if there exists an alternative ground "upon which the circuit court would have had no discretion to deny summary judgment, summary judgment may be granted for a reason not relied on by the trial court." Warsham v. James Muscatello, Inc., 189 Md. App. 620, 635 (2009) (quoting Dixon v. Dep't of Pub. Safety Corr. Servs., 175 Md. App. 384, 418 n. 18 (2007)). LLS does not make such a contention.
We start with the material facts which are not in dispute at this point in the proceeding: They are:
1. Ramsburg obtained a mortgage loan on his house in the principal amount of $274,400 in May, 2006.
2. Ramsburg's loan was delinquent at the time LLS took over responsibility for servicing the loan on October 23, 2006.
3. On November 28, 2006, LLS and Ramsburg verbally agreed to a new payment plan. The plan required Ramsburg to make an initial payment of $2,180.20, followed by six monthly payments of $3,052.28. (The parties disagree as to whether Ramsburg was told that there would be no grace period in this conversation.)
4. The written version of the repayment agreement also stated that payment would be due on the 28th day of each month and that there would be no grace periods. Ramsburg claims not to have seen the repayment agreement until February 7, 2007.
5. On January 9, 2007, Ramsburg contacted LLS to make the December payment using a draft on his father's home equity line of credit. Initially, the payment was accepted but eventually, the transfer was not honored. Ramsburg claims he received written confirmation from LLS that the payment went through on January 11, 2007.
6. Ramsburg received the January 15, 2007 monthly statement from LLS showing entries for a "reverse payment" in the amount of $2,180.20, a "reverse fee payment" of $9.99, and a "reverse suspense" of $872.08.
7. Ramsburg made his next payment on February 9, 2007. That payment was applied to the payment due on December 28, 2006.
8. Ramsburg had a telephone conversation with an LLS employee on February 12, 2007 to make sure that his loan was in good standing. He was not told that the January payment had been voided. He was told that he needed to sign and return a copy of the repayment agreement, which he did.
9. Ramsburg had another telephone conversation with an LLS employee on February 15, 2007. In that conversation, he was not told that the January payment had been voided but rather that his "account was fully reinstated."
10. On February 27, 2007, LLS referred Ramsburg's loan to Friedman MacFayden to initiate foreclosure proceedings. LLS refused to accept Ramsburg's February 28, 2007 payment. Foreclosure proceedings were initiated on March 26, 2007.
11. LLS and Ramsburg entered into a binding stipulation whereby Ramsburg agreed to pay LLS $15,261.40 to reinstate the loan and enter into a new payment plan. In exchange, LLS cancelled the foreclosure sale and dismissed the foreclosure proceedings, without prejudice.
12. The foreclosure proceedings were dismissed on May 24, 2007.
With these considerations in mind, we will discuss each count of the Amended Complaint seriatim.
A. Negligence
In order to prove negligence, a party must show that the defendant had "(1) a legally cognizable duty on the part of the defendant owing to the plaintiff, (2) a breach of that duty by the defendant, (3) actual injury or loss suffered by the plaintiff, and (4) that such injury or loss resulted from the defendant's breach of the duty." Green v. N.B.S., Inc., 409 Md. 528, 546 (2009) (quoting Green v. N. Arundel Hosp. Ass'n, 366 Md. 597, 607 (2001) (citing Brown v. Dermer, 357 Md. 344, 256 (2000); Valentine v. On Target, Inc., 353 Md. 544, 549 (1999))).
The first count of Ramsburg's amended complaint alleges that LLS, as "a competent mortgage lending . . . financial, and/or banking institution," owed Ramsburg "the duty to exercise that degree of care recognized by similarly situated such institutions, respectfully [sic], engaging in similar business transactions and dealings." The amended complaint further alleges that LLS breached its duty in a wide variety of ways. The most pertinent are:
(a) failing to inform Mr. Ramsburg that his January 9, 2007 payment failed to process or was returned, despite sending him confirmation of the payment on January 11, 2007;
(b) confirming on February 15, 2007 that the account had "Full Reinstatement," and then voiding the payment plan agreement on February 26, 2007, and/or placing the account in foreclosure on February 27, 2007, without first notifying Ramsburg that the account was not in good standing;
(c) failing to, and misrepresenting during the February 15, 2007 telephone conversation with Ramsburg that it would, reinstate the account after confirming that the account had "Full Reinstatement";
(d) failing to reduce the November 28, 2006 payment plan agreement to writing and send the same to Mr. Ramsburg prior to February 1, 2007;
(e) failing to inform Mr. Ramsburg, prior to February 7, 2007, that there were no grace periods under the payment plan agreement; and
(f) failing, after receipt of the February 5, 2007 payment and after depositing the same on February 9, 2007, to inform Mr. Ramsburg that his January 9, 2007 payment failed to process or was returned.
Before evaluating LLS's specific contentions, we will address a preliminary matter. With regard to all of the counts in the amended complaint, LLS argues that
[Ramsburg] claims that Litton never informed him that h is payment in January, 2007 did not process; but an account statement received from Litton and produced in discovery proves that Litton in fact immediately informed him of the payment immediately after it occurred.
The argument is based on the following notation appearing on LLS's January 15, 2007 account statement:
01/12/07 Reverse Payment 2,180.20
There was nothing in the statement itself that explained, or indeed, even hinted, that the term "reverse payment" meant that the payment made earlier that month had not been credited by LLS. Ramsburg claims that he received written confirmation of the transfer and that a LLS employee verbally assured him that the account was current in early February. To be sure, a trier of fact could infer from the account statement that Ramsburg knew throughout this period that the January payment had failed. Summary judgment, however, is not trial and at this juncture, Ramsburg is entitled to the inference that the entry on the account statement did not inform him that the January payment had failed.
LLS presents a three-pronged argument in support of its contention that it was entitled to judgment on the negligence count: first, that it had no duty of care, second that, even if it did, "Ramsburg can identify no triable issue of fact on any of the other elements of a negligence claim," and third, that Ramsburg can prove neither proximate cause nor damages. Our analysis of the law and the record leads us to contrary conclusions.
(1) A Duty of Care?
First, LLS contends that the rights and obligations of a borrower and a lender are established by contract and, as a result, no general duty of care is owed by a lender to a borrower. It cites Parker v. Columbia Bank, 91 Md. App. 346, 379 (1992). Absent special circumstances, LLS continues, "the contract terms must govern, and the borrower cannot pursue remedies for tort claims. . . . These rules logically apply to loan servicers as well, since a servicer such as LLS necessarily acts to enforce the rights and obligations created as a matter of contract between the lender and borrower." LLS's reliance on Parker is misplaced; while Parker does indeed stand for the general rule cited by LLS, our opinion in that case identifies certain circumstances in which a bank will owe a duty of care to a customer. Based upon the record, at this juncture in the proceedings, one of those circumstances is applicable to this case.
LLS points to no loan documents between Ramsburg and his lender that would establish the terms of the relationship that LLS claims controlled Ramsburg's possible remedies.
Parker involved a claim by homeowners that a bank, which had extended construction financing to the plaintiffs breached its duty to them, by, among other things, permitting draws on the construction trust account substantially in excess of the value of work actually performed and that, as a result, the contractor left the home unfinished. Id. at 355-57. They sued the lender, alleging, among other things, that it owed them a duty of care. We disagreed, holding that, as a general rule, the relationship between a lender and a borrower is "ordinarily a contractual relationship . . . and is not fiduciary in nature." Id. at 368. We continued "[c]ourts have been exceedingly reluctant to find special circumstances sufficient to transform an ordinary contractual relationship between a bank and its customer into a fiduciary relationship or to impose any duties on the bank not found in the loan agreement." Id. at 369. However, we recognized four special circumstances which would impose a duty of care upon a bank. Those special circumstances arose when a bank:
The parties seem to agree that LLS would be a "bank" for the purposes of this analysis. We accept this assumption for the purposes of analysis only.
"(1) took on any extra services on behalf of [the borrowers] other than [lending money]; (2) received any greater economic benefit from the transaction other than the normal mortgage; (3) exercised extensive control over [what the loan was used for]; or (4) was asked by [the borrowers] if there were any lien actions pending."
Id. at 371 (quoting Tokarz v. Frontier Federal Sav. Loan Ass'n, 33 Wash.App. 456, 462 (1982)).
We do not read Parker's fourth condition as being restricted only to questions about lien proceedings but rather referring also to inquiries of like nature and import.
Ramsburg contends that, because LLS' representatives told him that his account was in good standing, he qualifies under the fourth exception, thus establishing a duty of care on the part of LLS. In the context of the facts of this case as we view them for purposes of a motion for summary judgment, we agree. Ramsburg's inquiry was not a mundane question such as asking the balance of one's checking account. An inquiry whether a loan account is in good standing requires the person responding not only to determine facts, e.g. whether payment was made on or before a specific date, but also to assess the legal implication of those facts upon the borrower's and lender's contract rights. We recognize that Ramsburg's loan documents may address the lender's responsibility but those documents are not in the record before us. When a bank (as LLS claims it should be treated) undertakes to communicate with a customer as to the status of a loan, it owes the customer a duty to provide accurate information.
(2) Issues of Material Fact?
Next we turn to whether Ramsburg identifies evidence establishing one or more issues of material fact regarding breach of LLS' alleged duty of care. N.B.S., Inc., 409 Md. at 546 (quoting N. Arundel Hosp. Ass'n, 366 Md. at 607 (citing Brown, 357 Md. at 256; Valentine, 353 Md. at 549)). We conclude that he has.
Ramsburg's theory is that he was unaware that his January 9, 2007 payment did not process until shortly before the initiation of the foreclosure proceedings. He states that he did not know that there was no grace period until he received and reviewed the repayment plan on February 7, 2007. He argues that, had LLS informed him that his January 9, 2007 payment had not processed and that there was no grace period, he would have taken steps to correct the situation.
LLS's counter to this argument is simply that Ramsburg should have known that he wasn't making payments and, in any event, that Ramsburg's failure to make payments precipitated the foreclosure proceeding. LLS's argument is not persuasive. Ramsburg's affidavit alleges that he negotiated a new payment schedule with LLS on November 28, 2006 but that the terms of his mortgage would be otherwise unchanged. He claims that LLS did not inform him that there would be no grace periods for late payments and that LLS did not, at that time, provide him with a written modification agreement. He asserts that, on January 9, 2007, his father made his December payment by wire transfer to LLS and that he received a written confirmation of payment from LLS. On February 5, 2007, he made his January payment. Two day later, he learned, for the first time, that he no longer had a grace period for late payments. He spoke to an LLS representative on February 15th and was affirmatively told that the account was in good standing.
We note that Ramsburg's affidavit in opposition to LLS's motion for summary judgment was signed by him with the affirmation by him "under the penalties of perjury that the foregoing statements are true to the best of my knowledge, information and belief." While this deficiency might have been dispositive, the issue was not raised before the circuit court. See De Coster v. Westinghouse, 333 Md. 245, 263 (1994).
There is an issue of fact as to whether Ramsburg should have known his loan was in default. The is material because Ramsburg claims that, (1) he was informed by LLS in the critical time period that his loan was "fully reinstated," and (2) had he been timely informed of the actual status of his loan, he would have corrected them prior to the foreclosure proceeding.
(3) Proximate Cause and Damages?
Ramsburg must also have created a triable issue of fact as to injury proximately resulting from LLS' alleged breach. N.B.S., Inc., 409 Md. at 546 (quoting N. Arundel Hosp. Ass'n, 366 Md. at 607 (citing Brown, 357 Md. at 256; Valentine, 353 Md. at 549)). Ramsburg alleges a host of damages he has suffered as a result of LLS' alleged breach. Specifically, he argues that, as a result of LLS' alleged breach of its alleged duty of care, he has suffered severe mental anguish, persistent headaches, repeated instances of vomiting resulting from anxiety, undue stress and other mental suffering, loss of sleep, anxiety, embarrassment and fear, depression, constant doubt, worry and fear as to the security of his home, other severe mental and physical pain and suffering, damage to his credit rating, future pain and suffering and "[o]ther such economic and noneconomic damages as have arisen or shall hereafter arise."
In response, LLS contends that Ramsburg paid money to bring his loan current to induce it to dismiss the foreclosure proceedings and that he "repeatedly acknowledged that he was in default and . . . that he took action to cure his default. Under the circumstances, the proper actions taken by Litton to enforce Ramsburg's legal obligations cannot have been the proximate cause of legally cognizable injury." The argument founders on the word "proper." Ramsburg has established issues of material fact as to (1) whether LLS owed him a special duty; (2) whether LLS unilaterally abrogated a contractual grace period for late payments without informing him; and (3) whether LLS provided him with inaccurate and misleading information regarding the status of his account leading to an unnecessary and avoidable foreclosure proceeding. If Ramsburg prevails on the factual matters, the foreclosure proceeding was not proper.
B. Malicious Use of Civil Process
The elements of malicious use of civil process are "[(1) a] prior civil proceeding was instituted by the defendant [;(2) t]he proceeding was instituted without probable cause[; (3) t]he proceeding was instituted with malice[; (4) t]he proceeding terminated in favor of the plaintiff[; (5) d]amages were inflicted upon the plaintiff by arrest or imprisonment, by seizure of property, or other special injury which would not necessarily result in all suits prosecuted to recover for a like cause of action." Berman v. Karvounis, 308 Md. 259, 266 (1987) (quoting Keys v. Chrysler Credit Corp., 303 Md. 397, 407 (1985)).
Ramsburg alleged that LLS and Friedman MacFayden instituted the foreclosure proceedings in bad faith. Ramsburg asserts that had LLS and Friedman MacFayden "engaged in good faith and/or investigated the matter, [they] would have discovered that there was no basis to file the proceedings against Mr. Ramsburg." Ramsburg further stated that, as such, LLS did not have probable cause to file the foreclosure proceedings, that:
[D]espite numerous conversations with [Ramsburg], during which conversations it was revealed that [LLS] did not engage in mitigation or observe other statutory and judicially-imposed standards before ordering the filing of the foreclosure proceedings as required by Maryland law, [LLS] never followed-up on the information, or otherwise properly investigated the matter."
Ramsburg does not identify which statutory and judicially-imposed standards LLS failed to observe.
Ramsburg also asserted that LLS instituted the foreclosure proceedings with malice because the proceedings were instituted without probable cause and engaged in the conduct described in the negligence count. Finally, Ramsburg claims that he incurred special damages as a result of the institution of the foreclosure proceeding, in the form of defamation and damage to his credit rating.
Ramsburg's argument fails because the damages he alleges are not "special damages." Special damages, in the malicious use of civil process context, arise out of a physical seizure of property or similar injury to an owner's possessory rights. One Thousand Fleet Ltd. Pshp. v. Guerriero, 346 Md. 29, 47-48 (1997) (citing Krashes v. White, 275 Md. 549, 555 (1975)). As there was no physical seizure of Ramsburg's property, LLS was entitled to judgment as a matter of law.
C. The Maryland Consumer Protection Act
In order to prove a private consumer is entitled to damages under the MCPA, the consumer must prove (1) that the defendant engaged in unfair or deceptive trade practices prohibited by the MCPA, and (2) that the consumer suffered actual loss or injury as a result of the prohibited practices. MCPA § 13-408; see also Hall v. Lovell Regency Homes Ltd. Pshp., 121 Md. App. 1, 27 (1998). In regard to the type of loss or injury required under MCPA § 13-408, the Court of Appeals in Lloyd v. GMC, 397 Md. 108, 142 (2007), stated that:
[I]n order to articulate a cognizable injury under the Consumer Protection Act, the injury must be objectively identifiable. In other words, the consumer must have suffered an identifiable loss, measured by the amount the consumer spent or lost as a result of his or her reliance on the sellers' misrepresentation.
(Citations omitted).
Ramsburg alleges that LLS violated the MCPA by committing unfair or deceptive trade practices by engaging in the conduct described in the other counts of the complaint. Specifically, Ramsburg alleges LLS violated Section 13-301(1), (3), (11) and (14) of the MCPA. He claims that, as a result of LLS's and Friedman MacFayden's allegedly unfair and deceptive trade practices, he has suffered severe mental anguish, persistent headaches, repeated instances of vomiting resulting from anxiety, undue stress and other mental suffering, loss of sleep, anxiety, embarrassment and fear, depression, constant doubt, worry and fear as to the security of his home, other severe mental and physical pain and suffering, damage to his credit rating, future pain and suffering and "[o]ther such economic and noneconomic damages as have arisen or shall hereafter arise."
MCPA § 13-301 provides, in pertinent part:
Unfair or deceptive trade practices include any:
(1) False, falsely disparaging, or misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers;
LLS argues that Ramsburg did not identify any support for the elements of his claim. It states that LLS proceeded as a prudent mortgage loan servicer but failed to provide any authority or facts to support this contention. They do not dispute that Ramsburg contends that LLS misrepresented the status of Ramsburg's loan. As we stated in Section I (A), Ramsburg has created a triable issue of fact on this issue.
In his opposition to the motion for summary judgment, Ramsburg submitted an expert's report concluding that LLS's handling of Ramsburg's loan "fell below the recognized standard of care applicable to mortgage servicers such as Litton."
LLS' main argument supporting the trial court's grant of summary judgment on this count is that the type of damages alleged by Ramsburg are not "objectively identifiable" damages that are recoverable under the MCPA. Ramsburg, however, does allege objectively identifiable economic losses. Specifically, Ramsburg claims that LLS' unfair and deceptive trade practices have made it impossible for him to refinance his loan until at least April, 2011, thus preventing him from taking advantage of more favorable interest rates. Ramsburg supports these allegations with an expert's report, which calculates Ramsburg's damages at $36,000. Ramsburg has created a triable issue of fact regarding whether or not he suffered actual loss or injury and we shall reverse and remand the trial court's grant of summary judgment as to this count.
D. Defamation
In order to prove defamation, one must prove "(1) that the defendant made a defamatory statement to a third person, (2) that the statement was false, (3) that the defendant was legally at fault in making the statement, and (4) that the plaintiff thereby suffered harm." Offen v. Brenner, 402 Md. 191, 198 (2007) (citing Smith v. Danielczyk, 400 Md. 98, 115 (2007)). Ramsburg also sought punitive damages on the defamation claim, arguing that LLS defamed Ramsburg with actual malice.
Ramsburg alleges that LLS defamed him by reporting to the three credit bureaus that Ramsburg was late in his payments, defaulted on, and/or was otherwise not in good standing in his mortgage on January 31, 2007, February 28, 2007, April 30, 2007, May 31, 2007 and June 30, 2007. Ramsburg claims that LLS made those statements negligently or knew or should have known that the allegations were false. However, there is no dispute that, for whatever reason, Ramsburg failed to make mortgage payments. Ramsburg's complaint is that LLS provided him with incorrect information when it was under a duty to give him accurate information. Ramsburg's alleged damages flow from LLS's alleged failure to observe its duty of care, not from statements that his mortgage was not in good standing. As such, LLS was entitled to summary judgment on this count as a matter of law.
E. Fraud
Ramsburg's final claim at issue before us is that LLS committed common law fraud by "intentionally conceal[ing] material facts that it had a duty to disclose, and/or [making] false representations of material facts that it knew were false or [making] misrepresentations with such reckless indifference to the truth that it would be reasonable to charge [LLS] with knowledge of their falsity." In order to prove fraud, one must prove:
"(1) that the defendant made a. false representation to the plaintiff; (2) that its falsity was either known to the defendant or that the representation was made with reckless indifference as to its truth; (3) that the misrepresentation was made for the purpose of defrauding the plaintiff; (4) that the plaintiff relied on the misrepresentation and had the right to rely on it; and (5) that the plaintiff suffered compensable injury resulting from the misrepresentation."
Sass v. Andrew, 152 Md. App. 406, 429 (2003) (quoting Nails v. S R, Inc., 334 Md. 398, 415 (1994)).
While Ramsburg, through his affidavit, has presented assertions of fact to create issues of material fact as to the negligence and MCPA counts, he presents no evidence that, directly or by inference, supports the proposition that LLS's alleged misstatements were made for the purpose of defrauding him. In his affidavit, he attempts to infer fraudulent intent on the basis that LLS stood to benefit financially from foreclosing on his house, when the amount of the loan was less than its fair market value. This speculative effort ignores the fact that any surplus resulting from the sale of Ramsburg's home would have been paid to Ramsburg or to his other creditors. See Maryland Rule 14-216(a). Since Ramsburg has not created a triable issue with regard to LLS' purpose in allegedly making fraudulent statements to him, LLS was entitled to summary judgment on the fraud count.
II. The Rule 1-341 Motions
At two different points in the proceedings in the circuit court, LLS filed motions seeking an award of attorney's fees pursuant to Maryland Rule 1-341. The motions were based upon Ostendorf's filing the amended complaint and a subsequent motion for a default judgment premised upon what Ostendorf termed LLS's spoliation of evidence.
After summary judgment was entered in LLS's favor, the circuit court conducted a hearing on the motions on September 26, 2008 and, at the conclusion thereof, ordered Ostendorf, but not Ramsburg, to pay $1,000 to LLS. Ostendorf appeals this order.
Rule 1-341 permits the court to require payment of an award by attorney, client, or both. While LLS's motion did not distinguish between counsel and client, its arguments made it clear that Ostendorf was the intended target. LLS made this point explicit at the hearing on its motions, and the circuit court agreed:
And under those circumstances, the Court does not think it's appropriate to require the client to do it because it was not a client decision in any way, shape, or form, nor is there any suggestion that it was the client withholding, or not giving forth information, or that the client somehow was a party to it.
Maryland Rule 1-341 provides:
In any civil action, if the court finds that the conduct of any party in maintaining or defending any proceeding was in bad faith or without substantial justification the court may require the offending party or the attorney advising the conduct or both of them to pay to the adverse party the costs of the proceeding and the reasonable expenses, including reasonable attorney's fees, incurred by the adverse party in opposing it.
An award pursuant to Maryland Rule 1-341 is not a sanction but is rather a mechanism to reimburse a party for expenses actually incurred in opposing the bad faith or unjustified conduct. Beery v. Maryland Medical Lab, 89 Md. App.81, 102 (1991). Judicial restraint is especially appropriate when it comes to awarding attorneys' fees. Legal Aid Bureau, Inc. v. Bishop's Garth Assocs. Ltd. P'ship, 75 Md. App. 214, 223 (1988). An award of counsel fees under Rule 1-341 is an "`extraordinary remedy,' which should be exercised only in rare and exceptional cases." Barnes v. Rosenthal Toyota, Inc., 126 Md. App. 97, 105 (1999) (citing Black v. Fox Hills N. Cmty. Ass'n, Inc., 90 Md. App. 75, 83 (1992)).
Writing for this Court in Garcia v. Foulger Pratt, 155 Md. App. 634, 676-77 (2003), Judge Sharer explained:
Maryland courts employ a two-step process to determine if sanctions under the rule are warranted. First, the court must determine if the party or attorney maintained or defended the action in bad faith or without substantial justification. Bad faith, in the context of Rule 1-341, exists when a party litigates with the purpose of intentional harassment or unreasonable delay. For there to be substantial justification, the litigant's position must be fairly debatable and within the realm of legitimate advocacy. The action(s) must be viewed at the time it was taken, not from judicial hindsight.
Second, if a court finds a claim was pursued in bad faith or without substantial justification, it then has to determine whether to award sanctions. Indeed, a court has the discretion to refuse sanctions, even if there is a finding of bad faith.
(Internal citations and quotation marks omitted.)
LLS does not assert that Ostendorf was guilty of "bad faith," as that term has been defined in Garcia and other cases. Instead, it argues that Ostendorf s actions were without substantial justification, that is, were not fairly debatable factually and were outside of the realm of legitimate advocacy. We will now turn to the specifics of each motion.
(A) The Amended Complaint
LLS filed its first motion in conjunction with a motion to strike Ramsburg's amended complaint. The crux of the motion was LLS's assertion that Ramsburg's allegations that LLS wrongfully filed the foreclosure proceeding were false and were known by Ramsburg to be false because:
[Ramsburg] brought this action despite having a document in his possession which completely contradicts the factual basis for his claims. [Ramsburg's] claims rely on the allegation that Litton failed to notify [Ramsburg] that a payment attempted on January 9, 2007 failed to process. However, [Ramsburg] produced in discovery a copy of his January 2007 monthly billing statement, in which Litton clearly informed [Ramsburg] that this payment failed to process. This document proves that [Ramsburg's] claims are based on false factual allegations.
This contention is based upon, the "reverse payment" notation in the January, 2007 account statement. As we explained in Part I (A), there is nothing in the statement itself that explained, or indeed, even hinted, that the term "reverse payment" meant that the payment made earlier that month had not been credited by LLS. Ramsburg claimed that, during this period, a representative verbally assured him that the account was current in early February. This claim remains unchallenged by LLS.
Under these circumstances, the circuit court attributed a significance to the entry which was unwarranted. If the facts are viewed in Ramsburg's favor (and Ostendorf was certainly entitled to assess them from that persepctive when he filed the amended complaint), there are viable negligence and MCPA claims against LLS. The amended complaint added a fraud count which, ultimately, did not survive summary judgment. That Ostendorf was unable through discovery to identify evidence to support the claim does not mean that the count was filed without substantial justification or fell outside of the "realm of legitimate advocacy." The circuit court erred in finding that the filing of the amended complaint was without substantial justification.
(B) The Motion for a Default Judgment
During discovery, LLS produced a "composite report" — a log of documents generated by LLS pertaining to its servicing of Ramsburg's loan. The log did not mention four documents prepared by LLS that were arguably pertinent to the issues between the parties. Each of these documents was generated between November 28, 2006 and February 6, 2007, i.e., between five and eight months prior to the filing of the current action. With this as a basis, and citing Klupt v. Krongard, 126 Md. App. 179, 201 (1999), as authority, Ostendorf filed a motion for entry of a default judgment as a sanction for what he termed LLS's "willful and contumacious destruction and falsification of evidence."
In Klupt, we affirmed a trial court's decision to dismiss Klupt's counterclaim because he committed a long series of violations of the discovery rules, including lying under oath with regard to the existence of documents, altering some documents responsive to discovery requests and destroying others. Id. at 186-87, 190. Klupt eventually admitted his misdeeds in a deposition. Writing for this Court, Judge Thieme discussed the distinction between spoliation, which can be the basis for the fact-finder to determine that the lost or missing evidence would have been harmful to the party that failed to preserve it, and the intentional destruction of possible evidence during discovery. Id. at 197-98. Spoliation is an evidentiary matter; the destruction of possible evidence during discovery is an affront to a court's authority to regulate proceedings before it. Id. at 198. Spoliation may occur through either intent or negligence; Klupt was concerned solely with the intentional destruction of evidence. Spoliation may occur prior to, or during, litigation. Klupt was concerned only with the destruction of evidence during the discovery phase of litigation.
In his motion for a default judgment, Ostendorf pointed to no facts to support his assertion that LLS had intentionally destroyed documents, much less that documents were destroyed in the process of discovery. At the conclusion of the Rule 1-341 hearing, the circuit court found that:
[W]hat [Ostendorf] has presented . . . does not show that a document has been altered. And I want to be really clear. I don't know if it has been altered or not, but there's been no such showing.
There's been a theory that's developed. I don't know whether or not it's true, what that's what it is. There's no — — there's no proof at all, even anything that could come close to what we would call proof that a document's been altered and falsified.
And certainly there is nothing on top of that[,] that it was done in the context of litigation; that is, . . . discovery. . . .
But of course we haven't even got to the first part, so in some ways to say that we haven't gotten to the second part is repetitive. And then we haven't gotten to the other part that says that as a result of that it's appropriate for the Court to issue a default judgment.
(Emphasis added.)
There was a substantial basis for the circuit court's finding that the filing of the motion for a default judgment was without substantial justification.
The circuit court's decision to award attorney's fees was also based upon its other finding that the amended complaint was without substantial justification. We cannot determine whether, or how, the circuit court would have exercised its discretion in awarding fees based upon one, but not both incidents.
Since this case is being remanded for further proceedings, we would normally simply vacate the Rule 1-341 order so that the circuit court could reconsider the matter. However, Ostendorf no longer represents Ramsburg and we do not believe that his further participation, even tangentially, serves the interests of either Ramsburg or LLS.
At the hearing on the Rule 1-341 motions, LLS's attorney indicated that he filed them not out of a desire to seek reimbursement for LLS's expenditures but because "a strong message needs to be sent that [this] kind of conduct . . . cannot be tolerated." The circuit court agreed: "the Court is also convinced that actually an admonition from this Court will not have any effect." LLS's counsel suggested an award of $1,000, an amount considerably less than the fees it asserts were generated by the amended complaint and the motion for default judgment. The circuit court agreed. In the interests of judicial economy, we will reverse the award of sanctions and instead exercise our discretion under Maryland Rule 8-607 to assess a portion of the costs of this appeal against Ostendorf. THE JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY IS REVERSED IN PART AND AFFIRMED IN PART. THE CASE IS REMANDED TO THE CIRCUIT COURT FOR FURTHER PROCEEDINGS. THE ORDER AWARDING APPELLEE $1,000 IN ATTORNEY'S FEES IS REVERSED. APPELLANT JASON A. OSTENDORF TO PAY $500 IN COSTS; THE REMAINING COSTS TO BE PAID BY APPELLEE.
In this Court, LLS filed a motion for an award of attorney's fees pursuant to Rule 1-341 against both appellants. The motion for sanctions is based on the assertion that appellants' brief is meritless. We deny the motion.
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(3) Failure to state a material fact if the failure deceives or tends to deceive;
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(11) Use of any plan or scheme in soliciting sales or services over the telephone that misrepresents the solicitor's true status or mission;
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(14) Violation of a provision of:
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(iii) Title 14, Subtitle 2 of this article, the Maryland Consumer Debt Collection Act. . .