Blackstone v. Sharma Shanahan v. Marvastian
161 A.3d 718
Md. Ct. Spec. App.2017Background
- Two consolidated Maryland foreclosure actions filed by substitute trustees on behalf of Ventures Trust (a Delaware statutory trust) seeking to foreclose defaulted residential loans purchased after default.
- Ventures Trust acquired the loans through MCM Capital; substitute trustees filed orders to docket in 2014.
- Borrowers moved to dismiss or enjoin the sales under Md. Rule 14-211, arguing the trust (a debt purchaser) lacked a Maryland collection-agency license under the MCALA.
- Trial courts dismissed both foreclosures without prejudice, concluding Ventures Trust was a "collection agency" under the MCALA and required a license before attempting collection via foreclosure.
- Ventures Trust argued it was exempt as a "trust company" and that foreign statutory trusts foreclosing in Maryland are not "doing business" under relevant corporate registration provisions; courts rejected both defenses.
- Court of Special Appeals affirmed: debt purchasers who sue to collect defaulted consumer claims via foreclosure must be licensed under MCALA unless an applicable statutory exemption applies; Ventures Trust is not a "trust company" exempt from MCALA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a party that authorizes a trustee to initiate foreclosure must be licensed under MCALA before filing suit | MCALA covers debt purchasers who own defaulted consumer claims and engage in collection; without a license a judgment is void (relying on Finch) | Foreclosure enforcement of a security interest is not "collection" under MCALA; statute and legislative history do not mention foreclosures | Yes. Debt purchasers who acquire defaulted consumer claims and seek to collect (including by foreclosure) must obtain an MCALA license |
| Whether a foreign statutory trust like Ventures Trust is exempt from MCALA as a "trust company" or as not "doing business" in Maryland | Ventures Trust is a "trust company" (holds trust property) or is not "doing business" in MD so MCALA licensing/registration exemptions apply | MCALA exemptions are limited to those in the statute; "trust company" exemption does not include this foreign statutory trust and the Corporations & Associations exception does not extend to MCALA | No. Ventures Trust is not a "trust company" within MCALA; the foreign-trust "not doing business" provision in the corporate code does not exempt it from MCALA |
Key Cases Cited
- Finch v. LVNV Funding, LLC, 212 Md. App. 748 (recognizing that an unlicensed collection agency has no authority to sue and judgments for unlicensed collectors are void)
- Old Republic Ins. Co. v. Gordon, 228 Md. App. 1 (interpreting MCALA amendments to reach debt purchasers who acquire defaulted claims)
- Ademiluyi v. PennyMac Mortg. Inv. Tr. Holdings I, LLC, 929 F. Supp. 2d 502 (D. Md.) (concluding allegations that a debt purchaser pursued foreclosure without an MCALA license state a cognizable claim)
- Hobby v. Burson, 222 Md. App. 1 (discussing standard of review for injunctions/stays in foreclosure proceedings)
- Board of Liquor License Comm’rs v. Kougl, 451 Md. 507 (explaining that courts give considerable weight to administrative agency interpretations of statutes they administer)