Bowers v. Legum & Norman Realty, Inc.
1:24-cv-00620
| D. Maryland | Mar 31, 2025Background
- Plaintiffs Bowers and Bridgett purchased a condominium unit at The Garden Condominium II (GCII) in Ocean City, Maryland, managed by Defendant Legum & Norman Realty, Inc., for $520,000 in 2022.
- GCII had long-standing structural and water infiltration defects, as documented by engineering reports prior to Plaintiffs’ purchase, with multiple special assessments levied to fund repairs.
- After the 2021 Surfside condominium collapse, Fannie Mae instituted stricter requirements for condo loan eligibility, requiring completion of Form 1076 by property managers addressing structural soundness.
- Defendant allegedly submitted Form 1076 to Plaintiffs’ mortgage lender with misleading or false answers, omitting known construction defects and planned special assessments.
- Plaintiffs assert they would not have obtained financing or closed on the unit if their lender had received accurate disclosures.
- Plaintiffs sued for violations of the Maryland Mortgage Fraud Protection Act (MMFPA) and Maryland Consumer Protection Act (MCPA); Defendant moved to dismiss the complaint, challenging both substance and sufficiency of Plaintiffs’ claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| MMFPA applicability to property managers and lender reliance | False statements on Form 1076 intended for lender are actionable, even if lender (not plaintiff) relied | Plaintiffs must personally rely on misrepresentations; lender reliance does not suffice | MMFPA covers lender reliance; Plaintiffs plausibly allege causation/injury |
| Sufficiency of pleadings under MMFPA (Fraud) | Pleadings specify who, what, when, where, and how of fraud and omissions | No benefit to Defendant; no causation; truthful resale certificates given to Plaintiffs | Factual allegations sufficient; benefit to Defendant not necessary |
| Form 1076 as "document" under MMFPA | Form 1076 is a document used in mortgage process and falls within the statutory definition | Form 1076 is an optional, not required, disclosure so is not covered | Form 1076 qualifies as a "document" under MMFPA |
| Conspiracy under MMFPA | Reasonable inference Defendant conspired with HOA or other advisers | No co-conspirator identified; cannot conspire with oneself | Conspiracy claim dismissed without prejudice (not pled with required particularity) |
| MCPA claim (Reliance and causation) | Defendant's misrepresentations to lender "infected" Plaintiffs’ unit purchase, satisfying reliance | Plaintiffs weren't aware of Form 1076 pre-purchase and got truthful resale certificate | Claim survives: Misrepresentation to lender was integral to transaction and caused harm |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard for plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility and facial sufficiency of pleadings)
- Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (Rule 9(b) pleading standard for fraud)
- King v. Rubenstein, 825 F.3d 206 (motion to dismiss standard)
- Johnson v. City of Shelby, Miss., 574 U.S. 10 (dismissal for imperfect statement of legal theory is improper)
- Hoffman v. Stamper, 867 A.2d 276 (indirect reliance in consumer fraud cases)
- Morris v. Osmose Wood Preserving, 667 A.2d 624 (a non-seller's deception can "infect" a consumer sale)