704 F.Supp.3d 633
D. Maryland2023Background
- Plaintiff Scarlett Bowman executed a $510,000 balloon note on December 8, 2006 secured by a deed of trust on her Mount Airy, MD home; Select Portfolio Servicing, Inc. (SPS) serviced the loan and Rosenberg & Associates acted as substitute trustee/foreclosure counsel.
- Bowman fell behind after COVID-19 impacts, entered a trial payment plan with SPS, and requested the loan collateral file and verification of the debt.
- Bowman received a validation/notice letter and, after a dispute letter to Rosenberg, Rosenberg filed a state-court foreclosure on November 11, 2022.
- Bowman sued in Maryland state court asserting MCPA, MMFPA, fraud, FDCPA, and negligence claims; SPS removed to federal court.
- Defendants moved to dismiss / for judgment on the pleadings; the court considered the note, deed, collateral file, recorded assignments, and foreclosure docket as exhibits.
- The court concluded Towd Point (the trust), SPS (servicer), and Rosenberg (substitute trustee) had authority to enforce the note; dismissed all claims except the FDCPA claim against Rosenberg, and granted SPS’s motion in full.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to collect/enforce the Note | Bowman contends Towd Point is not the owner per the allonges and defendants lack authority to collect/foreclose | SPS/Rosenberg contend transfers and indorsements (including blank indorsement) make the servicer/ trustee holders entitled to enforce | Court: holder-in-possession rule controls (Maryland UCC/precedent); no break in chain; Towd Point/SPS/Rosenberg entitled to enforce the note |
| Standing to challenge assignments | Bowman attacks validity/accuracy of assignments/allonges | Defendants: Bowman was not a party/beneficiary of assignments and thus lacks standing to challenge them | Court: Bowman lacks standing to contest assignments/transfers |
| MCPA / MMFPA / Common-law fraud | Bowman alleges deceptive misrepresentations about loan ownership and failure to verify debt | Defendants: no actionable misrepresentation; Rosenberg (law firm) exempt from MCPA; claims must meet Rule 9(b) | Court: Claims dismissed — no plausible intentional misrepresentations, MCPA inapplicable to Rosenberg, and fraud/MMFPA fail Rule 9(b) pleading requirements |
| FDCPA & negligence | Bowman alleges Rosenberg failed to validate debt and issued a stigmatizing "Notice to Occupants;" alleges negligence | Rosenberg: dispute untimely; Notice complied with Maryland law. SPS: not a FDCPA "debt collector" (exempt) | Court: FDCPA claim against Rosenberg survives (dispute plausibly timely given undated validation notice); FDCPA claims against SPS dismissed (exemption for servicer collecting non‑defaulted debt at acquisition); negligence dismissed against both |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard governs Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (apply Twombly standard to factual/legal conclusion distinctions)
- Deutsche Bank Nat. Tr. Co. v. Brock, 430 Md. 714 (Md. 2013) (holder in possession of a note indorsed in blank is entitled to enforce it)
- Anderson v. Burson, 424 Md. 232 (Md. 2011) (limits on enforcing unindorsed notes; distinction between holder and nonholder in possession)
- LeBrun v. Prosise, 197 Md. 466 (Md. 1951) (the note leads and the deed follows; assignment of the note carries the security)
- Henson v. Santander Consumer USA, Inc., 817 F.3d 131 (4th Cir. 2016) (statutory framework for who qualifies as an FDCPA "debt collector")
- Heintz v. Jenkins, 514 U.S. 291 (1995) (definition of "debt collector" includes those who collect debts owed to another)
- Svrcek v. Rosenberg, 203 Md. App. 705 (Md. Ct. Spec. App.) (assignments of deed of trust do not necessarily affect substitute trustee's right to foreclose)