Goshen Run HOA v. Cisneros, 223 A.3d 917

Background

Goshen Run HOA levied mandatory assessments; homeowner Cumanda Cisneros fell delinquent and negotiated a repayment plan memorialized in a Promissory Note titled “Promissory Note and Mortgage.”
The Note included a confessed-judgment clause authorizing attorneys to confess judgment on default and a separate clause stating the borrower did not waive legal defenses.
The HOA filed a complaint for judgment by confession in District Court under Maryland Rule 3-611 with an affidavit asserting the instrument was not a prohibited consumer transaction; judgment was entered and enforcement steps were taken before Cisneros was served.
After service Cisneros moved to vacate; the District Court vacated the confessed judgment, then severed the confession clause and allowed the HOA to proceed on a breach-of-contract claim; judgment entered against Cisneros on the breach claim.
On appeal the Circuit Court held HOA assessments are consumer debt, the confessed-judgment procedure violated the Consumer Protection Act (CPA), and the proper remedy under Md. Rule 3-611(b) was dismissal of the confessed-judgment complaint.
The Court of Appeals affirmed in part and reversed in part: it held (1) HOA assessments and the promissory note fell within the CPA; (2) CL § 13-301(12) prohibits confessed-judgment clauses in consumer contracts; and (3) the confessed-judgment complaint had to be dismissed under Rule 3-611(b), but dismissal was without prejudice to a separate severed breach action.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Do HOA assessments / collection fall under the CPA as consumer debt/credit?	Cisneros: Assessments are consumer debt/credit because they fund services for household use and arose from purchase.	Goshen Run: Assessments are property obligations under the HOA Declaration / Real Property law, not consumer transactions.	Held: Assessments are consumer debt; the Note is consumer credit under CPA.
2) Does CL § 13-301(12) bar all confessed-judgment clauses in consumer contracts or only those that expressly waive legal defenses?	Cisneros: The statute prohibits all confessed-judgment clauses because their essence is waiver of pre-judgment defenses.	Goshen Run: Clause only bars confessed judgments that expressly waive defenses; its Note preserved legal defenses so it is lawful.	Held: The statute prohibits all confessed-judgment clauses in consumer contracts; adding a “non-waiver” clause cannot avoid the bar.
3) Was entry of confessed judgment lawful here and what is the proper remedy under Md. Rule 3-611(b)?	Cisneros: Confessed-judgment filing was unlawful under CPA; Rule 3-611(b) requires dismissal.	Goshen Run: If judgment opened/vacated, court may sever confession and allow amended breach claim in same action.	Held: The confessed-judgment complaint failed Rule 3-611(a)/(b) and must be dismissed; vacating then litigating within that unlawful proceeding was improper.
4) May the HOA prosecute a breach claim severed from the confession within the same (initial) confessed-judgment action?	Cisneros: No; CPA intended to prohibit these consumer contracts with confessed-judgment clauses in full.	Goshen Run: Severance clause permits striking confession and proceeding on the Note in the same case.	Held: The HOA may bring a separate breach action with the confession severed, but may not proceed by amending inside the unlawful confessed-judgment action.

Key Cases Cited

D.H. Overmyer Co. v. Frick Co., 405 U.S. 174 (1972) (Supreme Court upholds cognovit procedure as constitutionally waivable in commercial/sophisticated contexts but warns about adhesion/abuse)
Swarb v. Lennox, 405 U.S. 191 (1972) (companion decision discussing confessed judgments and potential class vulnerabilities)
Billingsley v. Lincoln Nat’l Bank, 271 Md. 683 (1974) (Maryland held confessed-judgment rules constitutional as applied in commercial transaction)
Schlossberg v. Citizens Bank of Maryland, 341 Md. 650 (1996) (describes confessed-judgment clauses and Maryland courts’ liberal approach to striking them)
Newman v. Boehm, Pearlstein & Bright, Ltd., 119 F.3d 477 (7th Cir. 1997) (rejects an ‘‘extension of credit’’ test and treats HOA/condo assessments as debt under the FDCPA)
Zimmerman v. HBO Affiliate Group, 834 F.2d 1163 (3d Cir. 1987) (earlier case applying an extension-of-credit analysis under the FDCPA)
MRA Prop. Mgmt., Inc. v. Armstrong, 426 Md. 83 (2012) (Maryland recognized CPA liability for misleading condominium budget/disclosure practices)
Agrelo v. Affinity Mgmt. Servs., LLC, 841 F.3d 944 (11th Cir. 2016) (construing ‘‘debt’’/consumer statutes broadly to include HOA obligations)