Thompkins v. Mountaineer Investments, LLC
439 Md. 118
Md.2014Background
- Marshall and Antoinette Thompkins obtained a 2nd‑mortgage (secondary mortgage loan) in 1998; the lender (Mortgage Lenders) assigned the promissory note the same day and the loan later was assigned to Mountaineer Investments, LLC.
- The Thompkinses claimed Mortgage Lenders violated the Maryland Secondary Mortgage Loan Law (SMLL) at origination (excess origination fees, missing disclosures) and sued Mortgage Lenders and Mountaineer in 2009, after they had paid the loan in full and Mountaineer had released the deed of trust.
- Complaint sought remedies under CL §12‑413 (limitation to principal, and treble damages for knowing violations); plaintiffs alleged Mountaineer, as assignee, was subject to all claims and defenses against the original lender.
- Circuit Court granted summary judgment for Mountaineer; Court of Special Appeals affirmed, holding an assignee is not liable for assignor’s origination‑time SMLL violations unless it expressly assumed liability or committed its own SMLL violations; only recoupment might be available.
- Maryland Court of Appeals granted certiorari and affirmed: SMLL does not itself make assignees directly liable for lender’s origination violations; UCC §3‑306 does not impose derivative liability; UCC §3‑305 permits recoupment to reduce amounts owing but not when loan is paid off; common law does not impose derivative liability absent an express assumption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SMLL makes assignee directly liable for lender’s origination violations | SMLL protections should follow the loan; assignee should be liable for lender’s violations | SMLL contains no provision making assignees directly liable; assignee did not make or originate the loan | Assignee is not directly liable under SMLL for lender’s origination violations |
| Whether UCC CL §3‑306 makes assignee derivatively liable for lender’s SMLL violations | §3‑306 subjects transferees to claims to the instrument unless holder in due course; plaintiffs’ SMLL claim is a claim to the instrument/proceeds | Plaintiffs’ SMLL remedy is not a property/possessory claim to the instrument but a statutory penalty and thus not within §3‑306 | §3‑306 does not create derivative liability; the claim is extraneous to the instrument and instead is a claim in recoupment under §3‑305 |
| Whether UCC CL §3‑305 permits asserting SMLL claims against assignee | Plaintiffs argued they could reduce amounts owed to assignee by lender’s SMLL liability | Mountaineer noted plaintiffs had paid the loan in full so no amount remained to reduce; also asserted holder‑in‑due‑course defenses may bar recoupment | §3‑305 permits recoupment only to reduce amount owing at time of suit; no recoupment when loan already paid in full |
| Whether Maryland common law imposes derivative assignee liability for lender’s SMLL violations | Assignee “stands in the shoes” of assignor and takes subject to defenses and liabilities | No general delegation presumption; absent express assumption, assignee does not assume assignor’s origination liabilities | No common‑law derivative liability for assignee unless it expressly assumed the lender’s liability |
Key Cases Cited
- Drew v. First Guaranty Mortgage Corp., 379 Md. 318, 842 A.2d 1 (Md. 2003) (describing SMLL’s consumer‑protection purpose)
- Master Financial, Inc. v. Crowder, 409 Md. 51, 972 A.2d 864 (Md. 2009) (SMLL claims for origination defects are extraneous to notes/deeds and not claims to the instrument)
- Pines Plaza Limited Partnership v. Berklely Trace, LLC, 431 Md. 652, 66 A.3d 720 (Md. 2013) (assignment principles: when assignee assumes obligations; delegation vs. non‑delegation presumptions)
- Polek v. J.P. Morgan Chase Bank, N.A., 424 Md. 333, 36 A.3d 399 (Md. 2012) (aggregation of itemized fees under SMLL addressed in prior decisions)
- Webb v. Baltimore Commercial Bank, 181 Md. 572, 31 A.2d 174 (Md. 1943) (discusses defenses to assignees and holder in due course concepts)