This case arises out of an action filed in the Circuit Court for Baltimore City by co-appellants Larry Finch (“Finch”) and Kurt A. Dorsey (“Dorsey”) (collectively, “appellants”), against appellee, LVNV Funding, LLC (“LVNV”). In 2008, LVNV filed debt collection suits against Finch and Dorsey in the District Court for Baltimore City. Default judgments were entered against each appellant. Appellants thereafter filed a class action in the circuit court, alleging that LVNV was not licensed as a collection agency, as required by Maryland law, when it obtained the underlying district court judgments. Appellants sought to represent a class comprised of all persons against whom LVNV had obtained a judgment for an alleged debt in Maryland state courts during the period of time in which LVNV was unlicensed. The class action complaint asserted five claims. Appellants sought declaratory and injunctive
Appellants present three questions for review, which we have combined and rephrased as follows:
1. Whether the judgments entered in favor of LVNV in the district court are void because LVNV was not licensed as a collection agency when it filed the actions as required under Maryland law.
2. Whether a party may collaterally attack a judgment entered in favor of an unlicensed collection agency.
For the reasons set forth below, we reverse the decision of the Circuit Court for Baltimore City.
FACTUAL AND PROCEDURAL BACKGROUND
Finch and Dorsey are consumers who accumulated credit card debts. LVNV acquired appellants’ unpaid debts by assignment. In 2008, LVNV filed collection suits against Finch and Dorsey in the District Court of Maryland for Baltimore City. Both Finch and Dorsey were served, and neither contested LVNV’s claims. The district court entered a default judgment against Finch on July 31, 2009 in the amount of $3,621.67. In 2011, LVNV obtained a writ of garnishment against Finch’s earnings. The district court also entered a default judgment against Dorsey on April 8, 2009 in the amount of $5,838.95.
Appellants filed a putative class action in the circuit court on November 11, 2009. Appellants sought to represent a class comprised of:
Those persons sued by LVNV in Maryland state courts from October 30, 2007 through February 17, 2010 against whom LVNV obtained a judgment for an alleged debt, interest or costs, including attorneys fees in its favor in an attempt to collect a consumer debt.
In their complaint, appellants alleged that LVNV engaged in illegal collection of debts because LVNV was not licensed as a collection agency in Maryland, as required by the Maryland Collection Agency Licensing Act (“MCALA”), Md.Code Ann., Bus. Reg. § 7-301. The complaint further alleged that LVNV’s unlicensed collection activities violated the Maryland Consumer Debt Collection Act (“MCDCA”), Md.Code Ann., Com. Law §§ 14-201 to 14-204, and the Maryland Consumer Protection Act (“MCPA”), Md.Code Ann., Com. Law § 13-301. Finally, the complaint alleged that the judgments against Finch and Dorsey were obtained based upon affidavits that were irregular in certain respects.
The appellants’ complaint asserted five causes of action. In the first three counts, appellants sought a declaratory judgment and injunctive relief, both individually and as a class, based on LVNV’s unlawful activities as an unlicensed collection agency. In Count IV, appellants alleged unjust enrichment and sought to recover from LVNV “all judgment sums, costs, and pre- and post-judgment interest it has collected.... ” In Count V, appellants asserted individual and class claims for damages under the MCDCA and the MCPA.
LVNV filed a motion to dismiss appellants’ circuit court complaint on the basis that it constituted an impermissible collateral attack on the existing district court judgments. After holding a hearing, the circuit court dismissed appellants’ complaint, explaining that “[a]ll of [appellants]’
STANDARD OF REVIEW
The standard of review of a grant of a motion to dismiss is de novo. Reichs Ford Road Joint Venture v. State Roads Com’n of the State Highway Admin.,
On appeal from a dismissal for failure to state a claim [the Court] must assume the truth of, and view in a light most favorable to the non-moving party, all well-pleaded facts and allegations contained in the complaint, as well as all inferences that may be reasonably drawn from them, and order of dismissal only if the allegations and permissible inferences, if true, would not afford relief to the plaintiff, ie., the allegations do not state a cause of action for which relief may be granted.
Shailendra Kumar, P.A. v. Dhanda,
DISCUSSION
Appellants argue that the circuit court erred by dismissing appellants’ claims as an impermissible collateral attack on the district court judgments. In support, appellants contend that the district court judgments are void because LVNV was not licensed as a collection agency in Maryland when it filed the district court actions against Dorsey, Finch, and other class members. Appellants posit that the collateral attack doctrine does not apply because the district court judgments are void. LVNV asserts that the district court judgments are valid, and, therefore, the circuit court properly dismissed appellants’ action as an impermissible collateral attack. We hold that judgments entered in favor of an unlicensed collection agency are void. We further hold that the collateral attack doctrine does not apply to void judgments. Accordingly, the circuit court erred by dismissing appellants’ complaint.
I. THE VALIDITY OF DISTRICT COURT JUDGMENTS
We first consider whether the district court judgments are void, as urged by appellants. It appears from the record that the circuit court did not expressly consider the validity of the judgments. Rather, the circuit court analyzed whether, among other things, the request for a declaration that the judgments are void constitutes an impermissible collateral attack. In our view, the requisite analysis first requires a determination as to whether the underlying judgmerits are void, and only then can we consider the implications of the collateral attack doctrine. To be sure, “a void judgment is subject to attack either directly by appeal or collaterally----It does not constitute res judicata.” State v. Ambrose,
A. Void Judgments
Our analysis must necessarily begin by examining the distinction between a void and voidable judgment. A void judgment “is a mere nullity, which [is] disregarded entirely, and could [be] attacked collaterally, and ... could [be] discharged by any other court of competent jurisdiction.... ” Smith v. State,
Judgments are void as a matter of law in various circumstances. For example, a judgment is void if it was obtained by a “non-lawyer” through the unauthorized practice of law.
In Turkey Point, we held that a non-lawyer’s representation of an association rendered the complaint, and the trial proceedings, a nullity. Id. at 718-20,
Proceedings in a suit by a person not entitled to practice [law] are a nullity____If the cause has proceeded to judgment, the judgment is void____
Turkey Point Prop. Owners’ Ass’n, Inc.,
In Stein, the Court of Appeals held that a complaint filed in the name of a corporation that had forfeited its corporate charter was a nullity. Stein,
There is [] a strong analogy between the problem in the case before us and the purported filing of an action against a person who is deceased at that time. In Burket v. Aldridge,241 Md. 423 , 430,216 A.2d 910 , 913 (1966), we said that “the action filed by Burket against Smith, a few days before the expiration of the three year period from the date of the injuries, had no legal effect. Smith was dead, and an action brought against a dead man is a nullity.”.... We perceive no reason why an action purportedly brought by a defunct corporation has any more efficacy than an action brought against a deceased individual defendant.
Stein,
B. Unenforceable Judgments
Generally, a party that lacks a required license may not file an action in a
[I]f a statute requiring a license for conducting a trade, business or profession is regulatory in nature for the protection of the public, rather than merely to raise revenue, an unlicensed person will not be given the assistance of the courts in enforcing contracts within the provisions of the regulatory statute because such enforcement is against public policy.
Id. See also McDaniel v. Baranowski,
In McDaniel, the Court of Appeals concluded that the lack of a license implicated the landlord’s “status as a claimant” in Maryland courts, rather than constituting an affirmative defense.
Licensure under local ordinances in order to operate rental dwelling units is an integral part of a landlord’s status as claimant in those jurisdictions that require licensure. As a result, in order to invoke the facile process of summary ejectment, a landlord in those jurisdictions requiring licensure, must affirmatively plead and demonstrate that he is licensed at the time of the filing of the complaint for summary ejectment in order to initiate the summary ejectment process.
Id. at 587,
C. The MCALA Licensure Requirement
Maryland law requires a debt collector to obtain a license. See MCALA, Md.Code Ann., Bus. Reg. § 7-301(a) (“a person must have a license whenever the person does business as a collection agency in the State.”). The MCALA defines a “collection agency” as a “person who engages directly or indirectly in the business of:
D. Lack of MCALA License and Validity of District Court Judgments
It appears to be a question of first impression in Maryland whether a collection agency’s failure to obtain a license, as required by the MCALA, renders any judgment entered in favor of an unlicensed collection agency void or voidable. We conclude that a judgment obtained by an unlicensed collection agency is void.
At least one other jurisdiction has considered this issue, and held that judgments entered in favor of an unlicensed debt collection agency are void. See LVNV Funding, LLC v. Trice,
In reaching its decision, the Trice court explained that “[w]e find this case similar to cases in which a person practices law without a license.” Id. at 1237. Under Illinois law, “[a] complaint drafted by a nonattorney on behalf of a corporation constitutes the unauthorized practice of law rendering the pleading a nullity and any judgment entered on it void.” Id. (citations omitted). Consequently, the Trice court held that “a complaint filed by an unregistered collection agency is similarly
Although there is no Maryland case directly on point, the United States District Court for the District of Maryland has held that filing a collection action without a license, as required under the MCALA, constitutes an attempt to “enforce a right ... that does not exist.” Hilco, supra,
In our view, the Maryland precedent on void judgments weighs in favor of adopting the analysis set forth in Trice.
Consequently, we adopt the logical and well-reasoned conclusion of Trice. Much like a complaint filed by a non-lawyer, “a complaint filed by an unregistered collection agency is [ ] a nullity, and any judgment entered on such a complaint is void.” Trice, supra,
Our holding in Turkey Point supports this rationale. See supra,
The Maryland cases addressing an unlicensed party’s “status as a claimant” in Maryland courts also bolster our analysis. McDaniel considered whether a party must “establish his bona fides regarding licensure at the time of filing, as a matter of law, or whether [the defendant] should plead the lack of a license as an affirmative defense.” The McDaniel Court held that the lack of a license was not merely an affirmative defense because licensure is an integral part of the landlord’s status as a claimant in Maryland. Similarly, here, the legislature has made clear that any entity that “collects consumer claims through civil litigation is ... required to be licensed____” Md. State Collection Agency Licensing Bd. Advisory Notice 05-10, May 5, 2010. Thus, the licensing requirement contained in the MCALA is an integral part of a collection agency’s status as a claimant in Maryland.
Moreover, like the landlord licensing requirement in McDaniel, the MCALA licensure requirement is intended to eliminate a perceived harm, rather than to “build the public fisc.” See McDaniel, supra,
In light of McDaniel, the instant case is distinguishable from Green, which is the principal case relied on by the trial court.
For these reasons, we hold that a judgment entered in favor of an unlicensed debt collector constitutes a void judgment as a matter of law. Accordingly, any judgments obtained by LVNV in the district court while operating as an unlicensed collection agency are void.
II. COLLATERAL ATTACK ON VOID DISTRICT COURT JUDGMENTS.
We next consider whether appellants may file an action in the circuit court to challenge a void judgment entered in a district court. The circuit court dismissed appellants’ action on the basis that Maryland law precludes collateral attacks on existing judgments. We hold that because the underlying judgments are void, appellants may collaterally attack these judgments in a circuit court action.
A. Collateral Attack Doctrine
We have previously summarized the principles governing the collateral attack of judgments under Maryland law:
A collateral attack is ‘an attempt to impeach the judgment by matters dehors the record, before a court other than the one in which it was rendered, in an action other than that in which it was rendered; an attempt to avoid, defeat, or evade it, or deny its force and effect, in some incidental proceeding not provided by law for the express purpose of attacking it____’ [and that] a ‘rule of inhibition’ [exists] against collateral attacks upon existing judgments.... [T]his bar against the collateral attack upon subsisting judgments is, of course, critical to the effectiveness of the judicial system itself, and it has long been applied by the Maryland courts.
Klein v. Whitehead,
On the other hand, however, “[a] judgment which is void may be collaterally attacked at any time.... ” Tucker v. Tucker,
A void judgment ‘may be assailed at all times, and in all proceedings by which it is sought to be enforced.’ Hanley v. Donoghue,59 Md. 239 , 243, 244,43 Am.Rep. 554 ; Wilmer v. Epstein,116 Md. 140 , 145,81 A. 379 . In other words, a void judgment is subject to attack either directly by appeal or collaterally. Pennoyer v. Neff,95 U.S. 714 ,24 L.Ed. 565 ; Staley v. Safe Deposit & Trust Co.,189 Md. 447 , 455,56 A.2d 144 , 148; Keen v. Keen,191 Md. 31 , 38-40,60 A.2d 200 , 203-205. It does not constitute res judicata. Presstman v. Silljacks,52 Md. 647 ; Josselson v. Sonneborn,110 Md. 546 , 552,73 A. 650 . See also Travelers Indemnity Co. v. Nationwide Construction Corporation,244 Md. 401 , 410,224 A.2d 285 (1966); Thomas v. Hardisty,217 Md. 523 , 536,143 A.2d 618 (1958);Board of Zoning Appeals of Howard County v. Meyer, 207 Md. 389 , 394,114 A.2d 626 (1955). The invalidity of the Virginia judgment, therefore, does not affect the status of the bank’s claim based on the original debt. Its status here is the same as if that judgment had never been entered.
Cook v. Alexandria Nat. Bank,
The Court of Appeals has, however, recognized that the rule permitting collateral attack of void judgments “has probably been more frequently stated than found applicable in cases in this State.” Thomas,
B. The Circuit Court’s Rationale
The circuit court relied on Klein, supra,
Appellants distinguish Klein on the basis that it did not involve a question that the defendant lacked standing or was otherwise not entitled to pursue the foreclosure action, or that the district court lacked jurisdiction to hear the underlying action. See Klein,
The circuit court also cited Green, supra,
Regarding the first issue in Green, we held that the underlying judgment was not void due to fraud, mistake, or irregularity because “[t]he facts alleged in Counts I-V are insufficient to show fraud, mistake, or irregularity in connection with obtaining the consent judgment.” Id. at 52,
In our view, the critical difference is that the underlying judgments in Klein and Green were valid. Moreover, the claims asserted in the subsequent actions were defenses that could have—and should have—been raised in the underlying proceedings. Accordingly, in Klein and Green, the general rule prohibiting the collateral attack of a judgment applied. By contrast, here, the underlying judgments are void, insofar as the judgments were obtained by LVNV while it was operating as an unlicensed collection agency. Thus, Klein and Green are not dispositive, and we must instead consider whether the “void judgment” exception to the collateral attack doctrine applies.
C. Discussion
The Court of Appeals has stated that “Maryland law is in total accord with [other] authorities” which have held that:
Although it is not necessary to take any steps to have a void judgment reversed or vacated, it is open to attack or impeachment in any proceeding, direct or collateral, and at any time or place, at least where the invalidity appears upon the face of the record. It is not entitled to enforcement and is, ordinarily, no protection to those who seek to enforce it. All proceedings founded on the void judgment are themselves regarded as invalid and ineffective for any purpose.
In short, a void judgment is regarded as a nullity, and the situation is the same as it would be if there were no judgment.
Cook,
A collateral attack is defined as “‘an attempt to impeach the judgment ... before a court other than the one in which it was rendered, in an action other than that in which it was rendered---- Klein,
Although no Maryland court has had occasion to hold on the merits that a void judgment may be attacked in another court, we cannot ignore the unequivocal pronouncement that “a void judgment ... is open to attack [ ] in any proceeding, direct or collateral, and at any time or place.... ” Cook,
For the foregoing reasons, we hold that the circuit court erred in dismissing appellants’ complaint. LVNV was not licensed when it obtained judgments against appellants in the district court; accordingly, the underlying district court judgments are void. We further hold that parties may collaterally attack a void judgment in another court. The circuit court, therefore, erred by ruling that appellants’ complaint constituted an impermissible collateral attack on the district court judgments. Accordingly, we reverse the judgment of the Circuit Court for Baltimore City, and remand for further proceedings consistent with this opinion.
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY REVERSED. CASE REMANDED FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY APPELLEE.
Notes
. See infra, Part II, for a complete discussion of the collateral attack doctrine and the implication of void judgments.
. The practice of law by a nonlawyer is prohibited. Md.Code Ann., Bus. Occ. & Prof., §§ 10-206(a), 10-601(a) (West 2013).
. A Maryland corporation must be represented by lawyer in civil proceedings in a circuit court. Md. Rules l-202(q), 2-131(a)(2).
. See also Snodgrass v. Immler,
. We observe, however, that the procedural posture of McDaniel is vastly different because that case involved an appeal from the denial of a motion to revise a district court judgment.
. LVNV claims in a footnote that it is a “passive” debt buyer, and that passive debt buyers were "confused about whether they were ‘required to be licensed as collection agencies when they collect consumer debts through civil litigation....’” This contention has been consistently rejected. See, e.g., Bradshaw v. Hilco Receivables, LLC,
. The Trice court observed that the issue was one of first impression, and framed the question as follows: "When an unregistered collection agency obtains a judgment against a debtor, does the lack of a license make the judgment void, or merely voidable?” Id. at 1233.
. We observe, however, that the procedural posture of Trice is different. There, the defendant sought to vacate the district court judgment by filing a motion to vacate the judgment in the district court. Id. at 1234. Regardless, the procedural posture does not impact our initial inquiry as to whether the underlying judgments here are void.
. We also point out that much like the defendant in Trice, appellants here did not raise LVNV’s licensing issue at trial.
. See also Hilco, supra,
. See also infra, Part II, for a more detailed discussion of Green.
. We also observe that appellants’ complaint asserted five causes of action, including a declaratory judgment count, which could only be brought in the circuit court.
. In light of our holding, we do not address appellants’ alternative arguments that: (1) the circuit court “has the legal authority to review void judgments entered by the district court of Maryland”; (2) appellants’ action is only proper in the circuit court because it is a class action, and seeks, in part, declaratory relief; and (3) public policy supports recognition of an exception to the collateral attack doctrine.