Carolyn Delorise PATTON v. WELLS FARGO FINANCIAL MARYLAND, INC.
No. 3, Sept. Term, 2013.
Court of Appeals of Maryland.
Feb. 24, 2014.
85 A.3d 167
pattern is an aggravating factor. See Dominguez, 427 Md. at 326-27, 47 A.3d 975; Kremer, 432 Md. at 340, 68 A.3d 862. Mr. Pinno‘s failure to participate in the disciplinary process is also an aggravating factor. Id. No mitigating factors have been offered by Mr. Pinno and none are evident in this record.
The Commission recommends that Mr. Pinno be disbarred. We agree. This Court has previously determined that disbarment is appropriate when an attorney repeatedly neglects client matters. See, e.g., De La Paz, 418 Md. at 557, 16 A.3d 181; Tinsky, 377 Md. at 655, 835 A.2d 542; Attorney Grievance Comm‘n v. Wallace, 368 Md. 277, 290, 293, 793 A.2d 535, 543, 545 (2002); Attorney Grievance Comm‘n v. Manning, 318 Md. 697, 705, 569 A.2d 1250 (1990); Maryland State Bar Ass‘n v. Phoebus, 276 Md. 353, 365-66, 347 A.2d 556 (1975); see also Attorney Grievance v. Kwarteng, 411 Md. 652, 660, 984 A.2d 865 (2009) (disbarment was the proper sanction where an attorney undertook representation in two cases, but abandoned the matters without informing the client). We see no reason to deviate from that result in this case. Disbarment is the appropriate sanction.
IT IS SO ORDERED, RESPONDENT SHALL PAY ALL COSTS AS TAXED BY THE CLERK OF THIS COURT, PURSUANT TO
Martin C. Bryce, Jr. (Mark J. Furletti, Ballard Spahr, LLP, Philadelphia, PA; Glenn A. Cline, Ballard Spahr, LLP, Baltimore, MD), on brief, for appellee.
Argued before BARBERA, C.J., HARRELL, BATTAGLIA, ADKINS, MCDONALD, WATTS and DALE R. CATHELL (Retired, Specially Assigned), JJ.
This case concerns a loan contract by which a consumer financed the purchase of an automobile over time. The car dealer assigned the contract to a financial services company. Before the loan was paid off, the consumer stopped making payments. As a result, the assignee of the loan contract repossessed and sold the automobile to recover some of the money owed under the contract. The consumer brought suit, alleging that the repossession and sale of the car did not comply with the Credit Grantor Closed End Credit Law (“CLEC“), a Maryland statute that governed the loan contract. The Circuit Court dismissed the lawsuit, apparently finding that the consumer‘s statutory claims were untimely by applying a one-year statute of limitations from the Maryland Equal Credit Opportunity Act. The Circuit Court also dismissed a related contract claim apparently on the ground that the requirements of CLEC were not incorporated into the contract as to the assignee.
We hold that the appropriate statute of limitations for an action alleging a violation of CLEC can be found in CLEC itself—in particular, such an action may not be brought more than six months after the loan is satisfied. We also hold that the loan contract in this case adequately incorporated CLEC as part of the contractual obligations, that the assignee voluntarily accepted that provision in taking the assignment, and that a contract claim may be asserted against the assignee. Accordingly, we reverse.
I. Background
A. Closed End Credit
As a general rule, “closed end credit” denotes a loan or extension of credit in which the borrower receives the benefit of the proceeds of the loan immediately and repays the principal, together with interest and other charges, in the future, usually in installments.1 Closed end credit is sometimes contrasted to revolving—or “open end“—credit arrangements, like credit cards, in which the borrower is able to use credit to buy goods or secure loans on a continuing basis so long as the outstanding balance does not exceed a specified limit.2 See
In Maryland, when the purchase of a motor vehicle is financed by an installment sale, the lender may elect for the contract to be governed by either of two statutes found in Title 12 of the Commercial Law Article of the Maryland Code: the Credit Grantor Closed End Credit Law, Maryland Code,
B. CLEC
CLEC provides certain protections to consumer borrowers4 in transactions involving closed end credit. Among other things, CLEC sets limits on the rate of interest, as well as other fees, that may be charged by a lender—referred to as a “credit grantor” in the statute.5 See
The statute provides various remedies to a borrower if the lender fails to comply with CLEC. For example, in some circumstances, the lender may be limited to collecting the principal of the loan and prohibited from collecting interest and other charges.
The statute specifies that the phrase “credit grantor” includes an assignee.
C. Ms. Patton Finances the Purchase of a New Car
The complaint, including attachments, that initiated this case in the Circuit Court alleged the following facts:
In 2005, Appellant Carolyn Delorise Patton purchased a new Chevrolet Malibu from Fox Chevrolet, Inc. (“Fox Chevrolet“), a car dealership located in Maryland. Ms. Patton entered into a retail installment sales contract with Fox Chevrolet to finance the purchase. The contract was set forth on a standard form that contained the terms of the contract and blanks for the names of the parties and various monetary amounts specific to the transaction. Under that contract, Ms. Patton agreed to make monthly payments, covering principal in the amount of $22,095.74 and interest in the amount of $14,098.66 (calculated at a rate of 17.9%), over a six-year period. In addition, Ms. Patton gave Fox Chevrolet a security interest in the car to secure payment of the amount owed. The contract also recited various consequences if Ms. Patton failed to make the scheduled payments, including repossession of the car by the lender, acceleration of the obligation to pay the principal, and assessment of collection costs.
In a section entitled “Applicable Law,” the contract form stated that “Federal law and Maryland law and specifically Subtitle 10 of Title 12 of the Commercial Article of the Maryland Code apply to this Contract.” As noted above, subtitle 10 of Title 12 of the Commercial Law Article is the formal designation of CLEC.
The bottom of the contract form contained a space for assignment of the contract by the seller. The form also contained a notice in boldface print that stated that ”Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.”6
After the sale of the car to Ms. Patton, Fox Chevrolet assigned the loan contract to Appellee Wells Fargo Financial Maryland, Inc. (“Wells Fargo Financial“).
D. Ms. Patton Fails to Make Payments; Repossession and Sale of the Car
In 2007, Ms. Patton stopped making the monthly payments required by the contract. In November 2007, Wells Fargo Financial repossessed the car. It immediately notified her of the repossession and of the date that the car would be sold at a private sale if she did not make the payments necessary to redeem it. Ms. Patton did not make the required payment and Wells Fargo Financial proceeded with the sale. In January 2008, it informed Ms.
E. Ms. Patton‘s Lawsuit
On March 5, 2010, more than two years after she had been notified that Wells Fargo Financial had sold the car at a private sale, Ms. Patton sued Wells Fargo Financial7 in the Circuit Court for Anne Arundel County, alleging various violations of CLEC in connection with the repossession and sale of the car.8 Her complaint had seven counts:9
The first three counts alleged specific violations of CLEC—in particular, of
The second count alleged that Wells Fargo Financial had violated CLEC by charging Ms. Patton for the cost of repossessing her car because it had not provided her with an advance notice of the repossession, contrary to
The third count alleged that Wells Fargo Financial had failed to provide Ms. Patton with a “full accounting” after it disposed of her vehicle at a private sale, including “the purchaser‘s name, address, and business address; the number of bids received; and any statement as to the condition of the vehicle at the time of repossession,” in violation of
The fourth count alleged that the provisions of CLEC had “become a part of the [loan] contract just as if the parties expressly included the CLEC provisions in their credit contracts” and that, as a result of the violations of CLEC identified in the first three counts, Wells Fargo Financial was liable for breach of contract.
The fifth count was brought under the Declaratory Judgments Act10 and sought a declaration that Wells Fargo Financial was precluded from seeking a deficiency judgment against Ms. Patton as a result of the alleged CLEC violations.
The sixth count asserted that Wells Fargo Financial had been unjustly enriched as a result of its CLEC violations and sought restitution of any funds paid toward the deficiency balance, interest, fees, and other costs claimed by Wells Fargo Financial.
The seventh count alleged that Wells Fargo Financial‘s failure to comply with CLEC and its assertion that Ms. Patton owed a deficiency balance constituted unfair
F. Dismissal of Complaint and Appeal
Wells Fargo Financial moved to dismiss Ms. Patton‘s complaint. After a hearing on the motion, the Circuit Court entered an order dated October 8, 2010, dismissing all counts of the complaint. The court dismissed four counts—the first three counts alleging violations of CLEC and the fourth count alleging breach of contract—with prejudice, but gave Ms. Patton leave to amend the three remaining counts of the complaint. Although the court did not issue a written opinion, it appears that the court agreed with Wells Fargo Financial that the CLEC claims were untimely and that Ms. Patton‘s complaint did not state a cause of action for breach of contract.
Ms. Patton filed a notice of appeal. The Court of Special Appeals dismissed Ms. Patton‘s appeal without prejudice, on the ground that Circuit Court‘s judgment was not a final, appealable order. Wells Fargo Financial then moved in the Circuit Court for dismissal of the remaining counts of the complaint with prejudice, on the ground that Ms. Patton had failed to amend those claims within the requisite period of time—a motion that Ms. Patton did not oppose so that a final judgment could be entered. The Circuit Court complied on March 30, 2012, and Ms. Patton refiled her notice of appeal. On December 14, 2012, prior to a hearing or decision by the Court of Special Appeals, we issued a writ of certiorari on our own initiative.
II. Discussion
In her appeal, Ms. Patton contests the Circuit Court‘s rulings on the timeliness of her claims under CLEC and the adequacy of her breach of contract claim. We consider first the appropriate statute of limitations for a claim brought by a consumer borrower against a credit grantor for violation of CLEC to determine whether Ms. Patton‘s claims alleging violations of CLEC were timely. We next consider whether the requirements of CLEC become part of the contractual obligations incorporated in a contract regulated by CLEC, such that a violation of CLEC also constitutes a breach of contract.
A. Standard of Review
In deciding a motion to dismiss a complaint, a circuit court assumes the truth of the complaint‘s factual allegations, and any reasonable inferences, in the light most favorable to the plaintiff. Bobo v. State, 346 Md. 706, 708, 697 A.2d 1371 (1997). In reviewing the dismissal of a complaint, an appellate court applies the same standard and assesses whether that decision was legally correct. See Reichs Ford Rd. Joint Venture v. State Roads Comm‘n, 388 Md. 500, 509, 880 A.2d 307, 312 (2005) (citing Adamson v. Corr. Med. Servs., 359 Md. 238, 246, 753 A.2d 501 (2000)). The appellate court accords no special deference to the circuit court‘s legal conclusions.
B. Statute of Limitations for Violation of CLEC
More than two years elapsed between the repossession and sale of Ms. Patton‘s car and the filing of the complaint that initiated this case. Wells Fargo Financial argues that
1. CL § 12-707(g)
Wells Fargo Financial urges us to apply the following limitations provision:
An action under this title may be brought in any district court or circuit court, depending upon the amount in controversy, within one year from the date of the occurrence of the violation.
Nevertheless, according to Wells Fargo Financial, the plain language of this provision means that it states the period of limitations for any action that could be brought for violation of “this title“—i.e., Title 12 of the Commercial Law Article. Wells Fargo Financial is correct that, as a literal matter, the language of
Resolution of Ambiguity in Statutes
“[W]here a statute is plainly susceptible [to] more than one meaning and thus contains an ambiguity, courts consider not only the literal or usual meaning of the words, but their meaning and effect in light of the setting, the objectives and purpose of the enactment.” Kaczorowski v. Mayor & City Council of Baltimore, 309 Md. 505, 513, 525 A.2d 628 (1987) (internal citations omitted). Where, as here, there appears to be ambiguity or “uncertain meaning” in a statute, the Court “may and often must consider other ‘external manifestations’ or ‘persuasive evidence,’ including a bill‘s title and function paragraphs, its relationship to earlier and subsequent
In Kaczorowski itself, the Court considered whether a local development agency, which owed its existence to a particular statute, had inadvertently become defunct because the General Assembly, in the course of a legislative effort to enhance the financing capabilities of such agencies, had repealed certain parts of the agency‘s enabling act and a “savings clause by its plain wording [did] not save it.” 309 Md. at 511, 525 A.2d 628. The Court concluded that the General Assembly had made a “patent drafting error” that frustrated the legislative goal of the statute and that the courts should not give effect to it. Id. at 520, 525 A.2d 628.
Accordingly, we review the legislative history of
Legislative History of CL § 12-707(g)
In 1975, one year after the passage of the similar federal law,14 the General Assembly passed the Maryland Equal Credit Opportunity Act, Chapter 753, Laws of Maryland 1975 codified at
Although it contained a section describing a creditor‘s civil liability for violating the statute, see
It is clear that both the 1975 enactment of the Maryland Equal Credit Opportunity Act and its 1976 amendment were intended to ensure that creditors were prohibited from engaging in discriminatory practices when extending credit, and that consumer borrowers had a remedy if creditors did engage in such practices. It is also clear that the law was modeled on its federal analog.
Documents in the bill file for the 1976 bill that added the limitations provision indicate that the General Assembly sought to conform the Maryland statute to the provisions of the civil liability section of the Federal Equal Credit Opportunity Act.16 In particular, the bill file for House Bill 1038 (1976) contains a copy of the civil liability section of the Federal Equal Credit Opportunity Act that had been passed in 1974, Pub. Law 93-495 (1974) as codified at
The copy of the federal legislation in the bill file also provides a clue as to how the bill came to refer to “this title” in
Although the “plain meaning” of
2. CL § 12-1019
Statute and Case Law
As noted earlier,
Bediako
Wells Fargo Financial argues that
The court in Bediako based its analysis largely on a statement by this Court in Scott v. Ford Motor Credit Co., 345 Md. 251, 254, 691 A.2d 1320 (1997) that “CLEC does not contain a statute of limitations.” But, once again, context is key. Scott did not involve a suit alleging a violation of CLEC. Rather, it was an action brought by a lender against a borrower for a deficiency. Indeed, the Court specifically noted that the borrower “does not contend that the requirements of CLEC were not followed.” Id. at 255, 691 A.2d 1320. Thus, that case did not involve “[a]n action for violation of this subtitle” (i.e., CLEC) and the limitations period set forth in
The Bediako court also looked to adoption of the four-year period of limitations in Scott for a deficiency action as another basis for declining to apply
In reaching the conclusion that
In the end, after arguing that
Legislative History of CL § 12-1019
A review of the legislative history of
The Attorney General opposed the bill in its original form, stating that “[t]he bill goes too far” in removing consumer protections and urged the Legislature to modify the bill. See Statement of Attorney General Stephen H. Sachs (February 25, 1983). The Attorney General and the Secretary of Licensing and Regulation urged the addition of protections for consumer borrowers, as well as penalties for lenders who violated those provisions. See Senate Economic Affairs Committee, Hearing Summary for Senate Bill 591 (1983); Letter of Eleanor M. Carey, Deputy Attorney General, to Delegate Frederick C. Rummage, Chairman of House Economic Matters Committee concerning Senate Bill 591 (March 28, 1983).
Consistent with the positions of the Attorney General and the administration, the Governor‘s Office proposed a series of amendments to the bill. Among the proposed amendments were penalty provisions for lender violations of CLEC. See Senate Bill 591—Analysis of Proposed Administration Amend-ments (March 28, 1983) in legislative file for Senate Bill 591. While under consideration by the Legislature,
Thus, there is no mystery as to where the Legislature obtained the language of
The relationship of
Other Canons of Statutory Construction
Finally, even if the legislative record was not clear that
Summary
In sum, we hold that an action alleging that a lender (or the lender‘s assignee) violated CLEC in the repossession and sale of collateral must be brought no later than six months after satisfaction of the loan. This construction of
Nothing in the record before us indicates that Ms. Patton‘s loan was satisfied before she brought suit. Accordingly, there was no basis to dismiss her claims under CLEC on limitations grounds.
C. Whether an Assignee of a Loan Contract which the Originator Elected to be Governed by CLEC is Contractually Obligated to Comply with CLEC
1. Incorporation of external rules in a contract
The fourth count of Ms. Patton‘s complaint alleged breach of contract on the theory that the consumer protection provisions of CLEC had been incorporated into the contract and that the alleged violations of CLEC by Wells Fargo Financial also were a breach of its contractual obligations.
2. Whether external rules are incorporated voluntarily
Neal-required reference to HUD regulations in deed of trust
Neal concerned whether federal regulations referenced in a contract form required by a federal agency amounted to the voluntary incorporation of those regulations as terms of the contractual relationship between private parties. 398 Md. at 716-19, 922 A.2d 538. In particular, the deed of trust form for federally-insured mortgages required by the Federal Housing Administration (“FHA“) acknowledged that regulations of the Department of Housing and Urban Development (“HUD“) could limit a lender‘s right to require immediate payment and to foreclose in the event of a payment default and further stated that the instrument itself did not authorize actions in violation of those regulations. In Neal, homeowners who had defaulted on a mortgage loan sought to forestall foreclosure by filing suit against the assignee of the mortgage for failure to comply with HUD regulations. Id. at 712-13, 922 A.2d 538. This Court described the issue as whether “a paragraph in an FHA-approved form deed of trust alluding to a particular subset of HUD regulations is a bargained-for term between the mortgagor and the mortgagee such that an alleged violation of the regulations may give rise to a private action maintainable by the mortgagor against the mortgagee for breach of contract under Maryland law.” 398 Md. at 716, 922 A.2d 538. The Court concluded that neither the originator of the loan nor the assignee of the contract had “voluntarily” elected to be governed by the provision. Id. at 717-18 & n. 7, 922 A.2d 538. The Court held that the reference in the form to the HUD regulations did not create an affirmative cause of action in contract for the borrower against an assignee of the lender for violating the HUD regulations, although the borrower could raise such a violation as a defense to foreclosure. Id. at 719, 922 A.2d 538.
Epps and Decohen: voluntary incorporation of CLEC in car finance contracts
Like Wells Fargo Financial in this case, assignees of car loans governed by CLEC have invoked Neal in two recent cases decided by the United States Court of Appeals for the Fourth Circuit. In both cases, that court considered, and rejected, the argument that the incorporation of CLEC in the loan contract was involuntary and, instead, held that the consumer protection provisions of CLEC were enforceable as contract obligations.
In Epps v. JP Morgan Chase Bank, N.A., 675 F.3d 315 (4th Cir. 2012), the borrower financed the purchase of a used car through an installment contract, which contained an election of CLEC nearly identical to the loan contract in the instant case. The
On appeal, the Fourth Circuit reversed. It distinguished Neal, noting that “neither the assignor nor the assignee had any control over the terms of the FHA deed of trust.” 675 F.3d at 328. By contrast, in the case before it, the car dealer “and by extension, its successor-in-interest,” the bank, had the option of having the installment contract covered by either RISA or CLEC. Id. The court noted that the car dealer made a business judgment when it chose to adopt CLEC rather than RISA and “[the bank] is bound by that choice.” Id. The court concluded that the bank “may not take advantage of favorable, voluntary contract terms, and then cry foul when it fails to adhere to its own contractually derived obligations.” Id.24
A different panel of the Fourth Circuit reached the same conclusion in a similar case. Decohen v. Capital One, N.A., 703 F.3d 216 (4th Cir. 2012). In that case, the borrower financed the purchase of a used car under a loan contract that incorporated CLEC in terms nearly identical to those of the contract in the instant case. In addition, the loan contract also financed a “debt cancellation agreement.” Under CLEC, such an agreement could be financed as part of the loan contract when it provides for the lender to cancel the remaining debt if the car is totaled and insurance is insufficient to cover the remaining balance.25 The car dealer assigned the loan contract to a bank. The debt cancellation agreement did not comply with CLEC, however, as later became apparent when the car was declared a total loss and the insurance proceeds proved insufficient to cover the remaining payments, but the debt cancellation agreement did not wipe out the existing loan balance. The borrower filed suit against the assignee bank and others in circuit court, making claims similar to those in this action. The case was removed by the defendants to federal district court, which dismissed the claims against the bank. The borrower then appealed the dismissal of the contract claims.
One of the issues on appeal was whether the provisions of CLEC had become part of the loan contract such that the plaintiff could state a claim for breach of contract. The Fourth Circuit stated that “[t]he inquiry ... turns on whether the CLEC clause in [the loan contract] was freely chosen by the parties.” 703 F.3d at 227. The court found the facts of the case before it indistinguishable from Epps and reached the same conclusion as the court in Epps: “[The bank] may not purchase [a loan contract] that elects the CLEC, accept payments on a principal amount that includes a $600 fee for a debt cancellation agreement governed by the CLEC, and then refuse to abide by the terms of the CLEC when it is no longer convenient to do so.” Id. at 228. The court concluded
3. Whether reference to CLEC in Ms. Patton‘s contract was voluntary
Analogizing Neal to the instant case, Wells Fargo Financial argues that a contract term, such as a lender‘s election for a loan contract to be governed by CLEC, that is “forced upon a lender by a law or regulation may not be used offensively as a sword against that lender.” Wells Fargo Financial asserts that its assignor was forced to elect CLEC because the loan contract would have been in violation of Maryland law if Fox Chevrolet had not elected CLEC. Further, it argues that it is not subject to CLEC because it “did not participate in negotiations regarding the contract,” did not author the contract, and did not voluntarily elect to be governed by CLEC in the contract it assumed from Fox Chevrolet.
The description of the CLEC terms as “involuntary” provisions of the contractual relationship between Wells Fargo Financial and Ms. Patton does not appear quite accurate for at least two reasons. First, when Fox Chevrolet and Ms. Patton entered into the financing agreement, Fox Chevrolet had the option under Maryland law—as the Fourth Circuit has noted—of having an agreement subject to RISA or to CLEC. See
Second, Wells Fargo Financial voluntarily chose to take assignment of a loan contract that incorporated CLEC. As previously noted, under CLEC the phrase “credit grantor” includes an assignee of the originator of the loan. Consistent with that provision, the loan document itself advised that “[a]ny holder of this consumer credit contract” would be subject to the same claims and defenses as the originator of the loan. In accepting the assignment, Wells Fargo Financial expressly agreed to be governed by CLEC in the exercise of its rights under the contract.
Accordingly, we agree with the analysis and conclusion of the federal courts in Epps and Decohen. Wells Fargo Financial was contractually bound to comply with CLEC in carrying out its rights under the loan contract with Ms. Patton. Ms. Patton‘s breach of contract claim is not defective as a matter of law.
III. Conclusion
For the reasons outlined above, we conclude:
1. An action by a borrower alleging that a lender violated CLEC in the course
2. An originating lender who enters into a retail installment contract with a consumer borrower may choose, through a written election in the contract, to have the contract governed by CLEC. If the originating lender assigns that contract, the assignee is obligated to comply with the provisions of CLEC in carrying out its right to repossess and sell collateral upon default by the consumer borrower. A failure to do so is a breach of contract.
JUDGMENT OF THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY REVERSED AND CASE REMANDED TO THAT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY APPELLEE.
Notes
(1) “Credit grantor” means any individual, ... or any other legal or commercial entity making a loan or extension of credit under [CLEC] which is incorporated, chartered or licensed pursuant to State or federal law....
(2) “Credit grantor” includes:
(i) Any bank, trust company, depository institution, or savings bank having a branch in this State;
...
(iii) Any person who acquires or obtains the assignment of an agreement for an extension of credit made under [CLEC],