Green v. Ford Motor Credit Co.

SALMON, Judge. Cordelia Green (“Ms. Green”) and George Johnson brought suit in the Circuit Court for Baltimore City against Ford Motor Credit Company (“FMCC”) and the law firm of Thie-bolt, Ryan, Miller and Hrehorovich, P.A. (“Thiebolt, Ryan”). The defendants filed a motion to dismiss for failure to state a cause of action upon which relief could be granted.

The motions judge, the Honorable Allen L. Schwait, granted the dismissal motion as to Johnson due to his failure to allege any damages. The court granted the motion to dismiss all claims made by Ms. Green on the basis that her claims were barred by the doctrine of res judicata. Both Johnson and Ms. Green filed an appeal to this Court. Nevertheless, in the brief filed by appellants, no argument is advanced that would suggest that Judge Schwait erred in granting the dismissal motion as to Johnson’s claims.

Moreover, counsel for appellants, at oral argument, agreed that Judge Schwait had appropriately dismissed Johnson’s claims. Accordingly, the sole issue presented is whether the court erred in dismissing the complaint as to Ms. Green. ³⁶ I. FACTS AS ALLEGED IN APPELLANTS’ COMPLAINT 1 Ms. Green purchased an automobile from a Ford dealer in 1995. The purchase was financed by a loan from the dealer. The loan contract was later assigned to FMCC.

That contract referred to and incorporated by reference all the provisions of the Credit Grantor Closed End Credit (“CLEC”) statute, which is codified in Title 12, Subtitle 10, of the Commercial Law Article (“CL”) of the Maryland Code (1975, 2000 Repl. Vol.). CL section 12-1021(e) requires that in the event that a creditor repossesses a car or other item, the creditor must send the debtor a notice telling the debtor (1) where the item is located and (2) the place where the item will be sold. Ms. Green failed to make her car payments when due.

As a result, FMCC repossessed her vehicle. On February 24,1998, which was shortly after her car was repossessed, FMCC sent Ms. Green a “Notice of Repossession & Right to Redeem.” The notice advised that Ms. Green’s car was located at the Baltimore Washington Auto Exchange (“BWAE”), 7151 Brookdale Drive in Baltimore, Maryland, and that a public sale of the vehicle would be conducted at the same address on April 7,1998, at 9:30 a.m. Contrary to the statement in the notice, Ms. Green’s repossessed automobile was located at 7151 Brookdale Drive in Elkridge, Howard County, Maryland. Although there is a Brookdale Drive in Baltimore City, that street is approximately fifteen miles from BWAE’s facility in Elkridge.

On April 7, 1998, Ms. Green’s car was sold at public auction at 7151 Brookdale Drive in Elkridge. The sale resulted in a $4,854.19 deficiency. In December 1998, FMCC filed suit against Ms. Green in the District Court of Maryland for Baltimore City. In its ³⁷ statement of claim, FMCC alleged, inter alia, that Ms. Green’s vehicle was “repossessed and sold in accordance with the provisions of the [installment-sale] agreement.” This latter statement was technically false because the agreement required FMCC to comply with CL section 12-1021, which, in turn, required the repossession notice to provide the debtor with notice of the exact location of the car that was repossessed and the place where the car was to be sold.

Ms. Green, on February 11, 1999, entered into a consent judgment with FMCC. The agreement was as follows: [A] judgment [was to be entered] in the amount of $4,865.19, plus prejudgment interest in the amount of $218.33, plus post-judgment interest at the legal rate, plus attorney’s fees in the amount of $729.77 and court costs. [She] further agree[d] to make payments to [FMCC] at the rate of $200.00 per month, commencing 2/15/99, and each month thereafter until the judgment [was] paid. [FMCC] agree[d] not to execute on the judgment so long as [defendant makes the payments as agreed. Ms. Green did not make the $200 monthly payments as required by the consent judgment, and as a result, FMCC filed a garnishment proceeding to attach Ms. Green’s wages and monies she held in a bank account. In December 2000, Ms. Green filed a motion to quash the garnishment proceeding.

One of her grounds for that motion was that the consent judgment was invalid because the notice of sale provided by FMCC did not accurately provide her with information as to the place where the repossessed automobile would be sold. 2 Ultimately, FMCC voluntarily quashed the garnishment as to all property other than wages. 3 In regard to the wage ³⁸ garnishment, Ms. Green’s wages were garnished until the judgment was satisfied sometime in July 2001. On November 9, 2001, which was approximately three months after having paid off the judgment against her, Ms. Green, along with Mr. Johnson, commenced the subject law suit against FMCC. On February 21, 2002, the plaintiffs filed their first amended complaint in which they added Thiebolt, Ryan as defendants. Judge Schwait, in his written opinion dismissing this case, accurately summarized the seven counts of appellants’ complaint.

His summary, with certain additions (which we have placed in brackets) and a few deletions, was as follows: FMCC has used in the past and continues to use the services of BWAE in Elkridge, Maryland for repossession, storage and sale of cars repossessed by FMCC. Plaintiffs aver that cars repossessed by FMCC are brought to BWAE from locations throughout the State of Maryland. For all of these repossessed cars, FMCC issues standard form Notices of Repossession, with blank spaces for individual account information. Plaintiffs contend that, since 1992, FMCC has issued notices set forth on a standard form that stated that the repossessed cars had been taken to and stored in Baltimore, Maryland when, in fact, they had been taken to Elkridge, Maryland____ ... [U]nder Count I of their Amended Complaint, [plaintiffs seek declaratory judgment ... injunctive relief [and restitution].

Specifically, [plaintiffs ask that the [c]ourt declare the Notices of Repossession invalid pursuant to the contractual and statutory requirements of Title 12, Subtitle 10 of the Maryland Commercial Code. Further, [p]laintiffs ask the [c]ourt to declare that, for cars repossessed by FMCC which are stored for sale by BWAE in Elkridge, Maryland, FMCC is contractually and statutorily obligated to issue notices of repossession that list the exact location of ³⁹ the ear and place of sale as 7141 Brookdale Drive in Elkridge, Maryland. Plaintiffs further seek an injunctive order permanently requiring FMCC to comply with its contracts and with the referenced statute by issuing Notices of Repossession which accurately list the location of the repossessed property and place of sale. Plaintiffs also seek to enjoin FMCC from •prosecuting actions against them for deficiency judgments where the Notices of Repossession are inaccurate as to location for storage and sale of the car.

Finally, under Count I, [pjlaintiffs seek an order voiding all judgments obtained by FMCC against the named plaintiffs and all class members during the past four years to the extent such judgments are not yet satisfied or have been satisfied in the six months preceding the filing of their complaint. Plaintiffs seek a concomitant order of restitution of all funds collected as a result of such judgments plus pre-judgment interest. Count II alleges that FMCC is liable for fraud for sending out Notices of Repossession that are purported to comply with contractual and statutory provisions where the [pjlaintiffs “have no practical way to know” of the alleged deficiencies. Plaintiffs allege that because the Notices of Repossession sent to them were defective, FMCC could not obtain deficiency judgments if it revealed the deficiencies.

Plaintiffs further allege that by representing to [pjlaintiffs and the courts that the Notices of Repossession were proper, FMCC committed fraud, which led to consent or uncontested judgments. Count II also states that in failing to issue proper notices, FMCC also fails by definition, to conduct commercially reasonable sales of the cars.... [Plaintiffs’ prayer for relief as to Count II read: [Pjlaintiffs seek judgment against FMCC on behalf of themselves and the class herein, for all sums paid by them to FMCC pursuant to judgments obtained by FMCC, plus pre-judgment interest, to the extent such judgments have been obtained and/or any payments have been made under those judgments at any time during the ⁴⁰ four year period preceding the filing of this Complaint. Plaintiffs and the class also seek punitive damages in an amount to be determined'at trial.] Count III seeks recovery for breach of contract. Plaintiffs’ claim that the financing agreement incorporates the terms of Title 12, Subtitle 10 of the Maryland Commercial Code, and any violation of the statute constitutes a breach of contract.

By sending the defective Notices of Repossession, under the statute, [plaintiffs aver that FMCC breached its contracts with them and failed to sell the automobiles in a commercially reasonable manner. Furthermore, [p]laintiffs allege that any deficiency judgments FMCC obtained against them where there is an allegedly defective Notice of Repossession also violate the contractual terms.... [Plaintiffs’ prayer for relief as to Count III was substantively identical to that set forth as to Count II.] Count IV alleges that FMCC had notice of the exact location of the place of storage and sale of [plaintiffs’ vehicles but the Notices of Repossession did not accurately reflect those locations. Accordingly, [p]laintiffs allege that FMCC violated § 12-1018 of the Maryland Commercial Code.... [Plaintffs’ prayer for relief as to Count IV was as follows: [P]laintiffs seek on behalf of themselves and all class members herein, treble damages under § 12-1018 of the Maryland Commercial Code, including three times the amount of interest, fees and other charges collected by FMCC [pursuant] to judgments that are not yet satisfied or have been satisfied during the 6 month period preceding the filing of this Complaint, plus such other and further relief as this Court may deem appropriate.] Count V alleges that FMCC is liable under the Unfair and Deceptive Practices Act for the alleged failure to note the exact location of the repossessed autos and for the alleged failure to accurately state the amounts they would be assessed for repossession and resale fees.... [Plaintiffs’ prayer for relief as to Count V was substantively the same as for Counts II and III.] ⁴¹ Count VI, added [to] the amended complaint, alleges that FMCC, as a collector, regularly violates § 14-202 of the Maryland Consumer Debt Collections Act (“MCDCA”). That count alleges that FMCC claims, attempts or threatens to enforce a right with knowledge that the right does not exist whenever FMCC pursues or has pursued a collection action and claimed full compliance with the consumers’ contracts and applicable Maryland law, knowing FMCC is or was not in compliance. [Plaintiffs’ prayer for relief as to Count VI was as follows: [P]laintiffs seek judgment on behalf of themselves and all class members herein against FMCC for the four year period preceding the filing of this Complaint, for all amounts collected by it pursuant to the notices of repossession described herein, plus prejudgment interest, plus an award of their attorneys’ fees, plus emotional distress and mental anguish as permitted by Md. Comm.Code § 14-208, plus such other and further relief as this Court may deem appropriate.] Count VII, also added in the amended complaint, states that Thiebolt, Ryan, Miller & Hrehorovich, P.A., acted as counsel for defendant FMCC in collection matters.

Plaintiffs claim that TRMH is a collector and the plaintiffs and the class are persons as defined under the MCDCA. Plaintiffs allege that, as a collector, TRMH also regularly violates § 14-202 of the MCDCA by knowingly, falsely pleading that Ford sent repossession notices that comply with the statutory requirement to state the location and place of sale of the cars. [Plaintiffs’ prayer for relief as to Count VII was substantively the same as in Count VI.] (Emphasis added.) II. QUESTIONS PRESENTED 1. Did the [cjircuit [c]ourt err in ruling that a consent judgment in a[D]istrict [C]ourt deficiency action, allegedly obtained by a fraud on the court, should be given res judicata effect in a later [cjircuit [cjourt action challenging that fraud?.... ⁴² 2.

Did the [c]ircuit [c]ourt err in giving preclusive effect to [a][D]istrict [C]ourt judgment[] [even though] the [District [C]ourt[] lacked the authority to grant [such a judgment], particularly where the statute creating one of the causes of action in this case specifically contemplates collateral attack on such judgments in appropriate circumstances?.... 3. Did the [circuit [c]ourt err in ruling that a plaintiffs prosecution of an independent claim under the Maryland Consumer Debt Collection Act [“MCDCA”) is barred where the creditor has obtained a deficiency judgment on the debt in question?.... 4. Did the [c]ircuit [c]ourt err in dismissing independent MCDCA claims on the basis of res judicata in favor of a party in this case who was neither a party to, nor in privity with a party to, the earlier [District [C]ourt deficiency actions?....

III

ANALYSIS A. The First Five Counts in the Amended Complaint (Issues 1 and 2) Financing contracts, such as the one entered into by Ms. Green, are governed by the CLEC, which is set forth in Title 12, Subtitle 10, of the Commercial Law Article of the Maryland Code. See Biggus v. Ford Motor Credit Co., 328 Md. 188, 202 , 613 A.2d 986 (1992). The CLEC permits creditors, such as FMCC, some flexibility as to where the repossessed items are to be stored and sold but imposes strict notice requirements and strict enforcement mechanisms in connection with the sale and storage of repossessed items. See CL § 12-1018.

As Ms. Green correctly asserts in her complaint, CL section 12-1021(e)(3) requires that notices of repossession and resale must contain the “exact location” where the car is stored, and CL section 12—1021 (j)(1)(ii) requires accurate information about the “time and place of sale.” The first five counts of the complaint were all based upon one major premise, i.e., that the consent judgment obtained in ⁴³ the District Court for Baltimore City against Ms. Green was obtained due to “fraud on the court.” The alleged fraud was that FMCC said in its District Court statement of claim that “it had complied with all of the terms of the financing contract at issue including, by implication, the CLEC notice requirements incorporated into Ms. Green’s contract. As appellants acknowledge, the first five counts, at their core, “challenge!] FMCC’s entitlement to the judgments it obtained] in [District [C]ourt, whether by consent, default or otherwise.” Put another way, Counts I-V, inclusive, constitute an attack on the District Court judgment obtained by FMCC against Ms. Green. This is shown by the fact that Ms. Green asked for (1) an order “voiding” the District Court judgment and giving her “restitution” for all amounts paid pursuant to the judgment (Count I); (2) a judgment in the amount of all sums she paid pursuant to the judgment, plus pre-judgment interest (Counts II and III); (3) three times the amount of all interest, fees, and costs collected pursuant to the District Court judgment (Count IV); and (4) all amounts collected as a result of the District Court judgment, plus pre-judgment interest and attorney’s fees (Count V). FMCC argues that the trial court correctly dismissed the first five counts of the complaint based on the doctrine of res judicata, which is often referred to as “claim preclusion.” In Colandrea v. Wilde Lake Cmty.

Ass’n, 361 Md. 371, 392 , 761 A.2d 899 (2000), the Court said: Under Maryland Law, the requirements of res judicata or claim preclusion are: 1) that the parties in the present litigation are the same or in privity with the parties to the earlier dispute; 2) that the claim presented in the current action is identical to the one determined in the prior adjudication; and 3) that there was a final judgment on the merits. Therefore, a judgment between the same parties and their privies is a final bar to any other suit upon the same cause of action and is conclusive, not only as to all matters decided in the original suit, but also as to matters that could have been litigated in the original suit. To avoid the vagaries of res judicata’s preclusive effect, a party ⁴⁴ must assert all the legal theories he wishes to in his initial action, because failure to do so does not deprive the ensuing judgment of its effect as res judicata. As can be seen, res judicata looks to the final judgment on the merits earlier entered in the same case or same cause and to the necessary legal consequences of that judgment.

Id. at 392 , 761 A.2d 899 (citations omitted). For res judicata purposes, a “final judgment on the merits means” a valid final judgment by a court of competent jurisdiction. FWB Bank v. Richman, 354 Md. 472, 492 , 731 A.2d 916 (1999). The Court of Appeals, in Rowland v. Harrison, 320 Md. 223, 232 , 577 A.2d 51 (1990), adopted the position taken by the Restatement (Second) of Judgments (the “Restatement”), section 22 (1982), which reads: (1) Where the defendant may interpose a claim as a counterclaim but he fails to do so, he is not thereby precluded from subsequently maintaining an action on that claim, except as stated in Subsection (2).

(2) A defendant who may interpose a claim as a counterclaim in an action but fails to do so is precluded, after the rendition of judgment in that action, from maintaining an action on the claim if: (a) The counterclaim is required to be interposed by a compulsory counterclaim statute or rule of court, or (b) The relationship between the counterclaim and the plaintiffs claim is such that successful prosecution of the second action would nullify the initial judgment or would impair rights established in the initial action. (Emphasis added.) The exception set forth in section 22(2) (b) of the Restatement is explained in comment (/'), which, in relevant part, reads: f. Special circumstances under which failure to interpose a counterclaim will operate as a bar. Normally, in the absence of a compulsory counterclaim statute or rule of ⁴⁵ court, the defendant has a choice as to whether or not he will pursue his counterclaim in the action brought against him by the plaintiff.

There are occasions, however, when allowance of a subsequent action would so plainly operate to undermine the initial judgment that the principle of finality requires preclusion of such an action. This need is recognized in Subsection (2)(b). BAr such an occasion to arise, it is not sufficient that the counterclaim grow out of the same transaction or occurrence as the plaintiffs claim, nor is it sufficient that the facts constituting a defense also form the basis of the counterclaim. The counterclaim must be such that its successful prosecution in a subsequent action would nullify the judgment, for example, by allowing the defendant to enjoin enforcement of the judgment, or to recover on a restitution theory the amount paid pursuant to the judgment (see Illustration 9), or by depriving the plaintiff in the first action of property rights vested in him under the first judgment (see Illustration 10).

Ordinarily the conclusion that the subsequent action could not be maintained under Subsection (2)(b) would not be reached unless the prior action had eventuated in a judgment for plaintiff since only in such a case would there be the threat of nullification of the judgment or of impairment of rights to which the Subsection is addressed. (Emphasis added.) Section 22(2)(b) and comment / of the Restatement were discussed in depth in Fairfax Savings F.S.B. v. Kris Jen Ltd., 338 Md. 1, 22-31 , 655 A.2d 1265 (1995). In the Kris Jen Ltd. case, a lender instituted a foreclosure action due to a debtor’s failure to pay a note. Id. at 4-5 , 655 A.2d 1265 .

The debtor (Kris Jen) filed exceptions to the sale, which were later withdrawn. Id. at 5 , 655 A.2d 1265 . The sale was subsequently ratified. Id.

Kris Jen then filed a ten-count complaint against the lender, in which it, inter alia, asserted that various actions by the lender induced the mortgage foreclosure. Id. at 6-7 , 655 A.2d ⁴⁶ 1265. The trial judge ruled that, by virtue of the doctrine of res judicata, the following facts were not in dispute: (1) there was a default, (2) on which Fairfax was entitled to act, and (3) did so appropriately by foreclosure sale, (4) at an appropriate price, with the result (5) that Plaintiffs lost any right to redeem the property. Id. at 10 , 655 A.2d 1265 .

Because Kris Jen would not amend its complaint so as to recognize the preclusive effect of the judgment ratifying the sale, the second suit was dismissed. Id. at 9 , 655 A.2d 1265 . In the Kris Jen case, Judge Rodowsky, for the Court, said: [I]n the instant matter, a foreclosure-triggering default is a condition precedent to a Maryland mortgage foreclosure. Rule W72.a.

Ordinarily the existence of that essential will be demonstrated by the statement of mortgage debt and by the mortgage that are required to accompany the order to docket the summary proceeding. Rule W72.C.1 and d. Allegations that there was no foreclosure-triggering default negate, contradict, and in that sense nullify an essential foundation for the foreclosure judgment. Those allegations were precluded by the foreclosure judgment, and the circuit court correctly ruled that they should be culled from Plaintiffs’ second amended complaint.

We emphasized that the above holding is not intended to express the full range of the § 22(2)(b) exception to the general rule of non-preclusion. It is sufficient simply to note that the above holding is distinguishable in at least one substantial respect from Rowland . A veterinarian suing on an implied contract to pay the reasonable value of services rendered under an expectation of payment need not allege and prove that there was no malpractice. The burden is on the plaintiff in the malpractice action to prove negligence.

See Kennedy v. Burgess, 337 Md. 562 , 654 A.2d 1335 (1995). Id. at 31-32 , 655 A.2d 1265 (emphasis added). In the case at bar, the exception set forth in section 22(2) (b) of the Restatement would plainly appear to be applicable in regard to Counts I-V. Appellants ask the Court to void the ⁴⁷ District Court judgment (Count I) and/or for restitution of monies paid as a result of that judgment (Counts II-V). A condition precedent to obtaining the District Court judgment was the allegation that FMCC had given proper notice of sale.

Allegations in Counts I-V that the notice was improper, if proven to be true, would “negate, contradict, and in that sense nullify an essential foundation” for the District Court judgment. Id. at 31 , 655 A.2d 1265 . Ms. Green takes exception to the above analysis. While she tacitly admits that a valid District Court judgment would preclude her from bringing Counts I-V, she asserts that no valid judgment was entered against her in the District Court.

According to Ms. Green, the prior judgment was invalid because (1) the judgment was obtained due to extrinsic fraud; (2) the District Court had no authority to enter the judgment, and therefore entry of the judgment was due to “mistake or irregularity”; and (3) usual principles of res judicata are here inapplicable because CL section 12-1019 specifically authorizes claims of the sort set forth in Counts I-V. B. Extrinsic Fraud In order to set aside an enrolled judgment due to “fraud,” extrinsic fraud must be alleged and proven and not fraud, which is merely “intrinsic to the trial itself.” Hresko v. Hresko, 83 Md.App. 228, 231 , 574 A.2d 24 (1990). Ms. Green contends that in her complaint she alleged facts sufficient to demonstrate extrinsic fraud on the part of FMCC. She maintains that “ft]he fraud consisted of FMCC’s pleading and reliance upon the averment in its [District [Cjourt complaint[] that it had complied with all of the terms of the financing contracto at issue.” The term fraud, mistake, and irregularity, as used in Rule 2-535 and its predecessor, Rule 625a, have been thoroughly defined by our cases. It is evident from these decisions that those terms are to be narrowly defined and strictly applied. ⁴⁸ ...

In Hresko v. Hresko, 83 Md.App. 228, 232 , 574 A.2d 24 (1990), the Court of Special Appeals clearly distinguished intrinsic and extrinsic fraud: “Intrinsic fraud is defined as ‘[t]hat which pertains to issues involved in the original action or where acts constituting fraud were, or could have been, litigated therein.’ Extrinsic fraud, on the other hand, is ‘[fjraud which is collateral to the issues tried in the case where the judgment is rendered.’ “Fraud is extrinsic when it actually prevents an adversarial trial. In determining whether or not extrinsic fraud exists, the question is not whether the fraud operated to cause the trier of fact to reach an unjust conclusion, but whether the fraud prevented the actual dispute from being submitted to the fact finder at all.” (quoting in part Black’s Law Dictionary (5th ed.1979)). See also Schwartz [v. Merchants Mort. Co.], supra, 272 Md. [305,] 309, 322 A.2d 544 [ (1974) ](“fraud is extrinsic when it actually prevents an adversarial trial, but is intrinsic when it is employed during the course of the hearing which provides the forum for the truth to appear”).

In Schwartz, supra, 272 Md. at 308 , 322 A.2d 544 , we provided examples of intrinsic fraud which will not trigger a court’s revisory power: “an enrolled decree will not be vacated even though obtained by the use of forged documents, perjured testimony, or any other frauds which are ‘intrinsic’ to the trial of the case itself.” We also discussed examples of extrinsic fraud which will permit a court to revise an enrolled judgment: “ ‘Where the unsuccessful party has been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party and connives at his defeat; or where the attorney regularly employed corruptly sells out his ⁴⁹ client’s interest to the other side,—these, and similar cases which show that there has never been a real contest in the trial or hearing of the