Mills v. Galyn Manor Homeowner's Ass'n, Inc.

Panel: Berger, Arthur, Leahy, JJ. Berger, J. ⁶⁶⁷ This case arises out of an action filed in the Circuit Court for Frederick County by appellants, David and Tammy Mills (the "Homeowners") against appellee, Galyn Manor Homeowners Association, Inc. ("Galyn Manor"). In 2016, the Homeowners filed a complaint challenging the way Galyn Manor calculated and collected debts. The Homeowners specifically alleged violations of the Maryland Consumer ⁸⁸¹ Protection Act and the Maryland Consumer Debt Collection Act, in addition to claims of conversion and breach of contract. 1 Thereafter, Galyn Manor filed a motion for summary judgment.

The circuit court granted Galyn Manor's motion on the debt collection and consumer protection claims. The court also disposed of the conversion and contract claims that arose prior to April 1, 2013, ruling that those claims were time-barred. Any claims arising after that date proceeded to trial. At trial, the court granted Galyn Manor's motion for judgment at the close of the Homeowners' case-in-chief, ruling that the Homeowners did not present sufficient evidence to satisfy the elements of either cause of action.

On appeal, the Homeowners pose four questions, which we set forth verbatim . 1. Did the Circuit Court err by concluding the Maryland Consumer Protection Act didn't apply to Appellant's claims of unfair and deceptive trade practices? 2. Did the Circuit Court err by concluding that the Maryland Consumer Debt Collection Act does not protect consumers who claim that a collector is collecting or attempting to collect an invalid debt? 3. Did the Circuit Court err by ruling that all evidence of breach of contract, collection activity and conversion occurring prior to April 1, 2013 was time-barred? ⁶⁶⁸ 4.

Did the Circuit Court err by granting judgment in Appellee's favor on the breach of contract and conversion claims? For the reasons explained herein, we affirm in part and reverse in part, and remand the case for further proceedings. FACTS AND PROCEEDINGS The Homeowners own a home in Frederick, Maryland and are members of Galyn Manor, a homeowners' association ("HOA"). As members of the HOA, the Homeowners are bound by Galyn Manor's governing documents.

The governing documents contain the bylaws and declaration of covenants, conditions, restrictions, and easements. The bylaws and declaration require members to comply with certain rules and restrictions, and to pay yearly assessment fees, due in quarterly installments. The declaration sets forth the way delinquent assessments accrue interest and late fees. Galyn Manor may also seek attorney's fees and costs in collecting unpaid assessments.

To secure the payment of assessment fees, Galyn Manor holds a continuing lien on each member's property. The governing documents also authorize Galyn Manor to fine members who violate certain sections of the declaration and bylaws. For example, fines are permitted when a member constructs a structure on a lot without the HOA's permission. The declaration includes trailers in its definition of a "structure." These fines may be enforced and collected in the same manner as unpaid assessments.

In February 2007, Galyn Manor's former management company -- Chambers Management, Inc. ("Chambers") -- discovered that the Homeowners regularly parked a large trailer on their property overnight. Chambers notified the Homeowners that this conduct was in violation of the HOA's governing documents. Chambers further advised the Homeowners that they would be subject to a $50 fine for each day that the trailer was parked on their property. The Homeowners were given ⁸⁸² thirty days to correct the violation.

Chambers sent the Homeowners four more letters between April and October ⁶⁶⁹ 2007, but the Homeowners did not take any corrective action. On October 24, 2007, Chambers sent another letter to the Homeowners, informing them that the Homeowners owed $645 in fines. The letter further provided that it was the Homeowners' final notice, that the Homeowners had until November 26 to pay, and that the letter served as "an attempt to collect a debt[.]" In December 2007, Galyn Manor retained Andrews & Lawrence Professional Services, LLC ("Andrews") to provide legal services and to collect overdue assessments. By March 2008, the Homeowners accrued $1,500 in parking violations, while also falling behind on their quarterly assessment payments.

Andrews notified the Homeowners in April 2008 that it represented Galyn Manor and that the Homeowners owed $2,632.84 in "assessments due, late fees and costs of collections, including attorney's fees, authorized by the Declaration." The letter did not specifically provide whether the fines from the parking violations were included in the stated amount. Andrews warned the Homeowners that it would accelerate the debt and file a lien if the Homeowners did not satisfy the debt within thirty days. Andrews further provided the Homeowners with notice of their rights under the Maryland Contract Lien Act ("MCLA"). Specifically, Andrews advised the Homeowners that the debt would be presumed valid unless the Homeowners disputed its validity within thirty days.

The Homeowners did not dispute the debt or otherwise respond to the letter within the thirty-day period. Andrews also attached a statement of the Homeowners' account, which itemized each individual charge. A statement of lien was filed and recorded in June 2008 in the amount of $3,581.88. This amount represented the amount due and owing at the time, i.e. $2,632.84, plus interest, late fees, attorney's fees, and costs.

The Homeowners responded to the notice on August 28, 2008. In a handwritten letter to Andrews, the Homeowners agreed to "make payment arrangements for all overdue quarterly HOA dues[,]" but "dispute[d] the validity of all other ⁶⁷⁰ fines." The Homeowners further stated that they were preparing "factual evidence to proceed with a hearing." The Homeowners did not explain their failure to respond within the thirty-day period. Andrews sent the Homeowners a second notice of acceleration and intent to file a lien in August 2010. Andrews stated that the Homeowners owed $4,256.88 in assessments, late fees, costs, and attorney's fees.

Andrews again provided the Homeowners with their rights under the MCLA, and the Homeowners again failed to respond within thirty days. Thereafter, a statement of lien in the amount of $4,791.58 was filed and recorded. On October 14, 2010, Galyn Manor filed a complaint against the Homeowners in the District Court for Frederick County. The District Court entered judgment in favor of Galyn Manor in the amount of $1,872.93.

In July 2011, Andrews filed a writ of garnishment on behalf of Galyn Manor, seeking to garnish funds in the Homeowners' bank account to satisfy the judgment. Shortly thereafter, the Homeowners asked Galyn Manor to rescind the garnishment. Galyn Manor agreed to rescind the garnishment on the condition that the Homeowners sign a promissory note. Thereafter, a promissory note for $3,429 was executed.

The note obligated the Homeowners to make monthly payments of $130. The note also included a confession of judgment and a waiver of exemptions. ⁸⁸³ The Homeowners made two timely payments on the promissory note before defaulting. Galyn Manor filed a complaint for judgment by confession in the District Court for Frederick County, seeking $2,069 -- the remaining amount owed on the promissory note -- plus $413.80 in attorney's fees. 2 On July 18, 2013, the District Court awarded Galyn Manor judgment. Galyn Manor filed another District Court complaint in August 2014 and a consent judgment of $3,297.53 was entered on November 7, 2014.

On May 14, 2015, Galyn Manor garnished ⁶⁷¹ $3,497.53 from the Homeowners' bank account. Despite the garnishment, the record demonstrates that the Homeowners remained at least $5,000 in arrears. After nearly ten years of collection efforts, the Homeowners commenced this suit on April 1, 2016. In March 2017, the Homeowners filed an amended complaint alleging that Galyn Manor's collection efforts violated the Maryland Consumer Protection Act ("MCPA") and the Maryland Consumer Debt Collection Act ("MCDCA").

The Homeowners also brought conversion and breach of contract claims. Galyn Manor filed a third-party complaint against Andrews, contending that Andrews agreed to indemnify Galyn Manor for any liability. In a memorandum opinion, the Circuit Court for Frederick County granted Galyn Manor's summary judgment motion on the MCPA claim, noting that the statute specifically exempts attorneys. As a result, the circuit court held that Galyn Manor could not be held vicariously liable.

The circuit court also awarded Galyn Manor judgment as a matter of law on the MCDCA claim, ruling that the Homeowners improperly used the statute as a vehicle to dispute the validity of the debt, whereas the statute only proscribes certain methods of collecting the debt. Finally, the court granted Galyn Manor judgment as a matter of law on the conversion and breach of contract claims that arose before April 1, 2013, holding that those alleged breaches were barred by the statute of limitations. The Homeowners' claims that arose after April 1, 2013 proceeded to trial. At the close of the Homeowners' case, the court awarded Galyn Manor judgment as a matter of law, concluding that the Homeowners did not present sufficient evidence to satisfy the elements of a breach of contract or conversion claim.

This appeal followed. STANDARD OF REVIEW The Homeowners challenge both the circuit court's grant of summary judgment and the grant of Galyn Manor's motion for judgment at trial. "[T]hese rulings were premised on purely ⁶⁷² legal issues," therefore, "we apply the same standard of review." Golub ex rel. Golub v. Cohen , 138 Md. App. 508 , 516, 772 A.2d 880 (2001).

Under the Maryland rules, a circuit court "shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law." Md. Rule 2-501(f). "The purpose of the summary judgment procedure is not to try the case or to decide the factual disputes, but to decide whether there is an issue of fact, which is sufficiently material to be tried." Jones v. Mid-Atl. Funding Co. , 362 Md. 661 , 675, 766 A.2d 617 (2001) (citations omitted). Thus, "[i]n reviewing the grant of a summary ⁸⁸⁴ judgment motion, we are concerned with whether a dispute of material fact exists," id.

(citations omitted), and our review is de novo. MAMSI Life & Health Ins. Co. v. Callaway , 375 Md. 261 , 278, 825 A.2d 995 (2003) (citing Green v. H & R Block, Inc. , 355 Md. 488 , 502, 735 A.2d 1039 (1999) ). In doing so, we review the same record and issues of law as the trial court and are "tasked with determining whether the trial court reached the correct result as a matter of law." Id.

(citing Tyma v. Montgomery Cnty. , 369 Md. 497 , 504, 801 A.2d 148 (2002) ; Murphy v. Merzbacher , 346 Md. 525 , 530-31, 697 A.2d 861 (1997) ). We view the evidence in the light most favorable to the Homeowners as the nonmoving party. Jones , supra , 362 Md. at 676 , 766 A.2d 617 . DISCUSSION I. The Homeowners first contend that the circuit court erred in granting Galyn Manor judgment as a matter of law on their MCPA claim.

The MCPA prohibits deception or other misleading conduct in the collection of consumer debts. Md. Code (1975, 2013 Repl. Vol.), § 13-303(5), of the Commercial Law Article ("CL"). The Homeowners seek to hold Galyn Manor liable for Andrews' conduct in collecting debts under a theory of respondeat superior .

Galyn Manor correctly points ⁶⁷³ out that the MCPA does not apply to "[t]he professional services of a ... lawyer[.]" Galyn Manor contends that it did not engage in any collection efforts of its own, and further argues that the attorneys for Andrews are clearly exempt from liability under the statute. Consequently, Galyn Manor argues that it may not be held directly or vicariously liable. The circuit court agreed with Galyn Manor, holding: All of the collection activities against [the Homeowners] were conducted by [Andrews] on behalf of Galyn; however, the MCPA exempts attorneys from being held liable under the Act[.] * * * Therefore, Andrews cannot be held liable under [the] MCPA. Also, [the Homeowners] cannot impute liability to an attorney's client (Galyn) under [the] MCPA.

Fontell v. Hassett , 870 F.Supp.2d 395 , 414 (D. Md. 2012) addressed the issue of an HOA being vicariously liable for the collection activities of their attorney. The Court held that since the law firm was not subject to liability, the law firm's client could not be held vicariously liable under the Act. For these reasons, this Court must grant summary judgment in favor of Galyn on Count V. For the reasons that follow, we disagree and reverse the circuit court's entry of summary judgment in connection with the Homeowners' MCPA claim. In Fontell , 870 F.Supp.2d at 411 -14 , the United States District Court for the District of Maryland held that a HOA could not be held vicariously liable under the Fair Debt Collection Practices Act ("FDCPA") when the HOA did not independently qualify as a debt collector under the statute.

The court observed that, from a policy perspective, "[a] debt collector should not be able to hire an attorney to engage in illegal debt collection practices on its behalf as a means of avoiding liability under the FDCPA." Id. at 412 . Nevertheless, the court held that "if the client is not a debt collector subject to liability under the FDCPA itself, then its decision to hire an attorney to engage in debt collection practices on its behalf ⁶⁷⁴ would not be predicated on evading FDCPA liability, and imputing liability under those circumstances would not further the interests of the Act." Id. Contrary to Galyn Manor's contention, Fontell does not stand for the proposition relied upon by the circuit court because ⁸⁸⁵ Galyn Manor is potentially subject to liability under the MCPA. Unlike the FDCPA which only imposes liability on "debt collector[s,]" the MCPA -- with some statutory exemptions -- functions to hold any "person" liable, whether or not that person holds herself out as a professional debt collector.

CL § 13-303 ; compare 15 U.S.C. § 1692f. Critically, the Fontell court noted that "[a] debt collector should not be able to hire an attorney to engage in illegal debt collection practices on its behalf as a means of avoiding liability under the FDCPA." Fontell , supra , 870 F.Supp.2d at 412 . In this case, Galyn Manor qualifies as a "person" subject to liability under the MCPA. Therefore, "it would be improper for [Galyn Manor] to evade liability ... by hiring an attorney to commit violations on its behalf." Id.

(citing Fox v. Citicorp Credit Servs., Inc. , 15 F.3d 1507 , 1516 (9th Cir. 1994) ). In addition, Galyn Manor contends that a theory of recovery under respondeat superior is not viable where the agent is exempt from liability. In doing so, Galyn Manor cites to our recent opinion in Women First OB/GYN Assocs., LLC v. Harris , 232 Md. App. 647 , 658, 161 A.3d 28 (2017), cert. denied 456 Md. 73 , 170 A.3d 300 (2017). In our view, Galyn Manor's reliance on Women First is misplaced.

In that case, we observed that "the Maryland appellate courts have recognized two situations in which the resolution of a tort claim against an employee acting within the scope of his employment will preclude respondeat superior liability on the part of the employer: exoneration of the employee ... and release of the employee[.]" Id. (citations omitted). Neither Galyn Manor nor Andrews argue that Andrews was exonerated or voluntarily released from liability. We did not address statutory exemptions in Women First , and nothing in our opinion in this case should be construed as creating a third category. ⁶⁷⁵ Notably, there are several reported opinions in Maryland that discuss whether a principal may be held vicariously liable when the agent is immune.

In D'Aoust v. Diamond , 424 Md. 549 , 607, 36 A.3d 941 (2012), the Court of Appeals held that "unless there is an independent source of immunity for the employer or principal, the cause of action premised on vicarious liability can be brought even if the employee or agent is entitled to immunity." More recently, the Court of Appeals revisited its holding in D'Aoust to determine whether an employer could assert an employee's immunity under the Good Samaritan Act. 3 TransCare Md., Inc. v. Murray , 431 Md. 225 , 64 A.3d 887 (2013). The Court rejected the employer's "attempts to distinguish D'Aoust on the basis that it concerned common law immunity rather than statutory immunity[,]" holding that "its conclusion applied to the concept of immunity generally as it relates to causes of action based on vicarious liability." Id. at 242 , 64 A.3d 887 . Accordingly, the Court held that the employer could be held vicariously liable even though the tortfeasor was immune from liability. Id.

See also James v. Prince George's Cnty. , 288 Md. 315 , 332, 418 A.2d 1173 (1980) ("As a general rule ... the master remains liable for the servant's conduct even though the servant is himself not liable because of a personal immunity."). We, therefore, hold that the circuit court erred, as a matter of law, in allowing Galyn Manor to assert Andrews' personal exemption. In short, Galyn Manor is not shielded from liability under the MCPA simply because Andrews is exempt. TransCare, Md. , 431 Md. at 243 , 64 A.3d 887 . 4 ^{676 886} Galyn Manor and Andrews also urge us to conclude that the Homeowners' debts did not arise out of a consumer transaction.

They further contend that, assuming the debts arose out of consumer transactions, their claim under the MCPA is nevertheless barred by the statute of limitations. 5 The circuit court did not address any of these issues in its memorandum opinion. As a result, we limit our opinion to the sole basis relied upon by the circuit court in granting Galyn Manor's motion for summary judgment. We, therefore, reverse the circuit court's order granting summary judgment on the Homeowners' claim under the MCPA, and remand the Homeowners' MCPA claim for the circuit court's consideration consistent with this opinion. Nevertheless, on remand, the circuit court may certainly consider these issues in the context of any additional motion for summary judgment filed in this case.

II

We next consider whether the circuit court erred in awarding Galyn Manor judgment as a matter of law on the Homeowners' MCDCA claim. The Homeowners contend that Galyn Manor violated the MCDCA when Galyn Manor attempted to collect the Homeowners' overdue assessments, levied unauthorized fines against the Homeowners' account, charged interest and late fees, and filed liens that were allegedly in violation of the MCLA. In relying on a case from the United States District Court for the District of Maryland, the circuit court ruled as follows: [The Homeowners'] claims under [the] MCDCA are based on the argument that the underlying debt and associated fees, fines, liens, and costs were invalid. But [the] MCDCA provides no basis for liability in contesting the underlying debt but rather, only the methods used to collect any ⁶⁷⁷ alleged debt.

Accordingly, this Court will grant summary judgment in favor of Galyn on [the MCDCA claim]. (citing Fontell v. Hassett , 870 F.Supp.2d 395 (D. Md. 2012) ). 6 The principal issue raised by the Homeowners on appeal is whether the circuit court improperly interpreted Fontell , and misread CL § 14-202(8) in ruling that the statute may not be used to challenge the underlying validity of a debt. The Homeowners further contend that even if the circuit court correctly interpreted the statute, only some of the Homeowners' claims challenged the validity of the underlying debt, while several claims challenged the methods of collection. CL § 14-202(8) provides, in pertinent part, that "[i]n collecting or attempting to collect an alleged debt a collector ⁸⁸⁷ may not ... [c]laim, attempt, or threaten to enforce a right with knowledge that the right does not exist[.]" Under CL § 1-201(b)(34), the definition of "right" includes "remedy." " 'Remedy' 'means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.' " CL § 1-201(b)(32).

"To state a claim under the [statute], [the Homeowners] must establish two elements: (1) [Galyn Manor] did not possess the right to collect the amount of debt sought;