ROGER R. VALES, et al., Plaintiffs,
ALMA PRECIADO, et al., Defendants.
CHARLES B. DAY, Magistrate Judge.
Before the Court is Vales' Memorandum in Support of Pre-Judgment Interest and Other Relief ("Plaintiffs' Memorandum")(ECF No. 330) and the opposition and reply thereto. No hearing is deemed necessary. Local Rule 105.6 (D. Md.). Plaintiffs are ordered to submit a revised calculation of damages consistent with the findings made herein. Plaintiffs' revised calculations shall be submitted within seven (7) days.
On May 28, 2013, the Court found in favor of Plaintiffs Roger and Lourdes Vales against Defendant Dorita Down as to their claims of Intentional Misrepresentation (Count One) and Deceit (Count Two); in Plaintiffs' favor against Pidegro, LLC for Unjust Enrichment (Count Five) in the amount of $189, 000.00, and against Defendant Down under the same claim in the amount of $350, 000.00. The Court required additional submissions regarding the monies owed by each Defendant.
On April 5, 2005, Plaintiffs provided a check, made payable to Defendant Down in the amount of $350, 000.00 in reliance upon the following documents signed by Defendant Down.
1. Uniform Residential Loan Application - reflecting a loan amount of $350, 000.00, to be repaid in 360 months with an interest rate of 17%, with an expected monthly payment of $4, 958.00 (Pls.' Ex. 5a);
2. A Truth in Lending Disclosure Statement reflecting the same terms (but indicating the monthly payments would be $4989.86) (Pls.' Ex. 8);
3. A collection of financial disclosures reflecting late charges for overdue payments at "5% of the overdue monthly payment of principal and interest" (Pls.' Ex. 9);
4. Balloon Payment Riders to the Mortgage/Deed of Trust, declaring that any unpaid balance is due in full in two years (Pls.' Exs. 26 and 27); and
5. The Balloon Note ("Balloon Note") reflecting that in exchange for the loan, Defendant Down agrees to repay the loan at 17% interest "both before and after any default." This Balloon Note also requires all outstanding amounts to be paid on May 31, 2007. Defendant Down's monthly payment under the Balloon Note is $4, 958.00, and it also indicates that overdue payments will incur a late charge of 5% of the amount of any overdue principal and interest. (Pls.' Exs. 28 and 29).
The net result of the agreements reached on April 5, 2005 was that Defendant Down was receiving a loan, for which she was to pay interest only for two years. At the end of two years, if timely payments were made, the full balance of $350, 000 became due. Plaintiffs' Memorandum seeks prejudgment interest under the Balloon Note and other relief which Defendant Down opposes. The parties are at odds over whether tort or contract damages apply to Counts One and Two.
II. Plaintiffs are entitled to a "Benefit of the Bargain" Theory of Prejudgment Interest at the Rate Set Forth under the Balloon Note.
Defendant Down does not challenge the accuracy of Plaintiffs' prejudgment interest calculations, merely whether it is appropriate to include a "benefit-of-the-bargain" approach under fraud and deceit theories of recovery. The applicable law is set forth in Goldstein v. Miles , 159 Md.App. 403, 859 A.2d 313 (2004). As stated in Goldstein, when fraud type charges are asserted, "benefit-of-the-bargain" damages are available when there is an enforceable bargain. Id. at 316. Maryland has long adhered to a "flexibility theory" in fraud and misrepresentation cases, leaving for Plaintiff's election a decision whether to recover either "out-of-pocket" expenses or "benefit-of-the-bargain" damages. Id. at 324. The Goldstein court when on to quote Professor McCormick when he stated that the "benefit-of-the-bargain" damages are available "if the trial judge, in his discretion considers that, in view of the probable moral culpability of the defendant, and the definitiveness of the representations and the ascertainability of the represented value, (then) the case is an appropriate one for such treatment." Id. at 326 (quoting Charles T. McCormick, Handbook on the Law of Damages §121, at 454 (1935)(footnotes omitted)). Finally, the Maryland appellate courts have impliedly recognized "the legitimacy of such damages in fraud and negligent misrepresentation cases in which there is an actual contract between the parties." Id. at 327 (additional citations omitted).
Without doubt there is in place an enforceable bargain between Plaintiffs and Defendant Down. The only remaining question is whether in view of "the probable moral culpability" of Defendant Down, and the "definiteness of the representations and ascertainability of the represented value, " whether this Court in its discretion should permit the recovery of "benefit-of-the-bargain" damages. The Court has ruled that Defendant Down was complicit and morally culpable in this fraudulent scheme to obtain hundreds of thousands of dollars from Plaintiffs. While she may not have been as responsible as her co-defendant Alma Preciado, it was Defendant Down's conduct that made the fraud possible. Equally true, the agreements between the parties could not have been clearer. While the negotiated interest rate on the Balloon Note was friendly to Plaintiffs, there have been no assertions of impropriety from their hand. In fact it was the improving interest rate which greatly motivated Plaintiffs to agree to ...