DWIGHT LOUERS, et al.
SHANITA R. LACY, et al.
JILLYN K. SCHULZE, Magistrate Judge.
Presently pending and ready for resolution is Plaintiffs' Petition for Default Judgment Damages. ECF No. 182. The petition seeks damages against three remaining Defendants: Shanita Lacy, Clarence Lacy and Challenge Financial Investors Corporation (Challenge Financial). No hearing is necessary. For the reasons outlined below, the motion will be granted in part and denied in part.
On July 27, 2010, Plaintiffs, Dwight Louers and Faith Louers, filed a complaint in the Circuit Court for Prince George's County against Shanita Lacy, Clarence Lacy, Challenge Financial and several other Defendants, alleging that Defendants participated in a foreclosure rescue scam that, among other things, stripped Plaintiffs of the equity in their home. ECF No. 1; ECF No. 47 at 2. The case was removed to this court on August 20, 2010. ECF No. 1. Shanita and Clarence Lacy were served on August 17, 2010 and Challenge Financial was served on August 19, 2010 and again on August 22, 2010. ECF Nos. 10, 11, 16, 17. After they failed to respond to the complaint in any manner, the Clerk of the Court entered default against the Lacys and Challenge Financial,  ECF No. 162, and on October 2, 2013, the court entered a default judgment against them. ECF No. 181.
The amended complaint alleges that Shanita and Clarence Lacy created a scheme that induced individuals facing foreclosure to transfer title to their homes to the Lacy "Clean Slate" credit repair program. ECF No. 47 at 2-3. This program, as advertised by the Lacys, would allow Plaintiffs to stay in their home, avoid foreclosure, repair their credit, and re-purchase their home in one year. Id. at 2-4. In actuality, the Lacys created the program to acquire the equity held in the homes of their clients.
Plaintiffs also allege that Defendant, Challenge Financial, brokered a $255, 200 loan between Defendant, James Bennett,  and the lender, Option One Mortgage Corporation (Option One). Plaintiffs claim that, while brokering the loan, Challenge Financial knowingly provided Option One with false or misleading information including: that the matter involved an arm's length transaction; that Bennett was the real purchaser in interest; and that Bennett purchased the property with his own money. ECF No. 47 at 9. Plaintiffs contend that Challenge Financial turned a blind eye to the transfer of this false information to ensure that Defendants' scheme could proceed. Id.
As a result of Defendants' representations, the Louers (1) transferred title of their home to Bennett; (2) executed a contract of sale to Bennett for $319, 000; and (3) transferred $130, 000 of the $160, 110.98 in net proceeds of the sale to the Lacy Clean Slate program as an enrollment fee. ECF No. 47 at 5.
II. Standard of Review.
Upon entry of default judgment, the well-pleaded factual allegations of the complaint regarding liability are deemed admitted, in contrast to the allegations regarding damages. SEC v. Lawbaugh, 359 F.Supp.2d 418, 422 (D. Md. 2005); Fed.R.Civ.P. 8(b)(6) (a defaulting party is deemed to admit factual allegations of the plaintiff's complaint "other than [those] relating to the amount of damages"). The party in default is "not held... to admit conclusions of law" or allegations regarding liability that are not "well-pleaded." Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001) (quotation marks and citation omitted). Thus, before awarding damages, the court must consider whether the admitted facts constitute a legitimate cause of action. Haley v. Corcoran, Civ. No. WDQ 09-1338, 2010 U.S. Dist. LEXIS 112171, at *10 (D. Md. Oct. 20, 2010). As to damages, "[w]here the amount... is uncertain, the court is required to make an independent determination of the sum to be awarded." J&J Sports Prods. v. Melgar, Civ. No. PJM 11-3339, 2012 U.S. Dist. LEXIS 69391, at *5 (D. Md. May 15, 2012) (citations and quotation marks omitted). "While the court may hold a hearing to prove damages, it is not required to do so; it may rely instead on detailed affidavits or documentary evidence to determine the appropriate sum." Id.
Plaintiffs seek damages under the Maryland Protection of Homeowners and Foreclosure Act (PHIFA), MD. CODE ANN., REAL PROP. (RP) §§ 7-301 et seq., and under theories of fraud, unjust enrichment, negligence and breach of contract. ECF No. 182 at 2-5. Their claims for damages all stem from the same foreclosure rescue scam, and thus, the damages claimed are related and, in some instances, duplicative. As discussed more fully below, a party may not recover twice for the same injury, Kramer v. Emche, 64 Md.App. 27, 40 (1985), and the court will limit the damages accordingly.
PHIFA applies to foreclosure consultants, foreclosure consulting services and foreclosure purchasers. RP §§ 7-301(c), (e) and (h). A "foreclosure consultant" is a person who "solicits or contacts a homeowner... and directly or indirectly makes a representation or offer to perform any service that the person represents will, " inter alia, "stop... or postpone a foreclosure sale, " "save the homeowner's residence from foreclosure, " or "arrange for the homeowner to become a lessee or renter entitled to continue to reside in the homeowner's residence after a sale or transfer." RP §§ 7-301(c)(1)(i), (viii) and (x). The Lacys acted as foreclosure consultants by providing services to stop or postpone the imminent foreclosure of the Louers' home and to help repair their credit. ECF No. 47 at 2-4. The Lacys were contractually obligated to perform the services that they offered to the Louers, yet failed to do so, and thus engaged in conduct prohibited by PHIFA. See RP § 7-307 ("A foreclosure consultant may not: (1) Engage in... or carry out a foreclosure rescue transaction; (2) Claim... or receive any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform...;... (8) Acquire any interest, directly or indirectly... in a residence in default from a homeowner with whom the foreclosure consultant has contracted."). Because a homeowner may bring a private action for damages against anyone who violates PHIFA, see RP § 7-320, the Louers are entitled to receive damages from the Lacys.
A PHIFA damage award may consist of actual damages, reasonable attorney's fees, and, if the court finds that the defendants violated the statute willfully or knowingly, treble damages. RP § 7-320. Plaintiffs seek actual damages equal to the amount of equity lost in their home as a result of Defendants' scheme. To support this request, they submit a HUD-1 settlement statement and an appraisal conducted by Mr. Jerome Bell, both executed on the day of closing. The appraisal valued the property at $336, 000 at closing, ECF No. 182 at 22, and according to the HUD-1 settlement statement, Plaintiffs owed $135, 628.54 in mortgage liens on the property. Id. This left an equity value of $200, 371.46. However, Plaintiffs netted only $30, 110.98 from the proceeds of the sale after transferring $130, 000 of the gross payment of $160, 110.98 to the Clean Slate program. Thus, $30, 110.98 must be subtracted from Plaintiffs' actual damage award, leaving the Lacys jointly and severally liable to ...