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Murray v. Midland Funding, LLC

Court of Special Appeals of Maryland

June 29, 2017

CASSANDRA MURRAY
v.
MIDLAND FUNDING, LLC

         Circuit Court for Anne Arundel County Case No. 02-C-14187207 Hon. William C. Mulford II

          Graeff, Kehoe, Friedman, JJ. [*]

          OPINION

          Friedman, J.

          Debt buyers purchase consumer debt at deep discount, obtain judgments, and try to collect on those judgments. Md. Code Ann., Business Regulation Article § 7-301 (2015). In 2010, the Maryland State Collection Agency Licensing Board clarified that these debt buyers fall within the definition of collection agencies and, therefore, must have a license before engaging in debt collecting. Md. State Collection Agency Licensing Bd. Advisory Notice 05–10, May 5, 2010 (quoted in Finch v. LVNV Funding, 212 Md. App. 748, 758 (2013)); see also Cain v. Midland Funding, __ Md.__, __, No. 2280, September Term 2016, Slip Op. at 2 (filed March 24, 2017). And, in Finch v. LVNV Funding, this Court held that judgments obtained by unlicensed debt buyers while they were unlicensed are void. 212 Md. App. at 764.

         Cassandra Murray-on behalf of a proposed class of similarly-situated consumers-brought a lawsuit against Midland Funding, an allegedly unlicensed debt buyer,[1] to have the judgment that Midland obtained against her declared void. Murray sought to recover money that she paid to Midland (with fees and expenses), as well as to obtain equitable relief. By the time the matter arrived in the Circuit Court for Anne Arundel County, however, the counts seeking monetary damages had been dismissed and only the two non-monetary counts-a count seeking a declaratory judgment and a count seeking injunctive relief-remained viable. On November 30, 2015, the circuit court dismissed these final two counts, finding that they were barred by the three-year statute of limitations set forth in § 5-101 of the Courts & Judicial Proceedings ("CJ") Article of the Maryland Code. Murray noted a timely appeal.

         Four months after the circuit court's decision in Murray's case, this Court decided another Finch-style case predicated on similar facts, Jason v. National Loan Recoveries. 227 Md. App. 516 (2016) (decided April 1, 2016). Because the circuit court here did not have the benefit of our Jason opinion, it erroneously determined that Murray's non-monetary, equitable remedies are barred by limitations. We, therefore, will vacate the circuit court's decision and remand the case for reconsideration in light of our holding in Jason.[2] We summarize the rules that apply.

         ANALYSIS

         Several rules have emerged for Finch-style cases, in which a judgment debtor files a lawsuit to void a previously-obtained judgment by an unlicensed debt collector.

          1. All claims for monetary damages are actions at law and, thus, subject to a statute of limitations. Jason, 227 Md. App. at 529-530 (applying CJ §5-101's three-year statute of limitations).[3] Murray's complaint, in its current form, does not advance any claims-direct or ancillary-for monetary damages.

         2. All claims for purely equitable remedies, including claims for injunctive relief, are potentially subject to laches. Laches is the limit equity places on stale claims. "Laches derives from concerns similar to those that undergird statutes of limitations. Both devices-one a product of legislation, the other a development of the common law-are intended to set time limits on the assertion of claims." Lopez v. State, 433 Md. 652, 653 (2013). There is no firm time limit for laches: rather a judge sitting in equity considers plaintiff's delay in asserting the claim and its causes and weighs that against the prejudice to the defendant caused by the late assertion of the equitable claim. "Laches bars an action where there has been both an inexcusable delay and prejudice to the party asserting the defense." Dep't of Human Serv. v. Kamp, 180 Md. App. 166, 205 (2008) (citations and quotations omitted). "[I]n most cases involving an exclusively equitable remedy, [courts] refer to the limitations period for the cause of action at law most analogous to the one in equity." State Ctr., LLC v. Lexington Charles Ltd. P'ship, 438 Md. 451, 604 (2014) (citations omitted).

         As noted above, one of Murray's remaining claims seeks the equitable remedy of injunction. The purpose of an injunction is to prohibit future conduct. 100 Harborview Drive Condo. Council of Unit Owners v. Clark, 224 Md. App. 13, 64 (2015) (citations omitted). We note, parenthetically, that it is not clear to us how an injunction would work in Murray's case. Specifically, Murray's complaint seeks "an injunction against Midland from collecting upon the void judgments." There doesn't seem to be a dispute that Midland currently possesses the requisite license to collect debt. Moreover, Midland has completed collection on its judgment against Murray. Thus, as to Murray herself, the proposed injunction would likely be moot. Clark v. O'Malley, 186 Md. App. 194, 218 (2009) (explaining that, because a police commissioner's contract had expired, the injunctive relief he sought-reinstatement into his job as the Police Commissioner-was moot), aff'd, 434 Md. 171 (2013). Moreover, Murray may also have difficulty demonstrating that she has standing to assert the claim for injunction on behalf of those who do. Finally, as we began this discussion, on remand Midland will have the opportunity to argue that Murray has inexcusably delayed in bringing this claim and that, as a result, it has suffered prejudice, and therefore, laches is a bar to this equitable claim.[4]

          3. Actions seeking declaratory judgments present a unique, hybrid situation. Claims for declaratory relief were unknown at the common law and are exclusively a statutory construction. See CJ §3-401 et seq. The principal relief in a declaratory judgment action is a declaration, a separate written statement of the court declaring the rights of the parties. Bowen v. City of Annapolis, 402 Md. 587, 608 (2007) (explaining that a declaratory judgment defines the rights and obligations of parties and must be in writing). In the context of these Finch-style claims, three sub-rules have developed about the timeliness of declaratory judgment actions.

         There is no time bar at all if Murray seeks the primary relief of a simple declaration. Our courts (and others) hold that she can obtain such a declaration "at any time," meaning there is not, nor will there ever be a time bar to that cause of action. Jason, 227 Md. App. at 525 ("[T]here appears to be no time limit for asserting that a judgment is void." … "We agree with Jason that [neither] the statute of limitations [nor laches] preclude him from seeking a declaration that the judgment was void");[5] Cook v. Alexandria Nat. Bank, 263 Md. 147, 151, 282 (1971) ("Although it is not necessary to take any steps to have a void judgment reversed or vacated, it is open to attack or impeachment in any proceeding, direct or collateral, and at any time or place, at least where the invalidity appears upon the face of the record.") (Emphasis added); United States v. One Toshiba Color Television, 213 F.3d 147, 158 (3d Cir. 2000) ("[W]e hold that laches is not available to preclude a claimant from attacking a void judgment."). This rule may reflect an implicit conclusion about how a laches analysis would play out: the value of such a declaration to the judgment debtor (for example, to negate a derogatory notation on a credit report) far outweighs any potential prejudice to the unlicensed debt buyer. In part, this is because the evidentiary burdens of proving the judgment void are light (the only relevant issues are the date of the judgment and the date of licensure) and there is minimal, if any, cost to the formerly unlicensed debt buyer in allowing such a declaration to issue. Whatever the reason, the rule is clear that a simple declaration that a judgment is void, is subject neither to a statute of limitations nor laches.

         To the extent that a declaratory judgment action also seeks what the Jason Court called "remedies," Jason, 227 Md. App. at 525; "remedial relief," id.; and "ancillary remedies," id. at 526; that ancillary relief may be stale and therefore can be subject either to limitations or laches as the case may be. "A declaratory judgment can be obtained either at law or in equity." LaSalle Bank, N.A. v. Reeves, 173 Md. App. 392, 411 (2007). "The determination of whether [a declaratory judgment] action is properly at law or in equity must be made by an examination of the nature of the claim asserted and the relief requested." Id. (quoting Fisher v. Tyler, 24 Md. App. 663, 668-69 (1975) (holding that ...


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