United States District Court, D. Maryland, Southern Division
J. HAZEL UNITED STATES DISTRICT JUDGE
Mortgage Guaranty Insurance Company ("MGIC") brings
suit against John and Margit Whitaker
("Defendants") to recover losses following its
payment on a claim stemming from Defendants' default on
their mortgage. ECF No. 12. No hearing is necessary. Loc. R.
105.6 (D. Md. 2016). For the following reasons.
Defendants" Motion to Dismiss is granted.
February 15, 2008, Defendants borrowed money from Weichert
Financial Services O"Weicher() for the purchase of a
properly located at 18 North Luzerne Avenue in Baltimore,
Maryland and executed a Note and Deed of Trust secured by the
property. ECF No 2 ¶ 5: ECF No. 2-1. MG1C, a mortgage
insurance company, insured Weichert, and its successors or
assigns, against financial losses should Defendants default
on the Note. ECF No. ¶ 11. Defendants failed to pay the
installment payments due on the Note, and the Circuit Court
for Baltimore City entered an order ratifying the foreclosure
sale on July 17. 2012. Id. ¶¶ 6.7: see
also Rosenberg, el al. v. Whitaker. el al., Case No.
24012000110 (docket attached as ECF No. 14-1). After applying
all credits of the sale to Defendants' total debt, the
Court Auditor for Baltimore City determined a deficiency due
on the Note in the amount of $141.691.37. and the court
issued an order ratifying the Court Auditor's report on
November 28. 2012. See ECF No. 2 ¶¶ 9. 10;
ECF No. 2-2. Following ratification of the deficiency,
Dovenmuehle Mortgage. Inc.. Weicliert"s successor in
interest, filed an insurance claim with MGIC. who then paid
the claim in the amount of $88, 272.50 to Federal Home Loan
Mortgage Corporation. ECF No. 2 ¶ 12.
result of Defendants" default on the Note and
MGIC"s payment of the insurance claim. MGIC alleges that
it became subrogated as to Weichert's claim for the
deficiency due on the Note. See ECF No. 2 ¶ 13.
MGIC brought suit against Defendants for breach of contract
on June 26. 2017 in the Circuit Court for Montgomery County,
and Defendants removed the action to this Court on August 8.
2017 on the basis of diversity of citizenship under 28 U.S.C.
§ 1332. Defendants now move to dismiss the Complaint
pursuant to Federal Rules of Civil Procedure 12(b)(1) and
12(b)(6). arguing that MG1C lacks standing to enforce the
Note and Deed of Trust and that even if MGIC has standing, it
may not enforce the Note through a breach of contract action.
See ECF No. 12.
Motion to Dismiss Pursuant to Rule 12(h)(1)
standing is an element of subject matter jurisdiction, a
defendant's motion to dismiss for lack of standing should
be analyzed under Rule 12(b)(1). See Mclnnes v. Lord
Baltimore Employee Retirement Income Account Plan. 823
F.Supp.2d 360, 362 (D. Md. 2011) (citing White Tail Park.
Inc. v. Stroube. 413 F.3d 451, 459 (4th Cir. 2005)).
When such a motion has been filed, the plaintiff bears the
burden of proving that jurisdiction exists. Williams v.
United States. 50 F.3d 299. 304 (4th Cir. 1995). The
court should grant the motion only "if the material
jurisdictional facts are not in dispute and the moving party
is entitled to prevail as a matter of law." Richmond
Fredericksburg & Potomac R. Co. v. United Stales.
945 F.2d 765. 768 (4th Cir. 1991). In making this
determination, the court "is to regard the pleadings as
mere evidence on the issue, and may consider evidence outside
the pleadings without converting the proceeding to one for
summary judgment." Id
underlying claim is one of breach of contract, alleging that
it has suffered an "injury in fact" as a result of
Defendants" failure to pay Weichert the installment
payments due on the Note. See ECF No. 14 at 5
(citing McInnes. 823 F.Supp.2d at
362). Defendants do not dispute that they owed a
contractual obligation to Weichert; rather. Defendants argue
that MG1C does not have standing to bring suit against it
because MG1C is not in privity of contract with Defendants
nor designated by Weichert as a third-party beneficiary to
the Note. ECF No. 12 at 3. However, both parties agree that
the doctrine of subrogation, if properly established, would
allow MG1C to "step into the shoes" of Weichert to
pursue Weichert's breach of contract action. See
ECF No. 14 at 8 (citing Fireman's Fund Ins. Co. v.
Com'n Ins. Co.. 519 A.2d 202, 204 (Md.
1987)). Subrogation is "[t]he substition of one person
in place of another with reference to a lawful claim, demand
or right, so that he who is substituted succeeds to the
rights of the other in relation to the debt or claim, and its
rights, remedies, or securities." Riemer v. Columbia
Med. Plan. Inc. 747 A.2d 677, 682 (Md.
2000). The subrogee is then ordinarily entitled to all the
remedies of the creditor and associated means the creditor
could employ to recover payment. Foe v. Pbila. Cas.
Co., 84 A. 476 (Md. 1912).
recognizes both legal and conventional subrogation. Legal, or
equitable, subrogation does not require a contractual
relationship between a creditor and a subrogee and may be
applied where there is "(1) the existence of a debt or
obligation for which a party, other than the subrogee, is
primarily liable, which (2) the subrogee, who is neither a
volunteer nor an intermeddler. pays or discharges in order to
protect his own rights and interest." Sec. Ins, Co.
of New Haven-The Connecticut Indem. Co. v. Mangan, 242
A.2d 482. 485-86 (Md. 1968). In contrast, conventional
subrogation requires "an agreement, express or implied,
between a debtor and a third party or between a creditor and
a third party that, upon payment of the debt, the third party
will be entitled to all the rights and securities of that
debtor or creditor." Poteel v. Sauter. 766 A.2d
150. 160 (Md. 2001). Defendants claim that MG1C has no right
of subrogation, legal or conventional, and therefore does not
have standing. MG1C claims that it has a right of legal
relies on Bachmann v. Cheer & Glazer, Inc.. 559
A.2d 365 (Md. 1988) to assert that it may pursue its claim
against Defendants under the theory of legal
subrogation. ECF No. 14 at 8. In Bachmann, a tenant
in a commercial building entered into a sales agreement with
Glazer. Per the sales agreement, Glazer would become the
assignee under the building's lease in the event that the
tenant defaulted on the sales agreement. Prior to the sales
agreement with Glazer. the tenant had executed an agreement
with Bachmann who guaranteed the rental payments owed from
the tenant, or any assignee of the tenant's interest in
the lease, to the landlord of the building. After the tenant
defaulted on its sales agreement with Glazer, Glazer became
the assignee under the lease. Glazer then entered into an
agreement with the landlord, whereby Glazer agreed to pay the
tenant's outstanding rent balance and. in return, the
landlord would assign to Glazer its claim against the tenant
and Bachmann for the past due rent. See Bachmann.
599 A.2d at 366-67.
paying the outstanding rent balance, Glazer brought suit
against Bachmann to recover its costs. On review, the
Maryland Court of Appeals held that Glazer could recover the
payment against Bachmann under the doctrine of subrogation
because subrogation "is intended to provide relief
against loss and damage to a meritorious creditor who has
paid the debt of another." Id. at 368. Because
the landlord had assigned its interests in the back rent to
Glazer. the court found that Glazer was entitled to sue
Bachmann. the tenant's guarantor, because
"assignment of a debt ordinarily carries with it every
remedy or security that is incidental to the subject matter
of the assignment" Id. at 370. However,
contrary to Plaintiffs assertion of legal subrogation, the
court's decision rested on conventional
subrogation. Id. at 369 ("The case before us
involves conventional subrogation."). The court noted
that Glazer paid the back rent as a condition of the landlord
granting the assignment, not for the purpose of extinguishing
a debt "for" the tenant. Id. at 370.
(emphasis in original). Cf. Id. at 367-68 (citing
Schneider, Inc. v. Cole Build Co., 202 A.2d 326 (Md.
1964) (finding legal subrogation of claims for paving costs
where plaintiff paved roads on defendant's property in
order to obtain permission from the city to pave roads on
plaintiffs own property)).
Bachmun, MG1C did not provide payment to Weichert.
or its successors or assigns, for Defendants in order to
protect its own rights or interests; rather, it provided
payment as a result of its insurance agreement with Weichert.
Thus. MGIC had no relationship with Defendants, and its
interest in the debt is not grounded in the theory of legal
subrogation but rather only arises as a result of its
contractual relationship with Weichert. Cf. Mffigan,
242 A.2d at 486 (noting that a legal subrogee is normally not
"a complete stranger to the transaction"). Because
MG1C is not entitled to legal subrogation. MG1C. like other
insurers, "is denied subrogation unless specifically
permitted by a policy provision or sanctioned by
statute." Id. at 487.
forth in the Complaint. MGIC insured Weichert. and its
successors or assigns, against any financial loss sustained
due to Defendants' default on the Note. ECF No. 2 ¶
11. This insurance agreement included a subrogation
provision, providing that "only to the extent that
[MGICI is entitled under applicable law to pursue such
deficiency rights. [MGIC] will be subrogated, upon payment of
the Loss, in the amount thereof, and with an equal priority
to all of [Weichert"s] rights of recovery against a
Borrower." ECF No. 14-2 at 31. Therefore, because
Weichert assigned its interests in the Note to MGIC, and MGIC
discharged Defendants remaining debt to Weichert. MGIC has
standing to recover the debt from Defendants under a theory
of conventional subrogation. See Bachmann.
599 A.2d at 371 ("In order for Glazer to recover ...