Reginald Jones v. HSBC Bank USA, N.A.

Filing

UNPUBLISHED PER CURIAM OPINION filed. Originating case number: 8:09-cv-02904-RWT Copies to all parties and the district court/agency. [998663291].. [11-1197]

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 1 of 15

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11-1197

REGINALD JONES,
Plaintiff - Appellant,
v.
HSBC BANK USA, N.A.; HOME EQUITY LOAN TRUST, SERIES ACE
2005-HE5;
WELLS
FARGO
BANK
NA;
MORTGAGE
ELECTRONIC
REGISTRATION SYSTEMS INC.; BUONASSISSI, HENNING & LASH,
P.C.,
Defendants – Appellees,
and
ONE CALL LENDER
CORPORATION,

SERVICES,

LLC;

SUPERIOR

HOME

MORTGAGE

Defendants.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge. (8:09cv-02904-RWT)

Submitted:

July 7, 2011

Decided:

Before MOTZ, KING, and DUNCAN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

August 25, 2011

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 2 of 15

Lawrence J. Anderson, PELS ANDERSON, LLC, Bethesda, Maryland,
for Appellant.
Russell J. Pope, TREANOR POPE & HUGHES, P.A.,
Towson, Maryland, for Appellees.

Unpublished opinions are not binding precedent in this circuit.

2

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 3 of 15

PER CURIAM:
This
proceeding.

appeal

arises

out

of

a

Maryland

foreclosure

In October 2009, Plaintiff Reginald Jones (“Jones”)

filed suit in Maryland state court against defendants, HSBC Bank
USA,

N.A.

(“HSBC”),

Fremont

Reorganizing

Corporation

(“Fremont”), Home Equity Loan Trust Series ACE 2005-HE5 (“Home
Equity

Loan

Superior

Trust”),

Home

Wells

Mortgage

Fargo

Bank,

Corporation

NA

(“Wells

(“Superior”),

Fargo”),
Mortgage

Electronic Registration Systems, Inc. (“MERS”), One Call Lender
Services, LLC (“One Call”), Buonassissi, Henning & Lash, P.C.
(“BHL”), and Friedman & MacFayden, P.A.

Defendants removed to

federal court and the district court ultimately granted their
motion to dismiss.

Jones appeals that dismissal, urging that

the district court abused its discretion by denying him leave to
amend his complaint and that, in any event, the court should
have

entered

contained

in

dismissal
his

without

proposed

as

prejudice

amendment.

For

to

the

the

claims

reasons

that

follow, we affirm.

I.
In 2005, Jones took out an $825,200 home mortgage loan
from

Fremont.

The

loan

was

secured

Jones’s Rockville, Maryland property.

by

a

deed

of

trust

on

Fremont subsequently sold

its interest in Jones’s property on the secondary market to Home
3

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 4 of 15

Equity Loan Trust, with HSBC serving as trustee.

Wells Fargo

assumed servicing responsibilities for the mortgage.
In November 2007, Jones defaulted on the loan.

As a

result, Wells Fargo, through substitute trustee BHL, initiated
foreclosure

proceedings

County, Maryland.

in

the

Circuit

Court

for

Montgomery

BHL filed an order to docket foreclosure on

July 10, 2009. Jones responded by filing an objection on July
27.
While

Jones’s

objection

was

pending,

foreclosure

of

his home proceeded, and a sale of the property was scheduled for
October 7, 2009.

Seeking to delay the sale, Jones filed the

present action in the Circuit Court for Montgomery County on
October 6.

The complaint alleged six causes of action, all

relating to Jones’s objections to the foreclosure, and named as
defendants HSBC, Home Equity Loan Trust, Wells Fargo, and MERS. 1
Shortly after the complaint was filed, defendants removed to the
United States District Court for the District of Maryland.
Despite
proceeded

as

Jones’s

scheduled,

and

lawsuit,
HSBC

1

the

purchased

foreclosure
the

sale

property

on

MERS serves as the record nominee for the holder of the
loan.
The complaint also names as defendants One Call and
Superior, but contains no specific allegations against them.
Jones consented to dismissal of Fremont and the original
trustee, Friedman & MacFayden, though he originally named them
as defendants as well.

4

Appeal: 11-1197

Document: 25

October

7.

Date Filed: 08/25/2011

The

state

court

Page: 5 of 15

retained

jurisdiction

over

the

foreclosure proceedings, and, on December 2, 2009, it held a
hearing on Jones’s objection to the foreclosure, at which he
appeared.

The court ultimately denied Jones’s objection.

Jones

then filed a motion for reconsideration, which the court also
denied.
The state court ratified the foreclosure sale on March
2, 2010, and HSBC filed a motion for possession on April 9.
Still attempting to retain the property, Jones filed an opposing
motion.
which

Jones also filed a motion for a preliminary injunction,

sought

to

prevent

HSBC

from

taking

possession

property until the federal suit was resolved.

of

the

The state court

granted HSBC’s motion on May 14, 2010, and entered a judgment
awarding HSBC possession of the property.
On May 18, Jones filed a motion for an injunction in
his federal court case that was almost identical to the motion
he had earlier filed in state court.

It asked the district

court to prevent the state court from allowing HSBC to take
possession

of

the

property.

In

both

the

state

and

federal

injunction requests, Jones argued that Fremont’s assignment of
the mortgage “split” the note from the deed of trust, creating
an unsecured debt and leaving the opposing parties without legal
authority to foreclose.

J.A. 44, 81.

5

Due to the state court’s

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 6 of 15

granting a hearing on his motion for an injunction, Jones moved
to withdraw his federal court injunction request on June 18.
On July 1, 2010, the state court denied as moot all of
Jones’s outstanding motions in the foreclosure action.

With

Jones having exhausted all other avenues for relief, defendants
in

the

present

action

moved

on

October

21,

2010

filed

for

to

leave

dismiss

Jones’s complaint.
One

week

later,

Jones

district court to amend his complaint.
retained
sought

as

to

defendants
convert

only

the

HSBC,

suit

a

the

The proposed amendment

Wells

into

from

Fargo,

class

and

BHL,

action.

and

Raising

substantially different facts and legal theories, the revised
complaint centered on the manner in which Wells Fargo prepared
affidavits used in foreclosure proceedings.
employees

of

Wells

Fargo

signed

It alleged that

affidavits

supporting

foreclosures despite having no personal knowledge of the facts
contained
asserted

therein.
seven

Based

causes

of

on

this

action,

conduct,

complaint

fraud,

including

the

wrongful

foreclosure, and violation of the Maryland Consumer Protection
Act.
In a February 3, 2011 order, the district court denied
Jones’s

motion

dilatory,

for

futile,

Additionally,

the

leave

to

and

would

district

amend,

prejudice

court
6

explaining
the

dismissed

that

it

was

defendants.
the

original

Appeal: 11-1197

Document: 25

complaint

in

Date Filed: 08/25/2011

its

entirety,

finding

Page: 7 of 15

that

Jones’s

claims

were

barred by res judicata due to the resolution of the original
state court foreclosure action.

This appeal followed.

II.
On
denial

of

appeal,
his

Jones

motion

for

challenges
leave

to

the
amend

district

court’s

and

court’s

dismissal with prejudice of his original complaint.

the

We consider

each issue in turn.

A.
Jones first argues that the district court erred by
refusing to grant his motion for leave to amend his complaint.
We review a district court’s denial of a plaintiff’s motion to
amend for abuse of discretion.
724, 729 (4th Cir. 2010).

Galustian v. Peter, 591 F.3d

When considering whether to grant

leave to amend a pleading, a “court should freely give leave
when justice so requires.”

Fed. R. Civ. P. 15(a)(2).

denial

lies

of

leave

to

amend

within

the

district

Though
court’s

discretion, the court may not deny a party’s motion solely on
the basis of delay.

Edwards v. City of Goldsboro, 178 F.3d 231,

242 (4th Cir. 1999).

Instead, “delay must be accompanied by

prejudice, bad faith, or futility.”
the

district

court

did

not

abuse
7

Id.
its

As we explain below,
discretion

by

finding

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 8 of 15

Jones’s amendment to be both dilatory and futile. 2 We therefore
affirm the denial of his motion to amend.

1.
Jones disputes the finding that his motion to amend
was dilatory.

He argues that, when he filed his motion, he had

only recently become aware of the facts supporting his amended
complaint’s assertion that the defendants supported foreclosure
with

false

affidavits.

However,

the

record

contains

ample

evidence that Jones either knew or should have known of these
facts considerably earlier.
that

Jones’s

concerns

As a threshold matter, it appears

about

the

accuracy

of

defendants’

documents were present when he filed his initial complaint, on
November 2, 2009.
the

accuracy

of

Indeed, that complaint explicitly questioned
documents

signed

by

Wells

Fargo

employees.

Though Jones was on notice of at least some potential problems
with the documents, he did not present the theories contained in
his proposed amendment until nearly a year later.
To

the

extent

that

Jones’s

complaint

cites

new

evidence, the information on which it relies was not presented
2

Because our determination that the district court did not
abuse its discretion in finding the proposed amendment both
dilatory and futile is sufficient to affirm the denial of
Jones’s motion to amend, we need not address the finding of
prejudice.

8

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

in a timely manner.

Page: 9 of 15

In support of his amended claims, Jones

relies on a spring 2010 deposition of a Wells Fargo employee
from unrelated litigation in Florida.

Although this deposition

was taken in March, Jones did not file his motion to amend until
that October.

Meanwhile, Jones delayed the proceedings twice,

first by filing a frivolous “motion to show authority” for which
he was nearly sanctioned, and second by filing a motion for an
injunction—-identical to one he filed in state court—-that he
moved to withdraw only after defendants had invested time in
responding.

Given Jones’s delay in filing his amended complaint

and his earlier pattern of dilatory behavior, we cannot say that
the district court abused its discretion in finding his motion
to amend dilatory.

2.
Jones also disputes the district court’s finding that
his

amended

complaint

was

futile.

In

assessing

whether

a

proposed amendment is clearly futile, a district court may look
to “substantive or procedural considerations.”
Aircraft, 615 F.2d 606, 613 (4th Cir. 1980).

Davis v. Piper

Here, the district

court found that Jones’s proposed amendment would be barred by
claim preclusion arising from the state court’s decision in the
original foreclosure action.

9

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 10 of 15

The preclusive effects of a state court judgment are
determined by state law.

Laurel Sand & Gravel, Inc. v. Wilson,

519 F.3d 156, 162 (4th Cir. 2008).

Under Maryland law, claim

preclusion has three elements: “(1) the parties in the present
litigation are the same or in privity with the parties to the
earlier

litigation;

(2)

the

claim

presented

in

the

current

action is identical to that determined or that which could have
been determined in prior litigation; and (3) there was a final
judgment on the merits in the prior litigation.”
v. Rice, 938 A.2d 839, 848 (Md. 2008).

R&D 2011, LLC

Here, the district court

did not err by finding all three elements satisfied.
Though

Jones

and

BHL

were

the

sole

parties

to

the

state court foreclosure action, privity exists between BHL and
the two additional parties involved here, HSBC and Wells Fargo.
In a claim preclusion context, privity “generally involves a
person so identified in interest with another that he represents
FWB Bank v. Richman, 731 A.2d 916, 930

the same legal right.”
(Md. 1999).

BHL prosecuted the state court foreclosure action

on behalf of Wells Fargo, which in turn serviced the underlying
mortgage

on

behalf

of

HSBC.

With

respect

to

the

proposed

amendment, the relevant interest of all three defendants is the
same right to foreclose on the Jones mortgage.

Because the

three defendants represent the same legal right in this action
that

BHL

represented

in

the

state
10

court

action,

the

privity

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 11 of 15

component of claim preclusion is satisfied.

See Anyanwutaku v.

Fleet Mortg. Group, Inc., 85 F. Supp. 2d 566, 571 (D. Md. 2000)
(finding privity, under Maryland law, between substitute trustee
who filed prior foreclosure action and successor holders of the
underlying mortgage note); see also FWB Bank, 731 A.2d at 930.
In deciding whether the claims are the same, so as to
satisfy

the

second

“transaction” test.

element,

Maryland

courts

employ

the

See Kent Cnty Bd. of Educ. v. Bilbrough,

525 A.2d 232 (Md. 1987).

Under this test, claims are the same

“when

the

they

arise

transactions.”

out

of

same

transaction

or

Anyanwutaku, 85 F. Supp. 2d at 571.

series

of

This holds

“regardless of the number of substantive theories, or variant
forms of relief flowing from those theories,” and “regardless of
the number of primary rights that may have been invaded” or
“variations in the evidence needed to support the theories or
rights.”

deLeon v. Slear, 616 A.2d 380, 392 (Md. 1992) (quoting

Restatement (Second) of Judgments § 24(2) (1982)).
In

the

proposed

amendment,

Jones

alleges

that

the

defendants improperly foreclosed on his home by submitting and
relying on false and defective affidavits.

While these claims

proceed on a new substantive theory and seek relief different
from what Jones sought in the initial foreclosure proceeding, at
bottom, they remain claims of wrongful foreclosure.

In both

cases, Jones’s claims center on the same basic transaction—11

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

foreclosure of his home.

Page: 12 of 15

And in both the amended complaint and

the state-court foreclosure action, Jones has raised objections
to the procedures through which the defendants prosecuted the
foreclosure.

Thus, for the purposes of the second element of

claim preclusion, the two sets of claims are identical. 3
Finally, the state-court foreclosure action resulted
in a final judgment on the merits.

In Maryland, a foreclosure

action is ordinarily a summary, in rem proceeding.

When the

mortgagor

however,

voluntarily

appears

and

raises

objections,

the action results in an in personam judgment with preclusive
effect.

See Fairfax Sav., F.S.B. v. Kris Jen Ltd. P’ship, 655

A.2d 1265, 1272 (Md. 1995); Tri-Towns Shopping Center, Inc. v.
First Fed. Sav. Bank, 688 A.2d 998, 1005 (Md. Ct. Spec. App.
1997).
Jones argues that because Maryland Code, Real Property
Article § 7-105.1 establishes a three-year limitations period
for

suits

in

response

to

wrongful

3

foreclosures,

foreclosures

Even if that were not so, the amended complaint certainly
involves claims Jones could have raised in the foreclosure
action, either as counterclaims or as a defense.
Though Jones
contends that Maryland’s permissive counterclaim rules insulate
such claims from preclusion, to allow them in this case would,
in effect, nullify the original foreclosure judgment.
Avoiding
such a consequence is a central concern of the claim preclusion
doctrine. See Fairfax Sav., F.S.B. v. Kris Jen Ltd. P’ship, 655
A.2d 1265, 1269 (Md. 1995) (citing Restatement (Second) of
Judgments § 22(2)(b) (1982)).

12

Appeal: 11-1197

Document: 25

themselves

Date Filed: 08/25/2011

cannot

However,

the

be

statute

intended
simply

Page: 13 of 15

to

have

addresses

preclusive
actions

effect.

brought

in

response to the in rem variety of foreclosures—-those which the
mortgagor did not challenge directly in the first instance.

See

Fairfax Sav., 655 A.2d at 1274 (noting that plaintiffs could
relitigate

the

merits

of

a

prior

foreclosure

judgment

in

a

subsequent claim for damages, so long as the prior judgment was
solely in rem).

As noted above, however, when the mortgagor

appears and raises objections to the initial foreclosure action,
he

loses

the

resulting

opportunity

judgment.

See

to

later

id.

at

collaterally

1272

attack

(explaining

the

that

the

greater preclusive effect of a foreclosure judgment to which
exceptions

were

filed

flows

from

the

mortgagor’s

appearance in the foreclosure proceeding”).

“voluntary

In other words, the

mortgagor is entitled to litigate his objections only once: he
may defend against the original foreclosure action directly, or
he may bring a separate, offensive suit within three years of
the sale; he may not do both.
In this case, Jones voluntarily appeared and raised
numerous objections to the state-court foreclosure action.

The

state court held two hearings to consider the merits of those
objections.

When his objections were rejected, Jones chose not

to appeal or seek revision of the state court decision.

Thus,

the

final

state-court

foreclosure

constitutes
13

an

in

personam

Appeal: 11-1197

Document: 25

Date Filed: 08/25/2011

Page: 14 of 15

judgment on the merits, 4 and precludes Jones from raising the
same claims in this case.
As each of the three claim preclusion elements are
satisfied, the district court did not err by finding Jones’s
motion to amend futile.

Having properly found both futility and

delay present, the district court did not abuse its discretion
by denying Jones leave to amend.

See Equal Rights Ctr. v. Niles

Bolton Assocs., 602 F.3d 597, 603 (4th Cir. 2010).

B.
Jones also appeals the district court’s dismissal with
prejudice of his original complaint.

We review the grant of a

Rule 12(b)(6) motion to dismiss de novo.

Coleman v. Maryland

Court of Appeals, 626 F.3d 187 (4th Cir. 2010).
Jones does not challenge the merits of the district
court’s dismissal, but instead argues only that it should have
entered

a

dismissal

amended

complaint.

without
Jones’s

prejudice
concern

with

appears

respect
to

be

to

his

that

the

prejudice designation prevents him from re-filing his amended
complaint in state court.

4

To the extent Jones believes that the final judgment was
procured by means of fraud or false testimony, his remedy is to
seek revision pursuant to Maryland Rule 2-535, not to bring a
collateral attack.

14

Appeal: 11-1197

Document: 25

Jones
Because

the

Date Filed: 08/25/2011

misinterprets

district

court

the

denied

Page: 15 of 15

district
Jones

court’s

leave

to

order.

file

his

proposed amendment, its dismissal order pertained only to his
original complaint.

While the district court did consider the

merits of the proposed amendment in deciding to deny his motion
for leave to amend, this consideration alone does not constitute
a final judgment on the merits.

Consequently, the dismissal

with prejudice of the original complaint in this case does not,
by itself, prevent Jones from re-filing the proposed amendment.
Because Jones’s only objection to the district court’s grant of
the defendants’ motion to dismiss is without merit, we affirm.

III.
For the foregoing reasons, we affirm the decision of
the district court.
facts

and

materials

legal
before

We dispense with oral argument because the

contentions

are

adequately

the

and

argument

court

presented

would

not

in

the

aid

the

decisional process.
AFFIRMED

15