Dennis McLeod v. PB Investment Corporation

Filing

UNPUBLISHED AUTHORED OPINION filed. Motion disposition in opinion--granting Motion to dismiss appeal pursuant to FRAP 42(b) [998830067-3] in 11-1291, granting Motion to dismiss appeal pursuant to FRAP 42(b) [998830068-3] in 11-1295; Motion to deconsolidate/sever [998830067-2] in 11-1291, Motion to deconsolidate/sever [998830068-2] in 11-1295 Originating case number: 1:09-cv-03218-JFM Copies to all parties and the district court/agency. [998907138].. [11-1259, 11-1266, 11-1270, 11-1276, 11-1277, 11-1281, 11-1284, 11-1289, 11-1291, 11-1292, 11-1295, 11-1297, 11-1299, 11-1304, 11-1308, 11-1316]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11-1259

DENNIS MCLEOD; BETTY MCLEOD; ANDY S. NEWMAN, on behalf of
themselves and others similarly situated,
Plaintiffs - Appellants,
v.
PB INVESTMENT CORPORATION, a Delaware Corporation; M&T BANK
CORPORATION, a New York corporation and successor, by merger
to PB Investment Corporation,
Defendants - Appellees.

No. 11-1266

DAVID HUTCHISON; KATHERINE HUTCHISON,
Plaintiffs - Appellants,
v.
SOVEREIGN BANK,
Defendant - Appellee.

No. 11-1270

CHARLES HEBB; CHARLENE HEBB,
Plaintiffs - Appellants,
v.

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HOMEQ SERVICING CORPORATION, f/k/a TMS Mortgage,
Defendant – Appellee,
and
FIRSTPLUS HOME LOAN TRUST 1996-2; FIRSTPLUS HOME LOAN OWNER
TRUST 1996-3; FIRSTPLUS HOME LOAN OWNER LOAN TRUST 1996-4;
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1; FIRSTPLUS HOME LOAN
OWNER TRUST 1997-2; FIRSTPLUS HOME LOAN OWNER TRUST 1997-3;
FIRSTPLUS HOME LOAN OWNER TRUST 1997-4; FIRSTPLUS HOME LOAN
OWNER TRUST 1998-1; FIRSTPLUS HOME LOAN OWNER TRUST 1998-2;
FIRSTPLUS HOME LOAN OWNER TRUST 1998-3; FIRSTPLUS HOME LOAN
OWNER TRUST 1998-4; FIRSTPLUS HOME LOAN OWNER TRUST 1998-5;
GERMAN AMERICAN CAPITAL CORPORATION; UBS WARBURG REAL ESTATE
SECURITIES, INCORPORATED; ACE SECURITIES CORPORATE HOME LOAN
TRUST 1999 A; SOVEREIGN BANK, a United States Savings Bank;
REAL TIME RESOLUTIONS, INCORPORATED; U. S. BANK NATIONAL
ASSOCIATION, ND, a National Bank; GRMT MORTGAGE LOAN TRUST
2001-1, a Trust organized under the laws of New York; THE
CORNERSTONE
FINANCIAL
GROUP,
INCORPORATED,
a
Colorado
corporation; EMPIRE FUNDING HOME LOAN OWNER TRUST 1997-1, a
Delaware business trust; EMPIRE FUNDING HOME LOAN OWNER
TRUST 1997-2, a Delaware business trust; EMPIRE FUNDING HOME
LOAN OWNER TRUST 1997-3, a Delaware business trust; EMPIRE
FUNDING HOME LOAN OWNER TRUST 1997-4, a Delaware business
trust; EMPIRE FUNDING HOME LOAN OWNER TRUST 1998-1, a
Delaware business trust; EMPIRE FUNDING HOME LOAN OWNER
TRUST 1998-2, a Delaware business trust; EMPIRE FUNDING HOME
LOAN OWNER TRUST 1998-3, a Delaware business trust; EMPIRE
FUNDING HOME LOAN OWNER TRUST 1999-1, a Delaware business
trust; PB INVESTMENT CORPORATION, a Delaware Corporation; PB
REIT
INCORPORATED,
a
Delaware
Corporation;
CITYSCAPE
CORPORATION, a New York Corporation; MASTER FINANCIAL,
INCORPORATED; GMAC RESIDENTIAL FUNDING CORPORATION; IMC
MORTGAGE COMPANY, a Florida Corporation; LIFE SAVINGS BANK,
a California Corporation; PREMIER FINANCIAL CORPORATION,
n/k/a Maximus Financial Corporation,
Defendants.

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No. 11-1276

EMANUEL PHILLIPS; GERALDINE PHILLIPS,
Plaintiffs - Appellants,
v.
RESIDENTIAL FUNDING COMPANY, LLC, f/k/a Residential Funding
Corporation; THE BANK OF NEW YORK MELLON, f/k/a The Bank of
New York Trust Company; JP MORGAN CHASE BANK, N.A., f/k/a JP
Morgan Chase Bank, f/k/a The Chase Manhattan Bank, successor
by merger to The Chase Manhattan Bank, N.A.,
Defendants - Appellees.

No. 11-1277

WILLIAM F. RODWELL; SHARON L. RODWELL,
Plaintiffs - Appellants,
v.
PSB LENDING CORPORATION; WELLS FARGO BANK MINNESOTA, N.A.,
as Indenture Trustees for HOME LOAN TRUST 2001-HLV2, SERIES
2001 HLV2; UNITED STATES BANK NATIONAL ASSOCIATION, as
trustee
for
the
C-BASS
MORTGAGE
LOAN
ASSET-BACKED
CERTIFICATES, SERIES 2006-SL1; LITTON LOAN SERVICING, LP;
WELLS FARGO BANK, N.A.,
Defendants - Appellees.

No. 11-1281

LYNN A. FULMORE,
Plaintiff - Appellant,
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v.
SOVEREIGN BANK, a U.S. Savings Bank,
Defendant - Appellee.

No. 11-1284

EDWIN RUBLE,
Plaintiff - Appellant,
v.
BANC ONE FINANCIAL SERVICES, INCORPORATED,
Defendant – Appellee,
and
THE MORTGAGE CONSULTANTS INCORPORATED,
Defendant.

No. 11-1289

JUDITH J. MOFFITT,
Plaintiff - Appellant,
v.
JP MORGAN
LLC,

CHASE BANK,

N.A.;

RESIDENTIAL

Defendants – Appellees,
and

4

FUNDING

COMPANY,

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MASTER FINANCIAL, INCORPORATED; GMAC RESIDENTIAL FUNDING
CORPORATION; BALTIMORE AMERICAN MORTGAGE CORPORATION,
Defendants.

No. 11-1291

In re: DONNA RENEE TIPTON,
Debtor.
-------------------JP MORGAN CHASE BANK, N.A.; RESIDENTIAL FUNDING COMPANY,
LLC, f/k/a Residential Funding Corporation,
Plaintiffs - Appellees,
BALTIMORE AMERICAN MORTGAGE CORPORATION,
Defendant,
v.
DONNA RENEE TIPTON,
Defendant – Appellant,
ROGER SCHLOSSBERG,
Trustee.

No. 11-1292

In re: MCLAREN BREWSTER; VANTA OTHELLA BREWSTER,
Debtors.
-------------------MCLAREN BREWSTER; VANTA OTHELLA BREWSTER,
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Plaintiffs - Appellants,
GEORGE W. LIEBMANN,
Trustee - Appellant,
v.
FAIRBANKS CAPITAL CORPORATION; PB INVESTMENT CORPORATION,
Defendants – Appellees,
and
SELECT PORTFOLIO SERVICING,
Capital Corporation,

INCORPORATED,

Defendant.

No. 11-1295

THOMAS A. GEPHARDT; MICHELLE L. GEPHARDT,
Plaintiffs - Appellants,
v.
SOVEREIGN BANK,
Defendant – Appellee,
and
THE MORTGAGE CONSULTANTS INCORPORATED,
Defendant.

6

f/k/a

Fairbanks

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No. 11-1297

LINDA OREM,
Plaintiff - Appellant,
v.
BANK OF AMERICA CORPORATION, as successor in interest to
MBNA America Bank (Delaware), N.A.; MORTGAGE ELECTRONIC
REGISTRATION
SYSTEM,
INCORPORATED;
HOUSEHOLD
FINANCE
CORPORATION,
Defendants – Appellees,
and
PACIFIC SHORE FUNDING INCORPORATED,
Defendant.

No. 11-1299

JAMES E. MITCHELL, SR.; BRENDA L. MITCHELL; KATHY T. CARY,
Plaintiffs - Appellants,
MARIE O. FELDER, individually and on behalf of all others
similarly situated,
Plaintiff,
v.
PSB LENDING CORPORATION; PSB LENDING HOME LOAN OWNER TRUST
1997-4,
Defendants – Appellees,
and

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CALIFORNIA LENDING GROUP, INCORPORATED, d/b/a United Lending
Group; WACHOVIA BANK NATIONAL ASSOCIATION, as successor by
merger to FIRST UNION NATIONAL BANK; BAYVIEW LOAN SERVICING,
LLC,
Defendants.

No. 11-1304

DEREK MOHRE; CHRISTINE MOHRE; LINDA FLOYD; SHERI C. PARKER,
individually and on behalf of others similarly situated,
Plaintiffs - Appellants,
v.
HOUSEHOLD FINANCE CORPORATION; BANK OF AMERICA CORPORATION,
as successor in interest to MBNA AMERICA BANK (DELAWARE),
N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INCORPORATED,
Defendants – Appellees,
and
HOMEQ SERVICING CORPORATION; BANC ONE FINANCIAL SERVICES,
INCORPORATED; AMAXIMIS LENDING, LP; PACIFIC SHORE FUNDING;
BALTIMORE AMERICAN MORTGAGE CORPORATION,
Defendants.

No. 11-1308

In re: SHELDON JOHNSON,
Debtor.
--------------------

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RESIDENTIAL FUNDING
COMPANY AMERICAS,

COMPANY,

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LLC;

DEUTSCHE

BANK

TRUST

Plaintiffs - Appellees,
v.
SHELDON JOHNSON,
Defendant – Appellant,
and
BALTIMORE AMERICAN MORTGAGE CORPORATION,
Defendant.

No. 11-1316

DENNIS C. TROJANOWSKI; PEGGY L. TROJANOWSKI,
Plaintiffs - Appellants,
v.
FIFTH THIRD BANK, INCORPORATED,
Defendant – Appellee,
and
SOVEREIGN BANK; UNITED MORTGAGEE, INCORPORATED; FIRSTPLUS
HOME LOAN TRUST 1996-2; FIRSTPLUS HOME LOAN OWNER TRUST
1996-3; FIRSTPLUS HOME LOAN OWNER LOAN TRUST 1996-4;
FIRSTPLUS HOME LOAN OWNER TRUST 1997-1; FIRSTPLUS HOME LOAN
OWNER TRUST 1997-2; FIRSTPLUS HOME LOAN OWNER TRUST 1997-3;
FIRSTPLUS HOME LOAN OWNER TRUST 1997-4; FIRSTPLUS HOME LOAN
OWNER TRUST 1998-1; FIRSTPLUS HOME LOAN OWNER TRUST 1998-2;
FIRSTPLUS HOME LOAN OWNER TRUST 1998-3; FIRSTPLUS HOME LOAN
OWNER TRUST 1998-4; FIRSTPLUS HOME LOAN OWNER TRUST 1998-5;
UBS WARBURG REAL ESTATE SECURITIES, INCORPORATED; ACE
SECURITIES CORPORATE HOME LOAN TRUST; REAL TIME RESOLUTIONS,
INCORPORATED; U. S. BANK NATIONAL ASSOCIATION, ND, a
National Bank; AMAXIMIS LENDING, LP, a Texas Limited
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Partnership; GRMT MORTGAGE LOAN TRUST 2001-1,
organized under the laws of New York; GERMAN
CAPITAL CORPORATION,

a Trust
AMERICAN

Defendants.

Appeals from the United States District Court for the District
of Maryland, at Baltimore.
J. Frederick Motz, Senior District
Judge.
(1:09-cv-03218-JFM; 1:10-cv-00082-JFM; 1:09-cv-02334JFM; 1:10-cv-00252-JFM; 1:09-cv-02202-JFM; 1:09-cv-02028-JFM;
1:09-cv-02056-JFM; 1:09-cv-02029-JFM; 8:11-cv-00055-JFM; 1:10cv-01434-JFM;
1:10-cv-01537-JFM;
1:10-cv-01177-JFM;
1:09-cv02287-JFM; 1:09-cv-02246-JFM; 1:10-cv-02769-JFM; 1:09-cv-02588JFM)

Argued:

January 25, 2012

Decided:

August 1, 2012

Before WILKINSON, NIEMEYER, and SHEDD, Circuit Judges.

Affirmed by unpublished opinion. Judge Shedd wrote the opinion,
in which Judge Wilkinson and Judge Niemeyer joined.

ARGUED: Edwin David Hoskins, LAW OFFICE OF E. DAVID HOSKINS,
LLC, Baltimore, Maryland, for Appellants.
Gerard J. Gaeng,
ROSENBERG, MARTIN & GREENBERG, LLP, Baltimore, Maryland; James
Christopher Martin, REED SMITH, LLP, Pittsburgh, Pennsylvania,
for Appellees.
ON BRIEF: Daniel O. Myers, THE LAW OFFICES OF
DANIEL O. MYERS, LLC, Mt. Pleasant, South Carolina, for
Appellants. John M. McIntyre, Colin E. Wrabley, David J. Bird,
REED
SMITH,
LLP,
Pittsburgh,
Pennsylvania,
for
Appellees
Sovereign Bank, Residential Funding Company, LLC, Deutsche Bank
Trust Co. Americas, Bank of New York Mellon, and JP Morgan Chase
Bank, N.A.; James D. Mathias, Anthony P. Ashton, DLA PIPER LLP
(US),
Baltimore,
Maryland,
for
Appellees
PB
Investment
Corporation and M&T Bank Corporation; Gregory L. Lockwood,
TREANOR, POPE & HUGHES, Towson, Maryland, for Appellee Homeq
Servicing Corporation; Daniel J. Tobin, BALLARD SPAHR, LLP,
Bethesda, Maryland, for Appellees Wells Fargo Bank Minnesota,
N.A., United States Bank National Association, Litton Loan
Servicing, LP, and Wells Fargo Bank, N.A.; Brian L. Moffet,
GORDON,
FEINBLATT,
ROTHMAN,
HOFFBERGER
&
HOLLANDER,
LLC,
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Baltimore, Maryland, for Appellees PSB Lending Corporation and
PSB Lending Home Loan Owner Trust 1997-4; Daniel H. Squire,
Reginald B. McKnight, WILMER CUTLER PICKERING HALE AND DORR,
LLP,
Washington,
D.C.,
for
Appellees
Mortgage
Electronic
Registration
System,
Incorporated,
and
Household
Finance
Corporation; Jefferson V. Wright, E. Hutchinson Robbins, Jr.,
Scott R. Wilson, MILES & STOCKBRIDGE, PC, Baltimore, Maryland,
for Appellee Bank of America Corporation; LeAnn Pedersen Pope,
Victoria R. Collado, Andrew LeMar, BURKE, WARREN, MACKAY &
SERRITELLA, PC, Chicago, Illinois, for JP Morgan Chase Bank,
N.A. and Banc One Financial Services, Incorporated; Edward J.
Longosz, II, Daniel A. Glass, ECKERT SEAMANS CHERIN & MELLOTT,
LLC, Washington, D.C., Dorothy A. Davis, ECKERT SEAMANS CHERIN &
MELLOTT, LLC, Pittsburgh, Pennsylvania, for Appellee Fairbanks
Capital Corporation.

Unpublished opinions are not binding precedent in this circuit.

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SHEDD, Circuit Judge:
In these consolidated appeals, 1 a group of homeowners who
obtained second mortgages on their homes challenge the district
court’s dismissal of their claims seeking damages from various
financial institutions for alleged violations of Maryland law in
connection

with

those

loans.

For

the

following

reasons,

we

affirm.
I
A
The cases that form these consolidated appeals arise from a
host of complaints filed against several different defendants,
but

the

underlying

facts

and

allegations

are

relatively

straightforward and nearly identical. Between September 1996 and
August 2000, the individual plaintiffs and class representatives
1

During
the
pendency
of
these
appeals,
defendant
Residential Funding Company, LLC, f/k/a Residential Funding
Corporation filed a voluntary petition for bankruptcy under 11
U.S.C. § 101, et seq., in the United States Bankruptcy Court for
the Southern District of New York. Pursuant to 11 U.S.C.
§ 362(a)(1), the filing of such a petition operates as an
automatic stay of any judicial proceeding against Residential
Funding Company, LLC, including appellate proceedings. See In re
Convention Masters, Inc., 46 B.R. 339, 342 (Bankr. D. Md. 1985).
Accordingly, the following appeals are automatically stayed as
to defendant Residential Funding Company, LLC: Emanuel Phillips
v. Residential Funding Co. (No. 11-1276); Judith Moffitt v. JP
Morgan Chase Bank, N.A. (No. 11-1289); Donna Tipton v. JP Morgan
Chase Bank, N.A. (No. 11-1291); and Residential Funding Co. v.
Sheldon Johnson (No. 11-1308). However, these appeals are not
stayed as to the non-bankrupt co-defendants. See A.H. Robins Co.
v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1986).

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(collectively, the “plaintiffs”) all obtained second mortgages
secured by real property in Maryland. In connection with each of
these

mortgages,

the

lenders

that

originated

the

loans

(collectively, the “originating lenders”) received a promissory
note and were named the beneficiary of a secondary mortgage deed
of trust to secure the loan. The originating lenders charged
closing costs and fees in connection with each plaintiff’s loan.
Subsequently, each originating lender assigned each plaintiff’s
loan

to

another

financial

institution

(collectively,

the

“assignees”), often immediately after the loan was closed. After
obtaining ownership of the loan, each assignee serviced the loan
by

continuing

to

collect

interest

and

other

charges

in

connection with the loan until it was assigned again or repaid
by

each

plaintiff.

Because

the

originating

lenders

held

the

loans for only a short time before assigning them, they rarely
collected any interest on the loans.
B
Although

the

facts

are

straightforward,

the

procedural

history of these appeals is more complicated. Between 2001 and
2003, more than forty individual and class action lawsuits were
filed

in

asserting

the

Circuit

claims

in

Court

for

connection

Baltimore

with

these

City,

secondary

Maryland,
mortgage

loans. In particular, the plaintiffs in these actions alleged
that

each

originating

lender

violated
13

Maryland’s

Secondary

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Mortgage Loan Law (“SMLL”) at the time the loans were made by
charging fees and closing costs in excess of the maximum amounts
permitted by the SMLL. In addition, the lawsuits alleged that
the originating lenders had failed to provide the plaintiffs
with the mandatory disclosure forms required by the SMLL. In
these

lawsuits,

originating

the

lenders,

plaintiffs
the

sought

assignees,

and

damages
certain

from

the

third-party

servicers of the loans (collectively, the “defendants”).
Eventually,
dismissed

as

a

part

number
of

four

of

these

class

cases

action

were

voluntarily

settlements,

and

the

Maryland Circuit Court then dismissed the remaining complaints,
finding that the claims for violation of the SMLL were barred by
a three-year statute of limitations. The Court of Appeals of
Maryland
holding

subsequently
that

claims

reversed
brought

the

under

Maryland
the

SMLL

Circuit

Court,

are

“other

an

specialty” subject to a twelve-year statute of limitations. See
Master Fin., Inc. v. Crowder, 972 A.2d 864 (Md. 2009).
After the Crowder decision, the plaintiffs amended their
complaints in several of the cases and also filed additional new
state court actions against the defendants. On remand to the
Maryland Circuit Court, the defendants removed all of the cases
to the federal district court, where they were consolidated. The
defendants

then

moved

12(b)(6),

arguing

that

to

dismiss

there

was
14

the
no

complaints
legal

basis

under
to

Rule

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derivative liability against the assignees and loan servicers
for the originating lenders’ alleged SMLL violations. After an
initial hearing, the district court granted the plaintiffs leave
to amend their complaints to further specify the grounds for
assignee liability. The defendants again moved to dismiss and,
after

a

second

hearing,

the

district

court

granted

the

defendants’ motions and entered judgment in their favor.
The

plaintiffs

timely

appealed

the

dismissal

of

their

complaints, the denial of their motions for leave to amend, and
the denial of their motions to remand. We address each issue in
turn.
II
In each of the cases forming these consolidated appeals,
the

plaintiffs’

originating

principal

lenders

violated

complaint
the

SMLL

has
by

been

failing

that
to

the

provide

required disclosure forms and charging excessive fees for the
secondary mortgages obtained by the plaintiffs. However, many of
the

originating

lenders

have

dissolved

and

are

now

judgment

proof, and with one exception all of the loans that are the
subject of this appeal have been paid in full. 2 Thus, even though
the plaintiffs do not allege that the assignees were involved in
2

The only appeal involving a loan that has not been paid
off is Rodwell v. PSB Lending Corp., et al. (No. 11-1277). The
last scheduled payment under this loan is December 19, 2012.

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the

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origination

of

their

Pg: 16 of 24

loans

or

committed

any

of

the

complained-of SMLL violations, they contend the assignees are
derivatively liable for statutory penalties and treble damages
based solely on the originating lenders’ alleged violations. 3
To

this

end,

the

plaintiffs

have

alleged

a

variety

of

evolving legal theories throughout the underlying litigation to
support

their

claims

against

the

assignees.

Our

review

is

limited to only two of those theories: 4 whether the assignees are
liable

for

the

originating

lenders’

alleged

SMLL

violations

either (1) by operation of Section 3-306 of the Maryland Uniform
Commercial

Code

(“UCC”),

or

(2)

by

operation

of

15

U.S.C.

3

The claims in this appeal are primarily against the
assignees; none of the claims is against any originating lender,
and only one appealed issue relates to defendants that merely
serviced a loan.
4

As the district court noted, “[a]t an earlier stage of
this litigation it appeared that plaintiffs were arguing that
the SMLL creates assignee liability. They no longer do so.”
Fulmore v. Premier Financial Corp., No. 09-2028, 2010 WL
4286362, at *2 (D. Md. Oct. 29, 2010). The plaintiffs
acknowledge as much in their briefs, see Opening Br. of
Appellants, at 25 (“[T]he SMLL, by itself, does not provide for
such derivative liability.”), and counsel acknowledged the same
during oral argument. In addition, the plaintiffs have abandoned
their claims that Maryland common law or Section 3-305 of the
Maryland UCC provide a basis for any derivative liability claims
against the assignees. See Edwards v. City of Goldsboro, 178
F.3d 231, 241 n.6 (4th Cir. 1999) (claims not raised in
appellant's opening brief are deemed abandoned).

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§ 1641(d)(1),

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a

provision

of

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the

federal

Home

Ownership

and

Equity Protection Act of 1994 (“HOEPA”). 5
The district court dismissed both of these theories for
failure to state a claim under Fed. R. Civ. P. 12(b)(6). The
district court found that Section 3-306 6 of the Maryland UCC
applies

to

controversies

between

persons

who

have

competing

claims to an instrument or its proceeds, not to claims asserted
by a borrower against an assignee. Therefore, the district court
concluded that Section 3-306 does not authorize the plaintiffs
to assert a claim for affirmative relief against the assignees,
5

The Home Ownership and Equity Protection Act of 1994, Pub.
L. No. 103-325, §§ 151-58, 108 Stat. 2160, 2190-98 (codified as
amended in scattered sections of 15 U.S.C.), amended portions of
the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”). By
its terms, HOEPA seeks only to regulate a special class of loans
known as “high-cost mortgages.” 15 U.S.C. § 1602(aa); 12 C.F.R.
§ 226.32(a)(1)(i)-(ii). If a loan qualifies as a high-cost
mortgage, HOEPA requires the lender to comply with special
disclosure
requirements
and
prohibits
the
mortgages
from
containing certain potentially abusive terms. 15 U.S.C. § 1639.
Lenders who fail to comply with these HOEPA requirements may be
liable for penalties or damages, and the borrower has the right
to rescind the loan within a specified time period. Id. §§ 1635,
1640.
6

Section 3-306 provides:

A person taking an instrument, other than a person
having rights of a holder in due course, is subject to
a claim of a property or possessory right in the
instrument or its proceeds, including a claim to
rescind a negotiation and to recover the instrument or
its proceeds. A person having rights of a holder in
due course takes free of the claim to the instrument.
Md. Code Ann., Com. Law, § 3-306.

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including

a

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claim

violations

of

concluded

that

based

the

on

SMLL.

Pg: 18 of 24

the
In

§ 1641(d)(1),

originating

addition,
which

lenders’

the

renders

alleged

district

the

court

assignees

of

certain mortgages “subject to all claims and defenses . . . that
the consumer could assert against the creditor of the mortgage,” 7
does

not

assignee
against

create
for

the

an

SMLL

affirmative

claims

originating

the

right

of

plaintiffs

lenders.

Rather,

action
could
the

against

have

an

asserted

district

court

concluded that § 1641(d)(1) merely eliminates the holder in due
course defense for an assignee that is seeking to collect on a
high-cost mortgage.
III
We review a district court's order granting a motion to
dismiss de novo, focusing only on the legal sufficiency of the
complaint, Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.
7

HOEPA’s assignee liability provision provides in relevant

part:
Any person who purchases or is otherwise assigned a
[HOEPA] mortgage . . . shall be subject to all claims
and defenses with respect to that mortgage that the
consumer could assert against the creditor of the
mortgage,
unless
the
purchaser
or
assignee
demonstrates, by a preponderance of the evidence, that
a reasonable person exercising ordinary due diligence,
could not determine, based on the documentation
required by [HOEPA], the itemization of the amount
financed, and other disclosure of disbursements that
the mortgage was a [high-cost mortgage].
15 U.S.C. § 1641(d)(1).

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2008), and we will dismiss a complaint “if it does not allege
‘enough facts to state a claim to relief that is plausible on
its face,’” id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). The complaint must allege facts sufficient “to
raise a right to relief above the speculative level.” Twombly,
550 U.S. at 555. We may affirm the district court’s dismissal of
the

complaint

on

any

basis

fairly

supported

by

the

record,

Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 222 (4th Cir.
2002), including “on different grounds than those employed by
the district court,” Shafer v. Preston Memorial Hosp. Corp., 107
F.3d 274, 275 n.1 (4th Cir. 1997).
Applying
court’s
Rule

this

decision

12(b)(6),

familiar

standard,

to

dismiss

albeit

on

the

we

affirm

plaintiffs’

different

grounds.

the

district

complaints
On

under

appeal,

the

plaintiffs argue that the district court erred in concluding
that they failed to state a claim under Section 3-306 or 15
U.S.C.
because

§

1641(d)(1).
assuming

We

need

arguendo

not

that

reach

Section

this
3-306

issue,
or

however,

§ 1641(d)(1)

does provide the plaintiffs with a cause of action in these
cases,

the

plaintiffs’

claims

here

are

time-barred

by

the

applicable statute of limitations. 8 See King v. Otasco, Inc., 861

8

Although the district court did not dismiss the
plaintiffs’ complaints on statue of limitations grounds, it did
indicate in a footnote that a “substantial limitations question”
(Continued)
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F.2d 438, 441 (5th Cir. 1988) (“When a suit alleges several
distinct causes of action, even if they arise from a single
event, the applicable limitations period must be determined by
analyzing each cause of action separately.”).
The Maryland UCC provides that an action “to enforce an
obligation, duty, or right arising under [Article 3] . . . must
be commenced within 3 years after the cause of action accrues.”
Md. Code Ann., Com. Law § 3-118(g)(iii). TILA and HOEPA provide
a one-year statute of limitations for affirmative actions for
damages. 15 U.S.C. § 1640(e) (“Any action under this section may
be brought in any United States district court, or in any other
court of competent jurisdiction, within one year from the date
of

the

occurrence

Residential

Funding

of
LLC,

the
678

violation . . . .”);
F.3d

271,

278

(4th

Gilbert
Cir.

v.

2012)

(noting same).
According to the complaints in these cases, the alleged
violations - failure to provide mandatory loan disclosures and
charging excessive fees – occurred at the latest at the time of
the loan closing. However, it is undisputed that in all of these
consolidated

appeals

the

plaintiffs

brought

suit

against

the

defendants more than three years after the closing of the loans.

would be presented if HOEPA did authorize the affirmative right
of action sought by the plaintiffs. J.A. 853 n.5.

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See In re Community Bank of Northern Virginia, 622 F.3d 275, 303
(3d

Cir.

2010)

HOEPA . . . is

(“[A]

subject

claim
to

a

for

damages

one-year

under

limitations

TILA

and

period

that

begins to run from the date the loan closed.”). Thus, regardless
of whether the plaintiffs have a cause of action by operation of
Section 3-306 or § 1641(d)(1), their claims are untimely under
either express statute of limitations.
Nevertheless,

the

plaintiffs

contend

that

because

their

claims against the assignees are ultimately for violations of
the SMLL, their claims should be governed by the twelve-year
statute of limitations applicable to SMLL claims. See Master
Financial v. Crowder, 972 A.2d 864 (Md. 2009). We disagree. The
plaintiffs acknowledge that the SMLL, by itself, does not create
derivative

liability

on

the

part

of

the

assignees

for

the

alleged misconduct of the originating lenders. See supra, at
n.4. Thus, under the plaintiffs’ own theories, the assignees are
derivatively liable – if at all – for the originating lenders’
violations of the SMLL only by operation of Section 3-306 or
§ 1641(d)(1).

Therefore,

to

the

extent

the

plaintiffs

can

maintain a cause of action against the assignees, that cause of
action has its source in Article 3 of the Maryland UCC or HOEPA,
and

the

controlling

respective
(“Because

statutory
we

are

limitations
schemes.

dealing

period

See

with
21

is

Crowder,

statutes,

governed
972

one

A.2d

by

those

at

873

preliminary

and

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possibly decisive factor is whether the Legislature has provided
a specific period of limitations for enforcement of the statute.
Some

statutes

that

prohibit

or

require

conduct

and

provide

remedies for violations contain such provisions, and if they do,
those provisions ordinarily will govern.”); Lyons P’ship, L.P.
v. Morris Costumes, Inc., 243 F.3d 789, 798 (4th Cir. 2001)
(“[W]hen Congress creates a cause of action and provides both
legal and equitable remedies, its statute of limitations for
that cause of action should govern, regardless of the remedy
sought.”). It would be extraordinary for us to find an implied
derivative right of action under Section 3-306 or § 1641(d)(1)
and then to permit that right of action to proceed under a
statute

of

limitations

that

is

longer

than

the

limitations

period Congress or the Maryland legislature has clearly provided
for express rights of action under these statutes, and we will
not do so.
Accordingly, we affirm the district court’s dismissal of
the

plaintiffs’

claims

under

Section

3-306

and

15

U.S.C.

§ 1641(d)(1).
IV
In addition to their primary legal argument, the plaintiffs
also

raise

consolidated

several
appeals,

secondary
which

we

issues
address

with

respect

briefly.

to

the

First,

the

plaintiffs argue that the district court abused its discretion
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by denying their motions to file amended complaints to assert
additional claims against certain loan servicers. 9 The district
court denied the plaintiffs’ motion to amend as futile. We have
reviewed

the

record

and

conclude

that

because

this

was

an

adequate basis for denying the motion to amend, the district
court did not abuse its discretion. See Glaser v. Enzo Biochem,
Inc., 464 F.3d 474, 476 (4th Cir. 2006) (noting that a denial of
a motion to amend is reviewed for abuse of discretion); Laber v.
Harvey, 438 F.3d 404, 426 (4th Cir. 2006) (en banc) (noting
district court may deny a motion to amend when the amendment
would be futile). Accordingly, we affirm for the reasons stated
by the district court. William Rodwell, et al. v. PSB Lending
Corp., Inc. et al., No. 1:09-cv-02202-JFM (D.Md. Feb. 8, 2011);
James E. Mitchell, Sr. et al. v. PSB Lending Corp. et al., No.
1:09-02287-JFM (D.Md. Feb. 8, 2011).
Second,

the

plaintiffs

challenge

the

district

court’s

dismissal of various state law claims regarding the assignees’
alleged failure to provide to the plaintiffs copies of the loan
documents

relating

to

the

secondary

mortgage

loans.

However,

after the parties submitted their initial briefing on this issue
and on the day before oral argument was heard in this appeal,

9

This issue pertains only to Rodwell v. PSB Lending, Corp.
(No. 11-1277), and Mitchell v. PSB Lending (No. 11-1299).

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the Maryland Court of Appeals held that once a mortgage loan is
paid in full, the assignee is under no common law or statutory
obligation

to

provide

copies

of

the

loan

documents

to

the

borrowers. Polek v. J.P. Morgan Chase Bank, N.A., 36 A.3d 399
(Md. 2012). In light of Polek, the parties now agree that the
plaintiffs’

state

law

claims

in

this

appeal

are

foreclosed.

Accordingly, we affirm the district court’s dismissal of these
claims.
Finally, the plaintiffs appeal the district court’s denial
of their motion to remand several of the consolidated appeals.
However, the plaintiffs have since voluntarily dismissed those
appeals; therefore, we need not address the district court’s
remand rulings. 10
V
For the reasons stated above, we affirm the judgment of the
district court.
AFFIRMED
10

Appellant Donna Renee Tipton, along with appellees JP
Morgan Chase Bank, N.A. and Residential Funding Company, LLC
f/k/a Residential Funding Corp. (the only parties to appeal No.
11-1291), have filed a joint motion to sever and dismiss with
prejudice appeal No. 11-1291, with each side to bear its own
costs. Similarly, Appellants Thomas A. Gephardt and Michelle L.
Gephardt, along with appellee Sovereign Bank (the only parties
to appeal No. 11-1295), have filed a joint motion to sever and
dismiss with prejudice appeal No. 11-1295, with each side to
bear its own costs. We hereby grant these motions.

24