Wiley et al v. Regional Acceptance Corporation

Filing 14

MEMORANDUM OPINION. Signed by Judge Theodore D. Chuang on 5/4/2015. (aos, Deputy Clerk)

UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND

JASON WILEY and REESHA WILEY,

Plaintiffs.
v.
Civil Action No. TDC-14-2709
REGIONAL ACCEPTANCE
CORPORATION,

Defendant.

MEMORANDUM

OPINION

In 2013, Defendant Regional Acceptance Corporation ("RAe") repossessed

and sold a

car purchased by Plaintiffs Jason and Reesha Wiley (the "Wileys") after they defaulted on their
car loan payments.

Due to a number of alleged errors in RAe's notices of repossession and sale,

the Wileys, on behalf of themselves and a prospective class of similarly situated individuals,
have brought suit against RAe. They assert claims for declaratory and injunctive relief, breach
of contract, violations of the Maryland Credit Grantor Closed End Credit Provisions ("CLEC"),
Md. Code Ann., Com. Law ~~ 12-1001 el seq. (West 2015), and violations of the Maryland
Consumer Debt Collection Act ("MCDCA"),
(West 2015).

Md. Code Ann., Com. Law ~~ 14-101 et seq.

Presently pending is RAe's Motion to Dismiss.

been fully briefed, and no hearing is necessary.

ECF No. II.

The issues have

See Local Rule 105.6 (D. Md. 2014).

For the

reasons set forth below, the Motion is GRANTED IN PART and DENIED IN PART.
BACKGROUND
The following

facts are presented as alleged in the Complaint.

In 2007, the Wileys, a

married couple, bought a used 2004 Honda Accord from Majestic Motor Cars. Inc. ("Majestic")

in Glen Burnie, Maryland. Compl. 2, ECF NO.2. They financed the purchase through a retail
installment sale contract ("'RISC") with Majestic, which later assigned the RISC to RAC. ld.
'1 3-4. The RISC is subject to the requirements of the CLEC. ld.

4. By January 2013, the

Wileys had fallen behind on their payments, so RAe mailed them a notice of its intent to
repossess the car. ld. ,~11-12.

The Wileys have alleged that the notice was not sent by

registered or certified mail and that they never received it. Id.

12. Despite making additional

payments in February, March, and April 2013, the Wileys were unable to bring their account
current. Id.

14.

In June 2013, RAe repossessed the car. ld The Wileys have alleged that RAC did not
send to them a separate notice of intent to repossess following their additional payments through
April 2013, and that RAe "never complied with the CLEC requirement that any such notice be
sent by certified or registered mail." ld.

15. After it repossessed the car, RAe sent the Wileys

a "Notice of Repossession and our Plan to Sell Property" (the "Redemption Notice"). ld.

16.

The Redemption Notice stated that RAe had repossessed the car and planned to sell it, and it
outlined the Wileys' right to redeem (reacquire) the car and described the costs they would have
to pay to do so, which included RAe's repossession and storage costs. ld.

16, 16(a). Thc

Redemption Notice also infonned the Wileys that RAC would sell the car at a public auction
through an auctioneer. Id.

16(d). The Wileys allege that the auctioneer identified by RAC

advertises that its sales are private. dealer.only sales and requires a substantial deposit from
prospective bidders.

Jd.

The Redemption Notice also stated that the Wileys would be

responsible for any attorney's fees and court costs arising from the sale. though none were
incurred. ld. ~ 16(c).

2

On July 12,2013, RAC sold the Wileys' car at a private sale in West Virginia, about 380
miles from where the Wileys lived. Id.

17. Afterwards, RAC sent the Wileys a "deficiency

notice" that identified how much the Wileys still owed RAC, but did not provide a full
accounting of the private sale, as required by the CLEC. Id

The Wileys were unable to learn

any details of the sale by contacting the auctioneer directly. Id.

1 19.

About a month after the

sale, RAC sent the Wileys a letter purporting to confirm the Wileys' agreement to pay a
deficiency balance in an amount different from the one contained in the Deficiency Notice, but
the Wileys had made no such agreement. Id.

18.

The Wileys filed suit on August 22, 2014, seeking a declaratory judgment that RAC must
provide timely, complete, and accurate redemption and deficiency notices as required by the
CLEC (Count I). The Wileys also assert claims for breach of contract (Count 1I), a violation of
the CLEC (Count III), and a violation of the MCDCA (Count IV), all based on the allegation that
RAC's inadequate notices and conduct violated the CLEe.
On September 25, 2015, RAC filed its Motion to Dismiss. ECF No. 11. 1n submitting
their Opposition to Defendant's Motion to Dismiss, ECF No. 12, the Wileys requested leave to
amend the Complaint and attached a proposed Amended Complaint, see PI.'s Opp. Def. 's Mot.
Dismiss ("PI.'s Opp.") at 3, ECF No. 12; see also PI.'s Opp. Ex. 1 ("Am. Com pl."), ECF No. 121. The proposed Amended Complaint continues to claim that the Wileys never received a Notice
of Intent to Repossess, but it no longer alleges that RAC failed to send such a notice by certified
or registered mail. Am. Compl. ~ 18. The proposed Amended Complaint also alleges additional
facts in support of the claim that the Wileys' car was sold at a private dealer sale, including
asserting that the auctioneer's website has markers indicating that RAe's auctions are "restricted
to dealers."

Id. ~ 21.

It also alleged that the sale was not conducted in a "commercially

3

reasonable manner."
Plaintiffs

Jd.

49.

On November 3, 2014. RAC filed its Reply in Response to

Opposition to Defendant's

Motion to Dismiss, in which it opposed granting the

Wileys leave to amend the Complaint. Def.'s Reply at 2 & n.2, ECF No. 13.
DISCUSSION
I.

Lean to Amend
Under Federal Rule of Civil Procedure 15(a), "a party may amend its pleading only with

the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2). Here, RAC
opposes amendment of the Complaint. Rule 15 also provides that "[t]he court should freely give
leave when justice so requires."

Id. Because no answer has yet been filed, and because this is

the Wileys' first request for leave to amend. the Court will grant leave. The Wileys' are directed
to file clean and redline copies of its proposed Amended Complaint, ECF No. 12-1. which shall
be docketed.

11.

Motion to Dismiss
In its Motion, RAC seeks dismissal based on its assertion that the Wileys have failed to

state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Specifically, it claims
that the Complaint does not sufficiently allege a violation of the CLEC and that. in the absence
of a plausible claim of a CLEC violation, the Wileys' claims for a declaratory and injunctive
relief, breach of contract, and a violation of the MCDCA necessarily fail. Def. 's Mem. Supp.
Mot. Dismiss PI.'s Class Action CampI. ("Def.'s Mem.") at 1-2, ECF No. II-I. Although the
Motion was directed at the original Complaint and arguably could be denied as moot in light of
the Amended Complaint, because the parties each had an opportunity to address arguments
relating to the Amended Complaint, see PI.'s Opp. at 17; Def.'s Reply at 4, and in the interests of

4

efficient case management, the Court will rule on the merits of the arguments in the Motion to
Dismiss as they apply to the Amended Complaint.
A.

Legal Standard

To defeat a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the
complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556
U.S. 662, 696 (2009). A claim is plausible when the facts pled allow the Court "to draw the
reasonable inference that the defendant is liable for the misconduct alleged."

Id.

Legal

conclusions or conclusory statements do not suffice. Id. The Court must examine the complaint
as a whole, consider the factual allegations in the complaint as true. and construe the factual
allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266, 268
(1994); Lambeth v. Bd. oJComm 'rs oj Davidson Cn/y., 407 F.3d 266, 268 (4th Cir. 2005).

In moving to dismiss, RAC has made several factual arguments, including that it had sent
the notice of intent to repossess by certified mail, that the language of its pre- and postrepossession notices complied with the CLEC, and that the auctioneer's website states that it
engages in public repossession auctions as well as private, dealer-only sales. Def.'s Opp. at. 10.
14. As a result. both parties have attached exhibits to their memoranda to address those
arguments, including copies of the notices and screenshots of the auctioneer's website. When
deciding a Rule 12(b)(6) motion, however, the court considers only the complaint and any
attached documents "integral to the complaint."

Sec}' of Stale for Defence v. Trimble

Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007).

Because the attached exhibits do not

adequately address the merits of the claims presented, and the opportunity for sufficient
discovery has not yet been afforded in this case, the Court excludes all attached exhibits from

5

consideration and construes the Motion as a motion to dismiss under Rule 12(b)(6) for failure to
state a claim. See Fed. R. Civ. P. l2(d).
B.

Count III: Violation oftbe CLEC

In their Complaint, the Wileys assert that RAC violated the notice requirements of the
CLEC in a variety of ways, including by (I) failing to provide them with a notice of the intent to
repossess, then seeking recovery of repossession and storage costs; (2) failing to state accurately
whether the resale of their car would be public or private, and to provide a "full accounting" of
the private sale of their car; and (3) making various inaccurate statements in the Redemption
Notice. Compl.'~ 15-17,32-36; Am. Compl. ~ 18-20,27-29,45-48,50.

In the Amended

Complaint, the Wilcys further assert that the sale was not conducted in a "commercially
reasonable manner."

Am. Compl.

49.

RAC argues that the Wileys have not provided

sufficient allegations to support these theories. For the reasons set forth below, the Court finds
that the Wileys have not stated a claim arising from the alleged failure to provide a notice of
intent to repossess, but that they have stated a plausible claim for a violation of the CLEC
provisions requiring that there be a full accounting of a private sale and that the sale be
conducted in a "commercially reasonable manner."
I.

The CLEC Provisions

The Maryland CLEC authorizes a credit grantor such as RAe to "repossess tangible
personal property securing a loan ... if the consumer borrower is in default." Md. Code Ann.,
Com. Law 9 12-1021(a)(I). To protect the consumer borrower's interest throughout the process,
the CLEC provides for a series of notices. Before the credit grantor repossesses the property, it
may send to the borrower \';Tittennotice of the intent to repossess at least 10 days before the
expected repossession.

9

12.102I(c)(I).

"The notice may be delivered to the consumer

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borrower personally or sent to him at his last known address by registered or certified mail."

9

12-1021(d).

The repossession notice is discretionary, but if the credit grantor provides the

notice, then the borrower must "pay the actual and reasonable expenses of retaking and storing
the property" in order to redeem or reacquire the property. ~ 12-1021 (h).
Within five days after repossessing the property, the credit grantor must send, by hand
delivery or registered or certified mail, written notice of, among other things, (1) the borrower's
right to redeem the property and the amount that must be paid to do so; (2) the borrower's rights
relating to the potential resale of the property; and (3) the borrower's liability for any deficiency
following resale.

~ 12-1021(e).

At least 10 days before any resale of the property, the credit

grantor is also required to send a written notice to the borrower of the time and place of the
resale, by certified mail, return receipt requested. ~ 12-1021G)(I)(ii).
The property can be resold at a public auction or private sale; in either case, the resale
"must be accomplished
1021G)(I)(iii).

in a commercially

reasonable

manner."

~~ 12-1021G)(I)(i),

12-

Following the sale, the credit grantor is required to provide different information

to the borrower depending on whether the resale was public or private. After a public auction,
the credit grantor need only send to the borrower a written statement showing the distribution of
the proceeds. S 12-1021(k)(3).

In contrast, private sales require the credit grantor to send to the

borrower, in writing, "a full accounting" of the sale, including:
(i)

The unpaid balance at the time the goods were repossessed;

(ii)

The refund credit of unearned finance charges and insurance premiums, if
any;

(iii)

The remaining net balance;

(iv)

The proceeds of the sale of the goods;

(v)

The remaining deficiency balance, if any, or the amount due the buyer;

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(vi)

All expenses incurred as a result of the sale;

(vii)

The purchaser's name, address, and business address;

(viii)

The number of bids sought and received; and

(ix)

Any statement as to the condition of the goods at the time of repossession
which would cause their value to be increased or decreased above or
below the market value for goods of like kind and quality.

~ 12-10210)(2).
If the credit grantor fails to comply with any of the notice requirements, "the credit
grantor shall not be entitled to any deficiency judgment to which he would be entitled under the
loan agreement."

S

12-1021(k)(4).

Moreover, the CLEC contains a broader damages provision

that states: "Except for a bona fide error of computation, if a credit grantor violates any provision
of this subtitle the credit grantor may collect only the principal amount of the loan and may not
collect any interest, costs, fees, or other charges with respect to the loan."
2.

S

12-10 18(a)(2).

Repossession and Storage Costs

In the original Complaint, the Wileys alleged that RAC violated the CLEC when it did
not send thcm the discretionary Notice of Intent to Repossess by certified or registered mail, the
consequence of which was that RAC violated the CLEC when it stated in the Redemption Notice
that the Wi/eys owed repossession and storage costs. Md. Code Ann., Com. Law

S

12-1021 (h).

In its Motion, RAC asserts that this allegation fails to state a claim under Rule 12(b)(6). In the
Amended Complaint, the Wileys no longer claim that the Notice of Intent to Repossess was not
sent by certified or registered mail, but instead simply alleges that they never received it. See
Am. CampI. ~ 18.
Under the CLEC, there is no requirement that a Notice of Intent to Repossess be sent.
Although the Wileys allege that they did not receive the Notice, the CLEC specifically provides

8

that a Notice of Intent to Repossess may be "sent to [the consumer borrower] at his last known
address by registered or certified mail." See Md. Code Ann., Com. Law ~ 12-1021(d). Having
affirmatively withdrawn its original allegation that the Notice was not sent by registered or
certified mail, the Wileys' claim rests on the premise that even if the requirement of sending the
Notice by certified mail is satisfied, a credit grantor nevertheless violates the CLEC if the
borrower does not actually receive it. The Wileys have cited no authority in support of this
position, and the Court declines to adopt such a rule. Thus, the Wileys have not alleged a
plausible claim for relief based on a lack of receipt of a Notice of Intent to Repossess.
Even if the Wileys had raised a valid argument that the sending of the Notice of Intent to
Repossess was deficient, they still have not stated a valid claim arising from the inclusion of
repossession and storage costs in the Deficiency Notice. To the extent that a failure to provide a
Notice of Intent to Repossess affects the payment of repossession or storage costs, the failure
only affects whether the Wileys were obligated to pay repossession and storage costs in order to
redeem the car prior to resale. See Md. Code Ann., Com. Law

S

12-1021(h)(J). Under the

CLEC, if this discretionary notice is provided, the Wileys would have to "pay the actual and
reasonable expenses of retaking and storing the property" in order "[t]o redeem the property."
Id.

The Wileys, however. have never alleged that they redeemed. or attempted to redeem. the car

prior to resale. The lack of a Notice of Intent to Repossess has no bearing on whether RAC is
entitled to seek those costs as part of the deficiency balance. See, e.g.. Smilh v. Toyola Molor
Credit Corp., No. WDQ-12-2029, 2013 WL IJ25460, at 'J (D. Md. Mar. 28, 2013) ("S 12-

l021(h)(3) has no application to ...

recovery of repossession costs; on its face the subsection

governs the cost to be borne by a consumer borrower who chooses to redeem his property,").

9

Accordingly, the Motion to Dismiss is granted as to claims in the Amended Complaint arising
from the alleged lack of Notice of lntent to Repossess.
3.

Private Sale

The Wileys have stated a plausible claim that RAC violated the CLEC by erroneously
stating in its Redemption Notice that the WiJeys' car would be sold at a public auction, and then,
after selling the car at a private sale, failing to provide the "full accounting" required by the

CLEC. Compl. ~ 15-17. RAC asserts that the Complaint lacks sullicient facts to establish that
the Wileys' car was sold at a private sale. Def.'s Mem. at 13-20.

Even focusing on only the

allegations in the original Complaint, the Wileys, have alleged that ''It)he Notice states that the
sale would be a public sale, but the auctioneer informs the public and advertises that its sales are
private, dealer only sales, and the auctioneer requires a subslantial deposit from all prospective
bidders." CampI. ~ 16(d). The Wileys argue that these facts provide a basis to support a
plausible claim for relief.
It is of limited value that the Wileys allege that the auctioneer chosen by RAC "requires a
substantial deposit from all prospective bidders" to support the claim that their car was sold at a
private sale.

Although the Court of Appeals of Maryland has held that an admissions fee

transforms a "public auction" into a private sale, the court distinguished a bidder's fee from an
admissions fee and indicated that a bidder's fee does not necessarily transform a public sale into

a private one. See Gardner v. Ally Fin. Inc. (Gardner II), 61 A.3d 817, 821, 828 (Md. 2013);
Pyles v. Goller, 674 A.2d 35, 37 (Md. Ct. Spec. App. 1996) (noting that a "public auction"

required a $5,000 fee to bid); see also Gardner v. Ally Fin. Inc. (Gardner I), 488 F. App'x 709,
713 (4th Cir. 2012) (citing Pyles). Under Maryland law, openness and competitive bidding are
"the gravamen ofa public auction." Gardner II, 61 A.3d at 827. "Openness and transparency,

10

then, are dependent on the ability to observe the proceeding to ensure ...

the rules are being

followed and those in control are not engaging in collusive or unfair practices." Id. While an
admissions fce obscures transparency by imposing a barrier between the public and the sale, a
bidder's fee imposed only on those who intend to bid, does not necessarily affect the public's
ability to observe the proceedings and thus does not touch on the openness and transparency of
the sale in the same way. Id. at 821, 828.
But the Wileys' allegation that the auctioneer advertises that its sales are private, dealeronly sales does support a plausible claim that the sale of their car was, in fact, private. By its
very nature, a dealer-only sale is one in which members of the public cannot participate. See,
e.g., Ford Motor Credit Co. v. So/way, 825 F.2d 1213, 1218 (7th Cir. 1987) (concluding that a

dealer-only sale is private); see also Beard v. Ford Motor Credit Co., 850 S.W.2d 23, 28-29
(Ark. Ct. App. 1993) (concluding that "the dealers-only auction, which was restricted to the
participation of other dealers, was a private sale"); Am. Gen. Fin. Servs., Inc. v. Wood.'i-Wilcher,
669 S.E.2d 709, 710-11 (Ga. Ct. App. 2008). Although RAC claims that the auctioneer has also
advertised that it engages in public auctions, and that in fact the Wileys' car was sold at such an
auction, at the Rule 12(b)(6) stage the Court must accept the allegations in the Complaint as true
and draw all reasonable inferences in favor of the plaintiff. It is a fair inference that an
auctioneer that advertises dealer-only private sales followed that practice in this instance. In
tum, the Wileys allege that, because the sale was private, RAe violated the CLEC by failing to
provide a full accounting of the sale. Thus, in alleging that the auctioneer's sales are private,
dealer-only sales, the Wileys have sufficiently stated a claim under the CLEC.I

I The Court reaches this conclusion based on the allegations in the original Complaint, which
were the only allegations available at the time of the filing of the Motion to Dismiss. The
additional allegations in the Amended Complaint relating to a private sale, such as the assertion

11

4.

Additional

Redemption Notice Deficiencies

In addition to these two primary claims, the WiIeys allege additional deficiencies with
RAe's processes, including that the Redemption Notice inaccurately stated that (1) they may be
responsible for attorney's fees and court costs, even though no such fees were incurred in the
sale; and (2) RAC would send a second notice outlining the Wileys' redemption rights, but RAC
never sent a second notice. Even assuming that the Redemption Notice contained the alleged
errors, those deficiencies would not amount to violations of the CLEe. The CLEe requires only
that the redemption notice "briefly state" the right of the consumer borrower to redeem the car,
the amount payable to redeem, and his liability for deficiency. Md. Code Ann., Com. Law ~ 12I021(e). Depending on the terms of the R1SC,the Wileys may well have been responsible for
attorney's fees and court costs in conjunction with the sale.

Even accepting the Wileys'

allegation that they did not owe such costs, they have provided no legal authority to support the
premise that such a notation would constitute a violation of the CLEC actionable in court.
Likewise, there is no legal basis to support the claim that a failure to send a second Redemption
Notice referenced in the first Notice would constitute a violation of the CLEC. A second
Redemption Notice is not contemplated in, much less required by, the CLEe. While the CLEe
imposes a specific penalty for notice violations, see Md. Code Ann., Com. Law 99 121018(a)(2), 12-I021(k)(4),

there is nothing in the CLEC that establishes a violation for an

inaccurate statement in the Redemption Notice beyond the affirmative requirements contained in

that the auctioneer's website contained markings indicating that RAC auctions were restricted to
dealers, see Am. Compl. 21, provide further support for the claim but are not necessary for the
Court's ruling.
12

the statute,2 see Gardner

n, 61 A.2d

at 828 (considering whether the sale was public or private

for purposes of assessing compliance with the affirmative requirement for a full accounting of a
private sale, not whether an inaccurate statement on the type of sale would violate the CLEC).
The Motion to Dismiss is therefore granted with respect to these allegations.
5.

MCommercially Reasonable Manner"

Finally, the Wileys allege for the first time in the Amended Complaint that RAC failed to
conduct the sale in a "commercially reasonable" manner on the ground that RAC sold the car "in
West Virginia, approximately 380 miles from the Wileys' residence" in Maryland?
~ 17; Am. Compl

Ii

Compl.

23-25. They further allege that as a result, their car sold for "about half, or

less, than half, of its value." Am. Compl.

26.

Under the CLEC, "[a)ny sale of repossessed

property must be accomplished

commercially reasonable manner." Md. Code Ann., Com. Law ~ 12-10210)(I)(iii).

in a

Although a

low sales price is one factor to consider in the analysis, the "primary focus" of commercial
reasonableness

is the "procedures employed for the sale."

Gardner

n, the

factors

that

Gardner

n, 61

A.3d at 826.

In

court noted that "an improper location" for the sale was among the procedural

commentators

have

stated

"could

influence

a

finding

of

commercial

unreasonableness of a sale." [d. llere, the Wileys claim not only that their car was sold for an
unreasonably low price, but also that the location of the sale was unreasonable

because the

distance to West Virginia limited their ability to monitor the sale, increased the shipping costs
associated with the sale, and limited the number of potential bidders because the population in

2 For this reason, the Court also finds that the allegation of inaccuracies with the specific figures
stated in the Redemption Notice, Am. Compl. 19, does not support a cause of action.
Because RAe fully briefed this issue in its Reply Memorandum in a manner that could be
construed as seeking dismissal of this allegation, the Court deems it appropriate to address this
issue at this time.

3

13

West Virginia is significantly lower than that of the part of Maryland between Baltimore and
Washington, D.C. from which the car originated.

Am. Compl. ~ 23-25.

At the Rule 12(b)(6)

stage, the Court finds a plausible claim and declines to dismiss this aspect of the Amended
Complaint pursuant to the Motion to Dismiss.

III.

Declaratory .Judgment, Breach of Contract, and MCDCA Claims
RAe's argument for dismissal of these additional claims is premised entirely on a finding

that the Wileys' CLEC claims must be dismissed. See Def.'s Mem. at 23, Because the Court has
concluded that the Wileys have sufficiently stated a claim under the CLEC, the Motion to
Dismiss is denied as to their claims for a declaratory judgment, breach of contract, and a
violation of the MCDCA.
CONCLUSION
For the foregoing reasons, the Wileys' request for leave to amend the complaint is
GRANTED, and they are directed to file a clean copy of the Amended Complaint forthwith.
RAC's Motion to Dismiss, ECF No. II, is GRANTED IN PART and DENIED IN PART. The
Motion is DENIED as to claims arising from the alleged private sale and RAC's failure to
include a full accounting, and from the alleged failure to conduct the sale in a "commercially
reasonable manner."

'lhe Motion is GRANTED as to the remaining claims. A separate Order

follows.

:s£: ¥~~

Date: May 4, 2015

THEODORE D. CII
United States District Judge

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