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Maryland High Court Holds Unlawful Threat of ‘Self-Help Eviction’ Enough to Sue

The Maryland Court of Appeals, the highest court in the State, recently held that (1) the plaintiffs owners and tenants of residential properties set forth a cause of action under Md. Code Real Prop. 7-113 against a mortgage servicer and real estate broker for supposedly posting eviction notices without first ascertaining the occupancy status, even though the notices did not cause the occupants to vacate the properties; and (2) the Court has not established a more demanding standard for pleading damages in private actions brought under the Maryland Consumer Protection Act.

A copy of the opinion in Wheeling v. Selene Finance, LP is available at:  Link to Opinion.

The petitioners, who were all occupants of residential property that they owned or leased, brought this action against the respondents, a mortgage servicer and a real estate broker, after the respondents posted eviction notices on the petitioners’ properties in an attempt to gain possession of the properties without a court order. The petitioners claimed that the respondents violated Md. Code Real Prop. (RP) § 7-113 and the Maryland Consumer Protection Act (MCPA), Md. Code Comm. Law § 13-101 et seq.

As you may recall, RP § 7-113 restricts the use of self-help in certain kinds of residential evictions. Without a court order, a person claiming the right to possession of a residential property may only resort to self-help evictions if the person posts a notice that complies with the requirements of the statute, and only if he or she “reasonably believes the protected resident has abandoned or surrendered possession of the property based on a reasonable inquiry into the occupancy status of the property[.]” RP § 7-113(b)(2)(ii)(1).

Although the respondents’ actions did not cause them to leave, the occupants alleged that the respondents’ unlawful act of allegedly posting the eviction notices without ascertaining the occupancy status of the property caused them to suffer two forms of compensable damages — (1) “emotional damages and losses with physical manifestations” such as fear that they would lose their home; and (2) economic damages in the form of attorney’s fees they incurred to understand their rights.

The respondents filed motions to dismiss the amended complaint on the basis that it failed to state a cause of action. The trial court granted both motions. The intermediate appellate court affirmed the trial court’s judgment.

The intermediate appellate court determined that the amended complaint alleged facts that, if proven, established that the respondents violated RP § 7-113. However, the intermediate appellate court concluded that a private cause of action arising under RP § 7-113 is only extended to residents who vacate the property as the result of the improperly posted eviction notice. The intermediate appellate court further determined that, assuming that the respondents’ actions violated the MCPA, the amended complaint failed to allege damages with the specificity required for private causes of action under that statute.

The Maryland Court of Appeals reversed the intermediate appellate court’s judgment in part and affirmed in part.

First, the Maryland Court of Appeals held that the occupants’ amended complaint adequately set forth a cause of action under RP § 7-113(d) and that the plain language of the statute does not require that a protected resident be deprived of actual possession as a condition to bringing a private cause of action. The Court observed that subsection (b)(1) prohibits a variety of conduct, including the claiming party taking actual possession, but also threats to take possession.

Furthermore, the Maryland Court of Appeals did not agree with the intermediate appellate court’s conclusion that the Court’s jurisprudence had established a more demanding standard for pleading damages in private actions brought under the MCPA. Instead, the Court held that the general rule of pleading as articulated in Maryland Rule 2- 302(b) applied here.

Maryland Rule 2- 303(b) states that:

Each averment of a pleading shall be simple, concise, and direct. No technical forms of pleadings are required. A pleading shall contain only such statements of fact as may be necessary to show the pleader’s entitlement to relief or ground of defense. It shall not include argument, unnecessary recitals of law, evidence, or documents, or any immaterial, impertinent, or scandalous matter.

The intermediate appellate court cited Lloyd v. GMC, 397 Md. 108 (2007) and Citaramanis v. Hallowell, 328 Md. 142 (1992) in reaching its conclusion, but the Maryland Court of Appeals concluded that those cases did not change the pleading standard, but instead those cases held that actual damages need to be pleaded in a private cause of action brought under the MCPA.

In other words, because “actual loss or injury” is a necessary element to bring a private cause of action under the MCPA, the Court held that actual damages need to be pleaded in the same fashion as would be required under Maryland Rule 2- 302(b) in any other cause of action where the plaintiff seeks money damages.

In order to recover damages for an emotional injury, the Maryland Court of Appeals held that the emotional injury must be accompanied by a physical injury, which the plaintiff would be required to prove by some objective physical manifestation. See Hoffman v. Stamper, 385 Md. 1, 39 (2005); Vance v. Vance, 286 Md. 490, 500 (1979).

Here, the Court concluded that the occupants alleged that the respondents’ unlawful acts of posting eviction notices, without undertaking the required “reasonable inquiry” to determine whether the property had been abandoned, caused them to suffer emotional damages and losses with physical manifestations.

However, the Maryland Court of Appeals affirmed the judgment of the intermediate appellate court with respect to the petitioners’ assertion that they were entitled to their attorney’s fees incurred to “know their rights” as separate compensable damages. The Court held that, under both RP § 7-113 and the MCPA, the petitioners would be entitled to their reasonable attorney’s fees incurred to prosecute their case (assuming they prevail).

But the Court determined that the petitioners’ damages claim related to their pre-litigation, consultation fees did not fall within any of the common law exceptions to the “American Rule,” which prohibits recovery of attorney’s fees as separate compensable damages. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975)

Accordingly, the Maryland Court of Appeals reversed in part and affirmed in part.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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