Court Opinion

ID: 612609
Source: CourtListenerOpinion
Date Created: 2011-08-25 20:20:25+00
Date Added: 2024-06-11T14:58:04.065901
License: Public Domain

UNPUBLISHED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       SERVICES,    LLC;   SUPERIOR   HOME   MORTGAGE
CORPORATION,

                  Defendants.

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

Submitted:   July 7, 2011                     Decided:   August 25, 2011

Before MOTZ, KING, and DUNCAN, Circuit Judges.

Affirmed by unpublished per curiam opinion.
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Unpublished opinions are not binding precedent in this circuit.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
PER CURIAM:

            This    appeal     arises     out    of    a    Maryland         foreclosure

proceeding.      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     Trust”),    Wells      Fargo   Bank,      NA        (“Wells    Fargo”),

Superior    Home     Mortgage       Corporation        (“Superior”),             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     dismissal      without      prejudice         as    to    the   claims

contained   in     his   proposed     amendment.           For    the       reasons   that

follow, we affirm.

                                          I.

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

from   Fremont.      The   loan    was    secured     by    a    deed       of   trust   on

Jones’s Rockville, Maryland property.                 Fremont subsequently sold

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

                                          3
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      in   the     Circuit   Court    for    Montgomery

County, Maryland.      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    Jones’s        lawsuit,      the    foreclosure      sale

proceeded    as   scheduled,    and    HSBC    purchased    the   property    on

      1
       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
October   7.        The    state    court   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.     Jones also filed a motion for a preliminary injunction,

which   sought      to    prevent    HSBC   from   taking      possession    of   the

property until the federal suit was resolved.                    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.        Due to the state court’s

                                            5
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     to    dismiss

Jones’s complaint.

                One     week   later,       Jones       filed     for    leave      from      the

district court to amend his complaint.                           The proposed amendment

retained    as        defendants     only       HSBC,    Wells    Fargo,      and      BHL,   and

sought     to    convert       the    suit      into     a   class      action.         Raising

substantially different facts and legal theories, the revised

complaint centered on the manner in which Wells Fargo prepared

affidavits used in foreclosure proceedings.                              It alleged that

employees         of     Wells        Fargo        signed       affidavits          supporting

foreclosures despite having no personal knowledge of the facts

contained        therein.          Based      on     this     conduct,     the      complaint

asserted        seven    causes       of    action,      including       fraud,        wrongful

foreclosure, and violation of the Maryland Consumer Protection

Act.

                In a February 3, 2011 order, the district court denied

Jones’s    motion        for   leave       to    amend,      explaining       that      it    was

dilatory,         futile,       and        would        prejudice       the      defendants.

Additionally,           the    district          court       dismissed        the      original

                                                 6
complaint     in     its   entirety,         finding    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     appeal,      Jones       challenges      the    district    court’s

denial   of        his   motion       for    leave    to     amend   and   the   court’s

dismissal with prejudice of his original complaint.                        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.                       Galustian v. Peter, 591 F.3d

724, 729 (4th Cir. 2010).                    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).            Though

denial   of    leave       to    amend       lies    within    the   district    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.”                     Id.     As we explain below,

the   district       court      did    not    abuse    its    discretion    by   finding

                                               7
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.              As a threshold matter, it appears

that       Jones’s     concerns     about         the    accuracy       of    defendants’

documents were present when he filed his initial complaint, on

November 2, 2009.           Indeed, that complaint explicitly questioned

the    accuracy      of    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
in a timely manner.         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.”          Davis v. Piper

Aircraft, 615 F.2d 606, 613 (4th Cir. 1980).        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
              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.”                            R&D 2011, LLC

v. Rice, 938 A.2d 839, 848 (Md. 2008).                    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

the same legal right.”              FWB Bank v. Richman, 731 A.2d 916, 930

(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       court   action,      the   privity

                                            10
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      element,        Maryland   courts        employ    the

“transaction” test.         See Kent Cnty Bd. of Educ. v. Bilbrough,

525 A.2d 232 (Md. 1987).            Under this test, claims are the same

“when   they     arise   out   of   the    same    transaction     or    series    of

transactions.”      Anyanwutaku, 85 F. Supp. 2d at 571.                  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
foreclosure of his home.             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     voluntarily      appears   and     raises   objections,   however,

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    foreclosures,   foreclosures

      3
       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
themselves      cannot     be    intended       to     have      preclusive    effect.

However,      the     statute    simply     addresses         actions     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     opportunity     to    later      collaterally       attack      the

resulting     judgment.         See   id.    at      1272    (explaining      that    the

greater preclusive effect of a foreclosure judgment to which

exceptions     were     filed   flows      from      the    mortgagor’s    “voluntary

appearance in the foreclosure proceeding”).                      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   state-court      foreclosure        constitutes       an   in   personam     final

                                           13
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   without   prejudice    with   respect    to    his

amended   complaint.      Jones’s   concern   appears   to   be   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
              Jones    misinterprets     the     district    court’s     order.

Because   the    district      court   denied    Jones   leave   to    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.           We dispense with oral argument because the

facts   and    legal   contentions     are    adequately    presented    in   the

materials     before    the    court   and    argument   would   not    aid   the

decisional process.

                                                                        AFFIRMED

                                       15