Court Opinion

ID: 2683299
Source: CourtListenerOpinion
Date Created: 2014-07-14 07:00:46.824649+00
Date Added: 2024-06-11T09:43:12.611441
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 13-1940

WILLIAM AUBREY MARSHALL,

                Plaintiff - Appellant,

           v.

JAMES B. NUTTER & COMPANY,

                Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.    Richard D. Bennett, District Judge.
(1:10-cv-03596-RDB)

Argued:   May 14, 2014                     Decided:   July 10, 2014

Before NIEMEYER and WYNN, Circuit Judges, and Robert J. CONRAD,
Jr., United States District Judge for the Western District of
North Carolina, sitting by designation.

Affirmed by published opinion.        Judge Niemeyer     wrote   the
opinion, in which Judge Wynn and Judge Conrad joined.

ARGUED:    Martin Eugene Wolf, GORDON & WOLF, CHTD., Towson,
Maryland, for Appellant. Todd W. Ruskamp, SHOOK, HARDY & BACON
L.L.P., Kansas City, Missouri, for Appellee. ON BRIEF: Richard
S. Gordon, Benjamin H. Carney, Thomas M. McCray-Worrall, GORDON
& WOLF, CHTD., Baltimore, Maryland; Cyril V. Smith, William K.
Meyer,   ZUCKERMAN   SPAEDER  LLP,   Baltimore, Maryland,   for
Appellant.    Clayton T. Norkey, Benjamin M. Johnston, SHOOK,
HARDY & BACON L.L.P., Kansas City, Missouri, for Appellee.
NIEMEYER, Circuit Judge:

         William Marshall, a resident of Baltimore, Maryland, who

borrowed $252,000 from Savings First Mortgage, LLC, in a reverse

mortgage       transaction,        commenced        this    action       against       James    B.

Nutter     &    Company,     which       purchased        the     mortgage    from      Savings

First,     alleging       that     Nutter       was      liable    for    conspiring          with

Savings        First    to      violate       the       Maryland     Finder’s       Fee      Act.

Marshall alleged that Savings First collected $3,666 in fees

from him at closing, in violation of Md. Code Ann., Com. Law

§ 12-804(e), which prohibits a mortgage broker from “charg[ing]

a finder’s fee in any transaction in which the mortgage broker

. . . is the lender,” and that because Nutter funded the loan

pursuant to a preexisting agreement, it was liable as a civil

coconspirator.

         The district court held that Nutter could not be a violator

of   §    12-804(e)      because       that     statute      regulates       only      mortgage

brokers        and     Nutter      was    not       a     “mortgage      broker”        in     the

transaction.           The court concluded that because Nutter was not

“legally       capable”      of    violating        the    Act,    it    could    not,       under

Shenker v. Laureate Education, Inc., 983 A.2d 408 (Md. 2009), be

held liable for conspiring with Savings First to violate the

Act.        Accordingly,          it   granted          Nutter’s    motion       for    summary

judgment.

         We agree and affirm.

                                                2
                                        I

     Following      Savings   First’s       solicitation,    Marshall   entered

into a reverse mortgage transaction on September 11, 2008.                     A

reverse mortgage loan provides cash payments to the borrower

based on the equity that the borrower has in his house.                   At the

closing, Marshall executed a $252,000 note payable to Savings

First and a deed of trust on his house on Payson Street in

Baltimore to secure the note.           Under the reverse mortgage, the

amount   of   the   note   covered   the      payment   of   Marshall’s    prior

mortgage, a cash payment to him at closing of $6,639, and the

payment of future cash advances.             It also covered the costs and

fees of the transaction, including the payment to Savings First

of a “loan origination fee” of $3,360 and a “correspondent fee”

of $305.56.     All closing documents designated Savings First as

the lender.

     During the closing, Savings First assigned the mortgage to

Nutter, which “table funded” the loan.             Table funding is a term

of art referring to “a settlement at which a loan is funded by a

contemporaneous advance of loan funds and an assignment of the

loan to the person advancing the funds.”                12 C.F.R. § 1024.2.

Nutter’s table funding of Marshall’s loan was pursuant to its

prior agreement with Savings First “to underwrite and table fund

each Reverse Mortgage Loan” that Savings First made.

                                        3
       Marshall commenced this class action against Nutter in the

Circuit Court for Baltimore City on September 22, 2010, alleging

that Nutter had “conspired with mortgage brokers” to violate a

provision         of   the   Maryland      Finder’s         Fee    Act     that    prohibits       a

mortgage broker from charging “a finder’s fee in any transaction

in which the mortgage broker . . . is the lender.”                                     Md. Code

Ann.,      Com.    Law   § 12-804(e).           He     alleged          that    “Savings     First

acted as both the mortgage broker and as the nominal mortgage

lender,”      while      “Nutter      table-fund[ed]              the    mortgage      loan      and

act[ed] as the funding lender.”                      Thus, as alleged, the $3,665.56

in fees that Savings First charged Marshall were “finder’s fees”

collected         in   violation      of   §    12-804(e).               Marshall      did       not,

however, name Savings First as a defendant.                                    Rather, he sued

only Nutter, asserting that Nutter was liable for conspiring

with       Savings     First    and   other         unnamed       “mortgage       brokers”        to

violate the Act.             Specifically, he alleged that Nutter conspired

“by     reaching       an    agreement         and     understanding            with   mortgage

brokers      to    table-fund      mortgage          loan    transactions          .   .     .    [in

which] brokers acted as both mortgage broker and lender, thereby

enabling brokers to charge unlawful finder’s fees.” 1                                  Marshall

       1
       Marshall also alleged that Nutter conspired to commit
unfair and deceptive trade practices, in violation of the
Maryland Consumer Protection Act, Md. Code Ann., Com. Law § 13-
303. That count, however, was voluntarily dismissed and is not
before us.

                                                4
sought to represent a class of similarly situated borrowers and

demanded judgment of three times the amount of all finder’s fees

collected, plus attorneys’ fees and costs.

       After removing the action to federal court and conducting

discovery,   Nutter   filed   a   motion   for   summary   judgment   on

Marshall’s conspiracy claim, which the district court granted.

In doing so, the court relied on Shenker, which held that “a

defendant may not be adjudged liable for civil conspiracy unless

that defendant was legally capable of committing the underlying

tort alleged.”    983 A.2d at 428.     The district court concluded

that “only mortgage brokers are ‘legally capable’ of violating

the Maryland Finder’s Fee Act” and therefore that Nutter, which

the complaint alleged was a “funding lender” and not a mortgage

broker, could not be held liable for conspiring to violate the

Act.

       From the district court’s final judgment dated July 22,

2013, Marshall filed this appeal. 2

       2
       Marshall has also filed a motion to certify the legal
questions addressed in this appeal to the Maryland Court of
Appeals.    Because we find that Maryland law unambiguously
resolves those questions, we deny the motion.  See Roe v. Doe,
28 F.3d 404, 407 (4th Cir. 1994) (“Only if the available state
law is clearly insufficient should the court certify the issue
to the state court”).

                                   5
                                           II

       Marshall contends that the district court “misinterpret[ed]

and misappli[ed] [the] Maryland Court of Appeals’ decision in

Shenker” to conclude “that there [can] be no civil conspiracy

liability by a non-broker for violation of the [Finder’s Fee

Act].”     He asserts that the district court’s ruling “undermines

the very nature of conspiracy as a means of imposing vicarious

liability upon parties for all acts committed pursuant to an

agreement to commit a tort or violate a statute.”                       He urges us

to hold instead that Nutter did not need to act as a mortgage

broker to be legally capable of violating the Finder’s Fee Act

and that the district court therefore erred in entering judgment

in Nutter’s favor.

       Nutter contends, on the basis of Shenker, that “a civil

conspiracy claim requires proof that the defendant was ‘legally

capable’       of     committing      the        wrongdoing         underlying      the

conspiracy.”        It argues that, because § 12-804(e) only applies

to   mortgage       brokers    and   because      it   did    not    function    as   a

mortgage broker, it was not legally capable of violating the

provision, as necessary to support a conspiracy claim.

       Thus,    the    sole     question        presented     is    whether,     under

Maryland law, a non-broker may be held liable for conspiring

with a mortgage broker to violate § 12-804(e), which states that

“[a]   mortgage       broker   may   not    charge     a     finder’s   fee    in   any

                                           6
transaction in which the mortgage broker . . . is the lender.”

Md. Code Ann., Com. Law § 12-804(e). 3

       We begin by noting that the Finder’s Fee Act itself does

not prohibit conspiracy to collect unlawful finder’s fees, nor

does it provide a cause of action to recover for conspiracy to

violate the Act’s terms.                       Instead, the remedy section states

simply that “[a]ny mortgage broker who violates any provision of

this subtitle shall forfeit to the borrower the greater of:                                       (1)

[t]hree times the amount of the finder’s fee collected; or (2)

[t]he sum of $500.”                Md. Code Ann., Com. Law § 12-807 (emphasis

added).           Thus, Marshall’s entitlement to relief must stem not

from    the       Finder’s    Fee       Act     itself,        but   instead        from    Maryland

common law governing civil conspiracy.

       Under       Maryland        law,    civil         conspiracy         is    defined    as    the

“combination          of     two     or       more       persons       by    an     agreement      or

understanding to accomplish an unlawful act or to use unlawful

means      to     accomplish       an     act    not      in    itself      illegal,       with    the

further       requirement         that     the    act      or    the    means       employed      must

result in damages to the plaintiff.”                             Hoffman v. Stamper, 867

A.2d       276,    290     (Md.     2005)       (quoting        Green       v.     Wash.    Suburban

Sanitary          Comm’n,    269        A.2d     815,      824       (Md.        1970))    (internal

       3
       We note that Nutter never argued that Savings First was
not a “mortgage broker” within the meaning of the Finder’s Fee
Act. Cf. Petry v. Prosperity Mortg. Co., ___ F.3d ___, No. 13-
1869 (4th Cir. July 10, 2014).

                                                     7
quotation marks omitted).           In addition to proving an agreement,

“the plaintiff must also prove the commission of an overt act,

in furtherance of the agreement, that caused the plaintiff to

suffer    actual      injury.”      Id.           The    agreement    itself     is   not

actionable under Maryland law “but rather is in the nature of an

aggravating       factor”    with   respect         to   the   underlying       tortious

conduct.        Id.     Indeed,     the   Maryland          Court     of   Appeals    has

consistently maintained that “conspiracy is not a separate tort

capable of independently sustaining an award of damages in the

absence of other tortious injury to the plaintiff.”                         Alleco Inc.

v. Harry & Jeanette Weinberg Found., Inc., 665 A.2d 1038, 1045

(Md.    1995)   (quoting     Alexander        &    Alexander     Inc.      v.   B.   Dixon

Evander & Assocs., 650 A.2d 260, 265 n.8 (Md. 1994)) (internal

quotation marks omitted).           As the Alleco court explained:

       There is no doubt of the right of a plaintiff to
       maintain an action on the case against several, for
       conspiring to do, and actually doing, some unlawful
       act to his damage. . . .    It is not, therefore, for
       simply conspiring to do the unlawful act that the
       action lies. It is for doing the act itself, and the
       resulting actual damage to the plaintiff, that afford
       the ground of the action.

Id.    (quoting    Kimball    v.    Harman,        34    Md.   407,    409-11    (1871))

(internal quotation marks and citation omitted); see also id.

(“‘No action in tort lies for conspiracy to do something unless

the acts actually done, if done by one person, would constitute

a tort’” (quoting Domchick v.Greenbelt Consumer Servs., Inc., 87

                                          8
A.2d 831, 834 (Md. 1952)).                 Thus, civil conspiracy requires an

agreement,      and    an    overt   act    in    furtherance        of   the    agreed-to

unlawful       conduct      that   causes    injury,      as    well      as    the   legal

capacity of the conspirators to complete the unlawful conduct.

       Building       on    this   understanding     of      civil    conspiracy,        the

Maryland Court of Appeals held in 2009 that “a defendant may not

be adjudged liable for civil conspiracy unless that defendant

was legally capable of committing the underlying tort alleged.”

Shenker, 983 A.2d at 428.               In Shenker, shareholders of Laureate

Education, Inc., alleged that the members of the company’s board

of     directors       had     breached      their      fiduciary          duties        when

negotiating the price that the shareholders would receive in a

“cash out merger,” a type of merger where minority shareholders

are forced to take cash for their shares, thus freezing them out

of the merger.             The shareholders also sued several third-party

investors       who    had     joined      two    defendant       board        members    in

acquiring the company, alleging that the third-party investors

were    liable    for       conspiring     with   the    board     members       in   their

breach    of    their       fiduciary    duties.        In     dismissing       the   civil

conspiracy claim against the third-party investors, the Shenker

court explained:

       “[T]ort   liability   arising    from    a  conspiracy
       presupposes that the coconspirator is legally capable
       of   committing   a   tort,   that    is,  that   [the
       coconspirator] owes a duty to the plaintiff recognized
       by law and is potentially subject to liability for

                                             9
      breach of that duty.” . . . “[A] cause of action for
      civil conspiracy may therefore not arise if the
      alleged conspirator, though allegedly a participant in
      the   agreement    underlying the   injury,   was  not
      personally   bound   by   the duty   violated  by  the
      wrongdoing.”

Id. at 428-29 (quoting Bahari v. Countrywide Home Loans, No. 05-

2085, 2005 WL 3505604, at *6 (D. Md. Dec. 16, 2005); BEP, Inc.

v.    Atkinson,      174       F.    Supp.     2d    400,     409        (D.    Md.    2001)).

Consequently,       the    Shenker         court    concluded       that       “in    Maryland,

liability for civil conspiracy based on the underlying tort of

breach     of    fiduciary       duty      (were    it     recognized)         would   require

proof that the defendant, although not committing personally the

underlying        tort,        was    legally       capable        of     committing       the

underlying tort.”              Id. at 429.          Thus, the court held that the

shareholders’       civil       conspiracy         claim    against       the    third-party

investors had been properly dismissed because the investors owed

no fiduciary duties to the shareholders and therefore could not

be legally liable for civil conspiracy.                      Id.

      We    conclude       that      the     district       court       correctly      applied

Shenker    to     Marshall’s         civil   conspiracy        claim      against      Nutter.

Marshall        sought    to    hold       Nutter    liable        for    conspiring      with

Savings First and other mortgage brokers to violate § 12-804(e),

which prohibits mortgage brokers from charging finder’s fees in

any   transaction         in    which      they     are    also     the    lender.        This

provision imposes a duty only on mortgage brokers, and therefore

                                              10
only mortgage brokers are capable of violating it.                                Since it is

uncontested that Nutter was not functioning as a mortgage broker

but,    as    Marshall        alleged    in    his    complaint,         as      the   “funding

lender,” Nutter was not legally capable of violating § 12-804(e)

and     therefore,       under     Shenker,          cannot       be     held     liable    for

conspiring to violate § 12-804(e).

       To avoid this fairly straightforward conclusion, Marshall

contends that the district court improperly limited “conspiracy

claims solely to direct perpetrators of the underlying wrong.”

(Emphasis         added).       This    argument,         however,       misconstrues       the

district court’s ruling.                The district court did not hold that

Nutter had to be a direct perpetrator of § 12-804(e); rather, it

held,    in       applying     Shenker,       that    Nutter       had      to   be    “legally

capable” of committing such a violation before it could be held

liable for conspiracy.                Because § 12-804(e) only regulates the

conduct of mortgage brokers, only mortgage brokers can violate

it.

       Marshall        also    argues    that       the   district       court        misapplied

Shenker       because       lenders     like    Nutter        are      in     fact     “legally

capable” of violating the Finder’s Fee Act.                                 He contends, in

this regard, that the “[Finder’s Fee Act] regulates lenders, and

there is nothing standing in the way of a lender such as Nutter

acting       as    a   ‘mortgage       broker.’           Thus,     Nutter       is    ‘legally

capable’ of violating the Act.”                     But the fact that Nutter could

                                               11
hypothetically act as a mortgage broker in some transaction and

then be bound by § 12-804(e) is irrelevant.                      The duty alleged to

have been violated in this case was one imposed on mortgage

brokers     to   refrain      from    charging       “a     finder’s       fee    in     any

transaction in which the mortgage broker . . . is the lender.”

Md. Code Ann., Com. Law § 12-804(e).                 As Nutter did not function

as a mortgage broker, but rather as a funding lender, Nutter was

“not personally bound by the duty violated by the wrongdoing”

and   therefore       could   not    be    held    liable       for   conspiring        with

others to commit that wrongdoing.                    Shenker, 983 A.2d at 429

(quoting BEP, 174 F. Supp. 2d at 409) (internal quotation marks

omitted).

      Finally, Marshall argues that Shenker’s “legally capable”

requirement      is   satisfied      as    long    as     the    defendant       owed   the

plaintiff any duty of care.                He maintains that Nutter owed him

and other borrowers duties of care in its capacity as a lender

under other provisions of the Finder’s Fee Act, as well as under

Maryland    regulations       and    common       law.      But,      as   Shenker      made

clear, the defendant must be “legally capable of committing the

underlying tort alleged.”                 983 A.2d at 428 (emphasis added).

That Nutter was potentially subject to liability for breaching

other duties of care is irrelevant to whether it was legally

capable of committing the violation alleged by Marshall in this

case -- i.e., a violation of § 12-804(e).

                                            12
     We   thus   affirm   the   district   court’s   judgment   dismissing

Marshall’s claim that Nutter conspired to violate § 12-804(e) of

the Finder’s Fee Act.

                                                                 AFFIRMED

                                    13