Franklin Credit Mgmt. Corp. v. Nefflen

208 Md.App. 712

57 A.3d 1015

FRANKLIN CREDIT MANAGEMENT CORPORATION

v.Fred NEFFLEN.

No. 989, Sept. Term, 2011.

Court of Special Appeals of Maryland.

Dec. 20, 2012.

Jason C. Rose (Nathaniel S. Berry, Venable, LLP, on the brief), Baltimore, MD, for Appellant.

Scott C. Borison (Legg Law Firm, LLC, on the brief), Frederick, MD, for Appellee.

Panel: GRAEFF, BERGER, J. FREDERICK SHARER, (Retired, Specially Assigned), JJ.

GRAEFF, J.

This appeal arises from a dispute between Franklin Credit Management Corporation (“Franklin”), appellant, and Fred Nefflen, appellee, regarding the enforcement of a settlement agreement. In April 2010, Mr. Nefflen filed a Complaint in the Circuit Court for Frederick County alleging that Franklin, the company servicing his mortgage, had violated the terms of a settlement agreement entered into by the parties in June 2009 pertaining to the mortgage. After Franklin failed to file responsive pleadings and a default hearing was held, which Franklin did not attend, the circuit court entered a default judgment in favor of Mr. Nefflen on all four counts in his complaint. The court found that Mr. Nefflen was entitled to $203,301.84 in damages. The court subsequently denied Franklin's Motion for New Trial or to Alter or Amend Judgment.

On appeal, Franklin presents the following questions for our review:

1. Did the [c]ircuit [c]ourt err as a matter of law or abuse its discretion in granting [Mr.] Nefflen a default judgment for his defamation claim because the failure to correct a negative credit report does not constitute a viable claim for defamation or, alternatively, because the defamation claim was not viable in the absence of factual allegations to support that Franklin acted with malice or intent to harm [Mr.] Nefflen?

2. Did the [c]ircuit [c]ourt err as a matter of law or abuse its discretion in granting [Mr.] Nefflen a default judgment for violations of the Maryland Consumer Debt Collection Act and the Maryland Consumer Protection Act because Franklin's request for verification that [Mr.] Nefflen had flood insurance in accordance with federal requirements was not an attempt to collect a debt owed to Franklin or, alternatively, because Franklin's request constituted a breach of a Settlement Agreement, not a tort under the Maryland Consumer Debt Collection Act?

3. Did the trial court abuse its discretion in denying Franklin's Motion to Alter or Amend the Judgment where Franklin's Motion established that Nefflen did not plead viable claims and that the judgment was erroneous as a matter of law?

4. Did the trial court abuse its discretion in denying Franklin's Motion to Alter or Amend the Judgment where Franklin's failure to defend was the result of misunderstanding regarding the timing of the default judgment hearing and where Franklin's Motion raised meritorious defenses?

For the reasons set forth below, we shall affirm the judgment of the circuit court.

FACTUAL AND PROCEDURAL BACKGROUND

In 1997, Mr. Nefflen refinanced his mortgage with Silver Financial Group, Inc. for $134,036.50. He refinanced again in 1998, increasing his loan to $177,000. The 1998 loan was originally payable to CIT, and in 1998, CIT assigned its interest in the loan to Bank One, who in turn, assigned the servicing rights of the loan to Franklin on September 1, 2004. Prior to the assignment to Franklin, Mr. Nefflen had modified his loan with Bank One, which resulted in a monthly payment amount of $1,059.36, effective May 2003.

When Franklin began servicing the loan, it claimed that Mr. Nefflen's monthly payment was $1,385.51. The monthly statements that it sent Mr. Nefflen alleged that he was behind on his payments after he paid the $1,059.36 due pursuant to his agreement with Bank One. In October 2005, after ten months of correspondence between Mr. Nefflen and Franklin regarding the monthly payment amount, Franklin sent a letter to Mr. Nefflen “confirm[ing] that the payment due on the loan was the amount set forth in the loan modification.” Franklin, however, continued to send statements asserting that Mr. Nefflen's loan account was overdue, and it reported to credit agencies that Mr. Nefflen was delinquent in his payments.

Mr. Nefflen subsequently filed suit against Franklin. On June 2, 2009, the parties settled the case. Among other agreements, the settlement provided that “Franklin will delete all derogatory information from any Credit Reports and report the Nefflen Loan as current and paid as agreed,” and that “[t]he parties agree that there shall be no demand or requirement for flood insurance of any kind in connection with the Nefflen Loan.”

On April 13, 2010, Mr. Nefflen filed another complaint against Franklin, contending that Franklin was in breach of these two provisions of the settlement agreement. Specifically, he stated that Franklin “has not deleted the derogatory information from [his] credit reports,” and it “continued to make demands for flood insurance.” In his complaint, Mr. Nefflen alleged violations of the Maryland Consumer Debt Collection Act (“MCDCA”) and the Maryland Consumer Protection Act (“MCPA”), as well as counts for defamation and breach of the settlement agreement.

A writ of summons dated April 19, 2010, was sent to Franklin, care of “CSC Lawyers Incorporating,” Franklin's registered agent. On July 12, 2010, Mr. Nefflen submitted a proof of service and delivery receipt to the circuit court, stating that, on April 23, 2010, service was completed by “certified mail, return receipt requested, on [Franklin's] registered agent.” On August 31, 2010, the court issued and sent to Franklin a Notice of Hearing/Trial, which stated that a Status Conference had been set for October 22, 2010.

Franklin did not file an Answer. On September 29, 2010, Mr. Nefflen filed a Motion for Entry of Default, stating that Franklin “was served on April 23, 2010,” and “[t]he time has expired for [Franklin] to Answer the complaint.” The Certificate of Service attached to Mr. Nefflen's motion indicated that the Motion for Entry of Default was mailed to Franklin.

On October 6, 2010, the circuit court entered an Order of Default in favor of Mr. Nefflen and sent Franklin a Notice of Default Order. On January 18, 2011, a Hearing Notice was issued and sent to Franklin, advising that a default hearing had been set for March 8, 2011.

On March 2, 2011, Mr. Nefflen filed a Motion to Postpone Hearing, which included a Certificate of Service indicating that the motion was sent to Franklin. On March 7, 2011, the day before the hearing was scheduled, the circuit court granted Mr. Nefflen's motion. Also on March 7, 2011, the day the Motion to Postpone Hearing was granted, a Hearing Notice changing the hearing date to April 7, 2011, was issued and sent to Franklin. The notice read as follows, under the heading of “Date and Time”: “04/07/11 02:00 PM—reset from 03/08/11.”

On April 7, 2011, the court held a default hearing. Mr. Nefflen was the only witness to testify; Franklin was not present. Mr. Nefflen explained that, pursuant to the June 2, 2009, settlement, which he introduced into evidence, Franklin had agreed that it would delete derogatory information from his credit report and would not require flood insurance on his property. On June 19, 2009, however, two weeks after the settlement date, he received a letter from Franklin about flood insurance. The letter stated:

As you are aware your Mortgage ... requires you to maintain adequate Flood insurance coverage to protect our interest in the property. Our records show that your property is located in a Special Flood Hazard Area (SFHA) flood zone AE, and Flood Insurance is required under the Flood Disaster Protection Act of 1973, as amended, a Federal law. However, we have reviewed our records and determined that we do not have a current Flood insurance policy on file for the period starting on 02/01/2009. This requires your immediate attention.

On two subsequent dates, July 27, 2009, and October 23, 2009, Franklin sent Mr. Nefflen additional letters. These letters were similar to the one sent in June, but they additionally stated:

If you wish to contest this Flood insurance requirement or the special Hazard Flood Area flood zone AE, you must provide a Letter of Map Amendment/Revision (LOMA/LOMR) from the Federal Emergency Management Agency (FEMA) indicating that the property does not require Flood insurance.

On November 13, 2009, and February 22, 2010, Franklin sent additional letters regarding flood insurance. These letters stated, in pertinent part, as follows:

We wrote you previously to let you know that we had not received a current Flood Insurance policy for your property for the period starting on 02/01/2009. Since we did not receive a response from you or your agent, we have purchased Flood coverage in the amount of $146,589.00. The annual cost of $1,650.92, which includes applicable taxes and fees, will be charged to your account in monthly increments, and your mortgage payment will increase accordingly.

Mr. Nefflen then testified regarding his monthly mortgage payments to Franklin, specifically in reference to his escrow balance, which was increased to reflect the charges incurred for Franklin's purchase of flood insurance on Mr. Nefflen's behalf.

In January 2010, six months after the June 2009 settlement agreement, Mr. Nefflen obtained a copy of his credit report from Transunion. The report, dated January 18, 2010, listed Mr. Nefflen's account with Franklin under the “Adverse Accounts” heading; the remaining accounts on Mr. Nefflen's report were listed as “Satisfactory Accounts.” The statement reflected that 18 late payments were made on Mr. Nefflen's account with Franklin, all of which occurred prior to June 2007. Mr. Nefflen also introduced a credit report from Equifax, and a second report, dated January 26, 2011, from Transunion, which also reported that he had been late on his payments to Franklin dating back from May 2007.

Mr. Nefflen testified that he...