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Law firms have duty to investigate before debt collection, Md. appeals court says

Law firms engaged in debt collection have a duty under Maryland consumer protection laws to investigate a debtor’s claim that the money is not owed before pursuing collection efforts, Maryland’s second highest court ruled last week in enabling a widow who was threatened with foreclosure to pursue her lawsuit against the law firm that acted as a substitute trustee for the bank.

In its reported decision, the Court of Special Appeals said the Maryland Consumer Debt Collection Act and the Maryland Mortgage Fraud Protection Act must be interpreted broadly to protect consumers against unfair collection practices. These practices include instances when debt collectors know they have right to collect or act with “reckless disregard” of indications they had no right to pursue collection, the court added in its 3-0 ruling.

In the case, Mary T. Newsom claims Brock & Scott PLLLC acted recklessly – if not knowingly – in seeking to foreclose on her marital home in light of her contention that her purported signature on the couple’s deed of trust was a forgery, thus rendering the related debt invalid. Newsom also alleges the deed of trust cannot be enforced against her because the bank had not recorded it within six months of the death of her husband, Leslie “Boh” Newsom, in 2015.

A Prince George’s County Circuit Court judge had essentially dismissed Newsom’s claim that the law firm’s pursuit of foreclosure violated the MCDCA and the MMFPA, saying “there is no evidence that Brock & Scott played any role in the deed of trust (and) it was not present when the deed was signed.”

In sending the case back for trial, the Court of Special Appeals said the determination of the deed’s validity – as well as whether the law firm acted recklessly in light of questions Newsom raised about the deed — is for a jury to decide.

“If the jury believed Mrs. Newsom’s testimony, the jury could have reasonably concluded that (Brock & Scott) did not possess the right to foreclose upon her home, either because the deed of trust was not signed by her, or because the deed of trust was not recorded within six months after Mr. Newsom’s death and no timely claim was filed in his estate,” Judge Timothy E. Meredith wrote for the appellate court. “And the jury could conclude that the (firm was) placed on actual notice that Mrs. Newsom denied the validity of the debt they were endeavoring to collect by foreclosure upon her home, and therefore, the (firm) acted knowingly or recklessly in proceeding without further investigation.”

The Court of Special Appeals originally issued its decision in October as “unreported,” meaning the ruling had no legal significance beyond the parties to the case. The court then – without explanation — reissued its decision as “reported” last week, enabling the holding to apply statewide.

Newsom’s attorney, Phillip Robinson, hailed the court’s ruling Monday as sending a message to debt collectors.

“They never investigated,” Robinson said of Brock & Scott. “There is an expectation that a collector should investigate its purported right to collect. It should not turn a blind eye.”

Robinson is with Consumer Law Center LLC in Silver Spring.

Brock & Scott attorney Robert A. Oliveri, who represented the debt collection firm at the Court of Special Appeals, did not return a telephone message Monday seeking comment on the decision and any plans to seek review by the Court of Appeals.

Mary Newsom claims that, without her knowledge, her husband had apparently borrowed money from Capital One bank as evidenced by a promissory note signed by him. The promissory note was accompanied by the deed of trust, which created a lien on the marital home.

Under Maryland law, deeds of trust on homes owned by married couples must be signed by both spouses. Though her name was on the deed, Newson has insisted that she never cosigned the document and that her signature must be a forgery.

Newsom claims she learned of the deed of trust after her husband died and the bank contacted her after it stopped receiving payments on the loan. She claims she told the bank she never executed the promissory note or deed of trust.

But Capital One treated the debt as collectible and hired Brock & Scott to pursue collection, according to her lawsuit. B&S notified Newsom of its intention to foreclose on the home due to the outstanding debt.

Newsom, through counsel, filed a motion to dismiss the foreclosure action and sued B&S and Capital One, claiming they had violated the consumer protection laws.

Capital One settled with Newsom and terminated the foreclosure proceeding.

Newsom continued to pursue her claims against B&S.

The Prince George’s County Circuit Court judge dismissed the claims against the law firm after Newsom had presented her case and before the law firm was to present its defense.

Newsom then sought review by the Court of Special Appeals.

Meredith, now retired, was joined in the opinion by Judge Kathryn Grill Graeff and James R. Eyler, a retired judge sitting by special assignment.

The Court of Special Appeals rendered its decision in Mary T. Newsom v. Brock & Scott PLLC et al., No. 532, September Term 2019.