BERGER, J.
This case arises out of an action filed in the Circuit Court for Baltimore City by co-appellants Larry Finch ("Finch") and Kurt A. Dorsey ("Dorsey") (collectively, "appellants"), against appellee, LVNV Funding, LLC ("LVNV"). In 2008, LVNV filed debt collection suits against Finch and Dorsey in the District Court for Baltimore City. Default judgments were entered against each appellant. Appellants thereafter filed a class action in the circuit court, alleging that LVNV was not licensed as a collection agency, as required by Maryland law, when it obtained the underlying district court judgments. Appellants sought to represent a class comprised of all persons against whom LVNV had obtained a judgment for an alleged debt in Maryland state courts during the period of time in which LVNV was unlicensed. The class action complaint asserted five claims. Appellants sought declaratory and injunctive
Appellants present three questions for review, which we have combined and rephrased as follows:
For the reasons set forth below, we reverse the decision of the Circuit Court for Baltimore City.
Finch and Dorsey are consumers who accumulated credit card debts. LVNV acquired appellants' unpaid debts by assignment. In 2008, LVNV filed collection suits against Finch and Dorsey in the District Court of Maryland for Baltimore City. Both Finch and Dorsey were served, and neither contested LVNV's claims. The district court entered a default judgment against Finch on July 31, 2009 in the amount of $3,621.67. In 2011, LVNV obtained a writ of garnishment against Finch's earnings. The district court also entered a default judgment against Dorsey on April 8, 2009 in the amount of $5,838.95.
Appellants filed a putative class action in the circuit court on November 11, 2009. Appellants sought to represent a class comprised of:
In their complaint, appellants alleged that LVNV engaged in illegal collection of debts because LVNV was not licensed as a collection agency in Maryland, as required by the Maryland Collection Agency Licensing Act ("MCALA"), Md.Code Ann., Bus. Reg. § 7-301. The complaint further alleged that LVNV's unlicensed collection activities violated the Maryland Consumer Debt Collection Act ("MCDCA"), Md.Code Ann., Com. Law §§ 14-201 to 14-204, and the Maryland Consumer Protection Act ("MCPA"), Md.Code Ann., Com. Law § 13-301. Finally, the complaint alleged that the judgments against Finch and Dorsey were obtained based upon affidavits that were irregular in certain respects.
The appellants' complaint asserted five causes of action. In the first three counts, appellants sought a declaratory judgment and injunctive relief, both individually and as a class, based on LVNV's unlawful activities as an unlicensed collection agency. In Count IV, appellants alleged unjust enrichment and sought to recover from LVNV "all judgment sums, costs, and pre-and post-judgment interest it has collected...." In Count V, appellants asserted individual and class claims for damages under the MCDCA and the MCPA.
LVNV filed a motion to dismiss appellants' circuit court complaint on the basis that it constituted an impermissible collateral attack on the existing district court judgments. After holding a hearing, the circuit court dismissed appellants' complaint, explaining that "[a]ll of [appellants]'
The standard of review of a grant of a motion to dismiss is de novo. Reichs Ford Road Joint Venture v. State Roads Com'n of the State Highway Admin., 388 Md. 500, 509, 880 A.2d 307 (2005). The Court of Appeals has explained:
Shailendra Kumar, P.A. v. Dhanda, 426 Md. 185, 192, 43 A.3d 1029 (2012).
Appellants argue that the circuit court erred by dismissing appellants' claims as an impermissible collateral attack on the district court judgments. In support, appellants contend that the district court judgments are void because LVNV was not licensed as a collection agency in Maryland when it filed the district court actions against Dorsey, Finch, and other class members. Appellants posit that the collateral attack doctrine does not apply because the district court judgments are void. LVNV asserts that the district court judgments are valid, and, therefore, the circuit court properly dismissed appellants' action as an impermissible collateral attack. We hold that judgments entered in favor of an unlicensed collection agency are void. We further hold that the collateral attack doctrine does not apply to void judgments. Accordingly, the circuit court erred by dismissing appellants' complaint.
We first consider whether the district court judgments are void, as urged by appellants. It appears from the record that the circuit court did not expressly consider the validity of the judgments. Rather, the circuit court analyzed whether, among other things, the request for a declaration that the judgments are void constitutes an impermissible collateral attack. In our view, the requisite analysis first requires a determination as to whether the underlying judgments are void, and only then can we consider the implications of the collateral attack doctrine. To be sure, "a void judgment is subject to attack either directly by appeal or collaterally.... It does not constitute res judicata." State v. Ambrose, 191 Md. 353, 369, 62 A.2d 359 (1948).
Our analysis must necessarily begin by examining the distinction between a void and voidable judgment. A void judgment "is a mere nullity, which [is] disregarded entirely, and could [be] attacked collaterally, and ... could [be] discharged by any other court of competent jurisdiction...." Smith v. State, 240 Md. 464, 474, 214 A.2d 563 (1965). A voidable judgment "is not a mere nullity, but only liable to be avoided by a direct attack and the taking of proper steps to have its invalidity declared. Until annulled, it has all the ordinary consequences of a legal judgment." Id.
Judgments are void as a matter of law in various circumstances. For example, a judgment is void if it was obtained by a "non-lawyer" through the unauthorized practice of law.
In Turkey Point, we held that a non-lawyer's representation of an association rendered the complaint, and the trial proceedings, a nullity. Id. at 718-20, 666 A.2d 904. In so holding, we adopted the rationale of other jurisdictions, which have held that:
Turkey Point Prop. Owners' Ass'n, Inc., 106 Md.App. at 718, 666 A.2d 904. We explained that this "drastic remedy" was called for by "[t]he totality of the circumstances, including the long history of rules and legislation aimed at preventing the practice of law by nonlawyers[.]" Id. at 719, 666 A.2d 904.
In Stein, the Court of Appeals held that a complaint filed in the name of a corporation that had forfeited its corporate charter was a nullity. Stein, 358 Md. at 675, 751 A.2d 504. The Stein Court explained that, "[o]ne of the powers of [the company] that became `inoperative, null, and void' upon forfeiture of its charter was the power to sue." Id. at 675, 751 A.2d 504 (citing the Maryland Code provisions governing corporate charters). The Court further observed that:
Stein, 358 Md. at 682, 751 A.2d 504.
Generally, a party that lacks a required license may not file an action in a
Id. See also McDaniel v. Baranowski, 419 Md. 560, 583-87, 19 A.3d 927 (2011) (reversing summary ejectment judgment entered against a tenant and in favor of an unlicensed landlord because "the purpose of the [landlord licensing] statute was to eliminate a perceived harm, rather than to build the public fisc....").
In McDaniel, the Court of Appeals concluded that the lack of a license implicated the landlord's "status as a claimant" in Maryland courts, rather than constituting an affirmative defense.
Id. at 587, 19 A.3d 927.
Maryland law requires a debt collector to obtain a license. See MCALA, Md. Code Ann., Bus. Reg. § 7-301(a) ("a person must have a license whenever the person does business as a collection agency in the State."). The MCALA defines a "collection agency" as a "person who engages directly or indirectly in the business of:
It appears to be a question of first impression in Maryland whether a collection agency's failure to obtain a license, as required by the MCALA, renders any judgment entered in favor of an unlicensed collection agency void or voidable. We conclude that a judgment obtained by an unlicensed collection agency is void.
At least one other jurisdiction has considered this issue, and held that judgments entered in favor of an unlicensed debt collection agency are void. See LVNV Funding, LLC v. Trice, 352 Ill.Dec. 6, 952 N.E.2d 1232 (Ill.App.2011).
In reaching its decision, the Trice court explained that "[w]e find this case similar to cases in which a person practices law without a license." Id. at 1237. Under Illinois law, "[a] complaint drafted by a nonattorney on behalf of a corporation constitutes the unauthorized practice of law rendering the pleading a nullity and any judgment entered on it void." Id. (citations omitted). Consequently, the Trice court held that "a complaint filed by an unregistered collection agency is similarly
Although there is no Maryland case directly on point, the United States District Court for the District of Maryland has held that filing a collection action without a license, as required under the MCALA, constitutes an attempt to "enforce a right... that does not exist." Hilco, supra, 765 F.Supp.2d at 732 (applying Maryland law). Similarly, in the context of federal law, the Hilco court held that filing a collection action without a license under the MCALA constitutes an "action that cannot legally be taken." Id. at 731. In so holding, the Hilco court relied upon various cases from other jurisdictions holding that "violations of parallel state laws that mandate licensure by collection agencies" amounted to actions "that cannot legally be taken." Id. at 728 (citing Sibley v. Firstcollect, Inc., 913 F.Supp. 469, 471-72 (M.D.La.1995); Russey v. Rankin, 911 F.Supp. 1449, 1459 (D.N.M.1995); Kuhn v. Account Control Tech., Inc., 865 F.Supp. 1443, 1452 (D.Nev. 1994)).
In our view, the Maryland precedent on void judgments weighs in favor of adopting the analysis set forth in Trice.
Consequently, we adopt the logical and well-reasoned conclusion of Trice. Much like a complaint filed by a non-lawyer, "a complaint filed by an unregistered collection agency is [] a nullity, and any judgment entered on such a complaint is void." Trice, supra, 952 N.E.2d at 1236. We are further persuaded by the Trice court's rationale that the imposition of criminal penalties for engaging in unlicensed collection activities establishes an intent by the legislature to void any judgment entered in favor of an unregistered collection agency.
Our holding in Turkey Point supports this rationale. See supra, 106 Md.App. at 719, 666 A.2d 904 (holding that the "drastic remedy" of deeming a judgment void because it was obtained by a nonlawyer was called for by "[t]he totality of the circumstances, including the long history of rules and legislation aimed at preventing the practice of law by nonlawyers[.]"). Likewise, here, the "drastic remedy" of deeming a judgment void if it was obtained by an unlicensed collection agency is warranted in light of the legislation aimed at preventing such practices. See, e.g., Hilco, supra, 765 F.Supp.2d at 728-32 (discussing the long-standing consumer protection statutes in force in Maryland, including the MCDCA and MCPA, as well as the implication
The Maryland cases addressing an unlicensed party's "status as a claimant" in Maryland courts also bolster our analysis. McDaniel considered whether a party must "establish his bona fides regarding licensure at the time of filing, as a matter of law, or whether [the defendant] should plead the lack of a license as an affirmative defense." The McDaniel Court held that the lack of a license was not merely an affirmative defense because licensure is an integral part of the landlord's status as a claimant in Maryland. Similarly, here, the legislature has made clear that any entity that "collects consumer claims through civil litigation is ... required to be licensed...." Md. State Collection Agency Licensing Bd. Advisory Notice 05-10, May 5, 2010. Thus, the licensing requirement contained in the MCALA is an integral part of a collection agency's status as a claimant in Maryland.
Moreover, like the landlord licensing requirement in McDaniel, the MCALA licensure requirement is intended to eliminate a perceived harm, rather than to "build the public fisc." See McDaniel, supra, 419 Md. at 583, 19 A.3d 927. To be sure, the MCALA imposes penalties for violations of the MCALA — such as engaging in unlicensed collection activities — and the penalty amount is determined based upon factors including "the deleterious effect of the violation on the public and the collection industry...." MCALA § 7-205(c)(4). Additionally, the MCALA does not just mandate licensure, but also imposes criminal penalties for collection agencies that engage in collection activities without a license. See MCALA § 7-401(b).
In light of McDaniel, the instant case is distinguishable from Green, which is the principal case relied on by the trial court.
For these reasons, we hold that a judgment entered in favor of an unlicensed debt collector constitutes a void judgment as a matter of law. Accordingly, any judgments obtained by LVNV in the district court while operating as an unlicensed collection agency are void.
We next consider whether appellants may file an action in the circuit court to challenge a void judgment entered in a district court. The circuit court dismissed appellants' action on the basis that Maryland law precludes collateral attacks on existing judgments. We hold that because the underlying judgments are void, appellants may collaterally attack these judgments in a circuit court action.
We have previously summarized the principles governing the collateral attack of judgments under Maryland law:
Klein v. Whitehead, 40 Md.App. 1, 20, 389 A.2d 374 (1978) (citing 49 C.J.S. Judgments § 408).
On the other hand, however, "[a] judgment which is void may be collaterally attacked at any time...." Tucker v. Tucker, 35 Md.App. 710, 712, 373 A.2d 16 (1977) (citing Thomas v. Hardisty, 217 Md. 523, 143 A.2d 618 (1958)). As the Court of Appeals explained:
Cook v. Alexandria Nat. Bank, 263 Md. 147, 153-54, 282 A.2d 97 (1971). See also Graham v. Graham, 190 Md. 434, 444, 59 A.2d 180 (1948) ("[I]f a court acts without jurisdiction its action is a nullity; and equity demands that a proceeding be reopened and a respondent be permitted to answer and defend.... The law is settled in this State."); Ambrose, 191 Md. at 369, 62 A.2d 359 ("A judgment by a court without jurisdiction over the parties is not merely erroneous, but `is absolutely void and may be assailed at all times, and in all proceedings by which it is sought to be enforced....' In other words, a void judgment is subject to attack either directly by appeal or collaterally.... It does not constitute res judicata."). Id. (citations omitted).
The Court of Appeals has, however, recognized that the rule permitting collateral attack of void judgments "has probably been more frequently stated than found applicable in cases in this State." Thomas, 217 Md. at 536, 143 A.2d 618 (citing cases in which the rule permitting collateral attack of void judgments "was [] restated, but found inapplicable....").
The circuit court relied on Klein, supra, 40 Md.App. at 20, 389 A.2d 374, in concluding that the appellants' action constituted an impermissible collateral attack. In Klein, we affirmed the dismissal of a suit by a debtor's trustee in bankruptcy against a judgment creditor alleging a foreclosure judgment entered against the bankrupt debtors was tortiously and fraudulently obtained. We observed that the allegations of fraudulent and tortious conduct constituted a defense that "if raised and proved in those earlier actions, would have averted most, if not all, of the damage allegedly suffered by virtue of those actions." Id. at 23, 389 A.2d 374. Accordingly, we concluded that the action amounted to a collateral attack on a valid final judgment. Id. at 24, 389 A.2d 374.
Appellants distinguish Klein on the basis that it did not involve a question that the defendant lacked standing or was otherwise not entitled to pursue the foreclosure action, or that the district court lacked jurisdiction to hear the underlying action. See Klein, 40 Md.App. at 23, 389 A.2d 374 ("We have here a situation in which actions were brought by persons facially entitled to bring them, in a court possessing both jurisdiction and venue, against persons properly served with process."). Moreover, the debtors admitted that they knew of their defense during the foreclosure action, but did not pursue it. Id. at 23, 389 A.2d 374. Appellants contend that, unlike Klein, this is not a case about defenses that could have been raised but were not. Rather, in appellants' view, this case involves underlying judgments that are void because LVNV lacked standing, and the district court, therefore, lacked jurisdiction to consider the case.
The circuit court also cited Green, supra, 152 Md.App. at 52, 828 A.2d 821, in support of its ruling. In Green, a debtor was sued in the district court by Ford Motor Credit Company ("FMCC"), which claimed a deficiency balance after the repossession and sale of the debtor's automobile pledged as collateral for a loan. Id. at 39. 828 A.2d 821. Ms. Green was served and consented to judgment. Id. Later, without challenging the district court judgment, Ms. Green filed a class action in the circuit court against FMCC and its counsel. Id. Ms. Green claimed
Regarding the first issue in Green, we held that the underlying judgment was not void due to fraud, mistake, or irregularity because "[t]he facts alleged in Counts I-V are insufficient to show fraud, mistake, or irregularity in connection with obtaining the consent judgment." Id. at 52, 828 A.2d 821. Next, we addressed Ms. Green's claim for damages under the MCDCA. We observed that defective notice would invalidate the underlying debt. Id. Accordingly, because the district court judgment was valid, Ms. Green's claim constituted an impermissible collateral attack on the judgment. Id.
In our view, the critical difference is that the underlying judgments in Klein and Green were valid. Moreover, the claims asserted in the subsequent actions were defenses that could have — and should have — been raised in the underlying proceedings. Accordingly, in Klein and Green, the general rule prohibiting the collateral attack of a judgment applied. By contrast, here, the underlying judgments are void, insofar as the judgments were obtained by LVNV while it was operating as an unlicensed collection agency. Thus, Klein and Green are not dispositive, and we must instead consider whether the "void judgment" exception to the collateral attack doctrine applies.
The Court of Appeals has stated that "Maryland law is in total accord with [other] authorities" which have held that:
Cook, 263 Md. at 151-52, 282 A.2d 97. The Court of Appeals has also consistently observed that "a judgment by a court without jurisdiction over the parties is not merely erroneous, but `is absolutely void and may be assailed at all times, and in all proceedings....' In other words, a void judgment is subject to attack either directly by appeal or collaterally.... It does not constitute res judicata." Ambrose, 191 Md. at 369, 62 A.2d 359 (citations omitted).
A collateral attack is defined as "`an attempt to impeach the judgment ... before a court other than the one in which it was rendered, in an action other than that in which it was rendered....'" Klein, 40 Md.App. at 23, 389 A.2d 374 (citing 49 C.J.S. Judgments § 408). See also Cook, 263 Md. at 153, 282 A.2d 97 (considering collateral attack doctrine in the context of a challenge to a Virginia judgment in a Maryland court); 50 C.J.S. Judgments § 717 ("[A] `collateral attack' is a tactic
Although no Maryland court has had occasion to hold on the merits that a void judgment may be attacked in another court, we cannot ignore the unequivocal pronouncement that "a void judgment ... is open to attack [] in any proceeding, direct or collateral, and at any time or place...." Cook, 263 Md. at 151-52, 282 A.2d 97. We are also mindful that we have "no discretion but to follow the law as enunciated by the Court of Appeals." Freed v. DRD Pool Serv., Inc., 186 Md.App. 477, 481, 974 A.2d 978 (2009), aff'd sub nom., DRD v. Freed, 416 Md. 46, 5 A.3d 45 (2010). Accordingly, absent any authority to the contrary, we hold that a party may collaterally attack a void judgment in another court. We, therefore, hold that the circuit court erred by dismissing appellants' complaint on the basis that its challenge to the district court judgments constituted an impermissible collateral attack.
For the foregoing reasons, we hold that the circuit court erred in dismissing appellants' complaint. LVNV was not licensed when it obtained judgments against appellants in the district court; accordingly, the underlying district court judgments are void. We further hold that parties may collaterally attack a void judgment in another court. The circuit court, therefore, erred by ruling that appellants' complaint constituted an impermissible collateral attack on the district court judgments. Accordingly, we reverse the judgment of the Circuit Court for Baltimore City, and remand for further proceedings consistent with this opinion.