UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.
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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.
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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
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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.
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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.
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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
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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—-
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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)).
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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
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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.
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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
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