Additional Consumer Credit Materials
The directors of Cash4U Finance Company have come up with a plan, called internally the "Your House Is Our House" plan,
by which to start home equity lending. You are the lawyer for Cash4U and it wants your blessing on this proposal. Under the
plan, the consumer will receive an advertisement like this:
WRITE A CHECK ANYTIME YOU WANT, AND WE'LL CASH IT IF YOU WILL PUT UP YOUR HOUSE AS
COLLATERAL! INTEREST PAYMENTS ON THE RESULTING LOANS WILL BE TAX DEDUCTIBLE! PAYMENTS
ARE LOW, LOW, LOW! NO ANNUAL FEE! CALL (800) 864-5911 FOR DETAILS!
Cash4U plans to make loans for up to 75 percent of the consumer1s equity in his or her home, with the interest rate being
variable and set by reference to the in-house rate established by Cash4U to achieve' maximum possible return.16 The plan also
provides that the consumer pay a minimum of only $100 each month no matter how high the interest rate surges- with being
added to the loan (thus the debt increases even though payments are being made, a so-called negative amortization). The
contract will provide that whenever the debt to Cash4U has increased to the point where the consumer has exhausted more than
75 percent of his or her equity in the home, the entire amount comes due (a "balloon" payment); if the consumer cannot make
the payment within 30 days, Cash4U forecloses the Loan. Look at Reg. Z §226.5b and decide whether you will approve this
plan. Does the advertisement cause trouble? See Reg. Z §226.16(d).
Cash4U Loan. Company has decided to make loans to people owning homes in the poorer part of town, charging them very
high interest rates, and then selling their mortgages to other institutions (which will possibly qualify as holders in due course,
and thus take free of the borrowers's defenses). You are Cash4U's attorney and are asked what they can get away with.
A. Will you put your imprimatur on the following practices?
1. A large ("balloon") payment at the end of the loan that the consumer is unlikely to be able to meet, thus allowing.
Cash4U to foreclose, buy the property cheaply at the foreclosure sale, and sell it at a nice profit to a later purchaser?
See Reg. Z §226.32(d)(1)(1).
2. A payment schedule in which the payments are not large enough to pay the interest rate in full each month with
the shortage added to the principal due? 8ee Reg. Z §226.32(d)(2).
3. A clause forbidding payments See Reg.Z §226.32(d)(6) and (7).
4. A practice of making loans only to those who are so poor they are highly likely to default? See Reg. Z
5. Cash4U has a favorite contractor who steers much business its way, and the two of them sometimes inflate the
charges and split the extra money. Advise Cash4U how to keep the consumer from knowing the actual amounts
paid to the contractor, See Reg. Z §226.32(e)(2).
B. Are the subsequent purchasers of the mortgages going to be able to take free of the consumers' defenses as holders in
due course normally would? See Rag. Z § 226.32(e)(3) and TlLA §131(d).
C. Could you get away with these practices if this were an open-end loan, where the consumers Would give Cash4U a
second mortgage on their homes in return for a line of credit against which they could make periodic draws? See Reg. Z
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 1
United States Court of Appeals, Fourth Circuit.
NATIONAL CITY BANK OF INDIANA v. TURNBAUGH
Decided: Aug. 10, 2006.
preempt the conflicting Maryland law. The parties filed
OPINION cross-motions for summary judgment. The district court
GOODWIN, District Judge: granted the plaintiffs' summary judgment motion, denied the
The issue before us is whether the National Bank Act defendant's motion, and permanently enjoined the
("NBA"), 12 U.S.C. § § 21-216 (2000), and regulations of Commissioner from enforcing the Maryland laws against the
the Office of the Comptroller of the Currency ("OCC") operating subsidiaries.
preempt Maryland laws requiring the State's Commissioner II.
of Financial Regulation ("Commissioner") to exercise certain We review a grant of summary judgment de novo, viewing
powers over operating subsidiaries of a national bank. We the facts in the light most favorable to the nonmoving party. .
agree with the district court that the Maryland laws are A moving party is entitled to summary judgment if the
preempted and affirm. evidence shows that no genuine issue of material fact exists
I. and the moving party is entitled to judgment as a matter of
This dispute arose when the Commissioner, acting pursuant law. The parties agree that this case involves only legal issues
to Maryland law, attempted to exercise visitorial powers and and that there are no disputed facts.
to limit prepayment penalties on adjustable rate mortgage III.
("ARM") loans originated by operating subsidiaries of a We first summarize the relevant federal statutory and
national bank.1 regulatory framework and then consider preemption.
The Maryland Mortgage Lender Law ("MMLL"), A.
Md.Code Ann., Fin. Inst. § § 11- 501 to -524 (West 2006), Congress enacted the NBA in 1864 "to facilitate ... a
enacted in 1989, provides Maryland's regulatory framework 'national banking system.' " Marquette Nat'l Bank of
for residential lending. The MMLL grants the Commissioner Minneapolis v. First of Omaha Serv. Corp., 439 U.S. 299,
the authority to exercise visitorial powers over *329 314-15, 99 S.Ct. 540, 58 L.Ed.2d 534 (1978) (quoting Cong.
mortgage lenders and to adopt rules and regulations to carry Globe, 38th Cong., 1st Sess., 1451 (1864)). In relevant part,
out the provisions of the MMLL. Id. § § 11-503 to -515. In a the NBA establishes nationally chartered banks and vests
separate statute, Maryland law gives the Commissioner these banks with certain powers. 12 U.S.C. § 24.
authority to restrict pre-payment penalties on ARM loans.
Id., Com. Law § 12-105(b). The OCC has the "primary responsibility for
surveillance of the 'business of banking' authorized by [the
In June and July 2004, two consumers filed complaints NBA].". To carry out this responsibility, the OCC
with the Commissioner contesting prepayment penalties promulgates regulations and defines the " 'incidental powers'
assessed by First Franklin. After the Commissioner notified of national banks beyond those specifically enumerated in the
First Franklin of the complaints, National City Bank and its statute
operating subsidiaries filed an action for declaratory and
injunctive relief to prevent the Commissioner's enforcement. Our analysis focuses on three federal statutes and the
The bank claimed that the regulations promulgated by the regulations issued by the OCC to enforce them. First,
OCC under the NBA exempt the bank's wholly-owned Congress gives national banks general authority to "exercise
subsidiaries, to the same extent that it exempts the bank itself, all such incidental powers as shall be necessary to carry on
from state regulation of its banking activities. Because the the business of banking." 12 U.S.C. § 24. In furtherance of
OCC regulations are valid exercises of the agency's this statute, the OCC allows national banks to conduct
congressionally delegated authority, the bank argued, they "business of banking" activities through operating
subsidiaries. 12 C.F.R. § 5.34(e)(1).
1 Second, Congress specifies that national banks may
Maryland law requires the operating subsidiaries to submit
to the Commissioner's visitorial powers, Md.Code Ann., Fin. engage in residential lending as regulated by the OCC. 12
Inst. § § 11-504 to -515 (West 2006), and establishes a U.S.C. § 371(a). Under this section, the OCC provides that
prepayment restriction on ARM loans, Id., Com. Law § 12- national banks and subsidiaries may deal in ARM loans
105(b). "Visitation" includes examination of bank records, "without regard to any State law limitations on those
regulation and supervision of banking activities, and activities." 12 C.F.R. § 34.21(a). The OCC also provides
enforcement of laws. 12 C.F.R. § 7.4000(a)(2) (2006). that "[a] national bank offering or purchasing ARM loans
National City Bank of Indiana wholly owns and may impose fees for prepayments notwithstanding any State
operates National City Mortgage Company and First Franklin law limitations to the contrary." Id. § 34.23.
Financial Corporation as operating subsidiaries. National City
Mortgage and First Franklin both previously engaged in Third, "No national bank shall be subject to any
residential lending in Maryland. visitorial powers except as authorized by federal law...." 12
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 2
U.S.C. § 484(a). Pursuant to this section and other sections, state law conflicts with federal law). The parties agree that
the OCC issued 12 C.F.R. § 7.4006, which states, "Unless the Maryland banking laws conflict with the OCC
otherwise provided by Federal law or OCC regulation, State regulations. This case therefore involves conflict preemption
laws apply to national bank operating subsidiaries to the same unless the OCC "exceeded its authority or acted arbitrarily
extent that those laws apply to the parent national bank."
B. The framework set forth in Chevron U.S.A., Inc. v. Natural
When the federal government acts within the scope of its Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81
authority, federal law preempts inconsistent state law. L.Ed.2d 694 (1984), determines whether the OCC exceeded
M'Culloch v. Maryland, 4 Wheat. 316, 17 U.S. 316, 436, 4 its authority or acted arbitrarily.
L.Ed. 579 (1819). To determine whether preemption exists,
courts look to congressional intent. Fid. Fed. Sav. & Loan Two questions control the Chevron analysis. First,
Assoc. v. de la Cuesta, 458 U.S. 141, 152, 102 S.Ct. 3014, 73 "whether Congress has directly spoken to the precise question
L.Ed.2d 664 (1982). Preemption "is compelled whether at issue." Chevron, 467 U.S. at 842, 104 S.Ct. 2778. If
Congress' command is explicitly stated in the statute's Congress's intent is clear, "that is the end of the matter....
language or implicitly contained in its structure and purpose." [But] if the statute is silent or ambiguous with respect to the
Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, specific issue, the question for the court is whether the
51 L.Ed.2d 604 (1977). agency's answer is based on a permissible construction of the
statute." Id. at 842-43, 104 S.Ct. 2778. If there is ambiguity,
The Commissioner contends the OCC exceeded its we "give great weight to any reasonable construction" of the
delegated authority by promulgating regulations that limit a statute.
state's power to regulate national banks' operating i.
subsidiaries. The Commissioner claims that a presumption Congress has not spoken directly about whether the OCC has
against preemption exists and therefore the OCC's regulations the authority to regulate operating subsidiaries. The
do not preempt the Maryland laws. The district court found Commissioner claims Congress's omission of references to
that a presumption against preemption does not exist, the "non-bank state-chartered" entities in the NBA is evidence
Maryland statutes conflict with federal law, and the that regulation of operating subsidiaries is beyond the scope
regulations are entitled to Chevron deference. The district of the OCC's authority. The Ninth Circuit in Wells Fargo
court accordingly found that federal law preempts the succinctly explains why the Commissioner's argument fails:
Maryland statutes. We agree. While this silence might have been significant to the court
were it to interpret the statute de novo, it does not answer
1. the question asked by the first step of Chevron--namely,
The Commissioner claims that the extensive history of state whether Congress has "unambiguously expressed [its]
regulation of non-bank, state-chartered mortgage subsidiaries intent." We agree. The absence of any reference to
creates a presumption against preemption. Courts generally operating subsidiaries in the Bank Act does not
apply a presumption against preemption in fields the states unambiguously provide that national banks may not create
traditionally regulate. . However, "an 'assumption' of nonpre- and perform banking functions through such entities.
emption is not triggered when [a] State regulates in an area We agree with the Ninth Circuit.
where there has been a history of significant federal presence ii.
The regulation of federally chartered banks is indisputably We next ask whether the OCC's regulations are based on a
such an area. Wachovia Bank, N.A. v. Watters, 431 F.3d 556, permissible construction of the NBA. If the OCC's
560 n. 3 (6th Cir.2005); Bank of Am. v. San Francisco, 309 interpretation is reasonable, we defer to its construction of the
F.3d 551, 558 (9th Cir.2002) ("Congress has legislated in the statute.
field of banking from the days of M'Culloch v. Maryland, ...
creating an extensive federal statutory and regulatory The Commissioner principally contends the OCC's
scheme."). Further, the "grants of both enumerated and regulations are unreasonable interpretations of the NBA. As
incidental powers to national banks" are "not normally explained, the NBA is silent on whether the OCC may
limited by, but rather ordinarily pre-empt [ ], contrary state regulate national banks' operating subsidiaries. When statutes
law (emphasis added). The pertinent regulations define the are silent, "agencies [generally] have authority to fill gaps."
scope of the national banks' authority to conduct business Nat'l Cable & Telecomm. Ass'n v. Gulf Power Co., 534 U.S.
through operating subsidiaries; undoubtedly these issues 327, 339, 122 S.Ct. 782, 151 L.Ed.2d 794 (2002). Further, in
involve the "incidental powers" of national banks. A cases of statutory silence, we "must defer, under Chevron, to
presumption against preemption, therefore, does not exist. [an agency's interpretation of its governing statute], so long
as that interpretation is permissible in light of the statutory
2. text and reasonable."
We now turn to whether conflict preemption exists. Our first
step in a conflict preemption analysis is to determine whether The NBA allows national banks to "exercise ... all such
a conflict exists between the federal and state laws. College incidental powers as shall be necessary to carry on the
Loan Corp. v. SLM Corp., 396 F.3d 588, 595-96 (4th business of banking." 12 U.S.C. § 24 Seventh. The
Cir.2005) (explaining that conflict preemption exists when a Supreme Court explains the " 'business of banking' is not
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 3
limited to the enumerated powers in § 24 Seventh and that the regulation is compelling:
the Comptroller therefore has discretion to authorize When national banks are unable to operate under uniform,
activities beyond those specifically enumerated." However, consistent, and predictable standards, their business suffers,
"[t]he exercise of the Comptroller's discretion ... must be kept which negatively affects their safety and soundness. The
within reasonable bounds. Ventures distant from dealing in application of multiple, often unpredictable, different state
financial investment instruments--for example, operating a or local restrictions and requirements prevents them from
general travel agency--may not exceed those bounds." operating in the manner authorized under Federal law, is
We find the OCC's regulation of operating subsidiaries costly and burdensome, *333 interferes with their ability to
does not exceed the limitations contemplated in NationsBank. plan their business and manage their risks, and subjects
"Allowing national banks to create, control, and delegate them to uncertain liabilities and potential exposure. In
banking functions to operating subsidiaries provides some some cases, this deters them from making certain products
assistance to banks in performing their authorized activities." available in certain jurisdictions.
Further, 12 C.F.R. § 5.34 limits the activities national banks The OCC therefore is issuing this final rule in furtherance
can conduct through operating subsidiaries to those activities of its responsibility to enable national banks to operate to
that are authorized by the NBA. See 12 C.F.R. § 5.34(e)(3) the full extent of their powers under Federal law, without
("An operating subsidiary conducts activities authorized interference from inconsistent state laws, consistent with
under this section pursuant to the same authorization, terms the national character of the national banking system, and
and conditions that apply to the conduct of such activities by in furtherance of their safe and sound operations.
its parent national bank."). With these principles in mind, we We adopt this reasoning.
find that the OCC's interpretation of 12 U.S.C. § 24 Seventh
is reasonable and therefore is permissible. Accordingly, we find that the federal regulations at
issue are reasonable interpretations of the NBA and are
We also find that 12 C.F.R. § 7.4006, which provides entitled to Chevron deference.
that state laws must apply to operating subsidiaries to the
same extent that state laws apply to parent national banks, is IV.
reasonable and within the OCC's delegated authority. If state We join the Second, Sixth, and Ninth Circuits in finding the
law applied to operating subsidiaries to a greater extent than OCC did not exceed its delegated authority Accordingly, we
it applied to their parent national banks, it would frustrate affirm the district court's grant of summary judgment to the
national banks' right to conduct the "business of banking" plaintiffs/appellees.
through operating subsidiaries. The OCC's reasoning behind AFFIRMED
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 4
Court of Appeals of Maryland.
Arthur J. HOFFMAN, et al. v. Toyome STAMPER, et al.
Feb. 4, 2005.
THIS IS THE TABLE REFERRED TO IN THE TEXT BEFORE FOOTNOTE 4
Beeman Purchase Sale Price
Property Buyer Price to Buyer
17 N. Kresson St. Jerry McFadden $14,500 (4/23/97) $52,000 (5/9/97)
612 E. 41 St. Carl Haley $20,000 (6/25/97) $57,200 (5/28/97)
610 N. Belnord Ave. Gertrude Green $12,500 (6/18/97) $44,000 (7/30/97)
5601 Force Rd. Denise Brower & Forrest $24,000 (8/7/97) $65,900 (7/21/97)
406 Oldham St. Francine Henderson $17,550 (3/27/97) $58,000 (2/17/97) $65,000
3132 Piedmont Ave. Eva Elder $29,551 (9/5/97) $51,000 (8/12/97)
6521 Lenhert St. Toyome Stamper $41,790 (9/5/97) $87,250 (8/14/97)
1127 Carroll St. Inez Coward $ 7,550 (9/29/97) $58,000 (12/19/97)
WILNER, J. damages. In post-trial proceedings, the court awarded
In an amended complaint filed in the Circuit Court for attorneys' fees and expenses under the CPA against all
Baltimore City, nine plaintiffs claimed that, through an defendants in the aggregate amount of $195,591, subject to a
elaborate “flipping” scheme, the defendants had conspired to dollar-for-dollar credit for attorneys' fees and expenses
defraud them, and did defraud them, into purchasing received by plaintiffs' counsel under their contingent fee
dilapidated residential properties in Baltimore City at inflated agreement.
prices.2 The participants in this alleged conspiratorial scheme
were (1) the “flippers,” Robert Beeman, Suzanne Beeman, Everyone except Robert Beeman and AHOYO appealed,
and a corporation controlled by the Beemans, A Home of although Suzanne Beeman later withdrew her appeal. The
Your Own, Inc. (AHOYO), (2) the lenders, Irwin Mortgage Court of Special Appeals affirmed the judgments for
Corporation (then known as Inland Mortgage Corporation) compensatory damages, but, after concluding that there was
and one of Irwin's loan officers, Joyce Wood, and (3) the sufficient evidence to show that Irwin, Wood, and Hoffman
appraiser, Arthur Hoffman.3Each of the nine plaintiffs participated in the fraudulent scheme and made
charged all of the defendants with conspiracy to defraud, misrepresentations of their own with actual knowledge of the
fraud, violations of the State Consumer Protection Act fraud and the falsity of those representations, it reversed the
(CPA), and negligent misrepresentation, and Irwin and Wood partial judgment in their favor with respect to punitive
were charged as well with general negligence. damages and remanded for further proceedings on those
Compensatory and punitive damages were sought by each claims.
plaintiff against each defendant.
On the premise that an award of attorneys' fees under the
After disposition by the court of various motions, a jury CPA must take into account all of the circumstances,
found each of the defendants liable to each of the plaintiffs including the amount of recovery, and because, on remand,
for fraud, conspiracy to defraud, and violations of the CPA. there was the prospect of a punitive damage award being
The jury awarded each plaintiff, as against all of the entered against Irwin, Wood, and Hoffman, the intermediate
defendants, differing amounts of economic damages and appellate court also vacated the award of attorneys' fees and
$145,000 for non-economic (emotional) damages, for an remanded that as well for reconsideration. As “guidance”
aggregate total of $1,434,020. In addition, it awarded each for the trial court, the Court of Special Appeals observed that
plaintiff $200,000 in punitive damages against the Beemans an award of attorneys' fees under the CPA would not
and AHOYO. Through a partial judgment in their favor, the duplicate fees paid by the plaintiffs under a contingent fee
court had previously withdrawn from the jury the punitive agreement but would simply reimburse them for all or part of
damage claims against Irwin, Wood, and Hoffman. Their those fees.
liability, joint and several, was only for the compensatory
We granted petitions for certiorari filed by Irwin, Wood, and
Hoffman to consider the following questions:
The word “flipping” was not used at trial, but it has been
used as a descriptive term by the parties on appeal. (1) Was there sufficient evidence of culpability on Hoffman's
An additional “lender” defendant, Homeside Lending, Inc., part to sustain the verdicts for conspiracy, fraud, and
was let out on summary judgment. violation of the CPA;
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 5
(2) In affirming the judgment for compensatory damages, did
the Court of Special Appeals err in holding that, in an action The trial lasted three weeks, during which a great deal of
based on fraud, non-economic damages may be awarded in documentary and testimonial evidence, some of it conflicting,
the absence of any physical injury; was presented. We must view that evidence in a light most
favorable to the parties who prevailed on the issues to which
(3) Did the trial court err in instructing the jury that damages it relates and shall recite the facts accordingly.
in an action based on fraud need be proved only by a
preponderance of the evidence and, if so, did the Court of Beeman began his business of buying distressed houses in
Special Appeals err in holding that Irwin and Wood waived Baltimore City at low prices and selling them to
their objection to such an instruction; unsophisticated buyers at inflated prices in 1996. Initially,
he arranged financing for the buyers through conventional
(4) Did the Court of Special Appeals err in reversing the mortgage loans, but those loans financed only 60% to 80% of
judgment for Irwin, Wood, and Hoffman as to punitive the purchase price. At some point in 1997, he met Wood,
damages and, if not, did it err in remanding for only a partial who was a loan officer for Irwin and dealt in FHA insured
new trial on punitive damages rather than an entire new trial loans. Wood received a commission on loans generated by
on all issues; and her and looked upon Beeman (and others in his line of
business) as customers and a source of commission income
(5) Did the Court of Special Appeals err in vacating the for her. She educated Beeman about the FHA program.
award of attorneys' fees and remanding that issue for further Mortgage loans approved under that program are insured by
reconsideration? HUD. If a loan goes into default, the lender, or current holder
of the mortgage, forecloses, buys the property at the
We shall answer some of these questions in the affirmative foreclosure sale for the balance due on the loan, transfers the
and some in the negative and shall therefore affirm in part property to HUD, and is reimbursed by HUD for 100% of the
and reverse in part the judgment of the Court of Special unpaid balance of the loan. Because of the greatly reduced
Appeals. For convenience, we shall refer to the Beemans risk of loss under that arrangement, lenders are willing to
and AHOYO collectively as “Beeman,” unless the context lend up to 100% of the appraised value of the property.
requires otherwise. Robert Beeman was the principal culprit.
Irwin's culpability is a vicarious one, resting on the conduct Most of Beeman's prospective buyers had both poor credit
of its employee, Wood. and insufficient funds to meet their share of the closing costs.
At their initial meeting, Wood advised Beeman that, under
BACKGROUND the HUD program, a seller could not contribute more than six
percent of the loan amount (which, with a 100% loan, was
The basis of the plaintiffs' case, in a nutshell, was that equivalent to the purchase price), and that if the seller
Beeman (1) bought dilapidated properties in Baltimore City contributed more, the purchase price would be reduced
at low prices, (2) then searched for unsophisticated, low- accordingly. Included in the six percent cap were a seller's
income buyers with poor credit histories, (3) promised them contributions to the buyer's share of closing costs and
that he could sell them a renovated home for a down payment payments made to clear up the buyer's credit problems.5 To
of only $500, (4) got those buyers to sign contracts of sale at
significantly inflated prices upon a promise to make extensive
repairs, many of which were never made, (5) arranged for the to the dates of Beeman's purchases and sales. In the record is
buyers to finance the purchases with 100% FHA loans an exhibit stipulated to by the parties that purports to show
obtained through Wood, and (6) obtained those loans for the those dates, but the source of that data is not clear. It seems
buyers in part by conspiring with Wood to have Hoffman to indicate when Beeman and his buyers took title to the
prepare erroneous appraisals showing the value of the homes properties, but there is other evidence that puts some of the
to be at or above the grossly inflated contract price and in part dates stated for Beeman's purchases in question. The
by engaging in practices that clearly violated Department of appropriate dates, for our purposes, are the dates that Beeman
Housing and Urban Development (HUD) regulations and took title and then entered into contracts to sell the properties.
requirements regarding the FHA program in order to The dates noted above for the sales to the plaintiffs are the
consummate the transactions. All nine plaintiffs-two of dates on the contracts of sale. Closing of those sales took
whom (Brower and Spencer) purchased one house together- place two months or so later. With one or two exceptions,
testified that, after taking possession, they experienced major the dates upon which Beeman actually took title to the
problems with their homes, some of which were properties are not in the record. We shall use the dates stated
uninhabitable. Six of the nine eventually lost their homes to in the exhibit even though by doing so it would appear that
foreclosure. Beeman sold the properties before he had title to them. The
discrepancies are not important with respect to the issues
The transactions at issue in this case were as follows: [NOTE: before us.
CHART IS SET FORTH BEFORE THE CASE] 4
. This advice was apparently based on HUD Mortgagee
Letter 87-35, issued October 22, 1987, amending Mortgagee
There are some discrepancies and uncertainties with respect Letter 86-15 (August 8, 1986) to provide that “seller
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 6
maximize his profit, of course, Beeman had an incentive not of sale when they met with her, that the price was sometimes
to have any reduction of the contract price. Wood explained missing from the contract, but that it was inserted before the
that it was possible for closing costs to be donated by a friend end of the meeting. Plaintiff McFadden said that Beeman
or relative of the buyer but that any such gift must be verified had estimated the price of the house on Kresson Street at
by (1) a gift letter from the donor, and (2) evidence that the $50,000, but that, at the meeting with Wood the price had
funds were drawn from the donor's bank account. been filled in at $52,000. Plaintiff Haley said that he thought
the price of the house on 41st Street was between $35,000
Wood offered a range of services to Beeman to permit him to and $40,000, but that, when presented with the contract at
pursue his business. First, presumably aware that Beeman's Wood's office, the price was $57,200. Plaintiff Green was
buyers would be unable, on their own, to pay their share of told by Beeman that the price for the house on Belnord
closing costs, she gave him a supply of blank gift letters. Avenue would be $38,000, but that the contract handed to her
She also agreed to generate on Irwin's computer, for each by Wood showed the price as $44,000. When Beeman took
buyer referred by Beeman, a “good faith estimate.” The Plaintiff Henderson to see the house on Oldham Street, he
“good faith estimate,” according to Wood, was based on the told her the purchase price would be $58,000; at the meeting
contract price and the estimated share of closing costs to be with Wood, the price was changed to $65,000. When he
paid by the buyer and determined how much cash the buyer took Plaintiff Coward to see the house on Carroll Street, he
would need to close. That would allow Beeman to determine told her that the price was $40,000; at the meeting with
how much of a “gift” would be required. In fact, that Wood, she was handed a document showing the price to be
estimate had a greater significance. In most, if not all, of the $58,000.
transactions, the “good faith estimate” prepared by Wood
became the purchase price for the house. The purchase price As none of the plaintiffs had sufficient funds to pay their
thus was determined by the maximum loan amount, not the share of the closing costs, Beeman paid those costs through a
other way around. It was not negotiated between Beeman sham transaction. Beeman asked each of them to find a
and the buyers but was inserted into the contract by Beeman friend or relative with a bank account who would be willing
after the “good faith estimate” was calculated by Wood. to act as a “donor.” Once that was done, Beeman filled out
one of the gift letters given to him by Wood and had the
Each of the nine plaintiffs called Beeman in response to one buyer and the “donor” sign the letter. The letter was an
of his ads offering a “rehabbed” home for only $500 down or attestation by the “donor” that he/she was making a gift of the
after learning of such an offer by word-of-mouth. Beeman amount specified to the buyer, to be applied to the purchase
met with the plaintiff, ascertained the area of the City where of the property described, and that no repayment was
the plaintiff wanted to live, got some basic credit information expected. Beeman then arranged to meet the “donor,”
regarding the plaintiff, and showed the plaintiff the houses sometimes with the buyer, at the “donor's” bank or credit
that he had in that part of the City, without clearly disclosing union. Beeman arrived with cash in an amount equal to the
that the properties were his. Most of the plaintiffs thought “gift.” He gave the cash to the “donor,” who deposited it
that Beeman was an agent of some kind or a lender and did into his/her account. The “donor” then obtained a certified
not realize that he was the owner/seller. Each house was still check for that amount payable to the buyer and gave the
in a dilapidated condition, but Beeman promised that the check to Beeman. That check was then used to pay the
house would be fixed by his own contractor, that he would buyer's share of transactional costs. The “donor” made no
have it inspected, and that he would assist in obtaining FHA contribution to the costs; they were contributed entirely by
financing for the plaintiff. When the plaintiff indicated Beeman. 6 Wood was aware that a “gift” would be required
interest, Beeman, either that day or shortly thereafter, drove in each of the eight cases now before us.
him/her to Irwin's office in Columbia, where they met with
Wood and made application for an FHA loan. Although all of the plaintiffs knew that Beeman was
providing the funds and that the gift letters were not accurate,
Some of the plaintiffs testified that they signed a contract of Beeman explained, when asked, that the gift letter procedure
sale with Beeman prior to meeting with Wood based on a was necessary to provide the closing costs and was a standard
price quoted or estimated by Beeman, that the purchase price and legitimate procedure in buying a house. The plaintiffs
was nonetheless left blank in the contract, and that, when or testified that they did not know that the process used by
after meeting with Wood, a price had been inserted in the Beeman was illegal and that, had they known it was illegal,
contract that was higher than was first quoted. Wood they would not have participated in it.
confirmed that Beeman and the buyer would bring contracts
buydowns in excess of six percent of the mortgage amount The amounts contributed by Beeman through these phony
must be applied as a dollar-for-dollar reduction of the sales gift letter transactions were as follows: (1) for McFadden,
price in mortgage credit process. Seller buydowns are $3,000; (2) for Haley, $6,000; (3) for Green, $2,600; (4) for
payments for discount points, any type of interest payments, Brower and Spencer, $2,850; (5) for Henderson, $3,100; (6)
or seller payment of closing costs normally (under local for Elder, $2,200; (7) for Stamper, $4,800; (8) for Coward,
market practice) paid by the buyer.” $3,000.
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The third piece of the scheme was the appraisal. Hoffman, a require proof by clear and convincing evidence and that,
licensed appraiser, had once worked for HUD and was when reviewing the denial of the motions for judgment, the
familiar with the regulations and requirements pertaining to Court of Special Appeals looked only to see whether there
FHA loans. He also had worked for Irwin as an in-house was “any evidence ... however slight” to support the claims.
appraiser. After leaving that employment, he continued to That, he claims, is not the proper standard.
do freelance appraisal work for Irwin and was paid $300 for
each appraisal. Indeed, he said that, after leaving Irwin's Hoffman is correct in stating that fraud must be proved by
employ, 99% of his income still came from work he did for clear and convincing evidence It is not so clear whether that
Irwin. We shall recite more of the evidence against Hoffman standard applies to the conspiracy count. In Daugherty v.
shortly. It will suffice here to note that there was evidence Kessler, we held that “[i]n a civil case not involving a
showing that (1) Hoffman was aware of a HUD requirement criminal act, conspiracy may be shown by a preponderance of
that, if an appraisal showed the value of the property to be the evidence
less than the contract price, the buyer had to be informed and
that the buyer then had an absolute right to cancel the Hoffman's argument arises from the statement by the Court
contract, in Hoffman's words “that would kill the deal”, (2) of Special Appeals that, in a civil jury case, “if there is any
most of the appraisals he did in these cases contained evidence adduced, however slight, from which reasonable
admitted errors of one kind or another, either with respect to jurors could find in favor of the plaintiff on the claims
the appraised property itself or regarding the properties he presented, the trial court should deny the defendant's motion
used as comparable sales, (3) in most cases, he used for judgment at the close of the evidence and submit the
inappropriate sales as comparable-properties in different claims to the jury for decision.” That is a correct statement,
kinds of neighborhoods or that were distant from the subject which mirrors what this Court has said in many cases. It
property that sold for higher prices-and ignored closer and would, however, be more precise if it read, “from which
more similar properties that had sold for much less, (4) in reasonable jurors, applying the appropriate standard of
each case, he appraised the dilapidated property at or above proof, could find in favor of the plaintiff on the claims
the contract price without regard to the much lower price presented.” In Darcars v. Borzym, we essentially made that
paid by Beeman just months before, (5) although he justified point-that, in deciding a motion for judgment, a court “must
the difference between Beeman's purchase price and his much account for and consider the appropriate burden of persuasion
higher appraisals on the basis that substantial repairs would in deciding whether to allow the jury to decide an issue.”
be made to the property, he did not make reasonable efforts to [T]here is no indication that the intermediate appellate court
assure that those repairs had, in fact, been made and many of failed to apply the appropriate standard in its review. It
them were not, in fact, made, (6) he was aware of a HUD understood that fraud needed to be shown by clear and
requirement that an appraiser keep the supporting data for convincing evidence and, indeed, believed that conspiracy
appraisals made with respect to FHA loans for a period of required that heightened standard of proof as well.
five years, and (7) in knowing and deliberate violation of that
requirement, he destroyed those records shortly after The important thing, in any event, is not how the Court of
Beeman's activity became public and investigations into it Special Appeals articulated the standard but whether the
commenced. Because in each case the appraisal showed the appropriate standard was applied by the trial court in deciding
value as equal to or greater than the inflated contract price, the motion, and we think that it was. The trial judge filed a
the buyer lost the option to cancel the contract. memorandum explaining his reasons for denying the motions
for judgment NOV filed by Hoffman, Wood, and Irwin. In
With this somewhat general background, we turn to the issues that memorandum, he clearly recognized that, although civil
before us. conspiracy need be proved only by a preponderance of the
evidence, fraud must be shown by clear and convincing
DISCUSSION evidence, and there is no indication that he ever lost sight of
that standard in finding the evidence sufficient to warrant
A. Hoffman's Culpability submission of the fraud count to the jury. Whether the trial
Hoffman moved for judgment at the end of the case, and, court was correct in that conclusion and, indeed, in its further
when that motion was denied and the verdicts against him conclusion that the evidence sufficed to warrant submission
were rendered, he moved for judgment NOV pursuant to Rule of the conspiracy and CPA counts, is now before us, and we
2-532. That motion, too, was denied. He makes two shall examine those conclusions in light of what we said in
complaints about the denial of those motions: (1) the trial Darcars.
court and the Court of Special Appeals applied the wrong
evidentiary standard in resolving the motions addressing the (2) Evidence of Culpability
conspiracy and fraud claims; and (2) because, under the As noted, the basic charge against Hoffman was that, in
correct standard, the evidence was legally insufficient to furtherance of the conspiracy by Beeman and Wood,
establish conspiracy, fraud, or violations of the CPA on his Hoffman knowingly prepared inflated appraisals that he knew
part, those motions should have been granted. were necessary in order for the transactions to take place.
Evidence to that end was presented with respect to each of
(1) Standard of Proof the appraisals he prepared.
Hoffman contends that findings of conspiracy and fraud
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 8
(a) McFadden-Kresson Street eight more comparable recent sales of properties in the
Beeman purchased the property at 17 N. Kresson Street on neighborhood overlooked or ignored by Hoffman, and that
April 23, 1997 for $14,500. Less than three weeks later, on the predominant value in the area was between $35,000 and
or about May 9, 1997, he sold the property to McFadden for $45,000.
$52,000. When the property was sold to McFadden, it was
in the same condition as when Beeman bought it. On June 5, (b) Haley-612 East 41st Street
Hoffman, knowing that Beeman had only recently bought the Beeman purchased the 41st Street property for $20,000 and,
property for $14,500, appraised the property for $52,000. 7 on May 28, 1997, sold it to Haley for $57,200. It is not clear
There were a number of deficiencies noted in that report. A when Beeman bought the property; the exhibit noted shows a
glaring, though relatively minor, one was that Hoffman date of June 25, but that is subject to question, for it would
reported that the property was in a residential zone, when, in indicate that Beeman sold the property before he owned it.
fact, it was in a manufacturing zone. The census track Hoffman appraised the property on July 17, 1997 at $57,500,
number was also incorrect. The more significant errors subject to a $90 ground rent.9He reported that the property
concerned the condition of the structure and the comparable had been purchased a month earlier for “$25,000±” claiming
sales that Hoffman used to establish his estimate of value. to be unaware that the price paid was only $20,000. He
stated that the house had been “recently re-habbed” and
Hoffman noted that the property was in “poor condition” characterized its condition as “good.” When Haley took
when purchased by Beeman but was in “good” condition possession in August, he found that the sump pump was
“now.” That could not have been so, for, on an attached broken and the basement had flooded, the kitchen windows
Valuation Condition sheet, he listed 14 repairs that still and the kitchen and bedroom ceilings leaked when it rained,
needed to be made, from replacing rotted wood on the porch the floorboards under the living room carpet were rotting, the
floor and ceiling, to repairing chipped paint in various parts walls behind the paneling were crumbling, and the front
of the house, to installing a downspout and gutter, to porch had extensive dry rot. Hoffman based the inflation in
patching, pointing, and painting parts of the house, to price on his having seen workmen, sheetrock, carpeting,
replacing windows. He apparently assumed that all of them paint, and windows in the house when he inspected it. He
would be made. On July 2, Hoffman certified that those did not ask for documentation, with respect to this appraisal
repairs had been completed, but there was evidence that some or any other, that the work had been done. Instead, he made
of them had not been done. Apart from the listed items, a cursory walk-around, often of just the exterior of the house,
Hoffman stated on his Valuation Condition sheet that there prior to closing.
was no evidence of roof leakage or damage. McFadden,
when first inspecting the property with Beeman, noted that Hoffman identified the sales of three properties as
repairs needed to be made to the roof. Although someone- comparable, two of which he emphasized because the
Wood thought it was probably Beeman-prepared and properties were only two blocks away. One, the evidence
submitted to Wood a document showing that extensive showed, was larger than he reported-1, 830 sf. rather than
repairs had been made, including a “new 2-ply roofing 1,600 sf. It also had a fireplace and a modern kitchen, which
system on entire roof of property,” a month after moving into the subject property did not have. Evidence showed that the
the house McFadden said that the roof was leaking and that, second comparable was “in far superior condition than the
when it rained, water poured into his laundry room. subject property.” Three other lower-price sales in the area
The plaintiffs' expert appraiser described the Kresson Street
property as being part of a residential “pocket” surrounded by (c) Green-610 North Belnord Avenue
industrial use properties and fronting on a “heavy truck Beeman purchased the Belnord Avenue property on June 18,
traffic” road. The three properties used by Hoffman as 1997 for $12,500 and sold it to Green for $44,000 on July 30,
comparable sales-3500 Claremont Avenue, 3613 East Fayette
Street, and 3811 Gough Street-were all in residential areas
quite some distance away. Indeed, the distances were appraisers to “[e]nter proximity in straight line distance, like
misleadingly stated in the appraisal. Hoffman reported the ‘3 houses or one tenth of a mile W subject.’ ” The problem is
Claremont Avenue property as five blocks away when, in that he did not state the distance to the comparables in parts
fact, it was eleven blocks away; the East Fayette Street of a mile but in terms of blocks. Hoffman regarded twelve
property was reported as being four blocks away when, in blocks as equaling a mile, so if a property was a half mile
fact, it was ten blocks away; he declared the Gough Street away by direct measurement “as the crow flies,” he would
property to be four blocks away when it was shown to be regard it as six blocks away even though it might, in fact, be
twelve blocks away.8 Evidence was presented that there were twenty blocks away. In calculating distances in that manner,
he made it appear that the “comparable” properties were a lot
closer than they actually were. These discrepancies appeared
7 in most of Hoffman's appraisals.
The appraisal report was prepared on June 9 based on an 9
inspection on June 5, and it appraised the property as of June Most ground rents in Baltimore City are capitalized at six
5. percent. Thus, had the property not been subject to the $90
Hoffman claimed that his method of measurement was ground rent, it would be worth $1,500 more.
authorized by a HUD handbook provision directing
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 9
1997. On August 13, 1997, Hoffman appraised the property Plaintiffs' expert stated that the three comparables used by
for $44,000, subject to a $180 ground rent ($3,000). For Hoffman were, for a variety of reasons, inappropriate. The
purposes of selecting comparable sales, he defined the subject property was surrounded by industrial uses and was
“neighborhood” as “East Baltimore” with “no precise near heavy truck and rail traffic. The comparables were in
boundaries.” The first comparable sale he chose was of 3501 residential areas and one was only half the age of the subject
East Baltimore Street, which, using his “as the crow flies” property. The expert noted a number of closer properties in
approach, he claimed was seven blocks away when in fact, it the area that had sold for much lower prices.
was sixteen blocks away. Another comparable sale was of
3613 East Fayette Street, which Hoffman said was five (f) Elder-3132 Piedmont Avenue
blocks away when, in fact, it was seventeen blocks away. Beeman purchased 3132 Piedmont Avenue for $29,551 and,
Evidence showed that Beeman was also the person who sold on August 12, 1997, sold it to Elder for $51,000. It is not
that property, a fact that should have been, but was not, clear when Beeman bought the property; the record indicates
disclosed on the appraisal report. Evidence also showed that that he bought it on September 5, 1997. On October 7, 1997,
there were seven closer sales, at much lower prices, that were aware that Beeman had purchased the property only a month
ignored by Hoffman. earlier for about $29,000, Hoffman appraised the property for
$53,000, subject to a $180 ground rent ($3,000). He noted
(d) Brower/Spencer-5601 Force Road that the property had a “modern kitchen,” although an
Beeman sold the property at 5601 Force Road to Brower and inspection by the plaintiffs' expert revealed that not to be the
Spencer on July 21, 1997, for $65,900. He purchased the case.
property for $24,000, but, as with some of the other
properties, it is not clear when he actually bought it. The One of the comparables used by Hoffman-3033 Mondawmin
record shows that he purchased it on August 7, 1997, but that Avenue-he reported as a center row house when in fact it was
is questionable. On August 26, 1997, Hoffman appraised the an end of group, which made it more valuable. It also had a
property for $65,900 subject to a $96 ground rent ($1,600). new kitchen, for which no adjustment was noted. A second
Unlike some of his other appraisals, Hoffman did not note comparable he reported as having only 1,200 sf. when, in
that the property had been recently purchased by Beeman, fact, it had 1,584 sf.; Hoffman also erred in stating the
although he did state that it was “recently renovated.” ground rent on that property, thereby overvaluing it by
$1,400. He miscalculated the square footage of the third
Hoffman selected three comparable sales, stressing the comparable as well, showing it as 1,100 sf. when, in fact, it
second one, 5531 Force Road, because it was on the same was 1,292 sf. As in the other cases, plaintiffs' expert
street. That house had sold very recently-settlement was in identified other comparables that Hoffman ignored.
August, 1997-for $75,000. In deposition testimony that he
sought to disavow at trial, Hoffman conceded that, without (g) Stamper-6521 Lenhert Street
that sale as a comparable, he could not have justified a Beeman purchased 6521 Lenhert Street for $41,790 and, on
$65,900 appraisal of the subject property. What he did not August 14, 1997, sold it to Stamper for $86,250. It is not
disclose, although he knew, was that the allegedly clear when Beeman purchased the property; in his appraisal,
comparable property had been sold by Beeman. The Hoffman notes that it was bought in September, 1997-before
plaintiffs' expert noted that Beeman had purchased that it was sold to Stamper. Wood's initial “good faith estimate”
property in August, 1997 for $27,000. He opined that the showed Stamper's share of closing costs to be $4,149. At
5531 Force Road sale was “out of line” and that Beeman's some point, Wood discovered that the taxes on the property
role as seller should have been noted. The expert also were higher than she first thought, which would increase
identified six comparable sales, all within three blocks of the Stamper's monthly payment. She suggested to Beeman that,
subject property, ignored by Hoffman-houses that sold for if she added an up-front fee of one point, she could reduce the
$36,500, $50,000, $44,500, $55,000, $55,000, and $45,000. interest rate enough to keep the monthly payment the same.
Beeman agreed, so a new “good faith estimate” of $87,250
(e) Henderson-406 Oldham Street was prepared showing the closing costs to be $4,519. On
Beeman purchased 406 Oldham Street for $17,550. The November 14, 1997, Hoffman appraised the property for
record indicates that he purchased the property on March 27, $87,500, subject to a $180 ground rent ($3,000).
1997, but that is questionable, for, on February 17, 1997, he
entered into a contract to sell it to Henderson for $58,000 and Hoffman reported that the house sat on a slab and had no
was given a $500 deposit at that time. Nothing more crawl space, which the evidence showed was not the case.
transpired for several months. Beeman was supposed to be The existence of a crawl space would have been apparent
making repairs. In August, 1997, Henderson took possession from just walking around the house. Hoffman said that he
under a lease calling for $500/month rent. No application for did walk around the house but that, because it was raining
financing was made until September 9, 1997, when Beeman that day, he walked fast. Hoffman also incorrectly reported
and Henderson met with Wood. At that meeting, the price that the house had 1,804 sf., when, in fact, it had only 1,505
was increased to $65,000, and a new contract at that price sf. Two experts regarded that discrepancy, of nearly 20%, as
was signed. On September 26, 1997, Hoffman appraised the significant; one noted that an appraiser could be suspended
property for $65,500 subject to a $90 ground rent ($1,500). by FHA for a discrepancy over 10%.
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 10
(h) Coward-1127 Carroll Street The plaintiff must also prove the commission of an overt act,
Beeman purchased 1127 Carroll Street for $7,550 in in furtherance of the agreement, that caused the plaintiff to
September, 1997, and, on December 19, 1997, sold it to suffer actual injury. The tort actually lies in the act causing
Coward for $58,000. On January 26, 1998, Hoffman the harm; the agreement to commit that act is not actionable
appraised the property for $58,000, subject to a $180 ground on its own but rather is in the nature of an aggravating factor.
rent ($3,000). Hoffman knew that Beeman owned the That is why this Court, in Alleco, held that civil conspiracy “
property and that he was required to report whether it had ‘is not a separate tort capable of independently sustaining an
sold within the past year. Although, had he consulted the award of damages in the absence of other tortious injury to
land records, he would have learned that Beeman bought the the plaintiff.’ ”
property a few months earlier, he reported “last sale
unknown.” When Hoffman initially could not locate any There is little doubt here that Beeman, with the assistance of
sales that he regarded as comparable, he called Beeman, who Wood, committed overt acts that were intended to defraud,
supplied him with sales of his own properties, somewhat and did defraud, the nine plaintiffs and that the plaintiffs
distant from the subject property. Hoffman used those high- suffered actual harm from that conduct. That is not really
price sales as comparables, without disclosing that Beeman contested by Hoffman. The only question, as to Hoffman, is
was the seller or that he had purchased those properties a whether the evidence sufficed to establish that he joined and
short time before at far lower prices. The plaintiffs' expert helped to implement an agreement to achieve that result. In
opined that, when relying on three comparables all controlled that regard, we pointed out in Western Md. Dairy v.
by the same seller, that fact should be disclosed. Chenowith, that a conspiracy may be proved by
circumstantial evidence, “for in most cases it would be
The first comparable used by Hoffman, 1207 West Cross practically impossible to prove a conspiracy by means of
Street, he reported sold in December, 1997, for $73,900. He direct evidence alone.” We explained:
did not report that Beeman had purchased the property in “Conspirators do not voluntarily proclaim their purposes;
October, 1997, for $27,000 but instead reported that there their methods are clandestine. It is sufficient if the proven
was no other sale within the year. The second comparable, facts and circumstances, pieced together and considered as a
1202 Carroll Street, he reported as sold in September, 1997, whole, convince the court that the parties were acting
for $54,900 without disclosing that Beeman had purchased it together understandingly in order to accomplish the
in August, 1997, for $24,000. Instead, he stated that there fraudulent scheme. Thus a conspiracy may be established by
was no other sale of that property within the year. Similarly, inference from the nature of the acts complained of, the
with the third comparable, 1119 Ward Street, Hoffman individual and collective interest of the alleged conspirators,
reported as sold for $64,000 a month earlier, without the situation and relation of the parties at the time of the
disclosing that Beeman had purchased that property for commission of the acts, the motives which produced them,
$12,700 in November, 1997. There, too, he stated that there and all the surrounding circumstances preceding and
was no other sale of the property within the year. In place of attending the culmination of the common design.”
these suspect sales, the plaintiffs' expert found ten lower price
comparable sales within the year prior to Hoffman's Viewing the evidence in that context and in a light most
appraisal. The range of values estimated by that expert was favorable to the plaintiffs, who prevailed at trial on this issue,
between $25,000 and $45,000. we are convinced that it sufficed, under even a clear and
convincing evidence standard, to permit the jury reasonably
Hoffman views this evidence as establishing, at worst, to have concluded that Hoffman acted together with Beeman
nothing more than simple negligence, not a conspiratorial and Wood to accomplish the fraudulent scheme. We are not
agreement to commit fraud, or fraud itself, or a violation of dealing here with just with some isolated inaccuracies in
the CPA. Inaccuracies in his appraisals, he says, do not individual appraisals or with honest differences of opinion
suffice to show a conspiratorial agreement between him and between Hoffman and the plaintiffs' expert over some fine
Beeman; nor, in the absence of any evidence that any of the points of appraisal practice. The evidence-clear and
plaintiffs ever saw or relied upon his appraisals, did they convincing-showed a pattern in all of the appraisals of:
establish actual fraud. Finally, Hoffman argues, given the
absence of any evidence that he dealt directly with any of the (1) actual knowledge by Hoffman in some cases and the
plaintiffs, the CPA simply does not apply. ability to know in others, that Beeman had purchased the
properties only months earlier for a fraction of what Hoffman
(3) Conspiracy appraised them for;
We have defined a civil conspiracy as “a combination of
two or more persons by an agreement or understanding to (2) an attempt by Hoffman to justify the huge inflation, at
accomplish an unlawful act or to use unlawful means to least in part, by assuming that major improvements would be
accomplish an act not in itself illegal, with the further made to the properties when, in fact, many of those
requirement that the act or the means employed must result in improvements were not made and, had Hoffman made a
damages to the plaintiff.” Although the notion of a tortious reasonable effort to investigate that critical assumption, he
conspiracy was derived from the common law criminal would have known, or had reasonable grounds to suspect,
conspiracy and each requires proof of an agreement, the tort
plaintiff must show more than just an unlawful agreement.
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 11
that they were not made; 10 and work.
(3) a further attempt by Hoffman to justify the actual (4) Fraud
appraisal by positing as comparable the sale of distant To prove an action for civil fraud based on affirmative
properties that were not at all comparable, in part by misrepresentation, the plaintiff must show that (1) the
including material misstatements as to both the physical defendant made a false representation to the plaintiff, (2) the
characteristics of some of those properties and their actual falsity of the representation was either known to the
proximity to the subject properties, and by ignoring recent defendant or the representation was made with reckless
sales at much lower prices of properties more like and in indifference to its truth, (3) the misrepresentation was made
greater proximity to the subject properties. for the purpose of defrauding the plaintiff, (4) the plaintiff
relied on the misrepresentation and had the right to rely on it,
The end result of this consistent pattern, documented in one and (5) the plaintiff suffered compensable injury as a result of
form or another in each of the appraisals, was a seemingly the misrepresentation 11
automatic appraisal, in each case, at or just in excess of
whatever the contract price happened to be. Overarching all Hoffman contends that there was no evidence that any of
of this were the facts that Hoffman derived 99% of his the plaintiffs actually relied on his appraisals and that, in any
income from appraisals done for Irwin, that he knew if the event, because of an FHA warning that the purpose of the
appraisal did not match the contract price, the deal would fall appraisal was to determine the value of the property for
through, thereby depriving Wood of her commission and mortgage insurance purposes and that the buyer should
Beeman of his profit, that in at least two cases, he actually independently evaluate the reasonableness of the purchase
consulted Beeman with respect to which comparables to use price, they had no right to rely on his appraisal. The Court of
and used the high-price sales recommended by Beeman even Special Appeals rejected both of those arguments on the
though they were not truly comparable, and that, in direct premise of indirect reliance-that the plaintiffs were aware that
violation of HUD and ethical requirements applicable to if the appraisal was less than the contract price, they would
appraisers, he deliberately destroyed all of his notes once have the right to cancel the contract and that, when that
Beeman's activities came to public attention. From that option was not afforded them because of the inflated
spoliation alone the jury was entitled to infer that those notes appraisal, they relied and had a right to rely on the fact that
would have been detrimental to Hoffman's defense, that they the property was worth what they were paying for it. That
would not have supported what he said from the witness kind of indirect reliance, Hoffman argues, does not suffice.
Hoffman is correct with respect to two of the factual
Some of these departures, viewed in isolation, might be underpinnings of his argument. There is no evidence that
regarded as simple negligence, as Hoffman argues, but any of the plaintiffs actually read Hoffman's appraisal. It is
“pieced together and considered as a whole,” they suffice to also clear that each of them entered into the contract of sale
show that Hoffman was aware of what Beeman was doing, with Beeman prior to Hoffman even being employed to make
that he understood that Beeman's scheme could not work the appraisal, so the appraisal could not have affected their
unless he produced appraisals at or above the inflated decision to enter into the purchase contract. There are
contract price, and that he knowingly participated in that several other important facts to be considered, however. As
scheme by providing those appraisals. He was dependent on the Court of Special Appeals noted, the plaintiffs were aware
Wood for his livelihood, Wood was dependent on people of the HUD requirement that, if an appraisal showed the
like Beeman for her livelihood, and Hoffman made it all value of the property to be less than the contract price, they
had an absolute right to cancel the contract, and Hoffman also
knew that to be the case, although he said he was unaware
Hoffman stated that “sometimes” he would go back and that such an option was provided for in the contract itself.
verify whether required repairs had been made, but Wood testified that, if the appraisal did not support the
sometimes he did not do so, believing it to be the contract price, she would have notified the plaintiffs of that
underwriter's problem. The problem with that is that, in each
case here, he knew that his appraisal was far in excess of
what Beeman had paid for the property only a few months It has long been clear that “[f]raud may consist in a
earlier and he justified his appraisal on the premise that the suppression of the truth as well as in the assertion of a
property had been “rehabbed”-that substantial improvements falsehood.” Schnader v. Brooks, 150 Md. 52, 57, 132 A.
and repairs had been made to it in the meanwhile. He thus 381, 383 (1926). We described the elements of an action
knew that if those repairs and improvements were not made, based on fraudulent concealment of material facts in Green v.
the appraisal would be grossly inaccurate. This was not a H & R Block, 355 Md. 488, 525, 735 A.2d 1039, 1059
case of checking to see if a dishwasher was working or a (1999): “(1) the defendant owed a duty to the plaintiff to
closet had been painted. There was substantial evidence that disclose a material fact; (2) the defendant failed to disclose
the very repairs and improvements needed to justify the that fact; (3) the defendant intended to defraud or deceive the
grossly inflated appraisal were not made and that, had plaintiff; (4) the plaintiff took action in justifiable reliance on
Hoffman made a reasonable investigation, he would have the concealment; and (5) the plaintiff suffered damages as a
known that they were not made. result of the defendant's concealment.”
fbd985c3-5d11-4e7d-b8bc-c87fc2edb8d0.doc 6/12/2012 12
fact, and the plaintiffs each testified that, had they been
advised of the true value of the property and the reasons why (5) Consumer Protection Act
it was less than the contract price, they would, in fact, have Maryland Code, § 13-303 of the Commercial Law Article,
cancelled the contracts. which is part of the State CPA, prohibits a person from
engaging in an unfair or deceptive trade practice in the sale of
In each contract of sale was an “FHA Amendatory Clause” consumer realty. An “unfair or deceptive trade practice”
that provided, in relevant part: includes any false or misleading statement or representation
“It is expressly agreed that ... Buyer shall not be obligated to which has the capacity, tendency, or effect of deceiving or
complete the purchase of the Property described herein or misleading consumers and encompasses a representation that
incur any penalty by forfeiture of monies on deposit or consumer realty has a characteristic that it does not have or is
otherwise, unless the Buyer has been given, in accordance of a particular standard or quality that is not the case.
with HUD/FHA or VA requirements, a written statement Commercial Law Art. § 13-301. Section 13-408 of that
issued by the ... Direct Endorsement Lender setting forth the article provides for a private cause of action to recover for
appraised value of the Property of not less than the purchase loss or injury sustained as the result of a practice forbidden
price. Buyer shall have the privilege and option of by the CPA.
proceeding with consummation of the Contract without
regard to the amount of the appraised valuation. The Citing Morris v. Osmose Wood Preserving, 340 Md. 519,
appraised valuation is arrived at to determine the maximum 541, 667 A.2d 624, 635 (1995), Hoffman points out that, for
mortgage [HUD] will insure. HUD does not warrant the the CPA to apply, the deceptive practice “must occur in the
value nor the condition of the Property. Buyer should satisfy sale or offer for sale to consumers.” His contention is that he
himself/herself that the price and the condition of the did not sell any consumer realty or offer any consumer
Property are acceptable.” 12 services to any of the plaintiffs, but merely provided
appraisals to Irwin, for Irwin's benefit.
Although that clause makes clear that the buyer may not rely
on the appraisal as a warranty either against defects in the Morris involved an action by homeowners, in part under the
property or that the value of the property is precisely as stated CPA, against the manufacturer of plywood that the builder
in the appraisal, it does permit the buyer to rely on the fact used in constructing the roofs of their homes and that
that, unless stated otherwise, the value is at least equal to the subsequently deteriorated. We affirmed the dismissal of the
contract price. It could have no other effect. The buyer may CPA claim on the ground that any misrepresentations made
not cancel the contract if the property is appraised at or above by the manufacturer regarding the plywood were made to the
the contract price, but only if informed that the appraised builder, not the plaintiff-buyers of the homes, and that there
value is less than the contract price. Significantly, if in that was “no allegation that the defendants were in any way
event if the buyer elects to cancel, his/her deposit or down involved in selling, offering, or advertising the townhouses
payment is not forfeited, but must be returned. The that the plaintiffs bought.”
cancellation, in other words, is without cost to the buyer.
Also implicit in that clause is the ability of the buyer, if the In holding that the deceptive practice must occur in the sale
appraisal is less than the contract price, to attempt to to consumers, we were careful to point out that we did not
renegotiate the price, so that it can be brought in line with the mean “that the only entity that can engage in a deceptive
appraisal. Indeed, with the appraisal effectively fixing the practice is one who directly sells or offers to sell to
maximum contract price in an FHA transaction, even consumers” and that “[i]t is quite possible that a deceptive
Beeman, who had a fairly substantial investment in the trade practice committed by someone who is not the seller
properties, would have had some incentive to renegotiate the would so infect the sale or offer for sale to a consumer that
matter. 13 the law would deem the practice to have been committed ‘in’
the sale or offer for sale.” For the reasons noted above, the
The phony appraisals prepared for Wood by Hoffman, as evidence more than sufficed to show that Hoffman's
part of the fraudulent scheme, precluded the plaintiffs from erroneous and misleading appraisals directly “infected” the
exercising those options. In proceeding with settlement, they sales at issue here. They would not have proceeded to
each necessarily, even if implicitly, relied on the fact that closing absent those appraisals. He was an integral part of
Hoffman had correctly valued the property as at least equal to the entire scheme of deceptive trade practices committed in
the contract price. the sale of consumer realty.
12 B. Non-Economic Damages-Physical Injury Rule in Fraud
Irwin was a direct endorsement lender. Cases
The record indicates that Beeman took out 100% Hoffman, Wood, and Irwin complain about the award of
commercial mortgages to finance his purchase of the $145,000 in non-economic damages to each of the plaintiffs
properties, that the mortgages carried 14% interest, were due in the absence of any evidence that any of the plaintiffs
in two years, and were personally guaranteed by Beeman and suffered any physical injury from the alleged fraud or
his wife. He had a clear financial interest in not holding the deception. They aver that this Court has traditionally
properties too long. precluded the recovery of emotional damages in the absence
of some evidence of an accompanying or consequential
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physical injury and that the lower courts erred in relaxing that damages for emotional or mental distress. There still
rule in this case. The plaintiffs counter that the physical remained concern that mental distress may be too easily
injury requirement applies only in negligence cases and not to simulated and that there was no practical standard for
intentional torts such as fraud. measuring such distress; thus, recovery for emotional injury
would not be allowed based on the plaintiff simply saying,
To set the stage, although all of the plaintiffs testified that the “This made me feel bad; this upset me.” The “modern
problems they encountered with their homes caused them rule,” allowing recovery of damages for emotional distress if
emotional distress-sadness, anger, humiliation, there was at least a “consequential” physical injury, we
embarrassment, stress-only one of them, Haley, testified as to regarded as a proper balance-a “sufficient guarantee of
any physical manifestation of those emotions. Haley, who genuineness that would otherwise be absent in a claim for
died prior to trial, stated in deposition testimony that, mental distress alone.” It simply applied the same rule to
whenever he began thinking about his problems, he would get this kind of injury that applied to other kinds as well-recovery
headaches and would vomit. Haley also admitted that he could be had if the injury was objectively ascertainable and
was a diabetic and was required to have kidney dialysis three was shown to be a provable consequence of the wrongful
times a week, and that those conditions were not caused by conduct.
the stress emerging from the problems with his house.
That rule itself underwent a significant expansion when we
At the end of the case, Hoffman, Irwin, and Wood moved for gave an elastic definition to the word “physical.” In Vance,
judgment on non-economic damages, arguing that there was we noted that, for purposes of applying the “modern rule,”
no corroborating evidence of emotional injury. Those the term “physical” was not used in its ordinary dictionary
motions were denied. In its written instructions on the fraud sense, but instead “is used to represent that the injury for
count, the court told the jury that, in addition to any economic which recovery is sought is capable of objective
injury suffered by the plaintiffs, it could consider any non- determination.” Id. at 500, 408 A.2d at 733-34. In that
economic injury that it found to be “proximately and directly regard, we observed that it had been held to include such
caused” and that, in determining non-economic damages, the things as depression, inability to work or perform routine
jury could consider “any mental pain, anguish, humiliation, household chores, loss of appetite, insomnia, nightmares, loss
nervousness, stress and insult to which the Plaintiff [was] of weight, extreme nervousness and irritability, withdrawal
subjected and which was a direct result of the conduct of one from socialization, fainting, chest pains, headaches, and
or more Defendants.” The award, the court added, must not upset stomachs.
be based on guesswork but must fairly and adequately
compensate the Plaintiff for the injury sustained. Hoffman, ****
Irwin, and Wood excepted to those instructions on the ground This Court has never addressed whether, or under what
that they did not go far enough-that “the jury should have conditions, emotional damages may be recovered in an action
been instructed that any claimed injury in the nature of non- for fraud. Courts around the country seem to be split on the
economic damages must be capable of objective issue. Most courts view fraud as an economic tort in the
determination” and that “the evidence must be detailed nature of a breach of contract and thus generally apply the
enough to give you a basis upon which to quantify the measure of compensatory damages applicable to a breach of
injury.” The court disagreed and gave no further instruction. contract-pecuniary loss.
We recounted the history and rationale of the physical injury ****
requirement in Vance v. Vance, 286 Md. 490, 408 A.2d 728
(1979). We observed that, in earlier times, courts did not We see no reason to create an exception for fraud cases to
recognize a specific duty to refrain from the negligent the carefully crafted rule enunciated in Vance and the
infliction of emotional distress and that, as a result, recovery subsequent cases. It is consistent with the more liberal
of damages solely for mental distress was not permitted. approach adopted by other courts; it remains a fair balance
Instead, we said, “damages for mental distress had a parasitic that permits recovery of damages for emotional injury which,
status; recovery was dependent upon an immediate physical by reason of either an accompanying or consequential
injury accompanying an independently actionable tort.” Over “physical” injury, is objectively ascertainable; and it avoids
time, we added, courts generally and this Court in particular the dilemma of requiring some physical manifestation where
began to modify that “accompanying physical impact” rule, the misrepresentation is negligent but not where it is
because it led to arbitrary results, and to create in its place deliberate, even though the consequences to the plaintiff may
what we termed the “modern rule,” which permitted recovery be precisely the same. The Court of Special Appeals erred in
for negligent infliction of mental distress if a physical injury excusing the plaintiffs from having to show some physical
resulted from the commission of the tort, regardless of manifestation as a condition to recovery of damages for
impact. purely emotional injury.
Although courts were not averse to eliminating the Because eight of the plaintiffs offered no evidence of any
requirement of an accompanying physical impact, they were physical manifestation of their claimed emotional stress, the
reluctant to eliminate entirely the requirement of some defense motions on that issue should have been granted. The
consequential physical injury as a condition to the award of uniform $145,000 awards to them must be stricken. As
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Haley did present sufficient evidence of some physical
manifestation, an award of non-economic damages to him We have required a higher standard of proof in fraud cases
would be possible under a correct jury instruction. We because of the seriousness of the allegations-an imputation of
cannot affirm the award to him because the instruction, to dishonesty sometimes bordering on criminal behavior. That
which a proper objection was made, was wrong. As we have rationale has no relevance to the proof of specific elements of
indicated, Haley died prior to trial. Whether his estate still loss or injury, however, especially in tort cases. There is no
can or might desire to pursue a retrial on that issue we cannot reason to require a greater quantity or higher quality of
determine, but we shall not foreclose it.14 evidence to show the amount of economic loss or the nature
or degree of emotional injury caused by fraudulent conduct
C. Evidentiary Standard for Proof of Fraud Damages than that caused by negligent conduct. The thing to be
The trial court gave both written and oral instructions to the proved in either case is the same. The trial court did not err
jury. In ¶ 4 of its written general instructions, the court told in permitting “individual items of damage” attributable to the
the jury that the plaintiffs were required to prove fraud and fraud and conspiracy claims to be proved by a preponderance
conspiracy to commit fraud by clear and convincing of evidence.
evidence, that that burden applied to “the elements of the
claim,” but that “[i]ndividual items of damage attributable to D. Punitive Damages
these claims must only be provided by a preponderance of the As we have previously observed, to establish the tort of
evidence.” Later, in its written instructions regarding fraud, the plaintiff must prove, among other things, that the
Question 6 on the verdict sheet, which dealt with damages defendant made a false representation to the plaintiff and that
upon a finding of fraud or conspiracy to commit fraud, the “its falsity was either known to the defendant or that the
court iterated that the plaintiffs had the burden “to prove by a representation was made with reckless indifference as to its
preponderance of the evidence each item of injury or loss truth.” Reckless indifference as to truth arises when the
claimed to be sustained and that such injury was sustained as defendant makes the representation even though aware that
a proximate result of the Defendant or Defendants' conduct.” he does not know whether it is true or false-where he knows
That instruction was also given orally to the jury. that he lacks knowledge as to its truth or falsity-and
nonetheless makes the representation without regard to that
At the conclusion of the oral instructions, Irwin and Wood, lack of knowledge.
but not Hoffman, lodged the following objection:
“Instruction No. 4 indicates that Plaintiffs only need to satisfy Although that alternative mental state of reckless
the jury by a preponderance of the evidence on the damages indifference suffices to support a finding of fraud and an
for the conspiracy and fraud claims. We take exception to award of compensatory damages that flow from it, we made
that. The clear and convincing test applies to all elements of clear in Ellerin that it does not suffice to justify an award of
the claims and so on that basis we believe that the clear and punitive damages. We pointed out that, in Owens-Illinois v.
convincing standard should be assigned to damages as well.” Zenobia, 325 Md. 420, 601 A.2d 633 (1992), reconsideration
denied, 325 Md. 665, 602 A.2d 1182 (1992), the Court
The trial judge did not agree and responded that “I'm going to modified the standard for an award of punitive damages and
ride with what I've got as far as that goes.” that, under the new standard, as applied in fraud cases, actual
knowledge of falsity “include[s] the type of deliberate
In order to recover damages in an action of fraud, the wrongdoing and evil motive that has traditionally justified
plaintiff must prove, by clear and convincing evidence, the award of punitive damages,” but that, where the fraud is
among other things, that he/she/ it “suffered compensable based on the alternative state of reckless disregard, “the
injury resulting from the misrepresentation What must be traditional basis for the allowability of punitive damages is
proved by that standard is that some compensable injury not present.” Ellerin, supra, 337 Md. at 235, 652 A.2d at
arose from the deceit, because a compensable injury arising 1126. What is needed to support an award of punitive
by reason of the fraud is an element of the tort. We have damages is conscious and deliberate wrongdoing. The Court
never held, however, that the measure of the damages thus concluded that only “a person's actual knowledge that
required to compensate for that injury must be proved by his statement is false, coupled with his intent to deceive
clear and convincing evidence. Indeed, in Empire Realty Co. another by means of that statement, constitute the ‘actual
v. Fleisher, we drew a distinction between liability for malice’ required for the availability of punitive damages.”
damages, on the one hand, and the measure of those damages, Id. at 240, 652 A.2d at 1129. The Ellerin court recognized
on the other, noting that, as to the latter, though not the and confirmed, however, that “actual knowledge” did include
former, Maryland applies “the flexible approach to damages “ ‘the wilful refusal to know.’ ” Id. at 235, n. 10, 652 A.2d at
for fraud and deceit.” 1126, n. 10 (quoting Zenobia, supra, 325 Md. at 462, n. 23,
601 A.2d at 654, n. 23). Zenobia made the same point:
“Actual knowledge, however, does include the wilful refusal
Hoffman also complains about the inclusion of injury to to know. See, e.g., State v. McCallum, 321 Md. 451, 458-61,
credit as part of non-economic damages. As we are striking 583 A.2d 250, 253-55 (1991) (Chasanow, J., concurring) (‘
the non-economic damages for other reasons, that complaint “[K]nowledge” exists where a person believes that it is
is moot and need not be addressed. probable that something is a fact, but deliberately shuts his or
her eyes or avoids making reasonable inquiry with a
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conscious purpose to avoid learning the truth.’) Therefore, a for “guidance,” also suggested that the trial court erred in
defendant cannot shut his eyes or plug his ears when he is directing that there be a dollar-for-dollar reduction in that
presented with evidence of a defect and thereby avoid award for whatever the plaintiffs' attorneys recovered under
liability for punitive damages.” their contingent fee agreement with the plaintiffs. Id. at 345,
843 A.2d at 211-12.
Aware of Zenobia and Ellerin, the trial court concluded that,
although there was sufficient evidence that Hoffman, Irwin, Irwin and Wood have made no complaint about the attorney
and Wood acted with reckless disregard as to whether fee award. Hoffman complains that the remand was
statements made to the plaintiffs, including the appraisals inappropriate in that the award is justified only under Count
prepared by Hoffman, were true or false, there was not III-the CPA claim-and that it cannot be based on punitive
sufficient evidence to establish that they had actual damages awardable only under Count II for fraud.
knowledge of the falsity of those statements. It was on that
finding that the court granted partial judgment to those Hoffman is correct. Maryland Code, § 13-408(a) of the
defendants and withdrew the punitive damage claims as to Commercial Law Article authorizes a private cause of action
them from the jury. “to recover for injury or loss sustained by him as the result of
a practice prohibited by this title.” Section 13-408(b)
On the plaintiffs' cross-appeal, the Court of Special Appeals provides that a person who brings an action “to recover for
reversed that ruling injury or loss under this section and who is awarded damages
may also seek, and the court may award, reasonable
If [Defendants] are satisfied, at this point, that there was attorney's fees.” (Emphasis added). The fee award is
legally sufficient evidence to sustain the jury's finding of limited to the CPA action and may not be based on additional
fraud based on the very kind of actual knowledge that would recoveries under other causes of action. Punitive damages
also support a claim for punitive damages, they have no may not be awarded in an action brought under § 13-408. In
enduring claim that it was insufficient to submit the punitive Golt v. Phillips, 308 Md. 1, 12, 517 A.2d 328, 333 (1986), we
damage claim to the jury, since both rested on precisely the concluded that the private remedy under that section was
same evidence as to actual knowledge. For that reason, we “purely compensatory” and “contains no punitive
shall affirm the determination by the Court of Special component.” Because the remand for reconsideration of
Appeals that the punitive damage claims should have been attorneys' fees was based solely on the prospect of punitive
submitted to the jury. Had we reached the issue, we would damages being awarded under the fraud count, it was
have found the evidence sufficient to show the kind of actual erroneous.
knowledge required for punitive damages.
JUDGMENT OF COURT OF SPECIAL APPEALS
E. Limited Remand AFFIRMED IN PART AND REVERSED IN PART;
Having concluded that the claim for punitive damages CASE REMANDED TO THAT COURT WITH
against Hoffman, Irwin, and Wood was wrongfully withheld INSTRUCTIONS (1) TO MODIFY JUDGMENTS FOR
from the jury, the Court of Special Appeals determined that ALL PLAINTIFFS BY STRIKING AWARD OF
the plaintiffs were entitled to a partial new trial limited to that $145,000 FOR NON-ECONOMIC DAMAGES OR TO
claim-whether punitive damages were warranted against REMAND TO CIRCUIT COURT FOR BALTIMORE
those defendants. Hoffman, supra, 155 Md.App. at 343, 843 CITY FOR THAT PURPOSE; (2) TO REMAND CASE
A.2d at 210. The court held that, if the jury finds the AS TO PLAINTIFF CARL HALEY FOR FURTHER
evidence admitted at that trial is sufficient to establish the PROCEEDINGS AS TO NON-ECONOMIC DAMAGES;
plaintiffs' entitlement to punitive damages, a separate hearing (3) TO REMAND CASES TO CIRCUIT COURT FOR
on the proper amount of those damages would have to be BALTIMORE CITY FOR NEW TRIAL AS TO
held. Id. PUNITIVE DAMAGES AGAINST PETITIONERS
HOFFMAN, IRWIN AND WOOD; AND (4) TO
There was no error in ordering the limited remand as to OTHERWISE AFFIRM JUDGMENTS ENTERED BY
punitive damages. CIRCUIT COURT FOR BALTIMORE CITY. COSTS
IN THIS COURT AND IN COURT OF SPECIAL
F. Attorneys' Fees APPEALS TO BE PAID 3/4 BY PETITIONERS
As noted, the Court of Special Appeals struck the award of HOFFMAN, IRWIN, AND WOOD AND 1/4 BY
$195,591 in attorneys' fees entered as ancillary relief under RESPONDENT PLAINTIFFS.
the CPA and remanded that issue as well for reconsideration.
Its decision was based on the premise that, as an award of
attorneys' fees under the CPA must take into account the
amount of recovery on the substantive claims and there was
the prospect of an additional punitive damage recovery
against Hoffman, Wood, and Irwin, the trial court should
revisit the matter based on what the jury might do with the
punitive damage claim. Hoffman, supra, 155 Md.App. at
344-45, 843 A.2d at 211. The intermediate appellate court,
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