Statute of Limitations; Collection Agency License; Unjust Enrichment; MCDCA

Md. App. Holds Judgment in Favor of Unlicensed Collection Agency Subject to Challenge "At Any Time"

In Jason v. National Loan Recoveries, LLC, the Court of Special Appeals of Maryland determined that a borrower could challenge a district court judgment as void beyond the catch-all three-year statute of limitations, where it was obtained against him by an unlicensed collection agency.  Noting that prior case law determined such judgments to be void, the intermediate appellate court held that a void judgment was subject to attack “at any time,” but an open question remained as to what remedies were available, including whether they were subject to the defenses of laches and waiver.

However, the Court determined that a three-year statute of limitations applied to Borrower’s claims for unjust enrichment relating to amounts received in satisfaction of the judgment through garnishment of his bank account, as well as Maryland statutory consumer protection claims relating to unlicensed collection activity.  Because the record was not clear as to when Creditor had been allegedly unjustly enriched, i.e., the date it received the garnished funds, the Court reversed the dismissal of the unjust enrichment claim for further proceedings.   However, the Court affirmed the dismissal of the statutory consumer protection claims on limitations grounds, noting that the Borrower was on inquiry notice of the alleged unlicensed collection activity more than three years before filing suit.

A copy of this opinion is available here.


After acquiring a debt in default, Creditor sued Borrower, and subsequently obtained a judgment against him.   Thereafter, a writ of garnishment was served upon Borrower’s bank, and ultimately the judgment was satisfied through the garnishment proceedings. 

Three years after the original collection suit had been filed, Borrower filed a lawsuit seeking a declaration that the prior judgment against him was void because Creditor lacked a collection agency license, asserting a claim for unjust enrichment, and further asserting that Creditor’s unlicensed collection activity violated the Maryland Consumer Debt Collection Act, Md. Code, Comm. Law § 14-201 (“MCDCA”), and Maryland Consumer Protection Act, Md. Code, Comm. Law § 13-101 (“MCPA”).

Notably, Borrower alleged that Creditor constituted a collection agency because it acquired the loan when it was in default.  See Md. Code, Bus. Reg. § 7-101(c)(1)(ii) (defining a “collection agency” to include “a person who engages directly or indirectly in the business of . . . collecting a consumer claim the person owns, if the claim was in default when the person acquired it; . . .”).  Further, for purposes of the appeal, it was undisputed that at the time Creditor had filed suit against Borrower, it did not hold a Maryland Collection Agency license, nor did it obtain a license until after the writ of garnishment was issued.

Creditor moved to dismiss Borrower’s claims, which the trial court granted, determining that all of Borrower’s claims were barred by the three-year statute of limitations under Maryland Code, Courts and Judicial Proceedings (“CJP”) § 5-101.  This appeal followed.


Addressing Borrower’s claims for declaratory relief, the Court noted that in Finch v. LVNV Funding, LLC, 212 Md. App. 748 (2013), it previously held that “a judgment entered in favor of an unlicensed debt collector constitutes a void judgment as a matter of law.”  Op. at 6.  Recognizing that Finch did not address the applicability of the statute of limitations, the Court nevertheless concluded that although “it is possible that the passage of time could limit the remedies available to the judgment debtor who is subject to a void judgment, there appears no time limit for asserting that a judgment is void.” Op. at 8 (Emphasis in original). 

Thus, although the Court reversed the dismissal of the claims for declaratory relief, it explicitly expressed no opinion regarding the remedial relief that the Borrower could ultimately obtain, and whether such relief was subject to defenses of laches or waiver.  Further, the Court noted that comments to the Restatement (Third) of Restitution and Unjust Enrichment indicated that payment on an invalid judgment resulting from valid debt does not create unjust enrichment.  See Op. at 8-9 n. 4.

The Court then determined that “a claim for unjust enrichment that seeks the remedy of restitution of money is subject to the general three-year statute of limitations” set forth in Maryland Code, CJP § 5-101.  Op. at 13.  Applying the discovery rule to Borrower’s unjust enrichment claim, the Court noted that it could not ascertain when Creditor obtained the funds from its judgment against Borrower.  Op. at 15.  Therefore, the Court could not determine whether the unjust enrichment claim was timely filed, and accordingly reversed the trial court’s dismissal of such claim for further proceedings.  Op. at 17.

Finally, the Court held that the three-year statute of limitations also applied to Borrower’s statutory consumer protection claims under the MCDCA and MCPA.  Op. at 18.  The Court rejected Borrower’s assertion that Creditor had a duty to disclose its lack of licensure.   Rather, the Court determined that Borrower was on inquiry notice of Creditor’s collection activities against him at least three years prior to filing his lawsuit, and was on inquiry notice to investigate potential claims against Creditor when it sought and obtained the judgment against him.  Thus, the Court held that Borrower’s statutory claims under the MCDCA and MCPA were time-barred, and affirmed the dismissal of such claims.  Op. at 18.