Mortgage Company’s Indemnification Claim Against Loan Officer Not Discharged In Bankruptcy

bankruptcy1When Fidelity First Home Mortgage Company was found liable by a jury under the doctrine of respondeat superior when one of its loan officers engaged in a fraudulent foreclosure rescue scheme, it sued the loan officer seeking indemnification and contribution. The loan officer claimed that Fidelity’s claims were discharged in his prior no-asset Chapter 7 bankruptcy, and that Fidelity’s negligence in supervising him precluded its claims. The circuit court granted summary judgment to Fidelity, and the Court of Special Appeals, in a unanimous panel opinion by Judge Graeff, affirmed. First, noting that the loan officer had failed to list Fidelity as a creditor in his bankruptcy, the Court held that the circuit court therefore had concurrent jurisdiction to determine whether Fidelity’s debt was discharged. It then held that since the loan officer’s conduct involved fraud, Fidelity’s claim was nondischargeable under the fraud exception even though it was seeking indemnification and contribution, as opposed to claiming that it had been defrauded. Finally, the Court held that there was no finding at trial that Fidelity engaged in “active, independent negligence” that would bar it from seeking indemnification against the loan officer. The opinion in Fox v. Fidelity First Home Mortgage Company was issued on July 1, 2015.