Pease v. Wachovia SBA Lending, Inc.

HARRELL, J. In this appeal, the parties ask us to consider and shape the contours of Maryland Code (2006 RepLVol.), Courts and Judicial Proceedings Article, § 5-408,1 which serves as a statute of frauds in the regulatory scheme for credit agreements. William and Michele Pease (Appellants)—husband and wife and guarantors on a Small Business Administration (hereinafter “SBA”) commercial loan financing substantially their acquisition of a plumbing business—appeal from the denial by the Circuit Court for Baltimore City of their motion to open, modify, or vacate confessed judgments in favor of Wachovia SBA Lending, Inc. (hereinafter “Wachovia” or Appellee), entered against them upon default under the underlying note. In arguing that the confessed judgments should be opened, modified, or vacated, the Peases claim essentially that: (1) the Circuit Court erred in refusing to consider their allegations and evidentiary proffers that Wachovia and its representatives induced them, fraudulently and negligently, to enter a series of related loans through certain oral representations and omissions; or, (2) that, had certain information been disclosed to them by Wachovia, they would not have consummated the SBA commercial loan and guarantees. In response, Wachovia argues that § 5-408—also coined the “Maryland Credit Agreement Act”—bars the admission of these alleged oral representations, as they were not set forth in writing. We hold, as explained more fully infra, that, to the extent the Peases’ assertions of negligence, fraud, and breach of fiduciary duty were advanced with an eye towards filing counterclaims against Wachovia in the suit on the commercial loan and [214] guarantees, such assertions do not seek to enforce or modify a “credit agreement” (or constitute a defense to a “credit agreement”) within the reach of § 5-408, and thus the Maryland Credit Agreement Act does not apply to bar the Circuit Court from considering the sufficiency of the allegations under Md. Rule 2-611(d). To the extent the Peases’ assertions were advanced, however, with an eye towards seeking a declaration that the credit agreement represented by the SBA commercial loan and guarantees was void ab initio, we hold that the Maryland Credit Agreement Act would apply to bar the Circuit Court from considering such allegations in this matter. We vacate the judgment of the Circuit Court and, as explained infra, remand to that court for consideration of whether the Peases alleged sufficiently one or more tortious acts, that may be plead as counterclaims, so as to justify opening, modifying, or vacating the confessed judgments. FACTS AND LEGAL PROCEEDINGS William Pease (hereinafter ‘William”) and Michele Pease (hereinafter “Michele”) were the former owners and operators of a successful plumbing business in Richmond, Virginia. In 2005, the Peases, in relocating their family to Maryland, decided to sell their business in Virginia and purchase an existing plumbing business in Maryland. They eventually settled in Harford County, Maryland, and purchased a residence for $820,000, paying $300,000 in cash and financing the remaining $520,000. Around the same time, William learned from a business brokerage firm that David Kolper was seeking to sell his Maryland-based plumbing company, Bush Plumbing & Heating, Inc. (hereinafter “Bush”). The Peases established two entities, which they would own, to purchase Bush: VLP Industries, Inc., a Maryland corporation, and VLP Real Estate, LLC, a Maryland limited liability company. To finance the purchase of Bush, William contacted Wachovia to obtain an SBA loan. He was ultimately referred to Jeffrey2 [215] Martin (hereinafter “Martin”), Wachovia’s agent, senior commercial business lender, and business development officer. During the period between March and August of 2005, William alleged that he spoke with Martin at least twice a week, and repeatedly told Martin that he did not want his new residence to be “implicated in the financing or to, in any manner, pledge or utilize the new home as collateral toward repayment of the [SBA] loan.” Allegedly, Martin informed William that, pursuant to Wachovia’s normal lending procedures, the only way the Peases would not be required to pledge their house as collateral on the SBA loan was if they had less than twenty-percent equity in the value of the home. Because the size of the Peases’ down payment put the amount of equity in the home above twenty percent, Martin suggested the Peases encumber the home with a home equity line of credit with Wachovia, which would decrease the amount of equity in the property below the twenty-percent threshold. The Peases applied for and received from Wachovia a $218,000 line of credit on their residence, which reduced their personal equity in the home to ten percent. The Peases contend that Wachovia and Martin misrepresented verbally that this “artificial loan” would safeguard the residence from foreclosure were the commercial loan to go into default and the personal guarantees triggered. In reality, however, because the commercial loan documents (including the guarantees) provided no such restriction on Wachovia’s abilities to execute on the Peases’ assets in the event of default, Wachovia could foreclose on the home under those circumstances notwithstanding the home equity loan gambit. Thus, the Peases allege that these statements regarding protecting the residence from foreclosure were made to induce them into agreeing to enter the SBA loan. At the same time, William began the process of reviewing the business affairs and finances of Bush to ensure the company was valued as estimated by Kolper. According to William, as part of his due diligence in reviewing the business affairs and finances of Bush, he required Kolper and the business brokerage firm to provide various documentation, including: [216] profit and loss statements for the duration of Bush’s operations, prior tax returns, a list of employees, a list of contracts, a list of accounts receivables, and various other documentation. Such documentation was submitted to Wachovia’s certified appraiser, Scott Gabehart, who, after conducting an independent financial analysis for Wachovia and the Peases, valued Bush at $950,000 as a going concern. Further, a separate real estate appraiser valued the real property on which the Bush business was located at $450,000. A few weeks prior to settlement on the SBA loan, Martin allegedly admitted to William that, according to the documentation supplied to Wachovia, Bush’s financial health was weaker than Kolper had indicated. A centerpiece of the Peases’ grievance is the allegation that Wachovia possessed certain negative financial information that it withheld from them.3 Allegedly, the Peases did not discover this negative financial information until after settlement. They claim that they would not have proceeded with the purchase of Bush had they known of the later-discovered negative financial information. In any event, because the financial state of Bush was not as Kolper had stated, Martin classified the proposed transaction as a “very tight” deal; that is, he was not sure whether Wachovia would approve the SBA loan now. The Peases allege that Martin urged William to cause VLP Industries, Inc. to execute a promissory note in the amount of $95,000, payable to Kolper, as additional financing for the purchase of Bush and as a way to ensure that Wachovia could authorize the financing for the balance of the purchase price. Allegedly, [217] Martin represented verbally to William that the $95,000 promissory note would be “hold-back money” that the Peases could utilize in the event that Bush incurred any liability as a result of its operations prior to the transfer of Bush. While Martin characterized this “hold-back money” as a safety precaution to protect against any outstanding issues associated with the purchase of Bush, the Peases maintain that this loan was merely a device for Wachovia to shift some of the risk exposure on the SBA loan from itself to the Peases. Settlement on the purchase of Bush took place on 19 August 2005, whereby Bush’s operating assets were transferred to VLP Industries, Inc., and the real property on which Bush was situated was transferred to VLP Real Estate, for a total purchase price of $1,494,075.49. On the same day, to finance the majority of the purchase price, VLP Industries, Inc. executed a commercial loan with Wachovia in the amount of $1,118,300. The Peases personally guaranteed the loan, and both William and Michele signed the loan agreement, which contained the following confessed judgment clause: CONFESSION OF JUDGMENT. If payment of the indebtedness ... shall not be made when due and at maturity ... the undersigned hereby authorize and empower any attorney of any Court of Record within the United States to appear for the undersigned in any Court ... and confess judgment against the undersigned either jointly or severally in favor of the Holder of this Note for the amount then due thereon, with the interest thereon aforementioned and the cost of suit and attorneys’ fees of fifteen percent (15%).... Less than one week after settlement, the Peases paid back the $218,000 home equity loan, plus $2,570.74 in related loan fees and interest. On the $95,000 hold-back note, however, the Peases made no payments to Kolper. Further, on 30 November 2007, VLP Industries, Inc. defaulted on the commercial loan, on which $1,112,312.34 was owed at that time. On that same date, Wachovia accelerated the commercial loan and informed both William and Michele of their obligation to pay the outstanding amount in full. On 28 January 2008, having not received the accelerated payments, Wachovia insti [218] tuted confessed judgment proceedings in the Circuit Court for Baltimore City. Confessed judgments for $1,285,995.28 were entered and indexed against the Peases and both of their business entities on 28 January 2008.4 The Peases filed a motion to open, modify, or vacate the confessed judgments on 8 April 2008, asserting allegations of negligence, fraud, and breach of fiduciary duty. In support of these allegations, the Peases attached an affidavit by John Burdiss, a purported expert in banking standards of care. Burdiss claimed that Wachovia failed to comport with commercially reasonable banking standards when it authorized the commercial loan, despite having reservations about Bush’s financial stability, and when it induced the Peases into taking out the home equity loan by assuring them that, by doing so, their residence would be protected from foreclosure. Wachovia responded by arguing that the Peases’ defenses of negligence, fraud, and breach of fiduciary duty were barred by the Maryland Credit Agreement Act, which states that “[a] credit agreement is not enforceable ... unless it is ... [i]n writing ....”§ 5-408(b). On 10 December 2008, a hearing on the motion to open, modify, or vacate the confessed judgments was held in the Circuit Court. Before the trial court, the Peases asserted that, should the hearing judge order the confessed judgment opened, modified, or vacated, they would file counterclaims against Wachovia,5 yet they informed the hearing judge also that they would argue that the SBA loan agreement was void ab initio for the same reasons as supported the tort claims. After listening to both sides, the hearing judge denied reluc [219] tantly the Peases’ motion, believing he was bound by the reasoning contained in a Court of Special Appeals’s case, ST Sys. Corp. v. Md. Nat’l Bank, 112 Md.App. 20, 684 A.2d 32 (1996):6 I am going to deny the Motion to Vacate. And I do so with a good deal of reluctance____ The Court need only find there is a potentially meritorious defense, not to determine the amount of merit, or that the moving party will indeed prevail____ And, while I would certainly find that the Plaintiff would be, I believe be able to present a defense that in terms of having been induced by perhaps misrepresentation .... I just cannot find that in light of the Maryland Credit Agreement Statute, and particularly in light of the ST Systems Corporation vs. Maryland National Bank case.... And I too, as an individual would hope that the statute would not be such a shield as to protect lending institutions from any tort.... [220] Yet, I am merely sitting in the Circuit Court and have been compelled to follow the dictates of the opinions of the Appellate Court. And, my understanding of what the Court of Special Appeals has said is literally the economic protective policy of the Maryland Credit Agreement statute is only upheld if tort claims based on an unenforceable alleged agreement are excluded and the torts that are alleged here as the potentially meritorious defenses are indeed based upon unenforceable alleged agreements. The Peases appealed timely to the Court of Special Appeals. On our initiative, we granted certiorari, before the intermediate appellate court could decide the appeal, to consider, if appropriate, whether the [Maryland Credit Agreement Act] which bars enforcement of credit agreements, unless the agreements are in writing, and the CSA decision in [ST Sys. Corp.] prohibit tort claim defenses to a bank’s confessed judgment claim where the defendants allege the bank violated standard banking practices to fraudulently and negligently induce a borrower to accept the bank’s loan of over $1 million dollars. Pease v. Wachovia, 409 Md. 413, 975 A.2d 875 (2009). DISCUSSION I. Standard of Review Pursuant to Md. Rule 2-611(d), a court must open, modify, or vacate a confessed judgment “if [it] finds that there is a substantial and sufficient basis for an actual controversy as to the merits of the action.... ” A trial court’s legal conclusions—including whether the evidentiary proffers of a defendant seeking to open, modify, or vacate a confessed judgment qualify as a meritorious defense—are reviewed under non-deferential appellate scrutiny. See Nils, LLC v. Antezana, 171 Md.App. 717, 727-28, 912 A.2d 45, 51 (2006) (“On the issue of whether what is offered by a party seeking to open, modify, or vacate a confessed judgment qualifies as a meritorious defense, that is a question of law for the judge.”); Shafer Bros. v. Kite, 43 Md.App. 601, 606, 406 A.2d 673, 676 [221] (1979) (“The issue of what can constitute a meritorious defense, assuming that the supporting facts are believed, is a question of law.”). II. Analysis The Peases devote a portion of their brief to canvassing the legislative history of the Maryland Credit Agreement Act. Wachovia devotes most of its brief to arguing that the Maryland Credit Agreement Act bars consideration of the Peases’ allegations and evidentiary proffers of alleged negligence, fraud, and breach of fiduciary duty. Read together, the parties’ briefs ask, in effect, this Court to cut through what might be a Gordian Knot of statutory interpretation and determine whether § 5-408(b) bars consideration of the Peas-es’ allegations and evidentiary proffers. To be sure, “[c]onstruing statutes ... is a large and essential part of the judicial process” and “[i]t is one of the principal functions which courts were created to perform.... ” Mangum v. Md. State Bd. of Censors, 273 Md. 176, 192, 328 A.2d 283, 292 (1974); see Atl. Sea-Con., Ltd. v. Robert Dann Co., 80 Md.App. 161, 165, 560 A.2d 592, 594 (1989), rev’d on other grounds, 321 Md. 275, 582 A.2d 981 (1990). Wading up to our eyebrows in the waters of statutory interpretation,7 however, [222] is not required where the perceived-as-relevant statutory provision does not control the alleged facts of a given case. See Boffen v. State, 372 Md. 724, 736, 816 A.2d 88, 95 (2003) (quoting Chen v. State, 370 Md. 99, 106, 803 A.2d 518, 521-22 (2002)) (“In discerning legislative intent, Ve look first at the language of the relevant statutory provision or provisions.’ ”) (emphasis added). Pertinent to our case, and pursuant to Md. Rule 2-611(d), we are alert to the fact that the practical effect of a hearing judge opening, modifying, or vacating a confessed judgment is to “permit the defendant to file a responsive pleading.” Admittedly, at this juncture in these proceedings, it is a bit unclear upon what grounds that pleading would be based and what its aim might be. The lack of clarity is occasioned by, on one hand, the Peases arguing before the trial court, and reiterating in their brief before this Court, that, if the judgments are opened, modified, or vacated, they intend to file counterclaims against Wachovia, asserting the same tort-based theories raised before the trial court and this Court: negligence, fraud, and breach of fiduciary duty. On the other hand, before the hearing judge, the Peases also acknowledged that they would seek to have the credit agreement declared void ab initio for the same reasons. At oral argument here, the Peases’ counsel stated that “the defenses in this case ... create a tort defense to the creation of the promissory note.”8 [223] (Emphasis added.) Thus, it is not clear then or now whether the Peases’ incipient responsive pleading would assert that they are entitled to damages, notwithstanding the enforceability of the credit agreement, or whether they will argue the credit agreement represented by the SBA commercial loan and guarantees is not enforceable in the first instance. Because different outcomes, vis á vis the application of the Maryland Credit Agreement Act, might result from these alternative approaches, after determining precisely the situations to which the General Assembly intended the Act apply, we will address the (1) counterclaims and (2) the void ab initio objectives in turn. [224] A. The Maryland Credit Agreement Act The Maryland Credit Agreement Act, Md.Code (2006 Repl. Vol.), Courts and Judicial Proceedings Art., § 5-408, provides, in pertinent part, that “[a] credit agreement is not enforceable by way of action or defense unless it: (1) [i]s in writing; (2) [expresses consideration; (3) [s]ets forth the relevant terms and conditions of the agreement; and (4)[i]s signed by the person against whom enforcement is sought.” § 5-408(b). As one would expect, however, with a statute entitled the “Maryland Credit Agreement Act,” the Act only serves as a statute of frauds with respect to “credit agreements.” See Bill Analysis of H.B. 704 (1989) (“The intent of this bill is to establish a statute of frauds that makes certain credit agreements ... unenforceable unless they are in writing ....”) (emphasis added). The Act provides that a “credit agreement” is a “covenant, promise, undertaking, commitment, or other agreement by a financial institution to: 1. [l]end money; 2. [forbear from repayment of money, goods, or things in action; 3. [forbear from collecting or exercising any right to collect a debt; or 4. [otherwise extend credit.” § 5-408(a)(2)(i). The Act goes on to explain that the term “ ‘credit agreement’ includes agreeing to take or not to take certain actions by a financial institution in connection with an existing or prospective credit agreement.” § 5-408(a)(2)(ii). Both the parties in this case and the Concurring and Dissenting opinion wrestle with the Maryland Credit Agreement Act without first considering a threshold issue: whether the Act even applies—in whole or in part—to the Peases’ assertions of negligence, fraud, and breach of fiduciary duty. The legislative history of the Act, though not extensive, illuminates the types of situations to which the General Assembly intended the Act apply. In 1989, at the time the legislation was enacted, “multimillion dollar lawsuits [were] being filed and recovery [was] being made based on alleged verbal promises to lend and based on modifications of existing loan agreements.” Notes to H.B. 704 (1989). Thus, the purpose of the bill was to “protect lenders against claims that the lender made a verbal promise to loan money and then [225] refused to do so, or that the lender verbally agreed to extend the terms of a loan.” Bill Analysis of H.B. 704 (1989). We interpret the plain language and the legislative history of the Maryland Credit Agreement Act consistently to mean that a court should only engage the statute of frauds portion of the Act when, either through affirmative claim or defense, a commercial borrower or lender either attempts to recover on a verbal promise to lend/borrow, or seeks to enforce a verbal modification of an existing credit agreement. Md. Rule 2-611(d) requires a trial judge to find “that there is a substantial and sufficient basis for an actual controversy as to the merits of the action” before opening, modifying, or vacating the confessed judgment. If, however, the Maryland Credit Agreement Act bars admission of certain evidence supporting the “basis for an actual controversy,” it logically follows that such evidence is not, then, “substantial and sufficient.” We now move to apply our understanding of the Maryland Credit Agreement Act to the (1) potential counterclaims and (2) the void ab initio objective, both asserted by the Peases before the trial court and this Court, as the theories upon which a future “responsive pleading” might be based, to determine whether the Act bars consideration at this stage of the proceedings of allegations and evidentiary proffers supporting either or both such objectives. B. As Counterclaims As explained supra, the Peases assert that, if successful in opening or vacating the confessed judgment, they will employ their allegations—negligence, fraud, and breach of fiduciary duty—as the bases for counterclaims against Wachovia. If the Act, however, would bar such counterclaims, or the evidence on which they rest, the allegations and evidentiary proffers cannot constitute a “substantial and sufficient basis as to the merits of the action” sufficient to open or vacate the confessed judgments. See Schlossberg v. Citizens Bank of Md., 341 Md. 650, 656, 672 A.2d 625, 627 (1996) (stating that a confessed judgment can only be opened if “the defendant has a potentially meritorious defense”). As discussed supra, the [226] statute of frauds portion of the Act only applies in the first instance to bar assertion of the Peases’ counterclaims if they constitute either an attempt to enforce either (1) an oral credit agreement; or (2) a verbal modification of their existing loan agreement. Simply put, in filing these counterclaims against Wachovia, the Peases would be doing neither. The filing of offensive counterclaims using the tort theories of negligence, fraud, and breach of fiduciary duty would be on the basis that, as the Peases acknowledge, any recovery on such claims would serve as a set-off against any judgment on the guarantees in favor of Wachovia.9 Accordingly, where such counterclaims are allowed to be filed, the Peases would not seek thereby to enforce or modify an oral agreement, but would be asserting such claims notwithstanding the implicitly conceded enforceability of the credit agreement (the SBA commercial loan and guarantees). On the other hand, the legislative history of the Act is clear that, if the Peases were asserting the counterclaims as a means to defeat directly or attain a modification of the credit agreement with Wachovia, the Maryland Credit Agreement Act would be triggered and bar consideration of the underlying allegations and evidentiary proffers in determining whether the confessed judgments should be opened, modified, or vacated.10 See Notes to H.B. [227] 704 (1989) (“[A]ll this legislation is saying is that ... if you are going to sue me to enforce an alleged loan agreement, get it in writing and get it signed.”).11 Because the Peases would be asserting the counterclaims against Wachovia for negligence, fraud, and breach of fiduciary duty, not to enforce a verbal agreement to borrow or to modify their existing agreement to borrow, but to constitute a set-off against any recovery obtained by Wachovia under a concededly enforceable credit agreement, these counterclaims plainly are not the sort of situation to which the General Assembly intended the Act apply.12 See Steven C. Bahls, Farm and Ranch Credit: [228] Duty-Based, Theories of Lender Liability, 19 Wm. Mitchell L.Rev. 367, 399 (1993) (“Since many ... claims do not seek to establish or modify a credit agreement, the [credit agreement] statutes may not apply.”). As such, § 5-408(b), which serves as the Act’s statute of frauds, does not bar at the threshold the Circuit Court from considering the Peases’ allegations—in assessing the legal sufficiency of whether the appropriate legal theory of each counterclaim states a prima facie cause of action—as grounds to open, modify, or vacate the confessed judgment.13 [229] C. As Void Ab Initio14 The Peases assert in the alternative that, if successful in opening or vacating the confessed judgments, they will use their allegations—sounding in negligence, fraud, and breach of fiduciary duty—as the bases for arguing that the SBA loan agreement and guarantees were void ab initio. As above, if the Act would bar the consideration of such parol evidence where the objective is to show that the credit agreement was void ab initio, then the parol evidence on which such a theory rests cannot constitute a “substantial and sufficient basis as to the merits of the action” sufficient to open the confessed judgment. Because we believe that the Act applies to bar evidence aiming to show that a credit agreement is void ab initio, we hold that such parol evidence cannot constitute a “substantial and sufficient basis as to the merits of the action,” and is therefore barred from consideration in the context of deciding whether to grant a motion to open, modify, or vacate a confessed judgment based on the credit agreement. [230] Again, the Act would only bar the Peases’ parol evidence tending to show the loan agreement was void ab initio if the admission of such evidence constitutes an attempt to enforce either: (1) an oral credit agreement; or (2) a verbal modification of their existing credit agreement. Here, while consideration of such evidence to nullify the credit agreement is not an attempt to enforce an oral credit agreement, we think it is an attempt to enforce a verbal modification of the credit agreement existing between the Peases and Wachovia. We explain. The SBA note and the accompanying guarantees set forth the rights and duties of the Peases and Wachovia. These rights and duties include, in pertinent part, the Peases’ duty to repay Wachovia $1,118,300, and, if default and acceleration occur under the note, failing repayment, Wachovia’s right to execute on the guarantors’ assets, including the real property upon which Bush is situated and the Peases’ residence. The Peases’ attempts to declare the credit agreement void ab initio, at least on the bases appearing in this record, constitute an attempt to have a court declare that they need not pay back the $1,118,300 and/or that Wachovia may not execute on the borrowers’ or the guarantors’ assets; as such, the Peases are arguing for the enforcement of what is, in effect, an oral modification of the original terms of the loan and guarantees. This is precisely the type of maneuver that the statute of frauds portion of the Maryland Credit Agreement Act was enacted to forestall. See Notes to H.B. 704 (“Multimillion dollar lawsuits are being filed and recovery is being made based on ... modifications of existing loan agreements.”). B. Summary This case requires this Court to consider the interplay between the law and rules governing confessed judgments and the Maryland Credit Agreement Act. “Judgments by confession are not favored in Maryland because Maryland courts have long recognized that the practice of including in a promissory note a provision authorizing confession of judgment lends itself far too readily to fraud and abuse.” Garliss [231] v. Key Fed. Sav. Bank, 97 Md.App. 96, 103, 627 A.2d 64, 68 (1993) (citation omitted). Not surprisingly then, Md. Rule 2-611(e) provides that “the court shall order the judgment by confession opened,” upon showing of a “substantial and sufficient basis for an actual controversy as to the merits of the action____” (Emphasis added.) A party can only successfully show the requisite “substantial and sufficient basis,” however, if the allegations and evidentiary proffers supporting such a basis will be arguably admissible. It is at this juncture that the Maryland Credit Agreement Act becomes relevant. That is, if the statute of frauds section of the Maryland Credit Agreement Act would apply to bar consideration of certain parol evidence at the merit-stage of the litigation, such evidence may not be considered in deciding a motion to open, modify, or vacate a confessed judgment. We hold that the General Assembly did not intend the Maryland Credit Agreement Act to apply to a borrower asserting tort counterclaims against a lender, even where the asserted factual underpinnings of the tort or torts derive from transactions relating to the execution of the credit agreement. As such, to the extent the Peases’ responsive pleading will assert counterclaims against Wachovia, the evidentiary proffers upon which these counterclaims appear to be based are not barred by the statute of frauds provision of the Maryland Credit Agreement Act from consideration in deciding whether to open or vacate the confessed judgment.15 Accordingly, the Circuit Court erred in refusing to consider whether the Peas-es’ allegations and evidentiary proffers plead sufficiently and substantially an actual controversy. To the extent, however, that the Peases claim that the SBA loan agreement was void ab initio, they ask the court effectively to enforce an oral modification of their written credit agreement. Because the applicable statute of frauds applies to bar a party from effectuating the enforcement of a claimed oral modification, [232] the evidence upon which such an argument rests would be, in that instance, inadmissible. In the Circuit Court, the hearing judge conceded that, but for his determination that he could not consider the Peases’ factual allegations and evidentiary proffers at the threshold, he “would certainly find that the Plaintiff would be ... able to present a defense ... by perhaps misrepresentation about the home being used as collateral.... ” Because he did not make a determination whether, pursuant to Md. Rule 2-611(d), there exists in this case a “substantial and sufficient basis for an actual controversy as to the merits of the action,” we remand the case, in light of this opinion, so that the court may consider whether the Peases’ allegations of negligence, fraud, and breach of fiduciary duty meet this threshold. JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY VACATED; CASE REMANDED TO THAT COURT FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION; COSTS TO BE ASSIGNED 50% TO THE PEASES AND 50% TO WACHOVIA. BELL, C.J., MURPHY and ADKINS, JJ., concur and dissent. Footnotes [1] Unless otherwise provided, all statutory references are to Maryland Code, Courts and Judicial Proceedings Article (2006 Repl.Vol.). [2] It is not clear whether Mr. Martin's first name is correctly spelled "Jeffrey” or "Jeffeiy,” as the Peases use both versions throughout their pleadings and briefs. [3] At oral argument, Peases' counsel admitted that he was not sure exactly what additional negative financial information was withheld. Furthermore, it is not clear whether the alleged withheld information was information in addition to that relied on by Wachovia's appraiser. At oral argument, Peases’ counsel stated that "there was, we believe, additional information beyond what was done in the appraisal ... that was received by ... the loan officer in this case.” On the other hand, in the affidavit supporting his motion to open, modify, or vacate the confessed judgment, William states merely that "Wachovia never provided to [sic] the negative financial information about the Bush purchase [to] its borrower, VLP Industries, or to William Pease and Michele Pease.” [4] Though it perhaps does not require stating, the $95,000 note from VLP Industries, Inc., payable to Kolper, was not part of the indebtedness under the commercial loan default that lead to the confessed judgments. [5] The Peases’ trial counsel stated expressly to the hearing judge that, ”[i]f you decide to vacate the Judgment, we will then file our counterclaim in this case.” Further, when asked by the hearing judge whether the Peases would file tort claims, Peases' counsel replied, "[wje’re asserting all tort claims. Yes, Your Honor.” [6] In ST Sys. Corp. v. Md. Nat’l Bank, 112 Md.App. 20, 684 A.2d 32 (1996), Maryland National Bank (MNB) offered a commercial-financing package to ST Systems Corporation (STX), part of which was conditioned upon STX having a value of at least $40,000,000. ST Sys. Corp., 112 Md.App. at 25, 684 A.2d at 34. Because STX as a going concern ultimately was valued at an amount less than that, the parties began negotiating a new commercial-financing package. ST Sys. Corp., 112 Md.App. at 25, 684 A.2d at 35. The parties never executed a loan agreement memorializing the terms of a restructured package, however. See ST Sys. Corp., 112 Md.App. at 26, 684 A.2d at 35. STX filed suit against MNB, asserting, inter alia, eight separate tort claims based on MNB's conduct during the loan negotiation process. Id. MNB filed a motion to dismiss these tort claims, arguing that the Maryland Credit Agreement Act barred STX’s tort claims that were related directly to the non-memorialized—and thus unenforceable—agreement. See id. The Court of Special Appeals explained that the Maryland Credit Agreement Act is "intended to limit the increase in lender liability litigation,” and that the statute "has broad language that appears to incorporate an expansive view of limiting lender liability....” See ST Sys. Corp., 112 Md.App. at 31, 684 A.2d at 37. Ultimately, the Court of Special Appeals held that " [allowing enforcement of tort claims based on an unenforceable oral agreement would invalidate [the Act] by nullifying its protective purpose ....” and that the Act's "economic protective policy is only upheld if tort claims based on an unenforceable alleged agreement are excluded.” See ST Sys. Corp., 112 Md.App. at 32, 684 A.2d at 38. See infra note 12. [7] The Concurring and Dissenting opinion’s efforts to grapple with the Maryland Credit Agreement Act’s plain language, legislative history, and how other jurisdictions may have treated debatably similar facts under arguably similar statutory schemes, where not entirely necessary, call to mind the stoiy of the Exodus. The Midrashic interpretation of the Exodus from Egypt recounts that, upon reaching the Red Sea, the waters did not automatically part before the Israelites. Midrash Rabbah, Vot. Ill 272 (S.M. Lehrman, trans., 3d ed.1983). While the Israelites stood by the shore contemplating their impending doom, Nahshon Ben Amminadab entered the water until the sea reached his nostrils. The Jewish Encyclopedia Vol. IX 146 (Funk & Wagnall 1905); Midrash Rabbah, supra. It was not until this act of self-sacrifice that the sea’s waters parted. Imagine, however, that there was a way for the Israelites to continue on their path without having to wade in water over their heads. The Concurring and Dissenting opinion here takes on the Maryland Credit Agreement Act at least up to its eyebrows; we wade in, however, only up to our nostrils. [222] We regret that the quality of our abridged analysis apparently does not meet the more rigorous standards expected by the subscribers to the Concurring and Dissenting opinion. See 416 Md. 211, 233, 6 A.3d 867, 880 (“|T]his argument merits more discussion than the brief treatment that the majority opinion accords it.”); 416 Md. at 237, 6 A.3d at 882 ("[A] more careful examination ... is key to this appeal.”). [8] The Concurring and Dissenting opinion highlights a different colloquy at oral argument between the Peases' counsel and Judge Murphy to support its view that we should decline to address the ¿’eases’ pursuit of a void ab initio claim. 416 Md. 211, 234 n.l, 6 A.3d 867, 880-81 n.l (2010). Apparently, Judge Adkins hears the Peases' counsel say, on the recording of oral argument, "we challenged that the loan that was executed, through the negligence or through fraud, was improperly created and therefore could either be void ab initio or as a setoff,” and [223] infers from the past-tense of the verb "challenged” that the Peases only pursued the void ab initio objective before the Circuit Court, but not before this Court. Id. (first emphasis added). After our careful review of the oral argument recording, we hear the Peases’ counsel utter the word “challenge” (the present tense); thus, we understand the Peases’ counsel to mean that he is currently—before this Court—arguing that, upon remand, the Peases be allowed to seek a declaration that the SBA loan was void ab initio (or voidable). Notwithstanding our difference of opinion about which tense the verb "challenge” took in the exchange between counsel and Judge Murphy, the Peases’ counsel—during what seems elsewhere on the recording of oral argument to be part of his prepared arguments, and not in direct response to an inquiry by a member of the Court—unequivocally states that it was his belief that the defenses asserted by his clients (then and now) operate to void the SBA loan ab initio. Finally, the Peases’ counsel, in his brief at 19, cites a Law Review article for the proposition that "[fjraud may serve both as a defense to a suit on a contract and as an independent tort.” Todd C. Pearson, Limiting Lender Liability: The Trend Toward Written Credit Agreement Statutes, 76 Minn. L.Rev. 295, 314-15 (1991). Concededly, while the Peases’ counsel could have been clearer before this Court that, upon remand, his clients intend to pursue the void ab initio claim before the Circuit Court, when viewing the proposition that "fraud may serve ... as a defense to a suit on a contract” through the lens of what was argued in the trial court and at appellate oral argument, the more reasonable interpretation of the record is that the Peases, before this Court, argue that they be allowed to proceed anew before the Circuit Court, claiming, among other things, that the SBA loan was void from the inception (or was at least voidable). Accordingly, it is fair and proper to comment on that contention in this opinion. [9] "Counterclaim” has been defined as "the assertion of a right to have an affirmative judgment against the adversary based upon a setoff....” Imbesi v. Carpenter Realty Corp., 357 Md. 375, 380, 744 A.2d 549, 552 (2000) (emphasis added). [10] Wachovia misplaces its reliance on a recent decision of the United States District Court for the District of Maryland, Kuechler v. The Peoples Bank, 602 F.Supp.2d 625 (D.Md.2009). In Kuechler, the Plaintiffs took out a $500,000 commercial loan used to purchase a piece of property. Kuechler, 602 F.Supp.2d at 627. The Plaintiffs’ personal guarantee on the loan was secured by an indemnity mortgage on both their personal residence and the to-be-purchased property. Id. After the borrower defaulted, Peoples Bank demanded full payment on the Plaintiffs’ guarantee. Kuechler, 602 F.Supp.2d at 628. In response, the Plaintiffs sued Peoples Bank, alleging, inter alia, that the bank engaged in illegal bank practices, professional negligence, and intentional and negligent misrepresentation in underwriting the loan. Kuechler, 602 F.Supp.2d at 631. The Plaintiffs premised these lender227 liability claims on allegations that "Peoples Bank, in order to induce Plaintiffs to execute the mortgage on their home, assured them that the foreclosure sales proceeds of the ... Property would be applied against the $500,000 loan.” Kuechler, 602 F.Supp.2d at 628. Such an allegation, however, was at odds with the express language of the credit agreement. Kuechler, 602 F.Supp.2d at 632. Judge J. Frederick Motz held that "Peoples Bank’s promise to take or not to take certain actions, such as foreclosing on the Davidson property before foreclosing on the Kuechler’s residence .... was not in writing, it is [therefore] not enforceable.” Id. In effect, the Plaintiffs’ claim in Kuechler was essentially that the bank’s inducements and assurances effectuated a modification of the original credit agreement. See id. Of course, the legislative history of the Maryland Credit Agreement Act is clear that such alleged modifications are unenforceable unless in writing. As noted supra, in the case sub judice, however, to the extent that the Peases seek to assert counterclaims against Wachovia, they are not alleging that the alleged tortious acts of negligence, fraud, and breach of fiduciary duty effectuated a modification of their credit agreement with Wachovia. [11] Not all jurisdictions have held that offensive use of counterclaims are allowed under their respective credit agreement statutes of frauds. For instance, Illinois’s credit agreement statute of frauds, 815 ILL. COMP. STAT. 160/2 (2007), which bars actions by a debtor “on or in any way related to a credit agreement,” has been held to bar counterclaims related to a written credit agreement. See First Nat’l Bank in Staunton v. McBride Chevrolet, 267 Ill.App.3d 367, 204 Ill.Dec. 676, 642 N.E.2d 138, 142 (1994) (“There is no limitation as to the type of actions by a debtor which are barred by the act, so long as the action is in any way related to a credit agreement.”). Because the Maryland Credit Agreement Act, however, is not as broadly worded, we do not need to construe similarly our statute to bar counterclaims, even if they are, in some way, related to the transaction leading to the execution of the written credit agreement. [12] Thus, we do not agree with the view, espoused by the Court of Special Appeals in ST Sys. Corp. v. Md. Nat’l Bank, 112 Md.App. 20, 32, [228] 684 A.2d 32, 38 (1996), that the Act's "economic policy is only upheld if tort claims based on an unenforceable alleged agreement are excluded.” (Emphasis in original.) [13] It is worth noting that a recent decision from the United States District Court for the Western District of Missouri concluded that Missouri’s Credit Agreement Act did not apply, in the first instance, to tort allegations similar to those before us. In Four A’s Investment Co., LLC v. Batik of Am. Corp., 2010 WL 2720713, 2010 U.S. Dist. LEXIS 66976 (W.D.Mo. 6 July 2010), a borrower sued Bank of America for negligent misrepresentation, fraudulent misrepresentation, negligence, and breach of covenant, stemming from the borrower’s desired loan from Bank of America. Specifically, the borrower alleged that the bank "made oral representations that the loan would be approved within a certain time” and that the bank "misrepresented the status of the loan when asked about why the process was taking so long." Four A's Investment Co., LLC, 2010 WL 2720713, at *4, 2010 U.S. Dist. LEXIS 66976, at *12. In response to these allegations, Bank of America asserted that, because the borrower was seeking a commercial loan, Missouri's Commercial Credit Agreement Statute of Frauds, Mo.Rev. Stat. § 432.047, which provides that "[a] debtor may not maintain an action upon or a defense ... in any way related to a credit agreement unless the credit agreement is in writing ... ”, barred such claims. In response, the borrower argued, inter alia, that "their common law theories have nothing to do with a credit agreement, but rather with the way the loan process was conducted” and that "their suit is independent of any ... credit agreement.” Four A's Investment Co., LLC, 2010 WL 2720713, at *4, 2010 U.S. Dist. LEXIS 66976, at *13. The court ultimately held that "because [the borrower is] not seeking to enforce an oral promise to loan money ... Mo.Rev.Stat. § 432.047 does not apply to bar plaintiff’s common law claims.” Four A’s Investment Co., LLC, 2010 WL 2720713, at *4, 2010 U.S. Dist. LEXIS 66976, at *14 (emphasis added). Similar to Four A's Investment Co., the Peases, if successful in opening the confessed judgment, seek to use the common law tort theories as an offensive maneuver. Thus, because both cases deal with assertions "havfing] nothing to do with a credit agreement, but rather with the way the loan process was conducted”, Four A’s [229] Investment Co., LLC, 2010 WL 2720713, at *4, 2010 U.S. Dist. LEXIS 66976, at *13, Four A’s Investment Co., LLC bolsters the view that the Maryland Credit Agreement Act does not apply to the facts before us. See also King v. Parish Nat'l Bank, 885 So.2d 540 (La.2004) (holding the Louisiana credit agreement statute, La.Rev.Stat. Ann. § 6:1122 (2008), inapplicable to allegations of bad faith that were separate from any credit agreement). [14] According to the Concurring and Dissenting opinion, we fail "to recognize that a successful claim of fraudulent inducement renders the contract voidable, not void ab initio." 416 Md. 211, 234, 6 A.3d 867, 881. It is not that we "fail to recognize" this apparently well-settled rule of law; rather, we view it as immaterial. That is, the Maryland Credit Agreement Act applies to bar certain evidence notwithstanding the likelihood of success in utilizing that evidence to prove a certain legal theory. Thus, it is immaterial that the Peases would be unsuccessful in using such evidence to prove that the SBA loan was void ab initio; rather, the only issue is whether, in so arguing, the Peases would be seeking to enforce a modification of the SBA loan agreement. Because we hold that they are seeking to enforce a modification of the agreement, the Act applies to bar the admission of the proffered evidence, regardless of whether they could be successful in actually enforcing such a modification. [15] This Court expresses no opinion as to whether the Peases will be successful in satisfying the trial court that there exists a ‘‘substantial and sufficient basis for an actual controversy as to the merits of the action,” as required by Md. Rule 2-611(e).