Kona Properties v. W.D.B. Corp , 224 Md. App. 517 ( 2015 )

REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
CONSOLIDATED CASES
Nos. 696, 697, 698
September Term, 2014
KONA PROPERTIES, LLC
v.
W.D.B. CORP., INC.
LIENLOGIC REO F1, LLC
v.
N.B.S., INC.
2009 DRR-ETS, LLC
v.
S&S PARTNERSHIP
Zarnoch,
Kehoe,
Leahy,
JJ.
Opinion by Leahy, J.
Filed: August 28, 2015
We consider appeals from separate orders entered in three foreclosure cases in the
Circuit Court for Baltimore City. We consolidated the cases, upon motion,1 because they
present equivalent and undisputed factual scenarios. In each case, the owner of a
residential property failed to pay property taxes owed to Baltimore City. The City
commenced a tax sale, and the winning bidder paid the delinquent taxes and fees and
received a certificate of tax sale in exchange. The balance of the bid price, i.e. the bid
surplus, remained on credit to be paid to the property owner. After the requisite statutory
waiting period, the holder of each tax sale certificate petitioned the Circuit Court for
Baltimore City to foreclose the property owners’ right of redemption. The circuit court
entered judgment foreclosing the right of redemption in each case.
Though these judgments were entered against them, the initial property owners or
mortgage holders for each property, namely, W.D.B. Corp., Inc., N.B.S., Inc., and S&S
Partnership (collectively Appellees), filed motions in the circuit court to enforce the
judgments because they each wanted to receive the surplus of the bid purchase on their
property.2 The motions to enforce the judgments were opposed by the certificate holders:
Kona Properties, LLC, LienLogic REO F1, LLC, and 2009 DRR-ETS, LLC (collectively
1
On April 9, 2015, Appellants each filed a motion to consolidate, through the
single attorney, Mr. Stefan B. Ades, representing them in their appeals. This highlights a
feature of these cases that we revisit throughout this opinion—the purchasers of the tax
sale certificates are linked by common addresses and attorneys.
2
After payment of the bid surplus to the owner and payment of outstanding taxes
and fees to the City, the certificate holder is able to obtain the deed to the property
pursuant to Tax-Property Article § 14-847 of the Maryland Code (1985, 2012 Repl. Vol.,
2014 Supp.).
Appellants). Appellants raised standing and jurisdictional issues, contending,
paradoxically,3 that the court could not enforce the judgments that Appellants had
obtained because Appellants had failed to perfect service upon certain Appellees.
Appellants also argued that Appellees’ motions to enforce the judgments should be
denied because the General Assembly had made changes to the tax sale statute
superseding Hardisty v. Kay, 268 Md. 202 (1973), which held, inter alia, that a property
owner is entitled to obtain a money judgment to compel a certificate holder to pay the
surplus bid. Ultimately, Appellants’ arguments failed. The circuit court granted
Appellees’ motions to enforce the judgments and required the certificate holders to pay
the bid surpluses to the respective property owners. The certificate holders appealed.
Appellants Kona Properties, LLC (“Kona”) and LienLogic REO F1, LLC
(“LienLogic”) present three threshold issues, which we have rephrased:
I. Whether the circuit court erred by not vacating the judgments
foreclosing the right of redemption because Kona and LienLogic failed
to effect service on Appellees WDB Corp. and NBS, Inc.
II. Whether the circuit court erred in finding that Appellees had standing to
bring their motion.
III. Whether the circuit court erred by not striking the judgments foreclosing
the right of redemption based upon the motions of Baltimore City and
Montego Bay Properties, LLC to strike the judgments because Kona
and LienLogic failed to pay the taxes and bid surplus within 90 days of
the entry of the judgments, pursuant to Tax-Property Article § 14-
847(d).
Appellant 2009 DRR-ETS, LLC (“DRR-ETS”) presents the following additional
3
Irony is the leitmotif that runs counterpoint to the LLC linkage theme throughout
these cases.
2
issue:
IV. Whether the circuit court erred in denying its motion to strike the
motion to enforce judgment filed by S&S Partnership because the
motion did not reference applicable law as required by Maryland Rule
2-311(c).
All three Appellants present the following issues for our consideration:
V. Whether the court erred in relying upon the ruling in Hardisty v. Kay to
hold that Appellees could enforce the judgments against Appellants to
obtain the surplus bid.
VI. Whether the court erred in failing to find that Appellees’ motions to
enforce the judgments would lead to unjust enrichment.
VII. Whether enforcing the judgments against Appellants violates public
policy.
We hold that the circuit court did not abuse its discretion in failing to strike the
judgments foreclosing the right of redemption, nor err in entering judgments against the
Appellants ordering them to pay the bid surpluses to Appellees. We further hold that
Hardisty v. Kay remains good law and that the judgments do not violate public policy nor
do they unjustly enrich Appellees.
Background
These cases contain a common thread tying each together and furnishing the
reason we granted the motions to consolidate. In each case, subsequent to the tax sale,
the tax sale certificate was transferred to another limited liability company that shared
either the same address, attorney and/or incorporator. The new holder of the tax sale
certificate foreclosed the property owner’s right of redemption and, for some unexplained
reason, the certificate holder later decided that it did not want the property and failed to
3
pay the bid price or the outstanding taxes and fees—payment of which is a prerequisite to
obtaining the deed to the property. The original property owner or mortgage holder in
each case later filed a motion in the circuit court to enforce the judgment against the
certificate holder, requiring the certificate holder to pay taxes accruing after the tax sale
and to pay the surplus bid to the property owner or mortgage holder. The circuit court
granted all three motions to enforce and required the certificate holders to pay the taxes
and bid surpluses to the collector.4
Tax Sale Statute
To lay a foundation for understanding the mazy foreclosures on appeal, we begin
with an explication of the tax sale statute and how the process should normally transpire.
The focus in the present appeal is whether; after the tax sale certificate holder obtains a
judgment foreclosing the property owner’s right of redemption, the property owner can
move to enforce the judgment ordering the certificate holder to pay the bid surplus to the
property owner, and whether, in response, the certificate holder can move to strike or
vacate the judgment it obtained earlier to avoid paying the bid surplus and interim taxes.
Tax Sale and Payment of Back Taxes
The tax sale procedure is set forth in Maryland Code (1985, 2012 Repl. Vol., 2014
4
A “collector” is “an officer of a county or municipal corporation who has a duty
to collect or remit taxes.” Maryland Code, (1985, 2012 Repl. Vol.), Tax-Property
Article, § 1-101(e). The Director of Finance is the collector for Baltimore City. See
Estime v. King, 196 Md. App. 296, 300 n.2 (2010).
4
Supp.), Tax-Property Article (“TP”) §§ 14-801 through -870.5 “[F]or a tax sale to be
effective substantial compliance with the statute is required.” Simms v. Scheve, 298 Md.
1, 3 (1983) (citing Free v. Greene, 175 Md. 36, 42 (1938); McMahon v. Crean, 109 Md.
652, 666 (1909)).
The Court of Appeals described the basic steps of the tax sale process:
Unpaid taxes on real estate constitute a lien on that property. [§ 14-
804]. Generally, within two years from the date taxes become in arrears the
jurisdiction’s collector must sell the land. [§ 14-808]. Notice of the
proposed sale must be given to the owner at least thirty days before the
property is advertised for sale and the owner is notified that if he does not
pay the taxes within thirty days, the property will be sold. [§ 14-812]. After
the sale is properly advertised, the property is sold at public auction. [§ 14-
817].
Scheve v. Shudder, Inc., 328 Md. 363, 369-70 (1992) (quoting Simms, 298 Md. at 3-4(citations omitted)), cited with approval in Quillens v. Moore, 399 Md. 97 (2007).
At the public sale, the purchaser pays the back taxes due on the property and is in
turn “given a certificate of sale which includes a description of the property, the amount
for which the property was sold, and information as to the time in which an action to
foreclose the owner’s right of redemption must be brought.” Id.; see § 14-820. It is
important to note that the tax sale purchaser does not pay the entire bid price at the time
of the tax sale. The purchaser pays the back taxes, and the rest of the bid remains on
credit, to be paid after the tax sale certificate holder forecloses the title owner’s right of
redemption. The title owner of the property may redeem the property at any time until
5
Hereinafter, unless otherwise indicated, all statutory citations are to Maryland
Code (1985, 2012 Repl. Vol., 2014 Supp.), Tax-Property Article.
5
the right of redemption has been finally foreclosed by paying the required sum to the
collector, who transfers the money to the tax sale purchaser in exchange for the tax sale
certificate. Id.; see §§ 14-827 to 14-828.
Foreclosing the Right of Redemption
The purchaser’s ability to foreclose the right of redemption is defined under
sections 14-832.1 to 14-848.
These provisions are to be [“construed to ensure a balance between:
(1) the due process and redemption rights of persons that own or have an
interest in property sold at a tax sale; and (2) the public policy of providing
marketable title to property that is sold at a tax sale through the foreclosure
of the right of redemption.”] [§ 14-832]. The holder of the certificate of sale
may file [a complaint] to foreclose the owner’s right of redemption after
[six months (nine months in Baltimore City)] from the date of the sale....
The [complaint] must be filed within two years or the certificate is void.
The owner may redeem the property at any time until the right of
redemption has been finally foreclosed. [§ 14-833].
The purchaser initiates the foreclosure proceeding in the [circuit]
court by filing a [complaint as detailed in § 14-835] and attaching the
certificate of sale issued by the collector....”[6]
Shudder, 328 Md. at 370-71.
The tax sale statute sets out several steps that must be complied with before a
circuit court may enter a final judgment foreclosing the property owner’s right of
redemption under § 14-844: (1) the certificate holder must file a complaint, conforming
with § 14-835(a) within two years following the sale; (2) the certificate holder must
attach the certificate of sale pursuant to § 14-835(b); (3) the certificate holder must attach
6
The Court in Shudder updated the language of Simms to reflect the recodification
of the Tax-Property Article adopted in 1985. See 1985 Md. Laws, ch. 8, § 2.
6
an affidavit of title search (§ 14-838); and (4) the court must issue process and public
notice under §§ 14-839 and 14-840, setting out the time after which the right of
redemption will be foreclosed.
Liability of the Certificate Holder to Pay Taxes Accruing after Tax Sale
Once the court enters final judgment to foreclose the right of redemption, the
holder of the tax sale certificate “immediately becomes liable for the payment of all taxes
due and payable after the judgment. . . . On the entry of judgment, the plaintiff shall pay
the collector any surplus bid and all taxes together with interest and penalties on the taxes
due on the property.” § 14-844(d). Section 14-831 clarifies that “[a]ll taxes accruing
after the date of sale, together with interest and penalties on the taxes, are additional liens
against the property and on passage of the final [judgment foreclosing the right of
redemption], are immediately due and payable by the holder of the certificate of sale.”
Thus, even though the taxes are not assessed to the certificate holder until the entry of
final judgment, upon entry of that judgment, the certificate holder is liable for all taxes,
interest, and penalties accruing after the tax sale.7 § 14-831. Notably, even though the
7
Section 14-831 states, in pertinent part,
Once the judgment is passed, the property shall be transferred on the
assessment books or records to the holder of the certificate of sale
notwithstanding the provisions of § 3-104 of the Real Property Article.
After the transfer, the property shall be assessed to the holder of the
certificate of sale for property tax purposes. All taxes accruing after the date
of sale, together with interest and penalties on the taxes, are additional liens
against the property and on passage of the final decree, are immediately due
and payable by the holder of the certificate of sale except as provided under
§ 14-826 of this subtitle. The collector may not deliver a deed to the person
(Continued…)
7
owner of the property may not redeem the property after the entry of final judgment, the
certificate holder does not receive the deed, and thus, may not take possession of the
property, until the certificate holder pays the collector the surplus bid and all subsequent
taxes on the property. § 14-831. If the certificate holder does not pay the taxes in full,
the property is left in limbo: the prior owner may not sell the property and knows that, as
soon as the certificate holder pays the collector, it will no longer have title to the
property, however, the certificate holder also does not have full rights to the property
because the collector has not issued a deed to the certificate holder.
Remedies for Further Failure to Pay Taxes
The taxing entity, such as the City of Baltimore in the cases before this Court, may
bring the property out of the limbo created by the certificate holder’s failure to pay the
taxes accruing after the tax sale by selling the property pursuant to the lien against it at a
second tax sale. See Prince George’s Homes, Inc. v. Cahn, 283 Md. 76, 79-80 (1978).
This solution comes with both limitations and costs. During the two-year period in which
a petition to foreclose the right of redemption may be filed, there can be no other tax sale,
and taxes continue to accrue until the holder of the certificate of sale has had an
opportunity to file his petition and to secure a deed from the collector. See id. at 79-80,
81-83 (holding that the city or county may not sell the property a second time until the
court has entered final judgment or has dismissed the case). Once the foreclosure
(…continued)
entitled to the deed until all subsequent taxes, together with interest and
penalties on the taxes, are paid in full.
8
proceedings are concluded, however, resale of the property for nonpayment of taxes is
permitted. If the certificate holder fails to pay the bid surplus and taxes on the property,
the taxing entity may bring suit against the certificate holder pursuant to § 14-864 within
seven years from the date the tax is due. Thus, the City is limited by the statutory time
frames from reselling the property quickly to obtain the delinquent taxes, and the City, as
well as the judicial system, is burdened with the costs of having to repeat the tax sale
foreclosure process.
The failure to pay taxes accruing after the tax sale are pervasive issues in these
consolidated cases. As we turn to address the merits of each case, we note that in each
circumstance, the tax sale certificate holder, after receiving an entry of final judgment
foreclosing the prior owner’s right of redemption, failed to pay the taxes accruing on the
property after the tax sale and failed to pay the bid surplus to the owner, as required by §§
14-831 and 14-844. This contributes to a cycle whereby the owners do not receive
compensation for the property, yet cannot sell it otherwise, and the city must wait until
the certificate holder forecloses the right of redemption—a process which may take
years—before reselling the property to recoup the taxes that the certificate holder failed
to pay after receiving final judgment.
We now recount the facts in each of the consolidated cases.
Kona Properties, LLC v. WDB Corp Inc.
At some point before April 14, 2007, W.D.B. Corp., Inc. (“WDB”), the owner of a
rowhouse located at 5405 Park Heights Avenue, Baltimore near Pimlico Race Course,
failed to pay the property taxes due to the City. On May 14, 2007, the Baltimore City tax
9
collector held a public tax sale and sold the property to Heartwood 88, LLC
(“Heartwood”). Heartwood bid $46,953.49 and paid the outstanding taxes on the
property along with interest, penalties, and expenses incurred in making the sale, which
amounted to $1,943.06.8 On November 16, 2007, Heartwood filed a complaint to
foreclose the right of redemption. Named in the complaint were defendants WDB,
Goldscheider Family Trust,9 Baltimore City, and “[a]ll unknown owners of the property
described below; all . . . persons having or claiming to have any interest in the property
and premises situate[d] in the City of Baltimore,” as required by §§ 14-835 and 14-836.
In the complaint, Heartwood averred that it complied with the requirements
dictated by the tax sale statute as prerequisites to foreclosure of the right of redemption.
Among other things, Heartwood averred (1) it is the owner of the tax sale certificate
either by direct purchase or by assignment; (2) it conducted a title search for the past 40
years, which found that fee simple title or other legal interest was vested in the
defendants named in the complaint; and (3) it sent two pre-suit notices of the tax sale to
the interested parties. Heartwood requested that the court enter a final judgment
8
The residue of the bid price, $45,010.43, remained on credit. § 14-818(a)(1)(i).
9
Although WDB is the owner the property, WDB pays ground rent on the
property to the Goldscheider Family Trust. The properties at issue in this case are all
subject to ground rent, necessitating that the certificate holders received leasehold
interests instead of fees simple. See Muskin v. State Dep’t of Assessments & Taxation,
422 Md. 544, 550 (2011) (citing Kolker v. Biggs, 203 Md. 137, 141 (1953)) (“A ground
rent lease, common in Baltimore City, is a renewable 99 year lease where the fee simple
owner of a property receives an annual or semi-annual payment (‘ground rent’) and
retains the right to re-enter the property and terminate the lease if the leaseholder fails to
pay.”).
10
foreclosing all rights of redemption of the defendants and of all persons having or
claiming to have any interest in the property and vesting an absolute and indefeasible title
in fee simple or leasehold to the property in Heartwood. Heartwood also requested that
the court send summons to the defendants and issue an order of publication, as required
by § 14-840.
On November 30, 2007 (entered December 1, 2007), Heartwood filed a separate
notice to defendants, pursuant to then Maryland Rule 14-502(b)(3),10 stating, “[you] are
hereby notified of the filing of this Complaint and are warned to redeem the property or
to file an answer to the complaint on or before . . . [t]he expiration date of the period
described in the summons. . . .”11 Notice was advertised in The Daily Record and was
posted on the property. A process server affirmed that, on February 11, 13, and 15, 2008,
he attempted to serve WDB and its resident agent with process without success, and that
10
On May 1, 2013, the Rules Committee amended Maryland Rule 14-502,
amending and renaming subsection (b) to subsection (c). As amended, subsection (c)
requires the complaint to be accompanied by the certificate of sale; a title search
supported by an affidavit; a description of the property; the time within which a
defendant must file an answer to the complaint or redeem the property; a statement that
failure to answer or redeem the property within the time allowed may result in a
judgment foreclosing the right of redemption; and an affidavit stating the date that the
notices required by law were given, the name and address of the persons to whom the
notices were given, and the manner of the delivery of the notice, and the amount required
to redeem the property.
11
Generally, the summonses required defendants to file a written answer or
petition to redeem within 30 days of receipt of service.
11
on February 17, 2008, he personally served Edward Goldscheider, a trustee for
Goldscheider Family Trust.12
Meanwhile, Heartwood assigned the entire right, title, and interest in the certificate
of tax sale for 5405 Park Heights Avenue to Kona Properties, LLC (“Kona”),13 as
reflected in a line filed by Heartwood on October 30, 2012, substituting Kona as plaintiff.
Attorneys Anthony J. De Laurentis, John K. Reiff, and John E. Reid represented both
Heartwood and Kona. 14
On October 31, 2008 (entered November 3, 2008), Kona certified that a process
server was able to substitute service on WDB by serving Ella McDaniel, an
administrative assistant at the State Department of Assessments and Taxation (“SDAT”)
on June 2, 2008, pursuant to Maryland Rule 2-124(o).15 On November 19, 2008, the
12
The record reflects that in each case before us, the certificate holder mailed a
notice of the foreclosure proceeding to the tenants occupying the property, indicating that
the property was being rented during the months after the tax sale.
13
Section 14-821 provides, in pertinent part, that “an assignment of the certificate
of sale vests in the assignee, or the legal representative of the assignee, all the right, title,
and interest of the original purchaser.” The assignment states that it was executed “FOR
VALUE RECEIVED.”
14
Although Heartwood is organized in Florida, its resident agent in Maryland is
Anthony J. De Laurentis, and Kona was organized here in Maryland by its resident agent,
John K. Reiff. All companies share the same Maryland address and suite number. We
take judicial notice of Appellants’ articles of organization and resident agent filings,
which are matters of public record on file with the State Department of Assessments and
Taxation. See Thomas v. Rowhouses, Inc., 206 Md. App. 72, 75 n.3 (2012).
15
Rule 2-124(o) permits substituted service upon State Department of
Assessments and Taxation if the entity has no resident agent, the resident agent is no
longer at the address for service of process maintained with SDAT, or two good faith
attempts on separate days to serve the resident agent have failed.
12
court entered a judgment foreclosing the right of redemption of all known defendants.
The judgment vested in Kona an absolute and indefeasible leasehold title, free of
encumbrances, except for taxes and municipal liens accruing after the tax sale. It ordered
the Director of Finance to deliver a deed to Kona and ordered the Supervisor of
Assessments of Baltimore City to enroll Kona as the leasehold owner of the rowhouse
near Pimlico. However, Kona’s receipt of the deed was contingent on its payment of the
bid surplus and all taxes, fees, and penalties accruing on the rowhouse after the tax sale.16
§ 14-847(a)(1) (“[T]he judgment of the court shall direct the collector to execute a deed
to the holder of the certificate of sale in fee simple or in leasehold, as appropriate, on
payment to the collector of the balance of the purchase price, due on account of the
purchase price of the property, together with all taxes and interest and penalties on the
property that accrue after the date of sale.”).
After Kona received judgment foreclosing WDB’s right of redemption, Kona
never paid the surplus bid to WDB or the taxes to the City of Baltimore on the Park
Heights Avenue rowhouse. A second tax lien was filed against the property, and
Baltimore City was forced to hold a second tax sale. After bidding on the property,
Montego Bay Properties, LLC (“Montego Bay”)—another company, with the same
resident agent and attorneys as Kona and Heartwood—received a tax sale certificate on
July 15, 2010. Throughout this entire time, WDB never entered an appearance, answer,
or contested the foreclosure proceedings; however, because neither Heartwood, Kona,
16
All taxes accruing after the tax sale were assessed to Kona after it received the
judgment foreclosing the right of redemption, pursuant to §§ 14-831 and 14-844.
13
nor Montego Bay paid the taxes and surplus bid, no tax sale certificate holder received a
deed to the property, leaving WDB in possession of the rowhouse.
More than two years later, on March 1, 2013, Montego Bay, as holder of the
subsequent tax sale certificate, filed a motion to strike the judgment foreclosing the right
of redemption (against WDB) entered on November 19, 2008, pursuant to § 14-847(d).
Montego Bay wanted to strike the judgment because it believed the judgment entered in
favor of Kona created a cloud on title that could affect Montego Bay’s rights. It alleged
that Kona had failed to pay the purchase price and taxes owed to the collector and that its
subsequent tax sale certificate was prima facie evidence that payment by Kona was not
made within 90 days as required by statute. Defendant WDB—having not answered the
complaint five years earlier and having never received the bid surplus—opposed the
motion and notified the court of a conflict of interest between Kona and Montego Bay
resulting from the fact that they were under common ownership and represented by the
same counsel. WDB argued that the Montego Bay tax sale did not affect the case before
the court—viz., Kona owed WDB the bid balance irrespective of a tax sale that took
place after the court entered judgment foreclosing the right of redemption. On March 21,
2013, by the request of the court, Baltimore City responded to the motion to strike
judgment, confirming that Kona never picked up the deed for the property at 5405 Park
Heights Avenue and never tendered payment for the balance of the purchase price or
subsequent tax liens that accrued, causing the property to be placed in the 2010 tax sale.
WDB filed a Motion to Enforce Judgment against Kona for the surplus bid owed
to WDB as the owner of the property before the tax sale, pursuant to the Court of
14
Appeals’ holding in Hardisty v. Kay, discussed infra. WDB stated that “the residue of the
purchase price, $45,010.43 ([]”surplus bid”) remained on credit, pursuant to §14-
818(a)(l)(i), Tax-Property Art. . . .” and, “following entry of said Order granting
judgment [foreclosing the right of redemption] Kona [] has failed to pay the City as
collector its surplus bid amount of $45,010.43 as required by Tax-Property Art. §14-
844(d).” Kona opposed the motion to enforce judgment, by asserting, aberrantly, that
because it had not effected proper service on defendant WDB, the court did not have
personal jurisdiction over WDB and so the court could not now enforce the judgment. As
explained in more detail in our discussion below, Kona also argued that Hardisty v. Kay
has been superseded by changes to the tax sale statute, and therefore the title property
owner could not enforce the judgment to receive the bid surplus from the certificate
holder. On May 9, 2014, the circuit court held a hearing to resolve the outstanding
motions in this case, along with the two other cases consolidated on appeal.
After a hearing on May 9, 2014, addressing the motions of all parties in these
appeals, Judge Charles J. Peters entered three orders on May 13, 2014 granting
Appellees’ respective motions to enforce judgment and requiring Kona and the other
Appellants to pay the bid surpluses and taxes due to the collector pursuant to the Court of
Appeals’ holdings in Scheve v. Shudder and Hardisty v. Kay. Kona noted a timely appeal
on June 11, 2014.
Also on June 11, 2014, WDB filed a motion to alter or amend the May 13, 2014,
order to reflect that Kona is required to pay WDB the surplus bid, in the amount of
$45,010.43 plus post-judgment interest so the amount could be reduced to a money
15
judgment and operate as a lien on the property. On August 7, 2014, the court granted the
motion in part, ordering “that a monetary judgment in the amount of the bid surplus,
$45,010.43, is granted against Substituted Plaintiff Kona Properties, LLC and in favor of
Defendant W.D.B. Corp., Inc.”17
LienLogic REO F1 LLC v. N.B.S., Inc.
The second case presents a similar factual scenario to the one described above.
The title owner of the property, 3015 Virginia Avenue LLC, failed to pay the taxes due.
On May 17, 2010, the Baltimore City tax collector held a public tax sale and sold the
single family home located at 3015 Virginia Avenue, also near Pimlico, to ETS
Maryland, LLC. ETS bid $43,935.24 and paid the outstanding taxes on the property
along with interest, penalties, and expenses incurred in making the sale, which amounted
to $3,253.58. On May 18, 2011, ETS Maryland filed a complaint to foreclose the right of
redemption, which named as defendants 3015 Virginia Avenue LLC, N.B.S., Inc.
(“NBS”), James W. Holderness, Trustee, Daniel Menchel, Trustee, Baltimore City, and
all persons having or claiming to have any interest in the property. Similar to the Kona
case, in the complaint, ETS averred that it complied with the requirements dictated by the
tax sale statute as prerequisites to foreclosing of the right of redemption and that it had
served the defendants. The process server affirmed by affidavit that, on June 30, 2011,
he personally served Harriette Ladson, the resident agent for 3015 Virginia Avenue LLC,
and, on July 5, 2011, he personally served Ben Seiderman, a staff member for NBS.
17
The order did not address the taxes, interest and penalties also due the Collector
per the May 9, 2014 order.
16
ETS assigned the certificate of tax sale for the 3015 Virginia Avenue property to
LienLogic REO F1, LLC (“LienLogic”), and substituted LienLogic as plaintiff on
October 1, 2012. As in the Kona case, ETS and LienLogic were represented by William
M. O’Connell and Stefan B. Ades, both operating out of the same office as Anthony J. De
Laurentis, John K. Reiff, and John E. Reid—3604 Eastern Avenue, Suite #300.18
Also on October 1, 2012, LienLogic filed an affidavit of compliance and request
for judgment that substantiated the claims and relief prayed for in the original complaint
filed by ETS. The affidavit of compliance detailed the methods of service and affirmed
that service was proper on all defendants. The circuit court entered a judgment on
December 5, 2012, foreclosing the rights of redemption of the defendants and allowing
LienLogic to obtain the deed to the property contingent upon its payment of the bid
surplus and all taxes, fees, and penalties accruing after the tax sale. § 14-847(a)(1).
Similar to the Kona case, LienLogic did not pay the bid surplus, taxes and fees, and did
not receive the deed to the property.
Again as in the Kona case, on March 7, 2013, months after the court entered
judgment foreclosing the right of redemption, NBS answered the complaint to foreclose
its right of redemption and asked the court to enter a monetary judgment against
LienLogic for the surplus bid owed to NBS under a purchase money deed of trust, dated
October 25, 1994. LienLogic also moved to vacate the judgment foreclosing the right of
18
Interestingly, although ETS is organized in Delaware, its resident agent in
Maryland is Anthony J. De Laurentis, and Kona was organized here in Maryland by its
resident agent, John K. Reiff. All companies have the same Maryland address and suite
number.
17
redemption arguing that the court lacked jurisdiction because the property owner was not
properly served.19
After the May 9, 2014 hearing, mentioned supra, on May 13, 2014, Judge Peters
entered the orders discussed supra, including an order directing LienLogic to pay the bid
surplus and taxes due. The court also denied LienLogic’s motion to vacate. LienLogic
noted a timely appeal on June 11, 2014.
On July 8, 2014, after LienLogic noted its appeal to this court, NBS asked the
circuit court to enter a money judgment for payment of the surplus bid in the amount of
$40,681.66. On August 7, 2014, the court granted the motion and entered an amended
order.
2009 DRR-ETS LLC v. S&S Partnership
In the third case, similar to the first two, a bidder purchased the tax sale certificate
for a property in Baltimore City, assigned the tax sale certificate to a different, but
related, LLC, which subsequently foreclosed the right of redemption.20 Approximately
19
NBS filed an affidavit from its president, which averred that NBS had, in fact,
been served with process because Ben Seiderman was authorized to accept service on
behalf of NBS and the complaint was promptly handed to NBS’s president. On
December 13, 2013, Baltimore City filed a motion to strike judgment, pursuant to § 14-
847(d), to which no party filed a written response.
20
On April 1, 2011, ETS assigned the certificate of tax sale for the rowhouse at
3924 Belle Avenue to 2009 DRR-ETS LLC and substituted DRR-ETS as plaintiff.
Anthony J. De Laurentis, John K. Reiff, and John E. Reid organized DRR-ETS and
operated the LLC out of the same office, 3604 Eastern Avenue, Suite #300, that they
operated LienLogic’s Maryland activities, as well as Kona, and Montego Bay, discussed
supra. William M. O’Connell and Stefan B. Ades, both entered appearances to represent
DRR-ETS as well.
18
one year later, on November 18, 2013, S&S Partnership asked the court to enter a
monetary judgment against ETS for the surplus bid owed to S&S Partnership as a
mortgagee of the property under a mortgage assigned from the title property owner.
DRR-ETS moved to strike or, in the alternative, opposed the motion by asserting grounds
similar to those argued by the two tax sale certificate holders in the two other cases
consolidated here. After the May 9, 2014 hearing, mentioned supra, on May 13, 2014,
Judge Peters entered the orders discussed supra, including an order directing DRR-ETS
to pay the bid surplus and taxes due and denying its motion to vacate. DRR-ETS noted a
timely appeal on June 11, 2014.21
Discussion
I. Post-Judgment Proceedings
In each case, subsequent to the entry of judgment the defendant below requested
that the circuit court amend the order to reflect the exact amount owed by the certificate
holder.22 We do not decide the propriety of the circuit court’s entry of particular
monetary judgments,23 because no party appealed from the amended orders.24
21
Also on June 11, 2014, and just as in the Kona case, S&S Partnership filed a
motion to alter or amend the order to reflect that DRR-ETS is required to pay S&S
Partnership the surplus bid, in the amount of $29,722.18. On August 7, 2014, the court
granted the motion.
22
Courts retain the power to enforce judgments, see Maryland Rule 2-631, and
pursuant to Maryland Rule 2-648(a), a circuit court may enter a money judgment to the
extent of any amount due if a party fails to comply with a judgment mandating the
payment of money. Appellees here asked the court to amend the orders to specify a
monetary amount so they could enforce the judgements as money judgments against
Appellants directly if Appellants failed to comply with the orders. The initial orders
(Continued…)
19
The question remains whether the May 2014 orders from which Appellants
appealed were final judgments. For there to be an entry of a final judgment that triggers
the time for filing an appeal, the following must be present in the record: a final judgment
that has the effect of putting the parties out of court, set out in a separate document that
specifies the judgment and that is a document separate from the docket entry. Hiob v.
Progressive Am. Ins. Co., 440 Md. 466, 503 (2014). The document must declare judicial
(…continued)
required payment of “all taxes together with interest and penalties on the taxes” to the
collector, who is otherwise required to pay the surplus bid to the person entitled to the
balance (Appellees) pursuant to TP § 14-818(a)(4).
23
Generally, the circuit court may entertain a motion to alter or amend a judgment
in a case where an appeal has been filed, if the motion would not affect “the subject
matter or justiciability of the appeal.” Brethren Mut. Ins. Co. v. Suchoza, 212 Md. App.
43, 67 (quoting Kent Island, LLC v. DiNapoli, 430 Md. 348, 361 (2013)) (internal
quotation marks omitted), cert. denied, 434 Md. 312 (2013). “After an appeal is filed, a
trial court may not act to frustrate the actions of an appellate court. Post-appeal orders
which affect the subject matter of the appeal are prohibited.” In re Emileigh F., 355 Md.
198, 202-03 (1999) (citing State v. Peterson, 315 Md. 73 (1989); Dent v. Simmons, 61
Md. App. 122 (1985)). If ruling on the motion would affect the subject matter of the
appeal, then the circuit court’s ruling is subject to reversal by the appellate court.
Brethren Mut. Ins. Co., 212 Md. App. at 67. The subject matter of this appeal is whether
the circuit court could enforce the judgments against the certificate holders and require
them to pay the surplus bids. Because the subject of this appeal is the propriety of
requiring the tax sale certificate holders to pay the surplus bids to the prior owners, the
later circuit court judgments—specifying the amount that the certificate holders were
required to pay the property owners—did not concern the propriety of awards and
therefore do not affect the subject matter of this appeal. We perceive, without deciding,
the subsequent monetary judgments as collateral matters to the issues presented in this
appeal. Gallagher v. Gallagher, 118 Md. App. 567, 590 (1997).
24
Here, Appellees filed their respective motions to alter or amend judgment on
June 11, 2014, more than 10 days after the entries of judgment. For that reason, each
Appellant would have had to file another appeal within the 30 days of the entry of the
respective amended judgments in order for this Court to consider the propriety of those
judgments.
20
action that grants or denies specific relief in an unqualified way. Id. Further, the
document must have been signed by the judge or the clerk, and, finally, the clerk must
have docketed the judgment in accordance with the practice of the court. Id. To be a
final judgment in the traditional sense, an order must not only settle an entire claim but
also must “be intended by the court as an unqualified, final disposition of the matter in
controversy[.]” Rohrbeck v. Rohrbeck, 318 Md. 28, 40 (1989). An order is an
“unqualified final disposition” if it determines and concludes the rights involved, or
denies the appellant the means of further prosecuting or defending his rights and interests
in the subject matter of the proceeding. Schuele v. Case Handyman & Remodeling
Servs., LLC, 412 Md. 555, 570-71 (2010).
The orders granting, inter alia, Appellees’ motions to enforce judgment from
which Appellants appealed constituted final judgments because they were entered as
separate documents from the docket entry, were signed by the judge, and decided the
issue of whether Appellants were obligated to pay the bid surplus and taxes, interest and
penalties due under the original judgments to foreclose redemption rights. The orders
had the hallmark of finality in that they put the parties out of court. The bid surplus is a
sum certain and is calculated by subtracting the amount the bidder paid in taxes and fees
at the tax sale to obtain the tax sale certificate from the amount bid on the property. TP §
14-818(a)(1). By directing Appellants to, “within 30 days of the date of this Order, pay
the Collector any surplus bid and all taxes together with interest and penalties on the
taxes due on” the properties, there was nothing left for the court to do to ensure that
21
Appellees received the bid surplus because the parties knew the amount of the bid surplus
pursuant to TP § 14-818(a)(1)—and therefore knew exactly how much they had to pay.25
Normally, to receive the bid surplus, the former property owner requests the
surplus funds from the collector. For example, in Allstate Mortgage & Co. v. Mayor &
City Council of Baltimore City, the party entitled to the bid surplus did not request that
the court determine the amount of the bid surplus and instead went directly to the
collector to receive the sum. 214 Md. App. 395, 398 (2013). This is because the tax sale
statute provides that the collector is required to pay this amount to the person entitled to
it, unless there is a dispute regarding the “proper distribution of the balance.” TP § 14-
818(a)(4)(ii).
It was not necessary for the Appellees to request the amended judgments in order
to receive the bid surpluses. They would have received the bid surpluses from the
collector soon after Appellants paid the collector, as they were required to do by the
orders. As stated in their motions to amend judgment, however, the Appellees requested
monetary judgments in order to avail themselves of the enforcement procedures
contained in the Maryland Rules (and not because the sum owed was uncertain).
Therefore, the orders entered by the court on May 9, 2014 were not qualified in any
sense—they determined and concluded the rights involved by requiring Appellants to pay
the Collector any surplus bid and all taxes together with interest and penalties.
25
Cf. TP § 8-420(c) (“[T]he collector shall prepare a tax roll that contains the
information from the assessment roll that is necessary to prepare the property tax bill.”), §
4-201 (providing that the collector collects the State, county, and municipal taxes that are
due “and any interest, penalties, and service charges on the property tax that are due”).
22
II. Standing and Jurisdiction to Enter Judgment
Foreclosing the Right of Redemption
We quickly dispense with the threshold standing and jurisdiction arguments made
by Appellants LienLogic and Kona Properties. Appellants contend the circuit court did
not have jurisdiction under Maryland Rule 2-507(b) to enforce the judgments against
them because Appellees NBS and WDB were never properly served. They also make the
corollary argument that Appellees do not possess standing to enforce the judgment
because the court did not obtain jurisdiction over them. Appellees counter that
Appellants cannot assert the due process rights of Appellees and that, even if they could,
Appellants performed valid service on WDB, and NBS had actual notice of the
proceedings. Further, Appellees maintain they have voluntarily submitted themselves to
the jurisdiction of the court, which gives them standing to enforce the judgment. Finally,
Appellees argue that Appellants cannot now contest service because they had previously
submitted affidavits to the court stating that proper service was effected in each case.
The Court of Appeals in Shudder, supra, confronted and rejected arguments
similar to those Appellants now make. 328 Md. 363. That case also presented factual
circumstances similar to those of the instant case—“where the tax sale purchaser has filed
suit to foreclose the right of redemption and taken all necessary steps to perfect the
foreclosure of the right of redemption, but thereafter changed its mind.” 328 Md. at 366.
In Shudder, the Scheves were tax sale certificate holders who appealed the entry of
judgment foreclosing the rights of redemption by the appellees, Shudder, Inc. and Bama,
Inc. Id. The Scheves attempted to assert Shudder’s rights to dismiss the case because the
23
Scheves failed to conform to the requirements for certifying service of process. Id. at
375. The Court described the Scheves’ argument:
The Scheves’ next contention is that the circuit court could not enter
a final judgment since they did not comply with the notice provisions of §
14-839; specifically, the Scheves point to their own failure to file an
affidavit certifying the method and time of service. § 14-839(a)(5). Thus,
they argue, all the prerequisites under the statute were not met and the
circuit court was without jurisdiction.
Id. In rejecting this argument, the Court stated:
Our prior case law indicates that the requirement of filing an
affidavit of service of process is not a jurisdictional requirement where
there are no allegations that the owners lacked notice of the foreclosure
proceedings. See Hauver v. Dorsey, 228 Md. 499, 503-04, 180 A.2d 475,
478 (1962).
The Scheves’ contention has no merit. The defendants here have all
been personally served with process and have submitted to the court’s
jurisdiction in these proceedings by filing motions for judgment. In
addition, the Scheves are not the proper party to raise issues concerning
the notice provisions. The Legislature intended property owners, not
tax sale purchasers, to be the beneficiaries of the tax sale notice
provisions and enacted these provisions to provide greater due process
protection for them. See St. George Church v. Aggarwal, 326 Md. 90, 96,
603 A.2d 484, 487 (1992).
Id. at 375-76 (emphasis added).
As made crystal clear by the Court in Shudder, tax sale purchasers “are not the
proper part[ies] to raise issues concerning the notice provisions.” Id. Tax sale certificate
holders retain all the right, title, and interest of the original purchasers. § 14-821. Thus,
in the instant case, Appellants, as tax sale certificate holders, cannot assert allegedly
defective service as justification for vacating the judgment foreclosing the rights to
redeem. The circuit court, therefore, had authority to enforce the judgments against Kona
and LienLogic.
24
In sharp contrast to Shudder, where there was a failure to file an affidavit
certifying the method and time of service, here such affidavits were filed, and Appellants
assert that their own affidavits incorrectly claimed that service was proper.26
Additional support for the propriety of the circuit court’s orders against Kona and
LienLogic derives from the undisputed fact that Appellees had actual notice of the
respective actions. Appellee NBS filed an affidavit stating that NBS received service,
and counsel proffered that Charles “Bud” Runkles would testify, as an officer of both
NBS and WDB, that Appellees each received notice of the actions.
For these reasons, we hold that the circuit court did not err in disregarding
Appellants’ challenges to jurisdiction. See Shudder, 328 Md. at 375. Moreover, because
Appellants cannot dispute the validity of the judgments on jurisdictional grounds, we also
reject Appellants’ arguments that Appellees lacked standing to file their motions to
enforce judgment.
III. Motions to Strike for Failure to Pay Taxes
Accruing after Tax Sale
Appellants LienLogic and Kona assert that the circuit court abused its discretion in
denying the motions to strike filed by Baltimore City and Montego Bay Properties,
respectively.27
26
The oddness of a party proclaiming the inaccuracy of its own affidavit for the
purpose of bolstering an argument has not escaped this Court.
27
We note that neither Baltimore City nor Montego Bay Properties have appealed
the circuit court’s rulings that denied their motions to strike, and they are not parties to
this appeal.
25
Generally, a judgment foreclosing the right of redemption is conclusive after 30
days. Section 14-845(a) (“A court in the State may not reopen a judgment rendered in a
tax sale foreclosure proceeding except on the ground of lack of jurisdiction or fraud in the
conduct of the proceedings to foreclose.”); see also Maryland Rule 2-535.
Section 14-847(d)(1), the statute invoked by Montego Bay Properties, provides:
If the holder of the certificate of sale does not comply with the terms of the
final judgment of the court within 90 days as to payments to the collector of
the balance of the purchase price due on account of the purchase price of
the property and of all taxes, interest, and penalties that accrue after the date
of sale, that judgment may be stricken by the court on the motion of an
interested party for good cause shown.
Consistent with the above statute, because the certificate holders failed to pay the surplus
bid and the taxes that accrued after the tax sale, the court could have stricken the
judgment that foreclosed the property owners’ (Appellees’) rights of redemption, for
good cause shown. However, even though Baltimore City and Montego Bay respectively
moved to strike the judgment, the court denied their motions. In reviewing the decision
of the circuit court, “the only issue before the appellate court is whether the trial court
erred as a matter of law or abused its discretion in denying the motion.” Canaj, Inc. v.
Baker & Div. Phase III, LLC, 391 Md. 374, 400-01 (2006) (quoting In re
Adoption/Guardianship No. 93321055/CAD, 344 Md. 458, 475, cert. denied sub nom.
Clemy P. v. Montgomery County Dep't of Soc. Servs., 520 U.S. 1267 (1997)) (internal
quotation marks omitted).
We first note that § 14-847(d)(1) vests discretionary power in the circuit court—
the “judgment may be stricken by the court.” (Emphasis added). Accordingly, the
26
determination of what constitutes “good cause” is also within the discretion of the court.
A circuit court abuses its discretion when no reasonable person would take the view
adopted by the court, “or when the court acts without reference to any guiding rules or
principles.” In re Adoption/Guardianship No. 3598, 347 Md. 295, 312
(1997) (quoting North v. North, 102 Md. App. 1, 13 (1994)) (internal citations,
alterations, and quotations omitted).
In their respective motions, Baltimore City and Montego Bay Properties recited
the predicates to judicial action pursuant to § 14-847(d)(1)—that the tax sale certificate
holder had not complied “with the terms of the final judgment of the court within 90 days
as to payments to the collector of the balance of the purchase price due on account of the
purchase price of the property and of all taxes, interest, and penalties that accrue after the
date of sale.” However, the motions stopped there; they did not elucidate any other
reason to strike the judgment. Appellee WDB opposed the motion to strike filed by
Montego Bay Properties, arguing that Montego Bay Properties failed to show good
cause—any reason to strike the judgment beyond the failure to pay taxes. WDB also
asserted that Montego Bay Properties and Appellant Kona Properties are under common
ownership and represented by the same counsel; thus, because of an extant conflict of
interest, the motion to strike should not be granted. NBS did not file a response opposing
Baltimore City’s motion to strike; however, during the hearing, counsel for Baltimore
City stated that the City is not concerned about whether the court enters an order
directing a monetary judgment for the property owners.
In these circumstances, we cannot say that the circuit court abused its discretion in
27
not finding good cause to strike the judgments foreclosing the right of redemption.
Neither Baltimore City nor Montego Bay Properties specified “good cause” to strike the
judgments, i.e., they did not provide the court with evidence of anything more than the
threshold requirement for striking the judgments—that the certificate holders had not
made payment to the collector within 90 days.
IV. Motion to Strike by 2009 DRR-ETS, LLC
In the proceedings before the circuit court, Appellant DRR-ETS asked the court to
strike, pursuant to Maryland Rule 2-311(c), S&S Properties’ motion to enforce judgment
because the motion allegedly did not reference the appropriate sections of the Maryland
Code.28 On appeal, DRR-ETS now argues that the circuit court abused its discretion in
denying the motion to strike. Specifically, it contends that S&S Properties improperly
cited to § 14-844(d),29 which in turn refers to § 14-864. DRR-ETS asserts that the
citation was improper because § 14-864 allows government bodies—not private entities
such as S&S Properties—to file a separate action to collect on taxes.
DRR-ETS’s argument is meritless because S&S Partnership did not rely on § 14-
844(d) as a section of the code that affords it relief in the form of a monetary judgment.
28
Maryland Rule 2-311(c) states, “A written motion and a response to a motion
shall state with particularity the grounds and the authorities in support of each ground.”
29
Section 14-844(d) provides that once a judgment is entered foreclosing the
owner’s right of redemption, the certificate holder “immediately becomes liable for the
payment of all taxes due and payable after the judgment.” Further, on the entry of
judgment, the holder “shall pay the collector any surplus bid and all taxes together with
interest and penalties on the taxes due on the property.” It also allows a government
entity to sue the holder in an action under § 14-864 to collect all taxes due and payable.
28
Instead, S&S Partnership referred to § 14-844(d) to establish the statutory basis for the
proposition that Appellant has not satisfied its tax obligations to the City of Baltimore,
“ETS, as the substitute plaintiff, has failed to pay to the City as collector its surplus bid
amount of $29,722.18 as required by Tax [-] Property Art. § 14-844(d).”
S&S Properties relied on § 14-818,30 which describes the procedure for
transferring the taxes, interest, penalties, and the purchase price—also referred to as the
bid—from the tax sale certificate holder to the collector, once the court has entered
judgment foreclosing the property owner’s right to redemption. The Court of Appeals
has interpreted the precursors to §§ 14-818(a)(4)(i) and 14-844(d) as allowing a circuit
30
§ 14-818(a) provides, in part:
(1)(i) The payment of the purchase price . . . shall be on the terms
required by the collector. . . [T]he collector shall require the
purchaser to pay, not later than the day after the sale, the full amount
of taxes due on the property sold, . . . together with interest and
penalties on the taxes, expenses incurred in making the sale . . . The
residue of the purchase price remains on credit.
***
(3) On receiving the balance and after accrued taxes and interest and
penalties on the taxes, the collector shall execute and deliver a
proper deed to the purchaser.
(4) Any balance over the amount required for the payment of taxes,
interest, penalties, and costs of sale shall be paid by the collector to:
(i) the person entitled to the balance; or
(ii) when there is a dispute regarding payment of the balance,
a court of competent jurisdiction pending a court order to
determine the proper distribution of the balance.
29
court to enter a money judgment against certificate holders—requiring them to pay the
surplus bids directly to the property owners or other interested parties. See, e.g., Hardisty
v. Kay, infra, 268 Md. 202, 213 (1973) (interpreting Maryland Code (1957, 1969 Repl.
Vol., 1972 Supp.), Article 81, § 81, the predecessor to § 14-818). Thus, S&S Properties,
presented the applicable statutory provisions to the court, and the circuit court correctly
referenced Hardisty v. Kay, 268 Md. 202 (1973), supporting its grant of the requested
relief. We hold that the circuit court was well within its discretion to deny DRR-ETS’s
motion to strike.
V. Hardisty v. Kay
All three Appellants contend that the circuit court erred in relying on Hardisty v.
Kay in entering judgments requiring them to pay the bid surpluses. Appellants first argue
that Hardisty is no longer good law because changes in the Tax-Property Article have
superseded the Court of Appeals’ 1973 decision. Second, Appellants LienLogic and
DRR-ETS argue that, with respect to Appellees NBS and S&S Partnership, the holding in
Hardisty is limited in its application because the Court only had opportunity to resolve
the rights of the owner of the property; thus, their argument goes, a mortgage holder, such
as NBS or S&S, cannot obtain the bid surplus directly from Appellants. Appellees
counter that the Tax-Property Article has not changed in any material aspect regarding
provisions relied upon by the Court of Appeals in Hardisty and implicated in the instant
cases, and, they maintain that nothing in Hardisty limits its holding to the property
owners to the exclusion of other interested parties, such as mortgagees.
30
We review the circuit court’s interpretation of the tax sale statute de novo. See,
e.g., Maryland-Nat’l Capital Park & Planning Comm’n v. Anderson, 395 Md. 172, 181
(2006) (citing Moore v. State, 388 Md. 446, 452 (2005)); Hardisty v. Kay, 268 Md. 202,
210 (1973) (giving no deference to the circuit court’s interpretation of the tax sale
statute). “In construing a legislative enactment the fundamental judicial task is to
determine and effectuate the legislature’s intent, and indeed the very language of the
statute serves as the primary source of the legislature’s intent. To accomplish this task
‘the words of the statute are to be given their ordinary and natural import.’” Shudder,
328 Md. at 371-72 (quoting Revis v. Maryland Auto. Ins. Fund, 322 Md. 683, 686 (1991))
(citations omitted).
A. Continued Validity
In Hardisty, the Court of Appeals encountered facts similar to those in the three
cases before us. Hardisty, a tax sale purchaser, obtained judgment foreclosing the rights
of redemption of the property owners (“Kay”). The judgment “vested in (him) an
absolute and indefeasible title in fee simple in the property.” Id. at 206 (internal
quotation marks omitted). “Hardisty balked at paying the balance owed,” and “[w]hen
more than eight months passed without [Hardisty] paying the balance required, [Kay]
filed a petition in the foreclosure case to compel payment.” Hardisty responded to the
petition, contending that he was not required to pay the balance because payment “was
merely a condition precedent to the issuance of the deed by the collector and that he
‘ha[d] no wish to acquire said property and [did] not intend to obtain a deed thereto . . .
and ha[d] elected to forfeit the amount of $1,139.87 paid on account of the purchase
31
price.’” Id. The circuit court entered judgment against Hardisty, requiring him to pay the
balance of the bid.
The Court of Appeals affirmed the judgment of the circuit court and enounced
three key holdings: (1) the entry of the judgment foreclosing the right to redemption
“makes the [judgment] final in all respects and binding on the plaintiff as well as the
defendant”; (2) the property owners were entitled to have the bidder compelled, “through
the entry of a money judgment against [the bidder], to make the payments obviously
contemplated by the [judgment] that vested title to this property in [the bidder]”; and (3)
the money judgment does not create a double recovery for the property owners whereby
the bidder would be required to pay both the property owners and the collector, because
the collector “would have to recognize the payment of the judgment of record as
satisfying the requirement of payment to the collector himself.” Id. at 209-10, 212-13.
The Court of Appeals based its holdings, in part, on the stated purpose of the tax
sale statute, communicated by the General Assembly through Article 81, § 97, which was
“‘to encourage the foreclosure of rights of redemption by suits in the equity courts and
for the decreeing of marketable titles to property sold by the collector.’” Hardisty, 268
Md. at 208 (quoting Md. Code (1957, 1969 Repl. Vol., 1972 Supp.), Art. 81 § 97). The
General Assembly has since recodified Art. 81 § 97 to TP § 14-832 and amended the
original language to structure a balance between: “(1) the due process and redemption
rights of persons that own or have an interest in property sold at a tax sale; and (2) the
public policy of providing marketable title to property that is sold at a tax sale through the
foreclosure of the right of redemption.” § 14-832. The amended language adds
32
protections for property owners and other interested parties, changing the purpose of the
tax sale statute, once concerned only with facilitating foreclosure, to a statute that
respects the due process and redemption rights of owners on the one hand, and the
interests of the State and certificate holders in an efficient foreclosure process on the
other.
We hold that these changes to the tax sale statute do not alter the validity of the
holding of Hardisty. In Hardisty, as in the cases currently on appeal, there were no
allegations of due process violations, nor were there any allegations that the redemption
rights of persons who own or have an interest in the properties were diminished. On the
contrary, the property owners in Hardisty, as here, did not assert their right to redeem;
instead, the owners wanted to divest themselves of the property. Thus, the balance that
the legislature struck by amending section 14-832 does not disturb the rationale of the
Court of Appeals in Hardisty and, furthermore, could only work in favor of Appellees—
the title owners or mortgagees of the property—because the amended statutory language
provides for consideration of the due process rights and redemption rights of persons that
own or have an interest in the property sold in the tax, i.e., those in Appellees’ positions.
The Court in Hardisty based its second holding—that the property owners were
entitled to have the certificate holder compelled to pay the surplus bid—on the language
of section 101 of Article 81, which conferred “‘full equity jurisdiction to give full and
complete relief under the provisions of this subtitle, in accordance with the general equity
jurisdiction and practice of the said court.’” Hardisty, 268 Md. at 211 (quoting Article 81,
§ 101). In 1985, the General Assembly implemented a general recodification of the tax
33
sale statute and, as a result, Article 81, section 101 was recodified to section 14-834 of
the Tax-Property Article. See 1985 Md. Laws, ch. 8, § 2, p. 552; 1986 Md. Laws, ch. 825,
p. 3160-61. Section 14-834 states that the circuit court “has jurisdiction to give complete
relief under this subtitle, in accordance with the general jurisdiction and practice of the
court.” The omission of the word “equity” from § 14-834 is of no import, as the
Revisor’s Note declares that, with the exception of the replacement of outmoded
terminology, the only changes to the statute are in style.
These stylistic changes mirrored the merger of law and equity that occurred upon
the adoption of Maryland Rule 2-301, effective July 1, 1984. Committee Note to Md.
Rule 2-301 (“The effect of this Rule is to eliminate distinctions between law and equity
for purposes of pleadings, parties, court sittings, and dockets.”). Although the merger of
law and equity makes possible the joinder “of claims previously cognizable only as
separate actions” in a single action, “it does not avoid the occasional necessity of
identifying the character and historical genesis of each claim for purposes of determining
entitlement to a jury trial, the extent of jurisdiction, [and] the application of particular
principles.” LaSalle Bank, N.A. v. Reeves, 173 Md. App. 392, 405 (2007) (quoting 9
Maryland Law Encyclopedia, Equity § 5 (2000)). Thus, the equitable nature of tax sale
proceedings has not been altered by the General Assembly or by the passage of time.
And, more specifically, the explicit retention of a circuit court’s ability to “give complete
relief” compels the conclusion that the circuit court could fashion the relief it did here,
just as it could during the time of Hardisty. See § 14-834; Hardisty, 268 Md. at 211.
Advancing to the crux of its analysis, the Hardisty Court analogized the position
34
of a tax sale certificate holder in a proceeding to foreclose the right of redemption to that
of a mortgagee, 268 Md. at 212, an analogy the Court of Appeals cited with approval as
recently as 1996, see Magraw v. Dillow, 341 Md. 492, 505 (1996). The older cases relied
upon by the Hardisty Court, such as Armstrong Enterprises v. Citizens Building & Loan
Ass’n of Montgomery County, 244 Md. 545 (1966), have not been overruled. In
discussing a motion to compel payment of a surplus, which remained after a foreclosure
sale based upon a mortgage, the Court of Appeals in Armstrong Enterprises stated:
When an audit is finally confirmed the approved practice is to accompany
the order (of final Ratification) with an order to pay the amounts allowed to
the parties in interest; but the judgment of the court is as effectually
pronounced without this order. After such an adjudication an order
directing payment would at any time be passed as a matter of course. The
order of final ratification is to be respected and obeyed without question by
the party directed to disburse the fund. In the case of failure to do so, the
remedy may be by petition by the injured party asking that payment be
compelled; it is not necessary to file an original bill.[31]
244 Md. 545, 550-51 (1966) (quoting Edgar G. Miller, Equity Procedure as Established
in the Courts of Maryland, § 554, at 652-53 (1897) (footnotes omitted)). The same
procedure may be used to compel payment of the surplus from a tax foreclosure sale to
interested parties. Hardisty, 268 Md. at 212-13. Accordingly here, “the [A]ppellees
31
In the contexts of mortgage foreclosures, Maryland Rule 14-216(a) currently
provides:
Distribution of Surplus. At any time after a sale of property and
before final ratification of the auditor’s account, any person claiming an
interest in the property or in the proceeds of the sale of the property may
file an application for the payment of that person’s claim from the surplus
proceeds of the sale. The court shall order distribution of the surplus
equitably among the claimants.
35
properly filed a [motion] to compel payment of the unpaid portion of the bid price and, as
in a mortgage foreclosure case, the [circuit court] could grant appropriate relief to compel
payment.” Id. at 212 (citing Armstrong, 244 Md. at 550). Thus, Appellees were clearly
entitled to petition the court to compel Appellants, through the entry of a judgment
against them, to make the payments contemplated by §§ 14-831 and 14-844(d) to the
collector.32 Id. at 213.
B. Section 14-847(d)(2)
Appellants contend that slight amendments to § 14-847(d) made in 1998
demonstrate a “complete and utter rebuke” of the Hardisty decision. Appellants’
argument is unavailing.
The Hardisty Court interpreted Maryland Code (1957, 1969 Repl. Vol., 1972
Supp.), Article 81, § 115 as providing an elective remedy for property owners who may
wish to strike a judgment foreclosing their right of redemption.33 The appellant in
Hardisty argued that Article 81, § 115, provided support for his argument that the circuit
32
Indeed, the instant appeals were taken from the circuit court’s order compelling
payment to “the collector,” i.e. the City of Baltimore. The court entered a revised order,
discussed supra, from which no appeal was taken, compelling Appellants to pay the bid
surpluses to Appellees. Based on our discussion of Hardisty, it is likely that that order
would have been affirmed, had it been appealed.
33
Article 81, § 115 stated:
If the holder of the certificate of sale does not comply with the terms
of the final decree of the court within ninety (90) days as to payments to the
collector of the balance of the purchase price due on account of the
purchase price of the property and of all taxes, interest, and penalties
accruing subsequent to the date of sale, that decree may be stricken by the
court upon the motion of an interested party for good cause shown.
36
court could not entertain a motion by the property owners to obtain a money judgment for
the bid surplus—an interpretation with which the Court of Appeals resoundingly
disagreed. Hardisty, 268 Md. at 211 (“We do not accept [Hardisty’s] interpretation.”).
The Court acknowledged that Article 81, § 115 (now § 14-847(d)) provided an optional,
but not exclusive, remedy to the property owners like the appellees in Hardisty and other
interested parties.
Article 81, § 115 was amended and recodified to section 14-847(d) of the Tax-
Property Article. As before, the recodified statute allows an interested party to strike a
judgment foreclosing the right of redemption if the certificate holder does not pay the bid
surplus and the taxes accruing after the tax sale to the collector within 90 days of the
entry of judgment. § 14-847 (recodified by 1985 Md. Laws, ch. 8, § 2 and amended most
recently by 2002 Md. Laws, ch. 466). Subsection (d)(2) clarifies that “[i]n Baltimore
City, a certificate holder who has been enrolled as the owner of the property under
subsection (a) of this section is not an interested party within the meaning of this
subsection.” § 14-847(d)(2).
Appellants assert that the General Assembly’s addition of subsection (d)(2) must
mean that a tax sale certificate holder, outside of Baltimore City, may be an interested
party—contrary to the language in Hardisty, which stated that a certificate holder is not
an interested party. See Hardisty, 268 Md. at 211. In other words, Appellants contend
that the legislature carved out who is and who is not able to file a motion with the court to
strike a judgment, thereby superseding the Hardisty Court’s entire holding.
In Hardisty, the Court of Appeals stated:
37
While we agree that the ‘interested party’ mentioned in the statute refers to
the owner of the land at the time of the sale or anyone claiming rights
through him, not including, however, the purchaser of the certificate, his
heirs or assigns, that is as far as our agreement with appellant extends.
268 Md. at 211. It is the Court’s statement, “not including, however, the purchaser of the
certificate, his heirs or assigns,” that Appellants assert was superseded by the legislature
in adding subsection (d)(2). Thus, Appellants claim that, because the legislature stated
that an enrolled certificate holder is not an interested party in Baltimore City, it stands to
reason that an enrolled certificate holder is an interested party elsewhere throughout
Maryland. This inference, Appellants’ argument continues, calls into doubt the entire
reasoning of the Hardisty Court.
Appellants’ argument appears to rely on the interpretative canon expressio unius
est exclusio alterius, under which the expression of one category implies the exclusion of
others, “so that a court will draw the negative inference that no other items may be
added.” Potomac Abatement, Inc. v. Sanchez, 424 Md. 701, 712 (2012) (citing
Comptroller of the Treasury v. Blanton, 390 Md. 528, 537 (2006) (“Maryland has long
accepted the doctrine of expressio (or inclusio) unius est exclusio alterius, or the
expression of one thing is the exclusion of another.”)). However, the Court of Appeals
has cautioned,
not all statutory enumerations are limited by this canon. As we recently
observed, “this particular canon of construction should be applied with
extreme caution, as [it] is not a rule of law, but merely an auxiliary rule of
statutory construction applied to assist in determining the intention of the
Legislature where such intention is not manifest from the language used.”
Id. at 712-13 (quoting Breslin v. Powell, 421 Md. 266, 294 (2011)). Following this
38
guidance from the Court of Appeals, we exercise caution and do not decide that
Appellants’ interpretation is correct.34
C. Application of Hardisty to Mortgagees
LienLogic and DRR-ETS argue that even if Hardisty is still valid, its holding
restricts the recipient of the requested relief to the property owner. Specifically, they
contend that the circuit court cannot enforce a judgment to obtain the surplus on a bid
when that relief is requested by a mortgagee or beneficiary of a deed of trust, as opposed
to a property owner. However, the holding in Hardisty is not so limited.
Given the circumstances of Hardisty, where the property owners sued for the bid
surplus, the Court did not have an opportunity to determine whether other interested
parties could collect the surplus. 268 Md. at 206. Rather, the Court declared that the
property owners, as parties in interest in the litigation, are “entitled to recover any excess
over the amount necessary to satisfy taxes, interest, penalties and costs.” Id. at 213. In
holding that the excess may be transferred directly from the certificate holder to the
property owners, the Court referenced Article 81, § 81, which was recodified by the
General Assembly in 1985 to § 14-818 without material change. See Revisor’s Note,
1985 Md. Laws, ch. 8, 539-40 (noting that changes were in style only). Section 14-
818(a)(4) provides that any bid surplus “shall be paid by the collector to . . . the person
34
Moreover, the Court in Hardisty did not rely on Article 81, § 115 for its
holdings. See 268 Md. at 211 (discounting the appellant’s argument and basing its
decision on provisions other than Article 81, § 115). Thus, even if the General Assembly
had significantly amended this provision, it would not have affected the validity of the
holding of the Court of Appeals in Hardisty.
39
entitled to the balance; or . . . when there is a dispute regarding payment of the balance, a
court of competent jurisdiction pending a court order to determine the proper distribution
of the balance.” Thus, the Court’s decision in Hardisty applies generally to parties in
interest, i.e., the defendants who have an interest in the property and who are entitled to
the balance. See Hardisty, 268 Md. at 213.
Here, Appellees S&S Partnership and NBS were defendants in the instant
proceedings foreclosing the rights of redemption. As interested parties entitled to the
surpluses that would satisfy the property owners’ respective obligations, they could
request the circuit court to enter judgments against Appellants.35
LienLogic and DRR-ETS also argue that the judgment would not preclude the
mortgagees from instituting foreclosure proceedings on the property in the future.
Appellants assert that NBS and S&S Properties would reap a double reward—one reward
from surpluses paid by Appellants and another reward from a potential future foreclosure
of the properties. This assertion has no merit. One of the stated purposes of the tax sale
statute is to allow clear title to pass to the tax sale certificate holder—this is the “public
policy of providing marketable title to property that is sold at a tax sale through the
foreclosure of the right of redemption.” § 14-832(2). To effectuate this policy, the
General Assembly has provided the circuit court with the authority to “give complete
35
Section 14-836 recognizes mortgagees and beneficiaries of deeds of trust as
interested parties. This section requires a plaintiff seeking to foreclose the right of
redemption to name certain interested parties as defendants, including the record title
holder, any mortgagee of the property, and the beneficiary under any deed of trust
recorded against the property, for the judgment to be effective against them. See PNC
Bank, Nat. Ass’n v. Braddock Properties, 215 Md. App. 315, 323-24 (2013).
40
relief” to extinguish “all liens and encumbrances on the property.” § 14-834. Upon entry
of judgment for the plaintiff foreclosing the right of redemption of the property owner
and interested persons, “the judgment vests in the plaintiff an absolute and indefeasible
title in fee simple in the property, free and clear of all alienations and descents of the
property occurring before the date of the judgment and encumbrances on the property.” §
14-844(b). Under Appellants’ interpretation, a title would not be marketable if a
mortgagee with notice of the tax foreclosure proceeding could later foreclose on the
property after a final judgment in the tax sale proceeding has been rendered.
The circuit court’s authority to extinguish all liens on the property reflects a
broader principle in property law. As we stated in PNC Bank, National Ass’n v.
Braddock Properties,
[a]s long as a court has jurisdiction over the res in question—a question not
at issue in this case—the court’s exercise of jurisdiction in an in rem
proceeding is binding upon a party with an asserted interest in the res when
the party has received “notice reasonably calculated to apprise” it of the
pending action. Mennonite Bd. of Missions [v. Adams], 462 U.S. [791,]
798, 103 S.Ct. 2706[, 2711 (1983)]. This constitutional principle is
reflected in TP § 14-839(a)(5) (“Notice to a defendant may be made in any
other manner that results in actual notice of the pendency of the action to
the defendant.”).
215 Md. App. at 328.
Thus, because Appellees had notice of the action foreclosing the right of
redemption, they are bound by it and cannot foreclose on the properties. Stated
differently, the circuit court’s entry of judgment foreclosing the right to redemption
extinguished the Appellees’ ability to foreclose on the property as lien holders. Here,
Appellees S&S Partnership and NBS were parties to the proceedings; they had notice,
41
and their rights were affected by the entries of final judgment. Accordingly, Appellants
have no legitimate worry that the mortgagees could foreclose on the respective
properties.
VI. Unjust Enrichment
All three Appellants assert that Appellees will be unjustly enriched if the circuit
court judgments requiring Appellants to pay the bid surpluses stand. As articulated by
DRR-ETS, “if the Appellee is successful in obtaining the Bid Balance then they can turn
around and move to strike the judgment under Tax [-] Property Article 14-847(d),” and
then sell or lease the property thereby obtaining a double recovery.
The Court in Hardisty, when confronted with a similar argument, held that the
satisfaction of the judgment is binding on the defendants as well, and thus would not
allow a double recovery. 268 Md. at 213. The Court stated:
The collector . . . would have to recognize the payment of the judgment of
record as satisfying the requirement of payment to the collector himself.
Thus, upon proof of satisfaction of this judgment and payment of any
subsequent taxes, interest, and penalties owed, the collector is required to
execute a proper deed when one is presented by the certificate holder.
Id. Once Appellants pay the bid surpluses, the collector must acknowledge that payment
as satisfying Appellants’ obligations to the Appellees. Appellees would not be able to
proceed as if payment had not been tendered, and the collector would similarly have to
recognize the situation as such. Appellants’ cries of unjust enrichment have no
foundation.
VII. Public Policy Considerations
In their final argument, ironic only because they are making it, all three Appellants
42
argue that public policy dictates that the circuit court may not enter a monetary judgment
against them because doing so would send a signal to property owners that it is
acceptable (and could be profitable) to not pay property taxes. Appellants pose this
argument as they, in appealing the judgments of the circuit court in these cases, attempt
to avoid paying the taxes they owe on the properties for which they hold certificates.
In construing the tax sale statute, as in construing any legislative enactment, “the
fundamental judicial task is to determine and effectuate the legislature’s intent, and
indeed the very language of the statute serves as the primary source of the legislature’s
intent. To accomplish this task the words of the statute are to be given their ordinary and
natural import.” Shudder, supra, 328 Md. at 371-72 (internal citations omitted). We note
that “the tax sale statute outline[s] ‘a complete, clear, and logical procedure for
foreclosing [the right of redemption].’” Id. at 373 (emphasis and alteration in original)
(quoting Simms, 298 Md. at 8).
The legislature has created a rational scheme that allows local jurisdictions to
obtain revenue that they might otherwise not receive. Indeed, the consequences of this
statutory scheme necessitate that another party—the tax sale purchaser—pays the
delinquent taxes owed by the property owner when the purchaser bids on the property.
See § 14-818(a)(1)(i) (“[T]he collector shall require the purchaser to pay, not later than
the day after the sale, the full amount of taxes due on the property sold . . . together with
interest and penalties[, and] expenses . . . .”). The tax sale statute further provides that
any balance left over from the purchase price, remits to the person entitled to the
balance—in the instant case, the property owner or mortgage holder. § 14-818(a)(4)(i).
43
The General Assembly created these procedures to direct the transfer of tax
revenue to the local jurisdiction, the transfer of title to the tax sale purchaser, and the
transfer of any sum that remains to the person entitled to it. Policy is the providence of
the General Assembly; similarly, it is the legislature’s prerogative to create the incentives
contained in the tax sale provisions. We do not pass judgment on the tax sale policies.
In conclusion, we hold that absent contrary indications from the Court of Appeals
or the General Assembly, Hardisty v. Kay remains good law and provides the vehicle to
transfer the bid surplus directly from the tax sale certificate holder to the property owner
or mortgagee. We observe that neither set of parties paid the taxes due on the
properties—not before the tax sale, with regard to Appellees and not after the tax sale,
with regard to Appellants. As made apparent by the facts of these cases, Baltimore City
has been subject to a cycle of tax delinquency, whereby the tax sale purchaser or
certificate holder fails to pay its own property taxes after foreclosing the title owner’s
right of redemption. This could not have been the intent of the legislature in crafting the
provisions of the tax sale statute.
JUDGMENTS OF THE CIRCUIT COURT
FOR BALTIMORE CITY AFFIRMED.
COSTS TO BE PAID BY APPELLANTS.
44