Relating to Real Estate
Relating to Real Estate January 2015
- VIOLATION OF FOREST CONSERVATION EASEMENT LEADS TO HUGE CIVIL PENALTY
- COVENANT THAT PROPERTY SERVE AS A PERPETUAL BUFFER ZONE SURVIVED TAX SALES
- FOURTH CIRCUIT AGREES THAT AN UNRECORDED DEED OF TRUST EXECUTED BEFORE A NOTICE OF TAX LIEN HAS PRIORITY, BUT FOR A SECONDARY REASON
- WITHOUT AUTHORITY, MORTGAGOR CANNOT OPPOSE FORECLOSURE SALE
- THE SAME STANDARDS APPLY TO TERMINATE A SECTION 8 LEASE OR TO EVICT A TENANT AS A HOLDOVER
- ONCE A COURT DETERMINES THAT A LEASE CLAUSE IS UNAMBIGUOUS, EXTRINSIC EVIDENCE CANNOT BE ADMITTED TO INTERPRET IT
- 2015 MARYLAND LEGISLATIVE SESSION STARTS
- SPEAKING OF REAL ESTATE
VIOLATION OF FOREST CONSERVATION EASEMENT LEADS TO HUGE CIVIL PENALTY
The Court of Special Appeals recently determined that a recorded Conservation Easement Agreement with the Maryland-National Capital Park and Planning Commission (the “M-NCPPC”), which included a metes and bounds description and a plat without a clear superimposition of the location of the easement on the drawing, provided constructive notice of a forest conservation easement (“FCE”). The Court of Special Appeals additionally held that, under Maryland’s version of the Accardi Doctrine, written guidance of the M-NCPPC did not amount to a rule of law binding on that agency.
In McClure v. Montgomery County Planning Board of the Maryland-National Capital Park and Planning Commission, No. 1031, Sept. Term 2013 (Md. Ct. Spec. App. Dec. 2, 2014), the Court of Special Appeals affirmed a judgment of the Circuit Court for Montgomery County finding that the Montgomery County Planning Board of the M-NCPPC (the "Board") had authority and jurisdiction to enforce an FCE, that the FCE was effective, and that the FCE encumbered the appellant McClure’s property. However, the Court of Special Appeals overturned the Circuit Court’s decision that the civil penalty and corrective action imposed by the M-NCPPC were arbitrary and capricious.
Background
In 1980, the M-NCPPC approved the original subdivision, with 19 outlots and 27 lots, including Lot 7, which was 5.21 acres (the "Property") developed by Fairhill Partners Limited Partnership, a venture arm of the Bozzuto Group. In 1995, Bozzuto asked the M-NCPPC whether the subdivision was subject to the forest conservation requirements of the recently enacted Montgomery County Forest Conservation Law (“MCFCL”), Montgomery County Code § 22A-1 et seq. The M-NCPPC responded that the 27 lots would be subject to new conservation requirements if a new subdivision plan was approved. Fairhill Partners submitted and received approval of a preliminary plan contingent on the recordation of a final record plat that delineated the FCE on the lots. However, according to the Court, “[a] final plat was never completed, and the FCE was not specifically marked on the plats for the 27 lots.” Instead, Fairhill Partners executed a Conservation Easement Agreement with the M-NCPPC (the “Agreement”) that was recorded among the Land Records of Montgomery County on March 13, 1998. The Agreement required Fairhill Partners to refer specifically to the Agreement in any instrument conveying an interest in the property referred to therein. Schedule A to the Agreement set forth the boundaries of the FCE with a metes and bounds description, and it contained a plat showing the property and adjoining lots.
In March 2000, McClure entered into a contract of sale with Fairhill Partners (the "Contract") for the Property, which was then unimproved. The Contract contained clear references to the FCE. McClure acknowledged the existence of the FCE, as demonstrated by his signature. The Contract also included a map demonstrating the FCE’s location on the Property. At settlement in May 2000, McClure received a deed that did not specifically refer to the FCE; instead, it provided that McClure was taking the Property “SUBJECT to covenants, easements, and restrictions of record." (Emphasis added.)
In May 2005, after improving the Property, McClure learned of the specific boundaries of the FCE when he sought to build a barn and a fence and received permits to do so. As a result of McClure’s construction, M-NCPPC received a complaint regarding unauthorized clearing and grading activity in the FCE. The M-NCPPC issued a notice of violation on January 7, 2009 and a civil citation on February 24, 2009. McClure never paid the citation nor took the remedial action directed by the M-NCPPC.
On April 10, 2012 (two years after the Board heard testimony and received evidence concerning McClure’s alleged violations), the Board issued an opinion and ordered McClure to pay a $102,378.80 civil penalty and take corrective actions, specifically: tree planting on- and off-site; limited amendment of the preliminary plan and recordation of a new plat reflecting the FCE; installations of posts and signage making clear the easement’s boundaries; submission of a land survey identifying impervious surfaces within the FCE; and removal of said impervious surfaces within the FCE.
McClure appealed to the Circuit Court for Montgomery County which held that the Board had authority and jurisdiction to enforce the FCE and that McClure violated the FCE. However, the Circuit Court found that the civil penalty and corrective action order of the Board were arbitrary and capricious.
McClure appealed to the Court of Special Appeals arguing that the FCE was not properly indexed in the Land Records of Montgomery County, that he did not receive notice of the FCE, that the Board took unauthorized action by not following the Board’s rules, and that the Board did not have the authority to impose a civil penalty and corrective action.
Constructive Notice of the Forest Conservation Easement
After concluding that McClure had actual notice of the existence and location of the FCE, the Court of Special Appeals embarked on an effort to determine whether McClure also had constructive notice of the FCE. This proved to be a somewhat difficult undertaking because of the form of the Agreement that was recorded among the Land Records of Montgomery County. The location of the FCE was determinable from two parts of the exhibit to the Agreement. The first part was a lengthy metes and bounds description of the FCE, and the second part was a series of pages that together comprised a plat of the lots. The problem was that the plat did not clearly indicate to the average person what part of the Property was actually subject to the FCE. An experienced title examiner testified that he was able to locate the FCE “at great difficulty.” However, the Court of Special Appeals considered this to be sufficient to impart constructive notice to McClure. This exercise, however, was not necessary to the case because the Court already concluded that McClure had actual notice of the FCE.
The Court of Special Appeals noted that failure to properly index the Agreement by the specific parcel identifier, as required by Md. Code Ann., Real Prop. (“RP”) § 3-501, did not render the FCE invalid because, according to RP § 3-501(b), an instrument is not rendered invalid if it is not recorded in accord with the provisions of RP § 3-501. Thus, the Agreement creating the FCE over and near the 27 Fairhill platted lots was valid.
Did the Board Violate the Accardi Doctrine?
Under Maryland’s modified version of the Accardi Doctrine, an agency is generally required to observe the rules, regulations, and procedures it has established. See Pollock v. Patuxent Inst. Bd. of Review, 374 Md. 463, 503, 823 A.2d 626, 650 (2003); see also United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954) (providing that when an agency fails to follow its own procedures or regulations, that agency’s actions are generally invalid). McClure argued that the Trees Technical Manual (the “Manual”), a technical manual adopted by the M-NCPPC to outline the methodology for working through the forest conservation program, mandated that an FCE must be shown on a record plat. (As noted above, a plat showing the FCE was never completed or recorded.) The Court of Special Appeals found that the Manual, however, is only a guidance document because it has been adopted by the Board to clarify and remind parties of their obligations but does not impose new duties carrying the force of law. See Comptroller of the Currency v. M.E. Rockhill, Inc., 205 Md. 226, 234, 107 A.2d 93, 98 (1954). Therefore, the Manual did not mandate that an FCE be shown on a record plat.
Conclusion
After determining that McClure had actual and constructive notice of the FCE and that the Board did not violate Maryland’s version of the Accardi Doctrine, the Court of Special Appeals overturned the Circuit Court’s holding that the Board’s civil penalty and corrective action were arbitrary and capricious. Because the MCFCL provided for civil penalties and administrative orders containing remedial actions for violations of the MCFCL, regulations adopted under it, forest conservation plans, or associated agreements or restrictions, the Court of Special Appeals held that the M-NCPPC could impose the fines and require the actions that it did.
For questions, please contact Ed Levin (410) 576-1900.
COVENANT THAT PROPERTY SERVE AS A PERPETUAL BUFFER ZONE SURVIVED TAX SALES
In Bernando Rene Flores v. Maryland-National Capital Park and Planning Commission et al., No. 01239, Sept. Term 2013 (Md. Ct. Spec. App. December 2, 2014), the Court of Special Appeals affirmed the Circuit Court for Prince George’s County’s decision that an “Owner’s Dedication” constituted an easement and, therefore, survived tax sales of the subject property under § 14-844(b) of the Tax-Property Article of the Maryland Code (“T-P”).
In 1981, the Maryland-National Capital Park and Planning Commission (the “M-NCPPC”) acquired title to approximately five acres of unimproved property in Upper Marlboro, and shortly thereafter it conveyed the property to the Melwood Citizens Association (the “Association”). M-NCPPC then approved a preliminary plan governing the subdivision of the neighborhood on the condition that approximately five acres be provided for a buffer space between industrial zoned land and single family residential homes in the subdivision. The Association recorded a plat (the “Plat”) on July 8, 1982, with an Owner’s Dedication that established Parcel A as a green space buffer in perpetuity.
The Association did not pay the real estate taxes on Parcel A, which was sold at tax sale in February 1987. At that sale, Jonathan Wilson purchased Parcel A free of all encumbrances “except easements to which [Parcel A was subject]” and of which he had actual or constructive notice. Wilson did not pay the taxes on the property, and, in 2001, the property was sold at a tax sale to Akila Nayak. In 2005, Nayak sold the property to Vijay Tonse, and, in 2010, Tonse sold the property to the appellant, Flores. All of the deeds since 1987 specifically referenced the Plat.
Flores attempted to develop Parcel A but was denied a rough grading and tree clearing permit because of the restrictive language in the Owner’s Dedication. The M-NCPPC explained that, until the lands abutting Parcel A are no longer used for residential purposes, the use of Parcel A is limited to a permanent green space buffer as established by the Prince George’s County Planning Board of the M-NCPPC in the approval of the preliminary plan of subdivision for the property.
Flores sought a declaration in the Circuit Court for Prince George’s County that the Owner’s Dedication was not binding upon him. He argued that the Owner’s Dedication was extinguished when the property was sold at a tax sale to one of his predecessors in title. The Circuit Court, however, agreed with Prince George’s County and the M-NCPPC, finding that the Owner’s Dedication created an easement for public use and stated that “the tax sale [did] not extinguish the easement created by the [D]edication. The intent of the statute [T-P § 14-844(b)] was the elimination of private encumbrances, such as mortgages, not public encumbrances of record, such as recorded green space buffers, as they are not affected by tax sales.”
Flores appealed to the Court of Special Appeals arguing that the restrictive language in the Owner’s Dedication did not survive the tax sale because the restrictive language created a covenant that would be extinguished if vertical privity did not exist between the current owner and the creator of the covenant. He contended that because Prince George's County was an interim seller of the property (twice), vertical privity did not exist. Flores also argued that T-P § 14-844(b) was not applicable because the restrictive language was a covenant. Flores relied on the fact that the Owner’s Dedication specifically stated that the land is “covenanted by Melwood Citizens Association of Prince George’s County, Inc., . . . to be and remain a permanent green space buffer in perpetuity . . . .”
To address Flores’s arguments, the Court of Special Appeals initially noted the language of T-P
§ 14-844(b), which provides:
If the court finds for the plaintiff, 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, except taxes that accrue after the date of sale and easements of record and any other easement that may be observed by an inspection of the property to which the property is subject.
(Emphasis added.) The Court of Special Appeals also noted that the word “dedication” (e.g., the Owner’s Dedication) had a well-defined technical meaning, i.e., “the donation of land or creation of an easement for public use.” Under Maryland case law, “[w]hen a parcel of land is dedicated as a street or for other public use, the owner of the land retains his fee simple interest, subject to an easement for the public.” (Citing Windsor Resort Inc. v. Mayor and City Council of Ocean City, 71 Md. App. 476, 483, 526 A.2d 102, 105 (1987)).
The Court of Special Appeals determined that the Owner’s Dedication created an easement for public use because the language and the context of its creation suggested that the parties intended to create a permanent easement. The Owner’s Dedication was labeled as such and contained the explicit binding language “heirs, successors and assigns.”
The Court of Special Appeals dismissed Flores’s argument that the language created a covenant by noting that the term “covenanted” in the Owner’s Dedication was used as a verb meaning “to promise” and, thus, had no bearing on whether an interest in land was created.
The Court of Special Appeals also rejected Flores’s argument that vertical privity was required for the validity of easements. The Court of Special Appeals applied T-P § 14-844(b) to hold that the property remained subject to the Owner’s Dedication after the tax sales because the language creating the green space buffer established an easement of record. Moreover, the Court pointed out that the easement had been mentioned in every deed in Flores’s chain of title, thus making the easement an easement of record.
[EDITOR’S NOTE: In McClure v. Maryland-National Capital Park and Planning Commission (discussed in this issue of Relating to Real Estate) the Court of Special Appeals held that it was not important that a forest conservation easement was not specifically mentioned in subsequent deeds that conveyed title to the subject property, even though the forest conversation easement agreement itself contained a provision requiring that it be specifically referenced in all deeds regarding the property.]
The Court of Special Appeals concluded that Flores’s predicament of owning property from which he could receive no benefit was one of his own doing that resulted from his failing to engage in basic due diligence, and he could not receive any relief from the courts on account of it.
For questions, please contact Ed Levin (410) 576-1900.
In In re Restivo Auto Body, Inc., 772 F.3d 168 (4th Cir. 2014), the Fourth Circuit Court of Appeals affirmed the holding of the United States District Court for the District of Maryland in United States District Court in United States of America/Internal Revenue Service v. Susquehanna Bank, In Re Restivo Auto Body, Inc., No. Civ. A. ECH-12-3597 (D. Md. Aug 12, 2013) establishing the priority of a deed of trust ahead of a federal tax lien. The Fourth Circuit did so after rejecting the main premise of the District Court’s opinion that a mortgage lender whose deed of trust was executed and delivered before a federal tax lien was filed against the mortgagor has priority under the relation-back provisions of Maryland’s statutory scheme. Instead, the Fourth Circuit reached its ruling based on the doctrine of equitable conversion, which was a back-up position of the District Court. SeeRelating to Real Estate, Oct. 2013 for a discussion of the District Court's opinion.
Background
Restivo Auto Body, Inc. ("Restivo") did not make certain payments of employment taxes and, on or before September 20, 2004, the IRS gave notice and made demand for payment. On January 4, 2005 Susquehanna Bank ("Susquehanna") made a loan of $1,006,065.72 to Restivo, and Restivo granted Susquehanna a deed of trust in that amount on two parcels of real property in Carroll County. Six days later, the IRS filed a Notice of Federal Tax Lien against Restivo for $147,392.84. The deed of trust in favor of Susquehanna was not recorded until February 11, 2005.
The Fourth Circuit noted that the priority of a federal tax lien is governed by federal law, and that under 26 U.S.C. § 6322 the lien arises when the tax assessment is made. However, a tax lien is not valid against the holder of a security interest until notice of the lien has been recorded. Significantly, 26 U.S.C. § 6323(h)(1) provides that "a security interest only 'exists' at such time as 'the interest has become protected under local law.'" (Emphasis added.)
Discussion
Was Susquehanna’s interest protected under local law on January 10, 2005 when the deed of trust was signed? District Court Judge Ellen Hollander thought that it was because Maryland Code, Real Property Article, § 3-201 provides, “Every deed, when recorded, takes effect from its effective date as against the grantor, his personal representatives, every purchaser with notice of the deed, and every creditor of the grantor with or without notice.” (Emphasis is by the District Court.) However, Judge Paul Niemeyer, writing for the majority of the Fourth Circuit panel, found that Susquehanna's interest had not become protected as of January 10 -- it only got the benefit of the relation-back theory when the deed of trust was recorded more than a month later. The key to this conclusion was the statute’s use of the future perfect tense (“the interest has become protected”), which Judge Niemeyer considered important. In the Fourth Circuit’s view, Susquehanna’s interest only had become protected upon the recordation of the deed of trust on February 11, 2005.
Judge Niemeyer then turned to an alternative basis for the District Court’s decision – that Susquehanna had a security interest prior to the IRS’s under § 26 U.S.C. § 6323(h)(1)(A) based on Maryland’s doctrine of equitable conversion. The District Court had stated “the holder of an equitable title or interest in property by virtue of an unrecorded contract of sale, has a claim superior to that of a creditor obtaining a judgment subsequent to the execution of the contract,” and it added that the doctrine applies to lenders whose interests are secured by mortgages or deeds of trust. The Fourth Circuit agreed with these points and noted that Susquehanna had taken equitable title to the property described in the deed of trust on the date that document was signed.
Because under 26 U.S.C. § 6323(h)(1)(A) federal tax law subordinates a federal tax lien to a deed of trust that has become protected “against a subsequent judgment lien arising out of an unsecured obligation,” Susquehanna's equitable security interest – which had become protected on January 4 – had priority over the IRS’s lien under § 6323(a). Therefore, the Fourth Circuit affirmed the District Court’s holding.
Dissent
Judge James A. Wynn, Jr. dissented from the Fourth Circuit’s decision because he did not accept the equitable conversion theory. Judge Wynn opined that the tax lien arose when the assessment was made on September 20, 2004, and it should have had priority from that date. He stated that he did not believe that an IRS lien should be treated as a judgment lien, as the majority opinion had done in order to reach its result.
Judge Niemeyer, in the majority opinion, countered the dissent's position in a footnote in which he stated that the IRS lien became effective against Restivo in September 2004, but it did not become effective against Susquehanna until February 2005 when the IRS recorded notice of the tax lien.
For questions, please contact Ed Levin (410) 576-1900.
WITHOUT AUTHORITY, MORTGAGOR CANNOT OPPOSE FORECLOSURE SALE
In Tower Oaks Blvd., LLC v. Procida, 219 Md. App. 376, 100 A.3d 1255 (2014), the Court of Special Appeals affirmed an order of the Circuit Court for Montgomery County denying a stay of a foreclosure sale because the people with authority to take action on behalf of the mortgagor had not acted to stop the sale and had not ratified the actions of the mortgagor in challenging the foreclosure.
Several of the points made in the Court of Special Appeals opinion are as follows:
I. One of the allegations by the mortgagor was that the lender had conspired with the tenants of the property to have the tenants not pay their rent, so that the mortgagor would not have the money to pay the mortgage obligation. The Circuit Court held that such an allegation was not sufficient because of the express language of Maryland Rule 14-211(a)(3)(B), which permits a foreclosure sale to be stayed. The Circuit Court did note that the allegation may be sufficient for an action for damages to lie. The Court of Special Appeals did not address this point.
II. David Buckingham, the person who hired counsel and directed them to attempt to stop the foreclosure sale, had been the court-named guardian of his brother, John. John had been the manager of the limited liability company that was the mortgagor, but died five days before the pleadings to halt the foreclosure sale were filed. David argued that his authority to act as guardian continued for a period of time after John died. However, the Court of Special Appeals held that the guardianship ended upon John’s death.
III. The Court of Special Appeals noted that the facts of this case did not involve ultra vires acts of an entity. Ultra vires acts are those that are beyond the power of an entity to perform. In this case, the act in question – attempting to stay a foreclosure sale – was well within the power of the mortgagor. Therefore, the act was not ultra vires, and it was possible to cure the problem.
IV. Power of attorney clauses must be read carefully and are usually construed restrictively. One of the provisions of the LLC operating agreement of the mortgagor provided that the manager was appointed the attorney-in-fact for the members:
to make, execute, sign, acknowledge, and file: … all documents (including amendments to articles of organization) which the Attorney-in-Fact deems appropriate to reflect any amendment, change, or modification of this Agreement.
The Court of Special Appeals held that this language was not sufficient to give the manager the right to make an amendment of the operating agreement. Instead, this section only permitted the manager to reflect any amendment that had otherwise been made. A separate section of the operating agreement provided that all members needed to consent to an amendment of the operating agreement.
V. The Court of Special Appeals held that an act by an entity that was invalid when made can be ratified, provided that the entity has knowledge of all material facts. Although previously the Court had only decided cases in which corporations had ratified unauthorized acts, here the Court extended the theory of ratification to include acts taken by a limited liability company. In the instant matter, the people with authority to act for the limited liability company mortgagor did not have knowledge of the pertinent facts before the foreclosure sale and, therefore, the action to try to stop the foreclosure sale was not considered to be ratified.
For questions, please contact Ed Levin (410) 576-1900.
THE SAME STANDARDS APPLY TO TERMINATE A SECTION 8 LEASE OR TO EVICT A TENANT AS A HOLDOVER
In Grady Mgmt., Inc. v. Epps, 218 Md. App. 712, 98 A.3d 457 (2014), the Court of Special Appeals held that the standard for showing good cause to terminate a lease, effective at the end of the term under the Real Property Article of the Maryland Code (“RP”) §8-402.1, is the same standard that applies to determine whether a landlord may evict a tenant during the term of a lease.
Jesse Epps was a tenant in an apartment project in Silver Spring, Maryland that receives federal funds under the Section 8 New Construction Program, which subsidizes rent of its tenants. Grady Management ("Grady") brought an action against Epps under the breach of lease statute, RP §8-402.1. A jury found that Epps had breached the lease and that the breach was substantial, but that it did not warrant eviction.
Grady then sent Epps a Notice to Vacate, and when Epps did not leave the property after the set time, Grady filed a Tenant Holding Over Complaint. Grady argued that a tenant holding over action can be brought against a federally subsidized tenant when the tenancy has been terminated for good cause. However, in this instance, the lease continued for successive terms. Unless the lease was terminated for good cause, Epps was in possession of an “unexpired lease,” and he was not a tenant holding over. Because the factual bases that Grady wanted to use to evict Epps as a tenant holding over were the same facts that were the subject of the jury trial, either the doctrines of res judicata or collateral estoppel were applicable.
Therefore, the Court of Special Appeals, in an opinion written by Judge James Kenney, affirmed the Circuit Court for Montgomery County’s granting of Epps's motion for summary judgment.
For questions, please contact Ed Levin (410) 576-1900.
In Huggins v. Huggins & Harrison, Inc., No. 1702, Sept. Term 2013 (Md. Ct. Spec. App. Dec. 2, 2014), the Court of Special Appeals held that the key provision in a lease was not susceptible to more than one interpretation, and therefore extrinsic evidence was not admissible to explain the parties’ meaning of that provision.
Huggins involved the lease of real property in Kensington, Maryland (the "Property") by Thomas Huggins and a company he controlled (collectively, "Thomas") for use as a gas station. The owner of the Property was Huggins & Harrison, Inc. (the "Landlord"), all of the stock of which was originally owned by Thomas’s father. On the father’s death, his widow (Thomas’s mother) became the sole shareholder of the Landlord. During her lifetime, the widow transferred some of the shares to Thomas and his six siblings, but she retained a majority interest in the Landlord until her death.
Originally Thomas operated under an oral lease, but in 1993 he and his father signed several versions of a lease. In 2002, after his father died, Thomas signed a lease with his mother on behalf of the Landlord. However, Thomas's mother later signed an affidavit stating that she had not understood the 2002 lease. At about that time, the Huggins family was considering using the property for other uses, and they learned that the property might be rezoned because Montgomery County was reconsidering Kensington’s master plan.
On August 27, 2003, Thomas and the Landlord signed an addendum to the then-current lease (the "Lease"). The addendum provided, in part, that the Lease would terminate upon the occurrence of the following:
2(a) The appropriate Government officials allow or require a zoning change for the Premises, or a building permit is issued for the development of the Premises, at which time the parties will renegotiate this Lease.
After the Landlord asserted that the Lease was terminated because of an impending zoning change affecting the Property and demanded the right to repossess the Property, Thomas filed a complaint for declaratory judgment and injunctive relief in the Circuit Court for Montgomery County. Thomas claimed that the Court should consider parol evidence to support Thomas’s position that section 2(a) of the Lease was only activated if government officials were to allow or require a zoning change, or were to issue a building permit, based on the request of the Landlord. Thomas contended that the purpose of that provision was to terminate the Lease if the Landlord took affirmative action to change the zoning of the Property, and not if the county acted on its own to do so.
The Circuit Court found that section 2(a) was not ambiguous, vague, or indefinite and that extrinsic evidence was, therefore, inadmissible to provide a different meaning. Thomas appealed to the Court of Special Appeals, but the appellate court affirmed the order of the trial court.
The Court of Special Appeals noted that courts in Maryland apply the law of objective interpretation, which is that the written terms of an agreement govern its interpretation and the rights of the parties under it unless the written language is not susceptible of a clear and definite meaning. This is the case regardless of the intent of the parties at the time the contract was executed. Therefore, it is up to the courts to determine whether the written words of a contract have a clear and unambiguous meaning on their face. If so, the courts are bound to give effect to that meaning. Parol evidence is admissible only when the words of an agreement are ambiguous. This rule is particularly applicable to leases, which are required to be in writing under Maryland’s Statute of Frauds.
The Court of Special Appeals found that section 2(a) meant that any zoning change could trigger a lease termination, not just one promoted by the Landlord. The Court noted that had the parties wanted to include such a limitation to section 2(a), they could have, and should have, done so. The Court of Special Appeals noted that neither it nor the Circuit Court had the power to rewrite a lease to add words that the parties themselves did not include when the terms of the lease were clear and unambiguous.
As a final point, the Court of Special Appeals considered whether the case was ripe for the Circuit Court to decide because the zoning change that triggered section 2(a) had not occurred at the time that the case was filed, but rather during the pendency of the litigation. Under the ripeness doctrine, courts may not declare rights with respect to matters that may never exist. However, the Court of Special Appeals held that the “ripening seeds” of an actual controversy existed when the declaratory judgment action was commenced, and the zoning change became “undeniable reality” during the proceedings. Therefore, it was appropriate for the Circuit Court to exercise its authority in the Huggins case.
For questions, please contact Ed Levin (410) 576-1900.
2015 MARYLAND LEGISLATIVE SESSION STARTS
The 2015 regular session of the Maryland General Assembly, its 435th legislative session, began on January 14. The legislature meets for 90 consecutive days in accordance with the legislative schedule found here: http://mgaleg.maryland.gov/Pubs-current/current-session-dates.pdf.
Bob Enten, Chair of Gordon Feinblatt's Government Relations Practice Group and a member of the Firm's Financial Services Practice Group, will spend the entire legislative session in Annapolis. Other Firm lawyers will spend a considerable amount of time in Annapolis on behalf of Firm clients.
Ed Levin serves as a member of the Legislative Liaison Committee of the Real Property Section of the Maryland State Bar Association. Ed has been on this Committee since he chaired it from 1983 to 1985.
We will keep you advised of Maryland legislation that affects real property interests in Maryland. For questions, please contact Ed Levin (410) 576-1900.
PRESENTATIONS
Ed Levin was a panelist on "Subordination, Non-Disturbance and Attornment Agreements in Commercial Leasing and Real Estate Finance," Strafford Webinar, November 13, 2014 (with John Matthew Trott of Cox, Castle & Nicolson LLP in Los Angeles). That program was so well received that Strafford ran an encore presentation on December 17, which included a replay of the discussion portion of the November 13 program followed by a live question and answer session led by Ed and his co-panelist.