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Opinions – 12/19/11: Court of Special Appeals

Real Property

Condominium Act

BOTTOM LINE: Under the Condominium Act, the purchaser of a condominium in a foreclosure sale holds legal title to the property as of the date of the sale, thus rendering her liable for condominium assessments and fees dating from that point.

CASE: Campbell v. Council of Unit Owners of Bayside Condominium, No. 1187 Sept. Term, 2010 (filed Dec. 1, 2011) (Judges Eyler, J., Wright & THIEME (retired, specially assigned)). RecordFax No. 11-1201-03, 11 pages.

FACTS: Elizabeth Campbell owned a condominium in the Bayside Condominium Regime. Campbell became its owner after her successful bid at a trustee’s foreclosure sale conducted on Aug. 3, 2009 by the holder of the deed of trust.

The sale was ratified by the circuit court on Nov. 25, 2009, and Campbell settled on the property on Dec. 28, 2009. The deed was recorded on Jan. 7, 2010. Campbell did not pay the condominium fees that had accrued from the date of the foreclosure sale, but instead paid only those condominium fees due from the date of settlement forward.

As a result of her refusal to pay the condominium fees that were due for the interval between the dates of the foreclosure sale and the execution of the deed, counsel for the Council of Unit Owners of Bayside Condominium, the governing body of the condominium regime, sent Campbell a letter notifying her of Bayside’s intent to create a condominium lien “with the ultimate intent of foreclosing on [her] property.”

Campbell responded by filing suit in the circuit court, pursuant to the Maryland Contract Lien Act, RP §14-203, seeking to “[d]eny the lien sought by [Bayside]” and for attorneys fees and costs. The circuit court ruled that, as a matter of law, there was probable cause for the creation of a lien and it entered the appropriate order.

Campbell appealed. The Court of Special Appeals affirmed.

LAW: “A unit owner shall be liable for all assessments, or installments thereof, coming due while he is the owner of a unit.” RP §11-110(c).

In Merryman v. Bremmer, 250 Md. 1 (1968), the trustee, Merryman, filed a petition to set aside the sale of certain real estate to the respondent, Bremmer. The chancellor directed the trustee to execute a deed conveying the property to Bremmer, so long as Bremmer paid the balance due on the purchase and applicable taxes. The Court of Appeals upheld the chancellor’s ruling, holding that Bremmer was entitled to maintain his equitable title, even over the passage of a considerable number of years, subject to remedies at law that the trustee could, but did not, utilize to compel Bremmer to comply with the terms of sale.

“The sale involved in the present case is a judicial sale of real estate and not a conventional sale. A sale made by order of court is an executory contract, subject to the filing of exceptions. The court itself is the vendor, the trustee being merely the agent of the court to carry into effect the order of court directing the sale, and upon final ratification of the sale by the court the contract of purchase becomes complete. When the sale is finally ratified, the purchaser’s inchoate equitable title, acquired at the time of the acceptance of his offer by the trustee, becomes complete and the purchaser’s equitable title is established retroactively to the time of the original acceptance of the offer by the trustee.” Id. at 8.

Donald v. Chaney, 302 Md. 465 (1985), involved the foreclosure of certain property of Herring Bay Partnership. Three of the partners were also junior creditors, who sought a distributive share in the proceeds of the foreclosure sale. When it became apparent that the available proceeds were insufficient to pay the partners in full, they petitioned for a court order for the collection of interest on the unpaid balance of the foreclosure price, reasoning that the interest would be applied to their claims. The Court of Appeals vacated the denial of the claims. The Court ruled that the foreclosure purchasers were liable for interest from a date following ratification of the sale to the date of settlement.

“It is a general rule as to sales under decrees of this Court, that the purchaser always pays interest, according to the terms of the decree, from the day of sale, whether he gets possession or not. His getting possession is, in no case, allowed to be a condition precedent to the payment of either principal or interest of the purchase money.” Id. at 468-69.

“[A] contract of sale made between the Court as the vendor of the property, through the agency of a trustee, and the purchaser, is never regarded as consummated until it has received the sanction and ratification of the Court. [Y]et, it gives to him, an inchoate and equitable title which becomes complete by the ratification of the Court. When this is accomplished, the ratification retroacts, and he is regarded by relation as the owner from the period of the sale. He is as such proprietor entitled to the intermediate rents and profits of the estate; he cannot escape from the sale….” Id. 469.

Thus, the purchaser at a foreclosure or judicial sale is in a unique position because of the particular nature of those transactions. From the date of the foreclosure sale, Campbell was the equitable owner of the property, see Four Star Enterprises Ltd. Partnership v. Council of Unit Owners of Carousel Center Condominium, Inc., 132 Md.App. 551, 573-74 (2000), with her enjoyment of any benefits of that ownership balanced by the obligations of ownership during that interval.

Therefore, Campbell was liable for condominium assessments from the date of the foreclosure sale.

COMMENTARY: The Maryland Condominium Act does not dictate a different result. A party becomes liable for condominium assessments “coming due while he is the owner of a unit.” RP §11-110(c). The holding here does no violence to the workings of the Act, because it does not detract from the ordinary definition of the term “owner.” Although the Act defines “unit owner” as a person holding legal title, see RP §11-101(r), given the authorities, the term “unit owner” embraces a holder of equitable title, whose rights are virtually ironclad so long as she fulfills her obligations under the terms of the foreclosure.

In the unique realm of foreclosure or similar purchases, the long-settled view that the purchaser’s title “retroacts” to the date of the sale means, for purposes of the Act, that Campbell became the “owner” at the time of the foreclosure sale, with the attendant rights and obligations of that status.

PRACTICE TIPS: The Maryland Contract Lien Act, RP §14-203(c), authorizes an action for the determination of whether probable cause exists for the establishment of a lien. RP §14-203(d) places the burden of proof on the party seeking to impose the lien.

Real Property


BOTTOM LINE: An easement was not void ab initio simply because it was described in general terms; however, the circuit court erred in granting summary judgment against the burdened property owner’s defense that the easement had been extinguished by adverse possession.

CASE: USA Cartage Leasing, LLC v. Baer, No. 1797, Sept. Term, 2009 (filed Nov. 30, 2011) (Judges Hollander, KEHOE & Hotten). RecordFax No. 11-1130-02, 62 pages.

FACTS: This case involved an easement dispute between two adjoining landowners, USA Cartage Leasing, LLC, and Todd Baer.

Edwin and Rebecca Glesner acquired what a 5.26 acre lot 1984. In 1985, the Glesners subdivided the lot into two roughly rectangular parcels. At the time, they retained one parcel (the “Cartage parcel”) and conveyed the other (the “Baer parcel”) to M.K.S. Development.

The deed to M.K.S. also granted it an easement over the Cartage parcel, described as “a non-exclusive right-of-way 25 feet in width, leading from the existing entrance from Governor Lane Boulevard, shown on the Plat of the above-referenced property, recorded at Plat folio 1806, to the property hereby conveyed.” The deed did not otherwise describe the easement.

The plat referred to in the deed was prepared in November 1984 by Fox & Associates, Inc. The Fox plat showed an “existing entrance” to the Cartage Parcel from Governor Lane Boulevard, near the dividing line between the Cartage parcel and the Baer parcel. On the other side of the dividing line between the two parcels, the Fox Plat showed a “proposed entrance” to the Baer parcel from Governor Lane Boulevard, of similar dimensions to the “existing entrance” on the Cartage parcel. However, the Fox Plat did not mention or depict the easement.

The Baer parcel changed hands several times before it came to be owned by Baer. In November 1988, M.K.S. conveyed the property to Patrick Grunberg and Lee Michael. This deed expressly conveyed the “non-exclusive right-of-way 25 feet in width” over the Cartage parcel, using the description taken verbatim from the Glesner/M.K.S. deed. A month later, Michael deeded his interest in the Baer parcel to Grunberg. This deed did not mention the right-of-way. In November 1992, Grunberg conveyed the Baer Parcel to Todd Baer’s parents, Donald and Joan Baer. Once again, the deed did not refer to a right-of-way over the Cartage parcel.

In early 2008, two additional deeds pertaining to the Baer parcel were filed. The first was a confirmatory deed from Grunberg and the Personal Representative of the Estate of Lee U. Michael, which recounted that the deed from M.K.S. to Grunberg and Michael had conveyed the Baer Parcel along with the right-of-way and that, although the deeds from Michael to Grunberg and from Grunberg to the Baers did not expressly refer to the right of way, the grantors of those deeds intended to convey to their respective grantees all rights appertaining to the Baer Parcel, including the right-of-way. The deed re-conveyed the Baer Parcel to the Baers with a description that included the description of the right-of-way using language identical to that in the Glesner/M.K. S. deed. The second deed was a deed by which Mr. and Mrs. Baer conveyed the Baer Parcel to their son, Todd Baer. This deed included a reference to the right-of-way.

In the meantime, the Cartage Parcel changed hands only once. The Glesners conveyed that lot to Cartage by a deed dated April 7, 1995. The deed to Cartage made no mention of the right-of-way over the Cartage Parcel. Cartage, a commercial trucking business, had previously leased the property from the Glesners. The Cartage parcel was developed for commercial use; the Baer parcel, by contrast, was undeveloped.

On Aug. 4, 2008, Baer filed an action against Cartage, seeking a declaratory judgment that Baer held a legally valid and effective right-of-way over Cartage’s property. The second count of Baer’s complaint alleged that Cartage had interfered with and continued to interfere with Baer’s lawful use of enjoyment of his right-of-way and sought an injunction prohibiting Cartage from such interference, as well as damages of $250,000.

In its answer, Cartage denied any liability and raised, among others, the defense of adverse possession. Cartage filed a counterclaim seeking to quiet title to the Cartage parcel, free of Baer’s asserted right-of-way. Cartage also filed a third-party complaint for damages and related relief against the Glesners.

On July 13, 2009, Baer filed a motion for summary judgment, which was granted by the circuit court. After granting Baer’s motion for summary judgment as to the existence of an easement across the Cartage parcel, the circuit court entered a judgment declaring that Baer had a right-of-way over a portion of the Cartage parcel, establishing a precise location for the right-of-way, and enjoining Cartage from interfering with Baer’s use of it.

Cartage appealed to the Court of Special Appeals, which vacated the judgment of the circuit court and remanded the case.

LAW: Cartage asserted that the circuit court erred in granting summary judgment to Baer because the easement was legally unenforceable. An easement may be created by express grant, by reservation in a conveyance of land, or by implication. Kobrine, L.L.C. v. Metzger, 380 Md. 620, 635 (2004). An express easement, whether by grant or reservation, must be created by a written memorandum that satisfies the Statute of Frauds; moreover, a right-of-way way created by deed must satisfy the mode and manner prescribed by the recording statutes Id. at 636.

An express easement can be either general or specific. Rogers v. P-M Hunter’s Ridge, LLC, 407 Md. 712, 731 (2009). An easement is specific when its location is easily discernible, such as from a metes and bounds description or a plat map. Id. An easement is reserved in general terms when it is clear from the intentions of the parties that an easement has been created, but without a precise location. Id. If an easement is reserved only in general terms, an ambiguity regarding the location of the easement exists, and a reviewing court must look to the surrounding circumstances, including subsequent agreements and conduct of parties, which may evidence the parties’ intent. Id. In contrast to express easements, easements by implication may be created in a variety of ways, such as by prescription or necessity. Id. at 730.

The easement at issue in this case, if it existed at all, was an express easement; however, some of the principles of law pertaining to implied easements were relevant because, at Baer’s urging, the circuit court relied upon easement-by-necessity cases in determining the location of the purported express easement. An easement-by-necessity is a particular type of easement by implication, which arises where a parcel is landlocked by other land that was originally held by a common grantor, such that the only way to reach a public road is by crossing adjacent property. See Sharp v. Downey, 197 Md.App. 123, 167 (2010). A court will not recognize a way of necessity if another road to the public highway can be made without unreasonable expense, even though the other road may be much less convenient. Condry v. Laurie, 184 Md. 317, 322 (1945).

Maryland courts have held that, in order to determine the location of an easement-by-necessity, a court must perform an equitable balancing analysis, whereby the way of necessity should be located so as to be the least onerous to the owner of the servient (burdened) estate while, at the same time, being of reasonable convenience to the owner of the dominant (benefited) estate. Sharp v. Downey, 197 Md.App. 123, 178079 (2010).

Here, the circuit court expressly applied this balancing analysis in locating the purported right-of-way. It stated that it could locate the easement consistent with the language of the cases that deal with right of way by necessity, and declared, in its declaratory order, that the right-of-way was at the location proposed by Baer, because Baer’s proposed location was the location least burdensome to the Cartage property and which, at the same time, provided Baer with reasonable access to his property.

Cartage contended, however, that the purported easement was invalid as a matter of law because the easement language failed to provide a description of the easement sufficient to identify such right-of-way on the ground with reasonable certainty, and because it entirely failed to identify its location at all.

In this connection, Cartage cited Real Prop. §4-101(a)(1), which provides that any deed containing the names of the grantor and grantee, a description of the property sufficient to identify it with reasonable certainty, and the interest or estate intended to be granted, is sufficient, if executed, acknowledged, and, where required, recorded. The deed language at issue in this case purported to grant “a non-exclusive right-of-way 25 feet in width, leading from the existing entrance from Governor Lane Boulevard, shown on the [Fox plat]…to the property hereby conveyed.” Neither the deed nor the Fox plat indicated where the right-of-way entered the Baer parcel or delineated the path the right-of-way took across the Cartage parcel to reach the Baer parcel. Although the “existing entrance” was shown on the Fox plat, there was no plat or metes and bounds description showing the right-of-way itself.

However, if Cartage’s interpretation of §4-101 were to be accepted, general easements would be effectively prohibited, because a grant or reservation of a general easement, by definition, does not describe the right-of-way so as to locate it with “reasonable certainty.” Therefore, the purpose of the statute is fulfilled when the description is sufficient to identify, with reasonable certainty, the servient estate, as opposed the specific location of the right-of-way across it.

Moreover, Cartage’s position was inconsistent with several Maryland cases that endorse the concept that a general easement can be located through evidence of acts or agreements of the parties occurring subsequent to the grant of the easement. See, e.g., Rogers, 407 Md. at 732. Although no such subsequent acts or agreements occurred in this case, the strong support for the principle that an easement may be located based on acts and agreements subsequent to the grant, strongly implies that, as a matter of logic, an easement is not void ab initio simply because it is described in general terms. Thus, the easement in this case did not violate R.P. § 4-101 because the deed establishing it clearly identified the servient estate, provided a fixed starting point for the right-of-way, and specified its width.

This determination did not end the inquiry. Given the validity of the original language granting the easement, it was necessary to determine whether a court can establish the location of the easement, in the absence of subsequent agreement or use by the parties, by means of the equitable balancing approach used by the circuit court in this case. The circuit court determined it could locate the right-of-way by applying the equitable analysis used in implied easement-by-necessity cases, whereby the way of necessity should be located so as to be the least onerous to the owner of the servient estate while, at the same time, being of reasonable convenience to the owner of the dominant estate. Stair v. Miller, 52 Md.App. 108, 111 (1982).

There is not a reported case in Maryland in which either appellate court has held that an express easement should, or should not, be located by means of the “least onerous/reasonably convenient” equitable standard proposed by Baer. The law in Maryland is that, where the parties cannot agree on the location of a hitherto unlocated express easement, an equity court is empowered to determine the location by balancing the equities of the parties.

Where, as here, an express easement has been established without fixing its location, and the location of the easement cannot be established either by reference to a road or way in existence at the time of the deed or by a subsequent, unopposed long-term use by the dominant tenant, or by a subsequent agreement of the parties, the court may establish the easement’s location so as to be the least onerous to the owner of the servient estate while, at the same time, being of reasonable convenience to the owner of the dominant estate.

However, the circuit court erred in rejecting Cartage’s defenses to the easement claim at the summary judgment phase. Cartage raised defenses of abandonment, estoppel, and adverse possession.

A claim of adverse possession is composed of several elements: the claimant must show possession of the property for the statutory period of 20 years, and such possession must be actual, open, notorious, exclusive, hostile, under claim of title or ownership, and continuous or uninterrupted. White v. Pines Cmty. Improvement Ass’n, 403 Md. 13, 36 (2008). The critical element of adverse possession at issue in this case was “hostility.”

In the context of the present case, “hostility” signifies a possession that is adverse in the sense of it being without license or permission, and unaccompanied by any recognition of the real owner’s right to the land. To disprove hostility, the record owner must show a “recognition of right” on the part of the adverse claimant, which means acceptance that another has a valid right to the property, and the occupant possesses subordinately to that right, and not mere acknowledgment or awareness that another claim of title to the property exists. Yourik v. Mallonee, 174 Md.App. 415, 429 (2007).

In evaluating a claim, the pertinent inquiry is whether the claimant has proved the elements based on the claimant’s objective manifestation of adverse use, rather than on the claimant’s subjective intent. Porter v. Schaffer, 126 Md.App. 237, 276 (1999).

While most adverse possession cases involve extinguishment of fee ownership through adverse possession, an easement may be terminated through adverse possession as well. See, e.g., Klein v.. Dove, 205 Md. 285, 295 (1954). However, in such a case, the adverse claimant is the servient owner — that is, the putative adverse possessor is the actual owner in fee of the real property subject to the easement, who already has possession of the land in any event.

In this case, Cartage observed that a physical right-of-way was never actually established on the land, and contended that it was evident that both USA Cartage and its predecessor had always used that undefined and unused area for their exclusive use for more than 20 years. Cartage maintained that its use was objectively manifested by the railroad ties, tree screening, and daily parking it had installed without challenge from 1986 for greater than 20 years.

Unless the adverse claimant has manifested an acknowledgment that the record owner holds a superior right to the claimed property (which would defeat the element of hostility), the adverse claimant’s intent is irrelevant to adverse possession. Rather, the pertinent inquiry is whether the claimant has proved the elements based on the claimant’s “objective manifestation” of adverse use, rather than on the claimant’s subjective intent. Porter, 126 Md.App. at 276.

It is entirely possible for a claimant to adversely possess land for the statutory period inadvertently, without realizing or intending to encroach on another’s property. Because adverse possession is not based on a claimant’s subjective intent, the fact that the possession was due to inadvertence, gnorance, or mistake, is entirely immaterial. See Tamburo v. Miller, 203 Md. 329, 336 (1953).

Certainly, the actions by Cartage and its predecessor-in-title — to plant a row of trees along the boundary with the Baer Parcel and to place a row of telephone poles inside the trees — had the effect of obstructing the easement and could give rise to a right to both injunctive relief and damages. See, e.g., Miller v. Kirkpatrick, 377 Md. 335, 350-52 (2003). At the summary judgment stage, at which the court must construe against the moving party any reasonable inferences that may be drawn from the facts, the reasonable inference from the relevant deposition testimony was that the boundary was not passable by vehicle.

Likewise, although Cartage was not in possession of the property for the entire 20-year period, Cartage was in privity of estate with the Glesners, both as predecessors in title, and, for a time, as Cartage’s landlord. See, e.g., Italian Fisherman, Inc. v. Middlemas, 313 Md. 156, 163 (1988). Moreover, a landlord can adversely possess land through occupation by its tenants. See Hackett v. Webster, 97 Md. 404, 407-14 (1903). For these reasons, in granting summary judgment as to adverse possession on the basis of Cartage’s subjective intentions in planting the trees and maintaining the parking barrier, the circuit court erred.

Accordingly, the circuit court judgment was vacated and the case remanded for trial on the facts.

COMMENTARY: Because the case was remanded for further proceedings, it was unnecessary to resolve Cartage’s contention that the circuit court misapplied the equitable balancing approach in the case at bar. However, for the benefit of the parties and the court on remand, the Court of Special Appeals noted that, if the circuit court determines that Cartage’s defenses to the easement failed, the circuit court should conform to the procedure specified in the Third Restatement to locate the easement. In other words, it should permit Cartage to propose a location for the right-of-way in the first instance, because Cartage, as the servient owner, was in the best position to determine what placement would be least onerous to it.

The court should make its own equitable determination of the easement’s location only if Cartage’s proposal does not conform to the express attributes of the easement (i.e., 25 feet in width, and running from the “existing entrance,” across some portion of the Cartage parcel to the Baer parcel), and does not otherwise provide reasonable access to the Baer Parcel, including safe and appropriate radii for turning vehicles.

PRACTICE TIPS: Whenever it appears from a fair construction of a deed that it was the purpose of the parties to create or reserve an easement in the property conveyed for the benefit of other land owned by the grantor, such a right is deemed to be appurtenant to the land of the grantor and binding on that conveyed to the grantee. As such, the right thus created or reserved will pass to all subsequent owners of the land to which it is appurtenant. The rule in Maryland is that one is bound by every express encumbrance on his property which he could have found in the records, even if it is not in the direct chain of title.

Real Property

Holdover tenancy

BOTTOM LINE: Defendant was not a holdover tenant, where its actions did not amount to continued control and possession of the premises which interfered with plaintiff’s use or possession.

CASE: The Carroll Independent Fuel Company v. Washington Real Estate Investment Trust, No. 467, Sept. Term, 2010 (filed Dec. 1, 2011) (Judges GRAEFF, Kehoe & Thieme (retired, specially assigned). RecordFax No. 11-1201-02, 37 pages.

FACTS: On July 15, 1988, Carroll Independent Fuel Company (CIF), a wholesale distributor of motor fuels that sells to retail service station operators, entered into a ten-year commercial lease agreement with Washington Real Estate Investment Trust (WRIT) to lease a gasoline service station in Westminster, Maryland. Approximately one year later, CIF and WRIT entered into another ten-year commercial lease agreement for another adjacent gasoline service station. The leases were virtually identical.

An addendum to the lease required CIF to install three new gasoline tanks at each of the leased properties at CIF’s sole cost, including the cost of bringing utilities to and hooking the same up with the “Additions.” The addendum stated that said Additions shall, at the end of the term) belong to WRIT and included equipment, improvements, gasoline tanks, islands, canopies, etc.

The leases permitted CIF to sublet or assign the premises with “the prior written consent of” WRIT. The leases specified that if CIF remained in possession of the “Demised Premises” after the expiration of the term of the lease, it would be deemed a holdover tenant and would create a tenancy from month to month, terminable on 30 days’ written notice by either party. The leases further stated that WRIT would be entitled to a holdover fee of 3 times the basic annual rent then in effect, prorated on a daily basis, per day for each day that CIF holds over past the termination date.

CIF and WRIT agreed to two extensions of each lease. In the second amendment, the leases were extended indefinitely on a month-to-month basis, leaving either party with authority to terminate the leases by providing written notice to the other party 30 days before the proposed termination.

Both leases required a surrender of the “Demised Premises” upon the termination date of the leases. They required CIF to provide an environmental inspection certificate declaring that the “Demised Premises” were free of dangerous and/or hazardous substances.

In a letter dated July 15, 2005, CIF provided notice to WRIT that it was terminating its leases with WRIT, effective Aug. 15, 2005. On Aug. 15, 2005, CIF shut down its businesses and vacated both sites.

In a letter dated Aug. 19, 2005, counsel for WRIT advised B & E Automotive, a mechanic shop that worked out of one of the service stations on the leased properties, that it, as CIF’s subtenant, had remained on the property past expiration of CIF’s lease term. WRIT demanded that B & E vacate the premises, but it left open the possibility of negotiating a direct lease with B & E.

Between Jan. 30 and Feb. 1, 2006, CIF removed the gasoline storage tanks and contamination was discovered. CIF removed tons of contaminated soil, and retained an environmental consultant to proceed with a site assessment.

By letter dated Feb. 27, 2006, WRIT sent a notice of default to CIF, stating that: (1) CIF had failed to remove its tanks by the termination date; (2) CIF had not provided the environmental inspection certificate; (3) CIF owed WRIT $12,987 in attorneys’ fees, consultant fees, and rent as of Feb. 20, 2006; (4) two of CIF’s rent checks were returned by the bank, and therefore, not paid; (5) the amount owed as of the date of the letter was $21,311; and (6) B & E remained on the premises.

CIF continued to work on remediation until approximately March 2007, at which time CIF decided to discontinue remediation efforts. WRIT took over remediation of the property.

WRIT sued CIF. In the two breach of contract claims, one for each lease, WRIT alleged that CIF had failed to keep the properties “in the condition required by law, in that petroleum products have contaminated the soil and groundwater,” and it failed “to surrender possession of the [properties] upon termination in the condition required by the [leases].” WRIT requested a judgment of $3 million, consisting of rent at the holdover rate and additional damages, including attorneys’ fees and costs and expenses associated with remediation.

In its claims for declaratory judgment, WRIT requested that the trial court declare that CIF be liable to WRIT “for all damages until such date as the [properties are] in the condition that [they were] required to be upon surrender of possession” and that CIF pay all fees, costs, and other damages incurred by WRIT in order to remediate the environmental contamination. The circuit court denied WRIT any relief on the declaratory judgment claims.

The circuit court did find, however, that CIF was a holdover tenant based on each of the three grounds asserted by WRIT. It awarded WRIT damages totaling $624,621. The court awarded attorneys’ fees in the amount of $25,000.

The Court of Special Appeals reversed, finding that CIF was a holdover tenant, but affirmed the order awarding attorneys’ fees.

LAW: The term “holding over” means a tenant under a lease who continues in possession of the leased premises after the expiration of the lease. See BLACK’S LAW DICTIONARY 800; West v. Humble Oil & Refining Co., 261 Md. 190, 193 (1971). The typical way that a tenant retains possession of leased premises is to physically remain on the premises at the expiration of the lease term. Here, however, CIF vacated the premises when the lease terminated.

There can be circumstances justifying a finding that a tenant is holding over even after the tenant has physically left the premises. The circumstances, however, must indicate the tenant’s continued control and possession of the premises, which interferes with the lessor’s use or possession of the premises. Compare Magner v. Barrett, 123 N.Y.S. 690, 690 (N.Y.App.Div.1910) with Caserta v. Action for Bridgeport Comty. Dev., Inc., 377 A.2d 856, 857 (Conn.Super.Ct.1977).

Here, the circuit court found that CIF was a holdover tenant from September 2005 through January 2006 because it did not remove the underground fuel tanks. The circuit court did not specifically address whether WRIT was the owner of the tanks pursuant to the lease. Thus, the first issue was whether the tanks were the property of CIF or WRIT. If the tanks were WRIT’s property, the question was, as a matter of law, whether a tenant can be found to be holding over where the property left behind is owned, not by the tenant, but by the landlord.

The lease required CIF to “install three new gasoline tanks,” and it provided that all “‘Additions’ shall, at the end of the term belong to [WRIT] ([including] equipment, improvements, gasoline tanks, islands, canopies, etc.).” Thus, pursuant to the terms of the lease, once the lease terminated, WRIT was the owner of the tanks.

The failure of a tenant to remove property owned by the landlord does not constitute holding over. Accordingly, CIF’s failure to remove the tanks owned by WRIT did not render CIF a holdover tenant.

The circuit court next found that CIF was holding over based on CIF’s failure to provide an environmental certificate showing the demised premises to be free from contamination, as required in the lease. It found CIF liable to WRIT for holdover rent from September 2005 through October 2007, when the buildings were demolished.

WRIT’s argument, essentially, was that CIF breached a term of the lease. A mere breach of the lease, however, does not necessarily constitute holding over. The relevant inquiry in deciding whether a tenant was “holding over” is whether the tenant’s actions amounted to continued possession of the premises after expiration of the lease term, which interfered with the landlord’s use or possession of the property. There was no evidence presented that supported a finding that CIF’s failure in this regard interfered with WRIT’s possession and control of the premises. Thus, the circuit court erred in finding that CIF’s failure to deliver the environmental certificate rendered CIF a holdover tenant.

The circuit court next found that CIF was holding over from September 2005 to March 2006 based on the presence of B & E. On the facts as found by the trial court, we hold that CIF was not holding over due to the presence of B & E.

As indicated, there is authority for the proposition that a tenant who enters into a sublease with another person will be held liable for holding over if the sublessee fails to vacate at the expiration of the lease. See United States v. Morgan, 196 F.Supp. 345 (D.Md.1961); Sanchez v. Eleven Fourteen, Inc., 623 A.2d 1179 (D.C.1993).

In such a situation, the sublessee could be viewed as standing in the shoes of the original tenant, and the original tenant has a remedy against the subtenant. If the subtenant does not vacate the premises, and the sublease contains a covenant to surrender possession at the expiration of the tenant’s lease, the tenant may recover damages, based on a breach of contract, for the amount of holdover rent the tenant is compelled to pay the landlord. Phelan v. Kennedy, 173 N.Y.S. 687, 690 (N.Y.App.Div.1919).

That was not the case here. The court made a factual finding that there was no sublease or other contractual relationship between CIF and B & E.

B & E’s action in remaining on the property as a trespasser after CIF had vacated the premises could not be attributed to CIF, and it did not constitute holding over by CIF in violation of the lease.

Accordingly, the circuit court’s judgment awarding WRIT holdover fees was reversed.

COMMENTARY: “Maryland generally adheres to the common law, or American rule, that each party to a case is responsible for the fees of its own attorneys, regardless of the outcome.” Friolo v. Frankel, 403 Md. 443, 456 (2008). A trial court may award attorneys’ fees, however, if the parties to a contract have an agreement to that effect. Nova Research, Inc. v. Penske Truck Leasing Co., 405 Md. 435, 445 (2008).

Where an award of attorneys’ fees is authorized by contract, “the trial court will examine the fee request for reasonableness, even in the absence of a contractual term specifying that the fees be reasonable.” Atlantic Contracting & Material Co., Inc. v. Ulico Cas. Co., 380 Md. 285, 316 (2004).

A contractual fee award is assessed pursuant to the factors set forth in Rule 1.5 of the Maryland Lawyers’ Rules of Professional Conduct. Monmouth Meadows Homeowners Ass’n v. Hamilton, 416 Md. 325, 336-37 (2010).

Here, the trial court specifically stated that it was guided by Rule 1.5. The court found that much of the litigation involved assessing liability for environmental contamination costs, an issue on which WRIT did not prevail. Thus, the court limited the fees and expenses to those related to collecting holdover rent. With respect to the fees in that regard, the court noted that the hourly rates were high for Carroll County attorneys.

Considering the factors in Rule 1.5, the court did not err in finding that $25,000 was a fair and just award.

Tax Law

Charitable exemption

BOTTOM LINE: Appellee, as a nonprofit hospital, was the owner of the improvements made to their land for real property tax purposes and thus was entitled to seek a charitable exemption for the land and improvements.

CASE: Supervisor of Assessments of Baltimore County v. Greater Baltimore Medical Center, Inc., No. 2060, Sept. Term, 2009 (filed Dec. 1, 2011) (Judges Krauser, WOODWARD & Wright). RecordFax No. 11-1201-00, 26 pages.

FACTS: Greater Baltimore Medical Center, Inc. owns a 4.5-acre parcel adjacent to GBMC Hospital in Towson. GBMC’s main campus, the medical center campus, includes over a million square feet of office space, with parking garages, located on several adjoining tax parcels of land.

During 2004, GBMC began construction of a new medical office building, together with an adjacent parking garage (Improvements), within the medical center campus. The building was constructed and is now occupied for medical office use by for-profit and non-profit providers. The garage is used for parking cars of visitors to that building and other nearby facilities.

GBMC ground leased the vacant land to Baltimore Hospital Investors LLC (BHI), a for-profit Delaware limited liability company, as tenant, pursuant to a Lease Agreement (Ground Lease). BHI was established to aid in financing the construction of the Improvements. The initial term of the Ground Lease was for approximately fifty-one years with an additional ten year option.

The Ground Lease provides that, upon expiration of the term of the Ground Lease, the land and Improvements revert back to GBMC. BHI owns and has title to the Improvements during the Ground Lease term, subject to the reversion to GBMC upon the expiration of the initial term and the additional term if the lease is extended.

BHI leased the improved property after construction back to GBMC for twenty-six years with seven five year options under an Improvement Lease. BHI retains title to the Improvements during the leaseback term. In the event GBMC defaults on its obligations, BHI has the right to re-enter and take possession of the land and Improvements constructed thereon and re-lease the property.

On March 15, 2006, Curtis Campbell, agent for BHI and GBMC, applied for a charitable property exemption on behalf of BHI with the Supervisor of Assessments of Baltimore County (Supervisor). The Maryland State Department of Assessments and Taxation (SDAT) denied the application. The Property Tax Assessment Appeals Board also denied the application.

GBMC filed an appeal to the Tax Court, which vacated the denial of the charitable exemption. The circuit court affirmed the Tax Court.

The Court of Special Appeals affirmed.

LAW: As an administrative agency, the Tax Court’s decisions are reviewed under the “same appellate standards generally applied to agency decisions.” Comptroller of the Treasury v. Johns Hopkins Univ., 186 Md.App. 169, 181 (2009).

All real property located in Maryland is taxable to the owner of the real property by the SDAT. TP §6-101(a)(1). Under Maryland law, the record owner, as listed in the land records, is the owner of real property for tax assessments purposes. Mayor & City Council of Baltimore v. Boitnott, 356 Md. 605, 617, 619 (1999); Johns Hopkins Univ. v. Bd. of County Comm’rs of Montgomery County, 185 Md. 614, 617 (1946).

Under TP §1-101(dd)(1), real property is defined as “any land or improvements to land.” See also Black’s Law Dictionary 1218. Improvements are “such things as are placed thereon by the way of betterments which are of a permanent nature and which add to the value of the property as real property…includ[ing] buildings and structures of every kind.” Allentown Plaza Assocs. v. Suburban Propane Gas Corp., 43 Md.App. 337, 346 (1979). Consequently, improvements affixed to the land are “considered part of the real property,” and “ownership of the improvements follows title to the land.” 41 Am.Jur.2d Improvements §3 (2005).

Thus, the owner of real property according to the land records also owns the improvements built thereon. It follows then that, for someone other than the record landowner to own the improvements on the land, there must be a recorded deed or other instrument of record showing a transfer of the title to the improvements to another owner. See RP §3-101.

At the trial before the Tax Court, GBMC introduced evidence indicating that GBMC was the owner of the land and the Improvements according to the land records. When questioning GBMC’s Executive Vice President and Chief Financial Officer, Eric L. Melchior, GBMC’s counsel introduced into evidence a “printout” from the SDAT website, which lists “Greater Baltimore Medical Center, Inc.” as the owner of “4.497 AC PT LT 1 MOB,” i.e., the land and the Improvements, and shows no “transfer” of the land or the Improvements. GBMC introduced the SDAT document into evidence before the Tax Court to demonstrate that, according to the land records, GBMC is the record title owner of the land and the Improvements. The Supervisor did not object to the introduction of the document.

The Supervisor, however, argued that BHI is the owner of the Improvements and that its ownership of the Improvements was “established” by the Ground Lease, Memorandum of Lease, Improvements Lease, Construction Escrow and Security Agreement, Reciprocal Parking Easement, and Leasehold Deed of Trust,.

Of all the documents relied upon by the Supervisor, only the Memorandum of Lease, Reciprocal Parking Easement, and Leasehold Deed of Trust were recorded in the land records. Although the Easement and Leasehold Deed of Trust acknowledge that BHI is the owner of the Improvements, there is no language in these recorded documents transferring GBMC’s record title ownership of the land or the Improvements to BHI. This result is corroborated by the “printout” on the SDAT’s own website, which states that GBMC is the owner of the land and the Improvements for real property tax purposes.

RP §3-101 requires all transfers in property ownership to be recorded. Consequently, none of the unrecorded documents can effect a transfer of the record ownership of the land or the Improvements from GBMC to BHI.

The Supervisor relied on Meade Heights, Inc. v. Tax Comm’n, 202 Md. 20 (1953), in which the United States government leased a parcel of federally-owned land to Meade Heights upon which Meade Heights was to construct housing units. Id. at 23-24. Under the predecessor statutory provision to TP §6-101(a)(2), the Court of Appeals concluded that Meade Heights could be taxed for its leasehold interest in the housing units. Id. at 27. That statutory provision allowed for assessment and taxation by the State of Maryland for property “owned or leased by the United States, or any agency or department of the United States.” Id. at 25.

Meade Heights was inapplicable because it addresses the taxation of real property leased by a private party from the federal government, which was not the case here.

Finally, an opinion authored by SDAT’s counsel, Kaye Brooks Bushel, dated May 20, 1982, involved land improved by a parking garage owned by Johns Hopkins Hospital (JHH) and thus was tax exempt. JHH proposed to lease the land underlying the garage to a limited partnership for a term of 40 years and sell the garage to the partnership under a conditional sales contract, with the purchase price paid over a 30-year period. Simultaneously with the lease and sale by JHH, the partnership would lease back the land and garage to JHH for a term of 30 years.

Because the deed transferring title to the garage was not recorded, Bushel determined that legal title to the garage would not pass until the end of the 30-year period. Therefore, Bushel concluded that the “legal title to the improvements which are subject to the conditional sales contract also remains in JHH for 30 years.” See also Bushel opinion dated May 18, 1983.

Accordingly, the Tax Court did not err in determining that GBMC was the owner of the Improvements according to the land records, and thus was entitled to seek a charitable exemption for the land and Improvements.

COMMENTARY: In general, a leasehold or other limited interest in property is not subject to property tax. TP §6-102(a). The Maryland Code, however, contemplates several exceptions to that general rule. Under §6-102(d)(3), an interest of a mortgagor or grantor under a deed of trust is subject to property tax as though the person in possession or the user of the property were the owner of the property. A deed of trust is a “security device,” which “transfers legal title from a property owner to one or more trustees to be held for the benefit of a beneficiary.” Springhill Lake Investors Ltd. P’Ship v. Prince George’s County, 114 Md.App. 420, 428 (1997).

BHI never held record title to the Improvements, and therefore, could not have transferred the legal title to the Improvements as a grantor would under a deed of trust. Instead, BHI conveyed only a leasehold interest in the Improvements to the trustees.

Furthermore, BHI transferred only a leasehold interest to the trustees under the Leasehold Deed of Trust, and not a title interest; and BHI is neither a person in possession of the land or Improvements, nor the user of such property. Thus, TP §6-102(d)(3) did not apply.

PRACTICE TIPS: Through the transfer of legal title, “the deed of trust secures repayment of the loan” and “[i]f the loan is not repaid, it is through the deed of trust that the beneficiary has recourse against the property[,]…by selling the borrower’s property and applying the funds received against the borrower’s indebtedness.” Springhill Lake Investors Ltd. P’Ship, 114 Md.App. at 428.


Negligent/intentional misrepresentation

BOTTOM LINE: As no genuine dispute of material fact existed concerning certain representations airline made to plaintiffs related to the booking and departure of plaintiffs’ flights, airline was entitled to summary judgment on plaintiffs’ claims for negligent and intentional misrepresentation.

CASE: Lavine v. American Airlines, Inc., No. 2917, Sept. Term, 2009 (filed Dec. 1, 2011) (Judges Graeff, Hotten & KENNEY III (retired, specially assigned)). RecordFax No. 11-1201-01, 23 pages.

FACTS: On Sept. 26, 2008, Deborah and Matt Lavine purchased two round-trip airline tickets from American Airline Inc.’s website. Each ticket included two flights on the outbound leg. Flight 1219 was from Reagan National Airport to Miami International Airport on Dec. 21, 2008, with an estimated arrival time of 7:55 p.m. Flight 4941 was from Miami International Airport to Key West International Airport on Dec. 21, 2008, with a departure time of 8:35 p.m. The Lavines had booked a hotel room in Key West for the night of Dec. 21, 2008.

After buying the tickets, the Lavines received an email with their itinerary & receipt, referencing the “Conditions of Carriage,” which stated that the ticket and the Conditions of Carriage “constitute the contract.”

After the Lavines arrived at Reagan National Airport for flight 1219, they were informed the flight was delayed. Concerned this would cause them to miss their connecting flight, the Lavines requested a refund or seats on another flight. American represented that, despite the delay, it would provide the Lavines with the connecting flight from Miami to Key West. Based on those representations, the Lavines agreed to board the delayed flight.

When flight 1219 arrived in Miami at 8:23 p.m, American instructed the Lavines that they had fifteen minutes to traverse the airport to arrive at the departure point for flight 4941. The Lavines ran through the airport and arrived at the gate at 8:30 p.m., but were denied entry because they did not arrive thirty minutes prior to the scheduled flight time.

American secured and paid for a hotel room for the Lavines in Miami and provided them with a stipend for dinner and breakfast. The next day, the Lavines boarded a flight from Miami to Key West.

The Lavines sued American for: (1) negligent misrepresentation and intentional misrepresentation. The complaint sought $10,000 in compensatory damages and $10,000 in punitive damages for each plaintiff. The circuit court granted summary judgment for American. The Lavines appealed to the Court of Special Appeals, which affirmed.

LAW: The Airline Deregulation Act, 49 U.S.C. §40101 et seq., provides that, “[t]o the extent the Secretary of Transportation prescribes by regulation, an air carrier may incorporate by reference in a ticket or written instrument any term of the contract for providing interstate air transportation.” 49 U.S.C. §41707.

“A ticket or other written instrument that embodies the contract of carriage may incorporate contract terms by reference (i.e., without stating their full text), and if it does so shall contain or be accompanied by notice to the passenger.” 14 CFR 253.4(a). The ticket or written instrument must include a “conspicuous notice” that “[a]ny terms incorporated by reference are part of the contract.” Id at 253.5(a). The incorporated terms may include information regarding the “[r]ights of the carrier and limitations concerning delay or failure to perform service, including schedule changes, substitution of alternate air carrier or aircraft, and rerouting.” Id. at 253.5(b)(5).

Thus, American was authorized to incorporate by reference the Conditions of Carriage to the “E-Ticket Confirmation” email and those conditions were part of the contract between the Lavines and American. Therefore, the Lavines’ assertion that they did not see or receive the Conditions of Carriage before or after the purchase of the ticket did not create a genuine dispute of material fact.

The Lavines also contended that even if the Conditions of Carriage were part of the contract, an agent of American orally modified these conditions at the airport, thereby creating a genuine dispute regarding the applicability of the Conditions of Carriage. However, there is a non-modification clause in the Conditions of Carriage which precludes any agent of American from altering, modifying or waiving any provision of the Conditions of Carriage, unless authorized in writing by a corporate officer of American.

The Conditions of Carriage also stated that if a “delay or cancellation was caused by events within our control and we do not get you to your final destination on the expected arrival day, we will provide reasonable overnight accommodations, subject to availability.”

American produced the affidavit of their employees which stated that American secured and paid for a hotel room for the Lavines and provided them with a stipend for dinner and breakfast. Although the Lavines alleged that they paid for their own hotel room in Miami, during the summary judgment proceeding, they did not contest that American had arranged and paid for a hotel room for them.

With respect to the judgment as a matter of law on the negligent and intentional misrepresentation claims, the elements of negligent misrepresentation are: “(1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement; (2) the defendant intends that his statement will be acted upon by the plaintiff; (3) the defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury; (4) the plaintiff, justifiably, takes action in reliance on the statement; and (5) the plaintiff suffers damage proximately caused by the defendant’s negligence.” Griesi v. Atlantic Gen. Hosp. Corp., 360 Md. 1, 11 (2000).

The elements of intentional misrepresentation are: “(1) that a representation made by a party was false…(2) that either its falsity was known to that party or the misrepresentation was made with such reckless indifference to truth to impute knowledge to him…(3) that the misrepresentation was made for the purpose of defrauding some other person…(4) that that person not only relied upon the misrepresentation but had the right to rely upon it with full belief of its truth, and that he would not have done the thing from which damage resulted if it had not been made; and…(5) that that person suffered damage directly resulting from the misrepresentation.” B.N. v. K.K., 312 Md. 135, 149 (1988).

The Lavines asserted that American contractually promised it could transport them from Washington, D.C. to Key West within the time identified, and represented that, despite the delay, it would provide them with the connecting flight from Miami to Key West. The Lavines also alleged that American falsely represented that the Key West flight had departed prior to their arrival at the gate for that flight.

Even assuming such representations were made, the Lavines could not justifiably rely on such statements or the times indicated on their tickets, since the Conditions of Carriage stated that the times shown were not guaranteed and formed no part of the contract.

“[I]n determining whether the reliance was reasonable, the background and experience of the party that relied upon the representation is relevant.” Goldstein v. Miles, 159 Md.App. 403, 437 (2004). Lavine is an experienced attorney licensed to practice law in Maryland, and thus his reliance was not reasonable.

In the case of a misrepresentation, “the plaintiff must show not only that he would not have performed the act from which the injury resulted but for the misrepresentation, but also that the fact misrepresented was the proximate cause of the injury.” Lustine Chevrolet v. Cadeaux, 19 Md.App. 30, 35 (1973).

The Lavines argued that they were physically injured from American’s alleged misrepresentations because they suffered breathing difficulties from inhaling construction debris while running through Miami International Airport. However, it was not foreseeable that the Lavines would inhale construction debris and sustain personal injury as a result of an airline scheduling delay and, therefore, the Lavines did not demonstrate a sufficient causal connection

As to economic damages, it may have been foreseeable that the Lavines, relying on statements of American’s agents that allegedly induced the Lavines to board flight 1219, would need lodging in Miami on the night of Dec. 21 if they missed the connecting flight. But the Lavines did not generate a genuine dispute of fact that American did not secure lodging for them in Miami. And while it may have been foreseeable that the Lavines would lose the opportunity to use their Key West hotel room, this claim was expressly precluded by the Conditions of Carriage.

Accordingly, the trial court properly granted summary judgment for American.

COMMENTARY: “Where Congress has expressly stated its intent to preempt state law, federal law prevails.” Wells v. Chevy Chase Bank, F.S.B., 377 Md. 197, 209 (2003).

The ADA precludes a State from enacting a law “related to a price, route, or service of an air carrier that may provide air transportation under this subpart.” 49 U.S.C. §41713(b)(1). Congress enacted §41713(b)(1) “to ensure that the States would not undo federal deregulation with regulation of their own.” Morales v. Trans World Airlines, Inc., 504 U.S. 374, 378 (1992).

The statute “express[es] a broad pre-emptive purpose.” Id. at 383. Claims “having a connection with, or reference to, airline ‘rates, routes or services’ are [thus] pre-empted under” the statute, id. at 384, even if the effect is only indirect. Id. at 386. But state actions that affect airline prices, routes, or service “in too tenuous, remote, or peripheral a manner” are not preempted. Id. at 390.

“To determine whether a claim has a connection with, or reference to an airline’s prices, routes, or services, we must look at the facts underlying the specific claim,” and in doing so, concluded that “[u]ndoubtedly, boarding procedures are a service rendered by an airline.” Smith v. Comair, Inc., 134 F.3d 254, 259 (4th Cir.1998). However, “[s]uits stemming from outrageous conduct on the part of an airline toward a passenger will not be preempted under the ADA if the conduct too tenuously relates or is unnecessary to an airline’s services.” Id.

The claims at issue in this case were not “too tenuously” related to American’s “service,” and therefore were preempted by the ADA.

Boarding procedures are a “service,” and, it follows that allowing state tort claims that are closely related to such a service to proceed “would result in significant de facto regulation of the airlines’ boarding practices.” See Air Transp. Ass’n of Am. v. Cuomo, 520 F.3d 218, 223 (2d Cir.2008); Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364 (2008).

The Lavines’ economic claims had their genesis in a delayed flight and ultimately related to established boarding procedures as set out in the Conditions of Carriage. When the Lavines reached the gate, they were denied boarding because they arrived at the gate only five minutes before the scheduled departure. That denial was consistent with American’s boarding procedures and a provision of the Conditions of Carriage stating that a passenger “must be present at the departure gate and ready to board at least 15 minutes prior to scheduled departure time.”

The physical injuries were not incurred while actually boarding the connecting flight and were not the direct result of American’s activities within the terminal. Although “moving from one flight to the next” may not be strictly a part of the boarding procedures, the need to do so hurriedly usually relates, as it did here, to the timeliness of the earlier flight. See Tobin v. AMR Corp., 637 F.Supp.2d 406 (N.D. Tex 2009).

In the absence of some “outrageous conduct” by the airline, rushing to catch a connecting flight is not “too tenuously” related to an airline’s service to be denied preemption. But, even if it were, the resulting claims were barred by the Conditions of Carriage and the intervening construction within the airport.

PRACTICE TIPS: The validity of limitation of liability clauses have been routinely upheld and “[i]n the absence of legislation to the contrary, the law…is that there is ordinarily no public policy which prevents the parties from contracting as they see fit, as to whether the plaintiff will undertake the responsibility of looking out for himself. It is quite possible for the parties expressly to agree in advance that the defendant is under no obligation of care for the benefit of the plaintiff, and shall not be liable for the consequences of conduct which would otherwise be negligent.” See, e.g., Winterstein v. Wilcom, 16 Md.App. 130, 135 (1972).


Professional negligence

BOTTOM LINE: Because plaintiff’s complaint was a “claim” under CJ §3-2C-01(b), the circuit court did not err in granting defendant’s motion to dismiss for plaintiff’s failure to file a certificate of qualified expert as required by CJ §3-2C-02.

CASE: Heavenly Days Crematorium, LLC v. Harris, Smariga & Associates, Inc., No. 1453, Sept. Term 2010 (filed Dec. 1, 2011) (Judges Eyler, D, MATRICCIANI & Wilner (retired, specially assigned)). RecordFax No. 11-1201-04, 35 pages.

FACTS: Heavenly Days Crematorium, LLC owns and operates the Greenbriar Kennels Memorial Crematorium, an animal cemetery and crematorium. In August 2004, Heavenly Days applied to move its crematorium to its current location in Urbana, Maryland. The application process required Heavenly Days to obtain plan approval, zoning variances, and various building permits from the State of Maryland and Frederick County.

Heavenly Days hired Harris, Smariga and Associates, Inc. (HSA), a firm that offers site planning and civil engineering services, to assist Heavenly Days with the permit application and approval process. From 2004 through 2007, HSA employee Chris Mayo was Heavenly Days’ contact person during the application process. Mayo submitted a site plan to the Frederick County Planning Commission (FCPC) in the fall of 2004, and on Jan. 19, 2005 the FCPC gave the site plan a conditional approval. There were seven conditions attached to the conditional approval, one of which was that construction of the crematorium had to begin within two years to vest the approval.

Under the Frederick County Zoning Ordinance, site plan applicants may request a one-time six month extension, provided the request is made at least thirty days before the expiration of the two year conditional approval period. Zoning Ordinance §1-19-3.220.

By the fall of 2006, certain issues with the site plan had not yet been resolved. The conditional approval was due to expire on Jan. 19, 2007 unless a request for a six month extension was made by Dec. 19, 2006. Mayo requested a Dec. 15, 2006 meeting with the county to submit a revised site plan and request the six month extension. The county never responded to Mayo’s request, however, and the Dec. 19 deadline passed without anyone requesting a six month extension.

On Jan. 5, 2007 Mayo, along with representatives from Heavenly Days and its subcontractors, met with county planners and requested an extension. The county denied this request as untimely. Mayo submitted a revised site plan on Jan. 10, 2007. The county did not approve the revised site plan before the Jan. 19 deadline passed, and thus the original site plan’s conditional grant of approval lapsed.

Heavenly Days filed suit against HSA in the circuit court, seeking monetary damages for breach of contract and “professional negligence.” Heavenly Days contended that as a result of Mayo’s negligence Heavenly Days incurred penalties and fines, suffered construction delays, and had to repeat certain construction tasks; and that Mayo’s negligence ultimately forced Heavenly Days to re-start the application process. The circuit court dismissed the complaint for failure to file a certificate of qualified expert under CJ §3-2C-02.

Heavenly Days appealed to the Court of Special Appeals, which affirmed.

LAW: For suits under CJ §3-2C-02, the claimant must file a certificate of a qualified expert with the court. A valid certificate must “[c]ontain a statement from a qualified expert attesting that the licensed professional failed to meet an applicable standard of professional care.” CJ §3-2C-02(a)(2)(i). Failure to file the certificate within ninety days after filing the complaint entitles the defendant to dismissal without prejudice. Id. at §(a)(1). A “qualified expert” is “an individual who is a licensed professional, knowledgeable in the accepted standard of care in the same discipline as the licensed professional against whom a claim is filed.” CJ §3-2C-01(d).

Under §3-2C-01(b), a “claim” is “a civil action…against a licensed professional or the employer, partnership, or other entity…through which the licensed professional performed professional services that is based on the licensed professional’s alleged negligen[ce]…in rendering professional services.”

CJ §3-2C-01(c) enumerates five categories of “licensed professionals” based on certifications or licenses under the Business Occupations and Professions Article (BOP).

A professional engineer is “an engineer who is licensed by the [State Board for Professional Engineers] to practice engineering.” BOP §14-101(g). “[P]ractice engineering” is defined as providing “any service or creative work the performance of which requires education, training, and experience in the application of special knowledge of the mathematical, physical, and engineering sciences and the principles and methods of engineering analysis and design. BOP §14-101(f)(1).

“Practice engineering” also includes consultation, design, evaluation, investigation, and design coordination in regard to a building or other structure. BOP §14-101(f)(2).

Neither party disputed that Mayo does not hold a license to practice engineering issued by the State Board for Professional Engineers. However, under BOP §14-303(a)(1), a non-licensed individual who is the employee or subordinate of a professional engineer may practice engineering without a license.

The site plan prepared by HSA included stormwater management calculations prepared, signed, and sealed by a licensed professional engineer, HSA employee T. Merchant McDonald. Thus, HSA’s preparation of the site plan falls within the phrase “practice engineering” under BOP §14-101(f)(1).

In the fall of 2005 Mayo submitted the site plan to the FCPC. The FCPC granted the site plan a conditional approval on Jan. 19, 2005. This site plan contained several errors, which Heavenly Days later desired to change. Heavenly Days asked Mayo to get approval from the FCPC for the change and to correct the written comment on the site plan. Such revisions invoke the definition of “practice engineering” under BOP §14-101(f).

By the language of its own amended complaint, Heavenly Days attributed the failure to properly perform certain tasks to HSA as a firm of engineers, not to Mayo as an individual without an engineering license. That Mayo was the individual who delivered the engineering documents to the FCPC does not change the fact that the nature of the complaint was HSA’s negligent performance of engineering services.

Prior to 2005, CJ §3-2C-01(b) read: “’Claim’ means a civil action, originally filed in circuit court against a licensed professional that is based on the licensed professional’s alleged negligent act or omission in rendering professional services.”

In Baltimore County v. RTKL Associates, 380 Md. 670 (2004), the Court of Appeals interpreted CJ §§3-2C-01 and -02 as they were before the 2005 amendment. The Court held that the certificate requirement of the then-existing CJ §3-2C-02 applied only to individuals, and not to suits against corporate firms such as RTKL.

The General Assembly amended CJ §3-2C-01(b) in response to Baltimore County v. RTKL, so that in future cases the claimant would be required to file a certificate when suing a professional business entity that employed the alleged negligent licensed professional.

The crux of Heavenly Days’ complaint was the alleged deficiencies in the professional engineering services that HSA provided. To hold that Heavenly Days’ complaint is not a “claim” under CJ §3-2C-01(b) would be contrary to the policy of a statutory scheme designed in part to protect professional engineering firms from nonmeritorious tort claims.

The 2005 amendment to CJ §3-2C-01(b) made another substantive change and addressed the jurisdictional aspect of CJ §3-2C-01(b) by requiring a certificate for cases originally filed in a United States District Court, in addition to those filed in a Maryland circuit court. The two substantive changes to §3-2C-01(b) serve to expand the scope of the certificate requirement, which supports the view that the General Assembly intended CJ §3-2C-02 to apply when a claim involves professional services rendered in part by a non-licensed employee of a professional corporate employer.

Therefore, Heavenly Days’ complaint was a “claim” within the meaning of CJ §3-2C-01(b). The scope of work intended by the contract between Heavenly Days and HSA called for professional engineering services, specifically the preparation and submission of a site development plan application for the proposed crematorium.

In light of the 2005 amendment to CJ §3-2C-01(b) expanding the scope of the certificate requirement to include professional business organizations, it mattered not that Mayo herself does not hold a professional license of the type enumerated in CJ §3-2C-01(c). HSA was the only named defendant and at all times Mayo and HSA performed professional engineering services for Heavenly Days pursuant to a contract for professional engineering services.

Further, Heavenly Days’ “professional negligence” versus “ordinary negligence” distinction was without merit. The statute does not contemplate such distinctions where the alleged negligence arises from a failure to perform professional engineering services within the standard of care of a reasonable engineer.

Thus, the circuit court did not err in granting HSA’s motion to dismiss for Heavenly Days’ failure to file a certificate of qualified expert as required by CJ §3-2C-02.

COMMENTARY: Upon request and a showing of good cause by the claimant, the trial court has discretion to waive or modify the required filing of a certificate of qualified expert. CJ §3-2C-02(c).

“Circumstances that have been found to constitute good cause fit into several broad categories: excusable neglect or mistake, serious physical or mental injury and/or location out-of-state, the inability to retain counsel in cases involving complex litigation,…ignorance of the statutory [ ] requirement,” and “where representations made by [ ] government representatives are misleading.” Kearney v. Berger, 416 Md. 628, 663 (2010).

Heavenly Days filed the original complaint on Oct. 29, 2009, so the ninety-day deadline to file a certificate expired on Jan. 27, 2010. Heavenly Days did not file the certificate until Feb. 22, 2010. Thus, Heavenly Days was twenty-five days late in filing the certificate required by CJ §3-2C-02.

Under the medical malpractice statute, the claimant can be afforded the right to an automatic ninety-day extension, even if the request is late. There is no such provision in CJ §3-2C-02(c). Rather, under CJ §3-2C-02(c)(2), the claimant’s request for a waiver or modification of the certificate requirement merely “suspends” the ninety-day filing period.

If, as was the case here, the ninety-day filing period has already expired when the claimant makes the request to waive or modify the certificate requirement, there is no remaining filing period for the court to suspend. Thus, the circuit court did not have discretion to grant Heavenly Days’ untimely request for a waiver or modification..

Even if the circuit court did have such discretion, its decision not to grant a modification or waiver was not an abuse of discretion. Heavenly Days argued in part because its failure to timely file a certificate was based on a reasonable belief that CJ §3-2C-02 did not apply. The record contained no evidence to illuminate whether Heavenly Days’ failure to file the certificate was due to a shrewd calculation or due to ignorance of the statute’s requirements. Either way, the court did not abuse its discretion.

PRACTICE TIPS: The Court of Appeals previously acknowledged that dismissing a plaintiff’s claim for failure to file a certificate in a medical malpractice action “was potentially harsh where the statute of limitations had run because such claimants were time barred from refiling their claims, despite the fact that the claims may have been meritorious and timely when filed.” Edward v. McCready Mem’l Hosp., 300 Md. 497, 506 (1993).