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Law Digest — Court of Appeals, Court of Special Appeals — Aug. 5, 2021

Maryland Court of Appeals

Civil Procedure; Subject matter jurisdiction: A county Board of Appeals lacked subject matter jurisdiction to review the civil penalties assessed by the County Chief Code Compliance Officer because the Maryland General Assembly has not vested boards of appeal established by charter counties with authority to review or consider civil penalties assessed by a code enforcement officer for violations of a county code, and, instead, the authority to adjudicate civil penalties arising from violations of a local code enacted by a charter county is within the original jurisdiction of the courts. Angel Enterprises Limited Partnership v. Talbot County, Maryland, No. 45, Sept. Term, 2020.

Criminal Procedure; Waiver of Miranda rights: Where 16-year old, Spanish-speaking immigrant was given a Miranda advisement in verbally in Spanish, the fact that he was not given a Miranda advisement in writing did not make his waiver of rights involuntary. Madrid v. State, No. 50, Sept. Term, 2020.

Maryland Court of Special Appeals

Real Property; Foreclosure: The holder of an economic interest in a limited liability company was not entitled to notice of foreclosure of the right of redemption and was not permitted to intervene in the foreclosure proceedings. WAMCO, Inc. v. Northeast 400, LLC, No. 2271, Sept. Term, 2019.

Civil Procedure

Subject matter jurisdiction

BOTTOM LINE: A county Board of Appeals lacked subject matter jurisdiction to review the civil penalties assessed by the County Chief Code Compliance Officer because the Maryland General Assembly has not vested boards of appeal established by charter counties with authority to review or consider civil penalties assessed by a code enforcement officer for violations of a county code, and, instead, the authority to adjudicate civil penalties arising from violations of a local code enacted by a charter county is within the original jurisdiction of the courts.

CASE: Angel Enterprises Limited Partnership v. Talbot County, Maryland, No. 45, Sept. Term, 2020 (filed July 9, 2021) (Judges Barbera, McDonald, Watts, Hotten, Getty, BOOTH & Biran).

FACTS: Angel Enterprises Limited Partnership purchased an unimproved lot in Talbot County, Maryland, on September 10, 2002. The unimproved property contained a deed restriction denying the landowner direct access to Maryland Route 33 (also commonly referred to as “the St. Michaels Road”) unless approved by the Maryland State Highway Administration, the Talbot County Department of Planning and Zoning, and the Talbot County Public Works Department. Morton Bender intended to construct a residence on the property, and he obtained a building permit from Talbot County for the construction of the residence in 2003. In connection with the construction of the residence, Bender tried, without success, to obtain approval from Talbot County to build a driveway on the property with direct access to Route 33. Bender met with county representatives in February 2005 and was explicitly told that Angel could not have direct access from this property to Route 33 due to safety and environmental concerns.

Despite the County’s lack of approval for the driveway, Bender hired a contractor to clear trees and build a driveway in early 2006. The project was ongoing when the County was alerted to the violation by the Maryland Department of the Environment (“MDE”). Upon learning of the unlawful clearing and driveway construction activities, Talbot County issued administrative abatement orders for violations of the Talbot County Code, which kicked off 12 years of enforcement proceedings against Bender and Angel, including civil and criminal enforcement actions by MDE, county administrative hearings related to the abatement orders, county attempts to assess daily accruing penalties associated with the initial clearing and construction activity, and efforts by Bender and Angel efforts to restore the property.

First, after learning of the clearing activities and construction of the driveway from MDE, the Talbot County Chief Code Compliance Officer (“CCCO”), Robert Graham, mailed Angel an administrative abatement order on January 23, 2009. This order was followed by a supplemental abatement order, which was mailed to Angel and Bender on February 19, 2009. The abatement orders alleged two types of violations: one for cutting trees outside the Critical Area, and the other for cutting trees in the Critical Area. The abatement orders directed Angel and Bender to remediate and restore the property.

Under the applicable provisions of the Talbot County Code, the CCCO had the authority to issue “assessment notices” imposing civil fines that would accrue on a daily basis until the code violations were corrected. Under the County Code, a property owner’s method for challenging the assessment of civil penalties was to file an administrative appeal to the Talbot County Board of Appeals. Bender and Angel filed an administrative appeal of the assessments on December 29, 2009.

After the administrative appeal was stayed by agreement, in 2017, the Board of Appeals conducted an evidentiary hearing on the civil penalties that were assessed by the CCCO’s notices over the course of five evidentiary hearings, spanning a total of five months. At the conclusion of the evidentiary hearing, the Board of Appeals determined that the CCCO had the authority to issue the civil assessments under the Code and that the due process rights of Bender and Angel were not violated by the County’s procedure for the adjudication of civil fines. However, the Board determined that, under the applicable provisions of the Code, the daily accrual of fines was stayed by Bender and Angel’s administrative appeal filed on December 29, 2009. After Talbot County filed a petition for judicial review of the Board’s decision that the daily accrual of fines was stayed during the pendency of the administrative appeal, the circuit court reversed that portion of the Board’s determination and entered an order authorizing Talbot County to enforce the civil assessments “in the amount of $713,400 as originally assessed.”

Bender and Angel appealed to the Court of Special Appeals, which vacated the portion of the judgment providing that Bender and Angel owed $713,400, concluding that the amount owed was “a determination to be made in a separate proceeding.” The Court of Special Appeals also remanded the case to the Board of Appeals for the Board to consider additional issues pertaining to the County’s authority to assess penalties for daily violations of the particular code in question.

Angel and Bender appealed to the Court of Appeals, which vacated the judgment entered by the circuit court and remanded the case with instructions that the Board’s decision be vacated and the assessments be dismissed.

LAW: At issue was whether the Talbot County Board of Appeals had subject matter jurisdiction under the Express Powers Act, Local Government Article, Title 10, Subtitle 2, to review the CCCO’s assessment of civil fines or penalties.

The General Assembly has vested original jurisdiction in the Maryland courts for the adjudication of civil fines that are sought to be imposed by a charter county under the pertinent provisions of State law. Consistent with the applicable provisions of State law that confer original jurisdiction in the Maryland courts to adjudicate civil penalties arising from code violations enacted by a charter county, the General Assembly has not granted jurisdiction to a board of appeals established by a charter county to conduct an administrative review of assessments of civil penalties.

When a party is challenging the authority of a local government to take a particular action, it is important to strip away the labels and consider the particular governmental action that is sought to be undertaken. See K. Hovnanian Homes of Maryland, LLC v. Mayor of Havre de Grace, 472 Md. 267, 292 (2021). First, it is necessary to identify the precise nature of the governmental action in question. Id. Second, it must be determined whether the local government “has the legal authority to undertake the action, and if so, whether the contemplated action was correctly undertaken consistent with that grant of authority.” Id. (emphasis in original).

In this case, the governmental action at the center of the controversy consisted of the CCCO’s issuance of six assessment notices purporting to assess civil penalties arising from: (1) the Petitioners’ unlawful tree clearing and driveway construction activities in 2006; and (2) the Petitioners’ “ongoing failure to correct, discontinue, or abate ongoing” violations as required by the two administrative abatement orders that were the subject of the initial administrative appeal. On their face, the assessment notices were exactly what they were described to be: assessments of civil penalties or monetary fines. Having identified the nature of the governmental action, it was next necessary to consider whether the County’s assessment of civil penalties comported with the authority granted to the County by the Maryland Constitution, State law, and, finally, local laws. Although the code enforcement officer has the authority to seek the imposition of civil penalties for code violations, the local county administrative procedure for the assessment of civil penalties was inconsistent with the applicable provisions of State law that confer original jurisdiction over the adjudication of civil fines of this nature in the Maryland courts. Moreover, the County’s code provisions that purported to expand the Board of Appeals’ jurisdiction to encompass administrative appeals of civil fines were inconsistent with State law.

Article XI-A of the Constitution of Maryland (“the Home Rule Amendment”) mandated that the General Assembly enumerate and delegate certain powers, which may be exercised by counties electing a charter form of government. Ritchmount P’ship v. Bd. of Supervisors of Elections for Anne Arundel Cty., 283 Md. 48, 57 (1978). In compliance with its constitutional mandate, the Legislature enacted the Express Powers Act. Under the Express Powers Act, charter counties have the authority to exercise their express powers by legislative enactment. See Local Government Article (“LG”) §10-102(a). Where a charter county enacts local laws on any matter authorized by the Express Powers Act, the Act also grants the county the authority to enforce its laws by civil and criminal fines. Specifically, LG §10-202(b) provides that a county may provide for the enforcement of an ordinance, a resolution, a bylaw, or a regulation adopted under this title: (1) by civil fines not exceeding $1,000; or (2) by criminal fines and penalties not exceeding $1,000 and imprisonment not exceeding 6 months.” (Emphasis added).

Where a charter county adopts civil fines or penalties for violations of its ordinances that are adopted pursuant to the Express Powers Act, the Legislature has conferred exclusive, original jurisdiction over the adjudication of such matters in the courts. Specifically, Courts and Judicial Proceedings Article (“CJ”) §4-401 confers upon the Maryland District Court “exclusive original civil jurisdiction” in a proceeding for adjudication of a violation of an ordinance enacted by a charter county for which “a civil penalty is provided under §10-202 of the Local Government Article.” (Emphasis added). The District Court’s exclusive original jurisdiction over the adjudication of civil penalties is subject to the provisions of CJ § 4-402(d), which grants concurrent jurisdiction in the circuit court, if the amount in controversy exceeds $5,000, exclusive of prejudgment interest or attorney’s fees, if allowable.

In accordance with the authority granted under the Home Rule Amendment, the Express Powers Act, and other provisions of State law which grant the authority to enact local laws, Talbot County adopted a Charter and a County Code. In 2007, the Talbot County Council enacted Bill No. 1108, which adopted a new Chapter 58 to the Talbot County Code, which purported to create unified code enforcement procedures applicable to the Talbot County Code, including provisions for the accrual of daily civil penalties for continuing code violations, and a county administrative process for the imposition of civil fines and penalties by the code compliance officer, with the right to appeal to the Talbot County Board of Appeals. The Talbot County Code provisions that established a procedure for the administrative imposition and adjudication of civil fines by assessment notices issued by a CCCO, with a right to an administrative appeal to the Talbot County Board of Appeals, were inconsistent with the applicable provisions of State law, which vest original jurisdiction in the courts for the adjudication of civil penalties established by a charter county in the exercise of its express powers, as well as in the exercise of additional powers authorized by the Forest Conservation Act and the Critical Area Law. See, e.g., CJ §§ 4-401(10)(vi)(1), 4-402(d).

In sum, Talbot County did not have the authority to expand the jurisdiction of its Board of Appeals beyond the jurisdictional limits established by the General Assembly. As such, it lacked the authority to vest its Board of Appeals with administrative review of civil penalties, requiring vacation of the judgment and dismissal of the case. Additionally, the assessment notices issued by the CCCO that purported to assess civil penalties subject only to administrative review by the Board of Appeals were facially invalid and unenforceable.

Accordingly, the judgment of the Court of Special Appeals was vacated and the case was remanded to the Court of Special Appeals with instructions to vacate the circuit court judgment and remand to the circuit court, with further instructions to the circuit court to remand to the Board of Appeals, with further instructions that the Board vacate its decision and dismiss the assessments.

COMMENTARY: If the County’s argument that the assessments constituted “adjudicatory orders” within the subject matter jurisdiction of the Board of Appeals were to be accepted, such an interpretation would be flatly inconsistent with the other statutory provisions, which confer original jurisdiction over the adjudication of civil penalties and fines in the Maryland courts. See, e.g., Immanuel v. Comptroller of Maryland, 449 Md. 76, 87 (2016). To the extent that Chapter 58 of the Talbot County Code established a process for the administrative assessment of civil penalties that was inconsistent with the applicable provisions of State law that conferred original jurisdiction in the courts for the adjudication of civil fines and penalties, such provisions of the Talbot County Code were ultra vires and void.

  

PRACTICE TIPS: One of the fundamental tenets of administrative law is that judicial review of a matter arising under the jurisdiction of an administrative agency is different from a matter arising under the original jurisdiction of the courts. Judicial review of administrative agency action is narrow. A court’s role is limited to determining if there is substantial evidence in the record as a whole to support the agency’s findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law.

Criminal Procedure

Waiver of Miranda rights

BOTTOM LINE: Where 16-year old, Spanish-speaking immigrant was given a Miranda advisement in verbally in Spanish, the fact that he was not given a Miranda advisement in writing did not make his waiver of rights involuntary.

CASE: Madrid v. State, No. 50, Sept. Term, 2020 (filed July 9, 2021) (Judges Barbera, McDonald, WATTS, Hotten, Getty, Booth & Biran).

FACTS: Darwin Madrid was charged in the circuit court with multiple offenses, including the murder of Gamaliel Nerio-Rico and the attempted murder of Carlos Tenorio-Aguirre. Prior to trial, during custodial interrogation in connection with the investigation of the offenses, Madrid made a statement advising a law enforcement officer that he had shot Nerio-Rico, the deceased, and that he had shot at Tenerio-Aguirre, the person who survived the shooting. At trial, the State offered evidence that Madrid was a member of the gang Mara Salvatrucha, better known as MS-13, and that a higher-up in the gang ordered him to kill Tenorio-Aguirre, the surviving victim, who was a member of a rival gang known as 18th Street, and evidence of Madrid’s statement.

Madrid, who, at the time, was 16 years old, gave the confession statement while being interviewed by Detective Luis Cruz of the Homicide Unit of the Prince George’s County Police Department. During the interview, before administering the Miranda rights, among other things, Detective Cruz told Madrid that, although Madrid was not in the country legally, he still had legal rights. Detective Cruz advised Madrid of his Miranda rights and asked whether he understood his rights, and Madrid responded affirmatively. During the interview, Detective Cruz mentioned to Madrid that he was in danger from his own gang, MS-13, and the rival 18th Street gang. As noted, Madrid ultimately confessed.

Before trial, Madrid moved to suppress his confession statement. The circuit court denied the motion to suppress, determining that the police detective had complied with the requirements of Miranda v. Arizona, 384 U.S. 436 (1966), and that the defendant’s confession was voluntary. At trial, as a witness on his own behalf, Madrid testified that that he had been involved with MS-13 and performed various tasks on behalf of the gang. At trial, Madrid testified that he had participated in the murder and attempted murder because, if he had not complied, he would have been punished “the following day” or as soon as the punishment could be imposed.

Madrid’s counsel submitted to the circuit court written proposed jury instructions, including an instruction on duress. The circuit court declined to give the instruction. The jury found Madrid guilty. Madrid appealed, and the Court of Special Appeals affirmed his convictions, holding that the circuit court did not err in denying the motion to suppress or declining to give a jury instruction on duress. Madrid then appealed to the Court of Appeals, which affirmed the judgment of the Court of Special Appeals.

LAW: Madrid contended that he did not knowingly and voluntarily waive his rights under Miranda because, among other things, he was not given the advisement of rights in writing, no attempt was made to assess whether he understood the advisement, and Detective Cruz informed him before the advisement that he knew Madrid was in the country illegally. In addition, Madrid argued that his confession was not voluntary under the common law of Maryland because during the interrogation, Detective Cruz made references to threats on his life by gangs and, according to Madrid, the only conceivable interpretation was that the references were intended to imply an offer of protection if he confessed. Madrid asserted that his confession was not voluntary under Article 22 and the Due Process Clause because of, among other circumstances, his age, his inexperience with law enforcement officers, and the alleged coercion of the confession by Detective Cruz’s mentioning that he was in danger from gangs.

However, an evaluation of the totality of the circumstances revealed that Madrid understood his Miranda rights and knowingly and voluntarily waived them. At the time of the interview, Madrid was over 16 and a half years old. Madrid had been in the United States for two years and had completed some high school in the United States, including classes in science, algebra, history, and English as a second language. Madrid worked, was paid $1,400 every other week, and gave half of his pay to his mother.

Madrid was from Guatemala and his first language was Spanish. Detective Cruz, whose first language was also Spanish, conducted the interview in Spanish. Specifically, Detective Cruz advised Madrid of his Miranda rights in Spanish by reading aloud verbatim from a card on which the Miranda rights were printed in Spanish. After the advisement, Madrid responded affirmatively to Detective Cruz’s question concerning whether he understood his rights and willingly responded to other questions before and after the advisement.

Apart from Madrid’s argument that Detective Cruz did not comply with the requirements for the Miranda advisement of a juvenile because he (Detective Cruz) failed to ascertain how far Madrid went in school or to assess whether he was capable of understanding his rights, there was no indication that Madrid failed to understand his rights or the consequences of waiving them. According to Detective Cruz, Madrid did not appear to be under the influence of drugs or alcohol and was awake, responsive, a bit apprehensive, but cooperative. For his part, at the suppression hearing, Madrid testified that he could not remember being given his Miranda rights, not that he was given his rights but was unable to comprehend them.

In advising Madrid of his rights, Detective Cruz provided all of the advisements that the Supreme Court required under Miranda in Spanish, Madrid’s first language. It was not problematic that Detective Cruz orally advised Madrid of his rights in Spanish instead of allowing Madrid to read his rights on a written form. An officer is not required to issue Miranda advisements to a juvenile in writing. See, e.g., Miller v. State, 251 Md. 362, 365-67 (1968), vacated in part on other grounds, 408 U.S. 934 (1972). In addition, at the suppression hearing, Madrid’s counsel agreed that a law enforcement officer may choose to give or not give Miranda rights in written form.

No case law, including the cases cited by Madrid, holds that for a Miranda waiver to be given knowingly and voluntarily an officer interviewing a juvenile is required to obtain a specific response from the juvenile after each advisement or expressly re-ask certain questions to confirm the juvenile’s waiver of rights. Rather, case law uniformly requires that a determination as to voluntariness be based on the totality of the circumstances of the case. See Fare v. Michael C., 442 U.S. 707, 725 (1979). In fact, the Supreme Court specifically stated that the “totality-of-the-circumstances approach is adequate to determine whether there has been a waiver even where interrogation of juveniles is involved.” Id. Under the totality of the circumstances in this case, the  record showed that the Miranda advisement was adequate and that Madrid understood his rights.

Detective Cruz’s statements that Madrid was in the country unlawfully and that he was in danger from gangs did not render Madrid’s waiver of his rights under Miranda involuntary. To be sure, Detective Cruz told Madrid that he knew of his immigration status and that Madrid may have been in danger from the MS-13 and 18th Street gangs. Detective Cruz did not state or imply, however, that Madrid would receive any kind of assistance or benefit if he confessed, or that he would receive more severe treatment if he did not waive his rights and refused to make a statement. Far from being coercive, Detective Cruz’s remarks about Madrid’s immigration status and the danger that MS-13 and 18th Street posed conveyed accurate information – Madrid had constitutional rights, regardless of his immigration status and, as he already knew, he may have been in danger from the gangs.

In addition to satisfying the requirements of Miranda, Madrid’s confession was voluntary under the common law of Maryland, the Due Process Clause, and Article 22. The transcript of the interview did not establish that Detective Cruz promised or implied to Madrid that he would receive “special consideration from a prosecuting authority or some other form of assistance in exchange” for a confession. Hillard v. State, 286 Md. 145, 153 (1979). Moreover, the State proved by a preponderance of the evidence that Madrid’s confession was voluntary under the Due Process Clause and Article 22. Madrid’s confession was not the result of police conduct that overbore his will and induced him to confess. See Lee v. State, 418 Md. 136, 159 (2011).

The record painted a picture of Madrid as a self-sufficient young man who, despite being a minor, was working, earning money, and using half of his pay to help support his mother. Madrid engaged in conversation with Detective Cruz, indicated that he understood his rights, and verbally responded to Detective Cruz’s questions. In sum, the record demonstrated that Madrid knowingly and voluntarily waived his rights under Miranda and his confession was voluntary under the common law of Maryland, the Due Process Clause, and Article 22. As such, the circuit court was correct in denying the motion to suppress.

Accordingly, the judgment of the Court of Special Appeals was affirmed.

COMMENTARY: Madrid contended that the Court of Special Appeals erred in holding that he failed to meet the “some evidence” standard for generating the defense of duress and that there was ample evidence that he reasonably feared imminent death or serious bodily injury if he did not comply with the order from the higher-up in MS-13. A complete defense of duress, when applicable, requires that the defendant commit a crime because he or she honestly and reasonably believed that he or she was in imminent danger of death or serious bodily harm if he or she did not commit it, and that he or she had no reasonable opportunity to escape. See Maryland Criminal Pattern Jury Instruction (“MPJI-Cr”) 4:17.5C, “Voluntary Manslaughter (Duress)”. In Madrid’s case, there was no evidence of a “present, imminent, and impending” threat. Moreover, the defense of duress is unavailable as a matter of law to a defendant who voluntarily or recklessly placed himself in a situation in which it was reasonably foreseeable that the defendant could be subject to the coercive circumstances that the defendant contends constitute duress. By participating in MS-13 gang activities, Madrid put himself in a situation in which it was reasonably foreseeable that he might be ordered to commit a crime and face punishment if he did not comply. The circuit court was correct in denying the request for a jury instruction on duress.

  

PRACTICE TIPS: A defendant’s waiver of Miranda rights need not be express. A waiver of Miranda rights may be implied through the defendant’s silence, coupled with an understanding of his rights and a course of conduct indicating waiver.

Maryland Court of Special Appeals

Real Property

Foreclosure

BOTTOM LINE: The holder of an economic interest in a limited liability company was not entitled to notice of foreclosure of the right of redemption and was not permitted to intervene in the foreclosure proceedings.

CASE: WAMCO, Inc. v. Northeast 400, LLC, No. 2271, Sept. Term, 2019 (filed July 1, 2021) (Judges Arthur, Shaw Geter & GOULD).

FACTS: Northeast 400, LLC was the owner of the real property known as “Lot 3 – 222.525 Acre, Shady Beach Road, S/E of North East,” tax parcel 05-131146 (the “Property”). Northeast failed to pay its property taxes, prompting a tax sale by Cecil County, Maryland on June 5, 2017. WAMCO, Inc. purchased the Certificate of Sale for the Property. On August 1, 2018, and October 2, 2018, WAMCO sent notice to Northeast of its right to redeem the Property, as required by statute.

On November 24, 2018, WAMCO filed a complaint in the circuit court to foreclose Northeast’s right to redeem the Property. Northeast’s deadline to respond to the complaint was January 31, 2019. In late January 2019, an attorney representing Northeast contacted WAMCO’s attorney to determine the amount of attorneys’ fees and costs that Northeast needed to pay to redeem the Property and stop the foreclosure.

On January 23, 2019, Northeast started the redemption process by paying WAMCO a total of $2,476 as reimbursement of the legal fees associated with the foreclosure action. In return, WAMCO agreed to give Northeast until February 15, 2019, to pay the taxes and redeem the Property. WAMCO notified the Cecil County Department of Finance that Northeast had paid the fees and that it had given Northeast an extension.

Northeast nevertheless failed to pay the taxes by the extended deadline and did not ask WAMCO or its attorney for additional time. On March 1, 2019, the court entered the order foreclosing Northeast’s right to redeem the Property (the “Foreclosure Order”). On March 21, 2019, Northeast filed a motion to reconsider and vacate the Foreclosure Order, arguing that the Foreclosure Order was improperly entered because although Northeast did not pay all delinquent taxes, interest, penalties, and costs, it was sufficient that it had paid the legal fees and that WAMCO committed constructive fraud by accepting and keeping the legal fees from Northeast without informing the court of the payment.

On September 26, 2019, Sambol Family Foundation, Inc. moved to intervene, alleging that it held a loan secured by the Property. Relying on its claimed collateral interest in the Property, the Foundation argued that it was entitled to notice of the right of redemption pursuant to §14-836(b)(4)(i)(1) of the Tax Property Article (“TP”). The Foundation further alleged that WAMCO committed constructive fraud because it did not comply with this notice requirement.

The Foundation contended that the debt was “memorialized” in a UCC Financing Statement, which was attached as an exhibit. The UCC-3 was filed with the Maryland State Department of Assessments and Taxation (“SDAT”) on July 28, 2011. The UCC-3 identified Lawrence Bathgate as the debtor and Richard Sambol as the secured party.

On December 20, 2019, the circuit court held a hearing on Northeast’s motion to reconsider and the Foundation’s motion to intervene. The circuit court held that Sambol had the right to intervene and was entitled to notice. On this basis, the circuit court granted the Foundation’s motion to intervene, vacated the Foreclosure Order, and determined that all other outstanding motions were moot.

When the court held the hearing to consider Northeast’s motion to reconsider and the Foundation’s motion to intervene, it also heard a motion to reconsider filed on the same day as the present case in a related but different foreclosure action: WAMCO, Inc. v. The Haimish Group, LLC, et al. (the “Haimish Case”). As in this case, on March 1, 2019, the circuit court entered an order foreclosing the right of redemption of Haimish, the property owner. On December 20, 2019, the circuit court held a consolidated hearing for the pending motions in both cases. In the Haimish Case, the court entered an order denying Haimish’s motion for reconsideration. Upon Haimish’s appeal, the Court of Special Appeals affirmed the circuit court’s decision in an unreported opinion.

Northeast filed a cross-appeal on the issues raised in its motion to reconsider that the trial court did not address. In its appeal, WAMCO argued that the case against Northeast should have been decided as the Haimish Case was, and that Northeast’s motion for reconsideration should have been denied. The Court of Special Appeals agreed with WAMCO and reversed the judgment of the circuit court.

LAW: WAMCO argued that the circuit court erred in granting the Foundation’s Motion to Intervene and in vacating the February 27, 2019 Order foreclosing Northeast’s right of redemption. The requirements for foreclosing the right of redemption to property are spelled out in Title 14 of the Tax-Property Article. Section 14-827 of the Title provides that the “owner or other person that has an estate or interest in the property sold by the collector may redeem the property at any time until the right of redemption has been finally foreclosed under the provisions of this subtitle.”

The statute provides that to redeem the property, the owner or person with an interest in the property must pay: (1) the total lien amount paid at the tax sale for the property together with interest; (2) any taxes, interest, and penalties paid by any holder of the certificate of sale; (3) any taxes, interest, and penalties accruing after the date of the tax sale; (4) in the manner and by the terms required by the collector, any expenses or fees for which the plaintiff or the holder of a certificate of sale is entitled to reimbursement under §14-843 of this subtitle; and (5) for vacant and abandoned property sold under § 14-817 of this subtitle for a sum less than the amount due, the difference between the price paid and the unpaid taxes, interest, penalties, and expenses. TP §14-828(a). Notice of the foreclosure action must be sent to “all persons having a recorded interest, claim, or lien, including a judgment, who have not been made a defendant in the proceeding.” TP §14-836(b)(4)(i)(1). At issue here was whether the Foundation held the type of interest in the Property that, under TP §14-836(b)(4)(i)(1), entitled it to such notice.

The nature of the interest assigned to Sambol was an economic interest in Northeast, not an interest in the Property. An economic interest is defined as “a member’s share of the profits and losses of a limited liability company and the right to receive distributions from a limited liability company.” Corporations and Associations Article (“CA”) §4A-101(i). Unless otherwise agreed by the members, only an economic interest is assignable. CA §4A-603(a)(1). Thus, Lawrence Bathgate, as owner of a 33.33 percent membership interest in Northeast, had both economic and noneconomic interests in the LLC, but only his economic interest in the LLC was assignable. The partial assignment accomplished an assignment of 50 percent of Bathgate’s economic interest in Northeast to Sambol.

The financing statements on which the Foundation relied support this conclusion. The UCC-3 defined the collateral as “one-half of Debtor’s right, title and interest as a member of Northeast 400, LLC in and to the Property.” The words “Debtor’s right, title and interest” meant that the collateral was owned by Bathgate, as the debtor. The rest of the phrase – “as a member of Northeast 400, LLC in and to the Property” – meant that Bathgate’s “interest” in the Property existed only through his membership interest in Northeast. That interest, of course, was not a fee simple interest in the Property itself, but rather, an interest in the profits generated by the Property. In other words, the UCC-3 and the Partial Assignment referred to the same thing: an economic interest in Northeast.

As noted, notice of the right of redemption is required to be sent only to those who hold an interest in the subject property, not to those who maintain an economic interest in the entity that owns the property. TP §14-836(b)(4)(i)(1). As the interest acquired by the Foundation was an economic interest in Northeast, the Foundation was not entitled to notice. Because the Foundation was not entitled to notice, the court erred in permitting the Foundation to intervene and in finding that WAMCO committed constructive fraud by failing to provide notice to the Foundation. Therefore, the court erroneously vacated the Foreclosure Order.

Accordingly, the cross-appeal was dismissed, the judgment of the circuit court was reversed, and the case was remanded for further proceedings.

COMMENTARY: Northeast filed a cross-appeal on the issues raised in its motion to reconsider that the trial court did not address. Although the cross-appeal was improper, Northeast’s brief was treated as a request to affirm the circuit court on other grounds appearing in the record. See City of Frederick v. Pickett, 392 Md. 411, 424 (2006). Essentially, Northeast claimed that the Foreclosure Order was procured by constructive fraud. Specifically, Northeast contended that: (1) it started the process of redeeming the Property by paying the attorneys’ fees; (2) it secured an extension of time to redeem the Property; (3) it was ready, willing, and able to redeem the Property; and (4) despite Northeast’s actions, WAMCO erroneously proceeded with the foreclosure.

There was no merit to Northeast’s position. Maryland law clearly articulates the five payments required by the property owner to redeem the property. TP §14-828(a). Northeast complied with only one of the requirements: payment of WAMCO’s legal fees and costs. See id. That being the case, WAMCO was permitted under the statute to proceed with the foreclosure of redemption rights. Because there was no breach of duty, there was no constructive fraud. See Canaj, Inc. v. Baker and Division Phase III, LLC, 391 Md. 374, 421-22 (2006). As such, Northeast’s motion for reconsideration was without merit and did not provide an alternative basis to affirm.

  

PRACTICE TIPS: A non-economic interest in a limited liability company is defined as “all of the rights of a member in a limited liability company other than the member’s economic interest, including, unless otherwise agreed, the member’s right to: (1) inspect the books and records of the limited liability company; and (2) participate in the management of and vote on matters coming before the limited liability company; and (3) act as an agent of the limited liability company.”