Please ensure Javascript is enabled for purposes of website accessibility

Law Digest — Md. Court of Special Appeals — Aug. 26, 2021

Maryland Court of Special Appeals

Real Property; Disclosures: Where a purchaser of real property alleged in her complaint that the seller failed to disclose to the purchaser a good-faith calculation of the advance payoff amount of the deferred water and sewer assessment costs for which the purchaser could be liable, the purchaser stated a claim upon which relief could be granted under §14-117(a)(3)(i) of the Real Property Article, which provides, in part, that in an initial sale contract for residential real property in Prince George’s County, a seller must disclose to the purchaser the “estimated payoff amount of the assessment” and the “amount remaining on the assessment, including interest.” Sullivan v. Caruso Builder Belle Oak, LLC, No. 1909, Sept. Term, 2019.

Torts; Premises liability: Where the decedent was working inside a retail store when he was shot and killed by robbers, the decedent held the status of tenant, not that of business invitee, and the circuit court erred in dismissing the decedent’s family’s negligence claim against the shopping center in which the store was located on the basis that the shopping center did not owe a duty of care to the decedent, because the factual record in the case had not been sufficiently developed for the court to determine whether the shopping center had knowledge of criminal activity in common areas that posed a risk of harm to tenants in those areas and thus whether the shopping center had a duty to take reasonable measures to eliminate conditions contributing to the criminal activity. Ford v. Edmondson Village Shopping Center, LLC, No. 1656, Sept. Term, 2019.

Real Property

Disclosures

BOTTOM LINE: Where a purchaser of real property alleged in her complaint that the seller failed to disclose to the purchaser a good-faith calculation of the advance payoff amount of the deferred water and sewer assessment costs for which the purchaser could be liable, the purchaser stated a claim upon which relief could be granted under §14-117(a)(3)(i) of the Real Property Article, which provides, in part, that in an initial sale contract for residential real property in Prince George’s County, a seller must disclose to the purchaser the “estimated payoff amount of the assessment” and the “amount remaining on the assessment, including interest.”

CASE: Sullivan v. Caruso Builder Belle Oak, LLC, No. 1909, Sept. Term, 2019 (filed July 2, 2021) (Judges Nazarian, Beachley & ZIC).

FACTS: Under §14-117(a)(3)(i) of the Real Property Article (“RP”) of the Maryland Code, when a purchaser buys residential real property in Prince George’s County, the seller must provide the purchaser with certain disclosures regarding the deferred water and sewer assessment in the initial sale contract. Deferred water and sewer assessments are paid by purchasers and are used to reimburse the entities or persons who installed water and sewer lines on the residential real property. The required disclosures include the “amount remaining on the assessment, including interest” and the “estimated payoff amount of the assessment.”

Ronalda Sullivan contracted with Caruso Builder Belle Oak, LLC, a developer, to purchase a newly constructed home on real property in the Belle Oak subdivision of Prince George’s County, Maryland. On July 17, 2015, the parties entered into an Agreement of Purchase and Sale, and Sullivan closed on her property on February 24, 2016. The Purchase Agreement contained 13 addenda and was subject to a Declaration for Deferred Water and Sewer Facilities Charges.

The Declaration stated that the annual assessment was “for the purpose of reimbursing the Utility Company for its cost of providing Water and Sewer Facilities to the Lots.” The Declaration required each lot owner to pay an annual assessment of $900 per year, with a “reasonable rate of interest,” for a period of 23 years. Addendum Number 1 to the Purchase Agreement provided that the interest rate on the assessment was eight percent. The disclosures under §14-117(a)(3)(i) that Caruso provided to Sullivan were listed in Addendum Number 1. Importantly, the disclosures for the “amount remaining on the assessment, including interest” and the “estimated payoff amount of the assessment” were each listed as the same amount: $20,700.

Sullivan filed a complaint against Caruso in the circuit court on behalf of herself and a class of similarly situated persons, alleging violation of RP §14-117(a)(3)(i)(7). Caruso filed a motion to dismiss for failure to state a claim. Sullivan then filed an amended complaint, adding supplemental factual allegations. In response, Caruso filed a renewed motion to dismiss. Following a hearing, the circuit court granted the motion to dismiss., determining that §14-117(a)(3)(i)(7) did not mandate a specific formula to calculate the “estimated payoff amount of the assessment” and that the section did not require a present-day value calculation. The court further found that Caruso’s disclosures complied with RP §14-117(a)(3)(i)(7).

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

LAW: Sullivan argued that the circuit court erred in granting Caruso’s renewed motion to dismiss. Specifically, Sullivan contended that Caruso did not comply with RP §14-117(a)(3)(i)(7) by disclosing that the “estimated payoff amount of the assessment” was equal to the disclosure for the “amount remaining on the assessment, including interest.” According to Sullivan’s statutory interpretation, the “estimated payoff amount of the assessment” could not be identical to the “amount remaining on the assessment, including interest” and the “estimated payoff amount” must be accurate. Conversely, Caruso argued that it provided the proper disclosures as required by §14-117(a)(3)(i) because, Caruso asserted, the word “estimated” permitted a variance and, thus, the disclosed payoff amount was not required to be precise.

Section 14-117(a)(3)(i) provides eight required disclosures regarding deferred water and sewer assessments in a contract for the initial sale of residential real property in Prince George’s County. Md. Code Ann., Real Prop. §14-117(a)(3)(i) (2015 Repl. & Supp. 2020). The damages section articulates that violation of subsection (a)(3) of this section entitles the purchaser to: (i) recover from the seller the total amount of deferred charges the purchaser will be obligated to pay following the sale; (ii) recover from the seller any money actually paid by the purchaser on the deferred charge that was lost as a result of a violation of subsection (a)(3) of this section; or (iii) if the violation is discovered before settlement, rescind the real estate contract without penalty. Real Prop. §14-117(b)(2) (2015 Repl. & Supp. 2020). At issue in this case was the meaning of the phrase “estimated payoff amount.”

Notably, §14-117 does not define the word “estimate” and does not require a specific formula or calculation for the “estimated payoff amount.” It was therefore necessary to look to the ordinary and popular understanding of the word “estimate” to determine its meaning. See Chow v. State, 393 Md. 431, 445 (2006). According to the dictionary definition, to make an estimate means to “roughly calculate or judge the value, number, quantity, or extent of.” Oxford Dictionary of English 599 (Angus Stevenson ed., 3d ed. 2010). The ordinary, popular meaning of the “estimated payoff amount” is an estimate that is fairly accurate and close to the actual payoff amount, but it does not need to be exact.

Sullivan argued that because an “estimate” is an “approximate calculation,” the “estimated payoff amount” must be accurate and “nearly correct.” She further contended that a present-day value calculation was required to determine the “estimated payoff amount of the assessment” under §14-117(a)(3)(i) because the Declaration specified that an “Owner may prepay the outstanding assessment at present day values in total satisfaction of Owner[’s] obligations hereunder.” According to Sullivan, Caruso did not perform a present-day value calculation and thus did not attempt to provide an accurate “estimated payoff amount” given that the disclosed amount ($20,700) was more than double the actual payoff amount at the time of the initial sale. She also contended that the two disclosures could not be equal when there was interest on the assessment and the Declaration provided for a prepayment discount.

As Sullivan correctly asserted, the “estimated payoff amount” at the time of settlement could not be equal to the “amount remaining on the assessment, including interest,” which was the amount paid by the purchaser in annual payments of $900 with an eight-percent interest rate over a 23-year period for a total of $20,700. At the time of the initial sale, the “amount remaining on the assessment, including interest” was the maximum amount a purchaser would pay on the water and sewer assessment at the end of the amortization period, while the “estimated payoff amount of the assessment” was the lower amount to pay off the assessment in full at the time of settlement. The plain language of the statute indicates that the purpose of the disclosures is to ensure purchasers are aware of the option to prepay the assessment at a lower amount. By requiring sellers to disclose both amounts, and because the “estimated payoff amount” is naturally a lower value than the “amount remaining on the assessment, including interest,” the legislature intended to notify purchasers of the less expensive option of prepaying the assessment. If the General Assembly intended it to be acceptable for a developer to provide the same amount for the disclosures required by §14-117(a)(3)(i)(4) and (7), then it would be “surplusage, superfluous, meaningless or nugatory” to require two different disclosures. Daughtry v. Nadel, 248 Md. App. 594, 612 (2020).

Additionally, even if the seller provided a number for the “estimated payoff amount” that was not equal to the “amount remaining on the assessment, including interest,” these figures might still not notify the purchaser of the option to save money by prepaying the assessment. For example, if the seller inserted $20,699 for the “estimated payoff amount” and $20,700 for the “amount remaining on the assessment, including interest,” a purchaser would not be sufficiently notified that she would in fact save money by prepaying the assessment. While mistakes in calculations may be made or rounding errors may occur, to satisfy the disclosure requirement of §14-117(a)(3)(i)(7), the estimate must reflect a good faith calculation of the advance payoff amount that would be due on the settlement date.

It is unambiguous that the General Assembly intended that the disclosure for the “estimated payoff amount” be made in good faith and fairly accurate to notify the purchaser that she has the option to save money by prepaying the assessment in full at the time of settlement. Moreover, the historical context and legislative history of §14-117(a)(3)(i) reveal that the General Assembly intended the statutory disclosures to improve transparency and provide accurate information to purchasers. Thus, the statute’s legislative history supported this plain language interpretation.

In sum, under Real Property §14-117(a)(3)(i), the disclosure for the “estimated payoff amount of the assessment” must reflect a good faith calculation that notifies the purchaser that she has the option to save money by prepaying the assessment in full at the time of settlement. Based on this interpretation, Sullivan’s amended complaint sufficiently stated a claim upon which relief could be granted. As such, the circuit court erred in granting Caruso’s renewed motion to dismiss.

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

COMMENTARY: Sullivan’s amended complaint alleged that the Purchase Agreement “disclosed” that the “amount remaining on the assessment, including interest” and the “estimated payoff amount of the assessment” were both $20,700 and that, in doing so, Caruso failed to “accurately disclose” the estimated payoff amount. Instead of asserting that there was no disclosure, Sullivan alleged that the disclosure provided was not in compliance with §14-117(a)(3)(i). These allegations were adequate to state a claim upon which relief could be granted.

  

PRACTICE TIPS: In any contract, there exists an implied covenant that each of the parties thereto will act in good faith and deal fairly with the others. Thus, even when the parties are silent on the issue, the law will impose an implied promise of good faith.

Torts

Premises liability

BOTTOM LINE: Where the decedent was working inside a retail store when he was shot and killed by robbers, the decedent held the status of tenant, not that of business invitee, and the circuit court erred in dismissing the decedent’s family’s negligence claim against the shopping center in which the store was located on the basis that the shopping center did not owe a duty of care to the decedent, because the factual record in the case had not been sufficiently developed for the court to determine whether the shopping center had knowledge of criminal activity in common areas that posed a risk of harm to tenants in those areas and thus whether the shopping center had a duty to take reasonable measures to eliminate conditions contributing to the criminal activity.

CASE: Ford v. Edmondson Village Shopping Center, LLC, No. 1656, Sept. Term, 2019 (filed July 2, 2021) (Judges Kehoe, Gould & EYLER (Senior Judge, Specially Assigned)).

FACTS: On August 8, 2017, Deric Ford was killed inside the Dollar General store in the Edmondson Village Shopping Center, where there was a long history of criminal activity in the parking lot, including a murder committed the month before. On the night that he was killed, Ford was working as the store manager when he was shot and killed by one of two robbers who entered the store and held him up at gunpoint. Subsequently, Ford’s wife, Kathleen Ford, individually and as personal representative of Ford’s estate, together with the Fords’ adult children, brought survival and wrongful death actions in negligence against Edmondson Village Shopping Center Holdings, LLC, which owned the shopping center. The Fords alleged that Edmondson Village failed to take adequate security measures in common areas of the shopping center, causing it to become a “haven” for foreseeable violent criminal activity, thereby proximately causing Ford’s murder in the Dollar General store.

Edmondson Village moved to dismiss the complaint, arguing that as a matter of law Ford was not a business invitee and that it did not owe Ford a duty to protect him from the criminal acts of third persons inside Dollar General’s leased premises. The circuit court granted the motion to dismiss. The Fords then appealed to the Court of Special Appeals, which vacated the judgment of the circuit court and remanded the case for further proceedings.

LAW: The Fords argued that the circuit court erred in dismissing the Fords’ negligence claims on the ground that Edmondson Village did not owe Ford a duty to protect him from the criminal acts of third persons that took place on the Dollar General store premises. As alleged in the Fords’ complaint, the Edmondson Village Shopping Center was one of the oldest strip malls in Baltimore City, having opened in 1947. It consisted of a long row of stores facing a terraced surface parking lot. After thriving for decades, the shopping center “began deteriorating, and by the turn of the century, had turned into a well-known haven for criminal activity.”

In 2007, in response to years of complaints surrounding the general decay and prevalence of dangerous criminal activity occurring at the shopping center, the City of Baltimore commissioned the “Edmondson Village Area Master Plan.” The Master Plan concluded that one of the most prevalent concerns facing the Edmondson Village area, including the shopping center, was drug-related criminal activity. Several years after the Master Plan was released, a grassroots organization was formed in an attempt to hold the shopping center accountable to the promises made in response to the Master Plan. One of the group’s primary purposes was “to thwart the rash of criminal activity” at the shopping center.

During this time, there were complaints on third-party websites about the prevalence of criminal activity, lack of security, and general disrepair of the shopping center. Calls for Service Reports of the Baltimore Police Department (“BPD”) showed that, between January 1, 2010 and July 31, 2017, several hundred violent crimes, including robbery, assault, aggravated assault, homicide, larceny, auto theft, and burglary, committed with a wide variety of weapons, were reported as having occurred on and/or around the shopping center property. The Fords alleged that the shopping center was a “petri dish for criminal activity” and that the “absolute lack of adequate security measures provided violent criminal offenders with an open forum to engage in criminal enterprises, including but not limited to, armed robbery and homicide.”

The Fords further alleged that on July 21, 2017, less than three weeks before Deric Ford’s murder, a fatal stabbing, which was ultimately deemed a homicide, had occurred on the shopping center property.” Thus, the Fords claimed, for years leading up to the summer of 2017, Ira Miller, owner of Edmondson Village, had actual and/or constructive knowledge of the persistent dangerous conditions at the shopping center. They alleged that despite actual and/or constructive notice of pervasive criminal activity on the premises, Edmondson Village did not, and had not, ameliorated and/or otherwise changed and/or updated its security practices at the shopping center. They asserted that given that violent crimes were a “common occurrence” at or near the shopping center, the violent nature of the acts perpetrated on Ford were easily foreseeable, and Edmondson Village’s negligent failure to implement appropriate security measures caused Ford’s death.

Generally, there is no duty to protect a victim from the criminal acts of a third person in the absence of a statute, contract, or other relationship between the party in question and the third person, which imposes a duty to control the third person’s conduct, or between the party in question and the victim, which imposes a duty to protect the victim. Corinaldi v. Columbia Courtyard, Inc., 162 Md. App. 207, 219 (2005). In a premises liability case, the relationship between the defendant property owner and the plaintiff (or plaintiff’s decedent) who suffered harm on the property may give rise to a duty of care relating to criminal acts of third persons. See Southland Corp. v. Griffith, 332 Md. 704, 719 (1993). As property owner, the landlord’s duty of care to one entering on a common area depends upon the status of the person at the time. Outside the context of criminal acts of third persons, the landlord owes to those invited on the common areas, such as customers of a commercial property, tenants of residential properties, and employees of tenants of commercial properties using the common areas, the duty owed to an invitee: to use “reasonable and ordinary care to keep the premises safe.” Macke Laundry Serv. Co. v. Weber, 267 Md. 426, 429, 432-33 (1972).

Although there is no Maryland case directly on point, other courts have held that for purposes of premises liability, an employee of a commercial tenant has the same status on the leased property as the employer-tenant itself. See Reid v. Google, Inc., 113 Cal. Rptr.3d 327 (Cal. 2010). Here, Ford entered Dollar General’s leased premises at Dollar General’s invitation, to work for Dollar General, and he was fulfilling that purpose when he was killed during a robbery inside the store. He was not invited to work inside the leased premises by Edmondson Village, and he did not enter the leased premises as a customer. As such, the circuit court was correct in finding that Ford’s status on the Dollar General premises when he was killed was that of a tenant, not a business invitee.

The circuit court went on to rule that, on the facts alleged, Edmondson Village did not owe Ford a duty to protect him from the gunman’s criminal attack inside the leased premises. However, at this stage of the litigation, the legal question of whether Edmondson Village owed Ford a duty of care could not be answered. The facts that would have a bearing on whether a duty – including a duty to provide security guards – existed – and, if it did, whether any breach of duty proximately caused Ford’s death, had yet to be gleaned through discovery. When these relevant facts were revealed through discovery, summary judgment might be appropriate, or it might not. The duty question simply could not be decided on the existing undeveloped record.

Accordingly, the judgment of the circuit court was vacated, and the case was remanded for further proceedings.

COMMENTARY: When a landlord-tenant relationship exists, a duty may arise on the part of the landlord to maintain common areas so as to protect tenants from the criminal acts of third persons inside leased premises. Whether the duty actually arises depends upon the facts of the particular case, especially those relating to the state of the landlord’s knowledge. In this case, the Fords’ amended complaint, although containing some allegations that might not withstand discovery and others that were not relevant, set forth a bare minimum of facts that, if sufficiently developed during discovery, could support a duty of care.

The Fords alleged that Ford had a relationship with Edmondson Village that was recognized by Maryland law (i.e., a landlord-tenant relationship). They further alleged that for many years, violent criminal acts were perpetrated in the parking lot of the shopping center, including a murder the month before Ford was killed, and that Edmondson Village knew that such crimes were happening. Whether Edmondson Village had a duty to maintain the common areas of the shopping center so as to protect Ford from being shot and killed inside Dollar General’s premises depended upon a host of facts that were undeveloped at this time. For instance, a few categories of relevant facts were the terms of the lease between Edmondson Village and Dollar General; the number and type of criminal acts perpetrated on the shopping center parking lot (or other common area); whether those crimes were similar to the crime committed against Ford and whether they made it reasonably foreseeable that a tenant would be the victim of a similar crime inside a store; precisely what Edmondson Village actually knew or should have known about those acts; and whether Edmondson Village adopted any security measures for the purpose of protecting tenants inside their stores and, if so, whether it maintained those security measures.

Beyond these most basic facts, there are additional facts relevant to the many policy considerations that are part of the calculus of whether a duty arose, especially if the duty, as alleged, was to hire security guards in the common areas. Foreseeability of harm to the plaintiff, burden to the defendant, and consequences to the community are among the factors to be weighed in deciding whether a duty exists. Ashburn v. Anne Arundel Cty., 306 Md. 617, 627 (1986). Because the facts were not sufficiently developed to answer the legal question of whether Edmondson Village owed Ford a duty to protect him from the criminal acts of third persons on the Dollar General premises, vacation and remand were required