Bonds v. Royal Plaza Community Associates, Inc.

ADKINS, Judge. Appellant Eugene Bonds challenges the Circuit Court for Prince George’s County’s decision to vacate its year and a half old order foreclosing rights of redemption with respect to real property sold at a tax sale in 1997. The tax sale purchaser obtained an order foreclosing the rights of redemption in the property on January 13, 2000, but in doing so, failed to send the notice required under Md.Code (1985, 2001 Repl.Vol., 2004 Cum.Supp.), section 14-836(b)(4) of the Tax-Property Article (“TP”) to appellee Royal Plaza Homeowner’s Association, Inc. (“HOA”). Bonds, assignee of the tax sale purchaser, presents three issues for our review: 1.

Did the circuit court err in vacating the order foreclosing the right of redemption because the tax sale pur ⁴⁴⁸ chaser failed to follow the notice requirements of the Tax-Property Article? 2. Did the circuit court err in dismissing Bond’s Amended Complaint, which included a claim to quiet title? 3. Did the circuit court err by not including the purchase price of $100,000 as a development cost, in the amount fixed for redemption? We shall hold that the circuit court erred as to Issue I, and therefore, do not reach Issues II and III.

FACTS AND LEGAL PROCEEDINGS The property in question is a 4.42534 acre parcel (“the parcel”) located in the middle of the Royal Plaza subdivision in Prince George’s County. On May 22, 1989, Royal Plaza Associates, LP (“the developer”) recorded four subdivision plats among the land records for Prince George’s County for the then-proposed Royal Plaza development. Plat One of the four recorded subdivision plats described the parcel as “PARCEL A — TO BE CONVEYED TO THE HOMEOWNERS ASSOCIATION.” The developer subsequently formed the HOA, a non-profit, non-stock Maryland corporation, 1 listing John Dowd as its resident agent. 2 One of the purposes of the HOA, as stated in its Articles of Incorporation, was “to provide for or assure maintenance, preservation and architectural control of the Lots and Common Area within the [Royal Plaza development.]” On May 3, 1991, the developer conveyed by deed two of the four common areas to the HOA. For reasons unclear from the record, the subject parcel was not conveyed to the HOA. ⁴⁴⁹ On May 12, 1997, Willie Lenson purchased the tax certificate for the parcel at a tax sale for the sum of $4,000.

At the time of foreclosure, the developer remained the record owner of the parcel. Lenson then filed a Complaint to Foreclose the Equity of Redemption in the Circuit Court for Prince George’s County on September 23, 1998. Lenson attempted to serve notice on the developer by mailing, restricted delivery, a copy of the summons, complaint, and publication order to “Royal Plaza Associates Limited Partnership: Attn. John Dowd” at the street address for John Dowd on file with the Maryland State Department of Assessments and Taxation.

The service was returned marked: “NOT DELIVERABLE AS ADDRESSED. UNABLE TO FORWARD.” 3 Lenson failed to send written notice of the proceedings addressed specifically to the HOA. On January 13, 2000, the circuit court foreclosed the rights of redemption, and conveyed full ownership of the parcel to Lenson. Over a year and half later, the HOA filed a motion to intervene in the foreclosure action, along with a motion to vacate the order foreclosing the right of redemption.

On November 6, 2001, before the circuit court ruled on the motions, Lenson sold the parcel to Bonds for the sum of $100,000. Following the sale, on February 15, 2002, the circuit court granted the HOA’s motion to intervene, as well as Bonds’ motion to intervene, as the successor-in-interest to Lenson. The court then vacated the order foreclosing the right of redemption, ruling that the HOA was entitled to receive actual notice of the complaint. On January 3, 2003, Bonds amended the original complaint to foreclose the equity of redemption to include a claim to ⁴⁵⁰ quiet title.

Upon a motion by Bonds, the court dismissed this claim on September 10, 2003, for lack of jurisdiction. Bonds noted a timely appeal. DISCUSSION The procedure governing tax sales in Maryland is set forth in sections 14-808 through 14-854 of the Tax-Property Article. This case turns on the question of whether the circuit court could vacate its judgment, entered more than a year earlier, foreclosing the rights of redemption.

Two sections are of particular importance to this issue. Section 14-836, in its pertinent parts, identifies who shall be parties to such an action, and what notices must be sent to persons who are not parties: (a) Plaintiffs. — The plaintiff in any action to foreclose the right of redemption shall be the holder of the certificate of sale. (b) Defendants; notice. — (1) Except as otherwise provided in this subsection, the defendants in any action to foreclose the right of redemption shall be: (1) the record title holder of the property as disclosed by a search performed in accordance with generally accepted standards of title examination of the land records of the county, of the records of the register of wills of the county, and of the records of the circuit court for the county; (ii) if the property is subject to a ground rent, the record title holder of the fee-simple title and the owner of the leasehold title ...; (iii) any mortgagee of the property ...; (iv) the trustee under any deed of trust recorded against the property or any holder of a beneficial interest in a deed of trust who files notice of the interest ...; (v) the county where the property is located; and (vi) if appropriate, the State. (2) The plaintiff may choose not to include as a defendant any of the persons enumerated in paragraph (1) of this ⁴⁵¹ subsection.

However, the rights of any person not included as a defendant are not affected by the proceedings. (3) Subject to the provisions of paragraph (4) of this subsection, it is not necessary to name as defendant any other person that has or claims to have any right, title, interest, claim, lien or equity of redemption in the property sold by the collector. Any of these persons are included as defendants by the designation “all persons that have or claim to have any interest in property..... (giving a description of the property in substantially the same form as the description that appears on the Collector’s certificate of tax sale).” Any of these persons may be designated throughout the proceeding by the above designation and the cause may proceed against them by publication under order of court as provided in this subtitle.

(4) (i) Notwithstanding the provisions of paragraph (3) of this subsection, the plaintiff shall send written notice of the proceeding to: 1. all persons having a recorded interest, claim, or lien, including a judgment, who have not been made a defendant in the proceeding, and, if the subject property is the common areas owned by or legally dedicated to a homeowners association, to the homeowners association governing the property, at the last reasonably ascertainable address .... (iii) The plaintiff shall tile in the action: 1. the return receipt from the notice; or 2. an affidavit that: A. the notice provisions of this subsection have been complied with; or B. the address of the holder of the subordinate interest is not reasonably ascertainable. TP § 14-836 (emphasis added). TP section 14-845(a), the second important section, addresses when a tax sale foreclosure judgment can be reopened: ⁴⁵² A court in the State may not reopen a judgment rendered in a tax sale foreclosure proceeding except on the ground of lack of jurisdiction or fraud in the conduct of the proceedings to foreclose.

(Emphasis added.) The combined effect of these two statutes requires a homeowners association to establish three elements in order to successfully vacate an order foreclosing the right of redemption • in common area property for failure to send proper notice. First, a homeowners association must show that the common area is owned by, or “legally dedicated” to it, or that it have a recorded interest, claim or lien. See TP § 14-836(b)(4)(i)(l). Second, the homeowners association must establish that the tax sale plaintiff failed to send written notice to the association’s last reasonably ascertainable address as required.

See id. Finally, the homeowners association must demonstrate that the failure to send notice resulted in either the court lacking jurisdiction or fraud in the foreclosure proceedings. See TP § 14-845(a). We think the HOA satisfies the first requirement in two respects.

First, the designation on the plat that the parcel was “to be conveyed to the Homeowners Association” created a “recorded interest” in the HOA. Second, the parcel was “legally dedicated” to the HOA, within the meaning of section 14-836(b)(4)(i)(l). See discussion, infra, regarding how we interpret the legislature’s intent in using the term “dedicated,” a term that courts have held only applicable when land is given to or for the use of the public. See City of Annapolis v. Waterman, 357 Md. 484, 504-06 , 745 A.2d 1000 (2000).

As to the second requirement, Lenson failed to send written notice of the complaint to foreclose the right to redeem to the HOA at its last reasonably ascertainable address. Instead, Lenson sent notice to the developer, care of John Dowd, the developer’s resident agent, at the address on file with SDAT for Dowd. This notice was then returned marked “undeliverable.” At no time did Lenson mail any notice addressed specifically to the HOA, as required. ⁴⁵³ Bonds suggests that because Lenson sent notice to John Dowd, the shared resident agent for both the developer and the HOA, the notice requirements of section 14 — 836(b)(4)(i)(1) have been satisfied. We do not agree.

Sending notice addressed to the developer, care of John Dowd, is simply not the same as sending notice addressed to the HOA, care of John Dowd. Bonds cannot attempt now to transform the notice sent to the developer into something it was not — notice sent to the HOA. The third prerequisite, a showing of fraud or lack of jurisdiction, proves to be an insurmountable hurdle for the HOA. The HOA has never asserted that there was actual fraud in the foreclosure proceeding.

Lenson’s failure to send the required notice to the HOA, however, may have been constructive fraud. The Court of Appeals has held that a tax sale purchaser’s failure to provide the property owner with the statutorily required notice of his petition to foreclose the equity of redemption is constructive fraud because it constitutes a “fail[ure] to perform a legal duty.” See Jannenga v. Johnson, 243 Md. 1, 5 , 220 A.2d 89 (1966). Even though we have found no Maryland case addressing this precise circumstance, we are persuaded that a failure to perform the legal duty of notifying a homeowners association also would constitute constructive fraud. TP section 14-845(a), however, only permits reopening the judgment on the basis of constructive fraud if the petition to reopen is filed within one year of the order foreclosing the right of redemption.

Because the HOA’s motion was not filed within this one year window, the judgment cannot be reopened on constructive fraud grounds. Thus, to satisfy the third step required for reopening the foreclosure order, the HOA must establish that the court lacked jurisdiction to enter the order foreclosing the right to redeem. Because we conclude that the court did have jurisdiction to enter the order foreclosing the equity of redemption, we hold that the HOA is unable to satisfy the third step. We explain below. ⁴⁵⁴ “A proceeding to foreclose an equity of redemption in a tax sale is a proceeding in rem or quasi in rem and the legislature, without affronting due process, could have provided that all interested parties ... were to be brought before the court by publication.” Master v. Master, 223 Md. 618, 624 , 166 A.2d 251 (1960).

Here, there was service by publication accurately describing the location and size of the parcel. Therefore, if there were no further legislative requirements, no due process concerns would be present. The issue of personal jurisdiction is pertinent, then, only because the legislature chose to require that certain defendants be personally served with the complaint to foreclose. As the Court of Appeals said in Master, The Legislature ... chose to require ... that [certain named defendants] must be personally served by subpoenas ....

Since the [co-owner] ... was not served, the court had neither the right nor the power to proceed against her interest in the property, and the order of publication was without effect as to it. Id. The HOA, in an attempt to establish a jurisdictional defect, argues that “when a foreclosure plaintiff fails to follow the strict notice provisions of [TP] § 14-836, the trial court is •without jurisdiction to enter a valid decree of foreclosure, and such decree will not withstand attack by a party that failed to receive the required notice.” The cases cited by the HOA for this proposition, however, all involved property owners, whom the legislature had identified as necessary defendants to the tax sale foreclosure proceedings. In Master , for example, the property was owned as tenants by the entireties, and the tax sale petitioner failed to serve the wife, who was estranged from her husband.

See Master, 223 Md. at 620 , 166 A.2d 251 . Similarly, in Smith v. Watner, 256 Md. 400, 406 , 260 A.2d 341 (1970), the foreclosure petitioner failed to personally serve the record owners. The Court of Appeals upheld the circuit court’s decision to set aside the order foreclosing the owners’ right of redemption because “the ⁴⁵⁵ court below lacked jurisdiction to decree the foreclosure.” Id. at 405 , 260 A.2d 341 . In Bailey v. Stouter, 66 Md.App. 180, 187-88 , 502 A.2d 1125 , cert. denied, 306 Md. 288 , 508 A.2d 488 (1986), the foreclosure plaintiff failed to personally serve the sole trustees, who were the legal owners of the subject property, as required by the TP Article.

Recognizing that the owners of the property were necessary parties to the foreclosure proceedings, see id. at 187, 502 A.2d 1125 , Judge Wilner, writing for this Court, concluded that, “by reason of [the foreclosure plaintiffs] failure to comply with [the notice requirements] as to [the record owners], the court had ‘neither the right nor the power’ to proceed against their interest in the property.... The decree of foreclosure was jurisdictionally deficient and must be vacated.” Id. at 192 , 502 A.2d 1125 . We learn from these cases that when notice is not properly sent to a necessary party defendant, the court lacks personal jurisdiction to proceed against that defendant’s interest in the subject property. See also Thomas v. Hardisty, 217 Md. 523, 534-35 , 143 A.2d 618 (1958)(“There was no personal service on [the owner] or actual notice to him of the proceedings.... [T]he Circuit Court lacked jurisdiction to render a decree foreclosing the rights of [the owner] to redeem”); James v. Zantzinger, 202 Md. 109, 117 , 96