Cane v. EZ Rentals

McDonald, J. The General Assembly has provided a residential tenant who experiences serious conditions or defects in a rental unit ⁶⁰¹ with legal remedies in what is known as the rent escrow statute. That statute places “an obligation upon landlords to repair and eliminate conditions and defects which constitute, or if not promptly corrected will constitute, a fire hazard or a serious and substantial threat to the life, health, or safety of occupants.” 1 That statute creates both a cause of action for the tenant and an affirmative defense that may be asserted by the tenant in certain types of actions that may be brought by a landlord. If the tenant is successful in showing that the landlord was aware of such a defect and failed to correct it, the tenant may be entitled to an abatement or reduction of the rent, among other relief. Petitioner Wendy Cane rented an apartment in a house in Calvert County managed by Respondent EZ Rentals.

EZ Rentals filed a summary ejectment action against her to collect unpaid rent for the month of January 2015 and to regain possession of the unit. During the bench trial in the Circuit Court, Ms. Cane attempted to submit evidence of what she asserted were serious defects in the rental property, including a leak that resulted in a threat to shut off water service to the property. The Circuit Court declined to accept Ms. Cane’s proffered evidence on the ground that it would be relevant only in an affirmative rent escrow action which, the court believed, must be filed as a separate action. Ultimately, the Circuit Court entered a monetary judgment in favor of EZ Rentals and awarded possession of the rental unit to the landlord.

This appeal followed. We hold that Ms. Cane was not required to present her evidence and contentions under the rent escrow statute in a separate action, but could also present them in defense of the summary ejectment action brought by EZ Rentals. Of course, simply because a tenant alleges such defects does not by itself amount to a valid defense to a summary ejectment action. Accordingly, we vacate the judgment of the Circuit Court and remand the matter so that the ⁶⁰² Circuit Court may consider whether Ms. Cane’s proffered evidence would make a difference in its decision.

I Background A. Summary Ejectment and Rent Escrow The Maryland statutes that govern disputes between landlords and tenants who are parties to a residential lease are codified in Title 8 of the Real Property Article (“RP”) of the Maryland Code. 2 Pertinent to this case are the statutes concerning summary ejectment and rent escrow. 1. Summary Ejectment When a tenant does not pay rent that is owed, a landlord may bring an action under RP § 8-401 to obtain a judgment for the unpaid rent and to repossess the premises. Such an action is known as summary ejectment. “Summary ejectment proceedings empower the court to enter a money judgment for the amount of rent determined to be owing and also to issue an order for the tenant to yield possession of the premises when the jurisdiction over the tenant has been obtained.” Schuman, Kane, Felts & Everngam, Chartered v. Aluisi, 341 Md. 115, 122 , 668 A.2d 929 (1995) (internal quotation marks omitted). Summary ejectment proceedings are expedited.

A trial is ordinarily to be held on the fifth day following the filing of the complaint. RP § 8-401 (b)(3)(i). The statute allows a court to adjourn the trial for one day to permit a party to procure necessary witnesses if it is in “the interests of justice,” but requires the consent of both the landlord and the tenant for a longer postponement. RP § 8-401(c)(l).

If the tenant was personally served with the complaint and if the trial does not take place within five days of the filing of the complaint, the ⁶⁰³ trial court may include in the judgment any unpaid rent and late fees accruing since the filing of the complaint, as well as court costs. RP § 8-401(c)(2)(iii)-(iv). If judgment is for the landlord, the tenant ordinarily must vacate the premises within four days. RP § 8-401(c)(3).

If the judgment is in favor of the landlord, including restitution of the premises, the tenant has a “right to redemption of the leased premises” if the tenant tenders to the landlord the amount of the judgment, as well as any court-awarded costs and fees, before the execution of the judgment. RP § 8-401(e)(l). However, a tenant who has had three judgments of possession for unpaid rent within the previous 12 months does not have a right of redemption. RP § 8-401(e)(2).

When a court holds that a tenant no longer may redeem the tenancy for that reason, it is said to foreclose the right of redemption. Summary ejectment cases originate in the District Court. RP § 8-40103). Either party may appeal to the Circuit Court within four days of the District Court’s judgment.

RP § 8-401(f)(1). If the tenant appeals, the tenant must furnish an appeal bond to stay execution of the judgment. RP § 8-401 (f) (2)—(3). 2. Rent Escrow The rent escrow statute is designed to provide an incentive for a landlord to repair “serious and dangerous defects” in a residential rental unit by creating “meaningful sanctions” for a landlord who allows such conditions to exist.

RP § 8-211(a)-(b). The statute establishes “an obligation upon landlords to repair and eliminate conditions and defects which constitute, or if not promptly corrected will constitute, a fire hazard or a serious and substantial threat to the life, health or safety of occupants.” RP § 8-211(e). It is “remedial legislation” that should not be construed narrowly. Neal v. Fisher, 312 Md. 685, 693-94 , 541 A.2d 1314 (1988). ⁶⁰⁴ The statute provides a non-exhaustive list of examples of conditions for which a tenant may seek relief under statute.

Such conditions include: (1) Lack of heat, light, electricity, or hot or cold running water, except where the tenant is responsible for the payment of the utilities and the lack thereof is the direct result of the tenant’s failure to pay the charges; (2) Lack of adequate sewage disposal facilities; (3) Infestation of rodents in two or more dwelling units; (4) The existence of any structural defect which presents a serious and substantial threat to the physical safety of the occupants; or (5) The existence of any condition which presents a health or fire hazard to the dwelling unit. RP § 8-211(e)(l)-(5), There is a rebuttable presumption that such conditions do not include minor defects or the “absence of air conditioning.” RP § 8—211(f), The rent escrow statute creates both an affirmative cause of action for a tenant and a defense to certain actions brought by a landlord. If the tenant notifies the landlord of serious conditions or defects, and “[i]f the landlord refuses to make the repairs or correct the conditions, or if after a reasonable time the landlord has failed to do so, the tenant may bring an action of rent escrow to pay rent into court because of the asserted defects or conditions.” RP § 8—211(i). The tenant also “may refuse to pay rent and raise the existence of the asserted defects or conditions as an affirmative defense” to an action brought by the landlord to obtain the rent or recover possession of the premises.

Id. As a condition for relief under the statute, the tenant must notify the landlord of the defect and may be required to pay the rent to the court. RP § 8-211(g) and (k). Tenants who have a certain number of judgments for unpaid rent within the 12 months prior to initiation of the action may not obtain relief under the statute.

Id. In adjudicating issues under the rent escrow statute, the trial court is to make “appropriate findings of fact” and order relief either for the landlord—e.g., termination of the lease and ⁶⁰⁵ restitution of the premises—or the tenant—e.g., abatement of the rent and an order that the landlord make necessary-repairs. RP § 8-211(m). B, Facts The Rental The basic facts of the landlord-tenant relationship and the procedural path of this case are undisputed.

As will become apparent, there were some disputes of fact between the tenant and landlord at the trial, but we need only acknowledge them, rather than resolve them, to address the legal question at issue. The rental property in question is located at 1235 Golden West Way in Lusby, Calvert County. The property is a single-family residence that has been divided into a ground floor unit and a basement unit. During the relevant period, Daniel Brown owned the property, by virtue of an installment contract with a partner. 3 Mr. Brown rented out the units and managed the property through EZ Rentals. 4 Beginning in May 2013, Ms. Cane rented the ground floor unit from EZ Rentals under a one-year lease.

When the lease expired, Ms. Cane continued to occupy the unit as a month-to-month tenant. Summary Ejectment Action in District Court On January 7, 2015, EZ Rentals filed a summary ejectment action against Ms. Cane in the District Court of Maryland sitting in Calvert County. The complaint sought rent for the month of January 2015 in the amount of $1,100, 5 as well as a ⁶⁰⁶ late fee of $50, foreclosure of Ms. Cane’s right of redemption, 6 and possession of the property. A week later, the District Court entered a judgment in favor of EZ Rentals in the amount of $1,150 and granted judgment for possession of the property, without the right of redemption, to EZ Rentals.

On January 20, Ms. Cane noted a timely appeal to the Circuit Court and posted a court-ordered appeal bond in the amount of $1,150. De Novo Appeal in Circuit Court A de novo bench trial was held in the Circuit Court for Calvert County on June 26, 2015. 7 At the trial, Ms. Cane appeared without counsel and Mr. Brown appeared on behalf of EZ Rentals, also without counsel. At the outset of the trial, Mr. Brown asked the Circuit Court to award a judgment for rent pertaining to the months of January through June 2015. While EZ Rentals’ original complaint had sought unpaid rent for the month of January and the District Court had awarded judgment for that month alone, Mr. Brown asserted that he had received only $500 in rent payments from Ms. Cane from November 2014 through June 2015 and that she was in arrears on her rent in the amount of $7,000 or $8,000.

For her part, Ms. Cane expressed surprise that the subsequent months were at issue in the trial. She testified that, although she had sometimes paid late, she ⁶⁰⁷ had paid all rent due through May 15, 2015 directly to EZ Rentals’ property manager by means of money orders. She stated that the landlord’s online payment system did not reflect all of the payments she had made directly to the property manager with money orders. Ms. Cane asked for a one-day adjournment to produce receipts to document her payments with respect to the new issue raised by Mr. Brown relating to months other than January.

The Circuit Court declined to postpone the case for a day, but took a brief recess to allow Ms. Cane to print some receipts from her computer. After the recess, Ms. Cane was able to provide some receipts for rent payments for the months between February and May 2015. She also presented an email dated March 12, 2015 from the EZ Rentals’ property manager stating “March rent received/paid money orders.” The property manager was also called as a witness and confirmed that Ms. Cane had made some, though not all, rent payments since the beginning of the year. Documents retrieved by Mr. Brown also showed that Ms. Cane had made rent payments during the period in question and Mr. Brown ultimately conceded that Ms. Cane had paid $3,500 with respect to those months. “Other Issues” and “Offsets” During her testimony Ms. Cane also attempted to testify about “extenuating circumstances” and “other issues” with the property.

She said that there were “relevant and substantial” defects in the property and began to describe a major water leak for which the water company had threatened to turn off the water and had sent her a $600 bill. She asked for an “offset” 8 related to the water problems. The Circuit ⁶⁰⁸ Court declined to hear this testimony on the ground that those issues were “a completely separate landlord/tenant issue.” The trial court explained that “[tjoday we are not talking about anything but your failure to pay rent, alleged failure to pay rent. We are not talking about no heat, no water—” Ms. Cane then provided the court a letter detailing some expenses she had incurred with respect to the various problems she said she had experienced with the rental unit.

The court reviewed the items listed in the letter, but declined to consider any of them in connection with the summary ejectment proceeding. The court stated: Point one talks about utilities; utilities are not an issue today. Point two talks about water leak; water leak and repairs, damages to the leasehold are not issues today. Three, water leak consuming 1.5 gallons of water per minute, not an issue to be resolved today.

Four, AC broke, another problem with the leasehold, that is not an issue to be resolved in a failure to pay rent case. And the washing machine broke, it wasn’t repaired, the emergency repairs generated cost 150 so far, another problem with the leasehold. There [are] separate proceedings to deal with these things. (emphasis added).

Ms. Cane offered to provide additional documentation, but the Circuit Court declined to accept it and reiterated that issues relating to defects in the property had to be pursued in a separate proceeding, noting that “nobody is stopping you from suing on that.” Circuit Court Judgment Once the evidence was concluded, the Circuit Court ruled from the bench in favor of EZ Rentals for the January rent. While the court was rendering its judgment, the following discussion took place: ⁶⁰⁹ THE COURT: They have made their case on [the January rent]. I will make the record clear, that this is the fourth suit, they put in— MS. CANE: Yeah, they have that right, but—but then how can I have the offsets heard?

Because [the property manager] will admit, he has told me many times, for instance, this is one small item, that they would pay [$]250 in water bills. He—they—I—every time I had to pay that. THE COURT: Well, for one thing, they can’t do that. They can’t offset rent by paying for maintenance on other things.

MS. CANE: No, but they had to offset that they didn’t repair it when— THE COURT: No, no, that’s called a rent escrow. And you have to file for that. You have to get the Health Department out there.

They have to verify that the place is unsanitary and uninhabitable. MS. CANE: Oh, but they have. THE COURT: But that’s a separate action.

MS. CANE: Oh, right, right. THE COURT: Yes. And then the District Court Judge would escrow your rent until they got the repairs made.

(emphasis added). The Circuit Court rendered judgment in favor of EZ Rentals in the amount of $1,150, ordered the appeal bond released to EZ Rentals, and foreclosed Ms. Cane’s right of redemption. The judgment was incorporated in a document entitled “Daily Sheet” filed in the court record. Appeal On July 8, 2016, Ms. Cane filed a timely appeal but mistakenly directed it to the Court of Special Appeals. 9 The appeal ⁶¹⁰ was transferred to this Court to be considered as a petition for a writ of certiorari, 10 which we granted.

Other Posh-Trial Developments We are advised that Mr. Brown died in a drowning accident on July 25, 2015. We are further advised that the monetary judgment against Ms. Cane has been listed as an asset of Mr. Brown’s estate. EZ Rentals has not appeared in this case since we granted certiorari. Nor has Mr. Brown’s estate, his partner, or any successor to EZ Rentals sought substitution as a party in lieu of EZ Rentals pursuant to Maryland Rule 2-241.

With the permission of the Court, the Maryland Multi-Hous-ing Association, Inc. (“the Association”) filed an amicus brief supporting the position of the landlord and defended the judgment of the trial court at oral argument. 11 We are also informed that the property in which Ms. Cane’s unit was located was sold in November 2015 to Wells Fargo Bank, N.A. as a result of a foreclosure proceeding in the Circuit Court for Calvert County. 12 We were advised by the Association that there have been further proceedings under federal and State laws governing rental units when a landlord is in foreclosure 13 and that Ms. Cane’s tenancy was likely to terminate as a result of those proceedings. ⁶¹¹ II Discussion We granted the petition for certiorari to consider whether a tenant, such as Ms. Cane, may assert and prove a defense under the rent escrow statute in a summary ejectment proceeding brought by the landlord and, if so, whether the tenant may seek a reduction of the rent due in that proceeding. The Association has raised a preliminary issue in its amicus brief. It contends that the death of Mr. Brown and the foreclosure and sale of the property to Wells Fargo have rendered this appeal moot. A. Mootness This Court has the constitutional authority to express its