Golden Sands Club Condominium, Inc. v. Waller

ADKINS, Judge. The Maryland Contract Lien Act is codified as Title 14, Subtitle 2 of the Real Property Article. It was enacted by Ch. 736, Acts of 1985. It includes procedures for establishing and enforcing a lien against a condominium unit when certain assessments and other costs chargeable against the unit have not been paid.

We shall here hold that those procedures, so far as they relate to requirements of notice to the unit owner and that owner’s entitlement to a hearing, afford the due process of law demanded by the United States and Maryland Constitutions. 1 We reach this holding on a record in which the facts are undisputed. Appellee, Harry Waller (Waller), is the owner of condominium unit no. 1518 in a condominium governed by appellant, Golden Sands Club Condominium, Inc. (Golden ⁴⁸⁷ Sands). 2 As authorized by Md.Code (1988 Repl.Vol.), § 11-110(d) of the Real Property Article, a part of the Maryland Condominium Act, and pursuant to the condominium master deed and declaration and bylaws, Golden Sands levied certain assessments against Waller. 3 According to Golden Sands, Waller did not pay the assessments. When the assessments and the related costs, again according to Golden Sands, had mounted up to $10,661.44, Golden Sands sent Waller written notice of intention to create a lien against the unit. See § 14-203(a) of the Real Property Article.

Pursuant to the provisions of § 14-203(c) (of which more later), Waller sued Golden Sands in the Circuit Court for Worcester County. He alleged, among other things, that the statutory lien provisions were unconstitutional. The circuit court (Cathell, J.) agreed with him and on 2 November 1987 ORDERED AND DECREED that the lien claim by Golden Sands Condominium against Harry Waller be, and the same hereby is, declared and determined to be invalid in that it is based on the Maryland Contract Lien Act which this Court hereby finds to be unconstitutional for the reasons hereinabove cited. Golden Sands appealed to the Court of Special Appeals.

We granted certiorari before the case was argued in that court. 311 Md. 557 , 536 A.2d 664 (1988). I. “At the core of the procedural due process right is the guarantee of an opportunity to be heard and its instru ⁴⁸⁸ mental corollary, a promise of prior notice.” L. Tribe, American Constitutional Law § 10-15 at 732 (2d ed. 1988) (hereinafter American Constitutional Law ). 4 Judge Cat-hell did not address the problem of notice. His decision focused on the hearing aspect. We shall explore that first.

The Maryland Contract Lien Act requires certain notice to be given to a party against whom (or against whose property) a lien is claimed. Real Prop. Art., § 14-203(a) and (b). It goes on to provide: (c)(1) A party to whom notice is given under subsection (a) of this section may, within 30 days after the notice is mailed to the party, file a complaint in the circuit court for the county in which any part of the property is located to determine whether probable cause exists for the establishment of a lien.

(2) A complaint filed under this section shall include: (i) The name of the complainant and the name of the party seeking to establish the lien; (ii) A copy of the notice sent under subsection (a) of this section; and (iii) An affidavit containing a statement of facts that would preclude establishment of the lien for the damages alleged in the notice. (3) A party filing a complaint under this subsection may request a hearing at which any party may appear to present evidence. ⁴⁸⁹ (d) If a complaint is filed, the party seeking to establish the lien has the burden of proof. (e) The clerk of the circuit court shall docket the proceedings under this section, and all process shall issue out of and all pleadings shall be filed in a single action. (f) Before any hearing is held under subsection (c) of this section, the party seeking to establish a lien may supplement, by means of an affidavit, any information contained in the notice given under subsection (a) of this section.

(g) (1) If a complaint is filed under subsection (c) of this section, the court shall review any pleadings filed, including any supplementary affidavit filed under subsection (f) of this section, and shall conduct a hearing if requested under subsection (c)(3) of this section. (2) If the court determines that probable cause exists to establish a lien, it shall order the lien imposed. (h) (1) If the court orders a lien to be imposed under subsection (g) of this section, or if the owner of the property against which a lien is intended to be imposed fails to file a complaint under subsection (c) of this section the party seeking to create the lien may file a statement of lien among the land records of each county in which any portion of the property is located within the earlier of: (i) the expiration of 30 days of the court order; or (ii) 120 days after notice under subsection (a) of this section was mailed to a party. It is thus apparent that the owner of the property against which the lien is sought under the Contract Lien Act may obtain a hearing by filing an action in circuit court against the lien claimant, and by requesting a hearing.

If that is done, no lien can be imposed until there has been a hearing. If that is not done, a lien may be established upon the expiration of 120 days from the mailing of notice to the property owner. ⁴⁹⁰ Judge Cathell thought this procedure failed to provide the process that was due because what is [constitutionally] required is a hearing or opportunity for a hearing established in a case filed by the [lien] claimant. Under the Maryland Contract Lien Act, the [property] owner has to file suit____ In other words, when [an] ... owner receives notice he has two choices. First, he can do nothing and in approximately 150 {sic ] days the condominium gets its lien without a hearing, without affidavits, and without judicial review and when the lien is recorded, the owner’s property is encumbered____ Secondly, the owner can sue himself.

Neither one nor both courses of action appear to be constitutionally reasonable to the Court. We believe that when the judge struck down the legislatively established hearing provisions, he applied a standard of due process higher than that constitutionally required. The measuring device to which Judge Cathell looked was the Mechanics’ Lien Law as it was rewritten following our decision in Barry Properties v. Fick Bros., 277 Md. 15 , 353 A.2d 222 (1976). Barry Properties struck down the bulk of the pre-existing Mechanics’ Lien Law (Title 9 of the Real Property Article, essentially as enacted by Ch. 12, Acts of 1974) because it “permitted] an owner to be deprived of a significant property interest without notice or a prior hearing, and thus [was] ... unconstitutional unless it providefd] protections such as those discussed in Mitchell [v. W.T. Grant Co., 416 U.S. 600 , 94 S.Ct. 1895 , 40 L.Ed.2d 406 (1974)] and North Ga.

Finishing [, Inc. v. Di-Chem, Inc., 419 U.S. 601 , 95 S.Ct. 719 , 42 L.Ed.2d 751 (1975) ]....” 277 Md. at 31 , 353 A.2d at 232 [footnote omitted]. Because “Maryland mechanics’ liens [came] into existence upon the furnishing of labor or materials,” the protections of Mitchell and North Ga. Finishing were not afforded. Id. at 31-32 , 353 A.2d at 232 .

Those safeguards were that prior to creation of the lien, the “creditor provide a sworn affidavit on personal knowledge setting forth the facts on which ⁴⁹¹ the lien is based, file a bond to protect the debtor, submit the lien to preliminary judicial scrutiny or [provide] ... the debtor ... an opportunity for a prompt post-seizure hearing.” Id. Note that we stated them in the disjunctive. In prompt response to Barry Properties , decided on 10 February 1976, the General Assembly enacted emergency legislation that became effective 4 May 1976, as Ch. 349, Acts of 1976. Chapter 349 rewrote Title 9 of the Real Property Article to make it clear that, so far as the hearing was concerned, no mechanics’ lien would exist until (1) the claimant had filed in circuit court a petition to establish the lien (§ 9-105), and (2) the owner (lienee) had been given the opportunity to show cause why the lien should not attach, including an opportunity to be heard (§ 9-105).

The 1976 legislation also contained (and the statute still contains) an elaborate mechanism of affidavits in support of and in opposition to the lien. It seems to be these provisions that caught Judge Cathell’s attention and caused him to conclude that the Contract Lien Act, which lacks them, did not pass constitutional muster. 5 ⁴⁹² But the Mechanics’ Lien Act procedures do not necessarily represent the minimal requirements of constitutional procedural due process. Under the Contract Lien Act the opportunity for hearing is available, at the unit owner’s option, before a lien may attach. In that circumstance, judicial scrutiny of affidavits and the like is not essential to constitutionality.

As Mitchell and North Ga. Finishing make clear, those procedures are necessary if a valid lien or other substantial interference with a property interest is to arise prior to the possibility of a hearing and even then there must be opportunity for a prompt post-interference hearing. Mitchell, 416 U.S. at 611-620 , 94 S.Ct. at 1902-1906 , 40 L.Ed.2d at 415-421 ; North Ga. Finishing, 419 U.S. at 606-608 , 95 S.Ct. at 722-723 , 42 L.Ed.2d at 757-758 .

But as we recognized in Barry Properties , if, for example, there is a fair opportunity for judicial scrutiny before the lien attaches, the hearing requirement is satisfied. 277 Md. at 30-32 , 353 A.2d at 231-233 . There is no constitutional need for the probable cause determinations or the affidavit ⁴⁹³ and counteraffidavit procedures now contained in the Mechanics’ Lien Act. Under the Contract Lien Act, as we have seen, no lien attaches until after the unit owner has had an opportunity to be heard. If the owner requests a hearing, there can be no lien until the circuit court has (1) reviewed the pleadings and any affidavit(s) on file, and (2) held a hearing.

Section 14-203(g)(l). At that hearing the lien claimant has the burden of proof. Section 14-203(d). The court may not order a lien imposed unless it finds “that probable cause exists to establish a lien____” Section 14-203(g)(2).

Subject to the adequacy of the notice provisions, to which we shall turn shortly, these provisions give the necessary opportunity for hearing and provide a reasonable procedure for testing the validity of the lien prior to its creation, unless the fact that the owner must file suit in order to obtain a hearing is unconstitutionally burdensome. The current procedure for establishing a lien under the Mechanics’ Lien Law calls for the lien claimant to initiate proceedings in the circuit court. The Contract Lien Act takes the opposite tack: it is the property owner who is required to initiate suit in the circuit court if a hearing is to be had. Section 14-203(c).

This, of course, places a burden on the owner, who must prepare a complaint and pay filing fees in order to contest the lien. But due process, “ ‘unlike some legal rules, is not a technical conception with a fixed content unrelated to time, place and circumstances.’ ” Cafeteria & Restaurant Workers Union, Local 473, AFL-CIO v. McElroy, 367 U.S. 886, 895 , 81 S.Ct. 1743, 1748 , 6 L.Ed.2d 1230, 1236 , reh. denied, 368 U.S. 869 , 82 S.Ct. 22 , 7 L.Ed.2d 70 (1961) (quoting Joint Anti-Fascist Refugee Com. v. McGrath, 341 U.S. 123, 162 , 71 S.Ct. 624, 643 , 95 L.Ed. 817, 849 (1951) (Frankfurter, J., concurring)). “On the contrary, due process is flexible and calls for only such procedural protections as the particular situation demands.” Armacost, 299 Md. at 416, 474 A.2d at 203. In the realm of statutory creditors’ remedies, “[t]he procedural protection is adequate ⁴⁹⁴ if it represents a fair accommodation of the respective interests of creditor and debtor.” Finberg v. Sullivan, 634 F.2d 50, 58 (3d Cir.1980). The interests of the debtor here are obvious.

The chief interest of the creditor is a reasonable mechanism for the collection of assessments from delinquent unit owners. An effective procedure for the collection of assessments is required for the protection of all unit owners, for these assessments are used, in large part, for the maintenance and repair of the common areas of the condominium. It is for that reason that unit owners agree to pay assessments and agree, as did Waller when he accepted Golden Sands’s declaration and bylaws, that unpaid assessments may become liens. The unit owner must file suit, but that suit is not a complicated one.

Section 14-203(c) spells out what the complaint must contain: names of the unit owner and the claimant; a copy of the notice sent to the unit owner under § 14-203(a); “[a]n affidavit containing a statement of facts that would preclude establishment of the lien for the damages alleged in the notice”; and a request for hearing, if one is desired. Once the complaint is filed, the judicial system must see that process is issued and served. This is no concern of the unit owner’s, since once he files his complaint and requests a hearing, no lien can be imposed until the court so orders after a hearing is held. Failure of the court properly to process the complaint would burden the claimant, not the owner.

And, as we have already said, the burden of proof—indeed, the burden of pressing forward with the proceedings—also falls on the claimant. The unit owner has to do no more than file the complaint and pay the costs. 6 ⁴⁹⁵ We hold that procedural due process does not prevent the approach to hearing which the legislature has taken. In balancing the interests of the parties, the General Assembly has looked to economy, efficiency, and minimal involvement of the judiciary. At the same time, it has given the unit owner a reasonably simple and not unduly expensive way to secure a hearing and judicial action as prerequisites to the creation of a lien on the unit.

The hearing procedure here meets the tests of Mathews v. Eldridge, 424 U.S. 319 , 96 S.Ct. 893 , 47 L.Ed.2d 18 (1976). “[D]ue process is not violated merely because the burden is put on the defendant to request a hearing.” United States v. An Article of Device “Theramatic”, 715 F.2d 1339, 1343 (9th Cir.1983), cert. denied, sub. nom., Cloward v. United States, 465 U.S. 1025 , 104 S.Ct. 1281 , 79 L.Ed.2d 685 (1984). For example, we do not believe that due process is violated because one seeking to regain personal property held by an artisan pursuant to an artisan’s lien must institute a replevin action to do so. Nor is it violated by § 14-203(c)’s requirement that the property owner file suit to resist the lien.

II

The former Mechanics’ Lien Law was unconstitutional partly because it permitted an owner “to be deprived of a significant property interest without notice.... ” Barry Properties, 277 Md. at 31 , 353 A.2d at 232 . “[Sjtate action affecting property must generally be accompanied by notification of that action____” Tulsa Professional Collection Serv., Inc. v. Pope, 485 U.S. -, -, 108 S.Ct. 1340, 1344 , 99 L.Ed.2d 565, 574 (1988). Under the Contract Lien Act, notice is particularly important, for it is by that device that the unit owner is officially informed not only that a lien against his unit is being sought, but also what he must do to oppose that action, if he wishes to do so. As the Supreme Court has put it: “ ‘An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under ⁴⁹⁶ all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.’ ” Id., 485 U.S. at -, 108 S.Ct. at 1344 , 99 L.Ed.2d at 574 (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 , 70 S.Ct. 652, 657 , 94 L.Ed. 865 , 873 (1950)). Also see Mennonite Bd. of Missions v. Adams, 462 U.S. 791, 795 , 103 S.Ct. 2706, 2709 , 77 L.Ed.2d 180, 185 (1983).

Like the concept of a due process hearing, however, the concept of “ ‘notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action’ ” is not a static principle, yielding but a single uniformly applicable rule. Rather, a court considering the constitutionality of notice in a particular case must balance the interests of the state or the giver of notice against the individual interest sought to be protected by the fourteenth amendment. The focus is on the reasonableness of the balance; whether a method of giving notice is reasonable in a given case depends on the specific circumstances of that case. See Tulsa Professional Collection Serv., 485 U.S. at -, 108 S.Ct. at 1344 , 99 L.Ed.2d at 574-575 ; Mullane, 339 U.S. at 314 , 70 S.Ct. at 657 , 94 L.Ed. at 873; Goodyear Tire v. Ruby, 312 Md. 413, 420 , 540 A.2d 482, 485 (1988); Armacost, 299 Md. at 416, 474 A.2d at 203.

As Justice Jackson explained in Mullane: The notice must be of such nature as reasonably to convey the required information ..., and it must afford a reasonable time for those interested to make their appearance____ The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it. The reasonableness and hence the constitutional validity of any chosen method may be defended on the ground that it is in itself reasonably certain to inform those affected ... or, where conditions do not reasonably permit such notice, that the form chosen is not substantially less likely to bring home notice than other of the feasible and customary substitutes. ⁴⁹⁷ 339 U.S. at 314-315 , 70 S.Ct. at 657-658 , 94 L.Ed. at 873-874. With these principles in mind, we turn to the statutory requirements with respect to notice. Section 14-203 in pertinent part provides: (a) (1) A party seeking to create a lien as the result of a breach of contract[ 7 ] shall, within 2 years of a breach of contract, give written notice to the party against whose property the lien is intended to be imposed.

(2) Notice under this section shall be given by certified or registered mail, return receipt requested, and shall be addressed to the owner of the property against which the lien is sought to be imposed at the owner’s last known address. (b) A notice under subsection (a) of this section shall include: (1) The name and address of the party seeking to create the lien; (2) A statement of intent to create the lien; (3) An identification of the contract; (4) The nature of the alleged breach; (5) The amount of alleged damages; (6) A description of the property against which the lien is intended to be imposed sufficient to identify the property, and stating the county or counties in which the property is located; and (7) A statement that the party against whose property the lien is intended to be imposed has the right to a hearing under subsection (c) of this section. The notice sent to and received by Waller in pertinent part warned