Grady Management, Inc. v. Epps

KENNEY, J. Appellant, Grady Management, Inc. (“Grady Management”), appeals an order of the Circuit Court for Montgomery County granting summary judgment in favor of appellee, Jesse Epps (“Mr. Epps”). It presents one question 1 for our review which we rephrase as follows: Did the circuit court err in granting appellee’s motion for summary judgment? For the reasons that follow, we shall affirm the judgment of the circuit court. ⁷¹⁶ FACTUAL AND PROCEDURAL BACKGROUND Mr. Epps is a tenant residing in the Snowdens Ridge Apartments at 2108 Harlequin Terrace in Silver Spring, Maryland, an apartment project that receives federal funds under the Section 8 New Construction Program 2 to subsidize the rent for its tenants. Mr. Epps and Grady Management entered into a model lease for such subsidized programs, which provides that “[a]fter the initial term ends, the Agreement will continue for successive terms of one Year each unless automatically terminated as permitted by paragraph 23 of this Agreement.” The termination clause (Paragraph 23) states, in pertinent part: 23.

Termination of Tenancy b. Any termination of this Agreement by the Landlord must be carried out in accordance with HUD regulations, State and local law, and the terms of this Agreement. c. The Landlord may terminate this Agreement for the following reasons: 1. the Tenant’s material noncompliance with the terms of this Agreement; 3 d. the Landlord may terminate this Agreement for other good cause, which includes, but is not limited to, the tenant’s ⁷¹⁷ refusal to accept change to this agreement. Terminations for “other good cause” may only be effective as of the end of any initial[ 4 ] or successive term.[ 5 ] The term material noncompliance with the lease includes: (1) one or more substantial violations of the lease....[ 6 ] On November 3, 2010, Grady Management brought an action, under the breach of lease statute, Md.Code (1974, 2010 ⁷¹⁸ Repl.Vol.), § 8-402.1 of the Real Property Article (“R.P.”), 7 in the District Court.

The case was transferred to the circuit court after Mr. Epps requested a jury trial. The action alleged that Mr. Epps, a member of “his household!,] or guest [made] excessive noises” and “threatened another resident.” On July 29, 2011, a jury found that Mr. Epps had breached the lease, and that the breach was substantial, but that it did not warrant eviction. On January 31, 2012, Grady Management sent Mr. Epps a Notice to Vacate by April 1, 2012 based on “other good cause and/ or material noncompliance with the covenants and conditions of [Mr. Epps’s] lease agreement[.]” More specifically, that Mr. Epps or a guest of his household made excessive noise and disturbed [his] neighbors. [Mr. Epps,] an occupant[,] or guest threatened another resident. These incidents occurred in September 2010 in or about or close to [Mr. Epps’s] premises of 2103 Harlequin Terrace, Silver Spring, MD.

There were also prior incidents of noise ⁷¹⁹ making which occurred in June, August, September and November 2006 as well as April and May 2007[ 8 ] in or about or close to [Mr. Epps’s] premises of 2103 Harlequin Terrace Silver Spring, MD. All of the herein described incidents were described in answers to discovery in [the breach of lease case]. A Montgomery County Circuit Court jury on or about July 29, 2011 found that this conduct constituted a substantial breach of the lease in [that case.] When Mr. Epps refused to vacate, Grady Management filed a Tenant Holding Over 9 Complaint in the District Court on April 10, 2012. In his answer, he argued that the complaint was barred by res judicata and collateral estoppel because of the breach of lease case.

Mr. Epps again demanded a jury trial, and the case was transferred to the circuit court. Both parties filed motions for summary judgment on September 10, 2012. In its motion for summary judgment, Grady Management argued that the burden of proof for removing a holdover tenant is much less than that in a breach of lease case. Arguing that the jury in the breach of lease case found that the excessive noise and threat qualified as a substantial breach of Mr. Epps’s lease, there was good cause to terminate the ⁷²⁰ lease at the end of the term, even if those acts did not warrant an eviction during the term of the lease.

Relying on Carter v. Maryland Management Co., 377 Md. 596 , 835 A.2d 158 (2003), Grady Management argued that a tenant holding over action can be brought against a federally subsidized tenant when the tenancy has been terminated for good cause. Grady Management stated, “[t]he [Carter ] Court held that the tenant does not have an indefinite tenancy or a never-ending lease and that when the original term expires the tenancy may be terminated for good cause and the tenant evicted pursuant to the tenant holding over statute.” In his motion for summary judgment, Mr. Epps asserted that, because it could only be terminated for good cause, his “lease does not terminate upon the passing of an expiration date like a lease with a definite term, or at the discretion of the landlord as in a lease with an ‘at will’ term,” and, therefore, the tenant holding over statute does not apply. In his supporting memorandum, citing Cottman v. Princess Anne Villas, 340 Md. 295, 298 , 666 A.2d 1233 (1995), he argued that the “ ‘good cause’ requirement gives [him] ‘a continuing right of possession to the unit for an indefinite time period.’ ” (Emphasis in memorandum). He explained that a tenancy under the New Construction Program is different from the tenancy in Carter , which was based instead on the Federal Low-Income Housing Tax Credit Program (“LIHTC”) and the Section 8 Tenant-Based Assistance Rental Voucher Program (“Voucher Program”).

The Carter Court, he contends, allowed the landlord to proceed with the tenant holding over action because the lease in that case expired under its own terms, did not have a good cause requirement for termination, and the landlord had provided the requisite notice. Here, however, there was not “good cause” for the landlord not to renew the lease. Because the reasons stated for termination were the same reasons given in the breach of lease case, the doctrine of res judicata precluded termination. 10 ⁷²¹ In its opposition to Mr. Epps’s motion for summary judgment, Grady Management responded that Mr. Epps was “on a year long lease which renewed every year[,]” and thus, he was “a tenant for a definite term[.]” Any continuing right of possession “[did] not mean that his tenancy is indefinite.” Grady Management agreed that res judicata applied, but that the doctrine required a ruling in its favor because the jury had found a substantial breach of the lease and that finding provided the good cause required not to renew Mr. Epps’s lease. Grady Management further explained that it could not have brought a tenant holding over action when it filed the breach of lease case because Mr. Epps was “still in his yearly term” and therefore was not holding over.

But, when Mr. Epps’s lease was terminated for good cause at the end of his yearly term, he became a hold over tenant, and subject to a tenant holding over action. The circuit court held a hearing on October 18, 2012, and granted Mr. Epps’s motion for summary judgment, reasoning that: the jury’s prior verdict, that although it’s finding a material breach, finding that that breach did not justify eviction is tantamount to—you can phrase it different ways, but to preventing that jury verdict from constituting a good-cause basis not to renew, because I think there is—clearly, everybody agrees on automatic right to renew unless there’s good cause not to, and in essence, the jury verdict was “there’s not good cause to remove this person from the property,” and refusing to terminate is the equivalent in the context, the federal renewing lease situation is equivalent to eviction, and I will say that, as well, I do believe that the tenant holding over statute does not apply when in the renewing lease situation, that the basis for the alleged good cause here today has been litigated through a breach-of-lease ⁷²² action that was heard by the jury. And now, in essence, the landlord is unilaterally saying “well, we find good cause because the jury did,” or “if our belief is bolstered by the jury verdict,” and therefore, we are going to say “no, we’re not terminating,” and even though the automatic right to terminate is there.... ... I do think that refusing to continue the lease or to renew the lease is equivalent to terminating the lease, and the jury did not find that termination of the lease was appropriate.

Grady Management filed a timely appeal to this Court. 11 DISCUSSION The Arguments Presented On appeal, Grady Management argues that the termination clause of Mr. Epps’s lease conforms with 24 C.F.R. § 880.607 in regard to the grounds for termination, and that it was not precluded by 24 C.F.R. § 880.607 12 from using the Maryland ⁷²³ tenant holding over statute to remove Mr. Epps. Grady Management also argues that the holding in Carter , that the tenant holding over statute can be applied to a federally subsidized voucher program, should be “expanded to provide that landlords are not precluded from using the Maryland tenant holding over statute to remove any federally-subsidized tenant.” According to Grady Management, under “24 C.F.R. § 880.607, ‘when a termination notice is issued for other good cause ... the notice will be effective, and it will so state, at the ⁷²⁴ end of a term and in accordance with the termination provisions of the lease.’ ” The initial term of Mr. Epps’s lease began on May 1, 2010 and ended on April 30, 2011, and the lease provides that “[a]fter the initial term ends, the [Lease] will continue for successive terms of one Year each unless [] terminated as permitted by paragraph 23 of th[e Lease].” Grady Management argues that the breach of lease statute, R.P. § 8-402.1, applies when “ ‘an unexpired lease for a stated term provides that the landlord may repossess the premises prior to the expiration of the stated term if the tenant breaches the lease.’ ” On the other hand, the tenant holding over statute, R.P. § 8-402, “is available when ‘a tenant under any periodic tenancy, or at the expiration of a lease ... shall unlawfully hold over beyond the expiration of the lease or termination of the tenancy.’ ” Therefore, both the tenant holding over and breach of lease statutes can apply to New Construction Program tenants, depending on whether the action is brought during or at the end of the term, because the tenant holding over “statute applies to a tenancy for ‘any definite term or at will’ and the breach of lease statute applies to ‘an unexpired lease for a stated term.’ ” (Emphasis added). Grady Management contends that a “definite term” and a “stated term” are “effectively synonymous[,]” but “[e]ven if the semantic distinction between ‘stated’ and ‘definite’ is meaningful, Mr. Epps’s position that his lease “does not expire and is indefinite” would “make it impossible for a Maryland New Construction Landlord to enforce its statutory and contractual right to terminate a tenancy for “other good cause.” If that were the case, landlords would be required to “perpetually tolerate a habitual lease violator unless the Landlord could prove that the tenant committed a substantial breach which warranted the tenant’s eviction.” In response, and denying the applicability of Carter , Mr. Epps distinguishes between tenant-based voucher programs, where the financial subsidy follows the tenant and are meant ⁷²⁵ to operate as much like the unassisted market as possible, 13 and project-based subsidy programs. He contends that “[t]he Court’s rationale [in Carter ] turns entirely on the fact that the Voucher Program lease at issue in that case did not contain a ‘good cause’ requirement that prevented the lease from expiration,” and the one-year tenancy had expired.

He states that “[a]lthough the LIHTC Program requirements imposed a restriction on the landlord from terminating the tenancy except for ‘good cause,’ that ‘good cause’ requirement was not part of the lease agreement and therefore did not affect the Court’s finding that the lease had expired.” Therefore, the Court allowed “the landlord to proceed with a Tenant Holding Over action on the basis that the lease had expired (per the Voucher program) but requirfed] the landlord to prove ‘good cause’ at the Tenant Holding Over hearing (per the LIHTC program).” His lease, however, does not expire and the “good cause” requirement is part of the lease, and, therefore, “the rationale in Carter is inapplicable and does not justify [Grady Management’s] circumvention of Maryland’s statutory scheme in bringing a Tenant Hold Over action.” He argues further that, because the New Construction Program provides subsidies to project owners, the subsidy remains with the owner and not the tenant. For that reason, project-based programs provide the tenant with an “endless lease” that can be terminated only for good cause and “does not expire on the passing of an expiration date like a typical private residential lease[.]” Therefore, the tenant holding over statute is inapplicable because it only applies after the expiration of a tenancy for “any definite term or at will.” He points out that his lease “explicitly states that it will ‘continue for successive terms of one Year unless terminated in accor ⁷²⁶ dance with the termination provision [of the lease.]’ ” Citing Cottman, 340 Md. at 298 , 666 A.2d 1233 , he contends that the “good cause” requirement for termination of his lease gives him a continuing right of possession for an indefinite period, and that, the end of any initial or successive term is not “a fixed date that automatically ends the tenancy.” It merely determines “when [a landlord] may rely on ‘other good cause’ as a basis for terminating the tenancy.” Mr. Epps further contends that actions under the tenant holding over statute “were never meant to adjudicate the fact intensive issue of whether a tenant breached the lease and whether that breach gives the landlord the right to terminate the tenancy.” In support of this argument, he cites Maryland Rule 3-711, pointing out that in a tenant holding over action “pretrial discovery is not available, and only basic facts, such as the giving of proper notice and the passing of the lease’s expiration date, need to be established” and that breach of lease actions are not subject to this rule. Mr. Epps renews on appeal his argument that this action is barred by res judicata and collateral estoppel. He explains that res judicata applies because the parties are the same, the claim in the current action is identical to the previous adjudication, and there was a final judgment on the merits.

Applying the transaction test, 14 he asserts that the claims involve the same transaction because the facts in both cases “are predicated on the same lease dated September 14, 2010, and arise from the exact same breach of that lease.” He argues that in both cases, Grady Management claimed the right to terminate Mr. Epps’s lease because of a particular breach or set of alleged facts, and that, citing Whitaker v. Whitaker, 60 Md.App. 695, 702 , 484 A.2d 314 (1984), “cannot ⁷²⁷ escape the bar of res judicata by bringing a new claim when that claim differs merely in form but not substance.” In regard to collateral estoppel, he argues that “[a]lthough the element ‘warrants an eviction’ is not technically a part of the Tenant Holding Over statutory language, that element is necessarily “implicit in the definition of ‘good cause’ in this Tenant Holding Over action[,]” and that “the federal ‘good cause’ standard[ 15 ] for breach and Maryland’s Breach of Lease (R.P. § 8-402.1) standard are functionally identical in enabling the fact finder to weigh all of the relevant factors in determining whether a breach warrants an eviction.” According to Mr. Epps, the jury’s finding that the breach did not warrant an eviction precludes his landlord “from establishing ‘good cause’ to terminate his lease in the Tenant Holding Over action.” He also argues that, even if his lease was not indefinite, Grady Management did not properly issue a notice to vacate “and filed its Tenant Holding Over action prematurely.” According to Mr. Epps, the tenant holding over statute only applies when a landlord has properly given notice and the tenant refuses to vacate at the end of the term. Here, Mr. Epps’s “initial nominal term ended on April 30, 2011, [and] the lease continued for ‘successive term[s] of one Year’ to April 30, 2012 per the automatic renewal provision.” The Notice to Vacate, given on January 31, 2012, stated that the date to vacate was April 1, 2012 and the tenant holding over action was filed on April 10, 2012, which was prior to the end of the renewal term. According to Mr. Epps, “[bjecause there is no genuine dispute that [Grady Management] failed to provide a proper notice to vacate and filed its Tenant Holding Over ⁷²⁸ action prematurely,” there is no issue of material fact and summary judgment was appropriate for that reason. Not only was this argument not the basis for the court’s grant of summary judgment, it was not raised or decided in the circuit court and we will not address it in this opinion.

See Md. Rule 8-131 (“the appellate court will not decide any other issue unless it plainly appears by the record to have been raised in or decided by the trial court”). Analysis Summary judgment may be granted when “the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” Md. Rule 2-501(e). Whether a grant of summary judgment was proper is a question of law that we review de novo. Rockwood Cas.

Ins. Co. v. Uninsured Emp’rs Fund, 385 Md. 99, 106 , 867 A.2d 1026 (2005). In determining whether a trial court’s ruling as to summary judgment was legally correct, appellate courts “construe the facts properly before the court, and any reasonable inferences that may be drawn from them, in the light most favorable to the non-moving party.” Jurgensen v. New Phoenix Atl. Condo., 380 Md. 106, 114 , 843 A.2d 865 (2004). “We may not, ordinarily, affirm a summary judgment on a basis not relied upon by the circuit court[.]” Carter v. Aramark Sports & Entm’t Servs.

Inc., 153 Md.App. 210 , 246 n. 9, 835 A.2d 262 (2003) (citing Hemmings v. Pelham Wood Ltd. Liab. Ltd. P’ship, 375 Md. 522, 534 , 826 A.2d 443 (2003)). Because we believe the differences in the federal leasing programs and the leases involved in Carter and in this case are important, our analysis begins with a discussion of the Court of Appeals’s decision in Carter. In that case, the landlord participated in the Federal Low Income Housing Tax Credit Program 16 and the tenant received housing assistance ⁷²⁹ under the Voucher Program.

Carter, 377 Md. at 598 , 835 A.2d 158 . At issue was whether the landlord could use the Maryland tenant holding over statute to evict the tenant. Id. Carter argued that under the Low Income Housing Tax Credit Program, a landlord could not terminate a tenancy without good cause, so she had a right to continued occupancy and her “fixed-term lease” was converted “into an indefinite one[.]” Id. at 608-609 , 835 A.2d 158 .

The Court rejected her argument, reasoning: At one time, the law may have supported petitioner’s view of an indefinite lease. Prior to the consolidation of the certificate and voucher programs in a new § 1437f(o) in 1998, the leasing provisions governing those programs were contained in § 1437f(d)(1)(B), which provided, in relevant part, that (1) the lease between owner and tenant had to be for at least one year “and shall contain other terms and conditions specified by the Secretary,” and (2) the owner could not “terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause.” Section 1437f(d)(1)(B)(iii) through (v) listed certain conduct that would be cause for termination. In 1995, the Secretary adopted new regulations for the certificate and voucher programs. See 60 FR 34660 (July 3, 1995) adopting new 24 C.F.R. § 982.309 .

Those regulations required the lease to be for an initial term of at least one year and to provide either “[f]or automatic renewal for successive definite terms (e.g., month-to-month or year-to-year); or ... [f]or automatic indefinite extension of the lease term.” § 982.309(b)(1) and (2). It provided that the term of the lease would terminate if the owner, the tenant, ⁷³⁰ or the two together terminated the lease, but stated that, during the term of the lease, the owner could not terminate the lease except for good cause. §§ 982.309(b)(3), 982.310(a). In proposing those regulations, the Department noted that they were intended merely to “confirm and clarify” the existing principle that “the tenancy continues automatically after the end of the initial lease term” and that “[t]here is no need or requirement for the parties to execute a new lease or lease extension” as “[t]he automatic extension is provided for in the lease originally executed by the landlord and family.” 58 FR 11292 (Feb. 24, 1993) We intimated as much, although the issue was not directly before us, in Carroll v. Housing Opportunities Comm’n, 306 Md. 515 , 510 A.2d 540 (1986). The issue there was whether a § 8 tenant, who challenged a tenant-holding-over action, had sufficiently alleged a controversy involving more than $500 to entitle her to a jury trial.

Noting the good cause requirement in the Federal regulations, we concluded that she “has a right to remain in her townhouse indefinitely until the Commission can establish good cause for eviction” and that that right of continued tenancy, coupled with the rent subsidy, caused the value of the controversy to exceed $500. Id. at 525 [ 510 A.2d 540 ]. The statutory and regulatory regime changed significantly in 1998, however, when Congress consolidated the certificate and voucher programs in a new § 1437f(o). In place of the lease requirements of § 1437f(d), the new programs became subject to § 1437(o)(7) which, after requiring a one-year initial lease (unless the public housing agency approves a shorter term), provides that the lease shall (1) be “in a standard form used in the locality by the dwelling unit owner,” (2) “contain terms and conditions that—(I) are consistent with State and local law; and (II) apply generally to tenants in the property who are not assisted under this section,” and (3) “provide that during the term of the lease, ⁷³¹ the owner shall not terminate the tenancy except for serious or repeated violation of the terms and conditions of the lease, for violation of applicable Federal, State, or local law, or for other good cause.” (Emphasis added).

See P.L. 105-276, 112 Stat. 2461 , 2599. Those are the current provisions. In conformance with that statutory change, the applicable regulations were also significantly rewritten. See 64 FR 26632 (May 14, 1999).

They continue to require an initial lease of one year, unless the public housing agency approves a shorter term, but gone are the provisions requiring automatic renewal. Id. at 609-12 , 835 A.2d 158 . Recognizing that a showing of good cause remained necessary not to renew such leases, the Carter Court explained that while the changes in the Voucher Program were certainly intended to allow landlords more flexibility and to bring some aspects of the voucher program more in line with both private residential leasing practices and with State landlord-tenant law, we do not believe that they were intended to subject voucher tenants to the arbitrary whims of landlords who are reaping a significant tax advantage from the program. If we were to conclude that the good cause requirement applies only to mid-term evictions and not to renewal decisions, the program would lose substantial stability, as tenants could be evicted for no reason at the end of a one-year lease or at any time thereafter on 60 days notice.

That would hardly be consistent with the declared Congressional purpose of “aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing.” Id. at 613, 835 A.2d 158 (citing 42 U.S.C. § 1437f(a)). The Court concluded that although a participating landlord cannot evict a voucher program tenant without good cause, that neither the tax credit program nor the voucher program precluded the use of the tenant holding over statute to remove a tenant who is holding over after expiration of a lease term. See id. at 614, 835 A.2d 158 . To succeed in such an action, the ⁷³² landlord “must comply with terms and conditions [of R.P. § 8-402] and establish good cause for refusing to renew the tenancy.” Id.

(emphasis in original). Mr. Epps’s lease states it “will continue for successive terms of one Year unless automatically terminated” in accordance with paragraph 23 of the lease. It, therefore, provides for automatic renewal and is more consistent with the voucher program leases prior to the amendment in 1998. To terminate a New Construction Program lease, the landlord must “assure due process to the tenant” which “requires a hearing and proof of good cause for eviction after notice of the grounds upon which eviction is sought.” Green v. Copperstone Ltd. P’ship, 28 Md.App. 498, 517 , 346 A.2d 686 (1975). 17 The question is whether the landlord’s burden to establish good cause to terminate or not renew the lease at the end of a term is essentially the same as the landlord’s burden to terminate during the term of the lease.

Stated slightly differently, and in the context of this case: Can a claimed breach of the lease that did not warrant an eviction during the term of the lease constitute “other good cause” to terminate the lease at the end of a successive renewal term? The lease before us provides for termination by the