In re: Walker and Walker

In re: Anthony D. Walker and Denicia P. Walker, Misc. No. 8, September Term 2020. Opinion by Hotten, J. CERTIFIED QUESTION OF LAW – STATUTORY INTERPRETATION – LIENS The United States Bankruptcy Court for the District of Maryland requested the Court of Appeals of Maryland to answer the following certified question: Can a community association’s lien perfected under the Maryland Contract Lien Act, Md. Code Ann., Real Property (“Real Prop.”) §§ 14-201[–206] secure unpaid damages, costs of collection, late charges, and attorney’s fees arising under the association’s governing documents that accrue subsequent to the recordation of the lien? Pursuant to Md. Code Ann., §§ 12-601–613 of the Courts and Judicial Proceedings Article, the Court of Appeals of Maryland answered the certified question in the negative.

The Court of Appeals held that the Maryland Contract Lien Act, Real Prop. §§ 14-201–206 does not permit a lien that secures unpaid damages, costs, charges, and fees which accrue after the recordation of the lien, otherwise known as a continuing lien. The Court of Appeals determined that the Maryland Contract Lien Act’s plain text, legislative history, relevant case law, and comparison with other statutes precluded community associations from using a continuing lien to secure debts, as a matter of law. United States Bankruptcy Court for the District of Maryland Case No. 18-23752-NVA IN THE COURT OF APPEALS Argued: February 4, 2021 OF MARYLAND Misc. No. 8 September Term, 2020 __________________________________ IN RE: ANTHONY D. WALKER AND DENICIA P. WALKER __________________________________ Barbera, C.J., McDonald, Watts, Hotten, Getty, Booth, Biran, JJ. __________________________________ Opinion by Hotten, J. __________________________________ Filed: March 30, 2021 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2021-03-30 11:49-04:00 Suzanne C. Johnson, Clerk The Maryland Uniform Certification of Questions of Law Act,1 Maryland Code, §§ 12-601–613 of the Courts and Judicial Proceedings Article (“Cts. & Jud.

Proc.”) empowers this Court to “answer a question of law certified to it by a court of the United States . . . if the answer may be determinative of an issue in a pending litigation in the certifying court and there is no controlling appellate decision, constitutional provision, or statute of this State.” Cts. & Jud. Proc. § 12-603. This Court has been asked to answer the following certified question of law by the United States Bankruptcy Court for the District of Maryland (“the Bankruptcy Court”): Can a community association’s lien perfected under the Maryland Contract Lien Act, Md. Code Ann., Real Property. (“Real Prop.”) §§ 14-201[–206] secure unpaid damages, costs of collection, late charges, and attorney’s fees arising under the association’s governing documents that accrue subsequent to the recordation of the lien?

We answer this question in the negative. For reasons to be explained, we hold that the Maryland Contract Lien Act (“MCLA”) does not permit liens that secure unpaid damages, costs, charges, and fees which accrue after the recordation of the lien. 1 [The] Maryland [General Assembly] adopted the first version of the Uniform Certification of Questions of Law Act in 1972 as part of a uniform code promulgated by the Uniform Law Commission (also known as the National Conference of Commissioners on Uniform State Laws) and codified the Act as Article 26 §§ 161 to 172. 1972 Md. Laws, ch. 427. The following year, Article 26 was recodified as the [Cts. & Jud. Proc.] Article. 1973 Md. Laws 1st Spec.

Sess., ch. 2. In 1995, the Uniform Law Commission issued a new model Certification of Questions of Law statute, which Maryland then adopted in 1996. 1996 Md. Laws, ch. 344. The Maryland Uniform Certification of Questions of Law Act is currently codified at [Cts. & Jud. Proc.] §§ 12-601 to 12-613, Maryland Code (1973, 2020 Repl.

Vol.). United Bank v. Buckingham, Misc. No. 1, Sept. Term, 2020, 2021 WL 865246 , at ¹ n.1 (Md. Mar. 9, 2021). FACTUAL AND PROCEDURAL BACKGROUND In accordance with Cts. & Jud.

Proc. § 12-605(a), “the court certifying a question of law” to this Court “shall issue a certification order.” Pursuant to Cts. & Jud. Proc. § 12- 606(a)(2), the certification order must contain “[t]he facts relevant to the question, showing fully the nature of the controversy out of which the question arose[.]” We accept the facts provided by the certifying court, Price v. Murdy, 462 Md. 145, 147 , 198 A.3d 798, 799 (2018), and supplement with additional facts as necessary. The Underlying Incident Appellee and debtor, Denicia P. Walker,2 purchased a unit at the Long Reach Knolls Condominium, Inc. (“Appellant”) in Columbia, Maryland. Walker formally accepted the deed on June 30, 2000.

Appellant serves as the governing body of the condominium unit owners. Unit owners must adhere to Appellant’s bylaws and the Maryland Condominium Act (“MCA”), Real Prop. §§ 11-101–143.3 Appellant’s bylaws require unit owners to pay monthly “assessments” or fees, which Appellant uses to cover common expenses, including insurance, landscaping, property management, and improvement of common areas. 2 Denicia Walker married co-debtor Anthony D. Walker after she purchased the property. An ownership interest was never conveyed to Anthony Walker. “In exchange for the benefits of owning property in common, condominium 3 owners agree to be bound by the rules governing the administration, maintenance, and use of the property.” Ridgely Condominium Ass’n, Inc. v. Smyrnioudis, 343 Md. 357, 359 , 681 A.2d 494, 495 (1996) (footnote omitted). Condominium rules and bylaws must conform with the MCA, which “regulates the formation, management, and termination of condominiums in Maryland.” Id. at 360 , 681 A.2d at 495 . 2 Walker defaulted multiple times on her monthly assessments.

While Appellant has never restricted Walker’s access to common areas, it recorded eight liens against Walker’s unit between December 31, 2002, and April 4, 2014. The liens secured unpaid assessments, interest, and attorney’s fees. Appellant also obtained three personal judgments against Walker during this time span. On October 6, 2015, Appellant notified Walker of its intent to record a ninth lien against her unit to secure unpaid assessments, interest, and attorney’s fees arising on or after January 1, 2015.

The lien notice stated that it would secure $4,702.80 in unpaid damages owed as of October 6, 2015, “plus all sums becoming due thereafter[.]” Walker neither paid the owed amount nor challenged the intended lien. Appellant recorded its ninth lien on December 22, 2015 and obtained a fourth personal judgment against Walker in the District Court of Maryland for Howard County on August 9, 2016. The court entered a judgment of $13,933.99 against Walker, which included unpaid assessments from January 1, 2014 through December 31, 2016. Legal Proceedings Walker filed for Chapter 13 bankruptcy relief on January 12, 2017.

The Bankruptcy Court denied Walker’s Chapter 13 plan without leave to amend on August 17, 2017 and dismissed Walker’s case on September 8, 2017. Walker paid four monthly assessments between January and September 2017. Walker filed a second petition for Chapter 13 bankruptcy on September 11, 2017. The Bankruptcy Court denied Walker’s Chapter 13 plan without leave to amend on September 24, 2018.

The Bankruptcy Court dismissed the 3 second petition on October 16, 2018. Walker paid three monthly assessments during the pendency of the second petition. Walker filed a third petition for Chapter 13 relief on October 16, 2018. Appellant filed proof of a secured claim for $42,298.89 on October 31, 2018.4 This amount partly consisted of assessments, interest, and other costs that did not accrue until after Appellant recorded its ninth lien.

Walker objected to Appellant’s proof of secured claim on August 5, 2019. Walker asserted that the MCLA does not permit a lien to secure assessments, costs of collection, and attorney’s fees that accrue following the recordation of the lien. Appellant filed a response on August 29, 2019. The parties agreed to petition the Bankruptcy Court to certify the instant question to this Court.

The parties also agreed to a joint stipulation of facts and documents on February 19, 2020. At the time of the joint stipulation, Walker had not paid a monthly assessment since August 29, 2019. According to Appellant, Walker resumed making monthly payments beginning April 28, 2020, but remains in default of her post- bankruptcy petition assessments. The Bankruptcy Court ordered certification on September 23, 2020. 4 A proof of secured claim indicates the amount of secured debt that the debtor owed a creditor on the date of the bankruptcy filing.

When calculating the total debt owed, the United States Bankruptcy Court, Official Form 410, part 2:7, permits creditors to include “in addition to [the] principal amount, . . . interest, fees, expenses, or other charges[.]” Fed. R. Bankr. P. 3001(c)(2)(A). Walker owed Appellant a principal judgment balance of $24,205.89 at the time of bankruptcy filing. Appellant added $18,093.00 to this claim, reflecting subsequent delinquent assessments, interest, attorney’s fees and costs that accrued subsequently to the lien’s recordation, for a total secured claim of $42,298.89. 4 DISCUSSION Standard of Review This Court may answer a question of law certified by a federal court if “the answer may be determinative of an issue . . . in the certifying court and there is no controlling appellate decision, constitutional provision, or statute of this State.” Fangman v. Genuine Title, LLC, 447 Md. 681, 690 , 136 A.3d 772, 777 (2016) (citing Cts. & Jud.

Proc. § 12- 603). This Court cabins its review of certified questions to issues of Maryland law, not to issues of fact. Parler & Wobber v. Miles & Stockbridge, 359 Md. 671, 681 , 756 A.2d 526, 531 (2000). This Court “may go no further than the question certified.” Price, 462 Md. at 147 , 198 A.3d at 799 (quoting AGV Sports Grp., Inc. v. Protus IP Solutions, Inc., 417 Md. 386 , 389 n.1, 10 A.3d 745 , 746 n.1 (2010)).

The certified question of law concerns the interpretation of the MCLA. Statutory interpretation requires ascertaining and effectuating the intent of the General Assembly. Montgomery County v. Phillips, 445 Md. 55, 62 , 124 A.3d 188, 192 (2015). We review questions of statutory interpretation under a de novo standard of review without deference to other courts’ interpretation of the statute.

Harvey v. Marshall, 389 Md. 243, 257 , 884 A.2d 1171, 1179 (2005) (citing Mohan v. Norris, 386 Md. 63, 66-67 , 871 A.2d 575, 577 (2005)). Parties Contentions According to Appellant, as long as a lien complies with the procedural requirement for creation under the MCLA, a lien can secure unpaid damages that arise after the 5 recordation of the lien.5 In short, Appellant argues that the MCLA permits continuing liens.6 For Appellant, the strongest support for continuing liens comes from the plain text of the statute, which neither prohibits continuing liens, nor requires a lienholder to impose a new lien to secure additional unpaid damages that arise after a lien’s recordation. According to Appellant, finding a prohibition against continuing liens in the MCLA would impermissibly require the insertion of new language “as to reflect an intent not evidenced in the plain and unambiguous language of the statute[.]” Woznicki v. GEICO Gen. Ins.

Co., 443 Md. 93, 108 , 115 A.3d 152, 161 (2015) (quoting Stickley v. State Farm Fire & Cas. Co., 431 Md. 347, 358-59 , 65 A.3d 141, 148 (2013)). Appellant also notes that this Court has never held that the MCLA requires multiple liens to secure unpaid sums arising from a single contract. Instead, the past cases of this Court have focused on the purpose of the MCLA in creating a framework for recording and enforcing liens that accord with the minimum requirements of due process.

See, e.g., Golden Sands Club Condo., Inc. v. Waller, 313 Md. 484, 495 , 545 A.2d 1332 , 1337-38 5 These subsequent damages must also be provided by contract, governing bylaws, or statute. The Supreme Court defined a continuing lien as one “cover[ing] property or rights 6 to property in the delinquent’s hands at any time prior to expiration.” Glass City Bank of Jeanette, Pa. v. United States, 326 U.S. 265, 267 , 66 S. Ct. 108, 110 (1945). A continuing lien, in the context of a condominium association lien, constitutes not only the amount claimed in the lien, but the aggregate of unpaid charges, fees, and interest that have accrued since its recordation. See Bd. of Mgrs. of Netherlands Condo. v. Trencher, 128 A.D.3d 452, 453 , 9 N.Y.S.3d 213, 214 (1st Dept. 2015) (“plaintiff is entitled to not only the amount claimed in the lien, but also the amount of unpaid common charges and fees that have accrued since the filing of the lien[.]”) (emphasis added). 6 (1988) (“We hold that procedural due process does not prevent the approach to hearing which the [General Assembly] has taken [under the MCLA].

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.”) (emphasis added). Appellant contends that a continuing lien satisfies the minimum requirements of due process outlined by this Court in Golden Sands because continuing liens conserve time and expense for unit owners, condominiums, and the judiciary without increasing the risk of erroneous deprivation of the unit owner’s property. See id. at 495 , 545 A.2d at 1338 (citing Matthews v. Eldridge, 424 U.S. 319, 335 , 96 S. Ct. 893, 903 (1976)) (“[D]ue process generally requires consideration of three distinct factors: [f]irst, the private interest that will be affected . . . second, the risk of an erroneous deprivation . . . and the probable value, if any, of additional or substitute procedural safeguards; and finally, . . . the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.”).

The interest of a council of unit owners would be furthered by conserving time and expense in filing multiple liens. A continuing lien also protects the interests of the entire condominium because it ensures that accruing costs and interests from a delinquent unit owner are covered by a single lien. Unit owners meanwhile would still receive prior notice and an opportunity to challenge putative charges in a formal proceeding before the lien is recorded. Requiring successive liens would not in any meaningful way decrease the 7 risk of erroneous deprivation of a unit owner’s property interests compared to a continuing lien.

Appellant argues that prohibiting continuing liens could produce absurd results and deleterious consequences for both condominium associations as a whole and individual unit owners. See Blue v. Prince George’s County, 434 Md. 681, 689 , 76 A.3d 1129, 1133 (2013) (“An examination of interpretive consequences, either as a comparison of the results of each proffered construction, or as a principle of avoidance of an absurd or unreasonable reading, grounds the court’s interpretation in reality.”). The prohibition of continuing liens would subject the lienholder and property owner to unnecessary time and expense of additional proceedings. These proceedings could lead to contradictory results.

Less sophisticated parties, or those with financial constraints, may incur greater hardship when trying to comply with the multiple lien requirement. According to Appellant, prohibiting continuing liens would increase the fiscal and administrative burdens on the council of unit owners, and any other party subject to the MCLA’s lien procedures. Appellant also urges this Court to rely on non-Maryland authority to resolve this undecided question of Maryland law. Appellant cites Archie v. Nagle & Zaller, P.C., No. GJH-17-2524, 2018 WL 3475429 (D. Md. Jul. 19, 2018), in which the United States District Court for the District of Maryland stated in an unreported memorandum opinion that prohibiting continuing liens, under the MCLA, “would be bizarre [and] idiosyncratic and not tenable[]” because it would require a creditor to file a new lien every time an additional cost accrued.

Id. at ⁶ (internal quotation and citation omitted). 8 Appellant also cites to a line of cases from New York, culminating in a 2015 intermediate appellate court decision, that concluded the equivalent New York condominium association lien statute permits continuing liens. Trencher, 128 A.D.3d at 453 , 9 N.Y.S.3d at 214 ; see also Bd. of Managers of Soho Greene Condo. v. Clear, Bright & Famous LLC, 2012 N.Y. slip op. 33273(U) (Trial Order), 2012 WL 5877658 (N.Y. Sup. Ct. Nov. 5, 2012) (“To read into this statute, as has been suggested, a requirement that the board of managers update its liens monthly in order to protect additional amounts accruing each month would be an interpretation which would be costly, burdensome and contrary to the . . . legislative objective.”). Walker argues that the MCLA prohibits any sum from being secured by a statutory lien before the property owner has an opportunity to contest the sum prior to attachment.

According to Walker, continuing liens are prohibited by the plain language, legislative history, and due process requirements previously recognized by this Court. Walker contends that the plain language of the MCLA excludes continuing liens because it enumerates an exhaustive and bounded list of payment categories that may be secured by a lien, namely damages, costs, late charges, and attorney’s fees. According to Walker, the plain language of the statute only covers these payment categories when they are actually due. A continuing lien impermissibly stretches the meaning of the statutory language because it would cover payments that are not actually due.

As future sums, they have not yet, nor may ever, become due. According to Walker, continuing liens would contravene the purpose of the MCLA, which was amended by the General Assembly to conform with due process and ensure 9 debtors have the right to contest amounts allegedly owed. The Senate hearings indicated that debtors must have an opportunity to challenge a debt before the lien attaches. A continuing lien would circumvent the purpose of the statute because it would deny debtors the opportunity to challenge the precise amounts owed before the recordation of the lien.

Walker also asserts that a continuing lien conflicts with the precedent of this Court. In Golden Sands, this Court upheld the constitutionality of the MCLA because “no lien attaches until after the unit owner has an opportunity to be heard . . . the lien claimant has the burden of proof . . . these provisions give the necessary opportunity for hearing and provide a reasonable procedure for testing the validity of the lien prior to its creation[.]” 313 Md. at 493 , 545 A.2d at 1337 (emphasis added). Walker maintains that this Court underscored again, in Select Portfolio Servicing, Inc. v. Saddlebrook West Utility Company, LLC, 455 Md. 313 , 167 A.3d 606 (2017), the importance of unit owner’s ability to challenge putative costs before the lien is imposed. Id. at 336 , 167 A.3d at 619 (“Under the [MCLA], . . . no lien attaches until after the [property] owner has an opportunity to be heard.”).

A continuing lien contradicts this Court’s previous decisions that upheld a debtor’s due process right in being able to challenge the amount of debt putatively owed before the governing body of a condominium records a lien. Analysis of the MCLA A. Overview of Maryland Statutory Liens and the MCLA Legislatures have the power, subject to due process constraints, to authorize liens that secure payments, debts, or other obligations—like unit owner assessments—by statute. Hon. William Houston Brown & Lawrence R. Ahern, III, The Law of Debtors and 10 Creditors: Bankruptcy, Security Interests, Collection § 9:7 (Nov. 2020).

The creation and enforcement of a statutory lien is entirely limited to and governed by its statutory terms. MacBride v. Gulbro, 247 Md. 727, 729 , 234 A.2d 586, 588 (1967) (noting that when a statute “creates a cause of action which did not exist at common law, [it is] in derogation of the common law [and thus] is to be strictly construed.”). Maryland courts construe statutory liens “strictly” in favor of the debtor to protect a debtor’s common law rights. Patapsco Trailer Serv. & Sales, Inc. v. Eastern Freightways, Inc., 271 Md. 558, 564 , 318 A.2d 817, 820 (1974); T.R. Ltd. v. Lee, 55 Md. App. 629, 635 , 465 A.2d 1186, 1191 (1983) (“Consent being an important element of a common law lien, any statutory attempt to create such lien without the element of consent would have to be strictly construed in derogation of the common law.”).

A corollary of this Court’s strict interpretation of statutory liens is that a court cannot create or impose a lien itself based on what it considers just in a particular case. See Equitable Trust Co. v. Imbesi, 287 Md. 249, 271 , 412 A.2d 96, 107 (1980) (“[t]he creation of a lien is an affirmative act, and the intention to do such act [cannot] be implied from an express negative.”). The General Assembly enacted the MCLA, in part, for condominiums and their council of unit owners to secure the payment of assessments with a lien. Real Prop. § 14- 202(a)(1) (“A lien on property may be created by a contract and enforced under this subtitle if: [] The contract expressly provides for the creation of a lien[.]”).

The MCLA gives condominium associations “limited senior priority” over first recorded mortgage liens to ensure condominium associations receive some financial recoupment after a unit owner 11 defaults. Grahame K. Wells, The Use of Super-Liens to Promote Cooperation Between Condominium Associations and Lenders, 13 Ann. Rev. Banking L. 477 , 479 (1994). Prior to the MCLA, when a condominium unit owner defaulted, the mortgage lender would ordinarily have first priority in a foreclosure and would acquire all of the debtor’s assets—leaving nothing for the condominium association. In response, Maryland, along with most states, created a statutory lien (sometimes called a “super lien”) that enabled condominium associations to jump the foreclosure line and deduct some delinquent assessments and related costs from the sale proceeds.

Real Prop. § 11B-117(c) (creating a super lien for a portion of unpaid unit owner assessments). In sum, the MCLA created a shortcut for condominium associations to recover delinquent unit owner assessments by placing a lien on the unit owner’s unit. The parties dispute whether the MCLA grants a different type of legislative shortcut for condominium associations: whether the MCLA permits continuing liens—i.e., the securing of damages, fees, and interest that arise after the recordation of the lien. As we shall explain, the MCLA does not permit continuing liens.

The plain text and legislative history of the statute, as well as relevant case law of the statute, both from Maryland and our sister jurisdictions, support our conclusion. B. Statutory Interpretation of the MCLA The first indication that the MCLA prohibits continuing liens comes from the statutory text itself. “The cardinal rule of statutory interpretation is to ascertain and effectuate the real and actual intent of the [General Assembly]. . . . To ascertain the intent of the General Assembly, we begin with the normal, plain meaning of the statute.” State 12 v. Bey, 452 Md. 255, 265 , 156 A.3d 873, 878 (2017). “[T]he plain language must be viewed within the context of the statutory scheme to which it belongs, considering the purpose, aim, or policy of the [General Assembly] in enacting the statute.” Id. at 266 , 156 A.3d at 878 . “Where the words of a statute are ambiguous and subject to more than one reasonable interpretation, or where the words are clear and unambiguous when viewed in isolation, but become ambiguous when read as part of a larger statutory scheme, a court must resolve the ambiguity by searching for legislative intent in other indicia, including the history of the legislation or other relevant sources intrinsic and extrinsic to the legislative process.” Id., 156 A.3d at 879 .7 Real Prop. § 14-202(b) provides the four types of payments that may be secured by a lien provided for by contract: A lien may only secure the payment of: (1) Damages; (2) Cost of collection; (3) Late charges permitted by law; and (4) Attorney’s fees provided for in a contract or awarded by a court for breach of contract. (Emphasis added).

While the plain text of Real Prop. § 14-202 does not prohibit continuing liens, Archie v. Nagle & Zaller, P.C., 790 F. App’x 502 , 505 (4th Cir. 2019) (per curiam), the term “only” clearly limits the four types of payments that may be secured by a lien: “(1) 7 This Court also will construe a statute so “as to avoid a conflict with the Constitution whenever that course is reasonably possible.” Koshko v. Haining, 398 Md. 404, 425-26 , 921 A.2d 171, 183 (2007) (quoting In re James D., 295 Md. 314, 327 , 455 A.2d 966, 972 (1983)). 13 Damages; (2) Cost of collection; (3) Late charges permitted by law; and (4) Attorney’s fees provided for in a contract or