Motor Vehicle Administration of the Maryland Department of Transportation v. Seidel Chevrolet, Inc.

KARWACKI, Judge. In this case we focus on Maryland Code (1977, 1987 Repl.Vol.), §§ 13-209 and 13-210 of the Transportation Article which establish an Assurance Fund (“Fund”) within the Motor Vehicle Administration (“MVA”) to compensate “any interested person [who] has sustained [a] loss or damage” due to “an omission or error in the filing, recording, or indexing of a security interest ... made by an employee of [MVA] in the course of employment.” The principal question in the case is whether, and if so how much, the respondent/cross-petitioner, Seidel Chevrolet, Inc. (“Seidel”) is entitled to recover from the Fund. In answering this question we must decide the related issues of: 1) whether the Legislature intended to restrict a claimant’s compensable loss under the Fund to “net loss,” and 2) does the “collateral source rule” apply to damage or loss claims filed against the Fund. The case arose from MVA’s errors in connection with the issuance to one William Osborne James (“James”) of a duplicate title to an automobile.

The facts are undisputed. ²⁴⁰ I. On August 22, 1986, James purchased a 1983 Mercedes Benz from Euro Motorcars Bethesda, Inc. The purchase was financed, in part, by Loyola Federal Savings and Loan Association (“Loyola”), which placed a lien on the car in the amount of $27,374.84. On August 29, 1986, MVA issued a Certificate of Title for the Mercedes to James which noted the lien held by Loyola. MVA also sent a Notice of Security Interest Filing to Loyola certifying that a security interest had been filed with MVA in favor of Loyola on the Mercedes. In November of 1986, James went to the Largo Branch Office of the MVA and presented the Certificate of Title for his Mercedes together with a fraudulently executed Security Interest Termination Statement with reference to Loyola’s lien.

Upon receipt of the Termination Statement, a member of the Largo Branch Office staff telephoned the Central Lien Section at MVA Headquarters and obtained approval to release the lien held by Loyola. A clerk at the Largo Branch Office stamped the vehicle title indicating that the lien on the Mercedes had been satisfied. This transaction was recorded on a daily log at the Central Lien Section. According to MVA standard operating procedures, Termination Statements received at a branch office are to be forwarded immediately to the Central Lien Section for inclusion in the central titling records.

If the Termination Statement releasing the lien is not received by the Central Lien Section within a week, specified search procedures, including communication with the actual lienholder, are implemented. Although James’s Termination Statement was mailed to the Central Lien Section, it was not received. In addition, the prescribed search procedures to locate the statement were never implemented at the Central Lien Section. On January 13, 1987, James took the Mercedes title to MVA’s headquarters in Glen Burnie where he submitted it, ²⁴¹ along with an application for a duplicate title attesting that his Certificate of Title had been “misassigned” and certifying there was no existing lien on the vehicle.

The “misassigned” title presented to the MVA employee bore the stamp and initial of a clerk from the Largo Branch Office indicating release of the lien. At this point, MVA standard operating procedures required that MVA staff search its titling records to match the information contained in James’s application with the master records for lien releases. This task was either not done or the search was incorrectly performed, since there was no document in the file confirming the release of the lien on James’s Mercedes. Nevertheless, MVA issued to James a duplicate title showing that the car was free of any lien.

Ten days later, James took the duplicate title along with the Mercedes to Seidel, where he exchanged the Mercedes for a new 1987 Chevrolet Blazer and a check for $5,972.45. James also signed an “Acknowledgement of Clear Title on Trade-in Vehicles” wherein he warranted that there was no outstanding lien on the Mercedes. On March 30, 1987, Seidel sold the Mercedes to a Shirley Christopher for $19,-995.00. At the time of the sale, Seidel delivered the duplicate title and possession of the Mercedes to Christopher in exchange for a down payment of $1,500.00 in cash and a trade-in Chevrolet valued at $4,000.00.

The balance of the sale price was to be financed by General Motors Acceptance Corporation. 1 On May 12, 1987, Loyola repossessed the Mercedes from Christopher because James failed to make his required loan payments. As a result of the repossession, Christopher filed a complaint with the MVA against Seidel. Christopher’s complaint was investigated by MVA’s Licensing and Consumer Services Department, and on June 29, 1987, a ²⁴² report was filed which concluded that there was 1) “no evidence that the dealer was at fault,” and 2) “no apparent violation of Maryland Vehicle Law.” The report also recommended that the “investigation be considered closed.” Unsatisfied with the results of the investigation, Christopher filed a civil suit against Seidel in the District Court of Maryland, sitting in Prince George’s County. That case was eventually settled, by Seidel paying Christopher the sum of $6,500.00.

Seidel’s insurance carrier reimbursed Seidel $1,250.00 of the settlement amount. The facts and circumstances surrounding the James and Christopher transactions also gave rise to a civil action and criminal prosecution against James. In the civil case, Seidel sued James in the Circuit Court for Prince George’s County for breach of contract and fraud. This case was ultimately dismissed on June 27, 1991 for lack of prosecution pursuant to Maryland Rule 2-507.

In the criminal case James was charged in the District Court of Maryland, sitting in Prince George’s County, with theft of over $300.00 in violation of Md.Code (1957, 1987 Repl.Vol.), Art. 27, § 342. James prayed a jury trial and the case was transferred to the Circuit Court for Prince George’s County. There, he plead guilty to theft. The court suspended the sentence it imposed upon James, placed him on probation, and ordered him to pay $20,000.00 in restitution to Seidel. 2 Seidel also moved to recoup its losses outside of the courts.

First, it filed a claim with its insurance carrier based on its transaction with James, and was paid $21,-768.93. Then, in June of 1988, Seidel paid Loyola $10,000.00 in exchange for a lien-free title to and possession of the Mercedes. Soon thereafter, Seidel resold the car for $16,-000.00. Finally, on June 9, 1988, Seidel filed a claim with the MVA against the Fund.

Seidel alleged that it had “... sustained a loss in excess of $30,000.00 ...” as a result of ²⁴³ MVA’s errors in issuing the duplicate title to James for the Mercedes.

II

In accordance with § 13-210(b) of the Transportation Article a hearing on Seidel’s claim against the Fund was held before an administrative law judge (“AU”). All of the facts in the ease were reduced to stipulation except for the receipt by Seidel of payments from its insurance carriers in connection with the James transaction. Evidence concerning these insurance payments was admitted at the hearing, however, over Seidel’s objections. Pursuant to Md.Regs.Code, (COMAR) tit. 11, § 11.02.-08B(1) (1989), the AU made Findings of Fact, Proposed Conclusions of Law, and Recommendations.

The AU found that MVA’s errors in connection with the issuance and processing of James’s duplicate title resulted in “loss or damage” to Seidel, and therefore, Seidel was entitled to collect from the Fund. In determining the amount of Seidel’s “loss or damage,” the AU subtracted the sums paid to Seidel by its insurance carriers. In addition, the AU included as part of his calculation of Seidel’s loss, attorney’s fees expended by Seidel in its effort to make up for its losses. His calculation of the damages was as follows: “Cost of 1987 Blazer $15,584.72 Amount paid by Seidel to James 5,972.45 Settlement of Christopher 6.500.00 Attorney’s fees incurred by Seidel 4,031.25 Subtotal: Sustained Loss $32,088.42 Payment of Christopher to Seidel + $ 1,500.00 Trade-in of Chevy to Seidel + 4,000.00 Payment from Insurer + 21,768.93 Payment from Insurer + 1.250.00 Subtotal: Prior Recovery + $28,518.93 NET LOSS $ 3,569.49” ²⁴⁴ After considering the AU’s Findings of Fact, Proposed Conclusions of Law, and Recommendations, the Administrator of the MVA modified the AU’s recommendations.

The Administrator concluded that “the attorneys’ fees incurred by the claimant in the amount of $4,031.25 [we]re not damages for which the Assurance Fund [wa]s liable,” and therefore, “the Assurance Fund [wa]s not to pay [Seidel] any monies as a result of the claim filed with [MVA].” Seidel appealed the Administrator’s decision to the Circuit Court for Prince George’s County pursuant to § 13-210(c) of the Transportation Article. The circuit court ruled that the money collected by Seidel from its insurance carriers should not have been deducted in the calculating of Seidel’s loss and ordered the MVA to pay Seidel $10,000.00. The lower court reasoned that “[i]f the legislative body meant to exclude the collateral source rule from this type of statute, [it] had more than ample opportunity to do so. [However,] they have not done so.” In determining that the amount to be paid to Seidel was $10,000.00, the circuit court ruled that, although the security interest of Loyola resulting from the transaction between James and Euro Motorcars Bethesda, Inc. was $27,374.84, the security interest to which Seidel’s claim against the Fund related was the $10,000.00 Seidel paid to Loyola to buy Loyola’s interest in the Mercedes. The circuit court also upheld the Administrator’s decision not to award attorneys’ fees.

Discontented with the circuit court’s decision, MVA filed a petition for the issuance of a writ of certiorari asking this Court to determine: “[Whether] the circuit court err[ed] when it ruled, in the context of a claim against the [MVA’s] Assurance Fund for losses incurred as a result of the agency’s handling of a security interest filing, that [Seidel] should be paid twice — once by [Seidel’s] insurance carrier and again by the Fund.” Seidel filed a cross-petition. It asked us to decide the following questions: ²⁴⁵ 1. Did the circuit court err when it ruled, in the context of a claim against the [MVA] Assurance Fund that a claimant’s attorney’s fees are not a loss compensable under the Assurance Fund? 2. Did the circuit court err when it ruled, in the context of a claim against the [MVA] Assurance Fund that the amount of the security interest to which the claim related was $10,000.00? 3.

Whether the question of the Assurance Fund’s exemption from liability was not cognizable on appeal? We granted both petitions.

III

The question of whether, and if so how much, Seidel is entitled to recover from the Fund is essentially an issue of statutory construction. The statutes at issue are §§ 13-209 and 13-210 of the Transportation Article. 3 Section 13-209 establishes a duty within the MVA to create an Assurance Fund: “(a) Deposit of fees. — The Administration shall maintain an Assurance Fund and deposit in it that part of the filing fees collected under this subtitle that is not credited to any special funds under § 13-208 of this subtitle. (b) Transfer of excess sums. — When the Assurance Fund reaches $25,000, any money in excess of that amount shall be transferred to and form part of the Gasoline and Motor Vehicle Revenue Account of the Transportation Trust Fund. (An.

Code 1957, art. 66V2, § 3-209; 1977, ch. 14, § 2.)” Sections 13-210(a), (b), and (c) set forth the criteria for a valid claim against the Fund and outline the procedures under which a claim against the Fund will be considered and paid: “(a) How and by whom permitted; limitations. — (1) If an omission or error in the filing, recording, or index ²⁴⁶ ing of a security interest has been made by an employee of the Administration in the course of employment and, as a result of the omission or error, any interested person has sustained loss or damage, the person may file a claim with the Administration for payment of the loss or damage out of the Assurance Fund maintained under § 13-209 of this subtitle. The claim for payment shall include a request for a hearing on the matter and shall be made in the manner and on the form that the Administration requires. (2) A claim for payment under this section may not be made unless it is filed with the Administration within 3 years from the date the cause of action arose. (b) Determination by Administration. — After notice to all interested parties and a hearing on the claim, the Administration may: (1) Order that any loss or damage sustained by the claimant be paid out of the Assurance Fund, subject to the limitations set forth in this section; or (2) Order that the claim be dismissed and deny payment of the claim.

(c) Judicial Review of determination. — (1) Any aggrieved party to a hearing under this section may appeal from the decision of the Administration as follows: (1) To the circuit court for the county in which the party resides or has his principal place of business; or (ii) If the party does not reside or have a principal place of business in this State, to the Circuit Court for Anne Arundel County. (2) The circuit court to which an appeal is made under this section has jurisdiction to examine the facts of the case and to determine if the claimant is entitled under this section to recover for any loss or damage. The Administration shall pay the amount of any judgment recovered against the Assurance Fund up to the amount of the security interest to which the claim relates.” Section 13-210(d) delineates the circumstances under which the Fund is not liable: ²⁴⁷ “(d) When Fund exempt from liability. — The Assurance Fund is not liable under any circumstances for: (1) Any loss or damage that exceeds the amount of the security interest to which the claim relates; or (2) Any loss or damage that results from: (i) The claimant’s breach of any trust, whether expressed, implied, or constructive; (ii) The improper use of the seal of any corporation to deal with the property or interest involved or to execute or take the benefit of the instrument recorded; or (iii) The recording of an instrument executed by a person under legal disability, unless the fact of the disability is disclosed on the instrument.” Finally, subsection (e) provides for: “(e) Liability of claimant for costs. — If, in an appeal against the Administration, judgment is given in favor of the Administration or the appeal is dismissed at the request of the claimant, the claimant shall pay the full costs of the appeal. (An.Code 1957, art. 66x/2, § 3-209; 1977, ch. 14, § 2; 1982, ch. 820, § 3.)” In this court, MVA’s sole contention is that the Circuit Court misconstrued the Legislature’s intent in enacting §§ 13-209 and 13-210 of the Transportation Article by applying the collateral source rule to its determination of whether Seidel should be compensated from the Fund.

MVA argues that “the Fund’s stated purpose, its manner of administration, its legislative history, and its limited resources all suggest a self-contained remedy [designed to compensate only the] net loss incurred by a party injured by MVA’s mistake.” It claims that the collateral source rule is inconsistent with the statutory scheme set forth in §§ 13-209 and 13-210 because the collateral source rule is a principle applied exclusively in tort cases while §§ 13-209 and 13-210 are components of an administrative scheme designed to provide a benefit under a certain set of circumstances. ²⁴⁸ On the other hand, Seidel argues that the collateral source rule applies to any claim for loss or damage filed with the Fund. It contends that the phrase “loss or damage” set forth in 13-210(a) is clear and unambiguous on its face, and, therefore, should be construed according to its natural import. Seidel maintains that, since there is nothing in the statute which expressly states, or by inference refers to “net loss,” the legislature did not intend to restrict a claimant’s compensable loss under the Fund to net loss. Seidel also points to this Court’s adoption of the Restatement (Second) of Torts § 920A(2) (1979) in Levi v. Schwartz, 201 Md. 575 , 95 A.2d 322 (1952), which states: “Payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable.” IV.

We have stated time and time again that the cardinal rule of statutory construction is to ascertain and effectuate legislative intent. Weidig v. Crites, 323 Md. 408, 411 , 593 A.2d 1094, 1095 (1991); Mustafa v. State, 323 Md. 65, 73 , 591 A.2d 481, 485 (1991); Taxiera v. Malkus, 320 Md. 471, 480 , 578 A.2d 761, 765 (1990); Harford County v. University, 318 Md. 525, 529 , 569 A.2d 649, 651 (1990); Jones v. State, 311 Md. 398, 405 , 535 A.2d 471, 474 (1988); Mazor v. State Dep’t of Correction, 279 Md. 355, 361 , 369 A.2d 82, 87 (1977). In our quest to divine the Legislature’s intent, we have also explained: “There is no doubt that the beginning point of statutory construction is the