ROYAL PLAZA COMMUNITY ASSOCIATION, INC. v. Bonds

CATHELL, J. This case arises from an action to foreclose the equity of redemption with respect to real property sold at a tax sale in 1997. At issue is whether the Circuit Court of Prince George’s County lacked jurisdiction to enter a valid order of foreclosure because Petitioner Eugene Bonds’ (“Bonds”), assignor, Willie Lenson, 1 failed to follow the notice requirements provided by Md.Code (1985, 2001 Repl.Vol., 2004 Cum.Supp.), § 14-836(b) of the Tax-Property Article, as they apply to Respondent Royal Plaza Community Association, Inc. 2 (“HOA”). ¹⁸⁹ The HOA’s petition for writ of certiorari presents one question for our review: “Did the Court of Special Appeals err when it held that although a plaintiff in an action to foreclose the equity of redemption willfully failed to strictly follow the notice requirements under § 14 — 836(b) of the Tax-Property [A]rticle, the circuit court had jurisdiction to enter a valid order of foreclosure?” The HOA’s brief on appeal presents a number of additional questions, which we decline to discuss both because they were not presented in its petition for writ of certiorari and because, in any event, it would not be necessary to reach them even if they had been properly presented. I. Facts The piece of property this case concerns is a 4.42534 acre parcel (“the parcel”) situated in the center of the Royal Plaza subdivision in Prince George’s County. Royal Plaza is a community of residential townhouses built in the late 1980s and early 1990s.

On May 22, 1989, Royal Plaza Associates Limited Partnership (“the developer”) 3 recorded in the Land Records of Prince George’s County, four subdivision plats for the prospective Royal Plaza development. Each plat delineated a separate section of the development and designated common areas within each section for recreation or open space. The property in question was one of the designated common areas. This particular plat, Plat One, described the parcel as: “PARCEL A TO BE CONVEYED TO THE HOMEOWNERS ASSOCIATION 192,767.87 SQ.

FT. OR 4.42534 ACRES” On July 27, 1989, the developer formed the HOA as a nonprofit Maryland corporation. John Dowd, the general partner and resident agent of the developer, was listed as the HOA’s ¹⁹⁰ resident agent and was a member of its board of directors. A specific purpose enumerated in the HOA’s Articles of Incorporation is “to provide for or assure maintenance, preservation and architectural control of the Lots and Common Area within the [development.]” On May 3, 1991, the developer conveyed by deed two of the four common areas to the HOA.

Parcel A, the property in question, for reasons not made clear in the record, was not conveyed to the HOA. On May 12, 1997, there was a tax sale of the parcel and Willie Lenson (“Lenson”) purchased the tax certificate for the property for the sum of $4,000. Lenson had a title search conducted on September 14, 1998, which confirmed that the developer was the sole owner of the property. On September 23, 1998, Lenson filed a Complaint to Foreclose the Equity of Redemption in the Circuit Court for Prince George’s County.

At the time of the tax sale and foreclosure, the developer was still the record title owner of the parcel. Lenson attempted to serve notice on the developer, but was unsuccessful. 4 Lenson did not send written notice of the proceedings specifically to the HOA. It should be noted, however, that the HOA’s resident agent, John Dowd, was also the developer’s resident agent and listed the same address on record with the SDAT in his capacity as agent for both organizations. On January 13, 2000, the Circuit Court foreclosed the right of redemption and conveyed full ownership of the parcel to Lenson.

On October 22, 2001, well over a year later, the HOA filed a motion to vacate the judgment foreclosing the right of redemption on the parcel, along with a motion to intervene in the foreclosure action as a defendant. 5 On November 6, 2001, ¹⁹¹ before the motion was ruled on, Lenson sold the parcel to Bonds, who recorded his deed to the property on December 5, 2001. On January 14, 2002, Bonds filed a motion to intervene as successor-in-interest to Lenson. On February 15, 2002, the Circuit Court granted both the HOA’s and Bonds’ motions to intervene. In addition, the court vacated the order foreclosing the right of redemption, finding that the HOA was entitled to receive actual notice of the complaint.

On January 3, 2003, Bonds amended the original complaint to foreclose the right of redemption to include a claim to quiet title. On September 10, 2003, ruling on a motion by Bonds, the Circuit Court dismissed the claim for lack of jurisdiction. Bonds filed a timely appeal. On December 29, 2004, the Court of Special Appeals reversed the Circuit Court’s ruling, holding that Lenson’s failure to send the HOA notice did not deprive the Circuit Court of jurisdiction to enter judgment and that the Circuit Court erred in vacating the judgment and remanded the case to the Circuit Court to reinstate the order foreclosing the right of redemption.

Bonds v. Royal Plaza Community Associates, Inc., 160 Md.App. 445 , 864 A.2d 257 (2004). The HOA filed a petition for writ of certiorari which we granted on April 7, 2005. At no time has the record owner of the tract of land, the developer, challenged the foreclosure of the right of redemption.

II

Discussion The HOA contends that Bonds, as assignee of Lenson, failed to strictly follow the notice requirements under § 14-836(b) of the Tax-Property Article, and therefore, the Circuit Court for Prince George’s County lacked jurisdiction to enter a valid order of foreclosure. Under the circumstances here present we find that the Circuit Court had jurisdiction to enter an order foreclosing the equity of redemption. ¹⁹² Sections 14-808 through 14-854 of the Tax-Property Article set out and govern the procedure for tax sales in Maryland. Section 14-882 of the Tax-Property Article requires that provisions relating to tax sales (§§ 14-832.1 through 14-854) “shall be liberally construed as remedial legislation to encourage the foreclosure of rights of redemption by suits in the circuit courts and for the decreeing of marketable titles to property sold by the collector.” As we stated in Thomas v. Kolker, 195 Md. 470, 475 , 73 A.2d 886, 888 (1950), “the legislature has declared that the public interest in marketable titles to property purchased at tax sales outweighs considerations of individual hardship in every case, except upon a showing of lack of jurisdiction or fraud in the conduct of the foreclosure.” See also Lippert v. Jung, 366 Md. 221, 230 , 783 A.2d 206, 211 (2001); Hardisty v. Kay, 268 Md. 202, 208 , 299 A.2d 771, 774 (1973); Kaylor v. Wilson, 260 Md. 707, 712 , 273 A.2d 185, 187 (1971). The success and finality of tax foreclosure sales is essential to the marketability of title to property.

This is further evidenced by § 14-845(a) of the Tax-Property Article which addresses the reopening of judgments generally: “A court in the State may not reopen a judgment rendered in a tax sale foreclosure proceeding except on the ground of lack of jurisdiction or fraud in the conduct of the proceedings to foreclose; however, no reopening of any judgment on the ground of constructive fraud in the conduct of the proceedings to foreclose shall be entertained by any court unless an application to reopen a judgment rendered is filed within 1 year from the date of the judgment.” After a year has passed, the only occasions in which a judgment in a tax foreclosure sale will be reopened is if there was a lack of jurisdiction or actual fraud. Constructive fraud “shall be entertained” as a reason to reopen a judgment only if the claim is brought within one year from the date of the judgment. In the case sub judice, there was no claim or evidence of actual fraud in the record and the claim of the ¹⁹³ HOA was filed more than a year after the entry of the judgment. 6 In determining whether the Circuit Court lacked jurisdiction we look to the pertinent sections of the Tax-Property Article. Section 14-835(a) of the Tax-Property Article addresses the “Form of complaint,” stating that “[a] person shall file a complaint in the circuit court for the county in which the land is located” and § 14-834 provides for the jurisdiction of the court: “ § 14-834.

Jurisdiction of court. The circuit court, on the filing of a complaint to foreclose the right of redemption, has jurisdiction to give complete relief under this subtitle, in accordance with the general jurisdiction and practice of the court, and with all laws and rules of court that relate to the circuit courts for the county in which the property is located, except as otherwise provided in this subtitle, to bar all rights of redemption and to foreclose all alienations and descents of the property occurring before the judgment of the court as provided in this subtitle and all liens and encumbrances on the property, except property taxes that arise after the date of sale, and to order an absolute and indefeasible estate in fee simple or leasehold to be vested in the holder of the certificate of sale.” Under the circumstances here present, an accurate interpretation of the notice requirements outlined in § 14-836 of the Tax-Property Article is determinative. Section 14-836, in its relevant parts, identifies the necessary parties to an action to foreclose the right of redemption, and what notice must be sent to those who are not necessary parties: ¹⁹⁴ “ § 14-836. Parties.

(a) Plaintiffs. — The plaintiff in any action to foreclose the right of redemption shall be the holder of the certificate of sale. (b) Defendants; notice. — (1) Except as otherwise provided in this subsection, the defendants in any action to foreclose the right of redemption shall be: (1) the record title holder of the property as disclosed by a search performed in accordance with generally accepted standards of title examination of the land records of the county, of the records of the register of wills of the county, and of the records of the circuit court for the county; (ii) if the property is subject to a ground rent, the record title holder of the fee-simple title and the owner of the leasehold title ...; (iii) any mortgagee of the property ...; (iv) the trustee under any deed of trust recorded against the property or any holder of a beneficial interest in a deed of trust who files notice of the interest ...; (v) the county where the property is located; and (vi) if appropriate, the State. (2) The plaintiff may choose not to include as a defendant any of the persons enumerated in paragraph (1) of this subsection. However, the rights of any person not included as a defendant are not affected by the proceedings.

(3) Subject to the provisions of paragraph (4) of this subsection, it is not necessary to name as defendant any other person that has or claims to have any right, title, interest, claim, lien or equity of redemption in the property sold by the collector. Any of these persons are included as defendants by the designation ‘all persons that have or claim to have any interest in property.....(giving a description of the property in substantially the same form as the description that appears on the Collector’s certificate of tax sale).’ Any of these persons may be designated throughout the proceeding by the above designation and the ¹⁹⁵ cause may proceed against them by publication under order of court as provided in this subtitle. (4) (i) Notwithstanding the provisions of paragraph (3) of this subsection, the plaintiff shall send written notice of the proceeding to: 1. all persons having a recorded interest, claim, or lien, including a judgment, who have not been made a defendant in the proceeding, and, if the subject property is the common areas owned by or legally dedicated to a homeowners association, to the homeowners association governing the property, at the last reasonably ascertainable address; and (ii) The notice under this subsection shall: 1. be sent by certified mail, postage prepaid, return receipt requested, bearing a postmark from the United States Postal Service; and 2. be accompanied by a copy of the complaint. (iii) The plaintiff shall file in the action: 1. the return receipt from the notice; or 2. an affidavit that: A. the notice provisions of this subsection have been complied with; or B. the address of the holder of the subordinate interest is not reasonably ascertainable.” Section 14 — 836(b)(1) clearly defines and sets forth the necessary defendants in any action to foreclose the right of redemption to a piece of property.

It is evident from the facts that the HOA does not fall under any of the categories of § 14-836(b)(1). The developer failed to effectuate a conveyance of the property to the HOA. Neither did the HOA initiate suit to require the developer to do so. The HOA never became the record title holder of the property and title remained in the developer’s name.

It is also clear that the HOA is not a mortgagee or assignee of the mortgagee of record, nor a trustee or holder of a beneficial interest in a deed of trust. Lenson was not required to name the HOA a defendant in this action because it does not fall under one of the categories enumerated in § 14-836(b)(l). ¹⁹⁶ Section 14-836(b)(3) states, “it is not necessary to name as defendant any other person that has or claims to have any right, title, interest, claim, lien or equity of redemption in the property sold by the collector.” These “other” persons not named as defendants are included as defendants by the “catch-all” designation “ ‘all persons that have or claim to have any interest in property.Id. Section 14 — 836(b)(3) specifies that notice be provided to any such “other” defendants in this instance through “publication.” Lenson, the original tax sale purchaser, had a title search performed on both the land records and the records of the Register of Wills of Prince George’s County preceding the filing of his initial complaint. This search discovered that the developer was the record title holder of the property in question, a fact not disputed by the HOA.

Lenson sent notice of his action to foreclose the right of redemption on the property to the address for the developer’s resident agent on file at the SDAT, to the developer in care of the SDAT, and posted notice on the property itself. Lenson also published notice in the county newspaper of record: The Prince George’s Post. The publication properly complied with § 14-836(b)(3) 7 and was posted weekly for three successive weeks beginning on December 24,1998. Lenson satisfied the requirement of notice by publication under § 14-836(b)(3), as outlined above.

The HOA, however, argues that it was entitled to written notice as a homeowners association, pursuant to § 14 — 836(b)(4)(i)(l): “(4) (i) Notwithstanding the provisions of paragraph (3) of this subsection, the plaintiff shall send written notice of the proceeding to: ¹⁹⁷ 1. all persons having a recorded interest, claim, or lien, including a judgment, who have not been made a defendant in the proceeding, and, if the subject property is the common areas owned, by or legally dedicated to a, homeowners association, to the homeowners association governing the property, at the last reasonably ascertainable address.... ” [Emphasis added.] In order for the HOA to be entitled to written notice under § 14 — 886(b)(4)(i)( 1) it must show that it has a recorded interest, claim, or lien in the property or, because the subject property is a common area, that it is owned by or legally dedicated to it. If that burden is met, written notice of the foreclosure action generally must be sent to the HOA at its “last reasonably ascertainable address.” In Bonds , the Court of Special Appeals concisely framed the process that a homeowners association must follow to vacate an order foreclosing the right of redemption: “[A] homeowners association [must] establish three elements in order to successfully vacate an order foreclosing the right of redemption in common area property for failure to send proper notice. First, a homeowners association must show that the common area is owned by, or ‘legally dedicated’ to it, or that it has a recorded interest, claim or lien. See [ ] § 14-836(b)(4)(i)(l).

Second, the homeowners association must establish that the tax sale plaintiff failed to send written notice to the association’s last reasonably ascertainable address as required. See id. Finally, the homeowners association must demonstrate that the failure to send notice resulted in either the court lacking jurisdiction or fraud in the foreclosure proceedings. See [ ] § 14-845(a).” Bonds , at 452, 864 A.2d at 261 (alterations added).

The Court of Special Appeals found that the HOA satisfied both aspects of the first requirement, that it had a “recorded interest” and the common area was “legally dedicated” to it. 8 Id. The court ¹⁹⁸ also found that Lenson failed to send written notice of the complaint to foreclose the right of redemption to the HOA’s last reasonably ascertainable address as required. 9 Id. Finally, the court found that the failure to send notice did not result in lack of jurisdiction and that fraud in the foreclosure proceedings, if any, was constructive and thus barred, because the HOA failed to file its written claim within the one-year period allowed under § 14-845(a). See Bonds, 160 Md.App. at 461-63 , 864 A.2d at 267 .

Assuming, arguendo, that the HOA was entitled to written notice under § 14-836(b)(4)(i)(l) because it had either a “recorded interest” from the designation on the plat and/or the property was “legally dedicated” to it, 10 Lenson’s failure to send written notice to the HOA at its last reasonably ascertainable address does not preclude the Circuit Court from having jurisdiction to foreclose the equity of redemption under the circumstances here present. “The law is established that tax foreclosure proceedings are in rem and not in personam.” Sanchez v. James, 209 Md. 266, 270 , 120 A.2d 836, 837 (1956). The Court in Sanchez discussed Leigh v. Green, 193 U.S. 79, 90 , 24 S.Ct. 390, 393 , 48 L.Ed. 623, 628 (1904), noting: ¹⁹⁹ “[D]ue process of law guaranteed by the Fourteenth Amendment of the Constitution of the United States is not denied the owner of real estate by the lack of any provision for personal service on him of notice of the pendency of a proceeding in rem authorized by statute to enforce the lien acquired by a purchaser of the property at a tax sale, where notice is given by publication to all persons interested in the property to