Scott v. Seek Lane Venture, Inc.

HARRELL, Judge. These cases, which have been consolidated for purposes of this appeal, arise from the entry of an order partially setting aside the foreclosure of an equity of redemption and of ex parte injunctions by the Circuit Court for Montgomery County (Messitte, J.). In case number 1017, appellant raises the following issues for our consideration: I. Whether we have jurisdiction to address the issue of the interlocutory injunction entered in case number 1017 when appellant failed to file a notice of appeal; II. Whether the circuit court has jurisdiction to enter ex parte injunctions against appellant after a final judgment ⁶⁷³ foreclosing the right of redemption has been entered; and, III.

Whether the circuit court erred in reopening an enrolled final judgment, which foreclosed the right of redemption, when appellant failed to provide a defunct corporation with sufficient notice of the foreclosure action. Appellee seeks to raise one issue for our review: IV. Whether individual members of a homeowners association were entitled to notice of the tax sale. In appeal number 1096 the following issues are presented for our consideration: I. Whether the interlocutory injunction entered by the circuit court may be appealed when appellant has not filed an answer in the cause wherein the injunction was issued; II.

Whether the circuit court erred in denying appellant’s motion to dismiss the appellees’ declaratory judgment suit; III. Whether the circuit court has jurisdiction to enter ex parte and interlocutory injunctions against appellant after a final judgment foreclosing the right of redemption has been entered; and, IV. Whether the circuit court abused its discretion in enjoining appellant until the issues raised in the declaratory judgment suit are fully adjudicated. Facts On 5 October 1985 1 , Seek Lane Venture, Inc., (hereinafter Seek Lane Venture), a developer of real property, had ⁶⁷⁴ its corporate charter forfeited by the State of Maryland for failure to file corporate personal property tax returns.

As a result of Seek Lane Venture’s additional failure to pay county real property taxes, a tax sale was held. On 9 June 1986 appellant, Catherine F. Scott (hereinafter Scott), purchased at tax sale various parcels of real property, including one described as follows: Parcel B, Block F, “Long Branch View” per plat thereof recorded in Plat Book 127 at Plat 14873 among the Land Records of Montgomery County, Maryland, containing 2.86 acres, more or less, and designated as Tax Account No. 13-501-2415878. Long Branch View is a subdivision originally subdivided and developed by Seek Lane Venture. Parcel B contains the common areas of the Long Branch View subdivision adjacent to Lots 3 through 34 of that subdivision.

Within Parcel B is located, in addition to underground public utility easements, a storm water management easement, and open space associated with the single-family, residential building lots, a private street (denominated Seek Court) and vehicle parking to serve the homes that were constructed on the adjacent lots. Seek Court was the sole vehicular access for the residential lot owners to gain access to the public street nearest the subdivision. The subdivision plat was recorded among the land records of Montgomery County in 1984. In 1983 and 1984, during the time of Seek Lane Venture’s valid corporate existence, it recorded in Montgomery County a Declaration of Covenants, Conditions and Restrictions, and a modification pertaining to the subdivision. 2 These documents indicated that Seek Lane Venture intended to convey ownership of the common areas of the subdivision to a homeowners association (arguably appellee Seek Court ⁶⁷⁵ Homeowners Association, Inc., although the Declaration does not explicitly name that association as such).

The Declaration also contained references to easements. Seek Lane Venture apparently conveyed to the various lot owners of the subdivision easements “of enjoyment in and to the Common Area, including an easement for the use and enjoyment of the private streets and parking lots and walkways within the Common Area.” These easements were apparently intended to be appurtenant to, and pass with the title of, every lot in the subdivision, subject to certain rights of an unidentified association (again, arguably Seek Court Homeowners Association, Inc., although this was not explicitly stated). Another section of the Declaration specifically addressed the parking rights of the various lot owners. It provided: Section 3.

Parking Rights. Ownership of each Lot shall entitle the Owner or Owners thereof to the use of not more than two (2) automobile parking spaces, which shall be as near and convenient to said Lot as reasonably possible, together with the right of ingress and egress in and upon said parking area. These provisions of the Declaration notwithstanding, Seek Lane Venture never conveyed Parcel B to appellee, Seek Court Homeowners Association, Inc. During the time when Parcel B was being sold at tax sale, and a Certificate of Sale was issued to Scott, Seek Court Homeowners Association, Inc., which consisted of the various lot owners in the subdivision, erroneously believed that it was the owner of Parcel B. It paid liability insurance on the property and performed all required maintenance. In 1988, it even granted an easement to the local cable network, which provided that the cable system would be installed: across the common areas of Seek Court Townhouses, lots 3-39, Parcel B, Block F, being the property designated as being owned by the Homeowners Association as shown on Plat of Subdivision entitled “Long Branch View”, ⁶⁷⁶ Montgomery County, Maryland, and recorded among the Plat records of Montgomery County, in Plat Book 127, Plat No. 14873.

Eventually, Scott filed a Complaint to Foreclose the Right of Redemption on the property she purchased at the tax sale. Seek Lane Venture was the record owner, since it had never conveyed Parcel B as apparently intended by the Declaration. Scott attempted to serve by mail notice of its suit to foreclose the equity of redemption on Seek Lane Venture, even though she was aware that it was a defunct corporation. Scott addressed the notice to a post office box in Silver Spring, Maryland, which she maintained was the last known address of Seek Lane Venture as disclosed by “a search of the public Land Records.” The notice was returned as “undeliverable.” Scott’s attorney filed an affidavit of service in the circuit court to that effect.

No notice was sent to any individual lot owner in the subdivision, the Seek Court Homeowners Association, Inc. or any of the previous directors, officers, or stockholders of Seek Lane Venture. Although in March of 1988 Scott had contacted the Maryland Department of Assessments & Taxation, seeking a “corporate abstract” of Seek Lane Venture 3 , she did not inquire as to whether any departmental records might disclose who the resident agent had been, what the principal office address of the corporation had been, or the names and addresses of the officers or directors as last revealed by any corporate tangible personal property tax returns or the articles of incorporation. Scott did give notice by publication to Seek Lane Venture, First Maryland Savings and Loan, Inc.’s mortgage trustees, the State of Maryland Insurance Fund Corporation, and generally “all persons that have or claim to have any interest” in the subject property. To no one’s surprise, we are sure, no responses were received to the notice by publication. ⁶⁷⁷ On 7 December 1989, the circuit court entered an order foreclosing Seek Lane Venture’s right of redemption in favor of Scott.

This order provided that Scott’s title was “free and clear of all alienations and descents of the property occurring before this judgment as provided in said Code, and all encumbrances on the property, except ... easements to which the property is subject, and of which the Plaintiff herein [appellant, Scott] had actual [or] constructive notice at the time of sale.” Subsequently, a deed conveying Parcel B to Scott was executed by the tax collector. After Scott recorded the deed to Parcel B, she sent a letter, through her counsel, to each of the thirty-two homeowners in the Long Branch View subdivision, which provided, in part: As Purchaser at the tax sale, which was subsequently approved by the Circuit Court for Montgomery County, Ms. Scott now owns the street and parking area, as well as the open space surrounding the townhouse units. As owner of this area, she has the right to restrict use of this property in any manner. This would include, but not necessarily be limited to, the rental of parking spaces to various owners and the possible restriction of use of the private street.

On 5 December 1990, Seek Court Homeowners Association, Inc., (hereinafter “the Association”) petitioned the Circuit Court for Montgomery County to set aside the enrolled final judgment that had foreclosed the right of redemption. The Association argued that Scott knew, or should have known, that the Association had an interest in the property at issue and failed to give notice of the sale either to it or to the individual homeowners. The individual homeowners were not permitted by the circuit court to be parties to this action. On 11 March 1991, the circuit court determined that Scott did not provide proper service upon Seek Lane Venture, a defunct corporation, pursuant to the Maryland rules of procedure.

The court set aside and declared invalid the ⁶⁷⁸ final order of foreclosure of the equity of redemption as it pertained to Seek Lane Venture and/or any of its assignees, successors-in-interest, or any other persons claiming by or under or through Seek Lane Venture. The circuit court indicated that, at a future trial, the Association would have to prove its claim that it was a successor-in-interest or assignee of Seek Lane Venture. In all other respects, the circuit court’s 7 December 1989 final order of foreclosure continued in full force and effect. On 1 July 1991, Scott’s counsel sent a letter to counsel for the Association which provided, in relevant part: My client has owned Parcel B in fee simple since February 15, 1990.

Despite numerous efforts ... no payment for the use of this property has been made even though Ms. Scott’s ownership has been known since early last year. Therefore, Ms. Scott has instructed me to give you the terms for continued use of the property. This letter should be considered the bill for the use of the property since February 15, 1990. Ms. Scott has fixed the rental for the use of the parking at $30 per space; calculated at the rate of 80 spaces, she is entitled to $2,400 per month.

Actually, there are more than 80 spaces, but Ms. Scott has generously agreed not to charge for more or for the use of other areas of the property at this time provided Seek Court Homeowners Association, Inc. pays the arrearages and makes current payments. ____The total amount due is $66,000. This amount is due immediately. Until it is paid, no individual without authorization from Ms. Scott may park or use the property of Parcel B in any way including but not limited to picnicking, storage, or recreational activities. Arrangements are being made with a towing company to enforce this right, and any car without authorization on this property will be towed without further notice or warning.

Individuals who wish to purchase parking stickers should contact Ms. Scott directly if the Association does not act expeditiously. ⁶⁷⁹ Ms. Scott has agreed to stay any action until July 10, 1991, at 5 p.m. I am sure you will agree that anyone who owns property in the State of Maryland is entitled to be paid for its use. If your clients do not wish to pay, they had better not use it. Anyone who does will be towed and/or prosecuted civilly and criminally as trespassers.

The Association subsequently filed a motion for an ex parte injunction to bar Scott from carrying out any of the threats made in her letter of 1 July 1991, and from denying ingress or egress into the subdivision. On 8 July 1991, the circuit court granted Seek Court Homeowners Association, Inc.’s motion. The injunctive order was made interlocutory, pendente lite, by order of 26 July 1991. Appeal number 1017 followed.

Also on 8 July 1991, various lot owners in the subdivision 4 , all individual members of the Association, filed a “Complaint for Declaratory Relief to Confirm Easements and Other Rights and for Injunction” against Scott. Ex parte orders were entered against Scott, barring her from carrying out any of the threats contained in her 1 July letter to the Association. Scott filed an opposition to and a motion to dismiss the declaratory action, which motion was denied. After a hearing, the injunctive relief was made interlocutory, pendente lite, by a order on 26 July 1991.

Appeal number 1096 followed. Discussion This case, like others recently decided by this Court and the Court of Appeals 5 , requires an examination of the steps that must be taken by a tax sale purchaser to notify a ⁶⁸⁰ property owner of an impending foreclosure of the right to redeem. In tax sale cases, property owners may be deprived of their property rights. Since state action is involved, constitutional guarantees of due process are implicated.

The property owners’ interests, however, must be balanced against the State’s interest in encouraging the participation of purchasers in tax sales and in the granting of marketable titles. The procedure that governs tax sales in Maryland is set forth in Md.Tax-Prop.Code Ann. §§ 14-808 through 14-864. In 1986, the General Assembly made significant changes in the laws governing this procedure. 1986 Md.Laws ch. 825. These changes were intended to “provide greater protection for due process by facilitating notice of tax sales of property in the State.” Summary of Committee Report, Senate Judicial Proceedings Committee, p. 3.

The procedure set forth in the Tax-Property Article provides, in simplified form, that, when taxes on real property are not paid, the tax collector shall sell the property at public auction. Before doing so, the tax collector must mail a final bill and a notice of the proposed sale to the property owner at the address shown on the tax rolls. The tax collector must also advertise the tax sale in a newspaper having general circulation in the county in which the property is located. Even after the property is sold, the property owner has the right to redeem the property by paying all accrued taxes plus interest, costs, and fees.

That right to redeem, however, may be foreclosed by an order of the circuit court in the county in which the land is located. At any time between six months and two years from the date of the tax sale, the holder of the certificate of sale may file a complaint to foreclose all rights of redemption of the property to which the certificate relates. Md.Tax-Prop. Code Ann. § 14-833(a) and (c)(1).

Section 14-836(b) sets forth who must be named as a defendant in a suit to ⁶⁸¹ foreclose the right of redemption. It provides, in part, as follows: (b) Defendants. — (1) Except as otherwise provided in this subsection, the defendants in any action to foreclose the right of redemption shall be: (i) 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; Section 14-839, which was rewritten in its entirety in 1986, sets forth the manner by which the plaintiff-tax sale purchaser must give notice to each defendant. That section provides, in pertinent part, that: (a) Notice to defendants. — (1) The plaintiff shall show in the title of the complaint the last address known to the plaintiff or to the attorney filing the complaint of each defendant, as obtained from: (i) any records examined as part of the title examination; (ii) the tax rolls of the collector who made the sale, as to the property described in the complaint; and (iii) any other address that is known to the plaintiff or the attorney filing the complaint. (2) Paragraph (1) of this subsection does not require the plaintiff or the attorney for the plaintiff to make any investigations or to search any other records or sources of information other than those stated.

The effect of foreclosing the right of redemption is significant because the property owner is thereby divested of all right, title, and interest in the property. This fact notwithstanding, § 14-845(a) of the Tax-Property Article provides that a court may reopen a judgment rendered in a tax sale foreclosure proceeding on the grounds of lack of jurisdic ⁶⁸² tion or fraud in the conduct of the proceedings. 6 We shall now discuss each of the issues raised, seriatim. Appeal Number 1017 I. Whether we have jurisdiction to address the issue of the interlocutory injunction entered in case number 1017 when the appellant, Scott, failed to file a notice of appeal. On 12 March 1991, the circuit court filed an order granting the Association’s motion to set aside the final order of foreclosure granted on 7 December 1989.

On 9 April 1991, appellant filed a notice of appeal which stated, in pertinent part, as follows: The Plaintiff, Catherine F. Scott, ... hereby note [sic] an appeal from the Order of this Court dated March 11, 1991, filed March 12, 1991 ... at which time all rights of the Plaintiff to Parcel 2 were adjudged; modifying the previous Final Order of Forclosure [sic] entered by this Court, granting the Plaintiff, an absolute and indefeasible title in fee simple, free and clear of all alienations, descents, and encumbrances. On 8 July 1991, the Association filed a motion for an ex parte injunction, seeking to enjoin Scott from carrying out the threats contained in her letter of 1 July 1991. The injunction was granted, later extended, and ultimately made interlocutory, pendente lite, on 26 July 1991. At no time did Scott file a notice of appeal from the entry of the ex parte or interlocutory injunctions entered in that case.

Maryland Rule 8-201 provides that the only method of securing review by the Court of Special Appeals is by the filing of a notice of appeal within the time prescribed in Rule 8-202. Accordingly, the issue of the injunction entered in case number 1017 is not before us. The sole issue ⁶⁸³ properly raised in appeal number 1017 is the propriety of the circuit court’s 12 March 1991 decision to reopen an enrolled final judgment.

II

Whether the circuit court has jurisdiction to enter ex parte and interlocutory injunctions against appellant after a final judgment foreclosing the right of redemption has been entered. For the reasons set forth in our discussion of the first issue raised in appeal number 1017, supra, we need not address this issue.

III

Whether the circuit court erred in reopening an enrolled final judgment, which foreclosed the right of redemption, when appellant failed to provide a defunct corporation with sufficient notice of the foreclosure action. Scott argues that, with regard to giving notice to the defendants in a foreclosure of the right of redemption action, § 14-839 of the Maryland Code, supra, does not require the plaintiff to make any investigations or to search any records or sources of information other than those listed in the statute. She maintains that she properly followed the procedures set forth in the Tax-Property Article by listing “Seek Lane Venture, Inc., a defunct corporation,” as the defendant. She contends that her statutory duty to determine the proper identity of the property owners or other interested parties was satisfied, notwithstanding the fact that, at the time her petition to foreclose was filed, she was aware that Seek Lane Venture, the record owner, was a defunct corporation.

We qualifiedly disagree. As the Court of Appeals recognized in St. George Antiochian Orthodox Christian Church v. Aggarwal, 326 Md. 90 , 603 A.2d 484 (1992), the plaintiff in a foreclosure of the right of redemption action often stands to benefit from failed attempts to notify the defendant(s). The Court in Aggarwal also acknowledged that ⁶⁸⁴ when notice is a person’s due, process which is a mere gesture is not due process. The means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it.

Aggarwal, 326 Md. 90 , 603 A.2d 484 (1992) quoting Mullane v. Central Hanover Trust Co., 339 U.S. 306, 315 , 70 S.Ct. 652, 657 , 94 L.Ed. 865 (1950). In Aggarwal , the Court of Appeals ordered that petitioner’s motion to vacate the order foreclosing the right of redemption be granted because of respondent’s failure to comply with the statutory notice requirements. The respondent had mailed petitioner’s notice to the address listed on the records of the County Supervisor of Assessments, which was, in fact, the address of the unimproved property for which the unpaid taxes were due. While the deed to petitioner recorded in the land records did not contain petitioner’s address, it did contain the name and address of the title company that had handled the transfer of the property to petitioner less than two years before.

The Court concluded that where a plaintiff or the plaintiff’s attorney becomes aware that the address given on the tax rolls is a “bad address,” i.e., not a correct address for the owner of the property, the plaintiff and the attorney “know” the address of the owner within the meaning of § 14-839(a)(l) “when, except for manifest indifference to information shown in the land records or the tax rolls, they would have actually discovered that address.” Aggarwal, 603 A.2d at 490 . The Court stressed in its decision underlying due process concerns and the general inadequacy of notice by publication. The Court quoted from Mennonite Board of Missions v. Adams, 462 U.S. 791, 800 , 103 S.Ct. 2706, 2712 , 77 L.Ed.2d 180 (1983), wherein the Supreme Court stated that: [njotice by mail or other means as certain to ensure actual notice is a minimum constitutional precondition to a proceeding which will adversely affect the liberty or property interest of any party ... if its name and address are reasonably ascertainable. ⁶⁸⁵ Aggarwal, 603 A.2d at 486 . (Emphasis in original).

Discussing the Supreme Court’s decision in Mennonite, the Court of Appeals further stated that: Although the [Supreme] Court noted that the State need not make extraordinary efforts to locate an unnamed party, the assumption that the address of this known party ‘could have been ascertained by reasonably diligent efforts’ rendered constructive notice insufficient for constitutional purposes. Aggarwal, 603 A.2d at 486 (citing Mennonite, 462 U.S. at 798-800 , 103 S.Ct. at 2711-2712 ). In Aggarwal , the Court of Appeals also addressed the meaning of the word “known” as it is used in § 14-839(a)(l)(iii). The Court pointed out that, although a requirement of actual knowledge does not mean “constructive knowledge,”