Strass v. District-Realty Title Ins. Corp.

⁶⁹¹ Powers, J., delivered the opinion of the Court. The controversy involved in this appeal is whether assessments levied by the City of Rockville against nine residential lots for benefits resulting from installation of water and sewer lines by the City, were liens or encumbrances insured against by policies of title insurance purchased at the time of settlement by the owners of each of the lots. The claims of the respective lot owners were asserted in their Third Amended Declaration filed in the Circuit Court for Montgomery County against District-Realty Title Insurance Corporation. The plaintiffs were nine 1 married couples.

They were: Carl Strass and Elaine W. Strass, Morton Rosenberg and Aileen Rosenberg, Jon Ranhand and Barbara 0. Ranhand, Richard J. Zack and Mary T. Zack, James K. Jackson and Carol Jackson, Robert R. Hench and Marilyn Hench, Carl D. Olson and Rena Olson, Gabor F. Dobay and Norma Lee G. Dobay, Robert E. Gant and Janet Gant. The title insurance company was the only defendant proceeded against in the Third Amended Declaration. The plaintiffs alleged that each of the couples, between 4 September 1970 and 25 June 1971, had settled with the builder and seller on a contract for the purchase of a house and lot in the Rockshire Subdivision in the City of Rockville, Montgomery County.

Each of the couples obtained, at the time of settlement, a title insurance policy issued by District-Realty Title. The plaintiffs alleged that they thereafter learned that the City of Rockville made an assessment against each of the lots in the aggregate sum of $2,509.58, payable over a 20 year period, and that those assessments constituted liens or encumbrances against which they were protected by the title insurance policy. The case was brought to issue by several pleas filed by District-Realty Title, including pleas of general issue and special pleas that the assessments did not constitute liens or ⁶⁹² encumbrances at the time its policies of title insurance were issued. On 9 June 1975 a hearing was held in the Circuit Court for Mofltgomery County before Judge John J. Mitchell on a motion for summary judgment filed by the plaintiffs and a cross motion for summary judgment filed by the defendant.

Each motion was accompanied by a supporting memorandum of points and authorities, including numerous attachments. In addition, each side filed a memorandum in opposition to the summary judgment motion against it. Judge Mitchell took the motions under advisement. On 24 June 1975 he filed an order denying the motion of the plaintiffs and granting the motion of the defendant.

On the same day, the docket shows the entry of judgment in favor of the defendant for costs. Thereafter, Judge Mitchell filed a memorandum explaining the grounds for his decision. The plaintiffs, through their attorney, 2 noted a timely appeal. Each motion for summary judgment was, necessarily, premised upon the moving parties’ contention that there was no genuine dispute of any material fact.

From our examination of the motions, and the memoranda supporting and opposing them, we find -nothing to indicate that any fact material to the decision of the case was disputed by either side. Among the evidentiary material properly before the trial court, in conformity with Maryland Rule 610, the significant evidence, we believe, was the title insurance policies and the records of official actions taken by the City of Rockville. Matters of law were, of course, also before the court. The earliest of the title policies here involved was issued ⁶⁹³ on 10 September 1970» and the latest on 28 June 1971.

Each policy insured against direct loss or damage by reason of “1. Any defect or defects in the title of the Insured to the estate or interest covered hereby and identified under Schedule A hereof in the real estate described under said Schedule A; or 2. Liens or encumbrances charging the same, saving and excepting all loss or damage by reason of the defects, estates, interests, objections to title, liens or encumbrances mentioned in Schedule B hereof or excepted by the Conditions and Simulations of this Policy * * * .” None of the policies contains a relevant exception in Schedule B. In the Conditions and Stipulations of each it is provided: “2. The Company shall be liable hereunder in damages only: * * * (2) Where there has been [a final determination in a court of competent jurisdiction] adverse to the title insured upon a lien or encumbrance not excepted in this Policy.” “8.

Nothing contained in this Policy shall be construed as insuring * * * (6) against defects and encumbrances arising after the effective date of this Policy, or created, suffered, assumed or agreed to by the Insured.” The critical action of the City of Rockville was taken in its Ordinance No. 33-71, adopted on 12 October 1971. It cited the completion of the construction of water and sewer lines in several subdivisions, theretofore authorized; it ordained the approval of the work and statements of costs of the several projects; and it ordained that: “Pursuant to the provisions of Article X, Section 1, Paragraph d of the Charter of the City of ⁶⁹⁴ Rockville, Maryland, the expense of the work described in Paragraph 1 above is hereby levied as special assessments against the abutting properties and respective record owners thereof as of July 1, 1971, in the amounts shown on the attached list. The work described above is hereby found and declared to be of special benefit to the properties shown on said list in the amounts assessed.” The list of Special Assessments levied included, among other properties, 131 separate lots in the Rockshire Subdivision, each assessed for $2,509.58. Appellants were identified by name and address as owners of their respective lots.

The issue brought into sharp focus by what we have quoted is whether the assessments levied by the Ordinance of 12 October 1971 constituted liens or encumbrances on the lots of appellants on the effective dates of their title insurance policies. In addition to the Ordinance itself, other facts which it is contended bear on that issue are: a. The minutes of a meeting of the Mayor and Council of Rockville held on 10 June 1968, containing this entry: “Re — Approval — Water & Sewer Assessment Projects — Rockshire Subdivision “The Mayor and Council received a memorandum from the City Manager, noting receipt of a request, together with the appropriate waiver of public hearing, for the installation of water and sewer, on a special assessment basis, in a large portion of the Rockshire Farms subdivision. It was recommended that the Mayor and Council approve this request. “On motion of Councilman Hanna, duly seconded and unanimously passed, the Mayor and Council gave its approval to the water and sewer projects.” b.

Final passage on 3 November 1969 by the Mayor and Council of Rockville of Ordinance No. ⁶⁹⁵ 52-69. The Ordinance authorized the issuance of “General Improvement Bonds of 1969” in three series, Series A, Series B, and Series C, in varying amounts, all to be disbursed for financing various municipal improvements, itemized in the Ordinance by project number. 3 The Ordinance prescribed the form of the bonds, the schedule of maturities, and the form of the advertisement of sale. It required the advertisement to contain the following statement: “The bonds of each of the series described herein are general obligation bonds of The Mayor and Council of Rockville and will constitute an irrevocable pledge of the full faith and credit and unlimited taxing power of said City. In addition, special annual benefit assessments have been duly authorized with respect to the improvements to be financed by the proceeds of the Series A Bonds, which assessments are dedicated as the primary source of payment of such Series A Bonds.

Also, water and sewer connection charges have been duly authorized with respect to the improvements to be financed by the proceeds of the Series C Bonds, which connection charges are dedicated as the primary source of payment of such Series C. Bonds.” Ordinance 52-69 further provides, in Section 12: “That, the proceeds of the special benefit assessments with respect to the improvements set forth above to be ⁶⁹⁶ financed by the proceeds of the Series A Bonds, as and when collected, shall be credited to the appropriate accounts of Rockville for the purpose of providing, to the extent thereof, for the payment of the interest on and principal of the Series A Bonds.” and in Section 14: “That, for the purpose of paying the principal of and interest on the Bonds authorized to be issued by this Ordinance, Rockville shall levy or cause to be levied, and there is hereby levied, in each and every fiscal year in which any of the Bonds are outstanding ad valorem taxes upon all of the legally assessable property within the corporate limits of Rockville in rate and amount sufficient to provide for the payment, when due, of the principal of all of the Bonds maturing in each such fiscal year and of all the interest on the Bonds coming due in each such fiscal year, and, in the event the proceeds from the taxes so levied in each such fiscal year shall prove inadequate for the above purposes, additional taxes shall be levied in the subsequent fiscal year to make up any deficiency. It is the intent of this Ordinance that the rate of said ad valorem tax shall be so computed in each fiscal year that the proceeds of such ad valorem tax together with (i) in the case of the Series A Bonds, the proceeds of the special benefit assessments applied as set forth in Section 12 hereof, (ii) in the case of the Series C Bonds, the proceeds of the water and sewer connection charges applied as set forth in Section 13 hereof, and (iii) any ⁶⁹⁷ other funds lawfully available for the purpose, shall provide sufficient funds to meet said maturing principal and interest on all of the Bonds. Rockville may also apply to the payment of principal and interest of the Bonds any funds received by it from the State of Maryland, the United States of America, any agency or instrumentality thereof, or from any other source, if such funds are granted for the purpose of assisting Rockville in the financing of the public improvements (or type of public improvements) for which such Bonds are issued and may lawfully be applied to such principal and interest payments, and to the extent of any such funds received or receivable in any fiscal year the taxes hereby required to be levied may be reduced proportionately.” c. Final passage on 24 August 1970 by the Mayor and Council of Rockville of Ordinance No. 28-70.

This Ordinance authorized the issuance of “General Improvement Bonds of 1970” in two series, Series A, and Series B, in different amounts, to be disbursed for financing various municipal improvements. It appears that Ordinance No. 28-70, in all respects material to this case, parallels Ordinance No. 52-69, except that it provides additional money for financing additional municipal improvements, some of which may have involved the water and sewer lines in Rockshire. The City’s authority to undertake the improvements and to determine who would ultimately bear the cost 4 was derived from its Charter, which appeared as Chapter 48 of ⁶⁹⁸ the then current Montgomery County Code (1965). 5 In what was then Article X. Special Assessments, Sec. 48-60 (now Article XI. Sec. 72-68) of the Charter provided, in part: “(a) The council is authorized and empowered whenever, in its judgment, the public health, safety or comfort requires it, to grade, construct, reconstruct, pave, or otherwise improve any street, sidewalk, alley, curb and gutter and public highway, or parts thereof, at such time and to such extent and of such materials and in such manner as shall be provided by ordinance and to purchase, contract to purchase, lay or contract to lay water mains and trunk and lateral sewers in said city and to pay the costs of all such work and assess said cost, or any part thereof against the abutting property as hereinafter provided in this