Swinson v. Lords Landing Village Condominium

WILNER, Judge. In August, 1994, petitioner, Winifred Swinson, purchased a condominium unit in the Lords Landing Village Condominium (LLVC). Subsequent to her purchase of the unit, LLVC 1 made a special assessment on the unit owners to defray the cost of repairing or replacing rotted or exposed wood and flaking paint on the exterior of the condominium buildings, in conformance with a housing code Violation Notice issued by ⁴⁶⁶ the Prince George’s County Department of Environmental Resources. Petitioner refused to pay the assessment, claiming (1) that LLVC gave false and misleading information in a Certificate of Resale that was supplied to her in connection with her purchase of the unit, and (2) that, in any event, by virtue of § 13-103 of the Prince George’s County Code, either LLVC or the person from whom she purchased the unit was liable for the assessment.

The District Court of Maryland and, on appeal, the Circuit Court for Prince George’s County, held that petitioner was liable for the assessment and that LLVC was not liable to her by reason of the information it supplied in the Certificate of Resale. Although we do not agree with all of the reasons given by the two lower courts for their respective decisions, we agree that their judgments were correct. We therefore shall affirm the judgment of the Circuit Court which, in turn, affirmed the judgment of the District Court. BACKGROUND Maryland Code, § 11 — 135(a) of the Real Property Article, which is part of the Maryland Condominium Act, provides that a contract for the resale of a condominium unit by a unit owner other than the developer is not enforceable unless the unit owner furnishes certain documents to the purchaser.

One of the documents required to be provided is a certificate disclosing, among other things, “the existence of any pending suits to which the council of unit owners is a party” and whether the Council of Unit Owners “has knowledge of any violation of the health or building codes with respect to the unit, the limited common elements assigned to the unit, or any other portion of the condominium.” (Emphasis added). Some of that information may not be known to the unit owner. Accordingly, § 11-135(e) requires the Council of Unit Owners to “furnish a certificate containing the information necessary to enable the unit owner to comply with subsection (a) of this section.” In 1992, LLVC, aware of chipping paint and deteriorating wood on the outside surfaces of the condominium buildings, ⁴⁶⁷ came to the conclusion that the developer of the condominium had used defective wood products on the exterior of the buildings and, accordingly, sued the developer for damages. On March 30, 1994, while that suit was pending in the Circuit Court for Prince George’s County, the Prince George’s County Department of Environmental Resources issued a Violation Notice to LLVC, care of Linda Wells, Property Manager.

The Violation Notice informed LLVC that an inspection the day before revealed that several buildings throughout the project had exposed wood, rotting boards, and flaking, peeling paint and directed LLVC to repair or replace the rotted wood to a sound condition and apply a weather resistant protective coating to all exposed wooden surfaces by April 30, 1994. The Notice cited, as the ordinance violated by the conditions noted, Prince George’s County Housing Code, § H-321.2. According to Ms. Wells, the county agreed to defer any enforcement action while the suit against the developer proceeded. The lawsuit was tried in May, 1994, and, on May 26, 1994, produced a verdict for $1,100,000 in favor of LLVC.

What happened with the litigation thereafter is unclear. Ms. Wells stated that “certain areas of the litigation” were “being appealed.” The President of the Council of Unit Owners, Ms. Barbara Griffith, testified that the developer had appealed and that, as of the date of her testimony in April 1998, the appeal was still pending. The actual record of the case, which was never placed into evidence but of which we may take judicial notice, shows that judgment was entered on the docket on June 21, 1994, that no appeal was ever taken, and that no formal effort was ever made by LLVC to enforce the judgment. The only significant post-judgment action reflected on the docket was the entry of an additional judgment, on September 19, 1994, for $144,511 in attorneys’ fees.

It is undisputed that LLVC never collected any money from the developer. 2 ⁴⁶⁸ In July, 1994, petitioner became interested in a unit in LLVC then owned by Margaret Dickison. She inspected the unit and noticed flaking paint, particularly on the balcony. Ms. Dickison informed petitioner that there was a problem with the wood, that LLVC had sued the builder and obtained a judgment, and that the problem would be fixed. With that assurance, petitioner agreed to purchase the unit.

Upon the signing of the contract, Ms. Wells, on behalf of LLVC, prepared a Certificate of Resale for Ms. Dickison, which was, in turn, delivered to petitioner. The Certificate itself is undated, but information supplied in it suggests that it was prepared on or after July 15, 1994. This litigation arises mostly out of the information supplied in Items 5 and 8. Three pieces of information were supplied in Item 5, two of which are relevant.

First, in compliance with § 11-135(a)(4)(vi), there was attached to the Certificate the most recent operating budget of LLVC, “including details concerning the reserve fund repair and replacement and its intended use of a statement that there is no reserve fund.” The budget showed a number of appropriations for specific categories of repair and maintenance but, except for a $4,000 item for general repair and maintenance, there was no appropriation for the repair or replacement of the rotted or exposed wood. The only mention of painting was a small item for touch-up stripe-painting of parking lots. The budget indicated that the unit owner’s assessment fee would increase from $87 to $95.70/ month. The second relevant piece of information included in Item 5 concerned litigation.

In response to the statement “[t]he Council of Unit Owners is a party to the following pending lawsuits,” the Certificate stated “See letter in resale package.” Two letters, both from LLVC’s attorney in the lawsuit against the developer, were attached. The first, dated February 5, 1993 and addressed to Ms. Wells, informed her that LLVC is “currently suing” the developer and gave the name and number of the case. Counsel stated that the case involves “alleged construction defects and alleged violations of the Prince George’s County Building Code,” that the complaint was a ⁴⁶⁹ matter of public record, and that she was invited to examine the complaint at the courthouse. The second letter, dated June 14, 1993 and addressed to the LLVC unit owners, stated that the firm represented the Council of Unit Owners and that it had filed a suit against the developer in which damages were being sought “for defects to the common areas of the Condominium, including deteriorating wood and water penetration problems.” That letter also identified the case number and invited the unit owners to review the court file.

No information was supplied in the Certificate as to the then-current status of the litigation. Item 8 consisted of the statement that the Council of Unit Owners “has no knowledge of any violation of the health or building codes with respect to the above-described unit, the limited common elements assigned to the unit, or any other portion of the condominium” unit. That statement was in response to § ll-135(a)(4)(x), which requires the disclosure of any such violations. Petitioner took title to the unit in August, 1994.

Fourteen months later, at her first meeting of the LLVC Council of Unit Owners, she learned that an assessment was to be made on each unit in order to raise funds to comply with certain housing code violations identified by Prince George’s County. Precisely what she learned at that time is unclear. The actual assessment made against the unit owners arose from discussions with the county Department of Environmental Resources in September, 1995. By then, the March, 1994 Notice of Violation, premised, as noted, on § H-321.2 of the county housing code, had been outstanding for 18 months, and the county was preparing to go to court to enforce compliance.

After meeting with LLVC counsel, however, it agreed to a proposal offered by LLVC calling for a significant increase in the assessment for 1996 and 1997, payable monthly, to fund the completion of repairs by December, 1997. That agreement was confirmed in a letter from the county dated September 14, 1995. The assessment complained of by petitioner proceeded from and implemented that agreement. According to the testimony of Ms. Griffith, the president of the Council, ⁴⁷⁰ the total assessment was to be $4,580, payable over a three-year period — $500 in 1994, $2,040 in 1995 (or 1996), and $2,040 in 1996 (or 1997) — the latter amounts to be paid at the rate of $170/month. 3 It is not clear whether petitioner ever paid, or was asked to pay, the $500 assessed for 1994.

She clearly refused to pay any part of the $2,040 for 1996, and, in November, 1996, LLVC sued her in the District Court for $2,727, representing the unpaid assessment for one year and late charges applicable to that assessment, plus interest and attorneys’ fees. Petitioner did not contest the accuracy of the amount claimed but asserted, in a counterclaim, that (1) in violation of the disclosure requirements of § ll-135(e), LLVC failed to disclose certain information and made certain misrepresentations regarding the housing code violations, and (2) by virtue of § 13-103 of the Prince George’s County Code, Ms. Dickison, not she, was liable for the assessment. The principal focus of the counterclaim was on the responses in Items 5 and 8. Her claim with respect to the violations of § ll-135(c) was in the nature of a tort action for fraud or negligent misrepresentation.

As there was no dispute with respect to the amount claimed by LLVC, 4 or, indeed, with the asserted obligation of unit owners to pay assessments lawfully imposed by the Council of Unit Owners, the parties agreed that the case hinged on petitioner’s counterclaim. If petitioner prevailed on her claim under § 13-103 of the County Code, she would have no liability for the assessment. Barring that, if she prevailed on her fraud or negligent misrepresentation claim, any damages ⁴⁷¹ awarded would be set off against the amount of the assessment. The only matter tried, therefore, was the counterclaim.

Petitioner testified that she read and relied upon the information supplied in the Certificate of Resale and claimed that it reinforced Ms. Dickison’s statement that the necessary repairs to the wood and paint would be taken care of by the developer. She viewed the absence of any appropriation or assessment in the budget for repairing the wood and flaking paint, coupled with the two letters from the lawyer regarding the lawsuit, as confirmation that those repairs would be made by the developer as the result of the successful lawsuit. She stated, “[i]t just confirmed everything else that I saw, that there was some litigation, in 1993 and had been satisfied by the time I bought it in 1994.” She did not learn of the Violation Notice until, 14 months later, she attended her first Council meeting, when it was mentioned in connection with the proposed assessment. She then called the County and received a copy of the Notice.

Petitioner acknowledged that she never went to the courthouse to check the litigation file and never called the clerk’s office to determine the status of the case. She asserted that she did not believe that a trip to the courthouse was necessary, and that “if I thought I had to, I would never had [sic] bought the property, I would have just taken my offer back.” When questioned about the reference in counsel’s February, 1993 letter to violations of the Prince George’s County Building Code — the suggestion being that she was thus put on notice of a possible Code violation — she responded that the Certificate told her that, if there had been any violations, they had been satisfied, as the Certificate, being the later document, asserted that there were no violations. Ms. Wells stated that she included the two letters from counsel as her response to Item 5 upon the advice of counsel. She justified her response to Item 8 on the basis that, because the County had agreed not to enforce the Violation Notice pending the litigation, she did not treat the Notice as being in effect.

There was, in her opinion, no Violation Notice pending. ⁴⁷² The District Court rejected petitioner’s claim founded on § 11-135 on two bases. First, it found that the Resale Certifícate included, in answer to Item 5, “information concerning the pending law suit against the builder for construction defects resulting in building code violations,” and invited inspection of the court file. The court concluded from this that “even a casual reading or inspection of the resale package should have alerted [petitioner] to the problems she now indicates were unknown to her.” Apart from that, the court also construed § 11-135 as conferring no liability on LLVC “for providing erroneous or incomplete information.” The court determined that § 13-103 of the County Code, which makes “the seller” of a dwelling responsible for complying with all issued Violation Notices affecting the property that are outstanding on the date that a contract of sale is executed, was inapplicable, as LLVC was not the seller of the unit. Upon rejecting the counterclaim, the court entered judgment for LLVC in the amount of $3,400, representing the $2,727 assessment and late fees, $230 in interest, and $443 in attorneys’ fees.

On appeal, the Circuit Court agreed with the. District Court that (1) although the information supplied by the Council of Unit Owners may not be “a model of clarity,” it “was adequate to place [petitioner] on notice of the potential defects,” and (2) § 13-103 places obligations only on “the seller” of the unit. The District Court judgment was therefore affirmed. We granted certiorari to review petitioner’s complaint under both § 11-135 of the Real Property Article and § 13-103 of the Prince George’s County Code.

DISCUSSION Section 13-103 We shall deal first with petitioner’s invocation of § 13-103, which is part of the County housing, code and provides as follows: “The seller of a dwelling structure and premises shall be responsible for compliance with all issued notices of viola ⁴⁷³ tions of this Subtitle or other laws of the County, or actions in any court on account of such violations, against or affecting the property at the date of execution of any agreement of sale or transfer of ownership of such dwelling structure and premises. Nothing contained in his Subtitle shall affect the validity of any sale, transfer or disposition of any interest in real estate.” Petitioner’s argument is based, ultimately, on the premise that the assessment was made in order to comply with the Violation Notice, that the Notice was issued in March, 1994, and was thus in existence when she signed the contract to purchase the unit, and that liability for compliance with the Notice therefore rests with Ms. Dickison, not her. The fact that the county may have agreed to defer enforcement of the Notice, she avers, does not alter the statutory allocation of liability. On that basis alone, she claims that she should not have been assessed.

Additionally, she points out that, in preparing the Resale Certificate, LLVC knew of the outstanding Violation Notice but nonetheless failed to disclose it, stating instead that it had no knowledge of such violations. That, she contends, constitutes “constructive fraud and material misrepresentation.” LLVC responds that the obligation imposed by § 13-103 is on the “seller,” and that LLVC was not the seller of the unit. It points out, moreover, that even the seller, Ms. Dickison, would have been unable to comply with the Violation Notice, which involved the common elements and not her unit. Finally, it claims that, even if the court were to treat the March, 1994 Notice as being in the nature of an unpaid assessment, § 11-110(b) of the Real Property Article makes the grantor and grantee jointly and severally liable “for all unpaid assessments against the grantor for his share of the common expenses up to the time of the voluntary grant for which a statement of lien is recorded, without prejudice to the rights of the grantee to recover from the grantor the amounts paid by the grantee for such assessments.” As between LLVC and petitioner, therefore, petitioner is liable for the assessment. ⁴⁷⁴ Cutting through the various allegations and theories, several things become clear.

First, it is evident that the assessments ultimately made were for the purpose of complying with the Violation Notice. Both Ms. Griffith’s testimony and the September, 1995 letter from the county establish that much. It may be that an assessment to repair the problem would have been inevitable at some point in any event, but it is clear that the assessments actually made were in direct response to the county’s decision to proceed with an enforcement action if LLVC did not resolve the deficiencies voluntarily, and, indeed, the bi-annual, monthly-paid assessment imposed by LLVC was offered by it to the county as a way of complying with the Violation Notice. Second, the Violation Notice issued in March, 1994 cannot be regarded as an “unpaid assessment” in