30 A.3d 962 (Md. 2011), 140, Muskin v. State Department of Assessments and Taxation

Docket Nº:140
Citation:30 A.3d 962, 422 Md. 544
Opinion Judge:HARRELL, J.
Party Name:Charles MUSKIN, Trustee Trusts Created Under the Last Will and Testament of Israel Braverman v. STATE DEPARTMENT OF ASSESSMENTS AND TAXATION.
Attorney:Charles Muskin, Annapolis, MD, for Appellant. Matthew J. Fader, Asst. Atty. Gen. (Douglas F. Gansler, Atty. Gen. of Maryland, Baltimore, MD), on brief, for Appellee. Sara H. Arthur, Arthur Law Group, LLC, Annapolis, MD, Richard L. Brusca and Edward J. Meehan, Skadden, Arps, Slate, Meagher & Flom ...
Judge Panel:Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and BARBERA, JJ. BELL, C.J., and ADKINS, J., dissent. ADKINS, J., dissenting, in which BELL, C.J., joins. Chief Judge BELL authorizes me to state that he joins in the views expressed in this dissent.
Case Date:October 25, 2011
Court:Court of Appeals of Maryland
 
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30 A.3d 962 (Md. 2011)

422 Md. 544

Charles MUSKIN, Trustee Trusts Created Under the Last Will and Testament of Israel Braverman

v.

STATE DEPARTMENT OF ASSESSMENTS AND TAXATION.

No. 140-2010.

Court of Appeals of Maryland.

October 25, 2011

Page 963

[Copyrighted Material Omitted]

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Charles Muskin, Annapolis, MD, for Appellant.

Matthew J. Fader, Asst. Atty. Gen. (Douglas F. Gansler, Atty. Gen. of Maryland, Baltimore, MD), on brief, for Appellee.

Sara H. Arthur, Arthur Law Group, LLC, Annapolis, MD, Richard L. Brusca and Edward J. Meehan, Skadden, Arps, Slate, Meagher & Flom LLP, Washington, DC, for Amici Curiae brief of Stanley Goldberg and PFGR, LLC on Behalf of a Class of Interested Ground Lease Holders in Support of Appellant.

Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, [*]MURPHY, ADKINS and BARBERA, JJ.

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HARRELL, J.

Petitioner, Charles Muskin, trustee of two trusts owning ground rent leases in Baltimore City, contends that Chapter 290 of the Laws of 2007, the Ground Rent Registry Statute, is invalid under the federal and Maryland constitutions and Maryland's Declaration of Rights. Chapter 290 was enacted by the General Assembly in response to media attention and public interest in perceived problems with the ground rent system in Maryland. The statute requires Respondent, the State Department of Assessments and Taxation (" SDAT" ), to maintain an online registry of ground rent leases and, if a ground lease holder failed to register the property with SDAT by the statutory deadline, to issue an extinguishment certificate transferring the reversionary interest from the ground lease holder to the ground rent tenant. Although we shall assume, for the sake of discussion, that Chapter 290 would pass analytical muster according to the United States Constitution and relevant federal cases, Maryland's Constitution, Declaration of Rights, and long standing relevant case law provide specific prohibitions on the retrospective application of statutes that lead to the abrogation of vested rights and the taking of property without just compensation. For reasons that we shall elaborate, we hold that the extinguishment and transfer provisions of Chapter 290 are invalid under Maryland law. The registration requirements of the statute, however, survive Muskin's challenge. Accordingly, the judgment of the Circuit Court for Baltimore City, which upheld generally the statute through its grant of the SDAT's motion for summary judgment and denial of Muskin's motion for summary judgment, shall be vacated and we shall remand the case for entry of a declaratory judgment and issuance of an injunction consistent with the views expressed in this opinion.

I.

Factual and Legal Background.

Petitioner, Charles Muskin (" Muskin" ), is the trustee of two trusts owning 300 ground rent leases located in Baltimore City. A ground rent lease, common in Baltimore City, is a renewable 99 year lease where the fee simple owner of a property receives an annual or semi-annual payment (" ground rent" ) and retains the right to re-enter the property and terminate the lease if the leaseholder fails to pay. Kolker v. Biggs, 203 Md. 137, 141, 99 A.2d 743, 745 (1953). The fee simple owner retains a real property right in the land, but the leaseholder's interest is governed by the law of personalty. Id.

Ground rent leases have a mixed history in Maryland, with proponents focusing on the tradition and importance of ground rental income, and critics focusing on anecdotal examples of homeowners being evicted for failure to pay a relatively small amount of ground rent and the complicated system for administering ground rent leases.1 In response to media publicity in 2006 regarding perceived problems in the ground rent system, the Maryland General Assembly passed Chapter 290 of the Laws of 2007, which required the SDAT to create and maintain an online registry of properties subject to ground leases. Maryland

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Code (1974, 2010 Repl.Vol.) Real Property Article, § 8-703(a). Chapter 290 was designed to create a centralized registry where ground rent tenants could find easily for their properties the amount of ground rent owed, the ground rent due date, the ground rent payee, and the address to whom the rents could be sent. This registry sought to prevent predatory ejectments by protecting tenants against unintentional default. The new statute required ground rent holders to complete and submit a form 2 and registration fee 3 to the SDAT by 30 September 2010. Maryland Code (1974, 2010 Repl.Vol.) Real Property Article, §§ 8-704 and 8-707(a). If a ground rent owner failed to register by the deadline, the new statute mandated that

the reversionary interest of the ground lease holder under the ground lease is extinguished and the ground rent is no longer payable to the ground lease holder. The extinguishment of the ground lease is effective to conclusively vest a fee simple title in the leasehold tenant, free and clear of any and all right, title, or interest of the ground lease holder, any lien of a creditor of the ground lease holder....

Maryland Code (1974, 2010 Repl.Vol.) Real Property Article, § 8-708(a)(c). The session law did not contain a severability clause. Petitioner Muskin did not register the trusts' ground rent leases with the SDAT by the deadline, filing instead an action in the Circuit Court for Anne Arundel County requesting a declaratory judgment that Chapter 290 was unconstitutional 4 and an injunction prohibiting the SDAT from issuing extinguishment certificates regarding the trusts' ground leases. The action was transferred to the Circuit Court for Baltimore City and a hearing was held on 6 October 2010. In a written opinion issued 25 October 2010, the Circuit Court denied Muskin's motion for summary judgment, granted the SDAT's summary judgment motion, and issued a declaratory judgment stating that Chapter 290 was constitutional under the United States and Maryland Constitutions. The Circuit Court based its rulings primarily on United States v. Locke, 471 U.S. 84, 105 S.Ct. 1785, 85 L.Ed.2d 64 (1985), and Texaco, Inc. v. Short, 454 U.S. 516, 102 S.Ct. 781, 70 L.Ed.2d 738 (1982), concluding that:

Chapter 290 is not a retroactive abrogation of vested property rights because, inter alia, it does not operate retroactively. Chapter 290 requires ground lease holders to register their ground leases with the Department, and conditions their continued maintenance of that interest on compliance. Further, Chapter 290 does not retroactively create or eliminate property rights, but instead,

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prospectively conditions the continued ownership of ground rents on compliance with the requirement of registration. As a result, Chapter 290 does not violate the takings clauses of both the United States and the Maryland Constitutions.

Further, Chapter 290 does not violate the Equal Protection Clause because it is rationally related to legitimate government interests. This Court finds that the registration requirement of Chapter 290 is rationally related to legitimate governmental interests in fixing the ground rent system. Lastly, on this record, this Court finds that the Plaintiff has not provided any basis for concluding that Chapter 290 was enacted in an arbitrary or capricious way, or that it lacked a rational basis.

Petitioner filed an appeal to the Court of Special Appeals and subsequently a petition for writ of certiorari to us. We granted his petition and issued our writ, see Muskin v. State Dep't of Tax'n, 418 Md. 190, 13 A.3d 798 (2010), before the intermediate appellate court decided the appeal, to consider the following questions:

1) Does the Ground Rent Registry Statute ... violate the federal or state constitutions, or the Maryland Declaration of Rights, by ... extinguishing vested property and contract rights, by transferring property and contract rights to a third person without compensation, by violating the Contracts Clause, by violating due process and equal protection rights, or by being arbitrary?

2) Did the lower court err in granting summary judgment when Petitioner alleged facts supporting its claim that the Ground Rent Registry Statute process is so unreasonably harsh and costly that it deprives the Trusts in particular, and ground rent owners in general, of the value of their property?

We hold as a matter of law that (1) the extinguishment and transfer provisions of Chapter 290, the Ground Rent Registry Statute, are unconstitutional under Maryland's Declaration of Rights and Constitution; and (2) the registration requirements are constitutional under federal and Maryland constitutional principles.5 Accordingly, we reverse the judgment of the Circuit Court for Baltimore City, and remand the case to it with directions to grant the parties' competing motions for summary judgment in part and deny them in part, and for entry of a declaratory judgment and issuance of an injunction, in a manner consistent with the views expressed in this opinion.

II.

Relevant Standards of Judicial Scrutiny Concerning the Trial Court's Action on Motions for Summary Judgment.

Whether a circuit court's grant of summary judgment is proper in a particular case is a question of law, subject to a non-deferential review on appeal.

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Conaway v. Deane, 401 Md. 219, 243, 932 A.2d 571, 584 (2007); Charles Cnty. Comm'rs v. Johnson, 393 Md. 248, 263, 900 A.2d 753, 762 (2006). As such, in reviewing a grant of summary judgment, we review independently the record to determine whether the parties generated a dispute of material fact and, if not, whether the moving party was entitled to a judgment as a matter of law. Charles Cnty. Comm'rs, 393 Md. at 263, 900 A.2d at 762. We review the record in the light...

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