Dillow v. Magraw

• Decision Date: 01 September 1994
• Docket Number: No. 139,139
• Citation: Dillow v. Magraw, 649 A.2d 1157, 102 Md.App. 343 (Md. App. 1994)
• Parties: Robert M. DILLOW v. James S. MAGRAW, et ux. ,
• Court: Court of Special Appeals of Maryland

Page 343

102 Md.App. 343

649 A.2d 1157

Robert M. DILLOW v. James S. MAGRAW, et ux.

No. 139, Sept. Term, 1994.

Court of Special Appeals of Maryland.

Nov. 30, 1994.

Robert F. Kahoe, Jr., Bel Air, for appellant.

C. Thomas Brown (Albright & Brown, on the brief), Baltimore, for appellees.

Argued before GARRITY ^*, ALPERT and HOLLANDER, JJ.

ALPERT, Judge.

This appeal presents the novel issue of whether failure to name the proper parties in a proceeding to foreclose equity of redemption renders title to that property defective and constitutes a breach of special warranty or breach of the covenant against encumbrances when the property is subsequently conveyed.

Appellant in this case, Robert M. Dillow (Dillow), is a builder of single-family homes in Cecil County, Maryland. In the summer of 1988, he entered into a contract of sale with appellees, James S. Magraw and Deborah L. Magraw (the Magraws), for the purchase of four adjoining, unimproved lots of property located in Cecil County. The property was conveyed by two separate deeds, dated August 2, 1988 and November 7, 1988. Both deeds contained 1) a special warranty; 2) a covenant by the Magraws that "they have done not or suffered to be done any act, matter or thing whatsoever, to encumber the property hereby conveyed"; and 3) a covenant that "they will execute such further assurances of the same as may be requisite."

Dillow alleges that after purchasing the property he invested approximately $150,000 to construct three single-family homes on the lots. In early 1989, Dillow attempted to secure a loan for an additional $100,000 in order to complete construction on the homes, but was denied financing because it was learned for the first time that the Magraws did not have good title to the entire property that was conveyed. Dillow learned that the Magraws had originally owned only a five-sixths interest in the property and had apparently purchased the entire property at tax sale in 1983, thus acquiring the remaining one-sixth interest. This one-sixth interest, Dillow alleges, was owned by the heirs of Helen Rowland Squire, who died on January 12, 1947, without a will. On October 31, 1983, the Magraws filed a Bill of Complaint to Foreclose Equity of Redemption (Foreclosure Complaint) with respect to "the subject property." The Circuit Court for Cecil County, sitting in equity, issued a decree on August 28, 1984, granting the Magraws fee simple title to the property.

Dillow alleges that the foreclosure proceeding initiated by the Magraws with respect to the one-sixth portion of the property was not performed in compliance with the Tax-Property Article because it failed to name as defendants the heirs of Helen Rowland Squire. Dillow contends a search of the Orphan's Court records for Cecil County would have revealed that Ms. Squire left six heirs who, by virtue of Ms. Squire's intestacy death, were the record title holders of the property at the time of the tax sale. ¹ None of these heirs were named in the Foreclosure Complaint, nor were they notified of the foreclosure proceeding, according to Dillow. Dillow claims that, as a result, he has less than absolute title in the property; that title in the property is not merchantable; and that the property is presently encumbered. He alleges that he has been unable to refinance or sell the property and has sustained damages including expenses incurred in improving the property, lost profits, the amount of the purchase price, and other expenses.

In December 1991, Dillow filed a complaint in the Circuit Court for Cecil County against the Magraws as well as against the companies that performed a title search of the subject property, Industrial Valley Title Insurance Company and Fidelity Title Company, Inc. Industrial Valley and Fidelity Title were subsequently dismissed by Dillow ² and a First Amended Complaint was filed against the Magraws in five counts. The sole counts before this Court are: Count I, which alleges that the Magraws breached the special warranty contained in the deeds; Count IV alleging that the Magraws breached the covenant against encumbrances; Count V, which alleges breach of express and implied covenant of merchantable title; and Count VII, which alleges what essentially amounts to a claim for negligence on the part of the Magraws in the foreclosure proceedings. ³ On January 17, 1992, the Magraws filed a motion to dismiss the First Amended Complaint and, following a hearing, the circuit court dismissed Dillow's complaint in its entirety. This appeal followed.

Dillow presents three issues for our review, which we have recast as follows:

I. Did the Magraws' failure to designate Squire's heirs as defendants in their Complaint for Foreclosure of Equity of Redemption violate former section 103 of Article 81 of the Annotated Code of Maryland?

II. Does the failure to designate the proper defendants in a proceeding to foreclose equity of redemption render title in the subject property defective and constitute a breach of the special warranty contained in the deed?

III. Does the failure to designate the proper defendants in a proceeding to foreclose equity of redemption constitute a breach of the covenant against encumbrances?

IV. Did the circuit court err in dismissing Dillow's claims for negligent redemption and breach of the warranty of merchantable title?

In answering these questions, we are mindful that the posture of this case as presented to us requires only that we review the propriety of the trial court's dismissal. We are not called upon to decide any of the numerous factual issues that appear to have been generated in this case. We answer "yes" to questions one and three, and "no" to questions two and four. Accordingly, we affirm the judgment of the trial court as to Count I (breach of special warranty), Count V (breach of express and implied covenant of merchantable title), and Count VII (negligence). We reverse the judgment of the trial court as to Count IV (breach of covenant against encumbrances).

I.

We turn first to Dillow's allegation that the Foreclosure Complaint filed by the Magraws failed to name as defendants the heirs of Helen Rowland Squire. Dillow claims that these unidentified heirs owned an one-sixth interest in the subject property at the time the complaint was filed. He alleges that a title defect was created as a result of this error by the Magraws in the foreclosure.

At the time the Magraws filed their complaint to foreclose in October, 1983, Article 81 of the Annotated Code governed the procedure to be followed in tax sales. ⁴ Section 103 of Article 81 identifies the parties who must be named as defendants in the foreclosure proceeding:

The defendants in any such proceeding shall be the following:

(a) The owner of the property as disclosed by a search of the land records of the county, of the records of the register of wills of the county, and of the records of any court of law or equity of the county.

* * * * * *

(d) It shall not be necessary to name as defendant any other person having or claiming to have any right, title, interest, claim, lien or equity of redemption in and to the property sold by the collector. Any or all such persons may be included as defendants by the designation "all persons having or claiming to have any interest in property ..... (giving a description of the property in substantially the same form as the description which appears on the Collector's tax bill)." Any or all such persons may be designated throughout the proceeding by the above designation and the cause may proceed against them by publication under order of court as hereinafter provided.

(emphasis added).

The Magraws argue that they complied with section 103 by including in their Foreclosure Complaint the catch-all statutory language, "all persons having or claiming to have any interest in the property." The caption of the Foreclosure Complaint was as follows:

JAMES S. MAGRAW and DEBORAH L. MAGRAW

Plaintiffs

vs.

JAMES S. MAGRAW and ALL Persons having or claiming to have any interest in the property located in Cecil County, Maryland, described as 5.09 acres of land, more or less, with improvement thereon situated Rock-Battle Swamp Road, S/W of Woodlawn, District EQUITY NO. 7, adjoining the property of or formerly owned by John Carson

(emphasis added). The Magraws contend that this was all that was required. They claim that they could not have named the heirs of Ms. Squire as defendant "owners" because Ms. Squire died intestate and her property was, therefore, never bequeathed or devised to any of her heirs. They conclude that, as a result, the heirs never acquired actual ownership or record title in the property. ⁵ In support of this argument, the Magraws direct our attention to an "affidavit of search" attached to their Foreclosure Complaint, which certifies that a title search was performed on the subject property for the past forty years and no prior owners of the property were discovered. ⁶ Dillow argues in response that the affidavit of search is inaccurate and that a properly performed search would clearly have shown that six persons took the subject property as intestate heirs of Ms. Squire.

We note first that at the time of Ms. Squire's death in 1947, the applicable testamentary law held that title to a decedent's real property devolved directly to her heirs at law upon her death, without the necessity of administration by an administrator or personal representative. Heill v. Staniewski, 265 Md. 722, 723-24, 291 A.2d 449 (1972); Campbell v. Welsh, 54 Md.App. 614, 625, 460 A.2d 76 (1983). ⁷ Therefore, assuming as we must that Ms. Squire died leaving heirs, the Magraws' argument that these heirs never acquired an actual ownership interest or record title in the property is unavailing. The question remains, however, whether any such ownership interest would have been revealed by a properly performed title search. This is a factual issue that we have neither the...