Grady Mgmt., Inc. v. Epps

• Decision Date: 28 August 2014
• Docket Number: No. 2037,Sept. Term, 2012.,2037
• Citation: 98 A.3d 457,218 Md.App. 712
• Parties: GRADY MANAGEMENT, INC. v. Jesse EPPS.
• Court: Court of Special Appeals of Maryland

218 Md.App. 712

98 A.3d 457

GRADY MANAGEMENT, INC.

v.Jesse EPPS.

No. 2037, Sept. Term, 2012.

Court of Special Appeals of Maryland.

Aug. 28, 2014.

Todd Kelting (Offit Kurman, PA, on brief), Bethesda, MD, for appellant.

Hong Park (Maryland Legal Aid, on brief), Rockville, MD, for appellee.

Panel: WOODWARD, NAZARIAN, JAMES A. KENNEY, III (Retired, Specially Assigned), JJ.

KENNEY, J.

Appellant, Grady Management, Inc. (“Grady Management”), appeals an order of the Circuit Court for Montgomery County granting summary judgment in favor of appellee, Jesse Epps (“Mr. Epps”). It presents one question ¹ for our review which we rephrase as follows:

Did the circuit court err in granting appellee's motion for summary judgment? For the reasons that follow, we shall affirm the judgment of the circuit court.

FACTUAL AND PROCEDURAL BACKGROUND

Mr. Epps is a tenant residing in the Snowdens Ridge Apartments at 2103 Harlequin Terrace in Silver Spring, Maryland, an apartment project that receives federal funds under the Section 8 New Construction Program ² to subsidize the rent for its tenants. Mr. Epps and Grady Management entered into a model lease for such subsidized programs, which provides that “[a]fter the initial term ends, the Agreement will continue for successive terms of one Year each unless automatically terminated as permitted by paragraph 23 of this Agreement.” The termination clause (Paragraph 23) states, in pertinent part:

23. Termination of Tenancy

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b. Any termination of this Agreement by the Landlord must be carried out in accordance with HUD regulations, State and local law, and the terms of this Agreement.

c. The Landlord may terminate this Agreement for the following reasons:

1. the Tenant's material noncompliance with the terms of this Agreement; ³

d. the Landlord may terminate this Agreement for other good cause, which includes, but is not limited to, the tenant's refusal to accept change to this agreement. Terminations for “other good cause” may only be effective as of the end of any initial ⁴ or successive term.⁵

The term material noncompliance with the lease includes:

(1) one or more substantial violations of the lease....⁶

On November 3, 2010, Grady Management brought an action, under the breach of lease statute, Md.Code (1974, 2010 Repl.Vol.), § 8–402.1 of the Real Property Article (“R.P.”),⁷ in the District Court. The case was transferred to the circuit court after Mr. Epps requested a jury trial. The action alleged that Mr. Epps, a member of “his household[,] or guest [made] excessive noises” and “threatened another resident.” On July 29, 2011, a jury found that Mr. Epps had breached the lease, and that the breach was substantial, but that it did not warrant eviction.

On January 31, 2012, Grady Management sent Mr. Epps a Notice to Vacate by April 1, 2012 based on “other good cause and/ or material noncompliance with the covenants and conditions of [Mr. Epps's] lease agreement[.]” More specifically, that Mr. Epps or a guest of his household

made excessive noise and disturbed [his] neighbors. [Mr. Epps,] an occupant [,] or guest threatened another resident. These incidents occurred in September 2010 in or about or close to [Mr. Epps's] premises of 2103 Harlequin Terrace, Silver Spring, MD. There were also prior incidents of noise making which occurred in June, August, September and November 2006 as well as April and May 2007 ⁸ in or about or close to [Mr. Epps's] premises of 2103 Harlequin Terrace Silver Spring, MD. All of the herein described incidents were described in answers to discovery in [the breach of lease case]. A Montgomery County Circuit Court jury on or about July 29, 2011 found that this conduct constituted a substantial breach of the lease in [that case.]

When Mr. Epps refused to vacate, Grady Management filed a Tenant Holding Over ⁹ Complaint in the District Court on April 10, 2012. In his answer, he argued that the complaint was barred by res judicata and collateral estoppel because of the breach of lease case. Mr. Epps again demanded a jury trial, and the case was transferred to the circuit court. Both parties filed motions for summary judgment on September 10, 2012.

In its motion for summary judgment, Grady Management argued that the burden of proof for removing a holdover tenant is much less than that in a breach of lease case. Arguing that the jury in the breach of lease case found that the excessive noise and threat qualified as a substantial breach of Mr. Epps's lease, there was good cause to terminate the lease at the end of the term, even if those acts did not warrant an eviction during the term of the lease. Relying on Carter v. Maryland Management Co., 377 Md. 596, 835 A.2d 158 (2003), Grady Management argued that a tenant holding over action can be brought against a federally subsidized tenant when the tenancy has been terminated for good cause. Grady Management stated, “[t]he [ Carter ] Court held that the tenant does not have an indefinite tenancy or a never-ending lease and that when the original term expires the tenancy may be terminated for good cause and the tenant evicted pursuant to the tenant holding over statute.”

In his motion for summary judgment, Mr. Epps asserted that, because it could only be terminated for good cause, his “lease does not terminate upon the passing of an expiration date like a lease with a definite term, or at the discretion of the landlord as in a lease with an ‘at will’ term,” and, therefore, the tenant holding over statute does not apply. In his supporting memorandum, citing Cottman v. Princess Anne Villas, 340 Md. 295, 298, 666 A.2d 1233 (1995), he argued that the “ ‘good cause’ requirement gives [him] ‘a continuing right of possession to the unit for an indefinite time period.’ ” (Emphasis in memorandum). He explained that a tenancy under the New Construction Program is different from the tenancy in Carter, which was based instead on the Federal Low–Income Housing Tax Credit Program (“LIHTC”) and the Section 8 Tenant–Based Assistance Rental Voucher Program (“Voucher Program”). The Carter Court, he contends, allowed the landlord to proceed with the tenant holding over action because the lease in that case expired under its own terms, did not have a good cause requirement for termination, and the landlord had provided the requisite notice. Here, however, there was not “good cause” for the landlord not to renew the lease. Because the reasons stated for termination were the same reasons given in the breach of lease case, the doctrine of res judicata precluded termination.¹⁰

In its opposition to Mr. Epps's motion for summary judgment, Grady Management responded that Mr. Epps was “on a year long lease which renewed every year[,]” and thus, he was “a tenant for a definite term[.]” Any continuing right of possession “[did] not mean that his tenancy is indefinite.”

Grady Management agreed that res judicata applied, but that the doctrine required a ruling in its favor because the jury had found a substantial breach of the lease and that finding provided the good cause required not to renew Mr. Epps's lease. Grady Management further explained that it could not have brought a tenant holding over action when it filed the breach of lease case because Mr. Epps was “still in his yearly term” and therefore was not holding over. But, when Mr. Epps's lease was terminated for good cause at the end of his yearly term, he became a hold over tenant, and subject to a tenant holding over action.

The circuit court held a hearing on October 18, 2012, and granted Mr. Epps's motion for summary judgment, reasoning that:

the jury's prior verdict, that although it's finding a material breach, finding that that breach did not justify eviction is tantamount to—you can phrase it different ways, but to preventing that jury verdict from constituting a good-cause basis not to renew, because I think there is—clearly, everybody agrees on automatic right to renew unless there's good cause not to, and in essence, the jury verdict was “there's not good cause to remove this person from the property,” and refusing to terminate is the equivalent in the context, the federal renewing lease situation is equivalent to eviction, and I will say that, as well, I do believe that the tenant holding over statute does not apply when in the renewing lease situation, that the basis for the alleged good cause here today has been litigated through a breach-of-lease action that was heard by the jury. And now, in essence, the landlord is unilaterally saying “ well, we find good cause because the jury did,” or “if our belief is bolstered by the jury verdict,” and therefore, we are going to say “no, we're not terminating,” and even though the automatic right to terminate is there....

* * *

... I do think that refusing to continue the lease or to renew the lease is equivalent to terminating the lease, and the jury did not find that termination of the lease was appropriate.

Grady Management filed a timely appeal to this Court.¹¹

DISCUSSION

The Arguments Presented

On appeal, Grady Management argues that the termination clause of Mr. Epps's lease conforms with 24 C.F.R. § 880.607 in regard to the grounds for termination, and that it was not precluded by 24 C.F.R. § 880.607¹² from using the Maryland tenantholding over statute to remove Mr. Epps. Grady Management also argues that the holding in Carter, that the tenant holding over statute can be applied to a federally subsidized voucher program, should be “expanded to provide that landlords are not precluded from using the Maryland tenant holding over statute to remove any federally-subsidized tenant.”

According to Grady Management, under “24 C.F.R. § 880.607, ‘when a termination notice is issued for other good cause ... the notice will be effective, and it will so state, at the end of a term and in accordance with the termination provisions of the lease.’ ” The initial term of Mr. Epps's lease began on May 1, 2010 and ended on April 30,...