Select Portfolio Servicing, Inc. v. Saddlebrook W. Util. Co.

• Decision Date: 31 August 2016
• Docket Number: No. 1911,Sept. Term, 2013,1911
• Citation: 229 Md.App. 241,145 A.3d 19
• Parties: Select Portfolio Servicing, Inc. v. Saddlebrook West Utility Company, LLC, et al.
• Court: Court of Special Appeals of Maryland

229 Md.App. 241

145 A.3d 19

Select Portfolio Servicing, Inc.

v.Saddlebrook West Utility Company, LLC, et al.

No. 1911

Sept. Term, 2013

Court of Special Appeals of Maryland.

August 31, 2016

Argued by: Aaron D. Neal (Mark W. Schweitzer, McNamee, Hosea, Jernigan, Kim, Greenan & Lynch, PA, on the brief), Greenbelt, MD, for Appellant.

Argued by: Bruce L. Marcus (Joseph A. Compofelice, Jr., Sydney M. Patterson, Marcus Bonsib, LLC, on the brief), Greenbelt, MD, for Appellee.

Panel: Deborah S. Eyler, Woodward, Berger, JJ.

Deborah S. Eyler, J.

In this appeal, we hold that a Declaration recorded by the developer of a subdivision created a lien that secured payment of water and sewer charges; the lien could be enforced under the terms of the Declaration, without resort to the Maryland Contract Lien Act; and the lien has priority over a later recorded refinance deed of trust (“DOT”) against the property. Select Portfolio Servicing, Inc. (“SPS”), the appellant, is the holder of the DOT. Saddlebrook West, LLC (“Saddlebrook”), and Saddlebrook West Utility Company, LLC (“Utility”), the appellees, are the developer and its wholly owned subsidiary. Our decision affirms a declaratory judgment entered by the Circuit Court for Prince George's County.

FACTS AND PROCEEDINGS

In 1999, Saddlebrook embarked on a plan to purchase raw land in Bowie on which to build the Saddlebrook West residential subdivision (“the Subdivision”). The first phase of the Subdivision was to be comprised of 187 lots on which single family homes would be built. That is the only phase of the Subdivision this case concerns.

The parcel of land is located within the Washington Suburban Sanitary District. In December of 1999, Saddlebrook and the Washington Suburban Sanitary Commission (“WSSC”) entered into a Memorandum of Understanding (“MOU”) by which the WSSC authorized Saddlebrook to “construct water and/or sewer extensions” within the planned Subdivision, subject to the WSSC's inspection and approval. Saddlebrook purchased bonds to secure its obligation to perform under the MOU.

On February 4, 2000, Saddlebrook purchased the parcel of raw land by deed that was recorded in the Land Records for Prince George's County (“Land Records”) on February 17, 2000. (Liber 13643, Folio 461). Then, on April 4, 2000, Saddlebrook, as “Declarant,” executed a “Declaration of Deferred Water and Sewer Charges” (“the Declaration”) in favor of Utility. The Declaration imposes an annual Water and Sewer Charge on the owner of each lot in the Subdivision, to be paid by the lot owner to Utility.

As relevant to the issues in this case, the Declaration states:

• Utility intends to provide water and sewer infrastructure and connections for the lots.^[1]

• To recoup that cost, Saddlebrook will establish an annual Water and Sewer Charge on each lot.

• By accepting his deed, the lot owner agrees to pay Utility the Water and Sewer Charge for the lot, and any past due and unpaid such charge. The charge for each lot is $700 per year, for 23 years. The charge comes due on January 1 of the year following the owner's purchase of the lot.^[2](Saddlebrook and any “Builder” are not lot owners.^[3])• Also by accepting his deed, the lot owner “grants [Utility] a lien to secure payment of” the Water and Sewer Charge. The lien “shall have priority from the date upon which this Declaration is recorded ... over any subsequently recorded or created lien, deed of trust, mortgage or other instrument encumbering” the lot.

• The lot owner “grants to [Utility] a power of sale, and assents to the entry of a decree and order for the sale of th[e l]ot upon a default by the [lot o]wner under this Declaration.”

• If a lot owner fails to pay the Water and Sewer Charge, Utility shall be entitled to all available legal or equitable relief, including acceleration of the Water and Sewer Charge; an action at law against the lot owner; foreclosure on the “lien” “in the manner now or hereafter provided for the foreclosure of mortgages, deeds of trust or other liens on real property in ... Maryland”; and foreclosure on the “lien” under the Maryland Contract Lien Act.

• All lots will be held, encumbered, sold, etc., “subject to the covenants, conditions, restrictions, obligations and charges set forth in this Declaration,” which “shall run with such [l]ots and be binding on all parties having any right, title or interest in all or any portion of such [l]ots,” etc., and “shall inure to the benefit of [Saddlebrook], Utility and their respective successors, transferees and assigns.”

• “All provisions of this Declaration, including the benefits and burdens, shall touch, concern and run with the land[.]”

On May 17, 2000, the Declaration was recorded in the Land Records. (Liber 13818, Folio 503). An exhibit to the Declaration identifies by lot, block, and plat number the 187 lots to which the Declaration pertains. A “Land Instrument Intake Sheet” for the Declaration shows that Saddlebrook paid a $75 recordation charge and a $2 surcharge. No recordation or transfer taxes were charged and none were paid.

Saddlebrook paid W.F. Wilson & Sons, Inc. (“Wilson”), to construct and install the water and sewer facilities for the 187 lots. By letter of November 21, 2000, the WSSC certified that the conditions of the MOU had been satisfied and that those lots were being released for service. Almost a year later, on October 3, 2001, Saddlebrook entered into a “Lot Purchase Agreement” with Maryland Homes, LLC (“Maryland Homes”), a builder, for the 187 lots. A copy of the Declaration was attached to the Lot Purchase Agreement and “incorporated [t]herein by reference.” Under the terms of the Lot Purchase Agreement, Maryland Homes agreed to disclose the existence of an “annual deferred water and sewer benefit charge” to any purchaser of a developed lot. It further agreed “to include in sales contracts to home purchasers for homes to be constructed all required and appropriate notices/disclosures pertaining to the Water and Sewer Systems mandated by applicable law^{[4 ]}and acknowledging receipt by the home purchaser of such disclosures, which must be furnished at the time of contract.”

The 187 lots were conveyed to Maryland Homes by separate deeds that covered one or more lots. The property at issue in this case is lot 5, block J, Plat 20 of the Subdivision, later designated 8201 River Park Road (“the Property”). A deed conveying that lot and three others to Maryland Homes was recorded in the Land Records on November 13, 2001. (Liber 15170, Folio 694). It states that it is subject to “all easements, covenants and restrictions of record.”

Maryland Homes built single-family homes on all 187 lots. On April 1, 2002, Charles Bradley, Jr., purchased the Property for $347,388. He financed the transaction by a $351,922 purchase-money mortgage. The deed conveying the Property to Mr. Bradley was recorded in the Land Records on April 23, 2002. (Liber 15727, Folio 361). It states that it is made “SUBJECT to all easements, covenants, and restrictions of record.”

On January 1, 2003, Mr. Bradley's first annual $700 Water and Sewer Charge came due. He did not pay it. He also did not pay the $700 Water and Sewer Charge that came due a year later, on January 1, 2004.

On March 1, 2004, pursuant to the Maryland Contract Lien Act (“MCLA”), Md. Code (1974, 2003 Repl. Vol.), sections 14–201–206, of the Real Property Article (“RP”), Tidewater Property Management, Inc., acting as Utility's agent, recorded in the Land Records a “Statement of Lien” against the Property, for $1,210, for the unpaid Water and Sewer Charges. (Liber 19023, Folio 451). On November 17, 2004, it recorded a second “Statement of Lien” against the Property, for $1,578.80, also for the unpaid Water and Sewer Charges. (Liber 20718, Folio 127). Both Statements of Lien recite that the Property is subject to the Declaration and that, pursuant to the MCLA, is subject to a lien for Water and Sewer Charges, plus the cost to record the Statements of Lien.

The next year, by deed dated January 6, 2005, Mr. Bradley conveyed the Property to Sherrylyn Mitchell for $565,000. The deed was recorded in the Land Records on March 8, 2005. (Liber 21579, Folio 001). The deed does not include a “subject to all easements, covenants, and restrictions of record” clause, and makes no reference to the Declaration. In the deed, Mr. Bradley represents that he “has not done or suffered to be done any act, matter or thing whatsoever, to encumber the property hereby conveyed[.]”

Ms. Mitchell had been living in the Property since 2002, but the record does not disclose the circumstances under which she was living there or her relationship to Mr. Bradley.⁵ A Land Instrument Intake Sheet shows that Ms. Mitchell financed the purchase with a $480,250 loan, and that a deed of trust securing the loan against the Property was recorded in the Land Records. The deed of trust is not in the record, however, and there is nothing in the record showing the source of Ms. Mitchell's loan. The record includes a form document entitled “NOTICE TO PURCHASER OF DEFERRED WATER AND SEWER CHARGES,” acknowledging that the Property is subject to the annual Water and Sewer Charge of $700. Ms. Mitchell's signature is on the document, next to the date “9-1-01,” also in her handwriting. The document also is signed by a representative of Maryland Homes, which is described as the “Seller.” That signature is dated “9/4/01.” These dates are long before the conveyance to Ms. Mitchell, and indeed pre-date the conveyance by Maryland Homes to Mr. Bradley.

The Statements of Lien were not paid, cleared, and released upon closing of the sale of the Property by Mr. Bradley to Ms. Mitchell. Nothing in the record explains why that did not happen.

Sometime in early 2005, Ms. Mitchell decided to refinance. She applied to Long Beach Mortgage Company (“Long Beach”) for a $552,000 loan. Before extending the loan, Long Beach ordered a two-party title search of the Property, i.e. , a search that included Ms. Mitchell...