Sunday, November 29, 2020

4900 Park Heights Avenue LLC v. Cromwell Retail 1, LLC (Ct. of Special Appeals)

Filed: April 30, 2020

Opinion by: C.J. Fader

Holding: Appellant’s attorney had the authority to enter into a settlement agreement despite the client misunderstanding the legal effects of a provision; the settlement agreement placed on the record in lieu of trial was valid and binding where there were no open terms, and the language and context indicated an intent to be bound. However, approving a written version that omitted a provision incorporated by reference when set out orally on the record was an abuse of discretion by the circuit court.

Facts: Appellant owns and operates a lot on a business park developed by the Appellee. Appellant filed suit to resolve whether it had the right to erect a sign on its premises. The parties settled the matter and counsel placed the agreement on the record the morning of trial. The parties had agreed as to the location of the sign, legal fees and court costs, a mutual release, and to modify a declaration of covenants. However, the parties were unable to agree on a final draft of the agreement, and Appellee filed a motion to enforce the settlement. The circuit court held that the terms placed on the record were binding on the parties and issued an enforcement order containing Appellant’s written version of a mutual release and Appellee’s version of a declaration of covenants. 

Analysis: Appellant argued that its attorney did not have the authority to settle on its behalf. The attorney, it argued, had mistakenly interpreted the client’s statements that it did “not care about the covenants” to mean that he should proceed with settlement; rather, Appellant meant that it was agreeable to a proposed amendment, but not insofar as it would bind its successors. The Court found that this was not a misunderstanding about the proposed amendment, but rather a misunderstanding about its legal effects. There was no genuine dispute about whether Appellant authorized the amendment. The Court also noted that Appellant and its attorney did not promptly inform the other party of the misunderstanding and proceeded with negotiations for months. 

Even if, arguendo, there was ambiguity in what the appellant authorized (as opposed to what appellant fully understood the implications of what was authorized), the attorney reasonably interpreted the client’s statement and had the authority to act in accordance with it. The Court pointed out the troubling implications of the rule Appellant would have them adopt, as it would render suspect any settlement conveyed to the court unless and until the clients independently confirmed that they authorized settlement and that they and their attorneys shared the same subjective understanding of the agreed terms. Such a rule would impede settlements and efficient operation of the courts. See Maslow v. Vanguri, 168 Md. App. 298, 317 (2006). 

Appellant also argued that the basic requirements to form a settlement agreement were not met because there was no manifestation of the parties’ intent to be bound absent their subsequent consent to the terms of the agreement. Also, certain terms were too indefinite. The Court found that there was an intent to be bound because the existence of an agreement was referenced by the trial court and not contradicted by counsel; all material terms were set out on the record; no open terms were identified; and the presentation of the agreement was made at what would have been the beginning of trial. The sole contradicting factor is the Appellant attorney’s statement regarding the open language of a mutual release; however, the Court did not need to determine whether this statement created ambiguity regarding an intent to be bound because Appellant conceded during oral argument that it did intend to be bound. 

Appellant also argued that there were two open terms: the mutual general release and a proposed amendment to a declaration of covenants and whether it would bind successors. However, the Court found that the former is clearly defined in Black’s Law Dictionary. The latter issue is resolved by the fact that the declaration expressly referenced the record owner of fee simple title, regardless of their particular identity.

Appellant also argued that the circuit court improperly modified the settlement agreement by approving language that omitted an agreed-upon phrase. The Court agreed, finding that the settlement agreement placed on the record adopted by reference the definition of future improvements in the existing declaration of covenants. The definition included the phrase “all future material revisions thereto.” By omitting the phrase, the Court went beyond the terms of the parties’ agreement, constituting an abuse of discretion. 

The full opinion is available in PDF.

Friday, November 13, 2020

Mayor and City Council of Baltimore v. Prime Realty Associates, LLC (Ct. of Appeals)

Filed: May 12, 2020

Opinion by: J. Getty

Holding:  The Court of Appeals held that the Circuit Court for Baltimore City erred in invalidating the order ratifying the sale of Respondent’s vacant property on due process grounds.  The Court of Appeals held that Maryland Rule 3-124(o) allows for substituted service of process on a LLC by service on the State Department of Assessments and Taxation (“SDAT”) and satisfies a litigant’s due process rights. 

Facts:  Petitioner Mayor and City Council of Baltimore initiated a receivership action against Respondent Prime Realty Associates LLC, when the property owned by Respondent remained vacant and its condition deteriorated.  The Petitioner made several attempts to serve Respondent’s resident agent at the address on record with SDAT.  After unsuccessful attempts, Petitioner made substitute service on SDAT pursuant to Maryland Rules 3-124(o).  Respondent’s participation in this matter did not occur until the court-appointed receiver sold the property and the sale was ratified by the District Court of Maryland for Baltimore City.  Respondent moved to vacate the sale arguing that it had not been adequately served, violating its due process rights.  The District Court denied Respondent’s motion and Respondent appealed.  The Circuit Court for Baltimore City vacated the sale of property holding that Respondent’s due process rights were violated as Petitioner had knowledge of an alternative address for Respondent’s resident agent, having previously mailed notices to that known address. 

Analysis:  The Court of Appeals examined the history of substituted service pursuant to Maryland Rule 3-124(o).  The review demonstrates a policy decision of the General Assembly and of the Courts for efficiency in judicial procedures involving service of process.  In reviewing the first known challenge to Maryland Rule 3-124(o) on due process grounds, the Court concluded that substituted service upon SDAT is a practical method of service which affords litigants their due process rights.  LLC’s enjoy privileges such as tax benefits and liability protections in return for the company fulfilling its statutory obligations.  Specifically, LLC’s are obligated to keep accurate information including addresses for its principal office and resident agent.  Maryland Rule 3-124(o) is not the default method of service for LLC’s.  Rather, substitute service is only available in three limited circumstances, including after two good faith attempts to serve the resident agent have failed.  Once SDAT receives service it is required to forward a copy of the process and notice to the party at their last known mailing address or principal place of business.  Respondent’s failure to comply with its statutory obligation to accurately update its information and address on SDAT did not invalidate Petitioner’s attempts of service and therefore did not constitute a due process violation.

The full opinion is available in PDF.