Muffoletto v. Towers (Ct. of Special Appeals)

Muffoletto v. Towers (Ct. of Special Appeals)

Filed: January 30, 2020

Opinion by: James A. Kenney, III

Holdings: (1) An action seeking a declaration concerning the location of a common boundary line between adjacent boat slips was barred by the applicable statute of limitations. (2) Substantive and substantial discovery violations warranted the imposition of sanctions.

Facts: In the early 1980’s, a residential condominium was established in Dorchester County, Maryland.  Appurtenant to each condominium unit was a license to use a boat slip.  According to the 1982 site plan for the condominium, two adjacent boat slips were to be established as fourteen-feet-seven-inches wide each, separated by mooring piles.  However, according to an aerial photograph of the subject boat slips, taken in 1984, one slip was nineteen feet wide, and the adjacent slip was thirteen feet wide.

In 2004, the plaintiff purchased the condominium unit and corresponding slip license related to the thirteen-foot-wide boat slip.  Shortly thereafter, the plaintiff noticed the disparate sizes of the adjacent boat slips when he attempted to berth his boat.  In 2010, the plaintiff became a member of the condominium’s council of unit owners (the “council”), at which time he allegedly learned of a policy enacted by the council in 1999 requiring a unit owner who had made changes to the location of any mooring piles to return the piles to their original location when the appurtenant condominium unit is sold.  Title to each of the condominium units corresponding to the subject boat slips (and the related boat slip licenses) had been transferred multiple times before being transferred to the parties to this lawsuit.

In 2016, the plaintiff filed suit in the Circuit Court for Dorchester County, seeking (i) a declaration that the adjacent boat slips were intended and initially constructed to be of equal width and (ii) specific performance and injunctive relief, requiring that the mooring piles be moved to establish the adjacent boat slips as being equal in width.  During discovery, the defendants served the plaintiff with interrogatories.  Despite multiple court orders directing the plaintiff to respond to the interrogatories, the plaintiff failed to properly respond.

The Circuit Court entered sanctions against the plaintiff for failing to provide discovery responses as ordered, finding that the defendants had been prejudiced as a result.  Thereafter, the Circuit Court entered summary judgment in favor of the defendants, finding that the possible movement of the mooring piles was not a disputed material fact because they were placed in their current location no later than 1984 (when the aerial photograph was taken), and any legal action related to their present location was thus barred by the applicable three-year limitations period.  The plaintiff timely appealed the rulings to the Court of Special Appeals.

Analysis:  The Court of Special Appeals first addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the statute of limitations.  The plaintiff argued that the statute of limitations had been tolled by virtue of the “continuing harm” doctrine, which provides that claims in the nature of a continuous tort may toll the running of limitations based on new occurrences over time.  The court discussed Maryland case law applying the doctrine, and found that “courts have consistently held that the continuing harm doctrine rests on a new affirmative act” and does not apply to a “continuing ill effect” of a prior act.  The court then concluded that the continuing harm doctrine did not apply under the circumstances of this case because the act causing the harm was the alleged moving of the mooring piles, which occurred sometime before the photograph taken in 1984, and that “leaving them in place is a continuing effect of that act.”  Ultimately, the court held that the plaintiff’s claims were barred by the statute of limitations, noting that the action was filed six years after the plaintiff allegedly became aware that the piles may have been moved, twelve years after the plaintiff attempted to berth his boat in the slip, and more than twelve years after he bought the condominium unit (and corresponding boat slip license).

The Court of Special Appeals next addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the doctrine of laches.  The court noted that laches is an equitable doctrine intended to ensure fairness, and that it is “based upon grounds of sound public policy by discouraging fusty demands for the peace of society.”  The court also noted that, generally, “an action for declaratory judgment will be barred to the same extent that the applicable statute of limitations bars an underlying action in law or equity.”  The court concluded that the plaintiff’s claims were barred by the doctrine of laches because the mooring piles had been in place for thirty-five years and the only people who would have had definitive knowledge regarding when and if the piles had been moved (the developer and the person who initially bought the nineteen-foot-wide slip in 1983) had died before the suit was filed.

The Court of Special Appeals also addressed the Circuit Court’s holding that the plaintiff’s claims were barred by the doctrine of adverse possession or prescription.  The court noted that whether or not the doctrine applies to riparian rights is unsettled in Maryland.  Ultimately, the court, without concluding that the doctrine applied to the boat slip licenses at issue, held that the requisite period of adverse possession (i.e., twenty years) had not run.

Finally, the Court of Special Appeals addressed the Circuit Court’s imposition of sanctions against the plaintiff for discovery violations.  The court first noted that circuit courts have very broad discretion to determine whether sanctions should be imposed.  The court then outlined the factors that circuit courts should consider when deciding whether to impose sanctions (noting that the factors need not be analyzed on a compartmentalized basis), which factors include (1) whether the sanctioned violations were “persistent and deliberate”; (2) whether the discovery violation was technical or substantial; (3) the timing of disclosures made; (4) any reason for the violation; (5) the degree of evidentiary prejudice resulting from the violation; and (6) whether the resulting prejudice might be cured by postponement and the desirability of a continuance.  Applying these factors, the court affirmed the Circuit Court’s imposition of sanctions.

The full opinion is available in PDF.

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Commissioner of Financial Regulation v. Brown, Brown & Brown, P.C., et al. (Ct. of Appeals)

Filed: August 19, 2016

Opinion by: J. McDonald

Holding: A Virginia-based law firm and its managing partner were not covered by the attorney exemption to the Maryland Credit Services Business Act (“MCSBA”), which regulates the “credit services business,” because they regularly and continually engaged in the credit services business by consulting with several hundred Maryland homeowners confronted with the possibility of foreclosure and entered into paid agreements with 57 of them to renegotiate their mortgage loans over the course of nine months.

Facts: A small Virginia law firm accepted hundreds of referrals of Maryland homeowners from a Virginia-based consulting business that advertised in Spanish-language media and accepted fees to analyze a homeowner’s mortgage status. The law firm and its sole shareholder and managing partner, licensed in Virginia and D.C., but not Maryland, employed in succession two Maryland attorneys to meet with Maryland clients. The first of these Maryland attorneys (the "Maryland attorney") estimated that the majority of his workload was related to the Maryland homeowners by the time he left the firm. When the Maryland attorneys were unavailable, the managing partner or another D.C. attorney met with the homeowners.

The homeowners, mostly native Spanish-speakers who spoke little or no English, entered into retainer agreements with the law firm, paying up to $7,500 up front in exchange for negotiations with the lender to modify their loan, foreclosure defense, and possible litigation. The law firm made little effort to actually renegotiate the loans and did not obtain a loan modification for any of the homeowners.  One couple, who paid fees to the consulting company and the law firm and eventually lost their home in a foreclosure, lodged a Complaint with Commissioner of Financial Regulation.

The Commissioner investigated and issued a cease and desist order forcing the law firm to terminate its agreements with Maryland homeowners. The Maryland attorney settled but the law firm and its managing partner requested a contested hearing. The Commissioner referred the matter to an Administrative Law Judge ("ALJ"), who issued a proposed decision concluding that they had willfully violated the statute and recommending a final cease and desist order and monetary penalties. The Deputy Commissioner, the final decision-maker, adopted the ALJ’s holdings. The law firm and its managing partner requested an exceptions hearing. The Deputy Commissioner then issued a final order finding that they violated the statute and that the agreements were void, issued a cease and desist, and held them jointly and severally liable for a civil monetary penalty of $114,000 and $720,600 in treble damages. The law firm and its managing partner appealed in the Circuit Court for Baltimore County, which reversed the Commissioner’s decision, holding that their activities did not constitute “credit services business.” The Court of Special Appeals affirmed.

The question on appeal was whether the law firm and its managing partner conducted “credit services business” under the MCSBA, and if so, whether the attorney exemption applied. If they did conduct such services and the exemption did not apply, then they should have obtained a license and complied with the statute's other various requirements. It is undisputed that they did not do so.

Analysis: The MCSBA applies to any person (including legal or commercial entities) who, with respect to the extension of credit by others, sells, provides, or performs (or represents that it will do so) in exchange for consideration the enumerated services, which include obtaining a credit extension for a consumer and providing advice or assistance regarding obtaining a credit extension or improving his or her credit record. CL § 14-1901. A credit extension is defined as “the right to defer a payment of debt, or to incur debt and defer its payment, offered or granted primarily for personal, family or household purposes.” CL § 14-1901.

Providing these services qualifies one as a “credit services business.” Ten categories of individuals are exempted from the definition of “credit services business.” One category includes individuals who meet the following three conditions: is licensed as an attorney in Maryland, renders services within the course and scope of legal practice, and does not engage in the credit services business on a regular and continuing basis.

Here, the law firm and its managing partner accepted thousands in fees in exchange for renegotiating the terms of mortgage loans, which means seeking a modification of principal or interest or repayment term, and inevitably means seeking some form of deferral. Thus, renegotiating the terms of a distressed home mortgage loan means obtaining a credit extension for personal, family or household purposes, as defined under CL § 14-1901(e)(1),(f). As such, the law firm and its managing partner met the general definition under the statute. An analysis of the legislative history of the statute confirms that it is intended to provide broad protection to the consumers of credit services, and is not limited to merely credit repair agencies or lenders, as the law firm and its managing partner had argued.

As to the attorney exemption, the law firm and its managing partner did offer services on a “regular and continuing basis.” Though this term is undefined, the consultations and agreements were a very significant part of the law firm’s business and accounted for most of the work of its Maryland-licensed attorney by the time he left the law firm. The Court found hundreds of consultations and 57 agreements over the course of nine months to be significant. Notably, the Court pointed out that the ALJ had suggested that in less stark cases, there may be situations where “there is a significant question at what point an attorney who frequently provides such services has crossed the line into providing ‘regular and continuing’ credit services.” Nonetheless, the Court noted that this case sharply contrasts with that of an attorney providing occasional services to an individual client, for example. Ultimately, the mere fact that one is an attorney does not automatically qualify one for the exemption.

The Court affirmed the Commissioner’s holding that the MCSBA applied to the law firm and its managing partner's activities and that the attorney exemption did not apply because they conducted their activities on a regular and continuing basis. Because the issue of whether their violations were or were not willful was not argued on appeal, the Court remanded to the Circuit Court on that issue. 

The full opinion is available in PDF.

Dakrish, LLC T/A Vineyards Elite v. Ran Raich (Ct. of Special Appeals)

Filed: November 30, 2012.

Opinion by Judge Kathryn Grill Graeff.

Held: A party to a liquor board decision in circuit court has standing to appeal that court's decision to the Court of Special Appeals.  The review of a liquor board's decision by the Court of Special Appeals is limited to determining whether substantial evidence in the record as a whole supports the board's findings.  

 

Facts: The Baltimore County Liquor Board  ("Board") denied Applicant’s liquor license application. The Board reached their decison after hearing from several experts that presented conflicting testimony on the demand for the store, it's geographic location, proximity to other stores, and other factors.  The Applicant petitioned the Circuit Court for review, which reversed the Board's denial. The Circuit Court found “the Board’s decision was flawed because it failed to balance appropriate factors to be considered by the Board pursuant to Maryland Code (2011 Repl. Vol.) Art. 2B § 10-202(a)(2)(i), and gave undue weight to the potential for impact on existing licensees”  and remanded the case to the Board with instructions to issue a liquor license. 

 

Appellant, appearing at the Board hearing through one of its licensees in opposition to Applicant’s petition for a license, appealed to the Court of Special Appeals ("Court").  The Court addressed whether appellant had standing to bring suit and whether the Board had to consider all of the factors enumerated in the liquor licensing statute in reaching a decision to deny an application.

Analysis:  Applicant first argued Appellant lacked standing to seek judicial review of the Board’s decision as it was not an aggrieved party. The Court agreed that a person appealing to the circuit court must be aggrieved but found that appellant had the right to appeal pursuant to Md. Ann. Code art. 2B, § 16-101(f) as it was a party of record to the Circuit Court case.

The Court then addressed whether the Board was required to consider each of the enumerated factors of the liquor licensing statute.  Using United Steelworkers of America v. Bethlehem Steel Corporation, 298 Md. 665 (1984), Applicant contended that the Board here did not make adequate findings on the record with respect to each of the applicable factors to support its denial of the license application.  The Court noted the liquor licensing statute does not require that the Board set forth specific findings of fact and conclusions of law.  Instead, the Court stated its role is limited to "determining whether there is substantial evidence in the record as a whole to support the Board's conclusion."  The Court found such evidence to exist and supported the Board’s decision.

The full opinion is available in PDF.

Alcoa Concrete & Masonry, Inc. v. Stalker Brothers, Inc. (Ct. of Special Appeals)

Filed: March 31, 2010

Opinion by Judge Lawrence F. Rodowsky

Holding: An unlicensed contractor is entitled to be paid under a home improvement agreement with a contractor, regardless of the requirement that contractors must be licensed under the Maryland Home Improvement Law. The statute was intended to protect the public under contractor-owner contracts, not contractors who enter into arms-length agreements with knowledge of the subcontractor’s professional qualifications.

Analysis: In deciding a dispute to determine whether a home improvement general contractor is contractually obligated to pay a subcontractor who was not licensed under the Maryland Home Improvement Law (the “Act”) at the time of entering into the subcontract, but who was licensed when the suit was brought, the Court found that it is not a reasonable construction of the statute to allow a contractor to withhold payment on the grounds that a subcontractor previously was unlicensed (but is licensed at the time payment is due). Section 8-315(a) of the Act, which prohibits payment by contractor to subcontractor “unless the person to be compensated is licensed” does not bar payment to a subcontractor licensed at time of suit.

Applying the “revenue/regulation rule,” the Court distinguished between the owner-unlicensed contractor home improvement contract (the contractual relationship covered by the Act) and the contractor-unlicensed subcontractor contract, and found that the purpose of the requirement that contractors and subcontractors be licensed is to protect the public. As such, the Act was not intended to be a shield for contractors to escape liability for the unpaid balance due to a subcontractor by asserting the illegality of the subcontract.

The full opinion is available in PDF.

Baltimore Street Builders v. Stewart (Ct. of Special Appeals)

Filed: July 7, 2009
Opinion by Judge James P. Salmon

Held: Home improvement contractor that failed to comply or "substantially comply" with the regulatory requirement to hold a home improvement license was not entitled to enforce its contract.

Facts: Affirming the Circuit Court's dismissal of a petition to establish a mechanic's lien based on construction contract where builder did not have home improvement license.

A builder entered into a contract and performed construction on a residence in Maryland. The defendant owner failed to pay in full. The builder sued to establish and enforce a mechanic's lien. The builder was not licensed as a home improvement contractor. The builder protested that a principal owner of the builder did hold a license.

The Court noted that contracts made by unlicensed persons subject to regulatory statutes designed to protect the public are illegal and unenforceable. The Court discussed the principle that strict application of the rule is not always appropriate. There may be circumstances where such contracts may be enforced. Such circumstances would include where the contractor "substantially complied" with the regulatory requirement. Factors relevant to this issue would be (1) whether the contractor had a license at the time of contracting; (2) whether the contractor readily secured a license; (3) the responsibility and competence of the contractor.

Finding that neither the contractor nor its contracting agent ever held a license, the Court rejected the notion that the contractor substantially complied.

The full opinion is available in PDF.

*The opinion contains a detailed explication of the principle of "substantial compliance."