Relating to Real Estate
Foreign Forfeited LLC May Participate in Zoning Proceeding
On December 20, 2017, the Maryland Court of Special Appeals held that a Maryland LLC’s participation in a zoning exception proceeding was valid even though the LLC’s right to do business in Maryland had been forfeited at the time of the application for the exception. The court also held that a foreign corporation’s participation in the exemption proceeding was not sufficient to constitute doing business in Maryland. Willow Grove Citizens Assoc. v. County Council of Prince George's County, 235 Md. App. 162 (2017).
In 2001, Presidential Care, LLC, purchased a parcel in Bowie, Maryland. The prior owner of the parcel had obtained a special zoning exception to build a child day care center, an adult day care center, and a congregate living facility. These zoning entitlements were never developed. In 2012, Presidential’s right to do business and use its name in Maryland was forfeited, and was still forfeited in 2014 when it applied for a special exception to operate an adult day care facility and a 63–unit assisted living facility. Presidential’s sole member, Stoddard Baptist Home, Inc., which was named in the application, was a foreign corporation that was not registered to do business in Maryland. The zoning counsel appointed by County Council ("Zoning Counsel") to protect the public interest was the same attorney who conducted the settlement of the sale of the parcel to Presidential. That prior involvement was disclosed, and no objections to the representation were raised. Upon the recommendation of the Zoning Hearing Examiner, the Prince George's County Council ("County Council") voted to approve the special exception.
Willow Grove Citizens Association, Inc., a civic association, and other persons of record (collectively, “Willow Grove”) appealed to the County Council, which determined that Presidential was legally authorized to engage in the activity of filing an application for a special exception concerning real property and that Presidential’s forfeiture did not impair the validity of its application. The County Council also found that Stoddard, in applying for a special exception, was not doing business in Maryland. The County Council again approved the application for a special exception, and the Circuit Court for Prince George's County affirmed the County Council's decision.
On appeal to the Court of Special Appeals, Willow Grove argued that Presidential’s application for the special exception was “a nullity” because Presidential had forfeited its right to do business in Maryland and use its name. The court held that the County Council correctly concluded that Presidential's application was valid under Maryland law. The court pointed out that, unlike a corporation, an LLC does not become a non-entity after forfeiture, and cited to Section 4A-920 of the Corporations and Associations Article (“C&A”), part of the Maryland Limited Liability Company Act, which states that:
The forfeiture of the right to do business in Maryland and the right to the use of the name of the limited liability company under this title does not impair the validity of a contract or act of the limited liability company entered into or done either before or after the forfeiture, or prevent the limited liability company from defending any action, suit, or proceeding in a court of this State.
Willow Grove contended that the exemption application was a court proceeding, and §4A‑920 expressly provides that a forfeited LLC may only defend an action in court, not bring one. The Court of Special Appeals rejected this argument and found that Presidential did not file its exemption application in a Maryland court, and therefore the limitation in §4A-920 did not apply.
Willow Grove also asserted that Stoddard’s participation could not validate Presidential’s application for a special exception because Stoddard was not registered as a foreign corporation to do business in Maryland. The court held that Willow Grove had failed to show that Stoddard was doing business in Maryland, and therefore Stoddard's involvement did not invalidate the application for special exception. The court cited C&A §7-103, which provides that maintaining an administrative proceeding does not constitute “doing intrastate business.”
Finally, Willow Grove argued that the proceedings were unfair because Zoning Counsel had been involved in Presidential’s purchase of the property, and therefore Zoning Counsel should have recused himself due to his prior involvement with the purchase of the property. The court found that Willow Grove had not preserved for judicial review the question of any alleged conflicts of interest of the Zoning Counsel.
For the foregoing reasons, the Court of Special Appeals held that the County Council's decision to approve the application for the special exception was correct as a matter of law and upheld the decision.
For questions, please contact Michele Walsh (410) 576-4216.
March 05, 2018