Relating to Real Estate

Relating to Real Estate - September 2021

IN THIS ISSUE:

TRUSTEE MAY BE INDIVIDUALLY LIABLE FOR LEAD PAINT POISONING

BOARD OF APPEALS CANNOT REVIEW ASSESSMENT OF CIVIL PENALTIES

MOVE HERE AND WE’LL PAY YOU: STATE AND LOCAL RELOCATION INCENTIVES

REFINANCING LENDER ASSUMES FIRST PRIORITY POSITION OF ORIGINAL LENDER

CORPORATE SEAL ALONE WILL NOT EXTEND THE STATUTE OF LIMITATIONS

SPEAKING OF REAL ESTATE

Trustee May Be Individually Liable for Lead Paint Poisoning

Bank of New York Mellon, as trustee of a residential mortgage-backed securitization trust that held a deed of trust on a Baltimore City house, docketed a foreclosure action on November 21, 2001. The house was sold to the trustee in an auction sale on December 27, 2001, and the Circuit Court for Baltimore City ratified the sale on February 5, 2002. Although the deed of trust provided that the trustee had the right to possession of the property upon default, the trustee did not possess the house until after it obtained an order for possession on August 15, 2002. Tenants occupied the house when the foreclosure action commenced, but they vacated the property in spring 2002 before the trustee took actual possession. In June 2016, the tenants sued the trustee in the trustee’s individual capacity for damages alleging negligence causing lead paint poisoning. The suit was dismissed by the circuit court, which ruled that the trustee could not be sued in its individual capacity for the alleged tortious act.

On appeal, the Court of Special Appeals (CSA) affirmed. Hector v. Bank of New York Mellon, 244 Md. App. 322 (2020). On further appeal, the Court of Appeals reversed and remanded the case to the circuit court for trial. Hector v. Bank of New York Mellon, 473 Md. 535 (2021), reconsideration denied (July 9, 2021). In reversing the CSA, the Court of Appeals stated that “in order for a trustee to be individually liable for a tort committed in the course of trust administration, the trustee must be personally at fault.” But then the Court of Appeals held that the trustee had personal liability regardless of whether its role was active or passive, so long as it was an owner of the property within the meaning of the Baltimore City Housing Code.

Board of Appeals Cannot Review Assessment of Civil Penalties

In Angel Enterprises Limited Partnership v. Talbot County, Maryland, 474 Md. 237 (2021), Angel Enterprises Limited Partnership (Angel) purchased an unimproved lot in Talbot County on September 10, 2002. The lot was subject to a deed restriction denying the property direct access to Maryland Route 33/St. Michaels Road (Route 33) unless such access was approved by the Maryland State Highway Administration, the Talbot County Department of Planning and Zoning, and the Talbot County Public Works Department. Angel obtained a permit to build a house, but it was unsuccessful in obtaining approval to build a driveway to Route 33. That did not stop Angel, which hired a contractor to clear trees and build a driveway.

Upon learning of this, the Talbot County Chief Code Compliance Officer (CCCO) issued abatement orders for violations of the Talbot County Code. Angel and its general partner Morton Bender appealed to the Talbot County Board of Appeals, which determined that the CCCO had the authority to issue the civil assessments. However, the Board determined that, under the applicable provisions of the Code, the daily accrual of fines was stayed by Bender and Angel’s administrative appeal filed on December 29, 2009.

When the case reached the Court of Appeals, it held that the adjudication of civil penalties by a charter county in these circumstances is within the original jurisdiction of the Maryland courts, not within the jurisdiction of a local board of appeals. Therefore, the Court ruled that the assessments be dismissed.

Contact Ed Levin | 410-576-1900

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Move Here and We’ll Pay You: State and Local Relocation Incentives

States have long used economic development incentives, such as tax abatements, grants and training programs, to encourage certain businesses to relocate there or keep their operations inside state lines. Now, states and municipalities are using more individualized economic incentives to entice new and remote workers to relocate to their small towns and urban areas on either a short-term or permanent basis.

These incentives augment employer efforts to attract the right employee talent in the right place. While individual employer relocations are targeted on an as-needed basis, the public funds can attract a broader population with no local employment connection and encourage remote workers who could practically live anywhere to experience a new place while supporting a local economy.

Contact Ed Levin | 410-576-1900

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Refinancing Lender Assumes First Priority Position of Original Lender

On May 5, 2005 First Equity Mortgage Inc. extended a loan of $443,450 (First Equity Loan) to Denzil and Simone Waldron to purchase their house in Adamstown, Frederick County, MD (Property). The First Equity Loan was secured by a first priority deed of trust on the Property (First Equity Deed of Trust). On the same day, the Waldrons obtained a home equity line of credit from Branch Banking and Trust Company (BB&T) in the amount of $83,000 (BB&T Line of Credit), which was secured by a second priority deed of trust on the Property (BB&T Deed of Trust).

One month later, the Waldrons refinanced the First Equity Loan and BB&T Line of Credit with Wells Fargo Bank, N.A., but the BB&T Line of Credit was never terminated and the BB&T Deed of Trust was never released. BB&T subsequently docketed a foreclosure action against the Waldrons under the BB&T Deed of Trust. JP Morgan Chase Bank, N.A. (as assignee of Wells Fargo under the First Equity Loan and First Equity Deed of Trust) brought an action in the Circuit Court for Frederick County, in which it asked that the court declare the BB&T Deed of Trust to be released and that JP Morgan be equitably subrogated to the rights and priority lien position of First Equity by virtue of JP Morgan’s having paid off the First Equity Loan.

Contact Ed Levin | 410-576-1900

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Corporate Seal Alone Will Not Extend the Statute of Limitations

PennyMac Holdings, LLC (PennyMac), as the holder of a lender’s title insurance policy on a condominium unit in Ocean City filed a claim against First American Title Insurance Company (First American) because the deed of trust securing the loan was never recorded. Unfortunately for PennyMac, the Court of Special Appeals (CSA) found the claim to be untimely. Pennymac Holdings, LLC v. First Am. Title Ins. Co., No. 2758, Sept. Term 2018, 2020 WL 7024845 (Md. Ct. Spec. App. Nov. 30, 2020).

PennyMac argued that the title insurance policy was a specialty, because it included the seal of First American, and the statute of limitations for specialties is 12 years. Unfortunately for the claimant, the CSA held that a corporate seal may be included solely for the purpose of showing that the corporation had duly authorized the agreement; the inclusion of a corporate seal on a contract is not, in and of itself, sufficient to convert an ordinary contract into a specialty.

Contact Ed Levin | 410-576-1900

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Speaking of Real Estate

Three people have recently joined Gordon Feinblatt’s Real Estate Practice Group:

Nicole M. Lacoste Folks is a Member of Gordon Feinblatt’s Real Estate and Energy & Environmental teams. She focuses on acquisitions, leasing, easements, zoning and administrative approvals for commercial projects. Nicole also assists clients with securing economic development incentives for new and existing projects.
Tierra L. Dotson is an Associate in the firm’s Real Estate and Energy & Environmental teams. Prior to joining Gordon Feinblatt, Tierra was a judicial law clerk to the Hon. Melanie Shaw Geter of the Maryland Court of Special Appeals. She received her J.D. at Howard University School of Law where she was the Senior Articles Editor for the Howard Law Journal and a Student Attorney for the Howard University Clinical Law Center Fair Housing Clinic. Tierra received her B.A. in Business Administration and Marketing at Howard University School of Business.
Sydney Szparaga is the paralegal for the Real Estate and Business Law teams. She is a graduate of Siena College.

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Date

September 30, 2021

Relating to Real Estate