Select Portfolio Servicing, Inc. v. Saddlebrook West Utility Co.
145 A.3d 19
| Md. Ct. Spec. App. | 2016Background
- Developer Saddlebrook recorded a "Declaration of Deferred Water and Sewer Charges" (the Declaration) in 2000, imposing a $700/year, 23‑year charge on each of 187 lots and expressly stating each lot owner "grants [Utility] a lien" that "shall have priority from the date upon which this Declaration is recorded."
- Saddlebrook built water/sewer facilities under an MOU with WSSC; the Declaration was attached to lot sale contracts and recorded before ultimate homeowners purchased lots.
- Lot 5 (the Property) was conveyed to a homeowner in 2002; the homeowner defaulted on the Water and Sewer Charge; Utility later recorded Statements of Lien under the Maryland Contract Lien Act (MCLA), which later expired.
- Owner Mitchell refinanced in 2006; the lender’s title search (two‑party) did not reveal the recorded Declaration; a subsequent deed of trust (DOT) was recorded after the Declaration.
- Chase (later SPS), holder of the DOT, sued for declaratory relief arguing the Declaration did not create an attaching lien (or that MCLA was the exclusive enforcement vehicle), that it violated recording/tax statutes, and that it violated the Rule Against Perpetuities; trial court ruled for Saddlebrook/Utility and held the Declaration created a valid, first‑priority lien.
Issues
| Issue | Plaintiff's Argument (SPS) | Defendant's Argument (Saddlebrook/Utility) | Held |
|---|---|---|---|
| Rule Against Perpetuities | The lien vests only when lots sell to individual owners and might vest beyond the perpetuities period, so Declaration is void. | Sales of homes are the natural, foreseeable end of development; a reasonable time to vest may be implied and will be within the perpetuities period. | Court: Declaration does not violate the Rule Against Perpetuities; vesting occurs within a reasonable time. |
| Covenant Running with Land | The obligation to pay is personal (no ongoing burden/benefit to developer) and lacks vertical privity, so it does not bind downstream purchasers. | Declaration (and performance of construction) benefits the land; it expressly binds successors and assigns and satisfies touch/concern and privity. | Court: Declaration is a covenant running with the land and binds subsequent owners. |
| Failure to pay recordation/transfer taxes | Recording was defective because required state/county taxes on lien instruments were unpaid, making Declaration unenforceable and not constructive notice. | No taxes were assessed or invoiced at recording; failure to collect was an administrative error of the County, not Saddlebrook/Utility; SPS lacks special‑damages standing. | Court: SPS lacks standing to challenge tax collection; omission did not invalidate the Declaration. |
| Nature, enforcement, and priority of lien | The Declaration did not itself create an attaching lien — MCLA is the exclusive path to create/enforce such liens; any MCLA Statement of Lien (now expired) governs priority. | The Declaration’s plain language creates a contractual continuing lien (with power of sale) effective on recording or upon owner taking title; MCLA enforcement is one remedy but not exclusive. | Court: Declaration created a contractual lien (a lien instrument) enforceable via its power of sale; because it was recorded before the DOT, it has priority over the later DOT. |
Key Cases Cited
- Dorado Ltd. P’ship v. Broadneck Dev. Corp., 317 Md. 148 (1990) (Rule Against Perpetuities—court cannot imply a reasonable time where vesting depends on events outside parties' control)
- Brown v. Parran, 120 Md. App. 653 (1998) (distinguishing Dorado; where parties control or can access process to satisfy contingency, a reasonable time may be implied)
- Stewart v. Tuli, 82 Md. App. 726 (1990) (title‑clearing contingencies can support implying a reasonable time less than perpetuities period)
- Mercantile‑Safe Deposit & Tr. Co. v. Mayor & City Council of Baltimore, 308 Md. 627 (1987) (elements for covenants running with the land: touch/concern, intent, privity, writing)
- Chesapeake Ranch Club, Inc. v. C.R.C. United Members, Inc., 60 Md. App. 609 (1984) (covenants to fund and maintain subdivision improvements touch and concern the land and run with it)
- Bessemer v. Gersten, 381 So. 2d 1344 (Fla. 1980) (developer’s declaration created continuing lien that related back to recording and prevailed over intervening interests)
- Holly Lake Ass’n v. Fed. Nat’l Mortg. Ass’n, 660 So. 2d 266 (Fla. 1995) (distinguishes declarations creating automatic continuing lien from those granting only the right to file a lien upon nonpayment)