Select Portfolio Servicing, Inc. v. Saddlebrook West Utility Co.
167 A.3d 606
| Md. | 2017Background
- Developer Saddlebrook recorded a "Declaration of Deferred Water and Sewer Charges" (the Declaration) in 2000 imposing annual assessments on future lot owners and stating those assessments would be secured by a lien in favor of Saddlebrook West Utility, LLC (Utility), with priority dating to the Declaration's recording.
- The Declaration covered 187 lots; lots were later sold and homes built. The Declaration was recorded before most lots were conveyed to homeowners.
- On the subject property, owner Charles Bradley failed to pay assessments; Utility recorded two Statements of Lien under the Maryland Contract Lien Act in 2004 for unpaid charges. Those statements were later overlooked in a refinance and a deed of trust was recorded in 2006 in favor of the lender (eventually Select Portfolio).
- Utility later attempted foreclosure based on the Declaration; the lender filed a declaratory judgment action claiming the Declaration did not itself create a priority lien and that any lien required following the Maryland Contract Lien Act procedures.
- The trial court and Court of Special Appeals held the Declaration itself created a first-priority lien; the Court of Appeals granted certiorari and reversed, holding the Declaration did not itself create an enforceable lien and that Utility must follow the Contract Lien Act procedures to obtain a lien.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Declaration, by its recording, created an enforceable lien with priority over a later deed of trust without following the Maryland Contract Lien Act | Lender: The Declaration did not itself create a lien and any lien must be created by following the Act’s procedural requirements | Saddlebrook/Utility: Recording the Declaration (a covenant running with the land) created a lien and gave it priority from the recording date | No — the Declaration is not itself a lien; Utility must follow RP §14-203 procedures to establish/enforce a lien; priority dates from the recorded Statement of Lien |
| Whether the Declaration violated the rule against perpetuities (if treated as creating a lien) | Lender: If Declaration created a lien that vested at recording, it could violate the rule against perpetuities | Saddlebrook/Utility: Declaration is valid and does not violate perpetuities | Not reached (court reversed on statutory-procedure ground and did not decide this issue) |
| Whether the lender had standing to challenge the recording clerk’s acceptance of the Declaration for nonpayment of recordation/transfer taxes | Lender: Public defendants should have collected taxes or removed the Declaration; lender challenged validity based on tax nonpayment | Public defendants / Saddlebrook: Lender lacked standing; recording did not require taxes like a lien instrument | Not reached (court resolved case on lien-creation issue; earlier summary judgment dismissed mandamus claim) |
Key Cases Cited
- Montgomery County v. May Dept. Stores Co., 352 Md. 183 (1998) (definition and general principles regarding liens on real property)
- Golden Sands Club Condominium, Inc. v. Waller, 313 Md. 484 (1988) (upholding procedural due process protections in the Contract Lien Act scheme)
- WSSC v. Utilities, Inc., 365 Md. 1 (2001) (discussing WSSC statutory role and developer obligations)
- WSSC v. Phillips, 413 Md. 606 (2010) (background on Washington Suburban Sanitary Commission authority and functions)
- Tribbitt v. State, 403 Md. 638 (2008) (appellate standard of review for bench trials)