253 A.3d 1084
Md. Ct. Spec. App.2021Background
- Cecil County conducted a tax sale after Northeast 400, LLC failed to pay property taxes; WAMCO, Inc. purchased the certificate of sale and sent statutory redemption notices.
- WAMCO sued in circuit court to foreclose Northeast’s right of redemption after Northeast paid only WAMCO’s legal fees (and received a short extension) but did not pay the full statutory redemption amount.
- Sambol Family Foundation, Inc. (the Foundation) moved to intervene, asserting a secured interest in the Property via a UCC financing statement (UCC-3) and a Partial Assignment purporting to assign a 16-2/3% pari passu interest in the Property to Richard Sambol.
- The trial court concluded the Partial Assignment created a recorded interest in the Property, found WAMCO’s failure to notify the Foundation constituted constructive fraud under TP § 14-836, allowed intervention, and vacated the foreclosure order.
- On appeal, the Court of Special Appeals held the documents conveyed only an assignable economic membership interest in the LLC (personal property), not a recorded interest in the real property, so the Foundation was not entitled to notice or to intervene.
- The appellate court also held Northeast’s constructive-fraud/redemption arguments failed because Northeast did not pay the full statutory redemption sum required by TP § 14-828(a).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Foundation was entitled to statutory notice and could intervene | WAMCO: Foundation had no recorded interest in the Property; UCC-3/Partial Assignment only created an economic LLC membership interest, not a property lien | Foundation: UCC-3 and Partial Assignment created a secured/recorded interest in the Property entitling it to notice; failure to notify = constructive fraud | Reversed trial court: Partial Assignment and UCC-3 conveyed only an economic interest in a member’s LLC distributions (personal property), not an interest in the real property; no notice required; intervention improper |
| Whether vacating the foreclosure order was proper (constructive fraud / redemption) | WAMCO: Northeast did not redeem because it failed to pay the full statutory redemption amount; WAMCO followed statutory procedure | Northeast: paid legal fees, obtained an extension, was ready/able to redeem; WAMCO’s acceptance of fees without informing the court was constructive fraud | Reversed vacatur: Northeast paid only fees, not the full amounts required by TP § 14-828(a); no breach or constructive fraud; foreclosure order reinstated |
Key Cases Cited
- Canaj, Inc. v. Baker and Division Phase III, LLC, 391 Md. 374 (Md. 2006) (discusses standard for constructive fraud and appellate review)
- Maryland-National Capital Park & Planning Comm’n v. Town of Washington Grove, 408 Md. 37 (Md. 2009) (standards governing intervention and appellate review of intervention decisions)
- Credible Behavioral Health, Inc. v. Johnson, 466 Md. 380 (Md. 2019) (objective theory of contract interpretation; give effect to plain language)
- Taylor v. NationsBank, N.A., 365 Md. 166 (Md. 2001) (when contract language is unambiguous courts enforce its plain meaning)
- Univ. Sys. of Md. v. Mooney, 407 Md. 390 (Md. 2009) (an assignee takes no greater rights than the assignor possessed)
- Offutt v. Montgomery County Bd. of Educ., 285 Md. 557 (Md. 1979) (limits on cross-appeals; appellate courts may affirm on alternative grounds shown in the record)