Mayor & City Cncl. of Balt. v. Prime Realty Assoc.Mayor & City Cncl. of Balt. v. Prime Realty Assoc.
Mayor and City Council of Baltimore v. Prime Realty Associates, LLC, No. 53, September Term, 2019. Opinion by Getty, J.
CORPORATIONS AND ASSOCIATIONS—DUE PROCESS OF LAW—SUBSTITUTED SERVICE—STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
The Court of Appeals held that
Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic.
Suzanne Johnson
2020-05-12 15:51-04:00
Suzanne C. Johnson, Clerk
Barbera, C.J.
McDonald,
Watts,
Hotten,
Getty,
Booth,
Biran,
JJ.
Opinion by Getty, J.
Filed: May 12, 2020
By
the law of this state, the state of its incorporation, the Department was thus conclusively presumed to have been designated as the true and lawful attorney of the corporation to accept service of process. It clearly appears that legitimate efforts were made to notify the defendant corporation of this action and that those efforts were by means reasonably calculated to bring the attention of the corporation to the pendency of the proceeding. Judge Marvin H. Smith, Barrie-Peter Pan Schools, Inc. v. Cudmore, 261 Md. 408, 421 (1971).
A plaintiff in Maryland is permitted under limited conditions to substitute service of process on the state taxation authority when suing a business entity. Initially passed as a statute in 1937, the current provision for substituted service in the
In this case, Petitioner Mayor and City Council of Baltimore (the “City“) initiated a receivership action against Respondent Prime Realty Associates, LLC (“Prime Realty“) when real property owned by Prime Realty fell into disrepair. The City attempted on several occasions to serve Prime Realty‘s resident agent at the address on file with the State Department of Assessments and Taxation (“SDAT“).
After those attempts proved unsuccessful, the City made substitute service on the designated state agency, currently SDAT, pursuant to
Before the Circuit Court for Baltimore City, the City argued that
We granted the City‘s petition for a writ of certiorari to determine whether the method of substituted service upon SDAT prescribed by
BACKGROUND
A. Receivership, Generally.
Receivership is a code enforcement tool enacted by the City Council of Baltimore in 1991 that allows the City to abate the public nuisance created by vacant and problem properties. In a receivership action, the City petitions the District Court to appoint a third party—a “receiver“—to take control of a vacant property and auction it to a buyer who can rehabilitate the property.
To begin the receivership process, the Baltimore City Commissioner of Housing and Community Development (the “Commissioner“) must first determine that a building is “vacant” under the terms of the ordinance. A vacant structure is “an unoccupied structure that is: 1. unsafe or unfit for human habitation or other authorized use, or 2. a nuisance property.”
Once the property has been sold, the original property owner has thirty days to file exceptions to the sale.
B. Receivership Action Against Prime Realty.
This dispute arises out of a receivership action regarding 744 Patterson Park Avenue, a residential property in Baltimore City (the “Property“) acquired by Prime Realty in March 2005 as an investment rental property. Prime Realty continued to rent the property for several years after acquisition until, according to Prime Realty, the tenants were robbed and mugged “repeatedly” and moved out. Thereafter, the property remained vacant and its condition deteriorated.
On June 26, 2015, the City issued to Prime Realty a Code Violation Notice and Order declaring the Property “unfit for human habitation or other authorized use pursuant to sections 116–121 of” the Building, Fire, and Related Codes of Baltimore City. The violation notice required Prime Realty to either raze or rehabilitate the Property within thirty days. The City posted the violation notice on the Property and mailed a copy of the notice to a Silver Spring post office box address that Prime Realty used for, among other things, tax and water bills from the City.
By June 28, 2018, three years after the City issued the violation notice, Prime Realty had failed to raze or rehabilitate the Property as required. Accordingly, the City petitioned the District Court of Maryland sitting in Baltimore City to appoint a vacant building receiver. On July 10, 2018, the District Court issued a show cause order requiring Prime Realty to appear before the court on August 15, 2018.
The City was ordered to serve the Petition for Appointment of a Vacant Building Receiver (the “Petition“) and the show cause order upon Prime Realty prior to August 13, 2018, which, in the case of a limited liability company (“LLC“), under
However, the resident agent Mr. Belen had relocated in 2010 from the Dahlia Court address to Silver Spring, Maryland, where he began using a post office box for Prime Realty‘s business. Mr. Belen filed a notice with SDAT of this address change in 2011. Consistent with SDAT regulations
In serving the show cause order, the City mailed, by both regular and certified mail, copies of the Petition and order to the Dahlia Court address. The City also unsuccessfully attempted to serve Mr. Belen personally by private process server on July 20 and 27, 2018, at the Dahlia Court address. On the proof of service form, the process server noted “no answer” as the reason for inability to make service.
In light of the failure to serve, the District Court postponed the show cause hearing and issued an updated show cause order which extended the service deadline to September 20, 2018 and required Prime Realty to appear on October 3, 2018.
Proceeding under
The City sent Prime Realty a courtesy letter on October 29, 2018, both to the Dahlia Court address and the Silver Spring post office box address, advising that a receiver had been appointed and that the Property would be listed for sale at public auction in December. At the public auction on December 11, 2018, Mohammad Khan acquired the Property for $16,000. Two weeks after the sale of the Property, Mr. Belen filled out an application with the District Court to review the receivership action case file. The application reflects that Mr. Belen requested and received a copy of the receivership action case file. At the time Mr. Belen reviewed the receivership action case file, SDAT records indicated that Prime Realty was operating under a forfeited charter.1 Prime Realty failed to take any action in this case for another two months until February 15, 2019, when it took the necessary steps to reinstate the charter with SDAT prior to defending the receivership action.
The District Court received the report of sale from One House on January 10, 2019. The report was also mailed, by both certified and regular mail, to Prime Realty at the Dahlia Court address. Shortly thereafter an additional notice of the sale was posted on the Property. Almost a month after receiving the report of sale, the District Court ratified the sale of the Property to Mr. Khan. One House and Mr. Khan settled on March 4, 2019, with the final accounting of the settlement reflecting that One House proposed to distribute $3,182.67 to Prime Realty.2
The District Court received the final accounting on March 14, 2019. The next day, Prime Realty filed a Verified Motion to Vacate, Revise and Strike Judgment (“Motion to Vacate“) contending that the City did not adequately serve Prime Realty, therefore violating its due process rights. Four days later, the City responded with an Opposition to Prime Realty‘s Motion to Vacate. On March 29, 2019, the District Court issued an order denying
Prime Realty filed a Notice of Appeal on April 30, 2019. Before the Circuit Court for Baltimore City, Prime Realty contended that the City‘s use of substituted service on SDAT pursuant to
The City then petitioned for, and this Court granted, a writ of certiorari. Mayor & City Council of Balt. v. Prime Realty Assocs., LLC, 466 Md. 310 (2019). The City presents two questions for our consideration:
(1) Does
Md. Rule 3-124(o) , allowing for substituted service upon SDAT, provide due process of law?(2) Did the [circuit] court err in invalidating, on due process grounds, the order ratifying the sale of Prime Realty‘s property when Prime Realty claimed lack of notice but the City effectuated substituted service on SDAT and Prime Realty‘s lack of notice was a result of its failure to provide SDAT a current, lawful address for its resident agent?
For the reasons that follow, we answer both questions in the affirmative.
STANDARD OF REVIEW
The circuit court‘s determination to vacate the City‘s receivership action, to the extent that this is a factual finding, will not be set aside unless clearly erroneous. See Bottini v. Dep‘t of Fin., 450 Md. 177, 187 (2016) (“We give due regard to the trial court‘s role as fact-finder and will not set aside factual findings unless they are clearly erroneous.” (quoting Breeding v. Koste, 443 Md. 15, 27 (2015))). However, the legal analysis of a circuit court and its interpretations of relevant statutes receives no deference. Friendly Fin. Corp. v. Orbit Chrysler Plymouth Dodge Truck, Inc., 378 Md. 337, 342–43 (2003). Interpretation of a Maryland Rule is a question of law and is therefore reviewed de novo. State v. Schlick, 465 Md. 566, 573 (2019).
DISCUSSION
A. The Parties’ Contentions.
The City contends that the method of substituted service provided in
In arguing that it strictly complied with
Prime Realty argues that it has been deprived of proper notice because the City had knowledge of the Silver Spring post office box address evidenced by the fact that the City mailed the initial violation notice to that address. Additionally, Prime Realty cites this Court‘s holding in St. George Antiochian Orthodox Christian Church v. Aggarwal, 326 Md. 90 (1992), in contending the City was required to go above and beyond the service requirements of
In order to address Prime Realty‘s contention that the City violated Prime Realty‘s due process rights by only attempting service of process at the address on file with SDAT, we must first determine whether
B. Maryland Rule 3-124(o) Legislative History.
An understanding of
procedure still exist in the Maryland code and Maryland Rules today. Our inquiry into the legislative history of
The first version of the substituted service statute originated as a 1937 chapter law:
If any corporation of this State, or any foreign corporation required by any statute of this State to have a resident agent, has not a resident agent, or has one or more resident agents and two unsuccessful attempts have been made on different business days to serve process upon each of its resident agents, such corporation shall be conclusively presumed to have designated the State Tax Commission as its true and lawful attorney authorized to accept on its behalf service of process in the action in which such process issued, and in such case such process may be served upon the State Tax Commission as the true and lawful attorney of such corporation.
1937 Md. Laws, ch. 504, § 105. This chapter law was codified as § 111(d) of Article
In 1957, the new publisher of the Maryland code, the Michie Company, published an updated code. See Alan M. Wilner, Blame it all on Nero: Code Creation and Revision in Maryland (1994). While it followed the 1951 code organization where it could, the 1957 code renumbered, among others, several of the sections of Article 23. Id. Section 92 was renumbered as § 96 but remained the same in substance.
In 1967, § 96 was repealed among other sections of Article 23 and was reenacted as parts of § 127C of Article 23 and § 75B of Article 75. 1967 Md. Laws, ch. 532, § 2. Article 75, § 75B(a)(2) provided the same substance as § 96 but also reflected that the newly created SDAT took over the functions of the former State Tax Commission with respect to corporate filings and resident agents. Id. Article 23, § 127C provided in relevant part that “[a]ny notice required by law to be served upon any corporation of this State . . . by personal service upon a resident agent . . . may be served upon such corporation in the manner provided in Section 75B of Article 75.” Id.
In 1973, § 75B was repealed. 1973 Md. Laws., 1st Spec. Sess., ch. 2. Two years later, in 1975, when Article 23 was recodified as the Corporations and Associations Article, § 127C was repealed and replaced with § 1-401. 1975 Md. Laws, ch. 311. Section 1-401 specifically cross-referenced “Maryland Rule 106” and “Maryland District Rule 106.” It provided, in relevant part:
(A) Service of Process on Resident Agent.
Service of process on the resident agent of a corporation or on the resident agent of any other person binds the corporation or other person in any action, suit, or proceeding which is pending, filed, or instituted against it under the provisions of this article.
(B) Service of Notice on Corporation Under Rule 106.
(1) Any notice required by law to be served by personal service on a resident agent or other agent or officer of any Maryland corporation or of any foreign corporation required by statute to have a resident agent in this state may be served on the corporation in the manner provided by Maryland Rule 106 or Maryland District Rule 106 relating to the service of process on corporations.
(2) Service under Maryland Rule 106 or Maryland District Rule 106 is equivalent to personal service on a resident agent or other agent or officer of a corporation mentioned in paragraph (1) of this subsection.
The substituted service statute first appeared in the rules of procedure for the District Court in 1971, when the District Court of Maryland was created. The rule began as Rule 106(e) of the Maryland District Rules—a set of rules parallel to, but not exactly mirroring, the Maryland Rules which governed practice in the circuit courts.6 As noted above, this rule was cross-referenced, along with the circuit court equivalent (Maryland Rule 106), in the 1975 version of
1. If No Resident Agent or Unsuccessful Attempt to Serve.
If a corporation required (by statute of this State) to have a resident agent, (i) has not a resident agent, or (ii) has one or more resident agents, and unsuccessful attempts have been made on different business days to serve process either twice upon one resident agent or once upon each of two resident agents, process may be served upon the State Department of Assessments and Taxation.
2. How Made.
Service of process upon the State Department of Assessments and Taxation shall be made by serving two copies of the process, with the fee required by law, in the office of the Department upon the Director or a person designated by him for that purpose. The fee shall be taxable as costs in the case.
Ann. Code of The Public General Laws of Maryland (1981 Repl. Vol.), Md. Dist. Rule 106.
Maryland District Rule 106 was the predecessor to
Service may be made upon a corporation, limited partnership, limited liability partnership, limited liability company, or other entity required by statute of this State to have a resident agent by serving two copies of the summons, complaint, and all other papers filed with it, together with the requisite fee, upon the State Department of Assessments and Taxation if (i) the entity has no resident agent; (ii) the resident agent is dead or is no longer at the address for service of process maintained with the State Department of Assessments and Taxation; or (iii) two good faith attempts on separate days to serve the resident agent have failed.
The longstanding history of
C. Due Process Analysis of Maryland Rule 3-124(o).
It is well established that “procedural due process requires that litigants must receive notice, and an opportunity to be heard.” Pickett v. Sears, Roebuck & Co., 365 Md. 67, 81 (2001). The notice provided must be “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950). It is also well established that potentially less effective methods of service may be employed where traditional or more effective methods of service have been attempted and were unsuccessful. Miserandino v. Resort Props., Inc., 345 Md. 43, 65 (1997). Further, the service of process utilized on a business entity may be different than that which would be used to serve an individual.
The privileges associated with an LLC, such as tax benefits and liability protections, are afforded with the expectation that an LLC will fulfill its statutory obligations. An LLC is a statutory entity, whose formation only occurs upon SDAT‘s acceptance of its articles of organization.
While no court has analyzed
In Thomas, the Court of Special Appeals had to determine whether substituted service upon SDAT was proper where a corporation no longer had a resident agent. 206 Md. App. at 74–75. The Court of Special Appeals relied upon the holding in Biktasheva, in articulating that “when the resident agent cannot be located according to SDAT records,
alternative service on SDAT has been deemed proper.”8 Id. at 86. Both Thomas
In addition to the recent analyses of substituted service in Thomas and Biktasheva, substituted service has been challenged, albeit in different contexts, and upheld several times in the last sixty years. See Barrie-Peter Pan Schs., Inc. v. Cudmore, 261 Md. 408, 421 (1971) (“By the law of this state, the state of its incorporation, [SDAT] was thus conclusively presumed to have been designated as the true and lawful attorney of the corporation to accept service of process. It clearly appears that legitimate efforts were made to notify the defendant corporation of this action and that those efforts were by means reasonably calculated to bring the attention of the corporation to the pendency of the proceeding.“); Gkiafis v. S.S. Yiosonas, 342 F.2d 546, 558 (4th Cir. 1965) (“[T]he notice provisions of the Maryland substituted service procedure [to serve foreign corporations] are adequate.“); Speir v. Robert C. Herd & Co., 189 F. Supp. 432, 436 (D. Md. 1960) (same).
We agree with the holdings of the Court of Special Appeals and the U.S. District Court for the District of Maryland. The longstanding legislative history of
The City attempted to serve Prime Realty‘s resident agent at the address on file with SDAT on July 20, 2018 and July 27, 2018, prior to initiating substituted service on SDAT on September 5, 2018. Additionally, substituted service upon SDAT would have been acceptable once the City became aware that Prime Realty‘s resident agent was no longer located at the address on file with SDAT as prescribed in subsection (ii) of
Prime Realty relies upon this Court‘s holding in Aggarwal to argue that the City‘s knowledge of an additional address for its resident agent nullifies the City‘s service attempts prior to serving SDAT. Aggarwal required this Court to determine what steps were necessary of a tax sale purchaser to notify the property owner of an impending foreclosure. 326 Md. at 92. The tax sale purchaser in Aggarwal had actual knowledge that the address he was using in attempting to notify the property owner was a “bad address.” Id. at 99. Evidence demonstrated not only that the tax sale purchaser knew the address would not accomplish actual notice, but that he also
Aggarwal is not analogous to this matter. Aggarwal did not include any discussion of
CONCLUSION
We hold that
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY REVERSED. COSTS TO BE PAID BY RESPONDENT.
Getty, J.
Notes
(a) Service of process on the resident agent of a corporation, partnership, limited partnership, limited liability partnership, limited liability company, or real estate investment trust, or any other person constitutes effective service of process under the Maryland Rules on the corporation, partnership, limited partnership, limited liability partnership, limited liability company, or real estate investment trust, or any other person in any action, suit, or proceeding which is pending, filed, or instituted against it under the provisions of this article.
(b)(1) Any notice required by law to be served by personal service on a resident agent or other agent or officer of any Maryland or foreign corporation, partnership, limited partnership, limited liability partnership, limited liability company, or real estate investment trust required by statute to have a resident agent in this State may be served on the corporation, partnership, limited partnership, limited liability partnership, limited liability company, or real estate investment trust in the manner provided by the Maryland Rules relating to the service of process on corporations.
(2) Service under the Maryland Rules is equivalent to personal service on a resident agent or other agent or officer of a corporation, partnership, limited partnership, limited liability partnership, limited liability company, or real estate investment trust mentioned in paragraph (1) of this subsection.
[s]ervice may be made upon a . . . limited liability company . . . by serving two copies of the summons, complaint, and all other papers filed with it . . . upon [SDAT] if (i) the entity has no resident agent; (ii) the resident agent is dead or is no longer at the address for service of process maintained with [SDAT]; or (iii) two good faith attempts on separate days to serve the resident agent have failed.