[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
from the Circuit Court for Anne Arundel Count.y Paul F.
BY: Matthew J. Fader (Brian E. Frosh, Attorney General on the
brief) all of Baltimore, MD. FOR APPELLANT
BY: Sara H. Arthur of Annapolis, MD and Edward J. Meehan
(Groom Law Group of Washington, D.C. and Richard L. Brusca,
Skadden Arps, Slate, Meagher & Flom, LLP of Washington, D.C.)
all on the brief, FOR APPELLEE
BEFORE: Woodward, Arthur, Zarnoch, Robert A., (Retired,
Specially Assigned), JJ.[*]
Md.App. 246] Arthur, J.
landowners brought a class action against the State, alleging
a taking in violation of the Maryland Constitution. After
several years of litigation, two motions for summary
judgment, and an appellate ruling in a related case, the
landowners ultimately prevailed, and the Court of Appeals
affirmed the decision in their favor.
request by the landowners' attorneys, the circuit court
ordered the State to pay $5 million in attorneys' fees.
The State appealed. We reverse.
and Procedural History
Introduction: Ground Leases and the 2007 Modifications to the
Ground Lease System
case is the latest chapter in the litigation that grew out of
the 2007 legislative modifications to Maryland's
centuries-old system of financing real estate purchases
through the use of " ground leases." See
generally State v. Goldberg, 437 Md. 191, 85
A.3d 231 (2014); Muskin v. State Dep't of Assessments
and Taxation, 422 Md. 544, 30 A.3d 962 (2011).
brief summary, a ground lease is a 99-year, perpetually
renewable lease, by which an owner rents land to a lessee,
who is allowed to use and improve the land much as a typical
landowner would. Ground leases are quite common in
residential real estate in Baltimore City and have been
employed in other areas of the State as well.
ground lease, the lessee agrees to pay a specified amount of
yearly rent, as well as taxes and other assessments. If the
lessee defaults, the ground-lease owner may become entitled
to reenter the property and eject the tenant, terminate the
lease, and take possession of the land and any [228 Md.App.
247] improvements. When the ground-lease owner successfully
enforces the right of reentry, the lessees lose any equity
that they had accrued.
2006, the Baltimore Sun ran a series of articles
highlighting what it considered to be grave and unfair abuses
by ground rent owners. Among other things, the articles
reported that tenants had been evicted, and had lost all of
their equity, after they failed to make ground-rent payments
totaling far less than the value of their homes.
by the articles, the General Assembly unanimously passed two
laws that altered the ground-rent system in the 2007
legislative session. Chapter 290 mandated that the lessors
record their leases in a central registry upon pain of losing
their reversionary interests and having fee-simple title vest
in their lessees. Chapter 286, the provision at issue in this
case, eliminated an action for ejectment in most cases
involving a failure to pay ground rents on residential real
estate. In place of the action for ejectment, Chapter 286
established a lien-and-foreclosure remedy, similar to the
remedy for mortgage foreclosures. Under the
lien-and-foreclosure remedy, the tenants would not lose their
equity if the proceeds of the foreclosure sale exceeded the
unpaid rent and the recoverable costs.
the 2007 legislation, the market for ground leases,
previously seen as a stable, low-risk investment, dropped
The Early Phases of this Litigation
November 1, 2007, William Braverman, Stanley Goldberg, and 47
other plaintiffs filed suit in the Circuit Court for
Anne Arundel County to challenge Chapter 286. After several
amendments, their complaint alleged that the legislation
resulted in both the physical and regulatory taking of
property without just compensation in violation of the
federal and State constitutions and that it violated the
Contract [228 Md.App. 248] Clause and the Tenth Amendment
of the United States Constitution. The sole defendant was
the State of Maryland.
State removed the case to federal court, but the court on its
motion exercised its discretion to remand the case to the
circuit court. The circuit court rejected the State's
effort to transfer the case to Baltimore City on grounds of
improper venue and forum non conveniens. The court did,
however, dismiss all claims that alleged a physical taking of
property. In addition, the court certified the case as a
class action for purposes of liability, but not
several years of litigation, in September 2010, both parties
filed cross-motions for summary judgment. On January 6, 2011,
the circuit court denied the motions, stating " that the
evidence presents genuine and novel questions of law as to
whether Chapter 286 constitutes a taking."
The Muskin Decision
a challenge to Chapter 290, the registration provisions of
the 2007 legislation, was wending its way through the courts.
On October 25, 2010, the Circuit Court for Baltimore City
upheld Chapter 290. Exactly one year later, however, a
divided Court of Appeals reversed. Muskin v. State
Dep't of Assessments and Taxation, 422 Md. 544, 554,
30 A.3d 962 (2011). In a 5-2 decision, the Muskin
Court held that, by extinguishing ground rents and
transferring title to lessees as a penalty for the failure to
record ground leases, the legislation abrogated vested rights
and took private property without just compensation in
violation of the Maryland Constitution. [228 Md.App. 249]
Id. at 553; id. at 560; id. at
563; id. at 565. Judge Adkins, joined by former
Chief Judge Bell, dissented. Id. at 568 (Adkins, J.,
Muskin did not directly concern Chapter 286 and its
replacement of the right of reentry with the
lien-and-foreclosure remedy. Nonetheless, in reaching its
decision, the Muskin majority implied that the owner
of a ground lease had a vested right in the right of reentry.
For example, the Court stated: " A ground lease creates
a bundle of vested rights for the ground rent owner, a
contractual right to receive ground rent payments and the
reversionary interest to re-enter the property in the event
of a default or if the leaseholder fails to renew."
Muskin, 422 Md. at 559 (emphasis added). The Court
added: " These two rights cannot be separated from
the other ; together they are the essence of this unique
property interest, and as such, vested rights
analysis must consider them together." Id.
at 559-60 (emphasis added).
other hand, the Muskin Court recognized " an
exception" to the " general prohibition"
against abrogating vested rights. Id. at 561. The
exception, wrote the Court, " applies solely to remedies
and rules of evidence." Id. Under the
exception, " the Legislature has the power to alter the
rules of evidence and remedies, which in turn allows statutes
of limitations and evidentiary statutes to affect vested
property rights." Id. (citations omitted).
short, Muskin did not clearly decide the question of
whether the General Assembly had impermissibly deprived
ground-lease owners of a vested right, or whether it had
merely altered the applicable remedies, when it substituted
the lien-and-foreclosure remedy for the right of reentry that
was implemented through an action for ejectment.
Md.App. 250] D. Summary Judgment and Affirmance on
after the Muskin decision, the plaintiffs in this
case renewed their motion for partial summary judgment on the
claim that Chapter 286 violated the Maryland Constitution by
abrogating their vested right to reenter the leased property
in case of a default. On December 20, 2011, the circuit court
granted their motion.
the grant of summary judgment on the State constitutional
claims, the plaintiffs secured a final judgment by having the
court dismiss all remaining claims, including any individual
claims for damages by the two named plaintiffs, on mootness
grounds. The State appealed, and a divided Court of Appeals
affirmed. State v. Goldberg, 437 Md. 191, 199, 85
A.3d 231 (2014).
reaching its decision, the Goldberg majority
rejected the State's contention that Chapter 286
abrogated no vested rights, but simply substituted the new
lien-and-foreclosure for the previous remedy of ejectment,
which facilitated the right of reentry. Instead, the majority
held that the legislation unconstitutionally impinged upon a
vested right to reenter the leased premises and to terminate
the lease. Id. at 216-17. Two judges dissented.
Id. at 217 (Adkins, J., dissenting); id. at
227 (Watts, J., dissenting).
remand, the State agreed not to enforce the unconstitutional
statute. The court awarded no damages.