SELECT PORTFOLIO SERVICING, INC.
SADDLEBROOK WEST UTILITY COMPANY, LLC, ET AL.
Deborah S., Woodward, Berger, JJ.
DEBORAH S., J.
appeal, we hold that a Declaration recorded by the developer
of a subdivision created a lien that secured payment of water
and sewer charges; the lien could be enforced under the terms
of the Declaration, without resort to the Maryland Contract
Lien Act; and the lien has priority over a later recorded
refinance deed of trust ("DOT") against the
property. Select Portfolio Servicing, Inc. ("SPS"),
the appellant, is the holder of the DOT. Saddlebrook West,
LLC ("Saddlebrook"), and Saddlebrook West Utility
Company, LLC ("Utility"), the appellees, are the
developer and its wholly owned subsidiary. Our decision
affirms a declaratory judgment entered by the Circuit Court
for Prince George's County.
1999, Saddlebrook embarked on a plan to purchase raw land in
Bowie on which to build the Saddlebrook West residential
subdivision ("the Subdivision"). The first phase of
the Subdivision was to be comprised of 187 lots on which
single family homes would be built. That is the only phase of
the Subdivision this case concerns.
parcel of land is located within the Washington Suburban
Sanitary District. In December of 1999, Saddlebrook and the
Washington Suburban Sanitary Commission ("WSSC")
entered into a Memorandum of Understanding ("MOU")
by which the WSSC authorized Saddlebrook to "construct
water and/or sewer extensions" within the planned
Subdivision, subject to the WSSC's inspection and
approval. Saddlebrook purchased bonds to secure its
obligation to perform under the MOU.
February 4, 2000, Saddlebrook purchased the parcel of raw
land by deed that was recorded in the Land Records for Prince
George's County ("Land Records") on February
17, 2000. (Liber 13643, Folio 461). Then, on April 4, 2000,
Saddlebrook, as "Declarant, " executed a
"Declaration of Deferred Water and Sewer Charges"
("the Declaration") in favor of Utility. The
Declaration imposes an annual Water and Sewer Charge on the
owner of each lot in the Subdivision, to be paid by the lot
owner to Utility.
relevant to the issues in this case, the Declaration states:
• Utility intends to provide water and sewer
infrastructure and connections for the lots.
• To recoup that cost, Saddlebrook will establish an
annual Water and Sewer Charge on each lot.
• By accepting his deed, the lot owner agrees to pay
Utility the Water and Sewer Charge for the lot, and any past
due and unpaid such charge. The charge for each lot is $700
per year, for 23 years. The charge comes due on January 1 of
the year following the owner's purchase of the
(Saddlebrook and any "Builder" are not lot
• Also by accepting his deed, the lot owner "grants
[Utility] a lien to secure payment of the Water and Sewer
Charge. The lien "shall have priority from the date upon
which this Declaration is recorded . . . over any
subsequently recorded or created lien, deed of trust,
mortgage or other instrument encumbering" the lot.
• The lot owner "grants to [Utility] a power of
sale, and assents to the entry of a decree and order for the
sale of th[e l]ot upon a default by the [lot o]wner under
• If a lot owner fails to pay the Water and Sewer
Charge, Utility shall be entitled to all available legal or
equitable relief, including acceleration of the Water and
Sewer Charge; an action at law against the lot owner;
foreclosure on the "lien" "in the manner now
or hereafter provided for the foreclosure of mortgages, deeds
of trust or other liens on real property in . . .
Maryland"; and foreclosure on the "lien" under
the Maryland Contract Lien Act.
• All lots will be held, encumbered, sold, etc.,
"subject to the covenants, conditions, restrictions,
obligations and charges set forth in this Declaration, "
which "shall run with such [l]ots and be binding on all
parties having any right, title or interest in all or any
portion of such [l]ots, " etc., and "shall inure to
the benefit of [Saddlebrook], Utility and their respective
successors, transferees and assigns."
• "All provisions of this Declaration, including
the benefits and burdens, shall touch, concern and run with
17, 2000, the Declaration was recorded in the Land Records.
(Liber 13818, Folio 503). An exhibit to the Declaration
identifies by lot, block, and plat number the 187 lots to
which the Declaration pertains. A "Land Instrument
Intake Sheet" for the Declaration shows that Saddlebrook
paid a $75 recordation charge and a $2 surcharge. No
recordation or transfer taxes were charged and none were
paid W.F. Wilson & Sons, Inc. ("Wilson"), to
construct and install the water and sewer facilities for the
187 lots. By letter of November 21, 2000, the WSSC certified
that the conditions of the MOU had been satisfied and that
those lots were being released for service. Almost a year
later, on October 3, 2001, Saddlebrook entered into a
"Lot Purchase Agreement" with Maryland Homes, LLC
("Maryland Homes"), a builder, for the 187 lots. A
copy of the Declaration was attached to the Lot Purchase
Agreement and "incorporated [t]herein by
reference." Under the terms of the Lot Purchase
Agreement, Maryland Homes agreed to disclose the existence of
an "annual deferred water and sewer benefit charge"
to any purchaser of a developed lot. It further agreed
"to include in sales contracts to home purchasers for
homes to be constructed all required and appropriate
notices/disclosures pertaining to the Water and Sewer Systems
mandated by applicable law and acknowledging receipt by the home
purchaser of such disclosures, which must be furnished at the
time of contract."
lots were conveyed to Maryland Homes by separate deeds that
covered one or more lots. The property at issue in this case
is lot 5, block J, Plat 20 of the Subdivision, later
designated 8201 River Park Road ("the Property"). A
deed conveying that lot and three others to Maryland Homes
was recorded in the Land Records on November 13, 2001. (Liber
15170, Folio 694). It states that it is subject to "all
easements, covenants and restrictions of record."
Homes built single-family homes on all 187 lots. On April 1,
2002, Charles Bradley, Jr., purchased the Property for $347,
388. He financed the transaction by a $351, 922
purchase-money mortgage. The deed conveying the Property to
Mr. Bradley was recorded in the Land Records on April 23,
2002. (Liber 15727, Folio 361). It states that it is made
"SUBJECT to all easements, covenants, and restrictions
January 1, 2003, Mr. Bradley's first annual $700 Water
and Sewer Charge came due. He did not pay it. He also did not
pay the $700 Water and Sewer Charge that came due a year
later, on January 1, 2004.
March 1, 2004, pursuant to the Maryland Contract Lien Act
("MCLA"), Md. Code (1974, 2003 Repl. Vol.),
sections 14-201-206, of the Real Property Article
("RP"), Tidewater Property Management, Inc., acting
as Utility's agent, recorded in the Land Records a
"Statement of Lien" against the Property, for $1,
210, for the unpaid Water and Sewer Charges. (Liber 19023,
Folio 451). On November 17, 2004, it recorded a second
"Statement of Lien" against the Property, for $1,
578.80, also for the unpaid Water and Sewer Charges. (Liber
20718, Folio 127). Both Statements of Lien recite that the
Property is subject to the Declaration and that, pursuant to
the MCLA, is subject to a lien for Water and Sewer Charges,
plus the cost to record the Statements of Lien.
next year, by deed dated January 6, 2005, Mr. Bradley
conveyed the Property to Sherrylyn Mitchell for $565, 000.
The deed was recorded in the Land Records on March 8, 2005.
(Liber 21579, Folio 001). The deed does not include a
"subject to all easements, covenants, and restrictions
of record" clause, and makes no reference to the
Declaration. In the deed, Mr. Bradley represents that he
"has not done or suffered to be done any act, matter or
thing whatsoever, to encumber the property hereby
Mitchell had been living in the Property since 2002, but the
record does not disclose the circumstances under which she
was living there or her relationship to Mr.
Bradley. A Land Instrument Intake Sheet shows that
Ms. Mitchell financed the purchase with a $480, 250 loan, and
that a deed of trust securing the loan against the Property
was recorded in the Land Records. The deed of trust is not in
the record, however, and there is nothing in the record
showing the source of Ms. Mitchell's loan. The record
includes a form document entitled "NOTICE TO PURCHASER
OF DEFERRED WATER AND SEWER CHARGES, " acknowledging
that the Property is subject to the annual Water and Sewer
Charge of $700. Ms. Mitchell's signature is on the
document, next to the date "9-1-01, " also in her
handwriting. The document also is signed by a representative
of Maryland Homes, which is described as the
"Seller." That signature is dated
"9/4/01." These dates are long before the
conveyance to Ms. Mitchell, and indeed pre-date the
conveyance by Maryland Homes to Mr. Bradley.
Statements of Lien were not paid, cleared, and released upon
closing of the sale of the Property by Mr. Bradley to Ms.
Mitchell. Nothing in the record explains why that did not
in early 2005, Ms. Mitchell decided to refinance. She applied
to Long Beach Mortgage Company ("Long Beach") for a
$552, 000 loan. Before extending the loan, Long Beach ordered
a two-party title search of the Property, i.e., a
search that included Ms. Mitchell and Mr. Bradley, but not
prior owners. The search did not reveal the Declaration.
Also, the person who performed the title search did not find
the recorded Statements of Lien. On May 25, 2006, Ms.
Mitchell settled on the refinance loan. The Statements of
Lien were not paid, cleared, and released at closing. Ms.
Mitchell's refinance loan was secured by the DOT to Long
Beach, which was recorded in the Land Records on August 18,
2006. (Liber 25810, Folio 228). The Statements of Lien expired in
2007. See RP § 14-204(c) (an action to
foreclose under a statement of lien must be commenced within
three years of the date of recordation).
October 7, 2010, in the Circuit Court for Prince George's
County, agents of Utility filed an order to docket, seeking
to foreclose on its lien against the Property under the
Declaration, for non-payment of the Water and Sewer Charges.
By then, Long Beach had sold Ms. Mitchell's loan to JP
Morgan Chase Bank, N.A. ("Chase"). On March 5,
2012, Chase filed a motion to stay and dismiss. That same
day, it filed the declaratory judgment action that gives rise
to this appeal. Utility canceled the foreclosure sale and
voluntarily dismissed the foreclosure case.
filed a first amended complaint in the declaratory judgment
action, which became the operative complaint. Saddlebrook,
Utility, Ms. Mitchell, the Saddlebrook West Homeowners
Association, Inc. ("the HOA"), and Utility's
agents in the foreclosure action ("the substitute
trustees") were named as defendants. Also named were the
Clerk of the Circuit Court for Prince George's County
("Clerk"), the Director of the Prince George's
County Office of Finance ("Finance Director"), and
the Director of the State Department of Assessments and
Taxation ("SDAT Director") (collectively, the
alleged that the Declaration is not a lien instrument and
therefore it did not create a lien against the Property. It
pointed out that if the Declaration were a lien instrument
there would have been no need for Utility to have obtained
"Statements of Lien" under the MCLA. It asserted
that, although the Declaration purports to create a lien, it
was filed in the Land Records without payment of
approximately $60, 000 in recordation and transfer taxes
required to record a lien instrument securing more than $3
million in Water and Sewer Charges.
Count I, Chase sought a finding that the Declaration is
invalid and the DOT is the first priority lien against the
Property. In Count II, it sought mandamus relief against the
public defendants, requiring them to "either . . .
collect the appropriate taxes from . . . Utility or . . .
remove the Declaration from the Land
circuit court granted summary judgment in favor of the public
defendants in an order stating that "the dispute
concerning the priority of the lien must be resolved between
[Chase] and [Utility and u]ntil that time (if ever) no
justiciable controversy exists between [Chase and the public
defendants]." The remaining parties engaged in
September 17 and 18, 2013, Chase's declaratory judgment
action was tried to the court against Saddlebrook, Utility,
and Ms. Mitchell (who was self-represented). Chase called
three fact witnesses: John C. Puiles,  a member of
Saddlebrook and the managing member of Utility (adversely);
Ms. Mitchell (also adversely); and Albert Smith, Jr.,
Chase's custodian of records.
Puiles recounted the history of the Subdivision and testified
that Saddlebrook paid Wilson to construct and install the
water and sewer facilities for the 187 lots. Saddlebrook
hired counsel to draft the Declaration. Mr. Puiles identified
the MOU between the WSSC and Saddlebrook and the contract
between Saddlebrook and Wilson, under which those facilities
in fact were constructed and installed and Wilson was paid.
He identified the Declaration and the Lot Purchase Agreement.
He stated that at the time of settlement on the sales of lots
by Maryland Homes to lot owners, Maryland Homes was required
"by contract, " i.e., under the terms of
the Lot Purchase Agreement, to provide a "NOTICE TO
PURCHASER OF DEFERRED WATER AND SEWER CHARGES" like the
one signed by Mitchell. These documents all were moved into
Mitchell testified that since purchasing the Property, she
has received bills for Water and Sewer Charges. She did not
testify whether she has paid these charges. Chase called
three expert witnesses. Kristy Wingate, a title abstractor,
testified that lenders typically only order a two-party
examination for a refinance loan, and such an examination
would not have revealed the Declaration. If
competently performed, such an examination would have
revealed the Statements of Lien, however, because they were
recorded after Mr. Bradley took title to the Property. And
the Statements of Lien would have resulted in the discovery
of the Declaration, because they referenced the Declaration
by its Liber and Folio numbers. According to Ms. Wingate,
if the Declaration had been discovered in the title search,
the industry standard would have been to report it as an
exception to the title, not as a lien or encumbrance.
Boileau, an attorney for a title insurance company, opined as
well that a declaration for water and sewer charges, such as
the Declaration in this case, would be treated as an
exception on a title report, i.e., it would not be
covered by the title insurance policy. It "affects the
property and the use of the property and the way the property
owner can use the property. So [the] property conveys subject
to [the Declaration], and it is an important document but we
do not view it as an existing lien." However, "a
lien could arise if these charges are not paid."
Specifically, she opined that if the water and sewer charge
is not paid, "a statement of lien can be recorded [under
the MCLA], and that we do view as an encumbrance on property
that would have to be paid, cleared and released." Ms.
Boileau further opined that were a title insurance company to
consider a declaration of this sort as creating a lien
against the property being conveyed, it would not issue a
title insurance policy "unless [the] property was either
released from the lien altogether or it was subordinated, the
lien was subordinated to [the loan being issued]."
Goldfaden, a lawyer and underwriter for a title insurance
company, opined that the Declaration is a "notice
instrument" not a "lien instrument." If he had
been underwriting a title insurance policy for the Property,
he would have agreed "to insure title with [the
Declaration] shown as an exception in the policy
itself." The Declaration would not need to be
"satisfied, subordinated, or paid" before a title
commitment was issued. This is so, Mr. Goldfaden explained,
because the Declaration gives notice of an annual assessment
but does not create a present lien interest that
"trump[s] . . . priority" over a properly recorded
deed of trust securing a loan.
close of Chase's case-in-chief, the court granted
judgment in favor of Saddlebrook and Utility on the claim
that the Declaration could not be a valid lien instrument
because recordation and transfer taxes were not paid.
their case, Saddlebrook and Utility called Brian Bichy, a
real estate lawyer, who was accepted as an expert in that
field. Mr. Bichy testified that he routinely drafts
declarations for water and sewer charges that are nearly
identical to the Declaration. He has initiated foreclosure
proceedings under the power of sale provisions in those
declarations; and in some of those cases, courts have
ratified foreclosure sales. He explained that in drafting
these declarations he relies upon certain provisions of the
Anne Arundel County Code ("AACC") pertaining to
deferred water and sewer charges. He acknowledged that there
is no similar provision in the Prince George's County
Bichy opined that the Declaration "creates a lien for
the water and sewer charges based on the covenant that's
recorded in the specific paragraph where each owner is
granting a lien for repayment of the water and sewer charges,
as well as granting a power of sale to execute on that
lien." He further opined that the Declaration is a
covenant running with the land and an "interest
against" the Property. He did not express an opinion
about the lien priority of the Declaration.
the evidence phase of the case concluded and the court heard
closing arguments, the court directed counsel to submit
proposed findings of fact and conclusions of law.
proposed the following: 1) the Declaration is void because it
violates the Rule Against Perpetuities; 2) the Declaration is
not a covenant running with the land because it does not
touch and concern the land and because it lacks vertical
privity; 3) the Declaration does not create a lien, but is a
contractual agreement that, when a lot owner defaults upon
payment of the annual water and sewer charge, Utility may
obtain a lien; 4) in Maryland, the MCLA is the only vehicle
by which to obtain a lien against real property based on a
contract; 5) a lien obtained under the MCLA does not relate
back in time, for recording purposes, to the date of the
contractual agreement to create a lien; 6) the Statements of
Lien that Utility obtained against the Property were valid,
but because they expired, they had no impact on the priority
of the DOT; and 7) the Declaration is not enforceable against
third parties because recordation and transfer taxes were not
and Utility proposed the following: 1) the Declaration
created a lien against each lot that is subject to the Water
and Sewer Charges, including the Property; 2) the lien was
effective on the date the Declaration was recorded, which was
before the DOT was recorded, and therefore the lien has
priority over the DOT; 3) the Declaration satisfies the
"touch and concern" and vertical privity
requirements for a covenant running with the land; 4) the
Declaration does not violate the Rule Against Perpetuities;
and 5) the Declaration permits Saddlebrook/Utility to obtain
a Statement of Lien under the MCLA, but that is not the only
remedy available to it, nor does that mean that the
Declaration did not create a lien.
November 20, 2013, the court docketed its final opinion and
order. It made the following findings of fact
and conclusions of law. Under the terms of the Declaration,
Saddlebrook was required to install the water and sewer
facilities for the Subdivision. Because Saddlebrook fulfilled
that obligation, the Declaration "create[d] a
lien." The lien is "what some refer to as a
'super lien.' No developer would undertake this
development process without legal assurances of payment and
assurances that such payment would be a priority." The
lien on a lot "take[s] effect" when the owner takes
title to the lot. In this case, the lien on the Property took
effect in 2002, when Mr. Bradley purchased the Property. That
preceded the recording of the DOT in the Land Records.
Because it was reasonable to infer that the lots in the first
phase of the Subdivision would be sold within the
perpetuities period, and therefore the lien for each lot
would arise within that period, the Declaration does not
violate the Rule Against Perpetuities and is not void. The
lien created by the Declaration "is a covenant running
with the land"; Saddlebrook benefits from the payment by
lot owners of the Water and Sewer Charges, and the charges
"certainly touch the land."
court further found that because the Declaration was recorded
in the Land Records, the "world" was on
constructive notice of the lien it created. Long Beach's
two-party title search did not reveal the Declaration,
"despite references to it in a number of recorded
filings in the land records." And Long Beach did not
order the type of title search "that everyone agrees
would have revealed the Declaration." "One who does
not request a thorough search . . . does so at his peril. . .
. Here, [Chase] comes to court complaining that it
shouldn't be bound by something it didn't know about
when in fact it was by its own lack of a competent search
that it was unaware." Finally, Saddlebrook did not pay
recordation and transfer taxes when the Declaration was
recorded in the Land Records because none were charged. Any
"mistake" in this regard "was the
[C]ounty's mistake" and did not affect the validity
of the Declaration.
court ruled that the Declaration "is a valid,
enforceable first-priority lien encumbering the [P]roperty .
. . ." Although the court did not expressly
address Chase's argument that the MCLA was the sole
vehicle for enforcement of the lien, it was implicit in the
court's lien priority determination that it rejected that
noted a timely appeal. During the pendency of the appeal,
Chase sold its interest in the DOT to SPS, and SPS was
substituted for Chase as the appellant in this Court.
SPS presents four questions for review, which we have
reordered and rephrased:
I. Did the trial court err in ruling that the Declaration is
not void as in violation of the Rule Against Perpetuities?
II. Did the trial court err in ruling that the Declaration is
a covenant running with the land and therefore binds
III. Did the trial court err in ruling that the fact that
recordation and transfer taxes were not paid did not render
the Declaration unenforceable as a lien instrument?
IV. Did the trial court err in ruling that the Declaration
created a lien that could be enforced other than through the
process set forth in the Maryland Contract Lien Act, and that
the lien created by the Declaration has priority over the
no error on the part of the trial court, we shall affirm the
delving into the issues, we shall summarize them, how they
interrelate, and how SPS maintains their resolution will
affect the outcome of this appeal. First, is any lien the
Declaration created of no effect because the Declaration
violates the Rule Against Perpetuities and therefore is void?
If the answer to that question is yes, it is dispositive of
the entire appeal. Second, and obviously alternatively, is
any lien created by the Declaration a covenant running with
the land? A negative answer to that question also is
dispositive, because, if the lien is not a covenant running
with the land, Ms. Mitchell, as a subsequent purchaser, would
not be bound by the obligation to pay the Water and Sewer
Charges, and the lien would be of no effect as to her or
Chase. Third, and likewise alternatively, does the fact that
recordation and transfer taxes were not paid when the
Declaration was recorded mean that the Declaration could not
create a lien? An affirmative answer to this question is
dispositive as well.
if none of those issues is resolved dispositively, did the
Declaration create a lien against the Property to secure
payment of Water and Sewer Charges, effective either when the
Declaration was recorded or (as the trial court found) when
Mr. Bradley took title to the Property? If so, can the lien
be enforced by Utility, exercising its power of sale under
the Declaration, through a foreclosure action against the
Property, or can the lien only be enforced pursuant to the
MCLA? If the lien only can be enforced under the MCLA,
SPS's DOT has first priority status because the
Statements of Lien that Utility obtained under the MCLA have
expired, and any Statement of Lien it may obtain in the
future will be effective only from the date it is recorded.
If the lien can be enforced outside the MCLA process, then
whether the lien takes priority over a competing lien held by
a third party will depend, in part, on whether the third
party had adequate notice of the lien created by the
Declaration when its own lien was recorded.
the rule against perpetuities, "[n]o interest [in
property] is good unless it must vest, if at all, not later
than twenty-one years after some life in being at the
creation of the interest." Dorado Ltd. P'ship v.
Broadneck Dev. Corp. 317 Md. 148, 152 (1989) (quoting
Fitzpatrick v. Mercantile-Safe Deposit & Tr.
Co., 220 Md. 534, 541 (1959), in turn quoting Gray,
The Rule Against Perpetuities, § 201 (4th ed.
1942)). The rule against perpetuities applies to a contract
that "creates an equitable right in real property."
Id. at 152. It is designed to invalidate interests
in real property that "vest too remotely."
Fitzpatrick, 220 Md. at 541. "The term
'vested, ' as used in the law of property, signifies
that there has been the fixation of a present right to either
the immediate or future enjoyment of property."
Chism v. ...