Select Portfolio Servicing, Inc.
Saddlebrook West Utility Company, LLC, et al.
Argument: March 6, 2017
Court for Prince George's County Case No. CAE12-06289
Barbera, C.J., Greene, Adkins, McDonald, Watts, Hotten,
on real property is a right based on contract, statute, or
common law to have a debt or charge satisfied out of the
particular property. Three common points of dispute about a
lien are (1) whether one may be established; (2) if so, how;
and (3) when it is established. The first two issues relate
to the creation of a lien; the third to its priority. With
some exceptions, the priority of a lien is determined by the
date it is recorded in the land records.
issue in this case is the use of a lien as part of a deferred
financing arrangement for the construction of the water and
sewer infrastructure to serve a new home development. There
is no dispute that a lien can be created on the developed
property to secure the payment of an assessment for the
construction of that infrastructure. There is, however, a
dispute as to when that lien takes effect - which must be
resolved by answering how it is created.
carry out the deferred financing strategy, the developer in
this case, Respondent Saddlebrook West, LLC
("Saddlebrook") made use of an instrument entitled
a Declaration, which provided for payments of an annual
assessment by future homeowners to a related entity,
Respondent Saddlebrook West Utility, LLC
("Utility"). The Declaration, which provided for
the granting of a lien by future homeowners to Utility to
secure the payment of the annual assessment, purported to
give priority to that lien at a date before the development
was constructed or any homeowner had granted a lien under the
terms of the Declaration.
Select Portfolio Servicing, Inc., the holder of deed of trust
that arose out of the financing of one of the homes in the
development, brought this action to clarify the relative
priority of its interest in that property in relation to the
lien asserted by Utility for delinquent assessments.
that the Declaration recorded by Saddlebrook did not itself
create a lien on the property. Rather, Utility must follow
the procedures set forth in the Maryland Contract Lien Act,
Maryland Code, Real Property Article ("RP"),
§14-201 et seq., to establish a lien under the
Declaration with respect to delinquent assessments - as it
did on at least two occasions with respect to the particular
property that is the subject of this case. The priority of
that lien is determined by the date of its recording in the
Water and Sewer Infrastructure in the Washington Suburban
Washington Suburban Sanitary District ("Sanitary
District") is comprised of portions of Prince
George's and Montgomery Counties. The Washington Suburban
Sanitary Commission ("WSSC") is a bi-county state
agency established by State law to construct and operate
water supply, sewerage, and storm water management systems in
the Sanitary District. See generally Maryland Code,
Public Utilities Article ("PU"), Division II;
see also WSSC v. Phillips, 413 Md. 606, 630-32
(2010); WSSC v. Utilities, Inc, 365 Md. 1, 8 (2001);
Katz v. WSSC, 284 Md. 503, 509 (1979). In 1998, the
burden of constructing and paying for new water and sewer
facilities in a private development to connect to the WSSC
system was shifted from the WSSC to the developer by statute,
although the WSSC remains responsible for overseeing that
construction and operating the system. Chapter 516, Laws of
Maryland 1998, now codified at PU §23-201.
case arises from an instance in which, in accordance with PU
§23-201, a developer entered into an agreement with the
WSSC to assume responsibility for the construction of water
and sewer facilities for a development in part of the
Sanitary District located in Prince George's County. The
developer then recorded a document entitled a Declaration in
the land records of Prince George's County indicating
that the expense of creating the infrastructure for the
development was to be passed on to future homeowners in the
form of an annual assessment. The homeowner's liability
was to be secured by a lien granted by the homeowner on the
homeowner's property. This case concerns the procedure
for establishing that lien and its priority.
relevant facts were largely undisputed and were presented at
trial through stipulation and documents. To the extent that
expert testimony was contested, it had more to do with the
relevance of the opinion testimony than its substance.
Utility, and the Subdivision
late 1990s, Saddlebrook planned to develop a residential
subdivision known as Saddlebrook West ("the
Subdivision") in a portion of Prince George's County
that lies within the Sanitary District. Saddlebrook planned
ultimately to develop a total of 330 lots. The dispute in
this case relates to the first phase of the Subdivision,
which consisted of 187 lots on which single-family homes
would be built.
December 1999, Saddlebrook entered into a memorandum of
understanding ("MOU") with the WSSC under which
Saddlebrook would be responsible for construction of water
and sewer extensions for the Subdivision, subject to the
WSSC's inspection and approval. As part of the plan,
Utility would undertake the construction to connect the lots
in the Subdivision to water and sewer service provided by the
WSSC. Responsibility for maintenance of the infrastructure in
the future would be shared by the WSSC and the individual lot
February 4, 2000, Saddlebrook purchased the land on which the
project was to be built. The deed was recorded in the land
records for Prince George's County on February 17, 2000.
April 4, 2000, Saddlebrook, as "Declarant, "
executed a "Declaration of Deferred Water and Sewer
Charges" ("the Declaration") in favor of
Utility with respect to the Subdivision. The Declaration
recited that Saddlebrook and Utility would provide water and
sewer infrastructure and connections for the
lots. To recoup the cost of building that
infrastructure, the Declaration imposed an annual water and
sewer charge in 23 equal installments of $700 with respect to
each lot in the Subdivision. The charge was to be paid by the
lot owner to Utility and would be due on January 1 of each
year following conveyance of the lot to the lot
owner. Saddlebrook and the builders of the homes
in the Subdivision were explicitly excluded from the
obligation to pay the annual assessment during the period of
time that they owned lots.
paragraph of the Declaration stated that each lot owner, by
accepting deed to a lot, agrees to pay the annual water and
sewer charge to Utility and grants Utility a lien to secure
payment of that assessment. A later paragraph stated that the
lien created with respect to each lot would have priority
from the date of the recording of the Declaration in the land
records over "any subsequently recorded or created lien,
deed of trust, mortgage or other instrument encumbering"
a lot. The Declaration stated that, if a lot owner fails to
pay an annual assessment, Utility may, among other things,
foreclose on the lien against the lot "in the manner now
or hereafter provided for the foreclosure of mortgages, deeds
of trust or other liens on real property" and foreclose
on the lien under the Maryland Contract Lien Act. The
Declaration stated that a lot owner grants to Utility a power
of sale that could be exercised in the event of foreclosure
of a lien. The Declaration did not state the value of the
lien it sought to create.
the Declaration stated that "[a]ll provisions of this
Declaration, including the benefits and burdens, shall touch,
concern and run with the land . . . and shall inure to the
benefit of" Saddlebrook, Utility, and their successors.
on one's point of view, this method of deferred financing
of the water and sewer infrastructure in the Subdivision
either disguised the true price of a home in the Subdivision
or simply decreased the up-front cost of homeownership and
thereby made such housing more affordable.
17, 2000, the Declaration was recorded in the land records of
Prince George's County. 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 or paid.
of Water and Sewer Facilities and Homes in the
contracted with W.F. Wilson & Sons, Inc., to construct
and install the water and sewer facilities for the 187 lots.
On November 21, 2000, the WSSC certified that the conditions
of the MOU had been satisfied and that service would be
provided to those lots.
October 3, 2001, Saddlebrook entered into a "Lot
Purchase Agreement" with Maryland Homes CD, LLC
("Maryland Homes"), a builder, for 46 of the 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 annual
deferred water and sewer benefit charge to each subsequent
home purchaser as part of the sales
lots were conveyed to Maryland Homes by separate deeds that
each covered one or more lots. Maryland Homes built
single-family homes on all 187 lots.
Property at Issue
property that became the setting for the legal issues
presented in this case involves a changing cast of characters
and a series of anomalies of the type familiar to anyone who
has studied recent foreclosure cases: unsigned documents,
missing attachments, incongruous dates, title searches that
overlook key filings, deeds endorsed in blank, unpaid
assessments, expired liens. The confluence of these elements
provides a bloopers reel for a real property
course. Of course, had everything been done
perfectly on all sides, there likely would be no case before
property at issue in this case is 8201 River Park Road
("the Property"). It was sold by Saddlebrook to
Maryland Homes on November 7, 2001; a deed conveying the lot
to Maryland Homes was recorded in the land records on
November 13, 2001. The deed states that it is subject to
"all easements, covenants and restrictions of
April 1, 2002, Charles Bradley, Jr., purchased the Property
from Maryland Homes for $347, 388. He financed the
transaction with a $351, 922 purchase money mortgage. The
deed conveying the Property from Maryland Homes to Mr.
Bradley, which was recorded in the land records on April 23,
2002, states that it is made "subject to all easements,
covenants, and restrictions of record."
to the Declaration, the first annual water and sewer charge
on the Property came due on January 1, 2003. Mr. Bradley
apparently failed to pay that charge - or the charge that
came due the following year on January 1, 2004. As a result,
a management company acting on behalf of Utility recorded two
"Statements of Lien" in favor of Utility in the
land records with respect to the unpaid charges. In
particular, on March 1, 2004, a Statement of Lien in the
amount of $1, 072.50 (plus recording costs of $137.50) was
recorded against the Property. On November 17, 2004, a second
Statement of Lien in the amount of $1, 365.00 (plus recording
costs of $213.80) was recorded. Both Statements of Lien recite
that the Property is covered by the Declaration and that it
is subject to a lien for the amount stated pursuant to the
Maryland Contract Lien Act.
of Property by Mr. Bradley to Ms. Mitchell
after the second Statement of Lien was recorded, Mr. Bradley
sold the Property to Sherrylyn Mitchell for $565,
A deed dated January 6, 2005, conveying the Property from Mr.
Bradley to Ms. Mitchell was recorded in the land records on
March 8, 2005. According to a Land Instrument Intake Sheet
that appears in the land records with the deed, Ms. Mitchell
financed the purchase of the Property with a $480, 250 loan
secured by a deed of trust.
deed conveying the Property, Mr. Bradley represented that he
"has not done or suffered to be done any act, matter or
thing whatsoever, to encumber the property hereby
conveyed[.]" However, the deed made no reference to the
Declaration or Statements of Lien and, unlike the deed that
had conveyed the Property to Mr. Bradley, did not explicitly
state that it was "subject to all easements, covenants
and restrictions of record."
appear that, at some point, perhaps unrelated to this
particular conveyance, Ms. Mitchell executed a form document
entitled "Notice to Purchaser of Deferred Water and
Sewer Charges, " acknowledging the existence of the
annual charge for lots in the Subdivision. While that
document refers to "the Lot, " it does not identify
the lot by address or otherwise. Next to Ms. Mitchell's
signature appears the handwritten date "9-1-01."
The document also bears a signature of a representative of
Maryland Homes (designated in the document as the
"Seller") with a date of "9/4/01." These
dates are long before the conveyance of the Property by Mr.
Bradley to Ms. Mitchell, pre-date the conveyance by Maryland
Homes to Mr. Bradley, and indeed, pre-date the Lot Purchase
Agreement between Saddlebrook and Maryland Homes. There is no
evident solution in the record to this puzzle.
event, whatever knowledge either party to the transaction may
have had of the annual assessment, the delinquency with
respect to the Property, and the action that Utility had
already taken under the Maryland Contract Lien Act to
establish liens with respect to that delinquency, the
Statements of Lien were not paid, cleared, and released upon
closing of the sale of the Property by Mr. Bradley to Ms.
the Property with a Predecessor of Select Portfolio
Mitchell subsequently sought to refinance the loan on the
Property. She applied to Long Beach Mortgage Company
("Long Beach") for a $552, 000 loan. In connection
with the new 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 title search did not reveal the Declaration. Neither did
the title searcher find the two recorded Statements of Lien.
25, 2006, Ms. Mitchell settled on the loan with Long Beach.
The loan was secured by a deed of trust in favor of Long
Beach ("Deed of Trust"), which was recorded in the
land records on August 18, 2006. Presumably because Long
Beach was unaware of the Statements of Lien, they were not
paid, cleared, and released at closing.
Beach apparently sold Ms. Mitchell's loan to JP Morgan
Chase Bank, N.A ("Chase"). Chase in turn eventually
sold the loan to Select Portfolio during the conduct of this
litigation. For simplicity, we shall refer to Long Beach,
Chase, and Select Portfolio collectively as "the
Attempts to ...