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Butz v. Pulte Home Corp.

United States District Court, D. Maryland

May 30, 2018

THEODORE H. BUTZ, THOMPSON H. BUTZ, JR., ROBERT T. BUTZ and JEREMY F. BUTZ
v.
PULTE HOME CORPORATION

          MEMORANDUM OPINION

          Paula Xinis, United States District Judge

         Plaintiffs Theodore H. Butz, Thompson H. Butz, Jr., Robert F. Butz, and Jeremy F. Butz (collectively, the “Butz Family” or “Plaintiffs”) bring this lawsuit against defendant Pulte Home Corporation (“Pulte”) seeking declaratory relief for a contract claim. Now pending are two cross-motions for summary judgment filed by Plaintiffs and Pulte respectively. ECF Nos. 57, 58. The issues are fully briefed, and the Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. For the following reasons, Plaintiffs' motion for summary judgment is granted, and Pulte's motion for summary judgment is denied.

         I. Background

         Plaintiffs are brothers who owned undivided quarter interests in a 54.35 acre property located in Montgomery County, Maryland (“the Property”). ECF No. 58-2. Because Plaintiffs used the Property for agricultural purposes, the Property enjoyed preferential tax treatment, and transfer of the Property for purposes other than agricultural could subject the transfer to the Agricultural Land Transfer Tax pursuant to Md. Code Ann., Tax-Prop. § 13-301, et. seq. ECF No. 2 at && 1, 7, 15. In 2015, after years of discussion, Plaintiffs sold the Property to Pulte for the purpose of building an active adult community. This transfer triggered the assessment of the Agricultural Land Transfer Tax by the Maryland Department of Assessments and Taxation (“SDAT”). Id. At issue in this case is Pulte's failure to pay an equal share of this tax.

         The Butz family, through Thompson H. Butz, Jr (“Tom Butz”), began sale discussions with Pulte in September 2008. ECF No. 57-2. Tom Butz marketed the Property to Pulte as a “unique opportunity” and informed Pulte that Plaintiffs were “farmer[s] and own[ed] the site outright.” Id. Five years later, in August 2013, Matthew Bunch (“Bunch”), a Director of Land Acquisition at Pulte, emailed Tom Butz a Letter of Intent concerning the Property.[1] ECF No. 57-3. In the email, Bunch referenced Pulte's sophistication as a real estate developer, stating “We've had enormous success building active adult communities across the Mid-Atlantic region.” Id. The parties exchanged drafts of the Letter of Intent, but none of the changes addressed taxation. ECF No. 58-8. One significant change was the extension of the closing period from 15 months to 18 months because Pulte indicated 15 months would not be a “reasonable amount of time given [Montgomery County's] unpredictability.” ECF No. 57-4. The Letter of Intent was executed by the parties in September 2013. ECF No. 58-9.

         On October 3, 2013, Bunch sent Tom Butz a draft Purchase and Sale Agreement (“PSA”) using Pulte's standard form contract. ECF No. 58-10. The parties exchanged edits of the PSA, but did not discuss, as part of negotiations, the Agricultural Land Transfer Tax. ECF No. 58-11. In November 2013, the parties executed the PSA. ECF Nos. 58-13, 58-5.

         When the deed was recorded, three types of taxes were assessed: (1) the Agricultural Land Transfer Tax pursuant to Md. Code Ann., Tax-Prop. § 13-301, et. seq.; (2) a county transfer tax; and (3) a general state transfer tax applicable to all real estate transactions pursuant to Md. Code Ann., Tax-Prop. §§ 13-202 to 13-203. ECF No. 2 at & 19. The crux of this dispute is whether the PSA obligates the parties to share the cost of the Agricultural Land Transfer Tax, which was assessed on the Property because Pulte purchased the Property for the purpose of building homes. Id. at & 7, 14-15.

         The parties did not discuss the Agricultural Land Transfer Tax until the parties' escrow agent created the HUD-1 statement. The first version of the HUD-1 statement allocated full responsibility for this tax to Plaintiffs as the sellers. ECF No. 57-24 at 3. Plaintiffs' attorney instructed the escrow agent to amend the HUD-1 statement and split responsibility for this tax between the parties. ECF No. 57-25 at 2-4. The escrow agent did so, and the revised HUD-1 Statement split the tax between Plaintiffs and Pulte. ECF No. 58-20. At that point, the parties began exchanging emails discussing the Agricultural Land Transfer Tax. See, e.g., ECF No. 58-22. Pulte in some emails claimed to be “shocked that they were asked to pay any of this Tax, ” because Pulte, “had no notice of this and fully expected that any tax similar to a [d]eferral of taxes based on a land use would be [Plaintiffs'] obligation.” Id. at 2. Pulte, however, knew the Property was used as a farm before engaging in negotiations to buy it, spent over four months conducting due diligence on the Property, and had previously engaged in thousands of transactions to purchase properties in Maryland, several of which included assessment of the Agricultural Land Transfer Tax. ECF No. 57-18; ECF No. 57-5 at && 7-10; ECF No. 57-6; ECF No. 57-7; ECF No. 57-8; ECF No. 57-9; ECF No. 57-10.

         Pulte ultimately refused to pay an equal share of the tax, contending it was not responsible for any portion of this tax under the PSA.[2] Plaintiffs, however, contend that Pulte is responsible for an equal share of the tax under § 15.4 of the PSA, entitled “Shared Settlement Costs, ” which provides, “Seller and Purchaser shall share equally the Settlement Agent Fees and all state, county and other transfer taxes, recordation fees and other fees in connection with the Settlement.” ECF No. 58-2 (emphasis added). Two other provisions of the PSA are relevant to the parties' dispute. First, § 26 of the PSA, entitled “Montgomery County Disclosures, ” includes disclosures made “pursuant to applicable law in Montgomery County, Maryland.” Section 26 does not include any disclosures related to taxation. Id. Second, § 7.2 of the PSA, entitled “Available Plans, Reports, and Permits, ” provides,

Within five (5) days following the commencement of the Feasibility Period [which begins when the Agreement was executed], Seller shall deliver to Purchaser all documents, statements, plans, reports, permits, trust documents pursuant to which Seller holds the Property, and other materials in the Seller's possession regarding the property, including, but not limited to, any survey, soils, reports, architectural and engineering drawings, permits, zoning applications and appeals, environmental reports, real estate tax information, title reports and policies, etc….

Id. (emphasis added). Plaintiffs did not deliver any documents regarding real estate tax information pursuant to this provision. ECF No. 28 at 5.

         To proceed with the sale, Plaintiffs agreed to pay the Agricultural Land Transfer Tax in full on the condition that Pulte not raise merger as a defense to a suit against Pulte to recover Pulte's share of the assessment. ECF No. 57-26. Plaintiffs paid the tax, and the deed was executed and recorded.

         On April 18, 2016, Plaintiffs filed a complaint in the Circuit Court for Montgomery County seeking a declaratory judgment that (1) Pulte pay its $479, 928 share of the Agricultural Land Transfer Tax and (2) Plaintiffs are entitled to reasonable attorneys' fees for prosecution of this claim and suit. ECF No. 2 at 6. Pulte removed the case to this court on May 19, 2016 and moved to dismiss on June 28, 2016. ECF Nos. 1, 20. This court denied Pulte's motion to dismiss. ECF Nos. 25, 26. Pulte then filed a motion for reconsideration, which this court also denied. ECF Nos. 27, 41, 42. Following discovery, plaintiffs and Pulte filed cross-motions for summary judgment. ECF Nos. 57, 58.

         II. ...


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