Monday, November 6, 2017

Maryland's Construction Trust Fund Statute has obvious limits.

We read almost all the cases published by Maryland's appellate courts, even the non-published ones. The non-published opinions cannot be cited as binding precedent in later cases, but they are important.  A case is sometimes not formally reported because it confirms basic things Maryland lawyers know, or should know.

The November 1, 2017 case entitled C&B v. Dashiell is a good review of some basic construction law. The case began with a very familiar situation:  A sub-contractor was not paid by a general contractor.

The sub-contractor had worked on six different jobs for the general contractor, but had not been fully paid. The sub sued for over $200,000.  As part of the lawsuit, the sub sued the owners of the general contractor, individually.

Maryland's Construction Trust Fund Statute can impose personal liability on the owners of a general contractor where money paid on behalf of a sub-contractor's work is wrongly used. For instance, a GC might use money paid by the owner based on the subs pay application to pay down a bank line of credit, or mounting supplier accounts. The GC might direct the subs money to pay rent, the light bill, or taxes.  The GC might also pay the subs money direct to individual owners to repay loans, or as salary and expense reimbursement. Just about all of this is improper.

But the sub-contractor lost on its claims against the individual owners of the GC  (after taking consent judgments against the GC corporate entity). The case was lost at trial, and lost again on appeal because the sub did not put on essential proof that the trust fund statute applied to this particular situation.

The mere fact that the sub was owed over $200,000 over multiple projects did not automatically qualify the claim under the trust fund statute. The sub had to demonstrate that the work for which the money is owed either 1) arose from a public project covered by Maryland's Little Miller Act; or 2) arose from a private project for which a mechanic's lien could be taken.

Why? Because the Maryland legislature put those limitations in the trust fund statute. In cases involving private construction projects you must put on proof that the work is lienable under the mechanic's lien statute before you may sustain claims under the trust fund statute for personal liability.

The  proof is not difficult-- It requires a demonstration that the total value of the project (and not just the unpaid balance sued upon) meets the percentage of value formula in the mechanic's lien statute:

Every building erected and every building repaired, rebuilt, or improved to the extent of 15 percent of its value is subject to establishment of a lien in accordance with this subtitle for the payment of all debts, without regard to the amount, contracted  for work done for or about the building and for materials furnished for or about the building, including the drilling and installation of wells to supply water, the construction or installation of any swimming pool or fencing, the sodding, seeding or planting in or about the premises of any shrubs, trees, plants, flowers or nursery products, the grading, filling, landscaping, and paving of the premises, the provision of building or landscape architectural services, engineering services, land surveying services, or interior design services that pertain to interior construction and are provided by a certified interior designer, and the leasing of equipment, with or without an operator, for use for or about the building or premises.
 This requires proof. The judge cannot speculate that because the amount sued upon is large that it must fall within the 15% rule. In this case, the $200,000 sum was not sufficient proof that the sub had a lienable claim, and thus it could not demonstrate standing to make claim against the individual owners of the GC under the trust fund statute.

Your construction lawyer should know this.


Thursday, October 19, 2017

Contracts shortening Maryland's Statute of Limitations are not always enforceable.

You are free to make a contract that cuts short Maryland's Statute of Limitations. But it will not be automatically enforced against you.

Most lawsuits for breach of contract and negligence must be filed in court within three years of a breach. There are many situations where the three year period can be delayed or temporarily stopped, but that is a topic for another article. This piece will focus on contract language that cuts a three year limitation period to something shorter, usually one year.

Maryland will enforce contracts that cut back on your right to sue, from three years to something shorter. But a recent opinion from the highest appellate court makes clear that this contract term will not always be blindly enforced.

In Ceccone v. Carroll Home Services the parties litigated this issue. A home repair company sought to block claims for damage to the homeowner's furnace caused by its neglect. The homeowner made a claim within one year of the breakage, but failed to file the lawsuit within that same one year period. The service company defended by simply asserting "you're too late."

The trial court and the intermediate appellate court applied the long recognized Maryland law and enforced the shortened limitations as written in the contract. A judgment in favor of the home service company, which kicked the claim out of court, was affirmed. It took the homeowner's second level of appeal, to the Maryland Court of Appeals, to get the correct result.

The highest Maryland court instructed that:

A provision of a contract that purports to shorten this period of limitations will be enforced in Maryland only if (1) there is no controlling statute to the contrary; (2) the provision is not the result of fraud, duress, misrepresentation, or the like; and (3) the provision is reasonable. In assessing the reasonableness of such a provision, the court should make an explicit determination whether the provision is reasonable, considering a variety of factors, including the subject matter of the agreement, the degree to which the provision shortens the applicable period of limitations, the relative bargaining position of the parties, and whether the shortened period of limitations is one-sided or applies equally to the parties to the agreement. 
In the Ceccone case, the trial court did not weigh the three factors-- the judge just applied the contract language. The intermediate appellate court did a similar "rubber stamp" analysis to affirm the trial court. It did not matter that the contract only limited the homeowner to one year within which to file a lawsuit, while reserving to the service company all rights under the law. 

The Court of Appeals vacated the judgment in favor of the service company and sent the case back to the trial level for witness testimony and further consideration.  The new trial date shown in the on-line docket is November 2, 2017, in the Circuit Court for Anne Arundel County.

The surprising thing about the case is that the homeowners are representing themselves- only the service company has a lawyer--and the homeowners won the appeal after losing in two lower level courts. And even more surprising is that the case involves a dispute worth less than $4,000 and which has surely cost the service company many times more than the homeowner is claiming.

Operating without a lawyer, Mr. and Mrs. Ceccone obtained a reported opinion that will become part of Maryland's body of jurisprudence. That is more than many, many lawyers can claim!

As the Japanese proverb goes- "fall down seven times, but stand up eight." Kudos to Mr. and Mrs. Ceccone! 

Thursday, October 5, 2017

New Maryland foreclosure rules for abandoned or vacant properties.

Lenders may now foreclose faster on abandoned or vacant  Maryland residential properties. 

Senate Bill 1033 went into effect on October 1, 2017. It provides a short-cut to the existing foreclosure rules that prevent a lender from initiating foreclosure until 90 days have elapsed from the triggering event.

There must still be a triggering event, such as an extended failure to pay. But if the property is vacant or abandoned the lender may file a petition in the circuit court for permission to immediately foreclose without notice. The court is required to rule on the petition "promptly."

The petition must include admissible evidence to demonstrate that the property is vacant or abandoned. How is that to be done?  The lender must demonstrate any three of the following eleven factors (the capitalized language is lifted from the new law):

(1) GAS, ELECTRIC, SEWER, OR WATER UTILITY SERVICES TO THE PROPERTY HAVE BEEN DISCONNECTED;
(2) WINDOWS OR ENTRANCES TO THE STRUCTURE ON THE PROPERTY ARE BOARDED UP OR CLOSED OFF, OR MULTIPLE WINDOW PANES ARE BROKEN AND UNREPAIRED;
(3) DOORS TO THE STRUCTURE ON THE PROPERTY ARE SMASHED THROUGH, BROKEN OFF, UNHINGED, OR CONTINUOUSLY UNLOCKED;
(4) JUNK, LITTER, TRASH, DEBRIS, OR HAZARDOUS, NOXIOUS, OR UNHEALTHY SUBSTANCES OR MATERIALS HAVE ACCUMULATED ON THE PROPERTY;
(5) FURNISHINGS, WINDOW TREATMENTS, OR PERSONAL ITEMS ARE ABSENT FROM THE STRUCTURE ON THE PROPERTY;
(6) THE PROPERTY IS THE OBJECT OF VANDALISM, LOITERING, OR CRIMINAL CONDUCT, OR THERE HAS BEEN PHYSICAL DESTRUCTION OR DETERIORATION OF THE PROPERTY;
(7) A MORTGAGOR OR GRANTOR HAS MADE A WRITTEN STATEMENT EXPRESSING THE INTENTION OF ALL MORTGAGORS OR GRANTORS TO ABANDON THE PROPERTY;
(8) THERE IS A DETERMINATION THAT NO OWNER OR TENANT APPEARS TO BE RESIDING ON THE PROPERTY AT THE TIME OF AN INSPECTION OF THE PROPERTY BY:
     (I) THE THE SECURED PARTY; OR
     (II) AN APPROPRIATE OFFICIAL OF THE COUNTY OR MUNICIPAL CORPORATION IN WHICH THE PROPERTY IS LOCATED;
 (9) TWO OR MORE CITATIONS HAVE BEEN ISSUED BY A COUNTY OR MUNICIPAL CORPORATION AGAINST THE PROPERTY FOR FAILURE TO MAINTAIN THE PROPERTY AND A HEALTH AND SAFETY ISSUE EXISTS THAT HAS NOT BEEN RECTIFIED;
(10) THE PROPERTY HAS BEEN CONDEMNED BY A COUNTY OR MUNICIPAL CORPORATION; OR
(11) OTHER REASONABLE INDICIA OF ABANDONMENT EXIST.
As you can see, there is a lot to pick from, and each alleged "fact" is an opportunity for dispute at the court's "prompt" hearing. The borrower has an opportunity under the new rule to deny the alleged facts supporting the petition. What is not clear is whether a borrower can be given the opportunity to cure the conditions on which the petition is based (in addition to bringing the loan current), and thus render the petition moot or premature.

But shortening the process for foreclosure on vacants may not be enough to entice lenders to execute on recorded liens. Lenders may continue the practice of electing a breach of contract action against the borrower in order to obtain a money judgment. It is the business practice of some lenders to seek court judgment against the borrower on the underlying promissory note, while leaving the recorded lien intact as a cloud on title. This practice makes it even less likely that a vacant or abandoned property will be recycled to productive use. The new rule does nothing to remove this choice from the lender--- a bank cannot be forced to foreclose, even if the borrower is delinquent, and especially if the property is abandoned or vacant.

Do you need to file or defend such a petition? Fill out our contact form on this page and let's discuss your case.


Tuesday, October 3, 2017

Maryland's Justice Reinvestment Act opens door to sentence reconsideration for many drug convicts.

With the newly enacted Justice Reinvestment Act those convicted of certain drug related crimes may seek reconsideration of their mandatory minimum sentences. The issue is explained well in this September 30, 2017 Baltimore Sun excerpt:

Eighty-one percent of those sentenced in Maryland to a mandatory minimum between 2013 and 2014 were black, according to a report of the Justice Reinvestment Coordinating Council, a state panel that studied options for criminal justice reform.
“The concept that the system can jail its way out of a drug scourge has been shown to be a massive failure,” Maryland Public Defender Paul DeWolfe said.

DeWolfe, whose office is expected to handle the vast majority of the motions, added that many people pleaded guilty to crimes “for fear that [they would] end up with a mandatory sentence” if they went to trial.

Before Sunday, repeat offenders of drug dealing crimes were subject to mandatory sentences with no chance of parole: 10 years for second-time offenders, 25 years for third-time offenders and 40 years for fourth-time offenders.

The new law repeals those minimums, and allow those already serving them to seek shorter sentences.

Most of those now eligible for reconsideration — roughly 80 percent — are serving 10-year sentences, according to the public defender’s office.



If you or a family member may be eligible for reconsideration of a mandatory minimum sentence already imposed, fill out the contact form on this page.  Ian Valkenet may be able to help!


Thursday, August 24, 2017

A Declaration of future assessments is not a lien on real property

On August 16, 2017, Maryland's highest court decided Select Portfolio 
Servicing v. Saddlebrook West Utility Company , a case that centered on a long-running dispute among real estate and title lawyers- whether a developer's recorded declarations of future water and sewer charges creates a lien superior to later recorded deeds of trust.

Yes, real estate and title lawyers are pretty nerdy.

It is common for newly developed communities to fund creation of water and sewer facilities by periodic assessments. The future commitment of each lot owner is created and announced by written declarations that are recorded in the land records. The declarations are often recorded early in the development, often before any construction, and before the developer has sold off any lots to regular folks, like you and me.

When you or I buy a lot from the developer we take out a loan. The bank secures it's right to get paid by recording a deed of trust in the land records. This creates a lien on the lot. The bank expects it's lien to be in the first position, so that in the event of a foreclosure it takes all the proceeds of sale needed to pay of the underlying promissory note. Liens in lower positions get paid only if there is a surplus.

Over the years, assessments fall due to pay off the water and sewer construction costs. A portion of the assessment must be paid by me and you, as lot owners.

A failure to pay any assessment will trigger a statement of lien, recorded in the land records, for the amount of that payment. The lien can be foreclosed for up to 12 years after recording.

If you or I don't pay on the mortgage loan, the bank can foreclose, too.

But what lien is in the first position, and thus entitled to get paid first out of the proceeds of a foreclosure auction and sale? Some have argued that the assessments disclosed in the developer's declarations give the lien for unpaid assessments priority over the later filed bank deed of trust. Many more have argued that the bank's lien, evidenced by the recorded deed of trust, has priority over the declarations.

In the Select Portfolio case, both the trial court and the intermediate appellate court reached the wrong conclusion- that the water and sewer assessments trumped the later created bank lien. They reached this conclusion by treating the declaration as a "lien," rather than as notice of future charges that could result in liens.

The highest court, the Maryland Court of Appeals, reversed the case, finding that the bank's lien has priority over the liens for assessments. The reasoning is simple, and entirely consistent with already established law.

Quite simply, the declaration recorded by the land developer is merely notice of future assessments. But the path from declaration to bill to lien for unpaid bill must run through the Maryland Contract Lien Act. It is by recording a notice of lien according to the Act that the assessment announced  in the declarations becomes a lien.

It is only through the act of recording that the lien gains relative priority.  If the notice of lien is recorded after a bank lien, then the bank has the first lien position. The road to a lien for unpaid assessments runs only through the Maryland Contract Lien Act.

It only took the courts five years to get here. Amen.


Tuesday, July 25, 2017

Maryland lawsuits can be a whale of a problem

A contract is a collection of promises. When a promise is broken, it may require court action to get the remedies you seek. We can help!





Monday, July 10, 2017

AVVO is not a safe place to describe your alleged crime!

We ask all of our clients to avoid posting details about their alleged crimes on ANY social media site. The internet is completely open to the public, and that includes the prosecutors seeking to put you in jail-- They read everything.

Below is an AVVO posting that appeared on July 8, 2017. This person is shocked that his AVVO questions made it to the criminal file maintained by the prosecutor's office. And if he admitted to bad things in those on-line postings, or perhaps shared details of the alleged crime not generally known to others, then evidence of the posting may well lead to his conviction.

The only safe place to be completely open about criminal accusations is within the sanctity of the attorney-client relationship. But if you have already disclosed details of the alleged crime on the internet before we establish an attorney-client relationship, you may have done great damage to your potential defenses.


My avvo questions and answers have made it to my criminal discovery in my robbery case
Location: Washington, DC
how did they make it there? can they be used against me? there are some ip logs from my internet service providers and a return of service there. what does that mean?

Sunday, June 11, 2017

Your Maryland contractor cannot delegate his building code responsibilities.

Maryland's Court of Special Appeals has made clear what construction law practitioners have been arguing in the trial courts for a long time -- A general contractor or developer may not delegate its responsibility to comply with building codes to sub-contractors.


On May 31, 2017 the COSA decided Marrick Homes v. Rutkowski, an appeal from a very large money judgment by a trial court in favor of a severely injured homeowner against a general contractor. Mr. Rutkowski fell thirteen feet when a protective railing across a patio door opening failed. He broke bones and sustained a head injury. Expert witnesses explained that the wrong nails were used to secure the protective railing to the house, and that the connections failed when Mr. Rutkowski placed his weight against the railing. The railing did not comply with local building codes.

The work was done by a subcontractor of the defendant at least seven years before, when the house was owned by someone else. Mr. Rutkowski had even been living in the house for several months before he fell.

Thursday, April 27, 2017

Attacking a void judgment in Maryland has no time limits.

Statutes of limitations prevent successful lawsuits that are too old. For example, a lawsuit for money damages filed more than three years after a car accident is too late because the statute of limitations.

But lawsuits don't always demand money damages. Claims can be made for injunctive relief (asking the court to stop something from happening) or for declaratory relief (asking the court to determine a legal obligation). These non-money damage claims are not restricted by statutes of limitations.

The distinction is very important where you are attacking the validity of an old judgment entered against you. It may be that you were not properly served, that your identity was hacked, or that the process of taking a judgment against you was somehow improper or unfair. It may be years before you discover the existence of the judgment on your credit report, or perhaps when you move to a new job.

Tuesday, March 28, 2017

Maryland subpoena rule expands to allow forced access to your land.

New court rules broadening the power of subpoenas have been approved by our Maryland Court of Appeals. Effective April 1, 2017 a Maryland litigant may obtain access to the real property of fellow litigant or third-party by issuing a discovery subpoena. 

Rule 2-422 allows one litigant to issue a subpoena to another litigant: 
to permit entry upon designated land or other property in the possession or control of the party upon whom the request is served for the purpose of inspection, measuring, surveying, photographing, testing, or sampling the property or any designated object or operation on the property...

Companion Rule 2-422.1 creates the same forced rights of access over the land held by someone not a party to the court case. This rule has many more procedural requisites intended balance the interests of third-parties who are strangers to the lawsuit, and to provide leverage over those same third-parties to permit litigants access to relevant and material information.

There are dozens of reasons to compel access over the lands of others, ranging from obvious disputes over access to questions of visibility and testing of eye witness accounts in many other types of cases. Let your imagination run wild.





Thursday, March 16, 2017

Broaden your perspective on law and the Executive Branch.

We are sharing a link to a newly published collaborative blog. It is focused on law and the Executive Branch. This includes questions about legal limits on the President's exercise of authority. Multiple contributors promise a balanced view.

Sunday, March 5, 2017

Password protect your production, please!


Document production has always been an arduous task for lawyers. Collection and review for privileged information, followed by redaction and creation of privilege logs accounts for large chunks of time, and commensurate expense, in civil litigation. We are careful because it is important to protect our client's privileged communications and our own work-product. It would never occur to any civil litigation lawyer to simply invite access to a client's files without some prior review.

But mistakes happen. Years ago, when faxed transmissions were the latest in technology, a court was asked to determine if privilege had been waived when one law firm inadvertently faxed information to all opposing law firms. Care in use of the new technology was widely counseled as a result of the case.
And here we are, again.
It is increasingly common in our practice to share voluminous document productions via cloud based applications, such as Box and Dropbox. The risk of not implementing the most basic password protection, let alone proper vetting before an upload, is fully on display in the February 9, 2017 decision Harleysville Ins. Co. V. Holding Funeral Home, a federal district court case out of Virginia.
In connection with pretrial discovery the insurance company plaintiff uploaded privileged video files to Box.com for sharing among its own employees and a related entity. The link was not password protected and was later shared with the insurance company's lawyers who included the unprotected file in a larger production made to a lawyer for the other side, who further shared the link with other defense lawyers. The privileged nature of the cloud based files was recognized by the defense lawyers, who elected to review the files without making any disclosure to the producing party. The sharing and subsequent disclosure was inadvertent- the downloading, reading and further sharing by the opposing defense lawyers was not.
The insurance company's lawyers discovered the inadvertent disclosure when the protected folder was produced in a reciprocal production by the defense. A back-and-forth ensued among counsel involving demands for return and destruction of the electronic files. The dispute triggered the insurance company's motion to disqualify the defense lawyers.
A federal judge ruled that the lawyers did not have to be disqualified as their replacements would continue to have access to the inadvertently obtained files. But the court went a step further to sanction the defense lawyers for having downloaded, read and shared the clearly privileged items. Citing well known ethical obligations the court chided counsel for not having notified the insurance company's lawyers of the inadvertent disclosures. Ethically speaking, the matter should have stopped there- the material should have then been removed from circulation. But for the failure to act ethically, the court ordered payment of the insurance company's legal fees associated with the motion.
Of course, the further distribution of the inadvertently produced files would have been prevented by application of password protection to the particular folder.
Accidents happen, and careful lawyers make inadvertent disclosures. But even the most contentious cases are guided by ethical constraints on the unfair use of mistakenly disclosed information covered by privilege. In our own practice we recently received a large electronic production via Box.com. Notice was given by one of the other lawyers that the upload inadvertently contained privileged information. This was followed by a quick acknowledgement among all other lawyers in the case that no access would be made until the production was properly adjusted--no harm, no foul.
After thirty years of practice I take comfort in the high ethical standards of my peers, even where we disagree on the facts, law and likely outcome of a case. But there is no need to unnecessarily test the boundaries of your opponent's ethics, so set a password, please!

Saturday, January 28, 2017

Checks and balances temporarily beat back Prez Trump's muslim immigration ban.

On January 28, 2017 Judge Ann Donnelly of the U. S.District Court for the Eastern District of New York entered an order staying operation of the Administration's faith-based travel ban.  A full copy of the order can be read here.

In Seattle, Judge James Robart entertained a similar motion and also entered an order staying operation of the travel ban. Here is a one hour video of the full court hearing, leading to his decision.

Here is the complete docket for the U.S. Court of Appeals for the Ninth Circuit where you can read all filings in the appeal.

Want to help the lawyers fighting the faith-based travel ban? Contribute.

February 10, 2016: Here are some links of interest, after the appellate court's decision to leave the temporary stay of the Executive Order in Place--

  1. February 9, 2017 Opinion of the U.S. Court of Appeals for the Ninth Circuit.
  2. Summary of the various Amicus Briefs filed by others.
  3. Amicus Brief of HIAS, a refugee relief organization.
  4. Amicus Brief of fifteen States and the District of Columbia.
  5. Memorandum of law to the Amicus Brief of fifteen States and D.C.
  6. Amicus Brief of the Fred Korematsu Ctr. for Law and Equality.
  7. Amicus Brief of the Anti-Defamation League.
  8. Amicus Brief of the ACLU and ACLU of Washington State.
  9. Amicus Brief of technology companies and various businesses.
  10. Motion for leave to file as Amicus Curiae by various law professors.
  11. Amicus Brief of Freedom Watch in favor of the Executive Order.

Thursday, January 26, 2017

Stop everything, I need a continuance!

Senators Bobby Zirkin and Wayne Norman have introduced a bill before the Maryland General Assembly making it easier to obtain a continuance in civil court cases.

Senate Bill 250 proposes that a judge "SHALL CONTINUE A CIVIL PROCEEDING IF ALL PARTIES AGREE TO THE CONTINUANCE."

The current practice gives a judge all the discretion to grant, or not grant a requested continuance. Things happen-- witnesses get sick, settlement discussions break-out as parties assess the true cost of proceeding with a case or hearing, and your lawyer may even get sick or have a family emergency.

I have stood before a judge to request a continuance based on a family emergency, with the consent of the other lawyer, only to be told that "the case can proceed with someone else from your office." This was wrong for several reasons, and could have worked a great hardship on our client had I not chosen to ignore the needs of my family. This bill seems to address such a situation.

But even where it might benefit lawyers, I question the wisdom of chipping away at a judge's discretion to run his or her courtroom. We lawyers are in service of the court, as officers of the court, to promote the smooth administration of justice. Ultimately, the judge is our boss on procedural issues in addition to being the final arbiter of the law in our cases.

As a hedge against unwarranted and last minute agreement to postpone a civil proceeding the bill does grant to the court discretion to assess costs. That means if you pull a case on the day of a jury trial, and the court has already pulled a few dozen folks from their jobs to create your jury pool, you and your client may become responsible for paying members of that pool.

But as I write this, I find my objection to this bill is the potential disruption to the court of last minute private agreements to pull hearings and trials. A court schedules events far in advance to permit parties to prepare, and to subpoena witnesses to testify. Those witnesses take time off work well in advance of the court event. Last minute continuances by private agreement, and without a judge weighing the relative inconvenience imposed on the court and others, will cause significant disruption. For example, a court room may well sit empty and unused because of the last minute hole in the schedule-- there is no time to bring in a replacement case at the last minute.

To save the proposal, I suggest that it set a deadline at least thirty-days prior to a court event for such agreements to postpone. Requests inside thirty-days should remain within the sole discretion of the court. This is consistent with existing practice in some jurisdictions. In Baltimore City, for example, requests made inside thirty-days cannot be made by written motion-- you must show up in person to make the request and often argue with the judge and opposing counsel.

The proposal must also consider court designated "disposition" dates, which determine the latest by which a case must be concluded. Private agreements cannot operate to push case disposition too far into the future or there will be a backlog of unresolved cases.

But a good start. Let's see if Sen. Zirkin and Sen. Norman can fine tune the proposal so that it operates effectively.

Visit our website and see what we've been working on.