H.C. Utilities, LLC v. Hwang

H.C. UTILITIES, LLC v. SONG Y. HWANG, ET AL.

No. 2423

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2018

January 29, 2020

CONTRACT—PERSONAL LIABILITY FLOWING FROM DECLARATION RECORDED IN LAND RECORDS

CONTRACT—STATUTE OF FRAUDS—DECLARATION NOT SIGNED BY THE PARTY TO BE CHARGED

Appellant owns the rights to a declaration (the "Declaration") recorded in the Land Records for Howard County, giving it the right to recover utility charges related to Water and Sewer facilities. The Declaration provides that owners of property covered by the Declaration must make annual utility payments to H.C. Utilities for the Water and Sewer facilities, and that owners are also responsible for charges unpaid and due upon taking title to such property. On October 23, 2006, Olasumbo Agbe-Davies purchased property subject to the Declaration. Agbe-Davies failed to pay the Water and Sewer charges, and apparently also failed to make mortgage payments.

After foreclosure, on April 6, 2016, appellee Hwang purchased the Agbe-Davies property. H.C. Utilities then sought payment of Agbe-Davies's unpaid Water and Sewer charges from Hwang pursuant to the Declaration, and filed a contract action to recover those charges. Hwang moved for summary judgment, and the circuit court found that although the Declaration constituted a binding contract between the parties, the debts associated with the unpaid charges were discharged in Agbe-Davies's foreclosure. The court therefore granted summary judgment in favor of Hwang. H.C. Utilities appealed.

Held: Judgment affirmed. Although the Declaration constitutes a "contract" for purposes of the Maryland Contract Lien Act, that Act does not provide a statutory cause of action creating personal contractual liability. Instead, the Act simply provides the procedures for obtaining a lien on property.

Having established that the Maryland Contract Lien Act does not create a cause of action for personal contractual liability, the Court applies basic principles of contract law to determine whether the Declaration creates personal contractual liability. The statute of frauds requires a contract to be signed in writing by the party to be charged where, relevant here: 1) the contract cannot be completed within one year, and 2) the contract concerns an interest in land. Here, the Declaration requires property owners to pay the annual Water and Sewer charges over the course of forty years. Additionally, the Declaration concerns an interest in real property. Because Hwang never signed the Declaration, Hwang is not personally liable for charges set forth in the Declaration. Circuit Court for Howard County

Case No. 13-C-17-113744

REPORTED

Fader, C.J., Beachley, Wilner, Alan M. (Senior Judge, Specially Assigned), JJ.

Opinion by Beachley, J.

On December 18, 2017, appellant H.C. Utilities, LLC, filed a single count complaint in the Circuit Court for Howard County against appellees Song and Myong Hwang ("Ms. Hwang¹"). The complaint sought damages for breach of contract stemming from a Declaration recorded in the Land Records for Howard County which established a covenant running with the property at 8875 Warm Granite Drive, Unit 28, Columbia, Maryland (the "Property"). Specifically, H.C. Utilities alleged that Ms. Hwang was personally obligated to pay charges provided for in the Declaration, namely, the charges due and unpaid by the previous owner at the time Ms. Hwang acquired title to the Property. Following Ms. Hwang's motion to dismiss, or in the alternative, for summary judgment, and H.C. Utilities's response and cross-motion for summary judgment, the parties appeared for a hearing on May 15, 2018.

On July 20, 2018, the circuit court issued a Memorandum Opinion denying H.C. Utilities's motion for summary judgment and granting Ms. Hwang's motion for summary judgment. Following H.C. Utilities's unsuccessful motion to alter or amend, H.C. Utilities noted a timely appeal, and Ms. Hwang noted a timely cross-appeal. H.C. Utilities presents the following question for our review:

Did the Circuit Court err in ruling that, despite the explicit provisions of a prior-recorded covenant running with the land, a foreclosure of a subsequently-recorded lien operated to extinguish the contractual liability of [Ms. Hwang], as enforcement of the provisions of a water and sewer declaration would offend public policy?

In her cross-appeal, Ms. Hwang presents the following question for our review:

Did the Circuit Court err in finding that the June 20, 2005 Utility Declaration recorded among the public land records constituted a contract between H.C. Utilities and Ms. Hwang?

As we shall explain, the Utility Declaration recorded among the land records did not, as a matter of law, create a contract between the parties such that Ms. Hwang could be susceptible to personal liability. Accordingly, we affirm the circuit court's granting of summary judgment in favor of Ms. Hwang, albeit for a different reason.²

FACTS AND PROCEEDINGS

The parties agree that there are no genuine disputes of material fact. On June 20, 2005, Patriot Homes, Inc. ("Patriot Homes") recorded in the Land Records of Howard County a Utility Declaration titled "Villas at Snowden Overlook Declaration Establishing Water and Sewer Facilities Charges" (the "Declaration"). The Declaration stated that Patriot Homes owned certain property in Howard County, and as part of a scheme of development, Patriot Homes would provide that property with water pipes, sewer pipes, and connection lines for water and sewer facilities ("Water and Sewer Facilities") pursuant to an agreement between Patriot Homes and Howard County. Rather than assess the costs of providing the Water and Sewer Facilities to Howard County, the Declaration explained that Patriot Homes would recover those costs from future owners of units on the property (and their successors) over the course of forty years.

The Declaration further provided that it was meant to establish a covenant running with the property, and that it was binding upon Patriot Homes and all of its future successors and assigns, as well as the future unit owners, and all of their successors and assigns. Relevant to this appeal, the Declaration contained the following language requiring the payment of charges due when a grantee would acquire title to a lot on the property:

From and after the date hereof, upon fee simple conveyance by the Declarant of any Unit or any other portion of the Property comprising a Unit or Units, any and each such grantee shall pay all charges provided for in this Declaration at the times and in the manner required herein, whether or not such requirement be so expressed in any conveyance deed. Said charges shall include, without limitation, all those charges due and unpaid at the time said grantee acquires title, and all those charges thereafter falling due as long as said grantee shall hold title of record, without the right in any event to reimbursement from the Declarant or its successors or assigns for charges which said owner may pay in advance.

On June 27, 2007, Patriot Homes assigned certain rights created under the Declaration to H.C. Utilities, thereby authorizing H.C. Utilities to legally enforce the rights and obligations, if any, arising under the Declaration.

On October 23, 2006, Olasumbo Agbe-Davies bought the Property pursuant to a Purchase Money Deed of Trust. Nearly ten years later, on April 6, 2016, a foreclosure action was initiated against Agbe-Davies, apparently due to a failure to make mortgage payments. Following that foreclosure and sale, on February 24, 2017, Ms. Hwang became the record owner of the Property. Ten months later, H.C. Utilities initiated this action against Ms. Hwang by filing a single-count complaint for breach of contract in the Circuit Court for Howard County. The complaint alleged that $12,494.29 in utility charges weredue when Ms. Hwang purchased the Property, and that pursuant to the Declaration, Ms. Hwang was personally liable for those charges. The complaint also sought to recover the costs of collection, late charges, and attorneys' fees. After filing an amended answer, Ms. Hwang filed a motion to dismiss, or in the alternative, for summary judgment. In its response to Ms. Hwang's motion, H.C. Utilities filed a cross-motion for summary judgment.

The parties appeared for a hearing on their respective motions for summary judgment on May 15, 2018. At the conclusion of the hearing, the circuit court instructed the parties to file supplemental memoranda, and held the matter sub curia. Following those filings, the circuit court issued its memorandum opinion. In its opinion, the circuit court held that the Declaration created "in personam" liability against Ms. Hwang, but that the April 6, 2016 foreclosure action extinguished any such liability. Thus, the court entered judgment in favor of Ms. Hwang.

H.C. Utilities timely moved to alter or amend that judgment, and following a hearing on September 6, 2018, the circuit court denied H.C. Utilities's motion. H.C. Utilities timely noted an appeal, and Ms. Hwang timely noted a cross-appeal.

DISCUSSION

The central issue in this case is whether the Declaration constitutes a legally binding contract between the parties so as to impose personal liability on Ms. Hwang. As we shall explain, the Maryland Contract Lien Act, codified at Md. Code (1974, 2015 Repl. Vol.), § 14-201 et. seq. of the Real Property Article ("RP"), defines "contracts" for purposes of recording liens against property, but does not create an independent cause of actionsounding in contract. Furthermore, we are aware of no authority in this State holding that a declaration signed by a single party and recorded in the land records establishes personal liability against owners of property whose land is subject to that declaration. We therefore conclude that, because the Declaration at issue here does not constitute an enforceable contract for personal liability under Maryland contract law, H.C....