Sullivan v. Caruso Builder Belle Oak, LLC

251 Md.App. 304

253 A.3d 1142

Ronalda SULLIVAN

v.CARUSO BUILDER BELLE OAK, LLC

No. 1909, Sept. Term, 2019

Court of Special Appeals of Maryland.

July 2, 2021

Argued by: David M. Trojanowski (Cory L. Zajdel, Jeffrey C. Toppe, Z Law, LLC), Timonium, MD, for Appellant.

Argued by: Bruce L. Marcus (Sydney M. Patterson, MarcusBonsib, LLC, Greenbelt, MD) (Darin S Levine, Levine Law Group, LLC, Gaithersburg, MD), on the brief, for Appellee.

Panel: Nazarian, Beachley, Zic, JJ.^*

Zic, J.

When a purchaser buys residential real property in Prince George's County, the seller must provide the purchaser with certain disclosures regarding the deferred water and sewer assessment in the initial sale contract under § 14-117(a)(3)(i) of the Real Property Article of the Annotated Code of Maryland. Deferred water and sewer assessments are paid by purchasers and are used to reimburse the entities or persons who installed water and sewer lines on the residential real property. Based upon our reading of the statute, the purpose of these disclosures is to inform purchasers that the water and sewer assessments exist and to inform them of the costs of paying the assessments. Two of the required disclosures—the "amount remaining on the assessment, including interest" and the "estimated payoff amount of the assessment"—are at issue in this case. Md. Code Ann., Real Prop. § 14-117(a)(3)(i)(4), (7) (2015 Repl. & Supp. 2020). While the disclosures are not defined by the statute, the "amount remaining on the assessment, including interest" is the total cost of paying the assessment over a certain number of years, which includes interest. Purchasers, however, have the option of prepaying the entire assessment or paying off the amount remaining on the assessment in total satisfaction at any time—this is the "estimated payoff amount of the assessment."

Appellant Ronalda Sullivan contends that appellee Caruso Builder Belle Oak, LLC ("Caruso") did not comply with the disclosure requirements under § 14-117(a)(3)(i) in her initial sale contract for residential real property in Prince George's County and that she properly stated a claim upon which relief may be granted. Caruso argues that it complied with the disclosure requirements of § 14-117(a)(3)(i) and that Ms. Sullivan failed to state a claim upon which relief may be granted. The Circuit Court for Prince George's County agreed with Caruso and granted its renewed motion to dismiss. Ms. Sullivan appealed. As we explain below, we disagree with the circuit court and conclude that it erred by granting Caruso's renewed motion to dismiss. We therefore reverse the judgment of the circuit court and remand the case for further proceedings.

BACKGROUND

Ms. Sullivan contracted with Caruso, a developer, to purchase a newly constructed home on real property in Prince George's County. The real property is located in a subdivision known as Belle Oak. The parties entered into an Agreement of Purchase and Sale ("Purchase Agreement") on July 17, 2015, and Ms. Sullivan closed on her property on February 24, 2016. The Purchase Agreement contains 13 addenda and is subject to a Declaration for Deferred Water and Sewer Facilities Charges ("Declaration").

The Declaration states that the annual assessment "is for the purpose of reimbursing the Utility Company for its cost of providing Water and Sewer Facilities to the Lots." Addendum Number 11 to the Purchase Agreement provides that the assessment is "payable to a private utility company or its assigns (the ‘Company’)."¹ The Declaration requires each lot owner to pay an annual assessment of $900.00 per year, with a "reasonable rate of interest," for a period of 23 years. Addendum Number 1 to the Purchase Agreement provides that the interest rate on the assessment is 8%. In total, a purchaser is obligated to pay $20,700 for deferred water and sewer charges if the purchaser pays the fee annually over the 23-year period. Additionally, Addendum Number 11 states that "[t]here is a right of prepayment for the Water and Sewer Charges, and the prepayment figure may be ascertained by contacting the Company or by reviewing the Water and Sewer Declaration." The Declaration provides that "[u]pon written request of an Owner, the Utility Company, its successors, assigns, or designees shall provide Owner with a present day value of any assessment levied pursuant to this Declaration and Owner may prepay the outstanding assessment at present day values in total satisfaction of Owner[’s] obligations hereunder."

The disclosures under § 14-117(a)(3)(i) that Caruso provided to Ms. Sullivan are listed in Addendum Number 1 to the Purchase Agreement:

Disclosure Required Under Section 14-117 – Estimated Deferred Water and Sewer Charges.

The Purchaser is hereby advised ... that the Seller shall disclose the estimated cost ... of any deferred water and sewer charges for the Property for which the Purchaser may become liable.... The following additional information is hereby disclosed:

1. As stated above, there are deferred private water and sewer assessments;

2. The amount of the annual assessment $900.00 ;

3. The approximate number of payments remaining on the assessment is 23 years ;

4. The amount remaining on the assessment, including interest is $20,700 ;

5. The name and address of the person or entity most recently responsible for collection of the assessments is: Belle Oak Utilities, LLC c/o Sandy Excavating, 4230 Ray Road, LaPlata, Maryland 20646;

6. The interest rate on the assessments is 8 percent;

7. The estimated payoff amount of the assessment is $20,700 ;

8. The payoff of the assessment is allowed without prepayment penalty.

Importantly, the disclosures for the "amount remaining on the assessment, including interest" and the "estimated payoff amount of the assessment" are both $20,700.

Ms. Sullivan filed a complaint ("Original Complaint") against Caruso in the Circuit Court of Prince George's County on her own behalf and on behalf of a class of similarly situated persons.² Caruso subsequently filed a motion to dismiss for failure to state a claim, alleging that Ms. Sullivan's Original Complaint presented conflicting and inaccurate claims. Caruso argued that the Original Complaint erroneously alleged that the Purchase Agreement failed to disclose the "estimated payoff amount" of the water and sewer assessment because the "estimated payoff amount" was disclosed twice in the Purchase Agreement, in both Addendum Number 1 and Addendum Number 11. Ms. Sullivan initialed and signed the Purchase Agreement on the pages that contained the disclosures.

Ms. Sullivan subsequently filed a First Amended Class Action Complaint ("Amended Complaint"), adding supplemental factual allegations:

12. When Caruso enters into purchase agreements, Caruso fails to accurately disclose in the contract the estimated payoff amount of the water and sewer assessment.

....

15. Through its use of form purchase agreements, Caruso failed to disclose important information related to the existence and cost of the water and sewer assessments to new home purchasers in Prince George's County, Maryland.

....

27. The Declaration provides that an "Owner may prepay the outstanding assessment at present day values in total satisfaction of Owners’ obligations hereunder." Declaration, Liber 30568 at Folio 447.

28. [Ms. Sullivan]’s purchase agreement provided that the property is subject to annual water and sewer assessments in the amount of nine-hundred dollars ($900.00) per year for twenty-three (23) years.

29. The purchase agreement disclosed that the "amount remaining on the assessment, including interest is $20,700[.]"

30. The purchase agreement also disclosed that the "estimated payoff amount of the assessment is $20,700[.]"

(second and third alteration in original) (emphasis added). Ms. Sullivan further expanded upon the allegations in her single count for violation of Real Property § 14-117(a)(3)(i)(7) :

49. Md. Code Ann., Real. Prop. § 14-117(a)(3)(i)(7) provides that a contract for the initial sale of residential real property located in Prince George's County for which there are deferred private water and sewer assessments recorded by a declaration deferring costs for water and sewer improvements for which the purchaser may be liable shall contain a disclosure that includes the estimated payoff amount of the assessment.

50. [Ms. Sullivan]’s purchase agreement provided that the "estimated payoff amount of the assessment is $20,700[.]"

51. This amount ($20,700) was also the same amount disclosed as being the "amount remaining on the assessment, including interest[.]"

52. Because the Declaration provides that [Ms. Sullivan] may prepay the outstanding assessment ($20,700) at present value, the actual "estimated payoff amount" cannot be equal to the "amount remaining on the assessment, including interest" because the actual "estimated payoff amount" cannot include the 8% interest accruing on the water and sewer assessment for 23 years.

53. The actual "estimated payoff amount" can only be determined by performing a present value calculation of the total future amount due.

54. The actual "estimated payoff amount" must be less than the "amount remaining on the assessment, including interest."

55. [Ms. Sullivan]’s purchase agreement did not contain a disclosure that included the estimated payoff amount of the water and sewer assessment as required by Md. Code Ann., Real Prop. § 14-117(a)(3)(i)(7).

(second and third alteration in original). In response, Caruso filed a renewed motion to dismiss, incorporating the same arguments as its original motion to dismiss, which were previously noted above. The circuit court held a motions hearing and subsequently dismissed the Amended Complaint for failure to state a claim upon which relief may be granted as a matter of law. Specifically, the circuit court determined that § 14-117(a)(3)(i)(7) does not mandate a specific formula to calculate the "estimated payoff amount of the assessment" and that the section does not require...