Thornton Mellon LLC v. Adrianne Dennis Exempt Trust

478 Md. 280

274 A.3d 380

THORNTON MELLON LLC

v.ADRIANNE DENNIS EXEMPT TRUST

No. 28 Sept. Term, 2021

Court of Appeals of Maryland.

April 25, 2022

Argued by Geoffrey Polk (Attorney at Law, Chicago, IL; N. Tucker Meneely, Council, Baradel, Kosmerl & Nolan, P.A., Annapolis, MD), on brief, for Petitioner

Argued by William Steinwedel, Staff Attorney (Foreclosure Legal Assistance Project, Maryland Legal Aid Bureau, Baltimore, MD), on brief, for Respondent

Argued before:^* Getty, C.J., Watts, Hotten, Booth, Biran, Lynne A. Battaglia (Senior Judge, Specially Assigned), Robert N. McDonald (Senior Judge, Specially Assigned), JJ.

Watts, J.

This case involves a dispute over attorney's fees arising from an action to foreclose the right of redemption of property sold at a tax sale. The tax sale certificate holder purchased property at a tax sale, and the tax sale certificate advised that after six months an action could be brought to foreclose all rights of redemption as to the property. Six months after the tax sale, the tax sale certificate holder billed the property owner for attorney's fees and expenses for a complaint that had not yet been filed, supplied a release that stated that it was expired, and did not promptly notify the owner that the release could nonetheless be used to redeem the property. The property owner reimbursed the tax sale certificate holder for all attorney's fees and expenses actually owed at the time. Before the property owner was able to finish the redemption process, the tax sale certificate holder filed a complaint to foreclose the property owner's right of redemption and sought additional attorney's fees and expenses. The property owner later paid the county all amounts necessary to redeem the property.

Although numerous issues are raised in the petition for writ of certiorari , the overarching issue that we must determine is whether a property owner is required to reimburse a tax sale certificate holder for attorney's fees incurred after a complaint has been filed, i.e. , whether reimbursement under Md. Code Ann., Tax-Prop. (1986, 2019 Repl. Vol.) ("TP") § 14-843(a)(4)(i) is a mandatory or discretionary determination of the circuit court. If such a determination is discretionary, we must next address whether the circuit court may consider circumstances such as whether the tax sale certificate holder impeded the property owner's exercise of the right of redemption in denying reimbursement under TP § 14-843(a)(4)(i). In addition, we must determine whether the circuit court abused its discretion in denying the tax sale certificate holder's request for attorney's fees in exceptional circumstances under TP § 14-843(a)(4)(iii).

At the outset, to provide some background, we briefly discuss the statutes governing tax sales. Generally, after a property owner has fallen behind on paying property taxes, the local tax collector must sell the property. See TP § 14-808(a)(1). The local tax collector sells the property to the highest good-faith bidder at a public auction, known as a tax sale. See TP § 14-817(a)(2), (a)(4). The local tax collector provides the tax sale buyer with a tax sale certificate. See TP § 14-820(a). The tax sale certificate holder may file in a circuit court a complaint to foreclose the right of redemption after notices have been provided to the property owner and a specified number of months have passed since the tax sale (which varies by jurisdiction), but before two years have passed since the tax sale. See TP §§ 14-833(a), (a-1), (c)(1), 14-835(a).

Regardless of whether a tax sale certificate holder has filed a complaint, a property owner may redeem property at any time until a circuit court has finally foreclosed the right of redemption. See TP §§ 14-827, 14-833(b). To "redeem" means to "recover[ ] property taken for nonpayment of taxes, accomplished by paying the delinquent taxes and any interest, costs, and penalties." Tax Redemption , Black's Law Dictionary (11th ed. 2019). In Frederick County, the jurisdiction at issue, the required procedure is that the property owner pays fees and expenses due under TP § 14-843 to the tax sale certificate holder, and the certificate holder issues a release that the property owner uses to redeem the property.¹

Redemption is a condition precedent to the reimbursement of fees and expenses. See TP § 14-843(a)(1). In other words, if the property owner does not redeem the property, no fees or expenses are owed. See id. The attorney's fees and expenses for which the tax sale certificate holder may be reimbursed upon redemption under TP § 14-843 depend on which jurisdiction the property is in, how much time has passed since the tax sale, and whether the tax sale certificate holder has filed a complaint to foreclose the right of redemption. See TP § 14-843(a)(3), (a)(4), (a)(5), (b)(1).

Where a specified number of months have passed since the tax sale (which varies by jurisdiction and is four months in Frederick County) and a complaint to foreclose the right of redemption has not been filed, the tax sale certificate holder "may be reimbursed for[,]" among other fees, up to $500.00 in attorney's fees. TP § 14-843(a)(3)(i) 4, (a)(3)(ii)4. By contrast, where a complaint has been filed, the tax sale certificate holder "may be reimbursed for[,]" among other fees, $1,300.00 or $1,500.00 in attorney's fees, depending on whether an affidavit of compliance has been filed. TP § 14-843(a)(4)(i). In addition, where the tax sale certificate holder has filed a complaint to foreclose the right of redemption, the holder "may be reimbursed for[,] ... in exceptional circumstances, other reasonable attorney's fees incurred and specifically requested by the plaintiff or holder of a certificate of sale and approved by the court, on a case by case basis[.]" TP § 14-843(a)(4)(iii).

In this case, we hold that a determination of whether to order reimbursement of attorney's fees under TP § 14-843(a)(4)(i), after a complaint has been filed, is discretionary, and that, in making a determination as to reimbursement, a circuit court may consider whether the tax sale certificate holder impeded the property owner's exercise of the right of redemption. We conclude that, in the instant case, the circuit court did not abuse its discretion in declining to order reimbursement of the tax sale certificate holder attorney's fees under TP § 14-843(a)(4)(i). Nor did the circuit court abuse its discretion in declining reimbursement of attorney's fees in exceptional circumstances under TP § 14-843(a)(4)(iii).

The plain language of TP § 14-843(a)(4) is unambiguous in showing that trial courts are vested with discretion as to whether to order reimbursement of attorney's fees in tax sale foreclosure cases. In addition, the legislative history of the statutes governing tax sales confirms the unambiguous meaning of TP § 14-843(a)(4) and demonstrates the General Assembly's intent to encourage redemption. It would be at odds with the plain language of the statute and the intent of the General Assembly to find an abuse of discretion in a trial court's decision not to order reimbursement of fees where, as in this case, the tax sale certificate holder failed to cooperate and, indeed, impeded or hindered the property owner's efforts to redeem the property.

BACKGROUND

Tax Sale Certificate, Emails, and Related Documents

The Adrianne Dennis Exempt Trust ("the Trust"), Respondent, owns a house in Frederick County ("the Property"), and Adrianne Dennis is the only occupant of the Property and the only trustee and beneficiary of the Trust.² Dennis fell behind on paying taxes on the Property. On May 13, 2019, the Director of the Treasury of Frederick County conducted a tax sale and sold a tax sale certificate associated with the Property to Thornton Mellon, LLC ("Thornton Mellon"), Petitioner.

Under TP § 14-833(a)(1), with specified exceptions not relevant here, a tax sale certificate holder may file a complaint to foreclose the right of redemption six months after the tax sale. In this case, the Director of the Treasury of Frederick County issued a Certificate of Sale ("the Tax Sale Certificate"), stating that the Property had been sold to Thornton Mellon at public auction in a tax sale and that an action could be brought to foreclose the right of redemption after November 13, 2019. Accordingly, November 14, 2019 was the earliest date on which a complaint to foreclose the right of redemption could have been timely filed under TP § 14-833(a)(1).

On November 12, 2019, Dennis contacted Frederick County and learned the amount that she was required to pay in taxes and other fees to redeem the Property. The same day, Dennis visited Thornton Mellon's website and learned that the amount of attorney's fees and other fees due was $779.76, which included $500.00 in attorney's fees, a $250.00 title search fee, and a $29.76 postage fee.

On November 14, 2019, Dennis visited Thornton Mellon's website again and learned that there was a new balance due of $2,000.88, which included $1,500.00 in attorney's fees for the preparation and filing of a complaint, $181.12 for a filing fee charged by the court, and a $40.00 fee for service of process. At that time, Thornton Mellon had not filed a complaint to foreclose the right of redemption. In other words, although Thornton Mellon had not filed a complaint to foreclose the right of redemption, on November 14, 2019, Dennis's invoice included fees that may be reimbursed under TP § 14-843(a)(4)(i) only after a complaint has been filed.

Thereafter, on the afternoon of November 14, 2019, several emails and telephone calls were exchanged among Dennis, Geoffrey Polk, Thornton Mellon's counsel, and Kathy Martin, a Collections Specialist for Frederick County. After seeing the invoice charging the new fees, Dennis telephoned Polk at his Chicago office and he agreed that the unauthorized fees would be removed. A new invoice was generated, stating that the amount due was $779.76, which consisted of...