Wheeling v. Selene Finance, LP: The Safe Harbor for Landlords Conducting Self-Help Evictions In Maryland Is Not So Safe After All

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In an April 30, 2021 opinion, Maryland highest court, the Court of Appeals, largely reversed a decision of the Court of Special Appeals. The Court of Appeals held that: (a) posting a notice under Section 7-113 of Maryland’s Real Property Article stating that a landlord believes a property has been abandoned so that a self-help eviction can be carried out is a violation of both that Article and the Maryland Consumer Protection Act if the landlord has not conducted a reasonable investigation as to whether the property has been abandoned before posting the notice; (b) occupants who have not been evicted or had their access to property restricted may still recover for emotional injury that results in physical injury evidenced by objective physical manifestation; and (c) attorneys’ fees incurred by occupants in determining their rights as a result of the posting of the notice do not constitute “damages” recoverable under either statute.

Real Property Article Section 7-113 was enacted in response to a 2012 Court of Appeals decision upholding the right of property owners to evict occupants by self-help without any court proceeding. Section 7-113 generally outlaws self-help evictions of occupants of residential property. However, it provides for an exception if the property is abandoned and the owner posts a notice on the property providing its contact information, stating that it believes the property to be abandoned, and advising any occupant that if the occupant does not contact the owner within fifteen days, the owner will presume the property to be abandoned and proceed with self-help eviction. The statute provides for a private cause of action in the event of a violation in which a party damaged by a violation may recover damages, reasonable attorneys’ fees and costs.

The Maryland Consumer Protection Act prohibits any “unfair, abusive, or deceptive trade practice” in the lease or rental of “consumer realty.” It too provides for a private right of action and for the recovery of attorneys’ fees.

The case before the Court of Appeals involved two sets of occupants of residential property. The Wheelings rented the property that they occupied from Donna Poole. Ms. Poole had financed the property with a mortgage loan which was in default. The mortgage servicer posted a notice on the property stating that it believed the property to be abandoned, providing contact information, and stating that the property would be presumed abandoned and that it would evict by self-help unless it was contacted within fifteen days. It conducted no investigation before posting the notice. No foreclosure case was pending against Ms. Poole at the time.

Ms. Rodriguez occupied a house that she had financed with a mortgage loan. After she defaulted, the lender foreclosed and purchased her property at the foreclosure sale. The lender obtained an order for possession of the property in the foreclosure case. However, before the sheriff enforced that order, the mortgage servicer posted a notice substantially the same as the notice posted on the property occupied by the Wheelings. The lender knew that Ms. Rodriguez was living in the property because she had contested the foreclosure.

The Wheelings and Ms. Rodriguez sued the lenders and the mortgage servicer. They alleged that the posted notices constituted threats to evict them by self-help in violation of Section 7-113 and that a threat to use impermissible self-help was a deceptive practice that violated the Consumer Protection Act. Neither alleged that they had been evicted by self-help or that their use of the property had been restricted by self-help. However, they alleged that they had suffered “emotional damages and losses with physical manifestations” and sought attorneys’ fees incurred in “knowing their rights” under Section 7-113 and the Consumer Protection Act.

The lenders and the servicer filed motions to dismiss. The trial court granted the motions. It held that the posting of a notice in the form prescribed by Section 7-113 does not constitute a threat to conduct an illegal eviction. It also held that the Wheelings and Ms. Rodriguez had not stated a claim under Section 7-113 because they had not been evicted or deprived of their property by self-help. Finally, it held that the Wheelings and Ms. Rodriguez had failed to allege recoverable damages.

The Court of Special Appeals affirmed the dismissal. Agreeing with the trial court, the Court of Special Appeals said that a cause of action under Section 7-113 “is limited to cases in which the party seeking possession locks a protected person out of the property, intentionally terminates or diminishes utility water and sewer and similar services to the property, or takes any other action which deprives a protected resident of actual possession of the property.” The Court of Appeals also agreed that the complaints did not allege compensable damages under the Consumer Protection Act because the Wheelings and Ms. Rodriguez did not allege that they “manifested any physically observable manifestations of the emotional distress” cause by the defendants. Finally, the Court of Special Appeals held that attorneys’ fees incurred in “knowing rights” under Section 7-113 and the Consumer Protection Act were not recoverable under those statutes.

The Court of Appeals agreed with the Court of Special Appeals on only the last point. Since Section 7-113 or the Consumer Protection Act provide for recovery of attorneys’ fees incurred in actions brought under them, attorneys’ fees incurred before any action was filed could be recovered only if they fell under an exception to the “American Rule” that litigants are responsible for their own attorneys’ fees. The Court of Appeals found that none of the recognized exceptions was applicable.

The Court of Appeals rejected the conclusion that a party must lose actual possession of property to have a cause of action under Section 7-113. As Section 7-113 outlaws both self-help evictions of occupants of residential property and threatening to take possession of residential property, limiting the statute to cases where the plaintiff had lost possession would read “threatening to take possession” out of the statute.

Moreover, the Court said that the exception to liability under Section 7-113 applied only if the property owner “reasonably believes” that the property has been abandoned. The Court said that to be protected from liability, the property owner must conduct a reasonable investigation as to whether the property is occupied. Absent such an investigation, there is no basis for forming a reasonable belief as to whether it is occupied.

On the issue of damages, the Court of Appeals said that the lower courts had confused what the Wheelings and Ms. Rodriguez had to prove to recover damages with what they had to allege to withstand a motion to dismiss. The lower courts were right that they needed to prove physical injury “by some objective physical manifestation” to recover emotional damages. However, to avoid dismissal of their complaints, the Wheelings and Ms. Rodriguez were required only to allege facts showing their entitlement to relief. By alleging that they had suffered “emotional damages and losses with physical manifestations,” the Wheelings and Ms. Rodriguez had met that standard.

In a strenuous and extensive dissenting opinion, Judge Getty, joined by Judge Hotten, said that the majority’s interpretation of Section 7-113 was not supported by either the language of the statute or its legislative history. Judge Getty said that a notice posted pursuant to Section 7-113 could not be a “threat” because the statute expressly requires that a threat involve an “imminent” taking of possession. As the notices said that the self-help eviction was believed to be permissible because the properties at issue were abandoned, gave the occupants the information needed to inform the creditors that the properties were not abandoned, and gave them 15 days in which to do so, there as no imminent taking of possession. Moreover, a reading of the statute as a whole and an examination of its legislative history demonstrated that the provision authorizing self-help evictions in the case of properties believed to be abandoned as long as the required notice was given was intended as a “safe harbor” for landlords. By holding that posting the notice without a reasonable investigation is, by itself, a violation of Section 7-113, the majority converted what was supposed to be a safe harbor into an additional basis for liability.

Section 7-113 was enacted in response to a decision of the Court of Appeals. The disagreement of the Court of Special Appeals and the Court of Appeals over the interpretation of the statute, not to mention the disagreement among the judges of the Court of Appeals, may prompt yet another legislative response from the Maryland General Assembly on the subject to self-help evictions.

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