UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SOLOMON S. PILZ, and his wife;

MARIE ANN LANDGREBE PILZ,

Plaintiffs-Appellants,

v.

No. 96-2243

FEDERAL DEPOSIT INSURANCE

CORPORATION, as Receiver for

Perpetual Savings Bank, F.S.B.;

SENTINEL TITLE CORPORATION,

Defendants-Appellees.

Appeal from the United States District Court

for the District of Maryland, at Baltimore.

Marvin J. Garbis, District Judge.

(CA-95-3808-MJG)

Argued: June 2, 1997

Decided: July 1, 1997

Before RUSSELL and HAMILTON, Circuit Judges, and

HOWARD, United States District Judge for the

Eastern District of North Carolina,

sitting by designation.

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Vacated and remanded by unpublished per curiam opinion.

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COUNSEL

ARGUED: Thomas Joseph Dolina, BODIE, NAGLE, DOLINA,

SMITH & HOBBS, P.A., Towson, Maryland, for Appellants. Law-
rence Hipson Richmond, FEDERAL DEPOSIT INSURANCE CORPORATION, Washington, D.C., for Appellees. ON BRIEF: Kelly A.

Kormer, BODIE, NAGLE, DOLINA, SMITH & HOBBS, P.A., Towson, Maryland, for Appellants. Ann S. DuRoss, Assistant General

Counsel, Colleen B. Bombardier, Senior Counsel, Marta W. Berkley,

FEDERAL DEPOSIT INSURANCE CORPORATION, Washington,

D.C., for Appellee FDIC; Deborah M. Whelihan, JORDAN, COYNE

& SAVITS, Washington, D.C., for Appellee Sentinel Title.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Plaintiffs Solomon and Marie Pilz appeal the district court's Fed.

R. Civ. P. 12(b)(6) dismissal of their claims against the

defendants,

the Federal Deposit Insurance Corporation (FDIC) (which had been

substituted for Perpetual Savings Bank, F.S.B. (Perpetual))1 and

Sentinel Title Corporation (Sentinel). The sole issue presented by

this

appeal is whether the Pilzes' claims against the FDIC and Sentinel,

as alleged in their complaint, are barred by Maryland's general

threeyear statute of limitations. See Md. Code Ann., Cts. & Jud. P. § 5-

101. The district court held that the claims were barred because

the

Pilzes had "actual notice" of their claims against the FDIC and

Senti-

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1 Because Perpetual was in receivership at the time the Pilzes

filed their

complaint in Maryland state court, the Resolution Trust Company

(RTC)

was substituted for Perpetual as a defendant pursuant to the

Financial

Institution Reform, Recovery, and Enforcement Act of 1989 (FIRREA),

Pub. L. No. 101-73, 103 Stat. 183 (codified as amended in scattered

sections of 12 and 18 U.S.C.). Accordingly, the RTC removed the action

to

the United States District Court for the District of Maryland

pursuant to

12 U.S.C. § 1819(b)(2)(A) and 28 U.S.C. § 1441(b). After the RTC

was

dissolved, the FDIC was substituted as the defendant in Perpetual's
place. See 12 U.S.C. § 1441a(m)(2).

2
nel more than three years before filing suit and thus, the district

court

dismissed the complaint pursuant to Fed. R. Civ. P. 12(b)(6).

Because

the district court erred when it determined that, as a matter of

law, the

Pilzes had actual notice of their claims against the FDIC and

Sentinel

more than three years before they filed their complaint in state

court,

we vacate the district court's dismissal of the Pilzes' claims and

remand the case to the district court for further proceedings

consistent

with this opinion.

I.

In their complaint, the Pilzes alleged that in early January 1992

they met with a representative of Perpetual in order to refinance

their

house, which is located at 6415 Dry Barley Lane, Columbia, Maryland (the Property). During that meeting, the Pilzes gave

Perpetual's

representatives an unrecorded deed to the Property dated November

7, 1991, which would have transferred ownership in the Property

from Solomon Pilz, Marie Pilz, and Charles Osterwald as joint

tenants

to Solomon Pilz and Marie Pilz as joint tenants. At the meeting,

Perpetual told the Pilzes that they would be able to refinance the

Property

and assured them that, since they were married, a new deed would be

prepared by Sentinel which would title the Property in them as

"husband and wife" or tenants by the entireties. See (J.A. 7).

During the month of January 1992, the Pilzes received several documents in preparation for the loan closing which was scheduled for

February 3, 1992. These documents included a title insurance

binder,

dated January 29, 1992, wherein Sentinel represented to Perpetual

that the Property was to be titled in the Pilzes as"husband and

wife."2

See id.

At the February 3, 1992 closing, the Pilzes received the usual loan

closing documents relevant to the refinancing of their mortgage.

The

Pilzes also executed the deed, as prepared by Sentinel, which

vested

title to the Property in them as joint tenants and not as tenants

by the

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2 It is not clear from the complaint whether the Pilzes were given

access to the title insurance binder at or before the February 3,

1992 closing. However, under normal circumstances the title insurance binder

would have been available to them at closing.

3
entireties. However, in their complaint, the Pilzes assert that

they

believed the deed prepared by Sentinel and executed on February 3,

1992 conveyed the Property to them as "husband and wife" or tenants

by the entireties, consistent with Perpetual and Sentinel's

assurances.

They also assert that none of the above-mentioned documents gave

them any reason to suspect otherwise. Further, the Pilzes claim

they

did not know the legal distinctions between a husband and wife owning property as joint tenants as opposed to their owning property

as

tenants by the entireties.

Subsequently, in 1994, Solomon Pilz had a judgment recorded

against him for $63,000. As a result of the fact that the Property

was

deeded to the Pilzes as joint tenants, rather than as tenants by

the

entireties, the judgment creditor allegedly threatened to enforce

his

judgment against Solomon Pilz by attaching his one-half interest in

the Property. In order to keep the judgment creditor from securing

a

lien on Solomon Pilz's one-half interest in the Property, the

Pilzes

secured a loan from relatives to satisfy the $63,000 judgment. Due

to

various other costs, including interest and attorneys' fees

necessitated

by the loan from relatives, the Pilzes claim they have suffered

$81,044 in damages allegedly due to Perpetual and Sentinel's

professional negligence, negligent misrepresentation and breach of an

express warranty. In sum, the Pilzes claim that they did not know

until the $63,000 judgment was entered against Solomon Pilz that

Perpetual and Sentinel had not performed as promised and thus, they

did not know until some point in 1994 that the Property was deeded

to them with the legal significance of a joint tenancy, rather than

a

tenancy by the entireties.

On the basis of the facts alleged above, the Pilzes filed a

complaint

against Perpetual and Sentinel in the Circuit Court for Baltimore

County, Maryland on November 15, 1995. In that complaint, the

Pilzes raised various claims, including professional negligence,

negligent misrepresentation, and breach of an express warranty, all of

which revolve around Perpetual and Sentinel's alleged failure to

furnish a deed conveying the Property to the Pilzes as tenants by the

entireties or "husband and wife." After the matter had been removed
to federal district court and the FDIC was substituted for

Perpetual,

the FDIC, without answering the complaint, filed a motion to

dismiss

the Pilzes' complaint asserting that: (1) the district court lacked

juris4
diction over the Pilzes' claims because they failed to exhaust

their

administrative remedies as required by 12 U.S.C. § 1821(d), and (2)

the claims stated in the complaint were barred by Maryland's

general

three-year statute of limitations, see Md. Code Ann., Cts. & Jud.

P.

§ 5-101.3 Thereafter, the district court stayed the matter so the

Pilzes

could pursue their administrative remedies against the FDIC. Once

the Pilzes had exhausted their claims as required by 12 U.S.C.

§ 1821(d)(5), and the district court had lifted the stay, the

district

court reviewed the Pilzes' claims de novo, see Brady Dev. Co., Inc.

v. Resolution Trust Co., 14 F.3d 998, 1003 (4th Cir. 1994).

After reviewing the merits of the Pilzes' complaint, the district

court dismissed the Pilzes' claims against both the FDIC and

Sentinel

pursuant to Fed. R. Civ. P. 12(b)(6), concluding that the Pilzes

knew

or should have known they had claims against the FDIC and Sentinel

which arose more than three years before November 15, 1995. 4 Specifically, the district court reasoned that because: (1) the Pilzes

knew

that the November 7, 1991 unrecorded deed provided for the conveyance of the Property to them as joint tenants rather than tenants

by the

entireties, and (2) the February 3, 1992 deed actually titled the

Property to them as joint tenants, they should have been put on at

least "inquiry notice" of the manner in which the Property was actually

titled

in them.

II.

We review de novo whether the FDIC and Sentinel are entitled to

a dismissal of the Pilzes' complaint for failure to state a claim

upon

which relief could be granted. See Schatz v. Rosenberg, 943 F.2d

485,

489 (4th Cir. 1991), cert. denied, 503 U.S. 936 (1992). When

review-

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3 Md. Code Ann., Cts. & Jud. P.§ 5-101 states that unless otherwise

provided, "[a] civil action at law shall be filed within three

years from

the date it accrues . . . ."

4 Although Sentinel never filed a motion to dismiss, the district

court

concluded that because the Pilzes' claims against both defendants
arose

on the same day (the loan closing held on February 3, 1992) and

because

that day was more than three years prior to the date they filed

their suit

in Maryland state court (November 15, 1995), their suit was time

barred

as to both the FDIC and Sentinel.

5
ing a motion to dismiss for failure to state a claim, factual

allegations

must be construed liberally in favor of the plaintiffs. See

Battlefield

Builders, Inc. v. Swango, 743 F.2d 1060, 1061-62 (4th Cir. 1984).

We

will affirm a dismissal pursuant to Rule 12(b)(6) only when it

appears

beyond doubt that the plaintiffs can prove no set of facts in

support

of their claims which would entitle them to relief. See Conley v.

Gibson, 355 U.S. 41, 45-46 (1957).

III.

The parties do not dispute that Maryland's three-year statute of

limitations applies to this case. Nor is there any dispute that the

statute of limitations issue with regard to notice is dispositive of

the

FDIC and Sentinel's entitlement to a dismissal of the Pilzes'

claims

under Rule 12(b)(6). Pursuant to Maryland's general three-year

statute of limitations, the Pilzes' claims against the FDIC and

Sentinel are

time barred if the district court was correct in determining that

the

Pilzes should have been aware that the Property was not conveyed to

them as tenants by the entireties or "husband and wife" on February

3, 1992. However, the Pilzes' claims are not time barred if they

only

received actual notice of their claims when the $63,000 judgment

was

entered against Solomon Pilz. Thus, this appeal boils down to the

single question of when the Pilzes knew, or reasonably should have

known, under Maryland law, that the deed they executed on February

3, 1992 did not title the Property in them as tenants by the

entireties

or "husband and wife."

According to Maryland's discovery rule, the Pilzes' claims against

the FDIC and Sentinel accrued when the Pilzes knew or reasonably

should have known that Perpetual and Sentinel did not abide by

their

obligation to convey the Property to them as tenants by the

entireties

or "husband and wife" (i.e., when the Pilzes had actual notice of

their

claims). See Poffenberger v. Risser, 431 A.2d 677, 680-81 (Md.

1981). Constructive notice is not sufficient according to

Maryland's
discovery rule and therefore, the mere existence of the "joint

tenant"

language in the Pilzes' deed is not sufficient by itself to start

the limitations clock running on the Pilzes' claims. See id. Instead, there

must

have been some "fact or circumstance" which should have led the

Pilzes, through the exercise of due diligence, to engage in a

further

inquiry and thereby discover the defect in the deed. See id. at

680.

6
Poffenberger, the seminal case on Maryland's "discovery rule,"

itself involved a defect in the plaintiff's chain of title about

which the

Maryland Court of Special Appeals determined that Poffenberger

should have had constructive notice. See Poffenberger v. Risser,

421

A.2d 90, 92 (Md. Ct. Spec. App. 1980), rev'd, 431 A.2d 677 (Md.

1981).5

However, the Maryland Court of Appeals rejected the lower court's

constructive notice theory and concluded that there was a genuine

issue of fact regarding whether Poffenberger had actual notice of

Risser's negligence in not centering the house on his lot. See

Poffenberger, 431 A.2d at 679-81. Specifically, the Maryland Court

of Appeals reasoned that despite the records in his chain of title,

Poffenberger was not necessarily put on "actual notice" that his house

violated the side-lot restriction. See id. at 681. The Maryland

Court

of Appeals did not even find that Poffenberger should have been put

on "inquiry notice" by what the lower court termed "the obviously

off-center" house coupled with the restriction contained in his

chain

of title. See id. In short, the Maryland Court of Appeals concluded

that the reasonableness of Poffenberger's reliance on Risser's

expertise as a builder and his trust in Risser's ability to center the

house

on his property was a question of fact that a jury must resolve.

See

id. at 680-81.

Following the Poffenberger decision, Maryland courts have applied

the "discovery rule" in such a manner that makes it difficult for

a

defendant to secure judgment as a matter of law on the issue of

notice

as it pertains to the statute of limitations. See generally, O'Hara

v.

Kovens, 503 A.2d 1313, 1320 (Md. 1986) ("Whether or not the plain- _________________________________________________________________

5 In that case, the Poffenbergers purchased a lot in an undeveloped

subdivision from a developer in August 1972. The subdivision was

subject

to a residential setback restriction of fifteen feet from side-lot

lines. See

431 A.2d at 678. That restriction was clearly set forth on the

recorded

sub-division plat to which the Poffenbergers had ready access. See

id.

The Poffenbergers then contracted with Risser to build a house for

them

which was to be "centered" on the lot so as not to run afoul of the
fifteen

foot side-lot restriction. See id. In March 1976, the neighboring

lot was

surveyed prior to a house being constructed on that site and Mr.

Poffenberger allegedly discovered, for the first time, that his house was

built

less than eight feet from the neighboring property line, in

violation of the

side-lot restriction. See id.

7
tiff's failure to discover his cause of action was due to failure

on his

part to use due diligence, or to the fact that defendant so

concealed

the wrong that plaintiff was unable to discover it .. . is

ordinarily a

question of fact for the jury." (quoting Faust v. Hosford, 93 N.W.

58,

59 (Iowa, 1903)). Even when plaintiffs have some reason to suspect

they may have a claim, Maryland courts have been unwilling to

resolve the notice issue as a matter of law, especially when a

plaintiff

has relied on the defendant's or some other skilled person's assurances that there was no problem. See Baysinger v. Schmid Prod. Co.,

514 A.2d 1, 4 (Md. 1986) (Because a doctor told the plaintiff that

an

intrauterine device was most likely not causing her abdominal pain,

"[w]hether a reasonably prudent person should then have undertaken

a further investigation is a matter about which reasonable minds

could

differ . . . ."); DeGroft v. Lancaster Silo Co., Inc., 527 A.2d

1316,

1325-26 (Md. Ct. Spec. App. 1987).

The DeGroft case is particularly instructive on the difficulty a

defendant has, under Maryland law, to secure judgment as a matter

of law against a plaintiff on a notice based statute of limitations

issue.

In DeGroft, the trial court concluded that the plaintiff was put on

inquiry notice in 1977 when his neighbors told him that the silo

the

defendant had built for him was leaning. See id. at 1318. With that

in mind, the trial court determined that reasonable minds could not

differ on the notice issue because DeGroft himself called the

defendant to complain about the leaning, thereby demonstrating his

"actual

knowledge" of the problem. See id.

The Maryland Court of Special Appeals disagreed. See id. at 1325.

Specifically, the Maryland Court of Special Appeals concluded that

a reasonable jury could conclude that DeGroft was entitled to rely

on

Lancaster's assurances that the silo was properly constructed,

thereby

putting his suspicions to rest:

It may be that an ordinary and prudent person... would

have disregarded [Lancaster's] assurances... [a]nd it may

be that the... extent of the leaning . . . was so marked

that

an ordinary and prudent person would have concluded that

some fault on the part of [Lancaster] might have been the
cause of the leaning.

8
But these were matters for the trier of fact to determine

on a record more ample than that before the court....

Id. at 1326.

After considering Poffenberger, Baysinger, and DeGroft, and the

manner in which Maryland courts have applied the "discovery rule,"

it becomes clear that the district court erred when it resolved the

notice issue against the Pilzes as a matter of law at this stage of

the

proceedings. It is true that the Pilzes knew the November 7, 1991

unrecorded deed would have transferred the Property to them as

"joint

tenants," and that the Pilzes at least should have known that the

February 3, 1992 deed also used the term "joint tenants." However,

based

on the assurances allegedly given by Perpetual and Sentinel, the

Pilzes have alleged facts which entitle them to avoid a dismissal

of

their claims pursuant to Rule 12(b)(6). The Pilzes' knowledge of

the

underlying events was no more pronounced than Poffenberger's

knowledge that his house was not centered on his property, or

DeGroft's "actual knowledge" that his silo was poorly constructed,

even after his neighbors told him that it was leaning.

Specifically, the

Pilzes could possibly establish that they were relying on Perpetual

and

Sentinel's expertise to draft a deed in accordance with Perpetual

and

Sentinel's own assurances.

In sum, this was not one of the small number of cases that was ripe

for dismissal pursuant to Rule 12(b)(6). See Rogers v.

Jefferson-Pilot

Life Ins. Co., 883 F.2d 324, 325 (4th Cir. 1989) ("In our view, .

. .

a Rule 12(b)(6) motion should be granted only in very limited

circumstances."). We are not passing on the overall merits of the Pilzes'

claims, nor forecasting their possible success at the summary judgment stage, or before a jury, should the case proceed that far.

Instead,

we simply conclude that the Pilzes are entitled to go forward with

their case because the complaint sets forth sufficient facts such

that

it survives a motion to dismiss.

IV.

For the reasons stated herein, we vacate the district court's dismissal of the Pilzes' claims pursuant to Fed. R. Civ. P. 12(b)(6)
and

9
remand the case to the district court for further proceedings

consistent

with this opinion.

VACATED AND REMANDED

10