Opinion ID: 2681037
Heading Depth: 2
Heading Rank: 3

Heading: Muskin Governs the Outcome

Text: Put simply, the hash of the present case was settled effectively by the Court’s opinion in Muskin v. State Dep’t of Assessments & Taxation, 422 Md. 544, 30 A.3d 962 (2011). “Together, Maryland’s Declaration of Rights and Constitution prohibit the retrospective reach of statutes that would have the effect of abrogating vested rights.” Id. at 555, 30 A.3d at 968 (citing Dua, 370 Md. at 630 n.9, 805 A.2d at 1076 n.9). “It is only in times of revolution that, by a stroke of the pen, vested rights founded upon contract have been annihilated.” Mayer, supra, at 128. In Muskin, we reiterated the well-settled principle that “Article 24 of the Maryland Declaration of Rights, guaranteeing due process of law, and Article III, § 40 of the Maryland Constitution, prohibiting governmental taking of property without just compensation, have been shown, through a long line of Maryland cases, to prohibit the retrospective reach of statutes that would result in the taking of vested property rights.” - 11 - Muskin, 422 Md. at 555-56, 30 A.3d at 968 (footnote omitted) (citing Dua, 370 Md. at 604, 805 A.2d at 1061). We said there, as well as in Dua, that “[i]t has been firmly settled by this Court’s opinions that the Constitution of Maryland prohibits legislation which retroactively abrogates vested rights. No matter how ‘rational’ under particular circumstances, the State is constitutionally precluded from abolishing a vested property right or taking of a person’s property and giving it to someone else.” Id. at 556-57, 30 A.3d at 969 (alteration in original) (quoting Dua, 370 Md. at 623, 805 A.2d at 1072). 13 Thus, as we did in Muskin, “[t]o determine whether [the challenged statute (Chapter 286 in this case)] is constitutional under Maryland law, we evaluate whether the statute purports to apply retrospectively and abrogates a vested right or takes property without just compensation.” Id. at 557, 30 A.3d at 969. “If a retrospectively-applied statute is found to abrogate vested rights or takes property without just compensation, it is irrelevant whether the reason for enacting the statute, its goals, or its regulatory scheme is 13 This Court explained in Muskin that [s]tatutes have been found unconstitutional under the Maryland Declaration of Rights and Constitution for violating due process, the takings clause, or both. We said in Dua v. Comcast Cable of Md., 370 Md. 604, 630, 805 A.2d 1061, 1076 (2002), a “statute having the effect of abrogating a vested property right, and not providing for compensation, does ‘authorize private property, to be taken . . . , without just compensation’ (Article III, § 40). Concomitantly, such a statute results in a person or entity being ‘deprived of his . . . property’ contrary to ‘the law of the land’ (Article 24).” Muskin, 422 Md. at 557 n.8, 30 A.3d at 969 n.8. - 12 - ‘rational.’” Id. (citing Dua, 370 Md. at 623, 805 A.2d at 1072). “[T]he relevant standard for determining whether a retrospective statute is constitutional is ‘whether the vested rights are impaired and not whether the statute has a rational basis.’” Id. (quoting Dua, 370 Md. at 623, 805 A.2d at 1072).
As we stated in Muskin, “[r]etrospective statutes are those ‘acts which operate on transactions which have occurred or rights and obligations which existed before passage of the act.’” Muskin, 422 Md. at 557, 30 A.3d at 969 (citing Langston v. Riffe, 359 Md. 396, 406, 754 A.2d 389, 394 (2000)). Generally, retrospective statutes that abrogate vested rights are unconstitutional. Id. Although “there is no bright line rule for determining what constitutes retrospective application, . . . retrospective statutes are those that ‘would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.’” Id. at 557-58, 30 A.3d at 969 (quoting John Deere Const. & Forestry Co. v. Reliable Tractor, Inc., 406 Md. 139, 147, 957 A.2d 595, 599 (2008)). In determining whether a statute acts retrospectively, we evaluate “‘fair notice, reasonable reliance, and settled expectations’ to determine ‘the nature and extent of the change in law and the degree of connection between the operation of the new rule and a relevant past event.’” Id. at 558, 30 A.3d at 970 (quoting Landgraf v. USI Film Prods., 511 U.S. 244, 270, 114 S.Ct. 1483, 1499, 128 L.E.2d 229, 255 (1994)). See also John Deere, 406 Md. at 147-48, 957 A.2d at 599-600 (adopting the Supreme Court’s Landgraf factors analysis for retrospectivity analysis in this State). - 13 - Applying the Landgraf model to the present case, as we did in Muskin, fair notice is not satisfied by the provisions of Chapter 286. Chapter 286 was passed on 2 April 2007, and made effective three months later on 1 July 2007. Thus, if a tenant defaulted prior to the enactment of Chapter 286, but the ground lease owner had not acted upon his/her/its accrued right to re-enter (i.e. had not begun yet the process for ejectment), the ground lease holder’s present right to seek a judicial remedy is eliminated by Chapter 286 in but three months. Moreover, Chapter 286 impacts severely the reasonable reliance and settled expectations of ground rent owners by virtue of its extinguishment of the right of reentry and destruction of the reversionary interest. As this Court stated in Muskin, the settled expectations of ground rent owners does not lie solely in future rents, but rather “[g]round rent owners rely reasonably on the future income from ground rents or the ability to sell the fee simple interest on the open market or in the future, if necessary.” Muskin, 422 Md. at 558, 30 A.3d at 970 (emphasis added). “[A] ground rent holder’s fee simple interest remained . . . as settled an expectation as any fee simple owner’s interest in real property.” Id. (emphasis added) (citing Heritage Realty, Inc. v. Mayor of Baltimore, 252 Md. 1, 248 A.2d 898 (1969)). “The terms of the ground rent lease are fixed over the 99 year lease period and the conditions that create a reversionary interest in the property are predetermined.” Id. (emphasis added). Just as the Court found in Muskin, prior to adoption of Chapter 286, “owners of ground rent properties had no reason to believe that their interests were anything but well-settled, and had a reasonable - 14 - basis to rely on the continuation of the state of the law permitting ground rent leases to continue.” Id. As established further in Muskin, “[g]round rent leases, established through transactions consummated many years ago, create rights and obligations for ground rent owners and leaseholders.” Muskin, 422 Md. at 559, 30 A.3d at 970. One of these rights for the ground rent owners is the right to re-entry in the event of default, which Chapter 286 extinguishes for all intents and purposes. Thus, Chapter 286 acts retrospectively to impair a strand of the ground lease holder’s bundle of rights, namely its right to reentry in the event of default. The remaining question is whether this right is a vested one.
in Maryland Ground Rent Leases. To determine whether a right is vested, we analyze the nature of the right implicated by the challenged statute. We explained the proper framework for this analysis regarding the ground leaseholder’s rights in a ground rent lease most recently in Muskin. When analyzing the implicated rights under the proper framework for ground rent leases (i.e., the bundle of vested rights that is the essence of these leases), the ground leaseholder’s right of reentry must be viewed as an inextricable part of the bundle of vested rights which the Legislature may not abolish retrospectively. Because Chapter 286 destroys the ground leaseholder’s right of reentry, we conclude that the statute is unconstitutional. - 15 - (a) The Proper Framework for the Analysis of Vested Rights in Ground Rents in this State (As Settled in Muskin). A ground rent lease in this State is defined as “a renewable 99 year lease where the fee simple owner of a property receives an annual or semi-annual payment (‘ground rent’) and retains the right to re-enter the property and terminate the lease if the leaseholder fails to pay.” Muskin, 422 Md. at 550, 30 A.3d at 965 (emphasis added) (citing Kolker v. Biggs, 203 Md. 137, 141, 99 A.2d 743, 745 (1953)). In Muskin, we provided, in clear and definite terms, the proper framework for vested rights analysis of the rights in these transactions. There, this Court stated that “[a] ground rent lease creates a bundle of vested rights for the ground rent owner, a contractual right to receive ground rent payments and the reversionary interest to re-enter the property in the event of a default or if the leaseholder fails to renew.” Id. at 559, 30 A.3d at 971 (emphasis added). The Muskin Court explained specifically that “[t]hese two rights cannot be separated one from the other; together they are the essence of this unique property interest, and as such, vested rights analysis must consider them together.” Id. (emphasis added). Because the right to re-enter the property in the event of default is included in this bundle (as part of the lessor’s reversionary interest), this clear language directs how this Court should analyze the present case. Although Muskin determined that a failure to meet Chapter 290’s registration requirement could result in abrogation of the vested right to receive ground rents and the reversion at the expiration of the lease, the framework established in Muskin, i.e., that the bundle of the ground lease holder’s rights are - 16 - inseparable for purposes of the analysis of vested rights, remains true for purposes of the analysis in the present case. 14 The facts of the present case do not excuse obeisance to the underlying purpose of the ground rent nor the proper analytical framework for vested rights in a ground rent lease situation. The underlying purpose of the ground rent, from the viewpoint of the ground rent leaseholder, never has been limited exclusively to securing the payment, in perpetuity, of rent. The origins of the ground lease system in this State stemmed from the idea that “[t]here was thus a speculation in these peculiar leases, which, no doubt, added zest to the bargain on both sides.” 15 Mayer, supra, at 45. The main objects of the lessor in making a ground lease are “[1] the inducement thereby offered to improvement, and [2] the security and receipt of a clear annual rent and the fine for renewal . . . , [3] based upon the full recognition of the reversionary estate in the lessor and those who may claim under him . . . .” Id. at 87. Maryland lawyers at that time considered “[t]he common law lease, in which the reversion remained in the landowner and his tenure of the proprietary was not interfered with . . . as the form best adapted to accomplish their purpose.” Id. at 14 In Muskin, we noted that “[e]ven if [the rights in the ground lease] were analyzed separately, to determine one right is vested is to find Chapter 290’s extinguishment scheme flawed fatally.” Muskin, 422 Md. at 560 n.9, 30 A.3d at 971 n.9. That statement was provided in a footnote as an alternative to support the ultimate conclusion in that case. The statement does not negate the basis of the analysis which is supported by the historical development of the ground rent system in this State and which demands that the bundle of vested rights for the ground rent owner, provided by a ground rent lease, “cannot be separated one from the other.” Id. at 559, 30 A.3d at 971 (emphasis added). 15 Although this exact quotation refers to perpetual leases in Ireland, this same notion rings true as well for the origins of Maryland ground rent leases. - 17 - 46-47 (emphasis added). “In fact, it is a question whether the landed proprietors could have secured their object in any other way.” Id. at 47. Because the Bar at the time of the origin of the Maryland ground lease system established that the “common law lease, in which the reversion remained in the landowner and his tenure of the proprietary was not interfered with” was the best way to accomplish their purpose, it was established firmly that the reversionary interest was intertwined with the rent owed. See id. at 62 (“The rent reserved on a term is always incident to the reversion and follows it, as an incident follows its principal.”). “The reversion being in fee simple, to its incident the rent, are consequently attached all the qualities of fee simple property.” Id. Accordingly, “[i]t follows that the estate of the lessor is subject exclusively to the law that governs the realty. The rent passes with the reversion by descent to the lessor’s heirs at law, or goes to his devisees.” Id. at 63. Similarly, the right of re-entry passes by descent to the lessor’s heirs at law, or goes to the devisees as well. This intertwined nature of the lessor’s rights (collectively, “the reversionary interest”) 16 is the essence of the ground lease system. See id. 16 The State interprets our Muskin decision as setting forth two rights in the bundle of vested rights: (1) the reversionary interest (which, under the State’s view, means solely a reversion), and (2) the right to receive rent payments. This contention misinterprets Muskin and the common understanding of “reversionary interest.” In Muskin, we used the term “reversionary interest” as collectively referring to two distinct, intertwined rights (the reversion and the right to re-entry). Muskin, 422 Md. at 559, 30 A.3d at 971 (“A ground rent lease creates a bundle of vested rights for the ground rent owner, [1] a contractual right to receive ground rent payments and [2] the reversionary interest to reenter the property in the event of a default or if the leaseholder fails to renew.”) (emphasis added). Moreover, the definition of a “reversionary interest” is not limited to a “reversion,” but rather a reversion is a type of a reversionary interest. - 18 - Accordingly, considering a ground lease, we review the estate of the lessor as a unitary object because of the strength of the interconnection between the rents and the reversionary interests (the reversion and the right to re-entry). To sever the bundle of the lessor’s rights into pieces ignores the very nature of the ground lease system in this State. (b) The Proper Vested Rights Analysis The special interest at the heart of this case is the right to re-enter and take possession in the event of default (which is one of the two rights bundled as the lessor’s reversionary interest in the Maryland ground rent). The State contends, however, that no right is lost because ejectment and re-entry are merely remedies to enforce rent payments and the landlord’s reversionary interest remains intact in the replacement of these remedies with the foreclosure-and-lien remedy in Chapter 286. We disagree with much of the State’s arguments regarding the nature of the implicated right in the context of the ground lease system in this State. Particularly, we disagree with labeling the right of reentry as a remedy that the Legislature may switch-out in a ground lease, and with the State’s conclusion that the right is not vested, despite being part of the bundle of rights essential to the nature of these leases. Understanding the nature of a “right of entry” can be confusing; thus, we pause to review the nature of this strand of the helix that is the bundle of rights. See 1 John A. Borron, Simes & Smith, The Law of Future Interests 267 n.1 (Borron ed., 3d ed. 2002) (“Confusion of terminology is rampant in this area of the law [concerning the “right of entry subject to condition broken” and the “possibility of reverter”] and great care must be exercised in dealing with judicial utterances in which distinctions are obliterated by - 19 - careless use of words.”). Although some treatises may use “possibility of reverter” as a synonym for a “right of entry,” the appellate courts in this State have taken care to distinguish these rights due to the differing legal distinctions and consequences flowing from their effects. See, e.g., Arthur E. Selnick Assocs., Inc. v. Howard Cnty. Md., 206 Md. App. 667, 695-96, 51 A.3d 76, 93, cert. denied, 429 Md. 529, 56 A.3d 1241 (2012). The significance of the distinction is in the legal consequences of the rights. [T]he right of entry is frequently called a “possibility of reverter” even by courts which discriminate carefully between the legal consequences of the true possibility of a reverter (an interest which automatically revests in possession) and the right of entry (which becomes possessory only after an election). Of course, confusion is inevitable when a court refuses to recognize any distinction between the two. Borron, supra, at 267 n.1 (citation omitted). See also The Knights & Ladies of Samaria v. Bd. of Educ. of Charles Cnty., 113 Md. App. 656, 665 n.4, 688 A.2d 933, 937 n.4 (1997) (labeling this distinction between possibilities of reverter and rights of entry as “sharp” and “crucial”). Borron explained further: Strictly speaking, under the Hohfeldian terminology,[17] the interest here considered would constitute a “power” and not a 17 “Hohfeldian terminology” refers to the influential contribution of Professor Wesley Newcomb Hohfeld to analytical jurisprudence in the science of law. Of importance here is Hohfeld’s scheme in which “he set forth eight fundamental conceptions in terms of which he believed all legal problems could be stated.” Walter Wheeler Cook, Introduction to Wesley Newcomb Hohfeld, Fundamental Legal Conceptions As Applied in Judicial Reasoning and Other Legal Essays, at 5 (Walter Wheeler Cook, ed., Yale University Press 1919). He arranges them in the following scheme: Jural Opposites right privilege power immunity no-right duty disability liability (Continued...) - 20 - “right,” for a by right, in the strict sense, is meant a claim which may be presently enforced. Until the owner of a right of entry affirmatively elects to forfeit her breach of the condition, there is no such present right of enforcement. Thus, suppose A conveys to B in fee upon the express condition that if B or his successors should ever sell intoxicating liquor on the premises, the grantor may reenter and forfeit the estate. Even though the condition is broken, unless A elects to forfeit the estate, he cannot sue B to recover Jural Correlatives right privilege power immunity duty no-right liability disability Id. “With the clear recognition that the same term is being used to represent four distinct legal conceptions comes the conviction that if we are to be sure of our logic we must adopt and consistently use a terminology adequate to express the distinctions involved.” Id. at 6. According to Professor Hohfeld, “the tendency—and the fallacy—has been to treat the specific problem [of fundamental conceptions] as if it were far less complex than it really is; and this commendable effort to treat as simple that which is really complex has, it is believed, furnished a serious obstacle to the clear understanding, the orderly statement, and the correct solution of legal problems.” Wesley Newcomb Hohfeld, Some Fundamental Legal Conceptions as Applied in Judicial Reasoning, 23 Yale L. J. 16 (1913), reprinted in Wesley Newcomb Hohfeld, Fundamental Legal Conceptions As Applied in Judicial Reasoning and Other Legal Essays, 26 (Walter Wheeler Cook, ed., Yale University Press 1919). Instead, according to Professor Hohfeld, “the right kind of simplicity can result only from more searching and more discriminating analysis.” Id. In the context of Maryland ground rent leases, what we refer to as a “right of reentry” is not a “right” under Hohfeldian terminology, but rather is a “power” and a “privilege.” In discussing the nature of the “right of entry,” Professor Hohfeld explains, in the case of a conveyance of land in fee simple subject to condition subsequent, after the condition has been performed, the original grantor is commonly said to have a “right of entry.” If, however, the problem is analyzed, it will be seen that, as of primary importance, the grantor has two legal quantities, (1) the privilege of entering, and (2) the power, by means of such entry, to divest the estate of the grantee. The latter’s estate endures, subject to the correlative liability of being divested, until such power is actually exercised. Id. at 55. - 21 - possession. His election to forfeit will change his future interest to a present interest, and may fairly be regarded as the exercise of a power. Until such power is exercised, he has no technical “right”. It is for this reason, primarily, that the Restatement of Property has termed the interest a “power of termination.” (2 Restatement, Property (1936) § 155.) Borron, supra, at 267 n.1. See also 16 A.L.R.2d 1246 (Originally published in 1951) (“This right of re-entry is not a reversion, a possibility of reversion, or an estate in land, but is a mere right or chose in action — a right or power to terminate the estate of the grantee and retake the same if there is a breach of condition — and if it is enforced, the grantor would be in by the failure of the condition and not by a reverter.”) (citing 33 Am Jur, Life Estates, Remainders, and Reversions, §§ 204, 205, 207, 208)). Because of the important distinction in the legal consequences of these rights, we use the term “right of re-entry” here. The State characterizes improperly the “right of re-entry” as synonymous, or closely thereto, with ejectment (labeled by the State as “re-entry through ejectment”) and classifies both as remedies. Black’s Dictionary defines a “remedy” as “[t]he means of enforcing a right or preventing or redressing a wrong; legal or equitable relief.” Black’s Dictionary 1320 (8th ed. 2004). In other words, “‘[a] remedy is anything a court can do for a litigant who has been wronged or is about to be wronged.’” Id. (quoting Douglas Laycock, Modern American Remedies 1 (3d ed. 2002)). The right of re-entry is not a remedy, but is understood more properly as the right to pursue a provided remedy, such as ejectment, to terminate the leasehold interest and recover rents due prior to the termination. This distinction is pivotal in a proper analysis. The State argues that the - 22 - substitution of the foreclosure-and-lien remedy in lieu of the “re-entry through ejectment” is constitutional because the substituted remedy achieves the same purposes as its deceased predecessor. The proper question rather is whether the foreclosure-and-lien remedy provides an adequate remedy to replace ejectment as the current remedy for a ground leaseholder to enforce the right of re-entry. If the foreclosure-and-lien remedy is not an adequate replacement, then the analysis turns on whether the right of re-entry is vested. We conclude that the foreclosure-and-lien remedy of Chapter 286 does not provide the same safeguards for leaseholders as the prior ejectment remedy did. Under ejectment, the remedy for the right of re-entry in ground rent leases prior to 2007, the right of present possession is returned to the ground leaseholder, terminating the ground lease such that the holder owned the property in fee simple (and not subject to any lease), and provided the ground leaseholder (now owner in fee simple) the ability also to recover rents due prior to the termination of the lease. Under Chapter 286’s foreclosure-and-lien remedy, the ground leaseholder is not able to seek any judicial remedy to terminate the lease such that he could regain the right to present possession of the property. Some may argue that this “slight” distinction is tolerable because the sole purpose of the conveyance of a ground rent lease (and of the right to re-entry), from the viewpoint of the landlord, is to secure payments of rent. Admittedly, the right of re-entry is - 23 - described often as intending to secure payments of rent. 18 Although it may serve as security for the payment of rent, that purpose is not the only one it serves. It serves as a 18 Such a description, however, is criticized just as often for failing to include the other important aspect of the right of re-entry. For example, a Washington Practice of Real Estate treatise, in discussing the traditional term “right of entry,” explained, Traditionally the right of entry has been treated as one of the reversionary future estates. However, the Restatement of Property and some writers influenced by it using the phrase “power of termination” and classified it as an “interest” rather than as a “right” or an “estate.” [See Restatement of Property §§ 24, 155 (1936); W. Stoebuck & D. Whitman, Law of Property, § 3.5 (3d ed. 2000); L. Simes, Future Interests (Hornbook) § 14 (2d ed. 1966. But 1 L. Simes & A. Smith, Future Interests § 241 (2d ed. 1956), which was published after Sime’s original Hornbook, uses the phrase “right of entry.”] The traditional terminology will be used here, first, because most courts seem to use and act upon it. Also, if the grantor has only a power to terminate the estate he has granted, as the Restatement says, while this explains the mechanism by which that estate ends, it does not explain how the grantor is restored to an estate. 17 Wash. Prac., Real Estate § 1.17 (2d ed.) (emphasis added). The treatise explained further, The Restatement [of Property cited above] takes the position that the “power of termination” is not a power of appointment. If it were, that would explain how the grantor could appoint an estate to himself. But if he has only a power to terminate, how does he get any estate, unless he did indeed retain an estate, which the Restatement also denies. What would a bare power to terminate produce? An escheat to the state? Id. § 1.17 n.3. The State here falls prey apparently to this misleading nature of the term “power to terminate” and “right to re-enter” in concluding that the foreclosure-and-lien remedy is an adequate replacement for the remedy of ejectment. - 24 - means of terminating the lease as well. As Professor Bordwell stated aptly in his article Seisin and Disseisin, As long, however, as right of entry remained a technical term of the land law, what gave it vitality was that it was something more than its name implied. Just as recovery in ejectment meant little unless the recoveror had some right or interest in the land which entitled him to hold the land after the recovery, so the right of entry meant little in itself. What gave it vitality was the title or interest, the right of property, back of the right to enter and which would be realized in possession by the entry. Right of entry was therefore not properly a mere right to recover the land. It was a right to enter and to enjoy such right of property as the holder had. It was right of entry plus right of property. Percy Bordwell, Seisin and Disseisin, 34 Harv. L. Rev. 592, 609 (1921) (emphasis added) (footnotes omitted). Permitting the extinguishment of the right of re-entry changes the very essence of these transactions in this State from a lease subject to rent into a conveyance subject to rent, a label that this Court rejected previously. 19 Accordingly, the foreclosure-and-lien remedy cannot replace effectively the ejectment remedy which is essential for the right of re-entry in Maryland ground rents. Thus, 19 Were we analyzing ground rent leases in Pennsylvania, we might agree more easily with the State’s contention. In Pennsylvania, the ground rent lease is considered a land conveyance subject to rent payments. See generally Richard M. Cadwalader, A Practical Treatise on the Law of Ground Rents in Pennsylvania (Kay & Brothers ed., 1879). In contrast, though, in Maryland, the ground rent system is considered a lease subject to condition for rent payments. See generally W. Calvin Chesnut, The Effect of Quia Emptores on Pennsylvania and Maryland Ground Rents, 91 U. Penn. L. Rev. 137 (1942) (discussing the difference between the two States’ ground rent systems). This distinction has significant effects in multiple areas of the law. See, e.g., H. H. Walker Lewis, The Taxation of Maryland Ground Rents, 3 U. Md. L. Rev. 314, 335-36 (discussing the different effects in taxation resulting from the distinction between the Pennsylvania ground rent lease and its counterpart in Maryland). - 25 - Chapter 286 cannot survive constitutional scrutiny because the right of re-entry is vested in ground rents entered prior to its enactment. Due to the unique nature of the property rights invested in ground rent leases, 20 where the ground leaseholder’s rights are bundled, the right of re-entry is vested. In mindful ignorance of clear, strong language describing this unique property interest, the State seeks to separate the ground leaseholder’s rights for purposes of its vested rights analysis and concludes that Chapter 286 does not impinge impermissibly on any vested right. It imagines that, because the right of re-entry is a remedy, it is not a vested right, and thus not subject to the heightened protections we contemplated in Muskin and Dua. This view fails, however, to recognize the unique nature of the right of re-entry in the ground rent lease system in this State as being inseparable from the vested rights of reversion and to collect rent. As discussed earlier, the right of re-entry is part of the bundle of rights, which is essential to the nature of ground rent leases. When viewing that right under the proper analytical framework, this case becomes rather 20 Ground rent leases in this State are unique and so unusual (like an unattractive unicorn) that it is widely recognized that “[r]ecourse to the legal encyclopedias is almost hopeless.” Lewis, supra, at 314. The problem with referring to generalized statements in legal encyclopedias for purposes of analyzing ground rent leases in this State is that “[t]he encyclopedias fail adequately to distinguish the Maryland variety of ground rents from their cousins in Pennsylvania and elsewhere and are replete with generalities and citations which prove erroneous when applied to our own local product.” Id. at 314 n.2. Thus, rather than refer to generalized statements in legal encyclopedias, we rely on secondary sources and cases discussing this unique “mysterious being,” referred to by Judge Kaufman as the “ground rent animal.” Frank A. Kaufman, The Ground Rent— Mysterious but Beneficial, 5 U. Md. L. Rev. 1, 1, 2 (1940). See also id. at 72 (recognizing that the unique nature of Maryland ground rent leases stems from the fact that “the exact form of the present Maryland system ‘just sort of’ evolved by accident”). - 26 - straightforward. The right of re-entry is vested and, thus, Chapter 286 impinges unconstitutionally on it. JUDGMENT OF THE CIRCUIT COURT FOR ANNE ARUNDEL COUNTY AFFIRMED; COSTS TO BE PAID BY THE STATE OF MARYLAND. - 27 - Circuit Court for Anne Arundel County Case No. 02-C-07-126810 Argued: September 9, 2013 IN THE COURT OF APPEALS OF MARYLAND No. 8 September Term, 2013 STATE OF MARYLAND v. STANLEY GOLDBERG, ET AL. Barbera, C.J. Harrell Battaglia Greene Adkins Watts Cathell, Dale R. (Retired, Specially Assigned), JJ. Dissenting Opinion by Adkins, J. Filed: February 26, 2014 I respectfully dissent because in my view the Majority erroneously confers vested status on a contingent right, leading it to grant heightened protection to the right of reentry in the event of default. By deeming that a right can be vested even though the ability to exercise that right is still subject to a condition precedent, I believe the Majority errs. Only because it views the right of reentry as a vested right does the Majority subject Chapter 286 of the 2007 Session Laws of Maryland (“Chapter 286) to the heightened scrutiny we explained in Dua and Muskin. See Dua v. Comcast Cable of Md., Inc., 370 Md. 604, 630 n.9, 805 A.2d 1061, 1076 n.9 (2002); Muskin v. State Dep’t of Assessment and Taxation, 422 Md. 544, 30 A.3d 962 (2011). Because I do not believe that a contingent right can vest prior to its condition precedent occurring, I would hold Chapter 286 to be a constitutionally permissible substitution of remedies, well within the Legislature’s authority. Additionally, I disagree with the Majority and would hold that the particular substitution of remedies enacted by Chapter 286 is sufficient to protect the ground lease holder’s interests. I do not disagree with the Majority’s reminder that the Legislature may not retroactively abrogate vested rights. I dissent, nonetheless, because the right of reentry is an inchoate cause of action subject to a condition precedent. Namely, it is subject to the condition precedent of “in the event of default.” No doubt the right of reentry may vest, but that does not, absent the condition precedent occurring, make it vested. Because it is not a vested right, the right of reentry in the event of default should not receive the heightened protections that we grant to vested rights. Yet in its use of Muskin’s “bundle” language, the Majority announces that in Maryland there are three certainties: death, taxes, and ground lease tenants defaulting on their payments. The Majority does not explain why the Maryland ground lease, which differs from a traditional lease only in ways irrelevant to the right of reentry in the event of default,1 exists on a lonely jurisprudential island where the term “vested” takes on a meaning recognized in no other jurisdiction in this country. Before further analyzing the difference between something being vested and something being contingent, I want to explain the limits of our holding in Muskin. In Muskin, we held the extinguishment and transfer provisions of Chapter 290 of the 2007 Session Laws of Maryland (“Chapter 290) invalid under the Maryland Declaration of Rights and Constitution. Muskin, 422 Md. 544, 30 A.3d 962. We relied on Dua, which pronounced it “firmly settled by this Court's opinions that the Constitution of Maryland prohibits legislation which retroactively abrogates vested rights. No matter how ‘rational’ under particular circumstances, the State is constitutionally precluded from abolishing a vested property right or taking one person's property and giving it to someone else.” Dua, 370 Md. at 623, 805 A.2d at 1072. Thus, what is a “vested property right” was our primary question in Muskin, as well as in today’s case. 1 What sets apart the Maryland ground lease from a traditional lease is that the arrangement allows for an enduring option to renew the lease at any point during the ninetynine year lease term. This complicates the traditional analysis of end-of-term reversion because, unlike traditional leases devoid of a unilateral option to renew, determination of the definitive date that the possessory interest reverts to the landlord can be complicated. Yet this unilateral renewal right does not speak at all to the likelihood of default on rent payments. Thus, our analysis of the right of reentry in the event of default should not be colored by any of the idiosyncracies of this uniquely Maryland conveyance. 2 In reaching our holding in Muskin, we examined fully the prohibition against taking away vested rights. 422 Md. at 559–560, 30 A.3d at 971. Prior to Chapter 290, there was no central registry for ground rents in Maryland. Muskin, 422 Md. at 551, 30 A.3d at 966. In Muskin we were asked to review legislation that would create such a registry. Id. Chapter 290 mandated that all ground rent holders submit a form and registration fee to a centralized registry of ground rents by September 30, 2010. See Md. Code (1974, 2010 Repl. Vol.), §§ 8-704 and 8-707(a) of the Real Property Article (“RP”). Most importantly, if a ground rent owner failed to register by the deadline “the reversionary interest . . . under the ground lease [would be ] extinguished and [the] ground rent [would be ] no longer payable[.]” RP § 8-708(a) (emphasis added). Furthermore, “[t]he extinguishment of the ground lease [would be] effective to conclusively vest a fee simple title in the leasehold tenant, free and clear of any and all right, title, or interest of the ground lease holder . . . .” RP § 8-708(c). Chapter 290 was a harsh change, because the extinguishment and transfer provisions “cut off all remedies, while divesting impermissibly the real property and contractual vested rights of ground rent owners.” Muskin, 422 Md. at 563, 30 A.3d at 973. In short, the asset vanished. In holding the extinguishment and transfer provisions of Chapter 290 invalid under the Maryland Declaration of Rights and Constitution, we explained: A ground rent lease creates a bundle of vested rights for the ground rent owner, a contractual right to receive ground rent payments and the reversionary interest to re-enter the property in the event of a default or if the leaseholder fails to renew. These two rights cannot be separated one from the other; together they are the essence of this unique property interest, 3 and as such, vested rights analysis must consider them together. Muskin, 422 Md. at 559–60, 30 A.3d at 971 (footnote omitted). The Majority interprets this reasoning as a pronouncement that the right of reentry in the event of a default, by itself, is a vested right. Yet, what we dealt with in Muskin differs dramatically from the legislation here, and our explanation in Muskin must be seen in its proper perspective. There, the challenged legislation abrogated a vested right—it involved a complete forfeiture of the historical ground rent holder’s interest, merely from a failure to comply timely with a brand new registration requirement. The retroactive abrogation of a vested right required that we look at all the rights the ground rent holder possessed, and examine them in light of the constitutional standard. See Muskin, 422 Md. at 559–60, 30 A.3d at 971. We categorized the rights in the bundle as follows: (1) the property right to a reversion of ownership at the expiration of the lease; (2) the contractual right to receive ground rent payments; and (3) the right to pursue the remedy of reentry in the event of a default. Id. It is only by considering them together that their respective roles become apparent. The right to re-take possession at the expiration of the lease maintains the leaseholder’s interest in the property, and allows the ground lease to be assigned, devised, or inherited. The contractual right creates the ability for the leaseholder to receive payments. The right of reentry in the event of default allows the leaseholder to enforce performance of the tenant’s payment obligation. At its core, the ground rent creates two inseparable rights: (1) the right to create an 4 obligation tied to the land, and (2) the right to retain an interest in the land to allow for the enforcement of that obligation. Thus, any change in how one of these rights is treated must be analyzed in the context of the property interest as a whole. Under this framework, Chapter 290 was invalid because it abrogated a vested right and destroyed the underlying purpose of the conveyance, which, from the landlord’s view, was to secure the payment, in perpetuity, of interest on a sum of money. See Banks v. Haskie, 45 Md. 207, 217 (1876). If the ground rent was not registered, even inadvertently, the ground lease holder lost all of its rights. Thus, we held Chapter 290 unconstitutional because it abrogated a vested right. The Right Of Reentry In The Event Of Default Is Not A Vested Right In Muskin, we did not address the significant difference between the role of the reversion at the end of the lease, and the contingent right of reentry in the event of default because Muskin was a case about the Legislature’s complete vitiation of the vested end-oflease term reversion interest upon a failure to register. We had no need to analyze the role of the right of reentry in the event of default with any specificity. Indeed, as we explained, “[e]ven if [the rights in the ground lease] were analyzed separately, to determine one right is vested is to find Chapter 290's extinguishment scheme flawed fatally.” Muskin, 422 Md. at 560 n.9, 30 A.3d at 971 n.9. This is reflected in our explanation of the abrogated vested rights, wherein we recognized that “[t]here can be no reasonable doubt that the reversionary interest to real property and the contractual right to receive ground rent are vested rights under Maryland law.” Muskin, 422 Md. at 560, 30 A.3d at 971. Absent from this 5 explanation is any hint or mention of the right of reentry in the event of default. This is because once we determined that a failure to meet Chapter 290's registration requirement could result in abrogation of the vested right to receive ground rents and the reversion at the expiration of the lease, our analysis was complete. This renders any of our discussion of the right of reentry in the event of default as collateral to the underlying holding in Muskin. Conversely, because the case before us implicates the distinction between the reversion and the possibility of reverter, it is necessary to address this distinction. The distinction between the end-of-lease reversion, which Chapter 290 impermissibly abrogated, and the right of reentry in the event of default, which is also referred to as a possibility of reverter,2 explains why the Legislature is prohibited from abrogating one, but may alter the other. This distinction is best explained as follows: Despite its purely historical origin, the distinction between the 2 A preeminent treatise on real property, in discussing “Possibilities of reverter,” has explained the contingent nature of the right of reentry upon breach: [t]he right of re-entry for breach of a condition, annexed to an estate in fee simple, is sometimes referred to as a possibility of reverter. The expression “revert,” however, signifies a return to the grantor of the ownership or possession by operation of law, and is not properly applicable to his reacquisition of the ownership or possession by entry or its equivalent. The right of re-entry in such a case might, consequently, so long as the condition has not been broken, more appropriately be referred to merely as a contingent right of re-entry. 2 Herbert T. Tiffany, The Law of Real Property § 314 (3d ed. 1939) (emphasis added) (footnote omitted). 6 reversion and the possibility of reverter is still significant. The latter is generally a less substantial interest (because whether it ever becomes possessory depends upon some contingency) and is therefore accorded less protection. If an owner in fee simple transfers an estate in fee simple subject to a condition subsequent, the interest he now has is called a right of entry for breach of condition. Here again, the chance that the interest will become possessory depends upon whether there will be a breach of condition, and the interest is thus frequently less substantial than a reversion.