Opinion ID: 2327958
Heading Depth: 2
Heading Rank: 4

Heading: Confiscation of Property Through Regulation

Text: Muskin also argues that, based on assertions contained in his affidavit attached to his motion for summary judgement filed in the Circuit Court, a triable issue exists whether the process of complying with Chapter 290's registration requirement is so unreasonably harsh and costly that it results in an as-applied regulatory taking and, as such, the trial court erred in granting the SDAT's motion for summary judgment. To determine whether a regulatory taking occurred, the Court must look to the facts of the individual case and consider the following factors: (1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation has interfered with distinct investment-backed expectations, and (3) the character of the governmental action. Neifert v. Dep't of the Env't, 395 Md. 486, 517, 910 A.2d 1100, 1118-19 (2006). Muskin asserted that the costs of preparing the Ground Rent Registry forms would easily exceed $25 per ground rent, and may exceed $50 per ground rent, because he would be required to conduct a title search for each ground lease to determine the year the ground lease was created. [11] Muskin's assertion that he was obliged to conduct a title search in each or most of the trusts' ground rents is unfounded in light of the instruction on the registration form which directs the filer to complete this section merely [t]o the best of the filer's knowledge.... The phrase to the best of my knowledge implies an acceptable margin of error in the declarant's statement. See Cotton v. Frazier, 170 Tenn. 301, 95 S.W.2d 45, 47 (1936) (finding that an affidavit would be too much subject to the objection of uncertainty... when qualified with the phrase to the best of my knowledge.); Swanson v. Kraft, Inc., 116 Idaho 315, 775 P.2d 629, 638 (1989) (Bistline, J., concurring) (finding that to the best of my knowledge was an equivocating phrase.); Portee v. State, 277 Ga.App. 536, 627 S.E.2d 63, 66 (2006) (finding that to the best of my knowledge was a representation that is equivocal at best). Without a requirement for extraordinary accuracy dictating a title search, Muskin's economic impact argument is reduced to the mandatory registration fee, $10 for the first ground lease, and a maximum of $5 for each additional ground lease. Maryland Code (1974, 2010 Repl.Vol.) Real Property Article, § 8-703(c). The registration fee is a one-time fee that, when compared with the median annual rent of $48 asserted in Muskin's affidavit, collected through the lifetime of the ground lease, does not interfere unreasonably with the investment-backed expectations of ground lease holders. Even though the registration fees associated with compliance with Chapter 290 result in a small reduction in the net ground rental income for one year, Muskin's trusts, upon registration of their ground rents, would continue to receive an undiminished stream of income from the ground rent payments in the future. As discussed, supra, the registration requirement of Chapter 290 is an appropriate use of the State's police power to regulate private property. For these reasons, the registration provisions of Chapter 290 are not so unreasonably harsh and costly that it constitutes a regulatory taking. JUDGEMENT OF THE CIRCUIT COURT REVERSED. CASE REMANDED TO THE CIRCUIT COURT WITH INSTRUCTIONS TO GRANT THE PARTIES' SUMMARY JUDGMENT MOTIONS IN PART AND DENY IN PART, AND ENTER A DECLARATORY JUDGMENT AND INJUNCTIVE RELIEF, ALL AS CONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY RESPONDENT. BELL, C.J., and ADKINS, J., dissent. ADKINS, J., dissenting, in which BELL, C.J., joins. I respectfully dissent because I believe that the Maryland Declaration of Rights and Constitution permits the state to impose prospective conditions on the retention of a vested right so long as the holder of the right has an objectively reasonable time and opportunity to protect it by complying with the statute. [1] Accordingly, I would not strike down the legislature's enactment of Chapter 290, which is a legitimate, rational law designed to regulate the ground lease system. [2] I submit that we should adopt the reasoning of the Supreme Court that legislation does not cause the loss of a right or property interest if the loss results from the holder's failure to comply, after notice, with the statute's reasonable requirements. See U.S. v. Locke, 471 U.S. 84, 107, 105 S.Ct. 1785, 1799, 85 L.Ed.2d 64 (1985); Texaco, Inc. v. Short, 454 U.S. 516, 530, 102 S.Ct. 781, 792-93, 70 L.Ed.2d 738 (1982). The Majority holds that Chapter 290 is unconstitutional under the Maryland Declaration of Rights and Constitution because it retroactively abrogates vested rights and takes property without just compensation. Chapter 290, however, does not abrogate vested rights or take property without just compensation. Instead, it simply requires that holders of ground leases comply with reasonable registration requirements. No holder is required to forfeit his or her ground rents. Only by failing to comply with reasonable and simple registration requirements would an owner lose his or her property. Locke, 471 U.S. at 107, 105 S.Ct. at 1799; Texaco, 454 U.S. at 530, 102 S.Ct. at 792-93. As the Supreme Court observed in Locke, a person who fails to comply with reasonable statutory requirements for the retention of a vested right cannot claim that the statute abrogated the right or took the property, because the loss can only be said to have resulted from the person's failure to comply. Locke involved a federal statute that required holders of certain mineral rights to register them and make yearly filings. [3] Failure to comply resulted in a loss of the vested right. Several holders who had failed to comply claimed an unconstitutional taking, but Locke held no taking had occurred because the loss resulted solely from the holders' neglect; the legislature was within its powers to impose new and reasonable conditions on retaining vested property rights: Even with respect to vested property rights, a legislature generally has the power to impose new regulatory constraints on the way in which those rights are used, or to condition their continued retention on performance of certain affirmative duties. As long as the constraint or duty imposed is a reasonable restriction designed to further legitimate legislative objectives, the legislature acts within its powers in imposing such new constraints or duties.    `[T]his Court has never required the State to compensate the owner for the consequences of his own neglect.' Appellees failed to inform themselves of the proper filing deadline and failed to file in timely fashion the documents required by federal law. Their property loss was one appellees could have avoided with minimal burden; it was their failure to file on timenot the action of Congressthat caused the property right to be extinguished. Regulation of property rights does not `take' private property when an individual's reasonable, investment-backed expectations can continue to be realized as long as he complies with reasonable regulatory restrictions the legislature has imposed. (Citations omitted.) Locke, at 104, 107, 105 S.Ct. at 1797, 1799 (quoting Texaco, 454 U.S. at 530, 102 S.Ct. 781 (holding that it is the owner's failure to make any use of the propertyand not the action of the Statethat causes the lapse of the property right); Hawkins v. Barney's Lessee, 30 U.S. (5 Pet.) 457, 465, 8 L.Ed. 190 (1831) (What right has any one to complain, when a reasonable time has been given him, if he has not been vigilant in asserting his rights?)). The Majority claims that this long-standing principle does not apply in Maryland because of our unique constitutional protections for vested rights. It cites Dua v. Comcast Cable of Md., Inc. 370 Md. 604, 805 A.2d 1061 (2002), for the proposition that Maryland's Declaration of Rights and Constitution prohibit the retrospective reach of statutes that would have the effect of abrogating vested rights. Maj. Op. at 555, 30 A.3d at 968. Yet, neither Dua nor our other vested rights cases contradict the principle stated above. Rather, our precedents are consistent with the proposition, well established in the Federal courts and at least 13 states, that a statute does not take or abrogate vested rights when it merely imposes reasonable requirements on their retention; if a loss occurs, it can only be said to have resulted from the holder's failure to comply. See Locke, 471 U.S. at 107, 105 S.Ct. at 1799; Texaco, 454 U.S. at 530, 102 S.Ct. at 792-93; Cwik v. Giannoulias, 237 Ill.2d 409, 341 Ill.Dec. 476, 930 N.E.2d 990, 996 (2010); Smolow v. Hafer, 598 Pa. 561, 959 A.2d 298, 304 (2008); City of Kentwood v. Sommerdyke Estate, 458 Mich. 642, 581 N.W.2d 670, 674-75 (1998); In re Yellowstone River, 253 Mont. 167, 832 P.2d 1210, 1217 (1992); Ga. Marble Co. v. Whitlock, 260 Ga. 350, 392 S.E.2d 881, 885-86 (1990); Opinion of Justices to House of Representatives, 408 Mass. 1215, 563 N.E.2d 203, 207-08 (1990); Gerner v. Sullivan, 768 P.2d 701, 705-06 (Colo.1989); State ex rel. A.A.A Inv. v. Columbus, 17 Ohio St.3d 151, 478 N.E.2d 773, 775 (1985); Presbytery of Se. Iowa v. Harris, 226 N.W.2d 232, 242 (1975); Morris v. Chiang, 163 Cal.App.4th 753, 760, 77 Cal.Rptr.3d 799 (2008); Rowlette v. State, 188 N.C.App. 712, 656 S.E.2d 619, 624-26 (2008); Hooks v. Kennedy, 961 So.2d 425, 431-32 (La.App. 1st Cir.2007); Rocket Oil & Gas Co. v. Donabar, 127 P.3d 625, 637 (Okla.Civ.App.2005). Although we have never considered a registration statute like this one, we have, in two analogous instances, evaluated the constitutionality of statutes that impose conditions on vested rights. In both instances we held, consistent with Locke and Texaco, that such statutes are constitutional as long as the holder of the right has a reasonable time and opportunity to protect it by complying with the statutory requirements. In Safe Deposit & Trust Co. v. Marburg, 110 Md. 410, 414, 72 A. 839, 841 (1909), we upheld a statute that, like Chapter 290, extinguished a vested property right if the owner failed to act as required under the statute. The statute at issue made it easier for the tenant of a property to gain ownership of the land through adverse possession. Specifically, if the owner of the property failed to collect rent for twenty years, the statute specified that the owner's interest would be extinguished and fee simple would vest in the tenant of the property. Id. at 412, 72 A.2d at 840. The act thus imposed new restrictions on a vested property right and potentially resulted in a transfer of property from the landowner to the tenant. Nevertheless, we upheld the Act, stating that the legislature has the power to pass laws which may result in vesting good titles in those holding lands by adverse possessionprovided, of course, the former owners have a reasonable time after the passage of such laws within which to assert their rights. Id. at 414, 72 A. at 841 (emphasis added). The Act, we held, did not effect an unconstitutional abrogation of rights or taking of property. See id. Similarly, in Allen v. Dovell, 193 Md. 359, 66 A.2d 795 (1949), we upheld a statute that required any person whose lands had been subject to a tax sale to file suit within three years or lose their remedy. In upholding the statute, we distinguished between statutes that immediately impair a vested right (which are unconstitutional) and statutes that provide a reasonable opportunity for the holder to protect the vested right (which are constitutional). Specifically, we held: It is true that the Legislature cannot cut off all remedy and deprive a party of his right of action by enacting a statute of limitations applicable to an existing cause of action in such a way as to preclude any opportunity to bring suit. However, the Legislature has the power to amend a statute of limitations either by extending or reducing the period of limitations, so as to regulate the time within which suits may be brought, provided that the new law allows a reasonable time after its enactment for the assertion of an existing right or the enforcement of an existing obligation. (Emphasis added.) Id. at 363-64, 66 A.2d at 797; see also Garrison v. Hill, 81 Md. 551, 557, 32 A. 191, 192 (1895) (The Legislature can unquestionably limit existing claims, provided a reasonable time is allowed after the passage of the Act for parties interested to institute proceedings, but it cannot bar a past right of action without providing a reasonable time within which suit can be brought.). Dua reinforced this interpretation of our vested rights case law, holding that, when the legislature desires to shorten a limitations period, [t]he Maryland Constitution requires that a plaintiff must have a reasonable period of time, after the enactment of the new statute, to bring the cause of action which existed under prior law. Dua, 370 Md. at 633, 805 A.2d at 1078. Thus, our vested rights cases indicate that the legislature has the power to use the abrogation of a vested right as a penalty for noncompliance with reasonable statutory requirements, even though it does not have the power to abrogate vested rights directly. When the holder of the right has a reasonable time and opportunity to protect it, no taking or impermissible abrogation occurs. In addition to the reasonable time requirement, I would mandate a reasonable notice requirement, because presuming that a holder had notice of the enactment can, in some instances, deprive her of the constitutionally mandated reasonable opportunity to save the right. On this point I agree with the dissenters in Texaco, 454 U.S. at 540, 102 S.Ct. at 798 (1982) (Brennan, J., dissenting). This rule provides an additional layer of protection for those wishing to preserve their vested rights. [4] Indeed, the Texaco dissent's framework is markedly similar to the Maryland vested rights case law in that it provides heightened scrutiny (but not automatic invalidation) for statutes that apply retroactively to vested rights. Compare Dua, 370 Md. at 632-33, 805 A.2d at 1078 (Although there may not ordinarily be a constitutionally protected vested property right in a particular ... cause of action accruing after a statute limits or abrogates the cause of action, there normally is a vested property right in a cause of action which has accrued prior to the legislative action.) (citations and quotations omitted) with Texaco, 454 U.S. at 543, 102 S.Ct. at 800 (Brennan, J., dissenting) (It does not follow, however, that what [a State] can legislate prospectively it can legislate retrospectively. The retrospective aspects of legislation, as well as the prospective aspects, must meet the test of due process, and the justifications for the latter may not suffice for the former.). The Majority employs a strained reading of Marburg and Allen to justify striking down Chapter 290. The Majority holds that these cases apply solely to remedies and rules of evidence, as opposed to real property and contractual rights. Maj. Op. at 561, 562, 30 A.3d at 971, 972. This focus on the difference between property rights and remedies and rules of evidence is a distinction without a difference. The remedies and rules of evidence upheld in Marburg and Allen affected vested real property and contractual rights just as Chapter 290 does. As with Chapter 290, those laws extinguished vested rights if the holders of those rights failed to comply with reasonable statutory requirements in a reasonable time. Marburg did not limit its holding to rules of evidence, and I submit that no fair reading of it suggests any such a limitation. Indeed, Marburg makes it clear that the statute at issue threatened the same penalty as Chapter 290: The effect of the Act of 1884 is to vest the title of the former landlord in the tenant, when it is shown that no rent has been demanded or paid for the statutory period.... Marburg, 110 Md. at 417, 72 A. at 842. Marburg also held that the legislature can change[] the statutes of James I such that failing to act in a reasonable period will extinguish [the holder's] title. Id. at 415, 417, 72 A. at 841, 842. Marburg is more closely analogous to the present case than the majority admits. Although adverse possession had existed since before the founding of the United States, the legislature in Marburg passed a new statute that created a new rule, providing for potential extinguishment of property rights in additional cases. 110 Md. at 415, 72 A. at 841. It was not simply the old common law rule of adverse possession causing extinguishment. Rather, as we observed in Marburg, the legislature had change[d] the common law rule by passing a new statute that was similar to adverse possession, but not identical to it: There would seem to be no doubt that the Legislature intended by the Act of 1884, not only that the rent shall be conclusively presumed to have been extinguished, when there has been no demand or payment for more than twenty consecutive years, but that the reversionary interest of the owner of the fee should be barred and terminated.    [W]hen [property is extinguished under the Act] the tenant's rights are similar to those vested in one holding by adverse possession.... Under this statute, when there has been no demand or payment for more than twenty years, it is conclusively presumed that the rent has been extinguishedthat is to say, there is a presumption that it has been extinguished by a deed, just as there is the presumption of a grant in ordinary cases of adverse possession. (Emphasis added.) Id. at 412-13, 417, 418, 72 A. at 840, 842. Thus, Marburg did not merely impose an evidentiary restriction in adverse possession cases, as the Majority says, but it was a case in which the legislature created a new statute threatening the abrogation of vested property rightsand we upheld it. Because Chapter 290 does the same thing, Marburg instructs that we should uphold this legislation. The legislature can change the system of ground leases such that failing to act in a reasonable period will extinguish the ground lease. See Md. Code (1974, 2010 Repl. Vol.), § 8-708 of the Real Property Article. In a similar vein, the Majority cites Allen for the proposition that cut[ting] off all remedy ... in such a way as to preclude any opportunity to bring suit ... deprive[s improperly] a party of his [accrued] cause of action.... Maj. Op. at 563, 30 A.3d at 973. I have no quarrel with this principle. But it is not an apt description of Chapter 290, which cuts off no remedy and divests no rights unless the holder fails to register within the allotted time. Indeed, in the same paragraph, the Allen Court addressed an issue more akin to the present one: [T]he Legislature has the power to amend a statute of limitations either by extending or reducing the period of limitations, so as to regulate the time within which suits may be brought, provided that the new law allows a reasonable time after its enactment for the assertion of an existing right or the enforcement of an existing obligation.... In the instant case it is obvious that complainant was not denied due process of law, as she had three years after the statute of limitations took effect June 1, 1937, in which to challenge the title of the purchaser. (Emphasis added.) Allen, 193 Md. at 363-64, 66 A.2d at 797. Allen held, as I would, that a statute is not constitutionally infirm for threatening to abrogate a vested right unless it does so without giving the holder a reasonable time and opportunity to save it. Id. at 363-64, 66 A.2d at 797. Finally, the Majority quotes Baugher v. Nelson, 9 Gill 299, 309 (1850), for a similarly inapt piece of dicta, reasoning: [A] statute that divests a right through instrumentality of the remedy, and under the preten[s]e of regulating it, is as objectionable as if [aimed] directly at the right itself. This is a substantially similar situation to the present case where Chapter 290 purports to regulate vested rights, but in effect removes all remedies and extinguishes those rights completely. Maj. Op. at 563, 30 A.3d at 973 (quoting Baugher, 9 Gill at 309). Again, I do not challenge the principle of law stated in Baugher, but it is inapt because Chapter 290 does not divest a right under the pretense of regulating it. Rather, Chapter 290 makes no pretenseit openly regulates the right to ground rent by requiring registration, and gives the holders a reasonable time and opportunity to completely protect their rights. This kind of statute, as we observed in Marburg, is unquestionably constitutional: [T]here can be no doubt that the running of the statute may not only affect the remedy of the holder of the paper title, but may extinguish his title, vest title in fee in the adverse holder, and the constitutionality of statutes having such result is no longer an open question. Marburg, 110 Md. at 417, 72 A. at 842. Under the fairest reading of our vested rights case law, the Majority is incorrect that the Maryland Declaration of Rights and Constitution prohibit the retrospective reach of statutes that would result in the taking of vested property rights. Maj. Op. at 556, 30 A.3d at 968 (emphasis added). Rather, the Maryland Declaration of Rights and Constitution prohibit the retrospective reach of statutes that actually take or abrogate vested property rights. When a statute gives the holder of a vested right a reasonable time and opportunity to protect it by complying with reasonable statutory requirements, the statute cannot be said to take or abrogate anything. Under this standard, Muskin's claim must fail because Chapter 290 gave him a reasonable time and opportunity to protect his rights. [5] He claims that he did not have a reasonable opportunity because registering his ground leases would have been unreasonably burdensome. Yet, as the Majority observes, he has not shown that it would have taken any undue effort to comply with the statute. Therefore, I would hold that he lost his rights because he failed to comply with the statute's reasonable requirements, not because the statute took or abrogated them. Muskin stated in an affidavit that the cost of registering would have exceeded the annual rental income for more than one quarter of his ground rentals; would have exceeded the fair market value of some of his ground rentals; has destroyed the value of the smaller ground rentals and has reduced the value of the trust's assets by more than 50 percent. [6] He also claims that the cost of registering would have consumed more than 50 percent of the annual income of most of his ground lease. He estimates that registering the ground leases would have easily exceed[ed] $25 per ground rent, and may [have] exceed[ed] $50 per ground rent, taking into account filing fees and preparation costs. [7] The median rent for his ground leases was $48. Muskin's allegation that the registration form was burdensome derives from his belief that a registrant needed to conduct a full title search before registering each ground lease. He believed that he needed to do a title search for each ground lease because the Department's registration form required applicants to check one of four boxes indicating when each ground lease was created. Because a title search was cost prohibitive, Muskin did not conduct any, and he did not submit any registration forms. He stated, I don't know what else I could have done. The section of the registration form, which Muskin believed required an extraordinary effort to complete, appeared as follows: 6. Range of Years in Which the Ground Lease was Created: [] Prior to April 8, 1884; [] Between April 8, 1884 and April 15, 1888; [] Between April 6, 1888 and July 1, 1982; or [] July 2, 1982 or later The registration form further merely stated that the filer needed to indicate the date to the best of the filer's knowledge. The form did not require the filer to attest to the accuracy of any information. [8] To prove that the requirements of a statute are unreasonably burdensome, a person must show sufficiently how the procedure followed amounted to a denial of due process. Casey v. Mayor of Rockville, 400 Md. 259, 321, 929 A.2d 74, 111 (2007); see also Roberts v. Total Health Care, Inc., 349 Md. 499, 510, 709 A.2d 142, 147 (1998) (To invoke the protections of procedural due process in a property context, the party asserting unconstitutionality must show that (1) State action has been employed (2) to deprive that party of a substantial interest in property.); Sutton v. Cleveland Bd. of Educ., 958 F.2d 1339, 1349 (6th Cir.1992) (holding that in a procedural due process case . . . the plaintiff . . . carries the burden of pleading and proving the inadequacy of state processes). Under this standard, I would hold that the requirements of Chapter 290 were not unreasonably burdensome. The registration form merely stated that the filer needed to indicate the date of creation to the best of the filer's knowledge[,] and required no further attestation of accuracy. [9] As the Majority recognizes, the phrase to the best of my knowledge injects significant uncertainty into the subject statement. See, e.g., Cotton v. Frazier, 170 Tenn. 301, 95 S.W.2d 45, 47 (1936) ([T]he qualifying words `to the best of my knowledge and belief' in the oath . . . would vitiate the verification under certain conditions, leaving the affidavit too much subject to the objection of uncertainty in affirmation. . . .). Such a qualification indicates that the declarant might not have personal knowledge of the truth of the statement. See SCR Joint Venture L.P. v. Warshawsky, 559 F.3d 133, 139 (9th Cir.2009) (observing that the phrase `to the best of my knowledge' . . . seems to inject a level of uncertainty into just how sure the declarer is of the truth of the asserted fact). Many courts have characterized the phrase as equivocal. See Swanson v. Kraft, Inc., 116 Idaho 315, 775 P.2d 629, 638 (1989) (giving to the best of my knowledge as an example of an equivocating phrase[]); Portee v. State, 277 Ga.App. 536, 627 S.E.2d 63, 66 (2006) (describing such statements as equivocal at best). As these cases demonstrate, the common and legal understanding of the phrase to the best of my knowledge removes assurances of accuracy. Therefore, contrary to Muskin's belief, he did not need to conduct a title search to comply with the requirements of Chapter 290. Because Muskin's belief that he needed to conduct a title search was his sole basis for arguing that the requirements were unreasonable, I would hold that he has not shown that Chapter 290 denied him a reasonable time and opportunity to protect his vested rights. An incorrect belief about statutory requirement does not show sufficiently that the requirement was so unreasonable that it amounted to a denial of due process. In fact, nothing in the record indicates that Muskin submitted any registration forms on behalf of his trust or otherwise attempted to comply with the statute. [10] Thus, he has not met his burden of . . . proving the inadequacy of state processes. Sutton, 958 F.2d at 1349. He would have needed to do more to show that the requirements of Chapter 290 were actually so unreasonable that they deprived him of his vested property rights without due process. Moreover, in other circumstances, vested rights holders are required to do much more than the legislature required under Chapter 290. For example, when a legislature imposes or shortens a statute of limitations, the holder of a vested cause of action is required to initiate a lawsuit within the statutory grace period, a far more arduous task than completing a simple, two-page form. Such a form, without more, is not an unreasonably burdensome requirement. I would hold, therefore, that Muskin had an objectively reasonable time and opportunity to protect his vested rights without incurring undue cost or burden. The difficulties he perceived, and his claim that a full title search was required, were objectively unreasonable and could have been easily addressed by calling the Department. His failure to do so is insufficient to show a lack of reasonable opportunity or a denial of due process. For the foregoing reasons, I respectfully dissent. Chief Judge BELL authorizes me to state that he joins in the views expressed in this dissent.