Ronald S. Deutsch, Esq.

    I hope everyone had a great 2006.  The past year has seen many changes impacting the real estate practitioner and 2007 promises to bring even more.  In this edition of Ground Rules we have attempted to bring articles on topics that interest the readership.  I truly appreciate the efforts of all the authors who have taken the time to write for this issue.  Many opportunities exist in future editions, for those who wish to publish articles of interest to the Section.  If you are interested, please contact me at RDeutsch@cgd-law.com.

    Wishing you all great health, happiness and prosperity for 2007.

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John C. Murphy, Esq.
Law Office of John C. Murphy
   
   
    On November 3, 2006, the Court of Appeals issued a 37 page opinion holding the Baltimore Development Corporation (BDC) subject to the State opening meetings and public information laws.

    The sunshine laws have been around since the 1970s and at first glance one would assume that BDC would be subject to these laws. Indeed that was the very first question posed by Chief Judge Joseph Murphy to BDC in the argument before the Court of Special Appeals—why in the world would a powerful City development agency like BDC not be subject to these laws?

    The City’s defense boiled down to the contention that it was a private corporation and, as such, was not subject to the State laws which are aimed at public meetings, that is, meetings conducted by units of government , or public documents, that is documents generated by units of government. For the public meetings law, it came down to a question of statutory construction. The law states that a public body “includes” entities where a majority of the board members are appointed by the Mayor. SG 10-502 (h)(2). The City unsuccessfully argued that “includes” did not extend the reach of the law to non-governmental entities. Instead, the Court of Appeals held that in this case the word “includes” performed the function of extending the law to private corporations where the board was publicly appointed.

    For the public information law, the law applies to an “instrumentality” of government, SG. 10-611 (g)(1)(i). Here the Court of Appeals held that it was obvious that BDC performed public functions and that it fit the normal concept of “instrumentality”.

    So from a purely legal standpoint, it was not a difficult case. It also did not help BDC that it was represented in the proceedings by the City Solicitor who normally represents only units of the Baltimore City government, not private interests or private corporations. The strongest argument asserted for BDC’s, was that it had performed wonderful work over the years like the Inner Harbor, so why hamper it with restrictions that might make its life more difficult. Indeed there have been sporadic efforts over the years in the General Assembly to bring BDC and agencies like it under the Sunshine laws. One can assert that given BDC’s prominence, if it operated with an immunity from the Sunshine laws, that immunity must have flowed from the consent of the General Assembly.

    If the scales needed to be tipped, the Supreme Court case of Kelo v. City of New London, 545 U.S. 469 (2005) was there to do the tipping. Baltimore City undertakes eminent domain on a massive scale, mostly under the aegis of BDC. The Court of Appeals just could not accept the contention that an agency carrying on eminent domain programs was immune from the Sunshine laws. Judge Cathell’s opinion quoted extensively from Kelo and he wrote that given the justifiable concern with the seizure of private property for development projects such as upheld in Kelo, condemnation proceedings “should be even more open to public scrutiny”.

    The public meetings and freedom of information laws are often of great use to practitioners. It is difficult to represent clients, if the agency is meeting behind closed doors. Access to documents is often of immeasurable help. So given that BDC is an incredibly powerful agency, orchestrating the investment of hundreds of millions of dollars in private and public money and having a profound effect on Baltimore City, the decision is of great importance. The decision will also no doubt have application to other organizations both in the City and outside.

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James L. Thompson
Joseph P. Suntum
Miller, Miller & Canby, Chtd.

    After the Supreme Court of the United States decided the Kelo case permitting private property to be condemned for economic development, the public reaction was surprisingly swift and overwhelmingly against the decision. Within several months, four states, Alabama, Delaware, Ohio and Texas enacted eminent domain legislation in the 2005 legislative session and Michigan passed a Constitutional amendment to counteract Kelo. This eminent domain reform generally fell into five categories:

• Prohibiting eminent domain for economic development, including for generation of increased tax revenues or for transferring property to another private party;

• Limiting eminent domain to a “stated public purpose”;

• Restricting eminent domain to blighted properties or where an area as a whole is considered blighted;

• Imposing a moratorium on eminent domain use for economic development for a stated period while legislative task forces evaluated the issue; and

• Increasing the compensation amount for condemned property where it is a person’s principal residence.

    In 2006, twenty-one states passed eminent domain reform to limit Kelo, some with Constitutional amendments and most by statutory provisions. These states include Alabama, Alaska, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts, Missouri, Nebraska, Pennsylvania, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin; and five states Florida, Georgia, Louisiana, New Hampshire and South Carolina passed Constitutional amendments. Two additional states, Arizona and New Mexico, passed eminent domain legislation but it was vetoed by the governors. The 2006 eminent domain reform legislation fell into the same categories as it did for 2005, with two additional areas of coverage:

• It imposed greater procedural requirements on eminent domain use, e.g., greater public notice, more public hearings, good-faith negotiations and elected governing body approval; and

• Redefining “public use” as possession, occupation or enjoyment of the property by the public at large, public agencies or public utilities. [view article in it's entirety]

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By: Ronald S. Deutsch
Cohn, Goldberg & Deutsch, LLC

By: Robert Flynn
Covenant Title Corp.

The pivotal question to be asked in analyzing a seller’s obligation begins with, “What obligation?”  Trying to research the issue using only Maryland case law as a guide will leave you frustrated and probably without a clear answer.  Many cases dating back nearly two centuries can be found, which are still good law but they refer to sellers as “vendors”.  Using a computer assisted search without the word “vendor” would lead you to think Maryland has never before addressed these issues.

Because the cases necessarily revolve around differing fact patterns, it can be somewhat difficult to glean the general rules or “black letter law” that so many of us seek when providing advice to clients or each other.  However, the source documents upon which most of the cases rely is still available for us.  Corbin on Contracts and Williston on Contracts are the textbooks for many areas involving contracts, including this one.  Each treatise provides a framework for understanding this very interesting area of law. 

 Generally, there is no duty to disclose adverse facts to the other party in a contract setting.  To hold otherwise would create the absurd result that a party would have to tell the other party that the deal is too good, and why.  That would not exactly be conducive to our commercial enterprise system. 

So, if the rule of caveat emptor is alive and well, when is it mollified?

When a statute requires a disclosure, it must be made.  Whenever a true statement when made becomes false, a duty exists to explain it.  When a confidential relationship exists, disclosure is required. Whenever a statement is offered, it must be truthful and complete.  A seller certainly cannot take active measures to hide defects.  What else is there? 

When does a seller, who knows of a latent, material defect in property, required to make a disclosure of such, given the general rule states above?

In general terms, disclosure must be made when the seller is aware of a material, latent defect.  “Material” is a fact about the property that would change a reasonable person’s purchasing decision.  “Latent” means that the defect is not readily observable or readily discoverable by reasonable means.  The cases are decided on what property, defect, material and latent are.  Williston calls this the “passive concealment” exception to the caveat emptor rule. 

In describing the pendulum swing from caveat emptor to disclosure, Corbin states:  “A Seller of … land … is under an obligation to disclose latent defects.  This is a very old doctrine, though its history is not smooth … Although the dust has not settled, it may safely be said that the older law [disclosure] once again prevails as to latent defects in consumer transactions and single family housing.”  Corbin is very concise!

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The Maryland Pro Bono Service Awards are statewide awards honoring outstanding attorneys and non-attorneys who have made a significant contribution to the delivery of pro bono civil legal services to Maryland’s poor. The service may have been made through litigation, legal/ legislative advocacy, or any other means that extend needed legal services to low-income persons.


Nominations will be accepted for the following categories:

• Individuals
• Members of the judiciary
• Pro bono agencies or programs
• Law firms
• Government or corporate legal departments
• Special projects
• Non-legal or organizational involvement

If someone you know has made an impact, please consider nominating them for one of these awards. Information and an application will also be made available on our website www.probonomd.org.

For more information contact:
Pro Bono Resource Center
410.837.9379/ 800.396.1274 or jmoseley@probonomd.org.

Application deadline is Monday April 2, 2007.

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The Maryland State Bar Association Real Property Section is seeking nominations for its Distinguished Practitioner Award given at the annual meeting in Ocean City, Maryland. If you are interested in nominating a practitioner, the form required can be downloaded and printed from the enclosed link.

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