MRA Property Management, Inc. et al. v. Armstrong et al., No. 93, September Term 2007. STATUTORY INTERPRETATION – MARYLAND CONSUMER PROTECTION ACT – APPLICATION OF THE CONSUMER PROTECTION ACT IN A SALE OF A CONDOMINIUM UNIT TO ENTITIES OTHER THAN DIRECT SELLERS The Court of Appeals held that the Maryland Consumer Protection Act, Sections 13-101 through 13-501 of the Commercial Law Article, Maryland Code (1975, 2005 Repl. Vol.) applies to entities other than the direct seller, in the context of a sale of a condominium unit, if the entity provides information that is integral to the transaction, under the principle set forth in Hoffman v. Stamper, 385 Md. 1, 867 A.2d 276 (2005). STATUTORY INTERPRETATION – MARYLAND CONSUMER PROTECTION ACT – APPLICATION OF THE CONSUMER PROTECTION ACT TO DISCLOSURES MADE PURSUANT TO THE MARYLAND CONDOMINIUM ACT Mandatory disclosures made by a management company and an association of unit owners during a transaction for the sale of a condominium unit could violate the Maryland Consumer Protection Act, even if those disclosures complied with the Maryland Condominium Act, Sections 11-101 through 11-143 of the Real Property Article, Maryland Code (1974, 2010 Repl. Vol.), if they were false or misleading, or had the capacity, tendency, or capability of misleading. SUMMARY JUDGMENT – DISPUTE OF MATERIAL FACTS Summary judgment was not appropriate when there existed a dispute as to the facts material to the claims for which summary judgment was being sought, including whether the information provided by MRA and the Association of Unit Owners was misleading so as to violate the Consumer Protection Act and the timing of MRA and the Association’s knowledge of the need for a special assessment. IN THE COURT OF APPEALS OF MARYLAND No. 93 September Term, 2007 MRA PROPERTY MANAGEMENT, INC., et al. v. SUSAN ARMSTRONG, et al. Bell, C.J. Harrell Battaglia Greene McDonald Eldridge, John C., (Retired, specially assigned) Cathell, Dale R., (Retired, specially assigned), JJ. Opinion by Battaglia, J. Filed: April 30, 2012 This case involves a long-standing dispute between the Tomes Landing Condominium Association, Inc. (Association), located in Port Deposit, Maryland, and MRA Property Management, Inc., Appellants, and twenty-five condominium unit purchasers, Appellees.1 The unit purchasers were granted partial summary judgment in the amount of one million dollars against the Association and MRA in the Circuit Court for Cecil County, on the ground that the operating budget that MRA and the Association supplied as part of a “resale package” provided to the unit purchasers violated Sections 13-301(1), 13-301(3), and 13-303 of the Maryland Consumer Protection Act,2 because the budgets “had the capacity, tendency 1 The individual unit owners named as plaintiffs in the second amended complaint were: Susan Armstrong, Lois Ashworth, Reda Beer (Trustee), Pat Boling, Donald and Wendy Claus, Mary Anne Conover, Donald Gomish, Karen Green and Arthur Kettell, Karen and Robert Halupke, Ellen Jones, Kenneth Ko, Kenneth and Rita Kraft, Lynn Lehnert and Michael Owens, Theresa Lina, Ruth Maciejeski, Michael McGinn, Scott and Heather Mueller, MSM Investments, LLC, Eta Roehm, Roy and Diane Schaefer, John and Judy Schlecht, John and Dinah Schlecht, Michael and Jana Siwek, Thomas Stalcup, and David Sugar. 2 Section 13-301 states, in pertinent part: 13-301. Unfair or deceptive trade practices defined: Unfair or deceptive trade practices include any: (1) False, falsely disparaging, or misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers; * * * (3) Failure to state a material fact if the failure deceives or tends to deceive; Section 13-301 of the Commercial Law Article, Maryland Code (1975, 2005 Repl. Vol). Section 13-303 states: (continued...) and effect of misleading the movants in connection with their purchases of the condominiums in Tomes Landing Condominiums.” MRA and the Association appealed the grant of partial summary judgment to the Court of Special Appeals, but, while that appeal was pending, both MRA and the Association, as well at the unit purchasers, filed Petitions for Writs of Certiorari. We granted both Petitions, 402 Md. 352, 936 A.2d 850 (2007), to consider the following questions, the first presented by the unit purchasers and the remainder, rephrased for clarity and brevity, presented by MRA and the Association:3 2(...continued) A person may not engage in any unfair or deceptive trade practice, as defined in this subtitle or as further defined by the Division, in : (1) The sale, lease, rental, loan, or bailment of any consumer goods, consumer realty, or consumer services; (2) The offer for sale, lease, rental, loan, or bailment of consumer goods, consumer realty, or consumer services; (3) The extension of consumer credit; or (4) The colllection of consumer debts. Section 13-303 of the Commercial Law Article, Maryland Code (1975, 2005 Repl. Vol). Effective January 1, 2006, Section 13-301 of the Commercial Law Article was amended to add another subsection, but the quoted language remains unchanged. All subsequent references to the Consumer Protection Act are to the Commercial Law Article, Maryland Code (1975, 2005 Repl. Vol.). 3 Questions two through five have been rephrased using the language from MRA and the Association’s brief before us. The questions presented in their Petition, however, were: I. Where § 11-135 of the Maryland Condominium Act specifically delineates the 12 items to be included in a resale certificate given to the purchasers of a (continued...) 2 3(...continued) condominium unit, and this Court held, in Swinson v. Lords Landing Village Condominium, that a council of unit owners need not make disclosures beyond the items delineated in § 11-135, does the Consumer Protection Act impose a duty upon the council of unit owners and its agent to disclose information not mandated by the Condominium Act? A. Does the Condominium Act, which delineates the information the council of units owners must disclose in a resale certificate, control over the more general obligations set forth in the Consumer Protection Act? B. Do the council of unit owners and its agent qualify as “merchants” under the Consumer Protection Act by providing information in a resale certificate pursuant to the statutory duty created by § 11-135 of the Condominium Act? C. Can providing a resale certificate that adheres to the requirements of the Condominium Act qualify as an unfair or deceptive trade practice under the Consumer Protection Act when the resale certificate is not provided “in the sale or offer for sale” of consumer realty? II. If the Consumer Protection Act applies to a council of unit owners’ disclosure responsibilities under § 11-135 of the Condominium Act, is a finding of a violation of §§ 13-301 and 13-303 of the Consumer Protection Act dependant upon evidence of knowledge on the part of the council or its managing agent, at the time of the sale of a unit, of the severity of damage to the condominium buildings and the magnitude of a potential future assessment on unit owners to pay for repairs? III. Is it error for a trial court to enter judgment as a matter of law against a condominium association and its managing agent on a unit owners’ Consumer Protection Act claims based upon alleged failure to disclose the potential for future assessments to repair damage to condominium (continued...) 3 1. Does the Maryland Consumer Protection Act apply to representations made to the purchasers of condominium units in the sale, or offer for sale, of their condominium units? 2. Whether the trial court erred in finding as a matter of law that the Association and MRA had a further duty to Appellees under the Consumer Protection Act to disclose information beyond that required by § 11-135 of the Maryland Condominium Act, despite this Court’s holding in Swinson v. Lords Landing Village Condominium [360 Md. 462, 758 A.2d 1008 (2000)] that the MCA’s disclosure provisions were definite and limited and required no disclosures beyond those items specifically delineated in §11-135. 3. Whether the trial court erred in holding that the operating budgets provided by the Association and MRA pursuant to §11-135 were misleading as a matter of law, when the preparation and disclosure of the operating budgets 3(...continued) buildings where: A. genuine issues of material fact exist as to when the association and its agent became aware of the magnitude of damage to the condominium buildings, the cost to repair such damage, and the necessity of approving a special assessment to pay for such repairs? B. genuine issues of material fact exist as to whether the purchasing unit owners were aware, before purchasing their respective units, of damage to condominium buildings? IV. Is it error for a trial court to find that a current operating budget provided by a condominium association to selling unit owners pursuant to § 11-135 of the Condominium Act had the capacity, tendency, and effect of misleading the purchasing unit owners without any expert testimony indicating that an operating budget should include a line item for unapproved capital expenses? 4 complied fully with the requirements of §§ 11-109.2 and 11-135 of the Maryland Condominium Act. 4. Whether the trial court erred in holding, as a matter of law, despite the existence of genuine issues of material fact, that the Association and MRA knew at the time of the sale of the units to Appellees that existing construction issues would necessitate major structural repairs to buildings and an assessment of costs to unit owners, when there was evidence that the severity of the construction issues became evident after most, if not all, of the sales had taken place. 5. Whether the trial court erred in finding that the Association and MRA were “merchants” involved “in the sale of consumer realty” within the meaning of the Consumer Protection Act, when neither the Association nor MRA sold or offered for sale consumer realty, and neither was involved in the sale of any condominium unit. (internal footnotes omitted). For the reasons set forth below, we shall hold that the Maryland Consumer Protection Act could apply to disclosures made in a resale certificate by a condominium association and its management company during the sale of a condominium and that there exists a dispute of material facts as to whether the operating budgets provided by MRA and the Association to the unit purchasers constituted unfair or deceptive trade practices under the Consumer Protection Act. This case has its origins in a suit filed by the unit purchasers in the Circuit Court for Cecil County, alleging multiple violations of the Consumer Protection Act and the Maryland 5 Condominium Act,4 as well as common law torts, stemming from MRA and the Association’s representations that there were no known health or building code violations at Tomes Landing and that the operating budgets reflected that repair expenses in the community were declining, at a time when MRA and the Association knew they were climbing. The impetus for the suit was a special assessment that was imposed on all unit owners in December of 2004 to pay for water damage to the buildings allegedly resulting from improper construction and flashing that caused water to seep behind the building facades and threaten the structural integrity of the buildings. The unit purchasers alleged that the extent of the water damage had been known to MRA and the Association since 1996. The second amended complaint filed by the unit purchasers included a total of thirteen counts.5 The first count alleged that MRA committed fraud when it submitted the operating budgets to prospective purchasers as part of the resale package. Specifically, the unit purchasers alleged that MRA knew of the estimated cost of the necessary, extensive repairs, but did not include this information in the line item on the budget for repairs. The complaint also asserted that MRA represented to the unit purchasers that it had corrected “any defective 4 All references hereinafter to the Maryland Condominium Act are to Title 11 of the Real Property Article, Maryland Code (1974, 2003 Repl. Vol.). The pertinent language in the 2010 volume of the Article remains the same, unless otherwise noted. 5 The unit purchasers’ complaint was first amended by interlineation to add a party and was amended a second time to clarify and modify language throughout the various allegations. 6 conditions in [Plaintiff’s] units” when it knew that the steps taken to correct these problems were ineffective. These representations were made, according to the unit purchasers, with knowledge of their falsehood and with the intent to defraud them. Counts two and ten alleged a violation of Section 13-301(1) of the Consumer Protection Act by MRA and the Association, respectively. These counts contain allegations that MRA and the Association knew of the defective nature of the property, the existence of health and building code violations, and the need for substantial repairs, prior to creating the resale packages for the prospective purchasers, but did not indicate that these problems would cause substantial increases in the amount paid for repairs, including a special assessment. The counts contain the assertion that MRA and the Association knew the operating budgets provided to the purchasers materially understated the cost of anticipated repairs and did nothing to correct or note this understatement, which mislead the purchasers. Counts three and eleven alleged that MRA and the Association violated Section 13- 301(2) of the Consumer Protection Act.6 The unit purchasers based these allegations on the 6 Section 13-301(2) of the Consumer Protection Act states that unfair or deceptive trade practices include: (2) Representation that: (i) Consumer goods, consumer realty, or consumer services have a sponsorship, approval, accessory, characteristic, ingredient, use, benefit, or quantity which they do not have; (ii) A merchant has a sponsorship, approval, status, affiliation, or connection which he does not have; (continued...) 7 same conduct as counts two and ten, and further allege that MRA and the Association also violated Section 13-301(2) by “represent[ing] that the Tomes Landing Condominiums, and its constituent components, had a sponsorship, approval, characteristic, use, benefit and/or quantity that they did not have” because the condominiums “contained . . . extensive defects and deficiencies.” The unit purchasers also alleged in counts four and twelve that MRA and the Association violated Section 13-301(3) of the Consumer Protection Act because “the Plaintiffs were not told that extensive water leakage had been experienced. . . and that such leaks would continue and become more severe absent costly and extensive repairs. . . .” Counts four and twelve also contain allegations that MRA and the Association failed to disclose known health and building code violations and that MRA and the Association failed to disclose knowledge of the threat of structural problems with the buildings. Count five alleged that MRA violated Section 13-301(9) of the Consumer Protection Act7 by failing to disclose “any information regarding the existence, nature and/or extent of 6(...continued) (iii) Deteriorated, altered, reconditioned, reclaimed, or secondhand consumer goods are original or new; or (iv) Consumer goods, consumer realty, or consumer services are of a particular standard, quality, grade, style, or model which they are not; Section 13-301(2) of the Consumer Protection Act. 7 Section 13-301(9) of the Consumer Protection Act states that unfair or deceptive trade practices include: (continued...) 8