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Recent News

Insights and Developments in the Law
WAMPLER & SOUDER, L.L.C.
Concord Building Kensington • 10605 Concord St.., Suite 206 • Kensington, MD 20895
Telephone (301) 942-0802 • Fax (301) 942-8296

May 25, 2012

Construction Law

Liability for company contracts - Fraud::
One of the benefits of forming a separate legal entity such as a corporation or limited liability company (LLC) is that owners generally cannot be held personally liable for breach of company contracts. The Maryland Court of Special Appeals has recently ruled in Serio v. Baystate Properties, LLC that the protection from liability is fairly comprehensive. In Serio an LLC owned by the Defendant promised to set up an escrow account to deposit funds sufficient to pay a construction company draws on work performed on two investment properties. The land was owned by the Defendant and not his LLC. Money was to be received from the sale of the properties and the Defendant was found to have lied about the sale of one of the properties. Nonetheless the court held that the Defendant would not be held to redress the breach of a contractual obligation in the absence of fraud when the party seeking to pierce the corporate shield has dealt with that corporation in the course of its business on a corporate basis.

In In re Marinucci an appeal from a US Bankruptcy Court decision, US District Court Judge William Quarles held that fraud was committed and thus an owner could be held personally liable for his company's contracts when that owner lied about his construction company obtaining a performance bond and lied in the certifications in monthly payment applications by stating that draws were used only to pay subcontractors and suppliers.

Scope of Consumer Protection Act Limited- New Home Warranty claims::
U.S. District Court Judge Richard Bennett has ruled that the scope of the Maryland Consumer Protection Act ("CPA") is limited. In Savage v. Centex/Taylor LLC a homebuyer brought a warranty claim and a CPA claim against the homebuilder. The builder provided a warranty to the owner which expired one year after closing. The owner claimed that the builder did not have the right to limit its warranty to one year because the warranty statute mandated a two year warranty which expires as late as two years after the construction deficiency is discovered. The owner claimed damages under the CPA which provides for an award of counsel fees to a successful claimant. The court ruled that the one year warranty excluded a CPA claim and the owner only had a claim under the Maryland home warranty statute.

Unlicensed Subcontractors Can Sue for Payment::
The Court of Appeals has upheld the Court of Special Appeals and ruled that unlicensed home improvement subcontractors can sue for payment under certain limited circumstances. Hopefully, the door is now opened for rescinding the more inequitable aspects of the "no license no payment" doctrine.

Criminal Law

New Criminal Laws in Maryland::
Maryland criminal laws have recently been changed. Among the changes are:

1. A grace period of five days is now being given to renters of motor vehicles to return or account for the motor vehicle before being charged with a crime. The grace period begins after a written demand for the return of the motor vehicle is mailed by regular mail and certified mail (with return receipt requested) to the person who rented the motor vehicle A prosecution for abandoning or failing to return a rental vehicle may not be commenced until after the 5-day grace period has lapsed.

2. Maximum penalties for possession of small amounts of marijuana have been reduced A person may only be imprisoned for up to 90 days or a fine of $500 or both for possession of less than 10 grams of marijuana. The act also contains other leniency provisions. Maryland appears to be demonstrating recognition of the fact that marijuana is less serious than other illegal drugs.

Defendant Does Not Have to Make Counterfeit Check Good::
In Weems v. State a Defendant cashed a counterfeit check. The bank notified her that the check was counterfeit. She failed to make the check good. The trial court could not determine that she knew the check was counterfeit; however, it found her guilty of criminal conduct when she refused to return the funds she received after a request was made for their return. The Maryland Court of Special Appeals found that these facts were not sufficient to convict the Defendant of a crime.

Second Amendment Rights and Protective Orders::
The Fourth Circuit Court of Appeals has indicated that a domestic violence protective order does not infringe the second amendment's "right to bear arms" by prohibiting the possession of firearms. In United States v. Chapman the defendant was subject to the terms of a protective order. This order prohibited the possession of firearms. Firearms were found in defendant's possession and he was charged with the federal crime of violation of the firearms provision of the order. Chapman argued that his conduct posed no danger to the individual who obtained the protective order and thus the prohibition violated his second amendment rights. The court held that the government had established a reasonable fit between the law and the firearms prohibition.

Family Law

Gay Marriage::
Maryland has enacted a law legalizing gay marriage; however, the law does not take effect until next year and a referendum is expected. If the referendum occurs polling shows a 50/50 split among voters on this issue. Stay tuned.

Non Existent Attorney's Fees Must be Considered in Custody Case::
In Davis v. Petito the trial court awarded attorney's fees to a father who it found had been falsely and baselessly accused of sexual abuse by the child's mother. The Court of Appeals reversed the case indicating that the trial court had to consider attorney's fees incurred (but neither owed or paid by mother) to the Sexual Assault Legal Institute (SALI) which represented the mother free of charge. In other words, the mother got a free lawyer to facilitate the bringing of baseless sexual abuse charges and the father, who had to pay his lawyer, could not get awarded his fees unless fees - that the mother did not ever have to pay were considered.

Bankruptcy Law

False Representation that Money Needed Immediately is Fraud::
Maryland Bankruptcy Judge Nancy Alquist has ruled that lying about the immediate need for money can form the basis for a nondischargeabilty claim (nondischargeable debts cannot be eliminated by bankruptcy). The case of In re Simone involved a request by Defendant for a loan from one of the Defendant's friends. The Defendant told her friend that she needed $50,000 right away in order for a closing to take place the following day. However, there was no closing the following day. The closing did not take place for another two months. The court held that this representation was fraudulent and the debt non-dischargeable.

Maryland Homestead Exemption Unconstitutional?::
The Maryland exemption statute appears to prohibit two spouses or more than one family member from simultaneously or successively claiming the homestead exemption. However, any unrelated co-owners can claim the exemption. A similar Virginia statute was held unconstitutional in the Fourth Circuit case of Cheeseman v. Nachman. Additionally, the statute appears to be vulnerable to an equal protection challenge. Stay tuned..

August 11, 2011

Divorce Law

No fault divorce in Maryland:
As of October 1, 2011, a no fault divorce will become available in Maryland. Thus, a married couple will be eligible for divorce in one year regardless of the reasons causing the separation. Previously, unless the parties agreed to the separation, the parties would have to wait two years unless other grounds for the divorce (i.e adultery physical abuse) existed.

Mixed Maryland rulings on gay divorce:
Attorney General Douglas Gansler is of the opinion that same sex married couples can obtain a divorce in Maryland. However, decisions from Maryland courts on this issue have been mixed with some judges refusing to grant divorces to gay couples. A Maryland Appeals court decision has not been handed down on this issue.

Bankruptcy

Means testing and the economic unit approach:
The Bankruptcy Code sets limits on income and deductible expenses. If you exceed these limits, you cannot file a Chapter 7 and must instead file a plan bankruptcy (i.e Chapter 13 or Chapter 11). The income limits increase or decrease based upon the number of your dependants. How you define a "dependant" for purposes of means testing has become the subject of considerable dispute. Three separate theories have been adopted by courts.

1. The IRS approach - this requires that the dependant be lawfully taken on a tax return

2. "Heads on beds" approach - this approach permits utilizing all persons who lawfully occupy a housing unit. However, each person's income must be included as well.

3. The Economic Unit - this approach, adopted recently by courts in the 4th Circuit and by at least one judge in the Eastern District of Virginia permits an exemption claim for groups of individuals who function as an economic unit. Under this approach a dependant is not required to live with you a certain number of days, be related to you or be a dependant as defined by the tax code.

Government Employers cannot refuse to hire because of prior bankruptcy:
The 11th Circuit in Meyers v. Toojay's Mgmt. Corp. has interpreted a section of the Bankruptcy Code to prohibit governments from refusing to hire a prospective employee solely because of that individual's prior bankruptcy; however, this prohibition does not apply to private employers.

Watch out - you may still have to pay your taxes:
Often taxes can be discharged (gotten rid of in bankruptcy) as long the tax returns are due three years before a bankruptcy filing and the returns are timely and accurately filed However the bankruptcy code renders nondischargeable (meaning it still has to be paid) any tax "with respect to which the debtor... willfully attempted to evade or defeat such tax." However, nonpayment of taxes alone is not enough to show a willful attempt to evade ordefeat according to the 6th Circuit case of United States v. Storey, 640 F.3d 739 (6th Cir. 2011), but knowing and intentional nonpayment of taxes by intentionally failing to file returns to avoid paying taxes along with placing assets in the names of others to avoid collection are sufficient to make the taxes nondischargeable according to the 11th Circuit case of U.S. v. Mitchell.

Construction Law

Contractors successful lawsuit eliminates homeowner warranty:
On May 10, 2011, Maryland adopted the International Green Construction Code (IGCC) as an option for use by the Maryland Department of Housing and Community Development and local governments. This law takes effect on March 1, 2012. Maryland is the first state to approve IGCC in this manner. The law was initially drafted by the International Code Council along with others. It applies to commercial buildings.
A construction company brought an arbitration claim against a homeowner and successfully obtained an award which was turned into a judgment against the homeowner. The homeowner thereafter attempted to bring an action claiming breach of warranty by the contractor. The Maryland Court of Special Appeals held in U.K. Const. & Management, LLC v. Gore that this warranty claim could not be brought due to the fact that contractor had already successfully brought a claim against the homeowner.

Minority Contractor Status Determination Can be Appealed:
When Salisbury University determined that a contractor was not eligible to be a minority contractor and thus was barred from being awarded a contract for construction, the contractor attempted to appeal this decision to the Maryland Board of Contract Appeals (MBCE). However, he was told he did not have any right to an appeal both by the university and the MBCE. The Maryland Court of Special Appeals, however, overturned this decision and found the contractor did have the right to an appeal in Salisbury University v. Zimmer.

Criminal Law

You cannot be charged with fleeing and eluding an unmarked car:
In Williams v. State the Court of Special Appeals found that an unmarked police cruiser, equipped simply with lights and sirens, did not constitute a vehicle appropriately marked as an official police vehicle within the meaning of the fleeing and eluding statute. Therefore, a criminal charge of fleeing and eluding a police officer could not be brought against the Defendant in that case.

You cannot be arrested just because you are sleeping with a criminal:
A key to a lockbox containing drugs was found when a defendant's clothes were searched after he was arrested. This defendant was found in bed with another suspect who admitted she owned the keys to the lockbox. The police originally entered the home after obtaining a search warrant. The Maryland Court of Appeals in Belote v. State held that the arrest of the defendant was improper. The Court also held that any evidence regarding the discovery of the key in the defendant's clothing could not be introduced.

April 6, 2011 New Firm Announcement

We are happy to announce our new firm Wampler & Souder, LLC and the dissolution of Wampler, Souder & Sessing, LLC. We are excited about the fact that the firm is delivering legal services more productively, efficiently, and effectively than ever. We have also increased our areas of practice which include, but are not limited to those listed below:

• Estate Planning & Administration
• Tax Law
• IRS Disputes
• Business Transactions
• Foreclosures
• Landlord-Tenant
• Creditors and Debtor’s Rights
• Construction Law
• Construction Litigation
• Bankruptcy
• Custody
• Divorce
• Domestic Relations
• Domestic Violence
• Personal Injury
• Guardianships
• Wills
• General Business Litigation
• Collections
• Appeals
• Defamation
• Insurance Litigation and
Coverage Disputes
• Real Property Litigation
• Injunction
• Specific Performance
• Equitable Claims
• Corporate and Business Litigation
• Landlord Tenant
• Consumer
• Lemon Law
• Warranty Claims
• Attachment Before Judgment
• MVA hearings
• Criminal Law
• Serious Traffic Offenses
• DUI / DWI
• Appellate Law
• Civil Litigation
• Practice before Federal Courts

 

February 8, 2011 News Update

Maryland New Home Builders
Recent decisions of the Maryland Appeals Courts have shown that the State of Maryland may have a tough time broadly enforcing laws pertaining to new home builders. In Bayly Crossing, L.L.C. v. Consumer Protection Division ("CPD") the Court of Appeals held that a developer did not need a home builder's license as claimed by the CPD when it sold land to a consumer purchaser if a separate licensed builder was designated in its contract as being responsible for a home to be constructed.
In Coleman v. State, a builder/developer was criminally convicted both of violating the Deposits on New Homes subtitle of the Real Property Article of the Maryland Code and of theft when he failed to place deposits in escrow and complete homes. However, because the contracts did not call for land and a dwelling to be conveyed simultaneously, the Court of Special Appeals held that the builder could not be convicted of violation of the New Homes subtitle for failure to deposit the funds in escrow. In addition, the court held that the fact that the developer lied about the progress of construction, after receiving deposits from the purchasers, was not enough to convict him of theft by deception.

January 7, 2011 News Update

Mechanic's Lien
If you are a material man in Virginia, be on notice that a mechanic's lien may be limited to construction related goods. In Summit Community Bank v. Blue Ridge Shadows Hotel & Conference Center, LLC, a West Virginia Bankruptcy case which interpreted the Virginia mechanic's lien statute, a furniture supplier was unable to claim a mechanics lien for that furniture when the West Virginia Federal District Court reversed a lower bankruptcy court decision that permitted the lien. The court held that the furniture had to be attached to the building (i.e. cabinets) in order for a lien to attach.
In DC, care must be taken when preparing a mechanic's lien notice. In McNair Builders, Inc. v. 1629 16th Street, L.L.C., the D.C. Court of Appeals determined notice to be defective partly in naming the wrong owner and partly in misdescribing the property to which the lien related.
While on the subject of notice, it is very important for contractors to be aware both of what notice is required and what actions are necessary to successfully assert a mechanic's lien. DC, Maryland and Virginia's laws differ greatly with respect to mechanic's liens. It is best that you understand your rights and have a working knowledge of procedures before beginning construction work.

November 22, 2010 News Update

Construction Law

Licensing/ Registration Issues:
Our construction business owner clients are always advised, when in doubt, obtain all necessary licenses and properly register in states where you do business. Additionally, before performing any work, check to see if permits are required, make sure you obtain them and have your work inspected.
In Maryland, make sure that your Corporation or LLC is properly registered and remains in good standing with the Maryland State Department of Assessments and Taxation (SDAT). Additionally, make sure you have a county contractor's license and are registered as a contractor, subcontractor and/ or salesman with the Maryland Home Improvement Commission (MHIC) and/or have a new home builders license. Also, make sure that you obtain all necessary permits and inspections. If you are in Washington, D.C., obtain proper licensure through Department of Business and Consumer and Regulatory Affairs (DBCRA) and the Virginia Contractor Board in the State of Virginia.
The worst case scenario if you are not licensed, not registered or work without permits is that you will be unable to collect amounts owed and will have to give back amounts paid. Here are some recent court holdings with regard to these issues:

Maryland:
In the case of Alcoa Concrete & Masonry, Inc. v. Stalker Brothers, Inc., a subcontractor that did not have a home improvement commission license both at the time it contracted to perform home improvement work, and when it later performed the work, obtained a license prior to filing suit against a general contractor for payment. The Maryland Court of Special Appeals reversed the decision of the trial court and granted the subcontractor the right to enforce its subcontract with the general contractor. However, the Court of Appeals has weighed in and indicated that it is going to take another look at this issue. Stay tuned.

Virginia:
The Supreme Court of Virginia is reviewing a decision by Circuit Court in the case of Studio Center Corporation v. WKW Construction, LLC, which determined that an unlicensed contractor that knew he was required to be licensed through the Virginia Contractor Board, but did not know he could not use the license of another contractor, could nonetheless file a lawsuit to recover payment under his contract.

District of Columbia:
Nothing has changed recently. If you are not licensed through DCBRA, not only will you not be able to collect any money but you must give all the money that you have been paid back. This is most recently held in the DC US District Court Case of Authentic Home Improvements v. Mayo.

Wampler & Souder, LLC currently awaits decisions on cases it is handling by the Court of Special Appeals on cases involving licensing and registration issues. Specifically, whether a partially constructed home, which has yet to receive its first use and occupancy permit, requires a new home builder license or a home improvement licenseand whether a foreign corporation which worked on only one Maryland project was required to register as a foreign corporation with Maryland SDAT.

Indemnification Clauses and Contracts:
There is an old saying that, "Pigs get fat and hogs get slaughtered." This certainly applies to overreaching in contracts in the State of Virginia. In the case of Uniwest Construction v. Amtech Elevator Services, the general contractor utilized a contract which obligated the subcontractor to indemnify (assume responsibility for) all damages incurred by the contractor whether or not those damages were based on the subcontractor's negligence or the negligence of the owner or contractor. The Virginia Supreme Court invalidated this entire clause and refused to partially enforce it. Therefore, if this was the only clause in your contract in the State of Virginia, and damages were cause by the negligence of a subcontractor, you would have an invalid indemnification clause.

Bankruptcy Law

Additional Relief for Debtors Through Homestead Exemptions:
In Maryland, the tenancy by the entireties exemption exists which exempts the entire value of a home in the event of a bankruptcy filing. However, this exemption only exists if a husband and wife hold property together. Additionally it offers no protection from the joint debt of the husband and wife. The Maryland legislature has amended the Maryland Code to now allow an exemption in an individual debtors real property. The current inflation adjusted amount of this exemption is $21,625.00.

Recent Developments Concerning Lien Avoidance and Unsecured Debt:
One of the great benefits of Chapter 13 Bankruptcy is the ability to avoid attachment of second mortgages to real estate. Due to the substantial drop in the value of real estate, many individuals have second mortgages (or even third, fourth mortgages, etc.) that effectively encumber no value in their real estate. In other words, the value of their first mortgage equals or exceeds the value of their home. In these cases, the attachment of the second mortgage to the home can be eliminated through a Chapter 13 Bankruptcy filing. However, some Maryland bankruptcy judges have recently ruled that the original principle balance of the first mortgage is all that can be considered in determining that the first mortgage equals or exceeds the value of the real estate.

Unsecured Lien is Unsecured Debt:
Many people delay in filing for bankruptcy because they believe that they are not going to pay any more or any less money as a result of these delays. While this may be generally true as to what they have to pay their creditors, this may not be true as to what they have to spend in attorneys fees. Delay can increase the amount of debt and thereby eliminate the eligibility for filing.
Many are surprised to learn that even though all their debts are consumer debts, they are ineligible to file a Chapter 13 case and are instead forced to file a Chapter 11 Bankruptcy. A Chapter 11 bankruptcy involves attorney�s fees expenses which are many times those required to file for a Chapter 13. The amount owed for debts can result in the difference between being able to file a Chapter 13 or having to file an Chapter 11. In the case of In re Bernick, the Virginia Bankruptcy Court ruled that a lien secured by real estate did not make that debt a secured debt for eligibility purposes. Thus, the court held that if a lien is eligible to be stripped off the debtor cannot have it both ways and treat the lien as a secured debt.

Divorce Law

Individuals Residing in the Same Household May Obtain Divorce:
The Maryland legislature has amended the Maryland Code to permit married couples residing in the same house to obtain a divorce. Often, non-loving married couples remain in their home for many years, under intolerable circumstances, either because they cannot afford a new residence, or because neither party is willing to surrender the tactical advantage that results from remaining in the home. This new legislation alleviates much suffering by allowing these unhappy couples to get divorced.