author: Morton, J.,

text:
    LAMONT THOMAS et ux. v. FORD MOTOR CREDIT COMPANY
    [No. 658,
    September Term, 1980.]

      Decided May 11, 1981.

      The cause was argued before Morton, Melvin and Couch, JJ.

      Robert S. Sherman, with whom was Richard W. Winelander on the brief, for appellants.

      Robert D. Harwick, Jr., with whom were Donald C. Allen,

      Theodore B. Oshrine and Allen, Thieblot & Alexander on the brief, for appellee.
   Morton, J.,

delivered the opinion of the Court.

Appellants, Lamont and Beverly Thomas, appeal from an order of the Circuit Court for Baltimore County (Raine, J.f sustaining the demurrer without leave to amend the demurrer of appellee, Ford Motor Credit Company. The appellants assert that the lower court erred in sustaining the demurrer in that a cause of action was stated against the appellee in each and every count of the declaration.

Appellee has filed a motion to dismiss this appeal for appellants’ noncompliance with Maryland Rules 1028 a — c. The motion is without merit and, therefore, denied.

The declaration to which the appellee demurred was an amended declaration. A previous declaration had also been demurred to by Ford Motor Credit Company and the same court (Hinkle, J.) had sustained the demurrer on all but one count. The appellants were granted leave to amend. Appellants then filed the amended declaration which is before us in this appeal. The amended declaration, without referring to the previous declaration, reiterated the count on which the demurrer had been overruled.

The appellee, claiming no notice of the amended declaration having been filed, answered the original declaration by way of a general issue plea to the appellants’ count on which Judge Hinkle had overruled the demurrer. Appellee, upon learning of the amended declaration, filed a demurrer to all counts. Thereafter, the demurrer to the amended declaration was sustained by Judge Raine as to all counts, including the reiterated count.

The appellants filed their declarations based on the following alleged set of circumstances. On or about May 30, 1978, the appellants bought a 1977 Mercury Monarch automobile from Monarch Lincoln Mercury (seller). They financed the purchase of the car by entering into a retail installment contract which was assigned to the appellee. Printed on the face of the contract is the notice required by Md. Com. Law Code Ann. § 14-1302:

"NOTICE
Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.”

The car had been used as a "demonstrator model” and the odometer showed 12,000 miles. The appellants assert that the car was represented as being of the same standard, quality and grade as a new automobile of the same year and model. Furthermore, the appellants paid for an "extended warranty” which covered the car for up to 36,000 miles or two years. The cost of this warranty was included in the purchase price but not specifically disclosed on the retail installment contract.

The appellants asserted that the vehicle possessed so many defects as to render it unfit for transportation and constituted a safety hazard. It was further alleged that the seller attempted to repair the defects but was unable to do so and refused to replace the automobile. Appellants did not revoke acceptance of the car but brought this action, maintaining that the vehicle is worth only a small fraction of the purchase price.

The amended declaration before us sets forth the appellants’ claims in six counts. According to their brief, those counts assert the following: (1) "the sale of this particular automobile was in violation of the implied warranty of merchantability”; (2) "[t]he defects were of such a nature as to violate the implied warranty of fitness for a particular purpose”; (3) there was a breach of an express warranty by the seller in that the seller failed to repair the car as promised; (4) "the seller misled and/or deceived the AppellantLs] by deliberately misrepresenting the condition of the vehicle sold”; (5) Sections 12-605 and 12-606 of the Maryland Code of Commercial Law were violated in that an exact copy of the installment sales agreement was not delivered to the appellants at the time of signing and certain postsigning alterations were made on the agreement; and (6) the charge for the "extended warranty” was "hidden” in the cost of the vehicle, in violation of the Federal Truth in Lending Act (15 U.S.C. §§ 1601 et seq.).

We must first determine whether the appellants can assert their claims raised in counts one through four against the appellee. The appellee argues that its only relationship to the appellants is as a holder in due course of their consumer paper, the retail installment contract. We disagree.

To be able to assert the rights of a holder in due course as defined by Title 3 of the Maryland Uniform Commercial Code (see especially § 3-305), one must be a holder of a negotiable instrument as defined by Md. Com. Law Code Ann. § 3-104. Even without the notice stamped on the face of the retail installment contract, it is a contract, not negotiable paper. If it were negotiable paper, the notice would have eliminated the possibility of anyone acquiring holder in due course status with respect to the paper.

The notice required in specified consumer credit contracts under Md. Com. Law Code Ann. § 14-1302 is identical to that required for certain consumer credit transactions in or affecting interstate commerce by the Federal Trade Commission (FTC) Trade Regulation Rule, Preservation of Consumers’ Claims and Defenses, 16 CFR § 433 (1980). Both the statute and the regulation make it an unfair or deceptive trade practice to take or receive a consumer credit contract which fails to contain the notice in at least ten point, boldface, type. The preservation of consumers’ claims and defenses arises out of the legal effect the notice has on the consumer paper or contract, not directly from the statute or regulation. Thus, state law is applied in interpreting the effect of the notice.

The notice was intended to eliminate the possibility that the consumer’s duty to pay would be independent of the seller’s duty to fulfill his obligations where the seller "refers” customers to a creditor.or is "affiliated” with the creditor. See "Statement of Enforcement Policy and Invitation to Comment in Regard to Trade Regulation Rule on Preservation of Consumers’ Claims and Defenses,” 41 Fed. Reg. 34,594 (August 16, 1976). It accomplishes this purpose by eliminating the holder in due course status for the consumer paper. The language of the notice deprives the paper of its negotiability in that it becomes a conditional promise to pay a sum certain; one requirement for asserting the rights of a holder in due course is that one must be a holder of negotiable paper. When a contract is involved, as in the case at bar, the language becomes a part of that contract.

That language subjects the creditor or assignee of the contract "to all claims and defenses which the debtor could assert against the seller.” The creditor or assignee is "in the same position the seller would have been in. The rights between the buyer and the seller of goods are governed principally by Article 2 of the U.C.C. [Md. Com. Law Code Ann., Title 2], And buyer’s general remedies are catalogued in § 2-711. In addition, buyer’s right to reject or revoke acceptance is set out in § 2-602 et seq.” J. White and R. Summers, Handbook of the Law Under the Uniform Commercial Code, p. 1143 (2nd Ed. 1980).

The appellee urges that a debtor can only assert a defense in response to a suit by the creditor for collection of the debt. We disagree. The appellee, as the assignee of the contract, can be sued directly by the appellants, recovery being limited to the amounts paid by the debtor under the contract. To find otherwise would be to defeat the purpose of the notice and the clear import of the language.

The appellee further asserts that counts one through four fail to state a cause of action in that the appellants have failed to allege that any payments were made under the retail installment contract. The notice which was printed on the contract stated that "[r]ecovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder.” This is a limitation on the amount of recovery, but does not preclude the debtor from asserting a claim against the holder of the contract. We therefore reject appellee’s argument on this point.

We now turn to a more particularized examination of the declaration. The first count, according to appellants, asserts a claim for breach of implied warranty of merchantability. According to the appellee, it asserts three claims: breach of express warranty, breach of implied warranty of merchantability, and breach of implied warranty of fitness for a particular purpose. It is, of course, well settled that the failure to state separate causes of action in separate counts is improper and renders a declaration demurrable. Maryland Rule 340 C; Kirchner v. Allied Contractors, Inc., 213 Md. 31 (1957).

The first count states in pertinent part:

"Included in the purchase price for said automobile, was a two year extended warranty which was specifically provided for new cars only. The vehicle sold, had approximately twelve thousand (12,000) miles on it at the time of the sale, that the vehicle was represented by agents and/or servants of the defendant, Monarch, as a new car and sold as such, being specifically referred to as a 'demonstrator model.’
At the time of the sale, and delivery of said vehicle, the defendants, and both of them, had impliedly warranted the merchantability of the vehicle and further impliedly warranted that the vehicle would be fit for the ordinary purpose for which it was to be used, to the Thomas’. In this case, the particular purpose of the vehicle was for transportation and the defendants knew or should have known that said vehicle was not fit for that purpose.”

Appellants then expound upon the defective and valueless nature of the car and the considerable sums of money spent for other means of transportation.

In our view, the appellants have not alleged a breach of an express warranty. If the two year "extended warranty” is the warranty appellee is referring to, the argument is without merit. The terms and conditions of the warranty have not been set forth. Without these, no conclusion can be drawn that such a cause of action exists. If the "express warranty” to which appellee refers is the statement that the car was new, the argument also fails. To establish an express warranty by affirmation, promise, description or sample, the representation must form the basis of the bargain. Md. Com. Law Code Ann. § 2-313. No such allegation was set forth in this count and thus no express warranty was set forth.

Appellee asserts that a claim for breach of implied warranty of fitness for a particular purpose was also set forth in the first count. Appellants alleged that the vehicle would be fit for the ordinary purpose for which it was to be used. This is a requirement of merchantability. Md. Com. Law Code Ann. § 2-314 (2) (c). As will be discussed below, lack of fitness for ordinary purposes can also under Maryland law be grounds for claiming a breach of implied warranty of fitness for a particular purpose. Myers v. Montgomery Ward & Co., 253 Md. 282 (1969).

Although the count could have been more artfully drafted to emphasize that the allegation of lack of fitness for ordinary purposes was specifically addressing a requirement of an implied merchantability, and not one of an implied warranty of fitness for a particular purpose, the count did not violate the rule against stating separate causes of action in one count. If we were to rule otherwise, we would be depriving claimants of an advantage the Court of Appeals has granted in Myers, supra, as an allegation of lack of fitness for ordinary purposes gives a party two causes of action.

Appellants alleged only one cause of action, breach of implied warranty of merchantability. With respect to the first count, no violation of Maryland Rules 340 C exists; and the demurrer should not have been sustained.

As to the second count, appellants allege that the implied warranty on the automobile of fitness for a particular purpose was breached in that it was not fit for transportation. Appellee argues that use of an automobile for transportation is not a particular purpose as described in Md. Com. Law Code Ann. § 2-315, but rather the ordinary purpose. The official comment to this section distinguishes the two purposes:

"A 'particular purpose’ differs from the ordinary purpose for which the goods are used in that it envisages a specific use by the buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used are those envisaged in the concept of merchantability and go to uses which are customarily made of the goods in question. For example, shoes are generally used for the purpose of walking upon ordinary ground, but a seller may know that a particular pair was selected to be used for climbing mountains.” Md. Com. Law Code Ann. § 2-315, Official Comment 2.

While the official comment tends to support the appellee’s position, the Court of Appeals in Myers v. Montgomery Ward & Co., supra, undermined appellee’s argument:

"[Art. 95B § 2-314 (c)] '* * * tends to overlap the warranty of merchantability with that of fitness for the purpose. We have seen that a seller is obligated to provide goods which meet the buyer’s particular purpose as made known to the seller. Under this warranty, the buyer need not communicate to the seller the particular purpose for which the goods are intended, if the circumstances are such that the latter has reason to know that purpose. For example, one buying an automobile impliedly makes known the particular purpose for which the goods are intended — transportation. If the automobile will not run, both the warranties of fitness for the purpose and merchantability are breached, for such a defective car is not of fair average quality, nor is it fit for the purpose as impliedly made known to the seller.’ ” Id: at 295, quoting from Hawkland, A Transactional Guide to the Uniform Commercial Code(1964) § 1.19020702.

In light of Myers, we find that the demurrer should not have been sustained on the second count since a legally sufficient cause of action was stated.

As to count three, appellee did not raise any points in its demurrer other than those that have already been addressed.

Appellee first argues with respect to count four that appellants could not have relied on representations that the car they purchased was "of the same standard, quality [and] grade as a new automobile of the same year and model that was not sold as a demonstrator” since appellants bought a demonstrator model with 12,000 miles. We dismiss this argument as it raises a factual issue, Beach v. Mueller, 32 Md. App. 219 (1976), and further note that the argument was not asserted in the appellee’s demurrer.

The second point, which was presented to the trial court, raised with respect to count four is that the request for punitive damages is not sufficiently supported by the allegations. Punitive damages cannot be awarded in a pure breach of contract, but can be recovered in tort actions arising out of contractual relationships where actual malice is present. General Motors Corp. v. Piskor, 281 Md. 627 (1977); Henderson v. Maryland Nat’l Bank, 278 Md. 514 (1976); H & R Block, Inc. v. Testerman, 275 Md. 36 (1975).

If the tortious conduct, however, induced the innocent party to enter into the contractual relationship, the tort is not considered to have arisen out of the contract. Wedeman v. City Chevrolet Co., 278 Md. 524 (1976). See also Aeropesca Ltd. v. Butler Aviation, 44 Md. App. 610, 624-627 (1980). Under these circumstances where a case for actionable fraud has been made out, the standard for recovering punitive damages is whether "the legal equivalent of actual malice [is] established... .” 278 Md. 532. The Court in Wedeman, supra, at 532, then defined this standard as "conduct of an extraordinary nature characterized by a wanton or reckless disregard for the rights of others.”

In ruling on a demurrer, the court is required to accept as true all well pleaded facts and any reasonable inferences which may be drawn from these facts. Schwartz v. Merchants Mort. Co., 272 Md. 305 (1974). In the case at bar, the appellants have alleged the five essential elements, see James v. Goldberg, 256 Md. 520, 528-529 (1970), necessary to assert a cause of action against the appellee for fraud. They have also alleged sufficient facts to show a wanton or reckless disregard for the rights of others, stating that the appellee knew or should have known "that the frame of the vehicle had been damaged and rewelded in such a manner that it was a safety hazard and could separate while the Plaintiff was driving on the highway.” Sufficient facts and reasonable inferences have been alleged which may support a claim for punitive damages, thus withstanding the test of a demurrer. Furthermore, if the appellants can prove the allegations of direct participation by the appellee in the fraud, they are not limited in their recovery of punitive damages to the amounts paid under the contract.

Appellee in its brief raises an argument to support the granting of a demurrer as to count five, a claim based on Md. Com. Law Code Ann. §§ 12-605, 12-606, 12-630. This argument was not raised in appellee’s demurrer and a copy of the hearing on the demurrer was not provided. As the record before us does not indicate that the argument was raised below, we shall not consider it. Maryland Rule 1085.

Finally, we consider the granting of the demurrer with respect to count six. Appellants argue that the appellee should not be allowed to demur to this count. In the previous declaration the appellants had set forth in a count number five the same allegations as are stated in count six of the amended declaration, the subject of this appeal. The demurrer to count five of the prior declaration was overruled, leaving that count the only remaining one of the declaration. Appellee filed a general issue plea to the count. Appellants then filed the amended declaration. In filing this declaration which reiterated the allegations of the prior count without any reference to the previous declaration, the appellants withdrew the only remaining count of their previous declaration. Conklin v. Schillinger, 255 Md. 50, 75-76 (1969).

The demurrer to count six of the amended declaration was sustained. Count six asserted a violation of the Federal Truth in Lending Law, 15 U.S.C. §§ 1601 et seq. The allegation arose from the charge for an "extended warranty.” This charge of $246 was included on the retail installment contract, a copy of which served as the disclosure statement in the purchase price of the automobile. The cost was not specifically disclosed as a finance charge or as another charge included in the amount of credit extended. In other words, the fact that the appellants were being charged $246 for this "extended warranty” and that this sum was added to the cash price of the car did not appear on the face of the retail installment contract. On June 19, 1978, the appellee sent the appellants a notice informing them that "the amount of $246.00 [was] being financed on [their] contract.”

Appellants alleged in their declaration that this "extended warranty” was "held out” as a form of "insurance” and as insurance, it should have been disclosed as part of the finance charge:

"The Plaintiff believes and therefore avers that the manner in which same was charged and purchased by the Plaintiffs, in a relatively hidden manner, requires pursuant to the Federal Truth in Lending Law (15 U.S. CODE 1601 et seq.) that the cost of same be disclosed (15 U.S.C. Section 1638) and that the premium for said extended warranty which is to be included in the finance charge unless a clear and specific statement is furnished by the defendants to the Plaintiff, setting forth the cost of same, and giving Plaintiff a choice as to who shall write the insurance or whether insurance shall be written at all at the time of the execution of the installment sales contract (15 U.S.C. Section 1605 (a)).”

The determination of a finance charge is defined at 15 U.S.C. § 1605. Subsection (a) reads as follows:

"§ 1605. Determination of finance charge — Definition
(a) Except as otherwise provided in this section, the amount of the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit, including any of the following types of charges which are applicable:
(1) Interest, time price differential, and any amount payable under a point, discount, or other system of additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder’s fee, or similar charge.
(4) Fee for an investigation or credit report.
(5) Premium or other charge for any guarantee or insurance protecting the creditor against the obligor’s default or other credit loss.”

Appellee argues that a warranty cannot be equated with insurance. It further cites an interpretation by the Board of Governors of the Federal Eeserve System on service contracts:

"You ask whether the existence and cost of such a service contract must be disclosed in order to exclude such cost from the finance charge revealed on the credit sale disclosure statement. Since the cost of the service contract is not 'imposed directly or indirectly by the creditor as an incident to or as a condition of the extension of credit,’ it is not a finance charge within the meaning of § 226.4 of Eegulation Z. It therefore need not be itemized or described in order to be excluded from the finance charge.
You ask further whether the cost of the service contract should be disclosed as a part of the 'cash price’ under § 226.8 (c) (1) or whether it should be disclosed as an 'other charge’ under § 226.8 (c) (4). 'Cash price’ is defined in § 226.2 (n) to mean the price at which a creditor offers to sell for cash the property or services which are the subject of the consumer credit transaction and may include the cash price of accessories or services related to the sale. Since the service contract can be viewed as a service related to the sale, it appears to staff that inclusion of the cost in the cash price is permissible under Regulation Z. You will note, however, that § 226.2 (n) says that the cash price 'may include the cash price of accessories or services’ and does not require that such cost be included in the cash price. Thus, it appears that these costs may also be treated as 'other charges’ under § 226.8 (c) (4), since they are included in the amount financed but are not part of the finance charge.” 12 CFR § 226 Appendix, Official Staff Interpretations, FC-0019, November 12, 1976.

We note that the holding in Carney v. Worthmore Furniture, Inc., 561 F.2d 1100 (4th Cir. 1977), reaches another result on service contracts. Under the facts of Carney, the court found that a charge for a service policy on the freezer, which was the item upon which credit was extended, was "inextricably intertwined with Worthmore’s [the lender] interest as a creditor” as to constitute a finance charge "incident to or as a condition of the extension of credit.” The Fifth Circuit has also followed this holding under a similar set of circumstances. See Berryhill v. Rich Plan of Pensacola, 578 F.2d 1092 (5th Cir. 1978).

We agree with the board of governors that most service contracts are not imposed directly or indirectly by the creditor as incident to or as a condition of the extension of credit, but recognize that there are exceptions. Cases can be made out against a creditor’s demonstrating that the creditor’s practices in extending a service policy fall within the definition of a finance charge. Debtors should not be precluded from pursuing such actions.

Finally, we must determine whether the appellants in the case at bar allege facts sufficient to constitute a cause of action under 15 U.S.C. § 1605 (a). Appellants seem to base their claim on the "extended warranty” being equated with a form of insurance. This is not the basis upon which charges for service contracts have been found to be finance charges; insurance, as the appellee correctly points out, has another meaning. Appellants should have alleged that it was a charge imposed directly or indirectly as incident to or as a condition of the extension of credit. We cannot find any statement in this count which approaches even an inference of the necessary allegation. The demurrer was properly sustained on this count. Hooke v. Equitable Credit Corp., 42 Md. App. 610, 612 (1979).

Leave to amend this count was not granted. Although leave to amend is within the sound discretion of the court, Crowe v. Houseworth, 272 Md. 481, 489 (1974), the Court of Appeals and this Court have held that leave to amend should be generously granted. We think the appellants should be granted leave to amend this count. They may be able to cure the defective pleading and state a cause of action. Furthermore, this was the first time that a demurrer to this count was sustained.

Judgment reversed; case remanded for trial on counts 1 5 and for appellants to be granted leave to amend count 6.

Appellants to pay 1/6 costs of this appeal; appellee to pay 5/6 the costs.

      . The amended declaration, as had the previous declaration, named the seller as a defendant and relief was sought against both the seller and the appellee in all counts. The seller also demurred to the previous declaration which we assume was sustained. (The order is not included in the transcript.) The seller apparently did not demur to the amended declaration and we are informed that the law suit between the appellants and seller is pending in the Circuit Court for Baltimore County. The court entered a final judgment in favor of Ford Motor Credit Company, thus permitting this appeal pursuant to Md. Rule 605 a.

      . Revocation of acceptance is dealt with in Md. Com. Law Code Ann. § 2-608.

      . "S 3-104. Form of negotiable instruments; 'draft’; 'check’; 'certificate of deposit’; 'note.’

      (1) Any writing to be a negotiable instrument within this title must
      (a) Be signed by the maker or drawer; and
      (b) Contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this title; and
      (cl Be payable on demand or at a definite time; and
      (d) Be payable to order or to bearer.”

      . A transcript of the hearing before Judge Raine has not been provided. All that is before us is an order sustaining the demurrer to all counts. We shall, therefore, address all the issues raised by the appellee in its demurrer.

      . White and Summers in their "Handbook of the Law Under the Uniform Commercial Code,” pp. 357-358 (2nd Ed. 1980), agree with the appellee’s interpretation and cite several cases from other jurisdictions supporting this position.

      . A breach of an express warranty is contractual in nature and would fall under this rule. Sims v. Ryland Group, Inc., 37 Md. App. 470, 475 (1977). See also Md. Com. Law Code Ann. §§ 2-7Í4, 2-715.

      . Although, the appellee demurred to "Count V,” we will assume this was a typographical error and treat it as a demurrer to count six in that the entire argument was specifically addressed to the allegations contained in count six.

      . The terms of the "extended warranty” are not before us; but we are assuming that this "extended warranty” is in essence a service contract, an agreement to repair certain defects free of charge for a specified period of time.


source: Caselaw Access Project

author: Thompson, J.,

license: Public Domain

text:
    DIRECTOR OF FINANCE OF PRINCE GEORGE’S COUNTY, MARYLAND et al. v. RICHARD DENMEADE COLE et al.
    [No. 802,
    September Term, 1980.]

      Decided May 11, 1981.

    The cause was argued before Thompson, Lowe and Couch, JJ.

      Steven M. Gilbert, Associate County Attorney, with whom were Robert B. Ostrom, County Attorney, and Michael O. Connaughton, Deputy County Attorney, on the brief, for appellants.

      Alan J. Goldstein, with whom were Horowitz, Oneglia, Goldstein, Foran & Parker, P.A. on the brief, for appellees.
   Thompson, J.,

delivered the opinion of the Court.

Article 27, § 264 of the Annotated Code of Maryland (1957, 1976 Repl. Vol., 1980 Cum. Supp.) provides for the forfeiture to the state or local government of "money, currency, or cash” seized by its police officers in connection with arrests for illegal gambling. The issue on this appeal is whether, under this section, the court below, which correctly sustained a demurrer to a petition for forfeiture of money seized in connection with the arrest of the appellees herein for gambling offenses, erred in also ordering that the seized money be returned to the appellees. For the reasons set forth below, we hold it did.

On October 31, 1977, Richard Denmeade Cole, Cynthia Gezelle, and Edward George Busby, the appellees, were arrested in Prince George’s County and charged with various gambling offenses. Incident to the arrest, the police seized $15,500 in cash, belonging to the appellees, along with gambling devices and paraphernalia. The money seized was turned over to the Director of Finance of Prince George’s County (County), the appellant herein, and held, pending disposition of the charges, in accordance with § 264 (b). In January, 1980, a nolle prosequi was entered on all of the charges against the appellees; within 90 days thereafter the County filed a petition in the Circuit Court for Prince George’s County seeking forfeiture of the seized money under § 264 (c). The appellees demurred to the petition on the grounds that it did not allege that they had been convicted of the gambling offenses for which they had been arrested and the court below sustained the demurrer. In addition, although the appellees had not filed a counter-claim or a separate action seeking return of the money, the court, "based on [its] inherent equity powers,” ordered that the money be returned to the appellees. It is from this latter order that the County has appealed.

Section 264 (a) provides that "[w]henever any money, currency, or cash is seized or captured by any police officer in this State in connection with any arrest for . .. [illegal gambling] ..., all such money ... shall be deemed prima facie to be contraband of law as a gambling device or as a part of a gambling operation.” This section further provides: "All rights, title, and interest in and to such money, ... seized by the police . .. shall immediately vest in and to the local governments of the county, municipality, or Baltimore City, or if seized by State authorities, to the State, and no such money . .. shall be returned to any person . .. except as provided in this section.”

Section 264 (c) provides that "[i]f the trial or other ultimate disposition of such charge . .. results in a record of conviction being entered against the person or persons so arrested, . .. the county treasurer ..., shall within 90 days from the date of the record of the entry of such conviction,... make application to the . . . court .. . for an order declaring ... that such money ... shall be forfeited ..manifestly, the entry of a conviction is a condition precedent to the filing of a petition for forfeiture by the County. As the County here concedes, the court below was correct in sustaining the appellee’s demurrer where a nolle prosequi was entered as to the criminal charges against the appellees.

It does not necessarily follow that, because the County could not properly file a petition for forfeiture, the appellees were entitled to the return of the seized money. Although formerly § 264 (d) provided that "[i]f the trial or other ultimate disposition of such charge or charges ... results in an acquittal or dismissal . . . the [money] shall be returned to the person ...,” Md. Ann. Code Art. 27, § 264 (d) (1976 Repl. Vol.), and forfeiture could occur only if a conviction were obtained, Gatewood v. State, 264 Md. 301, 304, 285 A.2d 623 (1972), this subsection was amended by Chapter 720, Laws of Maryland, 1977. Md. Ann. Code Art. 27, § 264 (d) now reads:

"(1) Upon the ultimate disposition of such charge or charges, .. . resulting in acquittal, dismissal, a stet, [or] a nolle prosequi, ... any person claiming that . . . the seized money ... is not contraband of law under (a) and should be returned. . ., within one year . . . may make application ... to the appropriate court for a determination that the money ... is the property of the claimant and for an order that it be returned.
"(2) In a proceeding upon that application an acquittal, a dismissal, or a nolle prosequi with respect to the gambling charges ... is prima facie evidence that it is not contraband. ***
"(3) If a petition is not timely and properly filed, or if it is finally decided against the claimant, the seized moneys not disposed of shall be forfeited to the custodian without further judicial action.”

Under the present § 264 (d), money seized in connection with an arrest for illegal gambling is not automatically returned to the persons from whom it was seized when the charges are disposed of without a conviction. Rather, the money is to be returned only when the claimant files a petition for its return and proves that it is not contraband. While the dismissal of the charges against the claimant is prima facie evidence that the seized money is not contraband, the presumption thereby created is not conclusive. Although, absent a conviction, the county cannot properly file a petition for forfeiture, it may be able to obtain forfeiture when the claimant seeks return of the money by proving that the money is contraband. While the present statute is in some ways anomalous, its language insofar as our problem is concerned is clear and free from ambiguity, and "[wjhere the statutory language is clear, we are required to follow it.” City of Baltimore v. Rose, 47 Md. App. 481, 487, 424 A.2d 160 (1981). See also, State v. Fabritz, 276 Md. 416, 421-22, 348 A.2d 275 (1975), cert. denied, 425 U.S. 942 (1976). The trial court erred in treating as dispositive the entry of a nolle prosequi of the charges against the appellees and in ordering the return of the money seized without requiring them to prove that it was not contraband.

Order reversed.

Appellees to pay the costs.

      . Chapter 720 became effective July 1, 1977.

      . If the individual arrested is convicted and thereafter neither he nor the government files a petition, after 90 days the government loses its right to petition and the money must be returned to the individual, see, United States Coin and Currency v. Director, 279 Md. 185, 367 A.2d 1243 (1977); if, on the other hand, the individual is acquitted and neither he nor the government petitions, after 1 year the money is automatically forfeited.

      . Although § 264 (e)(4) provides that "[t[his section does not prohibit the trial judge after an acquittal or dismissal from ordering immediate return of all property seized,” the appellees did not contend that this subsection is applicable here. We read the language "trial judge” as referring to the judge who presides at the criminal, as opposed to the forfeiture, proceeding.


text:
    HERSHELL ANTONIO CLARK v. STATE OF MARYLAND
    [No. 1094,
    September Term, 1980.]

      Decided May 11, 1981.

      The cause was argued before Morton, Melvin and Wilner, JJ.

      Kenneth L. Thompson, with whom was George L. Russell, Jr., on the brief, for appellant.

      Thomas P. Barbera, Assistant Attorney General, with whom were Stephen H. Sachs, Attorney General, William A. Swisher, State’s Attorney for Baltimore City, and Haven Kodeck, Assistant State’s Attorney for Baltimore City, on the brief, for appellee.
   Morton, J.,

delivered the opinion of the Court.

In a jury trial in the Criminal Court of Baltimore (Hammerman, J., presiding), Hershell Antonio Clark was tried on the charges of second degree rape and burglary and the lesser included offenses of each. Based partially on an incriminatory statement made by appellant and received into evidence over appellant’s objection at a suppression hearing, appellant was convicted of second degree rape and burglary. He received a sentence often years on the burglary conviction, to run concurrently with 15 years on the rape conviction. The question presented for consideration is whether appellant’s inculpatory statement was prompted by improper police inducements thereby rendering its admission into evidence prejudicial error and requiring a reversal of his convictions.

In the early morning hours of March 19, 1980, the victim, Rosalind Hite, was raped in her home. Based on an analysis of fingerprints left on the premises, the appellant was arrested and brought in for questioning. After he was read his Miranda rights and had signed a waiver form, he wrote a detailed statement to the effect that he did have sexual intercourse with the victim on March 19, but that it was with her consent. At trial appellant denied being in her house that evening.

Detective Waters and Officer Kamen, the arresting and interrogating officers, both testified on direct examination at the suppression hearing to the general effect that no promises or threats were made or inducements given to appellant in obtaining the statement. On cross-examination by defense counsel, Detective Waters testified that the following transpired before the statement was made:

"Q. Well, did you indicate to him whether it would be of any benefit to him to make a statement at that time?
A. Well, if there were other circumstances surrounding the case it certainly would be a benefit to him if he told me the truth.
Q. So, if he told you the truth —
THE COURT: Is that what you told him? Is that what you told him?
THE WITNESS: I’m not sure the exact words or not. I told him if there was any other circumstances I would be able to investigate I certainly would.
THE COURT: Did you mean by that that if he gave you a statement it might shed light on the other circumstances, which you would then investigate?
THE WITNESS: Correct.
THE COURT: And that it might help him or not help him depending on what the circumstances were?
THE WITNESS: I couldn’t do anything about the charge he was charged with.”

Defense counsel resumed his questioning of Detective Waters:

Q. And you remember saying that to him, that it could be of benefit to him if he told the truth and gave a statement?
A. I told him that there was no sense in him lying to me.
Q. Do you remember using the word 'benefit’?
A. I don’t actually.”

Cross-examination by defense counsel of Officer Kamen revealed that he had accompanied Detective Waters to serve the arrest warrant on the appellant. He was also present during the questioning of the appellant and when appellant’s statement was given. Officer Kamen then testified that Detective Waters told the appellant what she knew about the case and that "she would just like to know the information that he was able to supply in reference to what happened that night.” After questioning the officer about when Miranda warnings were given, defense counsel elicited the following:

"Q. What if anything was said to Mr. Clark as to how he could benefit by making the statement?
A. To the best of my knowledge I don’t think there was anything else said about how it would benefit Mr. Clark in his case because we were not able to tell Court Commissioner whether he should make bail or anything like that if that is what you are speaking of.
Q. Was it said it would possibly be in his best interest, making a true statement?
A. I don’t recall.
Q. Did anybody ever say in your presence that Detective Waters is the only one that could help out Hershell Clark?
A. I believe I made a statement like — I didn’t advise that she is the only one that would help him. I stated that if he wanted to, that a statement could be given to go and give that information to Detective —”

The appellant then testified, in response to questions put by defense counsel, that he was led to believe that if he made a truthful statement, he would be helped:

"Q. What happened next?
A. Then Officer — the police officer — he told me — he said, 'You’re only wasting my time and you’re only wasting her [Detective Waters’] time. She is the only one who can help you.’
Q. What happened next?
A. Then after that we sat down and she kept asking me to tell her the truth, and I kept telling her I was telling her the truth, and I did go in the house with Granny, and she said, 'Well you got to come up with a better story than that. I can let you go.’ And the police officer said, 'Say it again’ she stated once again. 'She is the only one who can help. Tell her the truth and then we’ll let you go.’ He told me she’d let me go. You know, I was scared because I never been interrogated by the police before.”

Neither Detective Waters nor Officer Kamen was called back to the stand after appellant testified. The trial judge denied the motion to suppress the statement, noting that he found the testimony of Waters and Kamen more credible than appellant’s; and that Waters’ alleged inducements were made only after appellant indicated his desire to give a statement.

Appellant’s sole contention here is that the confession was induced by improper threats or promises and thus was improperly admitted into evidence. His argument is based on (1) the alleged statement of Officer Kamen, as testified to by appellant, that Detective Waters "is the only one who can help you”; and (2) Detective Waters’ statement to appellant that if there were other facts, those could be investigated for their possible impact on the case.

I. Officer Kamen’s Alleged Statement

It is well settled under Maryland criminal law that for a confession to be admissible into evidence against an accused it must not be the product of force, threats, promises or inducements. Stokes v. State, 289 Md. 155 (1980); Hillard v. State, 286 Md. 145 (1979). It is equally clear that the burden is on the State to show affirmatively that a confession is voluntarily given and not improperly induced. Hillard, supra; Abbott v. State, 231 Md. 462 (1963). Appellant, relying on Streams v. State, 238 Md. 278 (1965), argues that by not asking Officer Kamen specifically to rebut appellant’s assertion, the State did not meet the burden of proving the voluntariness of appellant’s confession.

We do not think the mandate of Streams was violated. Officer Kamen testified that he was present or within hearing distance at all times during appellant’s interrogation. He testified that no promises, threats, or inducements were made to appellant during this interrogation. Appellant, in subsequent testimony, did not allege any inducements other than the alleged statements made or witnessed by Officer Kamen. On cross-examination Officer Kamen specifically denied making the statement that Detective Waters was the only one who could help appellant. "I didn’t advise that she is the only one that would help him. I stated that if he wanted to, that a statement could be given to go and give that information to Detective —.” As this Court has pointed out, "there is no magic as to when testimony in denial of promises or inducements must be made.” Ponds v. State, 25 Md. App. 162, 166 (1975). See also Burks v. State, 1 Md. App. 81 (1967).

There was sufficient anticipatory rebuttal by Officer Kamen in his testimony on cross-examination. The trial judge, confronted by the necessity to resolve the conflicting testimony of appellant and Kamen, chose to believe the latter.

II. Detective Waters’ Statements

Although this State’s criminal law principle, which excludes improperly induced statements, is perhaps more extensive than that of our sister states, see Stokes v. State, supra, Hillard v. State, supra, we do not hold involuntary a confession motivated from within rather than without. As the Court of Appeals recently stated in Stokes, supra, at 161: "A finding that an inducement is impermissible .. . may only result where the challenged statement was produced by police words or deeds which communicated a threat or promise to the defendant.” It remains for us to determine whether Detective Waters’ statements to appellant were inducements and whether appellant was influenced by such inducements in making the confession.

Detective Waters testified that she told appellant that (1) there was no sense in lying to her; and that (2) other circumstances might be disclosed which could be investigated.

We do not think there was any inducement in Detective Waters’ statement that whatever statement appellant made could be investigated. Appellant could not have believed that any investigation of an inculpatory statement so as to determine the likelihood of its truth could possibly be beneficial to him. On the contrary, an investigation of an inculpatory statement could lead to other inculpatory evidence supporting its truthfulness.

It is the former statement to the effect that there was no sense in lying which presents a difficult, although not insurmountable, obstacle to the admission of appellant’s statement.

It is accepted law in Maryland, as appellant conceded at oral argument, that a mere caution to make a true statement, without more, does not make a subsequent statement inadmissible. The Court of Appeals in Biscoe v. State, 67 Md. 6, 9-10 (1887), quoted Judge Pollock in Reg. v. Baldry, 2 Den. C.C. 430:

" 'A simple caution to the accused to tell the truth, if he says anything, the statement may be given in evidence, but where the admonition to speak the truth has been coupled with any expression importing that it would be better for him to do so, it has been held that the confession was not receivable, the objectionable words being that it would be better to speak the truth, because they import that it would be better for him to say something.’ ”

In Biscoe, supra, the Court held a statement to be impermissibly induced where the accused was told that "it would be better for him to tell the truth and have no more trouble about it,” even when he was also told that no promises could be made. The Court stated:

"The prisoner was in the custody of the law, and although pressed, time and again, to make a confession, and pressed too by one in authority, he persisted in denying his guilt, and it was not until he was told that it would be better for him to tell the truth, and have no more trouble about it, that the confession was made. Here there was an inducement, and one, too, of the strongest kind held out to him ... It was, in fact, saying to the prisoner, if you will tell me the truth, it will not only be the better for you, but you shall have no more trouble about the matter.” 67 Md. 8.

The Court of Appeals also has found improper inducements in the following: a statement to the accused that "it would be possibly better for him if he would make a clean statement, so it would not appear erroneously in the papers . ..” (Watts v. State, 99 Md. 30 (1904)); officers’ statements that they would "go to bat” for the accused if a statement was made (Hillard v. State, supra); a warning to the accused to " 'let it out before [your codefendant] squeals, for if you do not, Tthe codefendant] will squeal before you, and you will get the worst of it’ ” (dictum in Nicholson v. State, 38 Md. 140, 152-54 (1873)); telling the accused that although he didn’t have to give a statement, "it will help you a lot” (dictum in Lubinski v. State, 180 Md. 1, 4-6 (1941)).

On the other hand, the Court has held that mere exhortations to tell the truth, and nothing more, are not improper. "I want you to tell the truth” has been held not to be an improper inducement. Nicholson v. State, supra. Similarly, in Deems v. State, 127 Md. 624 (1916), an officer’s questions to the accused of "why [didn’t he] tell the truth” and the statement that "the truth would hurt no one” did not render the confession inadmissible. In Merchant v. State, 217 Md. 61 (1958), the officer told the appellant, in response to a question, that he did not know if things would go easier if he made a statement and he could make no promises. He added, "the truth hurts no one.” The court did not think the generalization could be viewed as a promise of leniency, especially where the accused was told any statement could be used against him. Neither is it an improper inducement for an officer to tell an accused to "get it off his chest.” Bean v. State, 234 Md. 432 (1964).

The question before us is whether Detective Waters’ statement to appellant that there was "no sense in lying” was a mere exhortation to tell the truth, or whether it does more and implies benefit if the truth is told. We are of the opinion that the statement in the present case does not fall within the category of those condemned in Biscoe v. State, supra; Nicholson v. State, supra; and the others. To say that there is no sense in lying is not to imply a benefit in telling the truth. It is a mere exhortation to tell the truth, similar to "I want you to tell me the truth,” or "come on, get it off your chest.” Appellant may have thought it would be to his advantage to make the statement, but he was not led to believe this by anything Detective Waters or Officer Kamen said.

The confession was properly admitted into evidence and so the conviction must stand.

Judgments affirmed; costs to be paid by appellant.

      . Miranda v. Arizona, 384 U.S. 436 (1966).

      . Although there is some question under the facts as to whether appellant’s statement was, strictly speaking, a confession or only an admission, it is "significantly incriminating” and, as such, could be admitted into evidence at trial only if the voluntariness test is met. Stewart v. State, 232 Md. 318, 323 (1963).

      . Appellant argued, at oral argument, that Waters’ testimony disclosed that she did use the word "benefit” in discussing this "investigation of facts.” Appellant points to this testimony:
      "Q. Well, did you indicate to him whether it would be of any benefit to him to make a statement at that time?
      A. Well, if there were other circumstances surrounding the case it certainly would be a benefit to him if he told me the truth.”
      However, appellant’s interpretation takes the testimony out of context. Waters goes on to testify that she did not remember using the word "benefit.”

      . The Court has even held that it is not improper inducement to tell an accused that "it would be better if he [the defendant] told the truth.” Ralph v. State, 226 Md. 480, 485-487 (1961), cert. denied, 369 U.S. 813 (1962). Although the defendant admitted he had not been coerced into taking the lie detector tests, the Court noted "it is difficult... to say ... whether the admonition or caution to tell the truth was intended as an inducement or a mere exhortation.... Whether or not there was an inducement must, in most situations, be deducible from the substance of what was said to the accused and not from the verbiage employed in saying it.” Id. at 486.


author: Wilner, J.,

text:
    THE TALBOTT LUMBER COMPANY v. JOHN T. TYMANN et ux.
    [No. 1134,
    September Term, 1980.]

      Decided May 11, 1981.

    The cause was argued before Morton, Moylan and Wilner, JJ.

      Robert C. Brown for appellant.

      Robert B. Greenwalt, with whom was Robert N. Kerr on the brief, for appellees.
   Wilner, J.,

delivered the opinion of the Court.

Real Property article, § 9-102 (a), authorizes the imposition of mechanics’ liens. In relevant part, it provides that "[e]very building erected ... is subject to establishment of a lien in accordance with this subtitle for the payment of all debts .. . contracted ... for materials furnished for or about the building... .” Section 9-102 (d) states a caveat, however — an exemption from that provision. It provides:

"However, a building or the land on which the building is erected may not be subjected to a lien under this subtitle if, prior to the establishment of a lien in accordance with this subtitle, legal title has been granted to a bona fide purchaser for value.”

The question before us in this appeal is who has the burden of establishing whether that exemption applies. More particularly, where the respondent is an intervening purchaser — one who took title to the property prior to the establishment of the lien — must he prove that he was a "bona fide purchaser for value” or must the lien claimant prove that he was not?

This proceeding commenced on May 5, 1980, when appellant, a building supply company, petitioned the Circuit Court for Howard County to establish a lien in the amount of $4,219 against property owned by appellees. It is apparent from the record that the property in question is the appellees’ newly constructed residence. The petition and its exhibits alleged that appellant had delivered supplies to the site from June to December 1979, that the supplies were delivered at the request of the contractor Thomas Associates, Inc., and that they were used in the construction of the improvements. It also averred that on October 15, 1979, the property was conveyed by Thomas to appellees, and made references to the liber and folio in the Land Record Office where the deed implementing that conveyance was recorded. There was no allegation in the petition or the accompanying affidavit that appellees were not bona fide purchasers for value.

On May 12, 1980, presumably acting pursuant to Real Property article, § 9-106, and Maryland Rule BG73a, the court issued an order directing appellees to show cause why the relief requested by appellant should not be granted. The order warned appellees that they must file "either a verified answer or counter-affidavit to the Petition” and that failure to do so "may result in the facts in the Affidavit supporting Petitioner’s claim being deemed admitted. . ..”

Appellees responded not with an answer or counter-affidavit but with an unverified demurrer, in which they raised two defenses. First, they acknowledged appellant’s allegation as to their acquisition of title from Thomas on October 15, 1979, and stated that since they "became legal title holders prior to the establishment of a lien the building or land cannot be subjected to a lien under the exemptions provided by Section 9-102 (c). ...” Second, they complained that the petition failed to allege the amount of materials furnished or when they were furnished, and that the copies of the invoices attached to the petition were insufficient or illegible. Nowhere in this pleading did appellees claim that they were bona fide purchasers for value or point to the absence of a negative averment in that regard in the petition.

Upon these pleadings, the court conducted a "probable cause” hearing, at which some evidence was taken. The court concluded that appellant, as the petitioner, had the burden of showing that appellees were not bona fide purchasers for value, and that it had failed to satisfy that burden. For that reason, the court dismissed the petition, thus impelling appellant to file this appeal. We shall affirm.

We note initially that, although both the statute (§ 9-106 (a)) and Maryland Rule BG73b look toward the filing of a verified answer or counter-affidavit, a demurrer is a permissible way of challenging the sufficiency of the petition. See Scott & Wimbrow, Inc. v. Wisterco Investments, Inc., 36 Md. App. 274 (1977), cert. denied, 281 Md. 743; Mervin L. Blades & Son, Inc. v. Lighthouse Sound Marina and Country Club, 37 Md. App. 265 (1977). Maryland Rule BG73b itself makes clear that the failure to file an opposing affidavit or verified answer though serving to admit all statements of fact contained in the petitioner’s supporting affidavit, does "not constitute an admission that the petition or affidavit in support thereof is legally sufficient.” We mention this in order to frame properly the issue before us. Appellees have never alleged, much less proved, that they were bona fide purchasers for value. Such an allegation, if it were required, would have to be made by way of verified answer or counter-affidavit, not by way of demurrer. The demurrer, in this regard, is effective not to posit the fact that appellees were bona fide purchasers for value, but only to test whether the petition and its appendages are legally sufficient to entitle appellant to its lien, in the absence of any averment negating that status.

Until 1959, it was no defense to a claim for a mechanic’s lien that the respondent-owner was a bona fide purchaser for value — that he had purchased the property prior to establishment of the lien without notice of the petitioner’s claim. See Miller v. Barroll, 14 Md. 173, 183 (1859), Clark Certified Concrete Co., Inc. v. Lindberg, 216 Md. 576, 581 (1958), and compare Ortwine v. Caskey, 43 Md. 134 (1875). That defense was first statutorily provided by Acts of 1959, ch. 734, which may well have been enacted in response to Clark Concrete Co., supra. That Act amended what was then art. 63, § 1 — the statute authorizing mechanics’ liens — by adding to it this language:

"However, no building or the land on which it sits shall be subject to a lien as set forth above, if it shall be proved by evidence that all moneys due for work contracted and materials furnished in repairing or constructing such building has been paid to such persons, firms or corporations who have actually performed the labor or supplied the materials and said building has been conveyed to a bona fide purchaser for value without notice.” (Emphasis supplied.)

At the time of this enactment, the mechanic’s lien law was quite different than it is today. The format then was that the "mechanic” could acquire his lien simply by filing a claim with the clerk of the circuit court. The lien attached as of then in the amount claimed, and lasted for one year. During that period, the claimant could sue to enforce the lien or the owner of the property could sue to "compel the claimant to prove the validity of the lien or have it declared void.” See former art. 63, § 28; former Maryland Rule BG75 (1971 Repl. Vol.). Presumably, it would be in the context of such a proceeding that evidence pertaining to the two conditions set forth in the 1959 Act could be offered.

The law was not at all clear as to who had the burden of proving the existence (or nonexistence) of the two statutory conditions. On the one hand, the statute, read literally, would seem to have placed the burden on the owner to show that he was entitled to the exemption — to prove, by way of affirmative defense, the existence of the two conditions. That would certainly have been a reasonable interpretation of the statute as then worded. On the other hand, such a construction would have been inconsistent with the more general rule laid down by the Court of Appeals that the claimant had the burden of proving his entitlement to the lien. This was made most clear in Continental Steel Corp. v. Sugarman, 266 Md. 541 (1972), an action by an owner to compel the claimant to prove the validity of its lien. The petition baldly denied the validity of the lien, but gave no reasons in support of that statement. The claimant demurred, but the demurrer was overruled and ultimately the lien was declared void. On appeal, the Court concluded that in such a proceeding,

"[tlhe burden of establishing the validity of the Mechanics’ Lien is thus placed on the claimant and no requirement is imposed upon the owner to state why the owner believes the Mechanics’ Lien to be invalid. The owner, therefore, in order to allege a prima facie cause of action under the Statute and the Rule, need only deny the validity of the Mechanics’ Lien and require the claimant to prove its validity ....” Id. at 548.

The same rule was applicable in the converse context, of an action by the claimant to enforce his lien. See District Heights Apartments, Section D-E, Inc. v. Noland Co., Inc., 202 Md. 43, 48 (1953): "In an equity proceeding to enforce a mechanic’s lien, the claimant has the burden of proving his cause of action.” See also Parker v. Tilghman V. Morgan, Inc., 170 Md. 7 (1936); Wilson v. Wilson, 51 Md. 159 (1879). Also Barry Properties, Inc. v. Fick Bros. Roofing Co., 277 Md. 15, 20-21 (1976), where, commenting on an action by the claimant, the Court observed that "[i]f in such a proceeding the claimant establishes that he is entitled to the lien, the court will order a sale of the property to pay the claimant. ...” (Emphasis supplied.)

We thus have, under the "old” law, a statute that would seem, by its particular wording, to place on the owner the obligation to prove by evidence the two conditions necessary for the exemption, and the general requirement that in all instances the burden was on the claimant to prove his entitlement to the lien.

As the result of the decision in Barry Properties v. Fick Bros., supra, declaring the "old” law unconstitutional, the General Assembly completely rewrote the law in 1976. The entire format was changed; and with that change has disappeared the ambiguity as to burden of proof.

The statutory exemption, appearing in § 9-102 (d), no longer speaks of the condition being "proved by evidence.” As noted, it simply says that property sold to a bona fide purchaser for value "may not be subjected to a lien under this subtitle....” Yet the general burden of proving entitlement to the lien still clearly rests with the claimant; indeed, the principal defect in the "old” law, which the 1976 rewriting was largely designed to correct, was the ability of the claimant to acquire his lien in the first place without having to prove his entitlement to it. The new statutory scheme bears this out.

The proceeding now is commenced by the filing of a petition to establish the lien. Accompanying the petition must be an affidavit "setting forth facts upon which the petitioner claims he is entitled to the lien in the amount specified. . . .” § 9-105 (a) (2). The court must review the petition, and as a part of that review, "may require the petitioner to supplement or explain any of the matters therein set forth.” § 9-106 (a). If, preliminarily, the court thinks that the lien should attach, it issues an order directing the owner to show cause why it should not attach. Upon such an answer (or in default of it), the court has three options. See § 9-106 (b).

If, from the material before it, the court concludes that there is no genuine dispute of fact and that a lien should attach as a matter of law, it enters the lien. § 9-106 (b) (1). If, on the other hand (§ 9-106 (b) (2)), "the pleadings, affidavits and admissions on file and the evidence, if any, show that there is no genuine dispute as to any material fact and that the petitioner failed to establish his right to a lien as a matter of law, then a final order shall be entered denying the lien for cause shown.” (Emphasis supplied.)

The language of § 9-106 (b) (2), which was obviously the provision applied here, seems to make clear that the obligation or burden remains on the petitioner to establish his right to a lien. When coupled with the changes made to the 1959 statute and the general thrust of the current law, it is further clear to us that the claimant’s general burden includes proving that an intervening owner is not a bona fide purchaser for value. As the Court said in Continental Steel Corp., supra, the owner need do no more than deny the validity of the claim, or, as we held in Scott & Wimbrow and Mervin L. Blades & Son, both supra, contest by demurrer the sufficiency of the petition. He need offer no evidence of his status except in response to evidence first offered by petitioner tending to show that he is not a bona fide purchaser for value.

The affidavit and pleadings supplied by petitioner are, as we have noted, entirely silent on the issue, although they do clearly recognize appellees as intervening purchasers from Thomas. Moreover, the additional evidence offered at the "show cause” hearing (assuming that, in light of the pleadings, such evidence even should have been taken), was entirely insufficient to show what appellant needed to show. The court took notice from the deed, referred to in the petition and affidavit, that appellees had paid value for the home, and there was a complete dearth of any evidence to indicate that, in doing so, they had any notice whatever of appellant’s claim or potential claim, or any reasonable cause to make inquiry.

Judgment affirmed; appellant to pay the costs.

      . At the time, the reference to § 9-102 (c) was correct. It was by reason of a 1980 amendment to the section, not relevant to this proceeding, that subsection (c) was relettered as subsection (d).

      . We would also observe that merely taking legal title prior to the establishment of the lien does not serve to exempt the property under § 9-102 (d). The statute plainly requires that the intervening purchaser be a bona fide purchaser for value.

      . The third option, not applicable here, is where the court cannot determine the issue as a matter of law, generally because of a genuine dispute of material fact, but finds probable cause to believe that the petitioner is entitled to a lien. In that event, it may enter an interlocutory order (1) establishing the lien, (2) requiring a bond from the claimant, and (3) setting the matter for trial on the merits within six months.

      . It is not our function to determine where the burden of proof ought to lie; that is a matter of policy that the Court of Appeals or the General Assembly, acting in their respective spheres, may decide. We see no particular hardship in placing the burden on the claimant, however. The Maryland Rules afford him ample ability to ferret out the circumstances under which an intervening owner acquired the property and to offer evidence, if there is any, suggesting that the owner is not a bona fide purchaser for value.


author: Lowe, J.,

text:
    NORMA D. WATHEN v. HELEN H. BROWN
    [No. 1157,
    September Term, 1980.]

      Decided May 12, 1981.

    The cause was argued before Morton, Lowe and Couch, JJ.

      C. Clarke Raley for appellant.
    No brief or appearance for appellee.
   Lowe, J.,

delivered the opinion of the Court.

Appellee is the record title holder to a parcel of land and right of way in St. Mary’s County. Alleging that appellant claimed ownership by adverse possession, appellee filed a Bill of Complaint to Quiet Title in the Circuit Court for St. Mary’s County. Appellant answered, admitting her claim of ownership by adverse possession but denying all else save record title in appellee which was neither admitted nor denied.

Appellant tells us that appellee "elected to vest her claim of ownership and right of disposition on proof that she had paper title. Her proof consisted of the introduction into evidence of her deed .. . and of a plat” which set out the parcel and the right of way.

"At the close of Appellee’s case, Appellant moved to dismiss upon the ground that Appellee had not alleged or proved the conditions for maintenance of a cause of action and a right of relief pursuant to Real Property Article, Section 14-10&. The court denied the motion. The appellant declined to go forward.
The lower court declared that Appellee . . . was the owner of the land and had the right to dispose of the property in dispute. ...”

Appellant’s appeal, like her case below, rests upon two questions which may be answered as one:

"I. Is possession, actual or constructive, required to be proven by the plaintiff to establish a cause of action and a right to relief pursuant to Real Property Article, Section 14-108?
II. Did the evidence in this case permit the lower court to conclude that a cause of action and a right to relief pursuant to Real Property Article, Section 14-108 had been established by Appellee?”

Section 14-108 is one of the "Miscellaneous Rules” set forth in Title 14 of the recent recodification of the Real Property Laws. It was originally enacted in 1955 as a statutory section for the equitable remedy of quieting title to real estate, by authorizing courts of equity to do substantially what they had been doing prior to its enactment. Cherry v. Siegert, 215 Md. 81 (1957).

"§ 14-108. Quieting title.
(a) Conditions. Any person in actual peaceable possession of property, or, if the property is vacant and unoccupied, in constructive and peaceable possession of it, either under color of title or claim by right by reason of his or his predecessor’s adverse possession for the statutory period, when his title to the property is denied or disputed, or when any other person claims, of record or otherwise to own the property, or any part of it, or to hold any lien encumbrance on it, regardless of whether or not the hostile outstanding claim is being actively asserted, and if an action at law or proceeding in equity is not pending to enforce or test the validity of the title, lien, encumbrance, or other adverse claim, the person may maintain a suit in equity in the county where the property lies to quiet or remove any cloud from the title, or determine any adverse claim.
(b) Proceeding. The proceeding shall be deemed in rem or quasi in rem so long as the only relief sought is a decree that the plaintiff has absolute ownership and the right of disposition of the property, and an injunction against the assertion by the person named as the party defendant, of his claim by any action at law or otherwise. Any person who appears of record, or claims to have a hostile outstanding right, shall be made a defendant in the proceedings.”

Appellant argues that this statute established a burden of proving actual or constructive possession and that mere evidence of record title (which she concedes in appellee) is insufficient to constitute constructive possession.

The object of a bill to quiet title is to protect the owner of legal title "from being disturbed in his possession and from being harassed by suits in regard to his title by persons setting up unjust and illegal pretensions.. . .” Textor v. Shipley, 77 Md. 473, 475 (1893). The statutory requirement of "possession” is that which originally provided equity with jurisdiction; otherwise the complainant would have had to resort to law, having an adequate legal remedy there.

"In such cases, one being in possession, he cannot have a remedy at law and is obliged therefore to seek the aid of a Court of Equity. If, however, the possession is in another person, his remedy is by action of ejectment, and there is no ground for the interposition of a Court of Equity, and for the reason that he has an adequate remedy at law.” Id.

The alternative to "actual” possession (i.e., title plus vacancy) was early recognized in the case of Baumgardner v. Fowler, 82 Md. 631, 640 (1896), which noted that:

"... Courts have held that where a plaintiff has the legal title to lands that are wild, uncultivated and unoccupied, he may invoke the aid of a Court of Equity to remove a cloud upon his title, although he has no other than constructive possession resulting from legal ownership.”

In Baumgardner this conclusion was coupled with, and apparently predicated upon, the fact that there was no proof that the adverse claimants under a tax sale had taken possession of the lands in dispute under the tax sale deed. Consequently, the plaintiffs could not have sued in ejectment to recover the property and thus decide ownership. Id. at 640-41.

Although these cases arose prior to the statute, the statute was seemingly based upon them, Cherry, supra at 85, and when enacted, it did not dispense with the necessity of showing possession, actual or constructive. Thomas v. Hardisty, 217 Md. 523 (1958); Cherry, supra. Presumably then, if actual possession is not alleged in the Bill of Complaint although title is claimed, the bill is demurrable unless it is alleged that the lands are vacant and unoccupied. Barnes v. Webster, 220 Md. 473, 475-76 (1959).

The bill of complaint in this case was clearly demurrable if a demurrer had been filed. In five succinct paragraphs it alleged: (1) that appellee had record title to "Lot Number 5” (a copy of the deed was appended thereto); (2) that appellee had a twenty-foot right of way (evidenced by an appended deed); (3) that appellant’s husband had acknowledged the land and right of way in a survey (which was also appended); (4) that appellant claimed both land and right of way by adverse possession; and (5) that the survey was acknowledged on August 29, 1960 and that therefore adverse possession could not have ripened until August 29, 1980. The suit was filed on September 27, 1979, obviously with the intention of tolling the twenty-year adverse possession period. There being no assertion of facts indicative either of actual possession or that the land was vacant and unoccupied (which coupled with the record title would have satisfied constructive possession, see Baumgardner, supra), had appellant demurred she would have been successful since the bill failed to state on its face a case within the jurisdiction of the court of equity. Redwood Hotel, Inc. v. Korbien, 195 Md. 402, 410, 412 (1950). A bill to quiet title in equity would not have been appropriate because it did not appear that the complainant was in possession of the property in dispute. Schultz v. Kaplan, 189 Md. 402, 408 (1947), and cases cited therein.

Through oversight or cunning, appellant chose not to educate appellee during the crucial twentieth year and elected to answer rather than demur. By admitting that she claimed the land and right of way by adverse possession as contended by appellee, she underscored the questionable jurisdiction of the equity court, but did naught to raise the issue at that time. On July 14, 1980, just over a month before the crucial date noted in the complaint, a hearing was held. Appellee as noted, rested upon her record title, and appellant, apparently hesitant to chance supplying any defects in appellee’s case (see, Weil v. Terrell Air Conditioning and Heating Co., et al., 48 Md. App. 439 (1981)), moved for dismissal and rested upon her motion urging that appellee had failed to supply by proof what she had failed to assert by pleading. Had that proof of right to equity jurisdiction been supplied, even in the absence of a question of the sufficiency of a bill to confer jurisdiction, the court could have based its decree on the evidence without regard to the allegations of the bill. Young v. Diedel, 141 Md. 670, 672-73 (1922). But the evidence was not supplied and the bill was not amended even then, and if a bill fails to state on its face a case within the jurisdiction of equity, that error is fatal at every stage of the case. Diener v. Wheatley, 191 Md. 690, 698 (1948).

The judge sought to avoid this dilemma when faced with the fait accompli presented him by the motion to dismiss at the end of appellee’s case, by asserting that a factfinder might draw an inference (which he subsequently seems to have done) of possession from the evidence, which consisted only of the deed and a plat.

"So, the fact of Title Owner, I think an inference may be drawn from [sic.-"of ?”] the fact of possession, and for that reason, the Motion to Dismiss will be denied.”

No such inference, however, can be drawn from mere paper and the appellee’s express contention, admitted by appellant, claimed that appellant was an adverse possessor, which claim necessitates "actual” possession by the possessor. Goen v. Sansbury, 219 Md. 289, 295 (1959). The statutory requirement for constructive possession furthermore, is that the property be "vacant and unoccupied.” An inference of vacancy is not available from the proof of bare paper title any more than actual possession by appellee would be inferable in the face of her claim that appellant was claiming possession adversely.

Thus, it did not appear and was not alleged in the present case that appellee was in possession actually or constructively. The object of the suit was to try the question not of possession, but only of right to possession, and such a proceeding is not within the province and jurisdiction of a court of chancery. Polk v. Pendleton, 31 Md. 118, 124 (1869). Paraphrasing the holding of Crook v. Brown, 11 Md. 158 (1857), the Court of Appeals has noted:

"There is no head of equity jurisprudence under which a party in possession of land can be brought into Court, and made to show his title, in order that that title may be defeated and the possession delivered to the complainants, for this would be substantially to give a chancery suit the effect of an action in ejectment.” Polk, supra at 124-25.

Therefore absent actual or constructive possession, appellee could not bring appellant, who claimed possession adversely, into court to defeat appellant’s claim to title.

In Barnes v. Webster, supra, cited to us by appellant, a similar deficiency was found to exist in the Bill of Complaint. However, that case was never reached upon its merits. The trial court had sustained a demurrer without leave to amend for the wrong reason. When the Court of Appeals reviewed and discovered the error, it also found that the Bill was demurrable for failure to allege that complainants were in possession. In that case the Court of Appeals remanded the case without affirmance or reversal for further proceedings, saying that:

"Since we think the demurrer was sustainable only on the ground that there was not a sufficient showing of equity jurisdiction, we shall remand this case for further proceedings, which may include the granting of leave to file an amended bill of complaint, the filing of all relevant documents, or, if necessary the transfer of the suit to the law side of the court under Maryland Rule 515 [citations omitted].” 220 Md. at 477.

In this case we believe that a like remedy will provide substantial justice to both parties. We will vacate the decree entered below and remand the case for further proceedings which may include the granting of leave to amend the bill of complaint, the introduction of evidence, if any, solely relating to the jurisdictional question of the equity court, or, if necessary, the transfer of the suit to the law side of the court under Md. Rule 515. By so doing, neither party will be improperly prejudiced by a denial of the right to assert fully a claim of ownership in the proper form. Any other remedy appropriately applied would do no more than honor form over substance because a court of conscience erred.

Decree of July 24, 1980 vacated.

Case remanded without affirmance or reversal for further proceedings.

Costs to be paid by appellee.

      . An interesting contradiction in this statute which provides a means in equity of determining "any adverse claim” is the prerequisite of having "peaceable possession (actual or constructive).”

      . The statutory requirement is obviously a codification of the holding of Baumgardner, supra.


author: Liss, J.,

text:
    GEORGE R. YOUNG v. MAYNE REALTY CO., INC.
    [No. 1162,
    September Term, 1980.]

      Decided May 12, 1981.

    Appeal from the Circuit Court for Montgomery County (Miller, H. Ralph, J.).

      The cause was argued before Moore, Liss, and MacDaniel, JJ.

      Joseph A. Lynott, Jr., for appellant.

      William H. Roberge, Jr., with whom were Robert A. Gingell and John S. Weaver on the brief, for appellee.
   Liss, J.,

delivered the opinion of the Court.

This case arises out of a demand promissory note dated December 1, 1976, executed by appellant, George R. Young, in favor of Mayne Realty Co., Inc. The note authorized entry of a judgment by confession. On April 16,1980, appellee sued appellant in the Circuit Court for Montgomery County. Its declaration was accompanied by the note, an affidavit by the president of the corporation, and an order to confess judgment. On the day the case was docketed, judgment by confession was entered in favor of appellee in the amount of $40,410.80, representing principal, interest, attorney’s fees and court costs.

Appellant filed a timely motion to vacate the judgment on the grounds that he had a meritorious defense to the action and that enforcement of the note was barred by the Statute of Limitations. Appellee filed an affidavit in opposition to the motion to vacate, alleging that appellant recently acknowledged the debt. Appellant then filed a reply affidavit in which he alleged: (1) that he never acknowledged the debt; (2) that appellant executed the note at the request of appellee; (3) that the appellee represented to the appellant that the execution of the note was for "bookkeeping purposes only”; and (4) that payment of the note would not be enforced.

A hearing was held and the trial judge denied appellant’s motion on the ground that the Statute of Limitations did not constitute a "meritorious defense” within the meaning of Maryland Rule 645. It is from that judgment that this appeal was noted.

Appellant raises two issues to be decided by this appeal:

I. Did the lower court err in denying appellant’s motion to vacate a judgment that had been entered on a confessed judgment note on the ground that a defense based on the Statute of Limitations does not constitute a meritorious defense under Maryland Rule 645?

II. Did appellant’s affidavit set forth a meritorious defense?

We shall consider the two issues together.

I. and II.

Rule 645 requires that a motion to vacate a confessed judgment shall be made on the ground that the defendant has a meritorious defense to the cause of action, and that in order to vacate such a judgment the evidence presented at the hearing must establish the existence of "substantial and sufficient grounds for an actual controversy as to the merits of the case.” Rule 645 d. Both appellant and appellee, in their respective briefs, have become entangled in a struggle over semantics. Appellant argues that his burden of showing a "meritorious defense” is satisfied by the showing of a "defense that has merit.” Appellee contends just as strenuously that a meritorious defense must be a "defense to the merits,” and therefore a plea of limitations is not a plea to the merits for it does not deny the plaintiff’s right of action, but only the exercise of the right. See Foos v. Steinberg, 247 Md. 35, 230 A.2d 79 (1967).

The question as to whether a defense based upon limitations constitutes a meritorious defense under Rule 645 and could thereby serve as a ground to vacate a confessed judgment is, so far as we have been able to determine, a novel issue.

Maryland Code (1974, 1980 Repl. Vol.) Sec. 5-101 of the Courts & Judicial Proceedings Article provides that:

A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.

Rule 645 d, which governs the procedure for vacating a confessed judgment, stipulates:

d. Disposition of Application.
The motion shall be heard promptly by the court. If the evidence presented at the hearing establishes that there are substantial and sufficient grounds for an actual controversy as to the merits of the case, the court shall order the judgment by confession vacated, opened or modified with leave to the defendant to file a pleading and the case shall stand for trial. If the evidence does not establish that there are substantial and sufficient grounds for actual controversy as to the merits of the case, the judgment shall stand to the same extent as a judgment absolute entered after trial.

The trial judge took no evidence from either of the parties and after hearing legal argument, he dismissed the motion to vacate the confessed judgment on the ground that the Statute of Limitations did not constitute a meritorious defense within the meaning of Rule 645. We do not agree. The effect of the trial judge’s holding would be to deprive any defendant in a confessed judgment suit of the defense of limitations otherwise available to other debtors under Section 5-101 of the Courts Article. We perceive nothing in the statute which requires a holding that debts secured by cognovit notes are to be treated differently from other indebtedness so far as the defense of limitations is concerned. The courts are required to enforce the Statute of Limitations as adopted by the Legislature and have no authority to create an unauthorized exception merely on the ground that such exception would be within the spirit or reason of the statute. McMahan v. Dorchester Fertilizer Co., 184 Md. 155, 40 A.2d 313 (1944).

We conclude that a "meritorious defense” is not necessarily a defense to the merits of the transaction from which the note arose, but it is a defense that has merit. The case of Gelzer v. Scamoni, 238 Md. 73, 207 A.2d 655 (1965), is illustrative -of this principle. In Gelzer, the defendant, as a ground to vacate the confessed judgment, offered an alleged set-off due him. The trial court refused to vacate the judgment on the ground that the set-off was totally unrelated to the note upon which the confessed judgment was entered. In reversing, the Court of Appeals held:

[A] showing of a set-off, according to the tests and standards laid down ... is a "meritorious defense” so as to open a confessed judgment; hence the trial judge should have heard testimony to ascertain whether appellant could make such a showing. [238 Md. at 74.]

The Court of Appeals has further held: "A note payable on demand is payable immediately, without demand. [Citations omitted]. Limitations begin to run on the day of execution of such an instrument.” Continental Oil Co. v. Horsey, 177 Md. 383, 385-86, 9 A.2d 607 (1939).

It is obvious from the face of the note that the confessed judgment suit was filed more than five months after the expiration of limitations.

Appellee contends that the limitation protection provided by Section 5-101 of the Courts Article was waived by the defendant when he executed the confessed judgment note. The note provides, inter alia, that the defendant:

.. . authorize(s), irrevocably, any attorney of any Court of Record, to appear for me in such Court, in term time or vacation, at any time hereafter, and confess a judgment, without process, in favor of the holder of this Note, for such amount as may appear to be unpaid thereon, whether due or not, together with costs, including attorney’s fees at fifteen (15) per cent, and to waive and release all errors which may intervene in any such proceedings and to consent to immediate execution upon such judgment; hereby ratifying and confirming all that said attorney may do by virtue hereof.

The short answer to appellee’s contention is that no such argument was made at the hearing below, nor did the trial judge make any such finding. The contention was not raised below and is not before us for appellate review. Rule 1085.

After the appellant had filed his motion to vacate the confessed judgment, appellee filed an affidavit in which it stated that appellant had, on May 6, 1980, told Edward F. Mayne, Sr., president of the appellee, that there was no question that he owed the principal amount claimed and if he had the money he would pay it. In response, the appellant filed an affidavit in which he stated:

1. I deny the allegations of Plaintiffs Affidavit wherein he asserts that I acknowledged the indebtedness herein; that I have never acknowledged an indebtedness to Plaintiff, nor have I ever considered that I was obligated on the promissory note herein.
2. That the promissory note herein arose out of my employment with Plaintiff; that at the time Plaintiff requested me to sign the note, he stated that it was for "bookkeeping purposes” so that it could be reflected on his financial statement, but that he never intended to enforce payment of the note.

Appellee urges that the Court of Appeals in Bolotin v. Selis, 212 Md. 239, 129 A.2d 130 (1957), and this Court in Murray v. Steinmann, 29 Md. App. 551, 349 A.2d 477 (1975), held that a motion to vacate a confessed judgment must set forth fully, in the affidavit supporting the motion, all the facts and circumstances upon which the debtor relies to support the motion to vacate. The record extract discloses that this particular issue was never raised below or decided by the trial judge. Under these circumstances the issue is not before us for appellate review. Rule 1085.

The Court of Appeals in Stankovich v. Lehman, 230 Md. 426, 187 A.2d 309 (1963), enunciated the standards for determining under what circumstances a judgment by confession should be vacated:

To be successful in moving to strike a judgment by confession, one must adduce evidence in support of his motion sufficient to persuade the fair and reasoned judgment of an ordinary man that there are substantial and sufficient grounds for an actual controversy as to the merits of the case. If he does so, he is deemed to have met the burden of showing he has a meritorious defense, without the necessity of showing he will eventually prevail. This is to say that if the evidence is such that persons of ordinary judgment and prudence could fairly draw different inferences from it, the controversy should not be decided as a matter of law but instead should be submitted to a trier of fact. If a meritorious defense is made out (by affidavits or testimony, [citation omitted]), the Court should liberally exercise its equitable jurisdiction over judgments entered by confession and, on application of a defendant who prima facie shows such defense, vacate the judgment to permit a trial on the merits. Cropper v. Graves, 216 Md. 229; Remsburg v. Baker, 212 Md. 465, 470; Keiner v. Commerce Trust Co., 154 Md. 366, 370-371.

We conclude that appellant did prima facie establish that there was an actual controversy between the parties and offered a meritorious defense.

Order denying motion to vacate reversed.

Remanded for further proceedings pursuant to this opinion.

Costs to be paid by appellee.

      . The Court of Appeals has repeatedly used the term "meritorious defense” interchangeably with "substantial and sufficient” as used in Rule 645 d.