Bulletin: MD000016

Date:
April 28, 1997
To:
All Maryland Policy Issuing Agents
RE:
Update on Liens - Maryland

Dear Associates:

1. Mechanic's Liens - Limitations

a. At out 1995 Underwriting Seminar it was stated that under RP sec 9-109 the right to enforce a judgment establishing a mechanics lien was lost unless a Complaint to Enforce was filed within one (1) year following the date on which the initial Complaint to establish a Mechanics Lien is filed. The impression given in the lecture and materials was that there is a one (1) year statute of limitations on the enforcement of mechanics liens. THIS IS NOT THE CASE. We regret the confusion.

b. RP sec 9-109 is only applicable in those rare situations where the Complaint to Enforce are not consolidated and filed simultaneously by the Claimant. In all cases where a mechanics lien is established by interlocutory judgment pursuant to a Complaint to Establish and Enforce a Mechanics Lien the claimant has twelve (12) years to enforce it.

c.Thus, if your examination discloses a mechanics lien entered against your seller/borrower pursuant to a (combined) Complaint to Establish and Enforce Mechanics Lien less than 12 years ago, it must be either satisfied and released or bonded-off pursuant to RP sec 9-106(c). If you have any questions regarding the nature of the Complaint contact Maryland/DC underwriting counsel.

2. Limitations on Maryland Tax Liens

a.In reliance on the rather explicit language of TG sec 13-1103(a) we have previously taken the position that there is a seven (7) year limitation on enforcement of Maryland Tax Liens. For years title examiners have debated the application of this section to liens which otherwise appeared to have no limitations on enforcement. There was no definitive guidance from either the Attorney General or the appellate courts. Now, the Court of Special Appeals has spoken on the issue.

b.In Rossville Vending Machine Corp. v. Comptroller 114 Md App 346 (1997) the Court effectively invalidated TG sec 13-1103(a) and held that the filing of a tax lien gives the state a judgment lien against the taxpayer which, most acknowledge, can be enforced without regard to limitations under the Common Law doctrine that limitations could not run against the king.

c. Effective immediately all state tax liens which have attached to the property under examination must, regardless of age, be paid and released.

3. Assignments of Judgments to the Use of the State of Maryland and Its Agencies

a.A common practice in cases where an injured motorist recovers a judgment against an uninsured tortfeasor and is later compensated for his/her loss by the Maryland Automobile Insurance Fund (MAIF) is for the motorist to assign the judgment to the State of Maryland to the use of MAIF.

b.It has come to our attention that the Office of the Attorney General has taken the position that once such an assignment is filed in the case the judgment may be enforced without regard to limitations. It claims that such judgments must be treated as though the state was the original plaintiff.

c.Effective immediately, whenever your examination discloses any unsatisfied motor tort judgment against parties in your chain of title which was entered more that twelve (12) years ago the case file must be checked to insure that there has been no assignment of the judgment to the State of Maryland. If so, the judgment must be satisfied and released.

4. The FDIC Connection

a.From time to time we are asked to insure titles coming through recent foreclosures and tax sales. These title must be underwritten with great care due primarily, to due process/notice issues. It has come to our attention that there is yet another pitfall you need to be concerned with.

b.12 USC sec 1825 (b)(2) provides that whenever the Federal Deposit Insurance Corporation (FDIC) in its corporate capacity, as successor to the Resolution Trust Corporation (RTC) as receiver, as Trustee/Successor Trustee under trusts set up to hold assets of defunct banks and savings and loan associations or as receiver for defunct national banks has any interest in real property (either as owner following foreclosure or as lender) it is exempt from extinguishment of its interest by actions in state courts unless it gives its consent.

c.Upon dissolution of RTC all of its assets were transferred to FDIC.

d.Thus whenever your examination of title coming through a recent or current tax sale or mortgage foreclosure discloses that any party to the suit or subordinate lienholder is the RTC or FDIC or has any possible connection to the RTC or FDIC you must contact this office for guidance. In such cases, absent written consent from the FDIC the purchaser cannot obtain a title free and clear of the interest or lien held by the FDIC in any capacity. This is so even if FDIC is made a party to the suit and served with process and/or notified of a sale.

e. In appropriate cases we reserve the right to require an affidavit from counsel that they know of no unrecorded assignments or endorsement of notes to the use of the RTC and FDIC in any capacity.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.