Mayor & City Cncl. of Balt. v. Prime Realty Assoc. ( 2020 )

Mayor and City Council of Baltimore v. Prime Realty Associates, LLC, No. 53,
September Term, 2019. Opinion by Getty, J.
CORPORATIONS AND ASSOCIATIONS—DUE PROCESS OF LAW—
SUBSTITUTED SERVICE—STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION
The Court of Appeals held that Maryland Rule 3-124(o), which, in limited circumstances,
allows for substituted service of process on the State Department of Assessments and
Taxation (“SDAT”), satisfies a litigant’s due process rights. A limited liability company’s
failure to update its resident agent’s address with SDAT did not invalidate the plaintiff’s
attempts of service or use of substituted service upon SDAT, as prescribed in Rule 3-
124(o).
Circuit Court for Baltimore City
Case No. 24-C-19-002940
Argued: March 5, 2020
IN THE COURT OF APPEALS
OF MARYLAND
No. 53
September Term, 2019
MAYOR AND CITY COUNCIL OF
BALTIMORE
v.
PRIME REALTY ASSOCIATES, LLC
Barbera, C.J.
McDonald,
Watts,
Hotten,
Getty,
Booth,
Biran,
JJ.
Opinion by Getty, J.
Filed: May 12, 2020
Pursuant to Maryland Uniform Electronic Legal Materials Act
(§§ 10-1601 et seq. of the State Government Article) this document
is authentic.
Suzanne Johnson
2020-05-12 15:51-04:00
Suzanne C. Johnson, Clerk
By the law of this state, the state of its
incorporation, the Department was thus
conclusively presumed to have been designated
as the true and lawful attorney of the
corporation to accept service of process. It
clearly appears that legitimate efforts were
made to notify the defendant corporation of this
action and that those efforts were by means
reasonably calculated to bring the attention of
the corporation to the pendency of the
proceeding.
Judge Marvin H. Smith, Barrie-Peter Pan
Schools, Inc. v. Cudmore, 261 Md. 408, 421
(1971).
A plaintiff in Maryland is permitted under limited conditions to substitute service
of process on the state taxation authority when suing a business entity. Initially passed as
a statute in 1937, the current provision for substituted service in the District Court of
Maryland is Maryland Rule 3-124(o). While proper service is typically made upon a
business entity through personal service on its resident agent, the substituted service rule
provides a backup provision when regular service has been unsuccessful.
In this case, Petitioner Mayor and City Council of Baltimore (the “City”) initiated a
receivership action against Respondent Prime Realty Associates, LLC (“Prime Realty”)
when real property owned by Prime Realty fell into disrepair. The City attempted on
several occasions to serve Prime Realty’s resident agent at the address on file with the State
Department of Assessments and Taxation (“SDAT”).
After those attempts proved unsuccessful, the City made substitute service on the
designated state agency, currently SDAT, pursuant to Maryland Rule 3-124(o). Prime
Realty did not participate in the receivership action until after the court-appointed receiver
sold the property and the sale was ratified by the District Court of Maryland sitting in
Baltimore City. After ratification of sale, Prime Realty moved to vacate the sale,
contending that the City did not adequately serve Prime Realty, therefore violating its due
process rights. The District Court denied the motion and Prime Realty appealed.
Before the Circuit Court for Baltimore City, the City argued that Rule 3-124(o)
provides an entity with due process because business entities are statutorily required to file
the address of its principal office and the name of its resident agent with the State. The
City contended that Prime Realty’s due process rights were not violated because the City
followed the substituted service requirements set forth in Maryland Rule 3-124(o). The
circuit court disagreed and vacated the sale of the property, holding that Prime Realty’s
due process rights were violated because the City had knowledge of an alternative address
for Prime Realty’s resident agent.
We granted the City’s petition for a writ of certiorari to determine whether the
method of substituted service upon SDAT prescribed by Maryland Rule 3-124(o) satisfies
a litigant’s due process rights. For the reasons that follow, we hold that Maryland Rule 3-
124(o) provides due process of law. Accordingly, the circuit court erred in invalidating,
on due process grounds, the order ratifying the sale of Prime Realty’s vacant property.
BACKGROUND
A. Receivership, Generally.
Receivership is a code enforcement tool enacted by the City Council of Baltimore
in 1991 that allows the City to abate the public nuisance created by vacant and problem
properties. In a receivership action, the City petitions the District Court to appoint a third
2
party—a “receiver”—to take control of a vacant property and auction it to a buyer who
can rehabilitate the property.
To begin the receivership process, the Baltimore City Commissioner of Housing
and Community Development (the “Commissioner”) must first determine that a building
is “vacant” under the terms of the ordinance. A vacant structure is “an unoccupied
structure that is: 1. unsafe or unfit for human habitation or other authorized use, or 2. a
nuisance property.” Bldg., Fire, & Related Codes of Balt. City § 116.4.1.2 (“BFR
Codes”); see id. § 116.4.1.3 (defining “nuisance property” as an unoccupied structure that
has (1) two overdue and final building or fire violations; or (2) six overdue and final
exterior premises maintenance violations within a 12-month period). When the
Commissioner finds that a building is vacant, it has the authority to order the property
owner to rehabilitate or raze the property. Id. § 116.1. If a property owner fails to comply
with this order, the Commissioner then has the authority to initiate a receivership action
and appoint a receiver to rehabilitate or raze the property, or sell it to a buyer that will do
the same. Id. §§ 116.7, 116.7.1, 121.2. When the Commissioner is seeking the
appointment of a receiver for vacant property, it must provide notice to the property owner
in accordance with the Maryland Rules. See id. § 121.4.
Once the property has been sold, the original property owner has thirty days to file
exceptions to the sale. Md. Rule 3-722(f)(3). Following the thirty-day time frame, if the
District Court finds the sale was “fairly and properly made,” the sale may then be ratified.
Md. Rule 3-722(g). After ratification, the receiver is to sign the deed conveying title to the
buyer. BFR Codes § 121.14. In addition, the receiver must file an accounting of the sale
3
and a motion to terminate the receivership action with the court. Id. § 121.15; Md. Rule 3-
722(i), (j). The receiver is able to distribute the proceeds from the sale upon the court
ratifying the accounting. Md. Rule 3-722(i), (j).
B. Receivership Action Against Prime Realty.
This dispute arises out of a receivership action regarding 744 Patterson Park
Avenue, a residential property in Baltimore City (the “Property”) acquired by Prime Realty
in March 2005 as an investment rental property. Prime Realty continued to rent the
property for several years after acquisition until, according to Prime Realty, the tenants
were robbed and mugged “repeatedly” and moved out. Thereafter, the property remained
vacant and its condition deteriorated.
On June 26, 2015, the City issued to Prime Realty a Code Violation Notice and
Order declaring the Property “unfit for human habitation or other authorized use pursuant
to sections 116–121 of” the Building, Fire, and Related Codes of Baltimore City. The
violation notice required Prime Realty to either raze or rehabilitate the Property within
thirty days. The City posted the violation notice on the Property and mailed a copy of the
notice to a Silver Spring post office box address that Prime Realty used for, among other
things, tax and water bills from the City.
By June 28, 2018, three years after the City issued the violation notice, Prime Realty
had failed to raze or rehabilitate the Property as required. Accordingly, the City petitioned
the District Court of Maryland sitting in Baltimore City to appoint a vacant building
receiver. On July 10, 2018, the District Court issued a show cause order requiring Prime
Realty to appear before the court on August 15, 2018.
4
The City was ordered to serve the Petition for Appointment of a Vacant Building
Receiver (the “Petition”) and the show cause order upon Prime Realty prior to August 13,
2018, which, in the case of a limited liability company (“LLC”), under Maryland Rule 3-
124(h), is accomplished by service on the resident agent of the LLC. Records at SDAT
indicated that Prime Realty was established as a Maryland LLC on January 21, 2005. At
that time, Prime Realty’s resident agent, Miguel Belen, resided at 1313 South Dahlia Court
in Bel Air, Maryland. That address continued to be the address of record on July 10, 2018
when the District Court issued the show cause order.
However, the resident agent Mr. Belen had relocated in 2010 from the Dahlia Court
address to Silver Spring, Maryland, where he began using a post office box for Prime
Realty’s business. Mr. Belen filed a notice with SDAT of this address change in 2011.
Consistent with SDAT regulations that prohibit a business entity from registering a post
office box address as the address for its resident agent, SDAT issued a rejection notice to
Prime Realty’s former address on file—here to Mr. Belen at the Dahlia Court address.
Prime Realty never responded to correct this filing.
In serving the show cause order, the City mailed, by both regular and certified mail,
copies of the Petition and order to the Dahlia Court address. The City also unsuccessfully
attempted to serve Mr. Belen personally by private process server on July 20 and 27, 2018,
at the Dahlia Court address. On the proof of service form, the process server noted “no
answer” as the reason for inability to make service.
5
In light of the failure to serve, the District Court postponed the show cause hearing
and issued an updated show cause order which extended the service deadline to September
20, 2018 and required Prime Realty to appear on October 3, 2018.
Proceeding under Maryland Rule 3-124(o), which provides, in the case of an LLC
and certain other business entities, for substituted service upon SDAT, the City served
SDAT a copy of the Petition and updated show cause order on September 5, 2018. Prime
Realty did not appear for the October 3, 2018 show cause hearing. As a result, the District
Court appointed One House At A Time, Inc. (“One House”) as the receiver for the Property.
The City sent Prime Realty a courtesy letter on October 29, 2018, both to the Dahlia
Court address and the Silver Spring post office box address, advising that a receiver had
been appointed and that the Property would be listed for sale at public auction in December.
At the public auction on December 11, 2018, Mohammad Khan acquired the Property for
$16,000. Two weeks after the sale of the Property, Mr. Belen filled out an application with
the District Court to review the receivership action case file. The application reflects that
Mr. Belen requested and received a copy of the receivership action case file. At the time
Mr. Belen reviewed the receivership action case file, SDAT records indicated that Prime
Realty was operating under a forfeited charter.1 Prime Realty failed to take any action in
this case for another two months until February 15, 2019, when it took the necessary steps
to reinstate the charter with SDAT prior to defending the receivership action.
1
Counsel for Prime Realty noted at oral argument that the charter was forfeited for failure
to file personal property tax returns with SDAT.
6
The District Court received the report of sale from One House on January 10, 2019.
The report was also mailed, by both certified and regular mail, to Prime Realty at the Dahlia
Court address. Shortly thereafter an additional notice of the sale was posted on the
Property. Almost a month after receiving the report of sale, the District Court ratified the
sale of the Property to Mr. Khan. One House and Mr. Khan settled on March 4, 2019, with
the final accounting of the settlement reflecting that One House proposed to distribute
$3,182.67 to Prime Realty.2
The District Court received the final accounting on March 14, 2019. The next day,
Prime Realty filed a Verified Motion to Vacate, Revise and Strike Judgment (“Motion to
Vacate”) contending that the City did not adequately serve Prime Realty, therefore
violating its due process rights. Four days later, the City responded with an Opposition to
Prime Realty’s Motion to Vacate. On March 29, 2019, the District Court issued an order
denying Prime Realty’s Motion to Vacate. Accordingly, on April 22, 2019, the District
Court ratified the final accounting, ordered One House to disburse the remaining funds,
discharged One House from its appointment, and closed the case.
Prime Realty filed a Notice of Appeal on April 30, 2019. Before the Circuit Court
for Baltimore City, Prime Realty contended that the City’s use of substituted service on
SDAT pursuant to Maryland Rule 3-124(o) was in violation of Prime Realty’s due process
rights. The circuit court granted Prime Realty’s Motion to Vacate, citing the City’s
2
This number reflects the distribution to the record lien holder (Prime Realty) after
auctioneer’s fees, receiver’s attorneys’ fees, the receiver’s lien, and the City’s attorneys’
fees.
7
knowledge of the “homeowner’s whereabouts above and beyond which SDAT had in their
records,” i.e. the Silver Spring post office box address.
The City then petitioned for, and this Court granted, a writ of certiorari. Mayor &
City Council of Balt. v. Prime Realty Assocs., LLC, 466 Md. 310 (2019). The City presents
two questions for our consideration:
(1) Does Md. Rule 3-124(o), allowing for substituted service upon SDAT,
provide due process of law?
(2) Did the [circuit] court err in invalidating, on due process grounds, the
order ratifying the sale of Prime Realty’s property when Prime Realty
claimed lack of notice but the City effectuated substituted service on
SDAT and Prime Realty’s lack of notice was a result of its failure to
provide SDAT a current, lawful address for its resident agent?
For the reasons that follow, we answer both questions in the affirmative. Maryland
Rule 3-124(o) provides due process of law. Accordingly, the circuit court erred in
invalidating, on due process grounds, the order ratifying the sale of Prime Realty’s vacant
property. We therefore reverse the judgment of the Circuit Court for Baltimore City.
STANDARD OF REVIEW
The circuit court’s determination to vacate the City’s receivership action, to the
extent that this is a factual finding, will not be set aside unless clearly erroneous. See
Bottini v. Dep’t of Fin., 450 Md. 177, 187 (2016) (“We give due regard to the trial court’s
role as fact-finder and will not set aside factual findings unless they are clearly erroneous.”
(quoting Breeding v. Koste, 443 Md. 15, 27 (2015))). However, the legal analysis of a
circuit court and its interpretations of relevant statutes receives no deference. Friendly Fin.
Corp. v. Orbit Chrysler Plymouth Dodge Truck, Inc., 378 Md. 337, 342–43 (2003).
8
Interpretation of a Maryland Rule is a question of law and is therefore reviewed de novo.
State v. Schlick, 465 Md. 566, 573 (2019).
DISCUSSION
A. The Parties’ Contentions.
The City contends that the method of substituted service provided in Maryland Rule
3-124(o) satisfies notice requirements and provides due process of law to resident agents
on behalf of their principal entities. The City asserts that the statutory requirements for an
LLC place on an LLC the responsibility to register the name of its resident agent and the
address of its principal office with the State. According to the City, the purpose of the
resident agent is to accept legal service of process on behalf of the entity, therefore the LLC
statutory framework affirms that substituted service upon SDAT would provide the proper
notice to satisfy due process.
In arguing that it strictly complied with Rule 3-124(o), the City recounts its attempts
to personally serve Prime Realty’s resident agent on July 20 and 27, 2018 at the Dahlia
Court address prior to serving SDAT on September 5, 2018. The City contends that its
strict compliance with the service methods prescribed in Rule 3-124(o) ensured Prime
Realty’s due process rights were satisfied. Accordingly, the City concludes that the circuit
court erred in vacating the order ratifying the sale of Prime Realty’s vacant property.
Prime Realty argues that it has been deprived of proper notice because the City had
knowledge of the Silver Spring post office box address evidenced by the fact that the City
mailed the initial violation notice to that address. Additionally, Prime Realty cites this
Court’s holding in St. George Antiochian Orthodox Christian Church v. Aggarwal, 326
9
Md. 90 (1992), in contending the City was required to go above and beyond the service
requirements of Rule 3-124(o) to provide due process. See Aggarwal, 326 Md. at 104
(holding that a tax sale purchaser failed to comply with the notice requirements for a
foreclosure action because the tax sale purchaser had knowledge that the address being
used for service was a bad address).
In order to address Prime Realty’s contention that the City violated Prime Realty’s
due process rights by only attempting service of process at the address on file with SDAT,
we must first determine whether Rule 3-124(o)’s method of substituted service provides
due process.
B. Maryland Rule 3-124(o) Legislative History.
An understanding of Maryland Rule 3-124(o)’s history is necessary to appreciate
and recognize how the method of substituted service upon SDAT became a well-accepted
vehicle for service of process. From its inception over eighty years ago as a statute and its
later incorporation into the Court’s revision of the rules of procedure in the District Court
beginning in 1971, substituted service upon SDAT has a deep-rooted foundation in
Maryland’s legal history.3 As discussed below, the history of the current rule reflects both
a policy decision of the General Assembly and a procedural decision of the judiciary to
provide alternative methods of service of process on business entities. The policy and
3
These deep roots extend to other contexts as well. Indeed, the use of substituted service
upon a government entity that a defendant must register with is a time-honored device. For
example, the attorney disciplinary rules provide for substituted service on the Client
Protection Fund. Md. Rule 19-708; 19-723(b).
10
procedure still exist in the Maryland code and Maryland Rules today. Our inquiry into the
legislative history of Rule 3-124(o) begins with its statutory origins.
The first version of the substituted service statute originated as a 1937 chapter law:
If any corporation of this State, or any foreign corporation required by any
statute of this State to have a resident agent, has not a resident agent, or has
one or more resident agents and two unsuccessful attempts have been made
on different business days to serve process upon each of its resident agents,
such corporation shall be conclusively presumed to have designated the State
Tax Commission as its true and lawful attorney authorized to accept on its
behalf service of process in the action in which such process issued, and in
such case such process may be served upon the State Tax Commission as the
true and lawful attorney of such corporation.
1937 Md. Laws, ch. 504, § 105. This chapter law was codified as § 111(d) of Article 23
(at that time the Corporations Article) of the Annotated Code of the Public General Laws
of Maryland. After minor amendments in 1943,4 § 111 was repealed and recodified as part
of a complete revision of Article 23 in 1951. 1951 Md. Laws, ch. 135, § 92. But for
updated cross-references, § 92—the new service of process statute—mirrored former
§ 111.
In 1957, the new publisher of the Maryland code, the Michie Company, published
an updated code. See Alan M. Wilner, Blame it all on Nero: Code Creation and Revision
in Maryland (1994). While it followed the 1951 code organization where it could, the 1957
code renumbered, among others, several of the sections of Article 23. Id. Section 92 was
renumbered as § 96 but remained the same in substance.
4
See 1943 Md. Laws, ch. 733.
11
In 1967, § 96 was repealed among other sections of Article 23 and was reenacted as
parts of § 127C of Article 23 and § 75B of Article 75. 1967 Md. Laws, ch. 532, § 2. Article
75, § 75B(a)(2) provided the same substance as § 96 but also reflected that the newly
created SDAT took over the functions of the former State Tax Commission with respect to
corporate filings and resident agents. Id. Article 23, § 127C provided in relevant part that
“[a]ny notice required by law to be served upon any corporation of this State . . . by
personal service upon a resident agent . . . may be served upon such corporation in the
manner provided in Section 75B of Article 75.” Id.
In 1973, § 75B was repealed. 1973 Md. Laws., 1st Spec. Sess., ch. 2. Two years
later, in 1975, when Article 23 was recodified as the Corporations and Associations Article,
§ 127C was repealed and replaced with § 1-401. 1975 Md. Laws, ch. 311. Section 1-401
specifically cross-referenced “Maryland Rule 106” and “Maryland District Rule 106.” It
provided, in relevant part:
(A) Service of Process on Resident Agent.
Service of process on the resident agent of a corporation or on the resident
agent of any other person binds the corporation or other person in any action,
suit, or proceeding which is pending, filed, or instituted against it under the
provisions of this article.
(B) Service of Notice on Corporation Under Rule 106.
(1) Any notice required by law to be served by personal service on a
resident agent or other agent or officer of any Maryland corporation or of any
foreign corporation required by statute to have a resident agent in this state
may be served on the corporation in the manner provided by Maryland Rule
106 or Maryland District Rule 106 relating to the service of process on
corporations.
12
(2) Service under Maryland Rule 106 or Maryland District Rule 106 is
equivalent to personal service on a resident agent or other agent or officer of
a corporation mentioned in paragraph (1) of this subsection.
Id. Section 1-401 exists today in a substantially similar form, although it was repealed and
reenacted with amendments in 1992 to include LLCs, among other business organizations.5
1992 Md. Laws, ch. 536. We next turn to the long history of the substituted service rule in
the Maryland rules of procedure.
5
Section 1-401 of the Corporations and Associations Article of the Maryland Code (1957,
2014 Repl. Vol., 2019 Supp.) currently provides as follows:
(a) Service of process on the resident agent of a corporation, partnership,
limited partnership, limited liability partnership, limited liability company,
or real estate investment trust, or any other person constitutes effective
service of process under the Maryland Rules on the corporation, partnership,
limited partnership, limited liability partnership, limited liability company,
or real estate investment trust, or other person in any action, suit, or
proceeding which is pending, filed, or instituted against it under the
provisions of this article.
(b)(1) Any notice required by law to be served by personal service on a
resident agent or other agent or officer of any Maryland or foreign
corporation, partnership, limited partnership, limited liability partnership,
limited liability company, or real estate investment trust required by statute
to have a resident agent in this State may be served on the corporation,
partnership, limited partnership, limited liability partnership, limited liability
company, or real estate investment trust in the manner provided by the
Maryland Rules relating to the service of process on corporations.
(2) Service under the Maryland Rules is equivalent to personal service on a
resident agent or other agent or officer of a corporation, partnership, limited
partnership, limited liability partnership, limited liability company, or real
estate investment trust mentioned in paragraph (1) of this subsection.
13
The substituted service statute first appeared in the rules of procedure for the District
Court in 1971, when the District Court of Maryland was created. The rule began as Rule
106(e) of the Maryland District Rules—a set of rules parallel to, but not exactly mirroring,
the Maryland Rules which governed practice in the circuit courts.6 As noted above, this
rule was cross-referenced, along with the circuit court equivalent (Maryland Rule 106), in
the 1975 version of § 1-401 of the Corporations and Associations Article. In pertinent part,
Maryland District Rule 106(e) provided:
1. If No Resident Agent or Unsuccessful Attempt to Serve.
If a corporation required (by statute of this State) to have a resident agent, (i)
has not a resident agent, or (ii) has one or more resident agents, and
unsuccessful attempts have been made on different business days to serve
process either twice upon one resident agent or once upon each of two
resident agents, process may be served upon the State Department of
Assessments and Taxation.
6
The Maryland District Rules were drafted and approved by the Court of Appeals Standing
Committee on Rules of Practice and Procedure in 1971. See Meeting Minutes, Court of
Appeals Standing Committee on Rules of Practice and Procedure (January 7, 1971). The
Committee recommended “to publish the District Court rules in a volume separate from
the Maryland Rules, with chapter and rule numbers paralleling those of the Maryland Rules
where feasible, and to re-state in full, rather than incorporate by reference, whatever
Maryland Rules are adopted as District Court Rules.” Id. at 3–4. “[T]he Rules Committee
reviewed and extensively revised and redrafted the proposals of the Subcommittee on
District Court Rules [and] made its report and recommendation to the Court of Appeals”
on June 22, 1971. Meeting Minutes, Court of Appeals Standing Committee on Rules of
Practice and Procedure (May 20, 1971). The Court approved and adopted the Maryland
District Rules “for the governance of the District Court of Maryland” on June 28, 1971.
Order Adopting the Maryland District Rules and Amending and Supplementing Maryland
Rules of Procedure (June 28, 1971).
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2. How Made.
Service of process upon the State Department of Assessments and Taxation
shall be made by serving two copies of the process, with the fee required by
law, in the office of the Department upon the Director or a person designated
by him for that purpose. The fee shall be taxable as costs in the case.
Ann. Code of The Public General Laws of Maryland (1981 Repl. Vol.), Md. Dist. Rule
106.
Maryland District Rule 106 was the predecessor to Maryland Rule 3-124(o). In
1976, this Court directed the Rules Committee to study all of the rules and determine
whether substantive changes were necessary. The project became an extensive rewrite of
the rules. On April 6, 1984, this Court adopted Titles I through IV of the new rules—Title
III included Rule 3-124. As compared to Maryland District Rule 106, Rule 3-124(o)
expanded both the grounds for the use of substituted service to include when the resident
agent has died and broadened the applicability to include any entity required by the State
to have a resident agent. Today, Rule 3-124(o) provides:
Service may be made upon a corporation, limited partnership, limited
liability partnership, limited liability company, or other entity required by
statute of this State to have a resident agent by serving two copies of the
summons, complaint, and all other papers filed with it, together with the
requisite fee, upon the State Department of Assessments and Taxation if (i)
the entity has no resident agent; (ii) the resident agent is dead or is no longer
at the address for service of process maintained with the State Department of
Assessments and Taxation; or (iii) two good faith attempts on separate days
to serve the resident agent have failed.
The longstanding history of Rule 3-124(o) demonstrates a policy decision of the
General Assembly and of this Court for efficiency in judicial procedures involving service
of process. From what we can tell, this is the first time the rule has been challenged on due
15
process grounds in the rule’s 83-year history. We proceed to address the due process
challenge.
C. Due Process Analysis of Maryland Rule 3-124(o).
It is well established that “procedural due process requires that litigants must receive
notice, and an opportunity to be heard.” Pickett v. Sears, Roebuck & Co., 365 Md. 67, 81
(2001). The notice provided must be “reasonably calculated, under all the circumstances,
to apprise interested parties of the pendency of the action and afford them an opportunity
to present their objections.” Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314
(1950). It is also well established that potentially less effective methods of service may be
employed where traditional or more effective methods of service have been attempted and
were unsuccessful. Miserandino v. Resort Props., Inc., 345 Md. 43, 65 (1997). Further,
the service of process utilized on a business entity may be different than that which would
be used to serve an individual. Id. at 60. Rule 3-124(o)’s well established legislative
history coupled with the statutory requirements expected of an LLC demonstrate that
substituted service upon SDAT is a practical method of service which affords litigants their
due process rights.
The privileges associated with an LLC, such as tax benefits and liability protections,
are afforded with the expectation that an LLC will fulfill its statutory obligations. An LLC
is a statutory entity, whose formation only occurs upon SDAT’s acceptance of its articles
of organization. Maryland Code (1992, 2014 Repl. Vol., 2019 Supp.), Corporations and
Associations § 4A-202(b). Additionally, an LLC is statutorily required to have a principal
office within the state of Maryland as well as a resident agent. Id. § 4A-210(a). The
16
resident agent is designated as the individual to accept service of process on behalf of the
entity. Id. § 1-401. The LLC is required to file with SDAT an accurate address for its
principal office and resident agent. Id. § 4A-210. Further, if either of these addresses
change, an LLC is also required to file the appropriate change of address notification with
SDAT. Id. It is the LLC’s responsibility to understand and abide by SDAT’s policies and
procedures for these filings.
Maryland Rule 3-124(o) provides an additional method of service upon an LLC
through substituted service on SDAT in three limited circumstances: (1) where the entity
has no resident agent; (2) where the resident agent is dead or is no longer at the address for
service of process maintained with SDAT; or (3) where two good faith attempts on separate
days to serve the resident agent have failed. Md. Rule 3-124(o). This rule is not the default
rule for litigants to utilize when attempting service of process. Instead, substituted service
upon SDAT is only available in these three limited situations. Further, once service upon
SDAT has occurred, SDAT is required to “forward a copy of the process and notice of the
service to the defendant at [its] mailing address, if known, or to [its] principal place of
business.” Maryland Code (1957, 2013 Repl. Vol.), Courts and Judicial Proceedings § 6-
307. Since an LLC is statutorily required to register an accurate address for its resident
agent with SDAT, the plain language of Rule 3-124(o) ensures that substituted service upon
SDAT would apprise the interested parties of the pendency of the action and afford them
an opportunity to be heard.
While no court has analyzed Rule 3-124(o) in a due process context, the Court of
Special Appeals and the United States District Court for the District of Maryland have both
17
scrutinized Maryland Rule 2-124(o)—Rule 3-124(o)’s sister rule for the circuit court7—
and concluded that the method of service affords litigants their due process rights. See
Thomas v. Rowhouses, Inc., 206 Md. App. 72 (2012); Biktasheva v. Red Square Sports,
Inc., 366 F. Supp. 2d 289 (D. Md. 2005). In Biktasheva, the United States District Court
for the District of Maryland addressed a defendant’s motion to dismiss grounded in an
insufficiency of service of process claim. 366 F. Supp. 2d at 293. The plaintiffs in the
matter only attempted to serve defendant’s resident agent once prior to serving SDAT. Id.Accordingly, the defendant argued that the plaintiffs did not fulfill the two attempted
service requirements under Rule 2-124(o)(iii). Id. The court held that because the process
server determined the defendant’s resident agent was no longer located at the address on
file with SDAT, service upon SDAT was proper under Rule 2-124(o)(ii). Id.In Thomas, the Court of Special Appeals had to determine whether substituted
service upon SDAT was proper where a corporation no longer had a resident agent. 206
Md. App. at 74–75. The Court of Special Appeals relied upon the holding in Biktasheva,
in articulating that “when the resident agent cannot be located according to SDAT records,
7
Maryland Rule 3-124(o) is a civil procedure rule for the District Court. Rule 2-124(o) is
the rule governing substituted service upon SDAT for the circuit court. It reads in pertinent
part:
[s]ervice may be made upon a . . . limited liability company . . . by serving
two copies of the summons, complaint, and all other papers filed with
it . . . upon [SDAT] if (i) the entity has no resident agent; (ii) the resident
agent is dead or is no longer at the address for service of process maintained
with [SDAT]; or (iii) two good faith attempts on separate days to serve the
resident agent have failed.
18
alternative service on SDAT has been deemed proper.”8 Id. at 86. Both Thomas and
Biktasheva required the courts to determine whether substituted service upon SDAT was a
proper method of service where the resident agent could not be located at the address on
file with SDAT, and both courts held in the affirmative.
In addition to the recent analyses of substituted service in Thomas and Biktasheva,
substituted service has been challenged, albeit in different contexts, and upheld several
times in the last sixty years. See Barrie-Peter Pan Schs., Inc. v. Cudmore, 261 Md. 408,
421 (1971) (“By the law of this state, the state of its incorporation, [SDAT] was thus
conclusively presumed to have been designated as the true and lawful attorney of the
corporation to accept service of process. It clearly appears that legitimate efforts were
made to notify the defendant corporation of this action and that those efforts were by means
reasonably calculated to bring the attention of the corporation to the pendency of the
proceeding.”); Gkiafis v. S.S. Yiosonas, 342 F.2d 546, 558 (4th Cir. 1965) (“[T]he notice
provisions of the Maryland substituted service procedure [to serve foreign corporations]
are adequate.”); Speir v. Robert C. Herd & Co., 189 F. Supp. 432, 436 (D. Md. 1960)
(same).
8
In Thomas, the corporation forfeited its corporate charter (like here), did not have a
resident agent, and the corporate director listed in the articles of incorporation was
deceased. 206 Md. App. at 74–75. The court made clear that, even though a corporation
that has forfeited its charter is generally said to be a legal non-entity, a corporation
continues to exist for some limited purposes, including to receive service “in any method
which would have been appropriate when the corporation was in existence,” such as
substituted service on SDAT under Rule 2-124. Id. at 80–86.
19
We agree with the holdings of the Court of Special Appeals and the U.S. District
Court for the District of Maryland. The longstanding legislative history of Md. Rule 3-
124(o), as well as the statutory obligations of an LLC, demonstrate that this method of
service affords litigants their due process rights. It is the LLC’s obligation to accurately
record its resident agent’s address with SDAT and to understand the requirements
restricting the use of post office box addresses.
The City attempted to serve Prime Realty’s resident agent at the address on file with
SDAT on July 20, 2018 and July 27, 2018, prior to initiating substituted service on SDAT
on September 5, 2018. Additionally, substituted service upon SDAT would have been
acceptable once the City became aware that Prime Realty’s resident agent was no longer
located at the address on file with SDAT as prescribed in subsection (ii) of Rule 3-124(o).
Prime Realty’s failure to accurately update its resident agent’s address with SDAT does
not invalidate the City’s attempts of service, and therefore does not constitute a due process
violation.9
Prime Realty relies upon this Court’s holding in Aggarwal to argue that the City’s
knowledge of an additional address for its resident agent nullifies the City’s service
attempts prior to serving SDAT. Aggarwal required this Court to determine what steps
were necessary of a tax sale purchaser to notify the property owner of an impending
9
Even if we found a due process violation, this would have been harmless error because
Prime Realty’s resident agent inspected the receivership file on December 28, 2018,
conferring actual notice of the receivership action on Prime Realty. Prime Realty could
have petitioned the District Court to remove the receiver.
20
foreclosure. 326 Md. at 92. The tax sale purchaser in Aggarwal had actual knowledge that
the address he was using in attempting to notify the property owner was a “bad address.”
Id. at 99. Evidence demonstrated not only that the tax sale purchaser knew the address
would not accomplish actual notice, but that he also knew the address corresponded to a
vacant lot. Id. at 99–100.
Aggarwal is not analogous to this matter. Aggarwal did not include any discussion
of Rule 3-124(o) or the method of substituted service on SDAT, as this was not the method
of service employed by the tax sale purchaser. The City’s knowledge of the Silver Spring
post office box address does not correlate to the City having actual knowledge that the
Dahlia Court address was a “bad address.” As previously discussed, Rule 3-124(o)
provides litigants with due process and Prime Realty’s failure to accurately update its
resident agent’s address with SDAT does not invalidate the City’s service attempts.
CONCLUSION
We hold that Maryland Rule 3-124(o), which allows for substituted service of
process on an LLC by service on SDAT, satisfies a litigant’s due process rights. Prime
Realty’s failure to update its resident agent’s address with SDAT does not invalidate the
City’s attempts of service or the City’s use of substituted service upon SDAT, as prescribed
in Rule 3-124(o). Therefore, it was error for the circuit court to invalidate, on due process
grounds, the order ratifying the sale of Prime Realty’s vacant property. Accordingly, we
reverse the judgment of the Circuit Court for Baltimore City.
JUDGMENT OF THE CIRCUIT COURT
FOR BALTIMORE CITY REVERSED.
COSTS TO BE PAID BY RESPONDENT.
21