Butz et al v. Pulte Home Corporation
MEMORANDUM OPINION. Signed by Judge Paula Xinis on 2/21/2017. (aos, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
THEODORE H. BUTZ, et al.,
Case No. PX 16-1508
PULTE HOME CORPORATION,
Pending in this declaratory relief action is a motion to dismiss filed by Defendant, Pulte
Home Corporation (“Pulte” or “Defendant”). ECF No. 20. The issues are fully briefed, and the
Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. For the following
reasons, Defendant Pulte’s motion to dismiss is denied.
Plaintiffs Theodore Butz, Thompson Butz, Jr., Robert Butz, and Jeremy Butz are brothers
(collectively, “Plaintiffs”) who together owned a 54.45-acre property located at 21901 Ridge
Road, Germantown, Montgomery County, Maryland (“the Property”). ECF No. 2 at 2. Because
the Property was used for agricultural purposes, Plaintiffs enjoyed favorable tax treatment under
Md. Code Ann., Tax-Prop. § 8-209. See generally ECF No. 2 at 4. Defendant Pulte, a Michigan
corporation, is a national homebuilder with numerous projects in the state of Maryland. ECF No.
2 at 2.
These facts derive largely from Plaintiffs’ Complaint and are accepted as true for purposes of assessing
the sufficiency of its claim against Pulte at the motion to dismiss stage.
On August 14, 2013, the parties executed a Letter of Intent for Pulte to purchase the
Property for development of 140 single-family residential homes. ECF No. 2 at 2; ECF No. 2-2.
On November 27, 2013, Pulte and the Plaintiffs executed an agreement (“the Agreement”), ECF
No. 2-3, for the purchase of the Property. ECF No. 2 at 3. The recordation of deed to the
Property triggered three tax assessments: (1) an agricultural land transfer tax (“the Agricultural
Land Transfer Tax”) pursuant to Md. Code Ann., Tax-Prop. § 13-301, et seq.; (2) a Prince
George’s County transfer tax, pursuant to Prince George’s County Code § 10–188; (3) and a
general state transfer tax applicable to all real estate transactions, Md. Code Ann., Tax-Prop. §§
13–202 to 13–203. ECF No. 2 at 5. Because Pulte purchased the Property for the purpose of
building homes, ECF No. 2 at 2, the Property’s favorable tax treatment under Md. Code Ann.,
Tax-Prop. § 8-209 ended. ECF No. 2 at 4; ECF No. 2-5. This transformation from agricultural to
non-agricultural use resulted in an Agricultural Land Transfer Tax in the amount of $959,857.
ECF No. 2 at 4; ECF No. 2-5.
The Agricultural Land Transfer Tax assessment precipitated a dispute between the parties
as to which party should bear the cost under the Agreement. ECF No. 2 at 6. Plaintiffs contend
that Pulte is in material breach of Section 15.4 of the Agreement by not sharing equally in the
payment of the Agricultural Land Transfer Tax. Section 15.4 of the Agreement provides:
Shared Settlement Costs. Seller [Plaintiffs] and Purchaser [Pulte]
shall share equally the Settlement Agent Fees and all state, county
and other transfer taxes, recordation fees and other fees in
connection with the Settlement [to complete the purchase and
ECF No. 2-3 at 12.
On April 18, 2016, Plaintiffs filed a complaint in the Circuit Court for Montgomery
County Maryland seeking a declaratory judgment that Pulte pay its $479,928 share of the
Agricultural Land Transfer Tax. ECF No. 2 at 6. Following timely removal of the case to this
Court, Pulte filed its motion to dismiss. ECF No. 20.
STANDARD OF REVIEW
When ruling on a motion under Rule 12(b)(6), the court must “accept the well-pled
allegations of the complaint as true” and “construe the facts and reasonable inferences derived
therefrom in the light most favorable to the plaintiff.” Ibarra v. United States, 120 F.3d 472, 474
(4th Cir. 1997). In addition to the complaint, the court “may consider documents attached to the
complaint . . . so long as they are integral to the complaint and authentic.” Sec’y of State for Def.,
v. Trimble Navigation Ltd., 484 F. 3d 700, 705 (4th Cir. 2007) (citing Fed. R. Civ. P. 10(c)). The
Court also “may properly take judicial notice of matters of public record.” Philips v. Pitt County
Mem’s Hosp., 572 F. 3d 176, 180 (4th Cir. 2009). Here, the August 14, 2013 letter of intent to
purchase the Property, the executed Agreement, subsequent amendments to the Agreement, the
Agricultural Land Transfer Tax statement, and deed of conveyance are integral exhibits attached
to the Complaint, whose authenticity is not disputed. See ECF Nos. 2-2, 2-3, 2-4, 2-5, 2-6, 2-7.
“Even though the requirements for pleading a proper complaint are substantially aimed at
assuring that the defendant be given adequate notice of the nature of a claim being made against
him, they also provide criteria for defining issues for trial and for early disposition of
inappropriate complaints.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). “The mere
recital of elements of a cause of action, supported only by conclusory statements, is not sufficient
to survive a motion made pursuant to Rule 12(b)(6).” Walters v. McMahen, 684 F.3d 435, 439
(4th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To survive a motion to
dismiss, the factual allegations of a complaint “must be enough to raise a right to relief above the
speculative level on the assumption that all the allegations in the complaint are true (even if
doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations
omitted). “To satisfy this standard, a plaintiff need not ‘forecast’ evidence sufficient to prove the
elements of the claim. However, the complaint must allege sufficient facts to establish those
elements.” Walters, 684 F.3d at 439 (citation omitted). “Thus, while a plaintiff does not need to
demonstrate in a complaint that the right to relief is ‘probable,’ the complaint must advance the
plaintiff's claim ‘across the line from conceivable to plausible.’” Id. (quoting Twombly, 550 U.S.
Pulte contends the current action should be dismissed on three grounds: (1) Plaintiffs
impermissibly seek declaratory relief; (2) Plaintiffs failed to allege compliance with statutory and
contractual notice obligations regarding the Agricultural Land Transfer Tax; and (3) Plaintiffs
are obligated to pay the Agricultural Land Transfer Tax pursuant to the terms of the parties’
Agreement. ECF No. 20-1 at 2. The Court will address each argument in turn.
The Plaintiffs’ sole cause of action is for declaratory relief pursuant to §§ 3-401 through
3-415 of the Courts & Judicial Proceedings Article of the Maryland Code. ECF No. 2 at 6. Pulte
argues the Plaintiffs impermissibly seek declaratory judgment instead of pursuing a common law
breach of contract claim. The Court is not persuaded.
Maryland’s Declaratory Judgement Act provides:
Any person interested under a deed, will, trust, land patent, written
contract, or other writing constituting a contract, or whose rights,
status, or other legal relations are affected by a statute, municipal
ordinance, administrative rule or regulation, contract, or franchise,
may have determined any question of construction or validity
arising under the instrument, statute, ordinance, administrative rule
or regulation, land patent, contract, or franchise and obtain a
declaration of rights, status, or other legal relations under it.
Md. Code Ann., Cts. & Jud. Proc. § 3-406. The Court retains broad discretion in determining
whether to issue a declaratory judgment. Brohawn v. Transamerica Ins. Co., 276 Md. 396, 406
(1975). But dismissal of a declaratory judgment action without declaring the rights of the parties
is rarely appropriate. Allied Inv. Corp. v. Jasen, 354 Md. 547, 556 (1999); accord Christ by
Christ v. Maryland Dep’t of Nat. Res., 335 Md. 427, 435 (1994) (citing cases).
At the motion to dismiss stage, “the test of the sufficiency of the complaint for
declaratory judgment is not whether it shows that the plaintiff is entitled to the declaration of
rights or interest in accordance with his theory, but whether he is entitled to a declaration at all.”
Allied Inv., 354 Md. at 556 (quoting Shapiro v. Board of County Comm’rs, 219 Md. 298, 302–03
(1959)) (alterations omitted). So “even though the plaintiff may be on the losing side of the
dispute, if he states the existence of a controversy which should be settled, he states a cause of
suit for a declaratory decree.” Id.
It is proper to dismiss a declaratory judgment action only where there is a lack of
jurisdiction or where a declaratory judgment is not an available or appropriate type of remedy.
Christ by Christ, 335 Md. at 435. In considering whether declaratory judgment is an appropriate
remedy, the Court must consider whether declaratory relief would “serve a useful purpose in
clarifying and settling the legal relations in issue,” and whether the judgment would “terminate
and afford relief from the uncertainty, insecurity, and controversy giving rise to the
proceeding.” Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 594 (4th Cir.
2004) (internal citation and quotation marks omitted); accord Hamilton v. McAuliffe, 277 Md.
336, 339 (1976).
Pulte relies on Davis v. State, 183 Md. 385 (1944) and Porcelain Enamel & Mfg. Co. of
Balitmore v. Jeffrey, 177 Md. 677 (1940)—each of which pre-date the 1945 amendment to the
Uniform Declaratory Judgment Act—in arguing that Plaintiffs cannot bring a declaratory action
in lieu of a breach of contract claim. But under the post-1945 “Concurrent Remedies” section,
Maryland’s Declaratory Judgement Act provides that:
A party may obtain a declaratory judgment or decree
notwithstanding a concurrent common-law, equitable, or
extraordinary legal remedy, whether or not recognized or regulated
Md. Code, Cts. & Jud. Procs. § 3-409(c).
Importantly, the purpose of this provision is to offer concurrent, not exclusive, remedies
under the Uniform Declaratory Judgments Act. Schultz v. Kaplan, 189 Md. 402, 407 (1947)
(quoted extensively in Allied Inv. Corp. v. Jasen, 354 Md. 547, 557 n.2 (1999)). Plaintiffs’
possible breach of contract claim, therefore, does not defeat their right to seek and obtain a
declaratory judgment. See Allied Inv., 354 Md. at 556 (citing Md. Code Ann., Cts. & Jud. Proc. §
3-409(c)) (“A party may obtain a declaratory judgment or decree notwithstanding a concurrent
common-law, equitable, or extraordinary legal remedy . . . .”); Post v. Bregman, 349 Md. 142,
160 (1998) (“The existence of another remedy, at law or in equity, does not ordinarily defeat a
party's right to seek and obtain a declaratory judgment.”) (citing Turner v. Manufacturers’ Cas.
Ins. Co., 206 Md. 601 (1955); Glorius v. Watkins, 203 Md. 546 (1954)); Gloyd v. Talbott, 221
Md. 179, 183 (1959) (“The existence of a remedy at law or in equity is not a bar to declaratory
relief.”); accord Polakoff v. Hampton, 148 Md. App. 13, 26 n.4 (2002) (“[T]he General
Assembly amended the Uniform Declaratory Judgments Act . . . to declare that the real intention
of the Act was that the existence of another adequate remedy at law or equity should not
preclude a judgment for declaratory relief.” (internal quotation marks omitted)).
Furthermore, Plaintiffs’ requested declaration that Pulte “is required pursuant to the terms
of the Agreement to pay Plaintiffs the sum equal to one-half the Agricultural Transfer Tax,
which is $479,928.00 . . . .” is precisely the kind that is contemplated under the Act. ECF No. 2
at 7. Judgment as to which party must pay the tax “will serve a useful purpose in clarifying and
settling the legal relations in issue” so that this land deal can conclude. Penn–Amencan Ins. Co.
v. Coffey, 368 F.3d 409, 412 (4th Cir. 2004); Allied Inv., 354 Md. at 559 (finding declaratory
judgment appropriate where petitioners’ legal relations were affected by a contract).
Accordingly, because Plaintiffs’ declaratory action is proper, the Court denies Pulte’s motion to
dismiss on this ground.
Compliance with Statutory and Contractual Notice Obligations
Next, Pulte asserts that Plaintiffs failed to allege compliance with statutory and
contractual notice obligations regarding the Agricultural Land Transfer Tax, and this failure
1. Statutory notice
First with regard to statutory notice, Section 13-308(a) of the Agricultural Land Transfer
Tax provides that “[w]hen a contract is executed for the transfer of any interest in agricultural
land, the seller shall notify the buyer . . . that the land may be subject to the agricultural land and
transfer tax.” Md. Code Ann., Tax-Prop. § 13-308. The rationale behind not only the tax itself
but notice to pay the tax is to “inhibit property owners from transferring agricultural land to
nonagricultural uses.” Rouse-Fairwood Dev. Ltd. P’ship v. Supervisor of Assessments for Prince
George’s Cty., 138 Md. App. 589, 612 (2001) (quoting DMH Joint Venture v. Hahner, 80 Md.
App. 257, 266 (1989)) (quotation marks omitted). The statute “serves a dual role—first as a
deterrent to conversion of the land and second as a penalty when the land is sold for
development.” Rouse-Fairwood, 138 Md. App. at 612 (quoting State Department of Assessments
and Taxation, Real Property, The Agricultural Transfer Tax, at http://
www.dat.state.md.us/sdatweb/agtransf.html (Feb. 15, 2000)) (quotation marks omitted); accord
DMH Joint Venture, 80 Md. App. at 266 (“The tax supports this preservation motive in two
ways: it generates revenues to enable the State to purchase agricultural land preservation
easements . . . ; and, secondly, the tax inhibits property owners from transferring agricultural
land to non-agricultural uses . . . .” (citations omitted)). To effectuate this purpose, the tax is
assessed on the instrument that conveys title to the property and must be paid in order to record
the deed. Id.
Section 13–308 does not prescribe a form for the notice of the tax; thus the question
becomes “whether the notice given constitutes substantial compliance [with the statute].” DMH
Joint Venture, 80 Md. App. at 268 (quoting Bob Holding Corp. v. Normal Realty Corp., 223 Md.
260, 267 (1960)) (citations omitted). “Written notice” in some form “must be given.” Id. at 267.
Pulte contends the Agreement is ambiguous and thus inadequate to provide written notice
under Section 13–308. ECF No. 24 at 4. Pulte further argues that if the terms are ambiguous,
Plaintiffs are not entitled to discovery of extrinsic evidence. Id. Pulte’s arguments are unavailing.
At the outset, it bears noting that generally “the construction of ambiguous contract
provisions is a factual determination that precludes dismissal on a motion for failure to state a
claim.” Martin Marietta Corp. v. Int’l Telecomms. Satellite Org., 978 F.2d 140, 143 (4th Cir.
1992). Thus, if Pulte is correct, this Court would be hard pressed to dismiss Plaintiffs claims at
this stage. The Court, however, must first determine whether a contract provision is ambiguous.
See Diamond Point Plaza Ltd. P’ship v. Wells Fargo Bank, N.A., 929 A.2d 932, 952 (Md.
2007); see also Calomiris v. Woods, 727 A.2d 358, 362 (Md. 1999) (noting that “the question of
whether a contract is ambiguous ordinarily is determined by the court as a question of law”).
In Maryland, where contract language is unambiguous, courts “give effect to its plain,
ordinary, and usual meaning,” taking into consideration the context in which the language is
used. Id. By contrast, a contract is ambiguous if, “ ‘when read by a reasonably prudent person, it
is susceptible of more than one meaning.’ ” Diamond Point Plaza, 400 Md. at 751 (quoting
United Servs. v. Riley, 393 Md. 55, 80 (2006)). Courts may consider “the character of the
contract, its purpose, and the facts and circumstances of the parties at the time of execution” in
making such a determination. Calomiris, 727 A.2d at 363 (quoting Pac. Indem. v. Interstate Fire
& Cas., 488 A.2d 486, 488 (Md. 1985)).
With regard to the notice clause in the instant contract, the Maryland Court of Special
Appeals has interpreted a similar provision in DMH Joint Venture v. Hahner, 80 Md. App. 257
(1989). There, the Court of Special Appeals measured the statutory sufficiency of a provision
which read: “[t]ransfer taxes shall be split equally between Seller and Purchaser.” Id. at 261. The
DMH Joint Venture court held that because the subject property triggered three separate transfer
taxes (a general state transfer tax, a county transfer tax, and the Agricultural Land Transfer Tax),
the contractual “language [was] ambiguous and subject to interpretation with the aid of the
extrinsic evidence.” Id. at 269. The Court then considered “the sophistication of the parties, the
length of their negotiation, and the detail of their final Agreement” as extrinsic evidence
supporting the determination that the parties “were aware [the land] was potentially subject to the
imposition of the Agricultural Land Transfer Tax.” Id. at 270. The Court ultimately determined
the phrase “transfer taxes” legally sufficient to satisfy the notice requirements of Section 13–308.
Similar to the real estate in DMH Joint Venture, the conveyance of the Property from the
Plaintiffs to Pulte was subject to three types of transfer taxes—the general state transfer tax, a
county transfer tax, and the Agricultural Land Transfer Tax. According to Section 15.4 of the
Agreement, the Parties agreed to split equally “all state, county and other transfer taxes . . . .”
ECF No. 2-3 at 12. Construing the facts and inferences in the light most favorable to Plaintiffs,
the Complaint sufficiently alleges that written notice of the Agricultural Land Transfer Tax was
provided through Section 15.4 of the Agreement, equally allocating payment of “state, county
and other transfer taxes.” ECF No. 2 at 3.
Moreover, even if the Court were to regard this provision as ambiguous, the Court must
consider extrinsic evidence of their meaning, akin to the examination in DMH Joint Venture, to
shed light on what the parties intended regarding the provision. See DMH Joint Venture, 80 Md.
App. 257 at 270 (finding evidence of actual or implied knowledge of the Agricultural Land
Transfer Tax relevant to its statutory notice analysis where the transfer tax provision was
ambiguous); Key Tidewater Ventures LLC v. PNC Bank, N.A., No. CIV. JKB-14-2170, 2014 WL
5306716, at *5 (D. Md. Oct. 15, 2014) (“[T]he contract is not so clear and unambiguous such
that the Court can dismiss Plaintiffs’ claims as a matter of law at this early stage of litigation”).
Consideration of extrinsic evidence to interpret a contractual provision is inappropriate
on a motion to dismiss for failure to state a claim. See Lomas v. Red Storm Entm't, Inc., 49 F.
App’x 396, 402 (4th Cir. 2002) (where there is ambiguity in a contract the “parties should be
accorded an opportunity to conduct any relevant discovery, and they should be permitted to
present to the court any materials pertinent to the issue”); Beacon Wireless Solutions, Inc. v.
Garmin Int’l, Inc., No. 5:11–CV–00025, 2011 WL 4737404, at *11 (W.D.Va. Oct. 5, 2011)
(interpretation of contract on ambiguous issue “constitutes a question of fact that is inappropriate
for resolution on this Rule 12(b)(6) motion to dismiss”); W. Ref. Yorktown, Inc. v. BP Corp. N.
Am. Inc., 618 F. Supp. 2d 513, 527 (E.D. Va. 2009) (denying motion to dismiss because “both
parties have advanced reasonable interpretations of the ambiguous contract provisions, [and]
extrinsic evidence not presently before the Court is necessary to resolve the ambiguity”); accord
Yacoubou v. Wells Fargo Bank, N.A., 901 F. Supp. 2d 623, 635 (D. Md. 2012), aff’d sub nom.
Adam v. Wells Fargo Bank, 521 F. App’x 177 (4th Cir. 2013) (“When a trial court finds that a
contract is ambiguous, ‘the meaning of the contract is a question to be determined by the trier of
fact.’” (quoting Univ. of Baltimore v. Iz, 123 Md. App. 135, 162 (1998))). A fact-intensive
inquiry cannot and should not be undertaken at the motion to dismiss stage. Rather, Plaintiffs’
Complaint adequately alleges that they have provided statutorily sufficient written notice under §
13-308, and so Pulte’s motion to dismiss on this ground is denied.
2. Contractually required notice
Pulte also argues that the Complaint fails to allege that the Plaintiffs provided
contractually-required notice pursuant to Section 7.2 of the Agreement. Section 7.2 of the
Within five days following the commencement of the Feasibility
Period, Seller shall deliver to Purchaser all documents, statements,
plans, reports, permits, trust documents pursuant to which Seller
holds the Property, and other materials in the Seller’s possession
regarding the Property, including but not limited to . . . . real estate
ECF No. 2-3 at 4.
Pulte’s contention, however, amounts to an affirmative defense that cannot be reached on
a motion to dismiss under Fed. R. Civ. P. 12(b)(6).
The United States Court of Appeals for the Fourth Circuit has made clear that an
affirmative defense is one that raises “ ‘new facts and arguments that, if true, will defeat the
plaintiff’s or prosecution’s claim, even if all allegations in the complaint are true.’ ” Emergency
One. Inc. v. Am. Fire Eagle Engine Co., 332 F.3d 264, 271 (4th Cir. 2003) (quoting Saks v.
Franklin Covey Co., 316 F.3d 337, 350 (2nd Cir. 2003) (quoting Black’s Law Dictionary 430
(7th ed. 1999))); accord Wright and Miller, 5 Fed. Prac. & Proc. Civ. § 1271 (3d ed.)
(affirmative defenses not listed in Rule 8(c) include “allegations outside of the plaintiff's prima
facie case that the defendant therefore cannot raise by a simple denial in the answer”).
Affirmative defenses, therefore, generally “share the common characteristic of a bar to the right
of recovery even if the general complaint were more or less admitted to.” Id. (quoting Wolf v.
Reliance Standard Life Ins. Co., 71 F.3d 444, 449 (1st Cir. 1995)) (alterations omitted).
Pulte’s argument regarding “contractually required notice” is more properly characterized
as an affirmative defense of material breach of contract as a result of Plaintiffs’ non-disclosure.
See Wilkens Square, LLLP v. W.C. Pinkard & Co., 189 Md. App. 256, 277 (2009), aff’d, 419
Md. 173 (2011) (characterizing the “failure to disclose a material fact” as an affirmative
defense); Sky Angel U.S., LLC v. Discovery Commc’ns, LLC, 95 F. Supp. 3d 860, 879 (D. Md.
2015) (analyzing whether the “failure to notify” under a section of an agreement was either a
material breach discharging the non-breaching party of its duty to perform or an entitlement to
the equitable defense of unclean hands). Pulte, in its motion, raises new facts and arguments that,
if true, could defeat Plaintiffs’ claim. Emergency One. Inc. v. Am. Fire Eagle Engine Co., 332
F.3d 264, 271 (4th Cir. 2003) (quoting Saks v. Franklin Covey Co., 316 F.3d 337, 350 (2nd Cir.
2003)). Pulte specifically asserts that Plaintiffs “never complied with” the disclosure terms of
Section 7.2 of the Agreement. ECF No. 20-1 at 8.
A motion to dismiss filed under Fed. R. Civ. P. 12(b)(6) ordinarily “cannot reach the
merits of an affirmative defense.” Maryland Restorative Justice Initiative v. Hogan, No. CV
ELH-16-1021, 2017 WL 467731, at *16 (D. Md. Feb. 3, 2017) (quoting Goodman v. Praxair,
Inc., 494 F.3d 458, 464 (4th Cir. 2007)). Only “in the relatively rare circumstances where . . . all
facts necessary to the affirmative defense ‘clearly appear[ ] on the face of the complaint’ ” can an
affirmative defense be resolved at the dismissal stage. Goodman, 494 F.3d at 464 (quoting
Richmond, Fredericksburg & Potomac R. Co. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993))
(emphasis in Goodman). This rare circumstance is not present here.
Pulte cleverly argues that Plaintiffs’ failure to allege facts sufficient to defeat Pulte’s
claims of non-disclosure actually supports dismissal. ECF No. 20-1 at 18. But Plaintiffs are not
obligated to presage and rebut potential affirmative defenses on the face of the Complaint.
Goodman v. Praxair, Inc., 494 F.3d 458, 466 (4th Cir. 2007) (“Except, perhaps, in the unusual
case where a claim is filed clearly beyond the applicable limitations period[,]” a plaintiff is not
required “to plead affirmatively in his complaint matters that might be responsive to affirmative
defenses even before the affirmative defenses are raised.”) (emphasis omitted).To hold otherwise
would place an unfair and onerous burden on Plaintiffs inconsistent with bedrock principles of
pleading causes of action. Accordingly, Pulte’s argument here is more properly considered on a
motion for summary judgment. See Forst, 4 F.3d at 250.
C. Agreement Requires that Plaintiffs Pay the Tax
Finally, Pulte argues the Section15.1(1) of the Agreement requires Plaintiffs to pay the
Agricultural Land Transfer Tax. Section15.1(1) of the Agreement states:
Notwithstanding the aforesaid, Seller [Plaintiffs] shall be solely
responsible for payment of any land use, roll back, or similar tax
applicable to the Property; which taxes Seller [Plaintiffs] shall pay
Pulte’s reading of Section15.1(1) as being inclusive of the Agricultural Land Transfer
Tax violates a cardinal principle of contract construction: that a document should be read to give
effect to all its provisions and to render them consistent with each other. See Mastrobuono v.
Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 (1995) (citing Restatement (Second) of
Contracts § 203(a)); Walker v. Dep’t of Human Res., 379 Md. 407, 421 (2004) (citing Jones v.
Hubbard, 356 Md. 513, 534–35 (1999)) (Contracts are to be construed “as a whole, to interpret
their separate provisions harmoniously, so that, if possible, all of them may be given effect.”).
The Agreement specifically references equal division of transfer taxes between Pulte and
Plaintiffs. In Section 15.4 of the Agreement, the parties agreed to split equally “all state, county
and other transfer taxes . . . .” ECF No. 2-3 at 12 (emphasis added). Reading into Section 15.1 a
second reference to transfer taxes, as Pulte suggests, would be indefensibly duplicative and
create a tension between the two provisions that does not otherwise exist. Put differently, the
only reading which gives each provision full effect must construe “land use, roll back, or similar
tax” as not including a “transfer tax” which is instead covered by Section 15.4. DMH Joint
Venture, 80 Md. App. At 261 (referencing the statutory scheme as an “agricultural land transfer
tax”) (emphasis added); Montgomery Cty. v. Phillips, 445 Md. 55, 63 (2015) (distinguishing
between the state and county “agricultural land transfer tax”); accord Pulte Land of Maryland
Corp. V. Dep’t of Fin. for Montgomery Cty., No. 70, 1976 WL 1416, at *2 (Md. Tax Mar. 31,
1976) (the recoupment of “the county transfer tax is not a tax on property, but is a tax imposed
upon the act of transferring an interest in real property”).
Moreover, it is “possible to read the relevant statutory and contractual provisions
together, both harmoniously and consistently with their plain meaning.” Walker v. Dep’t of
Human Res., 379 Md. 407, 421 (2004). Simply stated, the specific taxes described in Section
15.1 do not encompass a transfer tax. A “land use tax” under the appropriate Maryland code, for
example, is a “tax assessment based on agricultural or farm use, rather than actual market value.”
Rouse-Fairwood, 138 Md. App. at 595. A land use tax provides preferential treatment afforded
to the Property during the time it is used as farmland. The Agricultural Land Transfer tax, by
contrast, is not assessed based on an ongoing use of the property as farmland, but by transfer of
the property’s title at the point it will no longer be used as farmland.
Likewise, a “rollback tax” by law is a specific type of assessment calculated by a
retrospective assessment of the difference in a property’s market value over time. See, e.g.,
Maryland State Department of Assessments and Taxation, Maryland Assessment Procedure
Manual, Real Property Chapter, 019.70.20 (revised July 28, 2016), available at
514F0C99765B324:%2540ID%3D201 (last visited February 21, 2017) (“The rollback tax is
calculated as follows. First, the market value of the property must be established for the tax year
in which the violation occurs. From this market value, the Supervisor will subtract the value in
effect at the beginning of the original [Department of Natural Resources] agreement. The
difference will be subject to a rollback tax bill that is calculated for the entire period of the
agreement, with the value difference being phased-in incrementally. . . . ”); Read v. Supervisor of
Assessments of Anne Arundel Cty., 354 Md. 383, 390 (1999) (describing the rollback tax as a
recoupment from “withdrawals of property from the FCMA for the purpose of a conveyance to a
new owner”). The “rollback tax” bears little to no resemblance to the flat percentage fee
calculation used for the Agricultural Land Transfer Tax imposed upon transfer of title. See Md.
Code Ann., Tax Prop., § 13-303 (calculation of the transfer tax); Pulte Land of Maryland Corp.
V. Dep’t of Fin. for Montgomery Cty., No. 70, 1976 WL 1416, at *2 (Md. Tax Mar. 31, 1976)
(distinguishing between the assessment of a county “land transfer tax” on the transfer and the
state “rollback tax” not assessed on the property). Pulte’s attempt to construe the Agricultural
Land Transfer Tax as a tax described in section 15.1 of the Agreement is therefore untenable.
Pulte’s motion to dismiss on this ground is also denied.
For the reasons stated above, Pulte’s motion to dismiss is denied. A separate order will
United States District Judge
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