E-Alert Case Updates

There Is No Jurisdiction Over a Defendant Whose Only Connection Is an Undeveloped Parcel of Land

Cappel v. Riaso, LLC
No. 2727 (Md. App. 2011)
By Kevin M. Cox, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In this case, the Maryland Court of Special Appeals held that the Montgomery County Circuit Court lacked personal jurisdiction over the Cappel’s, and therefore vacated the judgment entered against them. The case arose when the Cappel’s borrowed $1.6 million from Riaso to pay off an existing mortgage. The loan documents were executed in Virginia. In the case of default, the Cappel’s consented to the entry of a confessed judgment against them. When the Cappel’s eventually defaulted, Riaso filed a complaint for a confessed judgment against the Cappel’s, under MD. RULE 2-611, in the Circuit Court for Montgomery County. The Clerk entered judgment against the Cappel’s.

The Cappel’s filed a Motion to Open, Modify or Vacate the order of Confessed Judgment, arguing that the Circuit Court lacked personal jurisdiction over them because of their minimal connections to Maryland. Riaso argued that the court had personal jurisdiction based on the Cappel’s’ ownership of a piece of undeveloped property in Montgomery County, purchased in 1997.

Under MD. CODE CTS. & JUD. PROC. 6-102(a), a court has personal jurisdiction over a person domiciled in or served with process in Maryland. The Cappel’s were residents of Washington, D.C. and were served out-of-state. Maryland can only exercise personal jurisdiction over an out-of-state defendant if the long-arm statute, MD. CODE CTS. & JUD. PROC. 6-103, provisions are met. Additionally, the defendant must have minimum contacts with the state to prevent a due process violation.

The long-arm statute authorizes a court to exercise personal jurisdiction over a person who has an interest in, uses, or possesses real property in Maryland. However, the court reasoned that because the default on the promissory note had no connection to the unimproved parcel of land that the Cappel’s owned in Maryland, the long-arm statute could not apply.

Further, there was a lack of minimum contacts with the forum state. Where the cause of action is unrelated to the defendant’s contacts in the forum state, the defendant must have continuous and systematic contacts with the forum state. The Court rejected Riaso’s argument that the Cappel’s’ presence was systematic because they paid taxes on the property and held it for development or speculation. To the court, such contacts were merely incidental to the only contact that was present in the case—the ownership of the property. Consequently, the Court held that an out-of-state resident’s ownership of real property unrelated to the cause of action, absent other ties to the forum state, is insufficient to establish jurisdiction under either the long-arm statute or the due process clause.