Wm. T. Burnett Holding LLC v. Berg Bros. Co. ( 2017 )

Wm. T. Burnett Holding LLC, et al. v. Berg Brothers Company, et al.
No. 1727, September Term 2016
Contracts – Third-Party Beneficiary
Appellant, a neighbor of appellee, may have been an incidental beneficiary of a consent
agreement between appellee and the Baltimore City Department of Housing and
Community Development (DHCD) that resolved appellee’s appeals of DHCD zoning
violation notices, but it was not an intended beneficiary of that agreement. It therefore
had no standing to enforce the agreement and no standing to seek a declaratory judgment
that the agreement had been breached by appellee. Status as a third-party beneficiary is
questionable where the contract is with a government agency and involves a regulatory
matter within the statutory jurisdiction of that agency.
Promissory Estoppel Based on Forbearance
(1) Appellant, who was not a party to the agreement between DHCD and appellee, was
not entitled to enforce the agreement on the ground that, contemporaneously with the
agreement, appellant had withdrawn its objections to appellee’s appeals of the DHCD
violation notices. Neither the Court of Appeals not this Court has yet adopted the
Restatement (Second) of Contracts §90(1) view that a promise made to a third person,
not a party to the agreement, which induces action by that person may be enforced by
that third person. See Pavel v. A.S. Johnson, 342 Md. 143, 166 (1996)
(2) Even if §90(1) were applicable, appellant would not be entitled to the relief it sought
in this case.
Circuit Court for Baltimore City
Case No. 24-C-14-002903
REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1727
September Term, 2016
WM. T. BURNETT HOLDING LLC, et al.
v.
BERG BROTHERS COMPANY, et al.
Eyler, Deborah S.
Friedman,
Wilner, Alan M. (Senior Judge, Specially
Assigned)
JJ.
Opinion by Wilner, J.
Filed: December 21, 2017
BACKGROUND
Appellants, Wm. T. Burnett and Ellicott Dredges, LLC (hereafter referred to
collectively as Burnett/Ellicott), and appellee Berg Brothers Company (Berg) are
neighbors in the Carroll Camden Urban Renewal Area of South Baltimore. Berg owns
two properties, one at 1500 Bayard Street, which it uses as a scrap metal processing yard,
and one at 1434-1438 Wicomico Street, an intersecting street, on which it operates a
materials recovery facility. Both properties are in an M-2-3 Industrial zone. A scrap
metal yard is not a permitted use in an M-2-3 zone, but the yard on Bayard Street has
been allowed to continue as a lawfully existing non-conforming use.
Burnett/Ellicott are adjoining and across-the-street neighbors of Berg’s scrap yard
and recycling operations. Their facilities are a mixed use of corporate offices, conference
and meeting rooms, and manufacturing and warehouse facilities. Their businesses, they
claim, attract a lot of customer visits, many of whom “react negatively to Berg’s
unsightly operations.” That negative reaction, they say, has been harmful to them. A
particular sore spot was the ten-foot-high metal fence that enclosed Berg’s properties.
The fence consisted of large steel plates that were bolted together and topped with
highway guard rails. Burnett/Ellicott complained to Berg a number of times, to no avail.
The genesis of what is before us was several violation notices issued to Berg by
the City Department of Housing and Community Development (DHCD) over a 14-month
period, from December 2011 to March 2013. On December 20, 2011, DHCD issued
Violation Notices Nos. 79414A-1 and 79414A-2, both concerning the fencing. No.
1
79414A-1 charged that the fencing at 1434-1438 Wicomico Street was erected without a
permit and at a height higher than permitted by the City Building and Fire Code. No.
79414A-2 alleged that the fencing at 1500 Bayard Street also was erected without a
permit. Both of those notices directed Berg to remove all work done without a proper
permit and to obtain all required permits within 30 days. On March 1, 2013, DHCD
issued Violation Notice No. 936053A-1, alleging land use without a proper occupancy
certificate or use permit at 1500 Bayard Street. Berg was ordered to discontinue the
unlawful use or obtain the proper certificates or permits within 30 days.1
Berg appealed all three notices to the Baltimore City Board of Municipal and
Zoning Appeals (BMZA). On July 31, 2012, in response to Notice Nos. 79414A-1 and
79414A-2, Berg requested a variance for a fence ten feet high and 550 feet in length for
the Wicomico Street property and ten feet high and 600 feet in length for the Bayard
Street property. On March 14, 2013, Berg objected to Notice No. 93605A-1.
Burnett/Ellicott filed an opposition to all three appeals. With respect to the
Bayard Street property, it acknowledged that a scrap metal operation became a lawful
non-conforming use in 1972 but argued that that status terminated shortly thereafter when
the property ceased being used as a scrap metal yard and was used instead as a parking
lot for some period of time. It also asked that the fencing around both properties be
removed and replaced with “attractive screening that completely shields from view the
1
The record reveals that an additional Violation Notice, No. 790403A-3, was issued on
December 20, 2011 with regard to the fencing around the Bayard Street property. See
Extract at E-951. It is not clear what happened with regard to that Notice.
2
junkyard-like operations.” In a supplement to its opposition, Burnett/Ellicott argued that
the operation on Wicomico Street also was illegal, noting that the 2009 permit for that
operation was based on the operation being conducted within an enclosed building and
not as an open junk or scrap storage yard.
The appeals remained dormant until October 2013. During the summer of that
year, negotiations involving Berg, Burnett/Ellicott, and DHCD commenced, with a focus
on replacing the existing fencing with a more aesthetic wall. Those negotiations
eventually bore fruit in the form of an agreement between Berg and DHCD signed on
October 15, 2013. Burnett/Ellicott was not a named party to the agreement and did not
sign it.
The Agreement recited that its purpose was to resolve all outstanding violation
notices and appeals pending before BMZA regarding uses and structures located at 1500
Bayard Street and 1434-38 Wicomico Street and, to that end, stated that “the parties to
this appeal,” which it identified as Berg as the appellant and DHCD as the appellee,
“agree to the following facts and terms.” The rest of the Agreement was in two parts – a
recitation of the procedural history, including the violation notices, the appeals by Berg,
and the opposition filed by Burnett/Ellicott – and the remedial terms to which the two
parties had agreed.
The relevant terms were that:
(1) Berg would construct a masonry wall ten feet high and 420 feet in length at
1500 Bayard Street, as depicted on an attached Exhibit B, using the materials
3
described in another attached exhibit, the purpose of which was to screen the
contents and activity at both the Bayard Street scrap yard and the Wicomico
Street processing yard;2
(2) Berg would maintain and operate all structures at both locations in sound
condition, in good repair, and in compliance with applicable City health,
zoning, fire, and related codes;
(3) During non-operational hours, the stock piles of materials would be maintained
so as not to be visible from the sidewalks across the street from the properties;
(4) All construction of the wall and the gates as depicted on the attached exhibit
would be completed by March 31, 2014;
(5) Berg would obtain all permits necessary for the construction of the wall and
gates, and DHCD would support any zoning variances or minor privilege
applications necessary to complete the project;
(6) DHCD agreed that the use at 1500 Bayard Street was and has been a legally
existing non-conforming scrap metal processing yard and that the last approved
use on Wicomico Street is as a materials recovery facility approved by BMZA
in 2008;
2
There is a major inconsistency between the text of the Agreement and what is depicted
on Exhibit B. As noted, the text of the Agreement refers to a 420-foot wall at 1500
Bayard Street. Exhibit B shows a wall that, at oral argument, the parties estimated was
approximately 1,400 feet in length that was to run also along Hamburg Street and
Wicomico Street and enclose the Berg properties. The parties agreed that Exhibit B
accurately showed what was to be constructed.
4
(7) The Agreement would not limit the ability of DHCD to secure compliance with
other applicable codes and ordinances by any other legal, equitable, or
administrative means and not “limit in any way the legal, equitable or
administrative rights” of Burnett/Ellicott;
(8) If Berg failed to “materially comply” with the terms of the Agreement, DHCD
would issue a Notice to that effect and give Berg ten days to cure the non-
compliance; and
(9) If Berg failed to comply with the Notice, “the non-conforming use at 1500
Bayard as a scrap metal processing yard shall be forever terminated,” subject
to Berg’s right to appeal the notice of final termination.
On the same day that the Agreement was signed, it was filed with BMZA and, at a
public hearing before that Board, Burnett/Ellicott formally withdrew its oppositions to
the Berg appeals. On October 21, 2013, the Board adopted a Resolution granting the
appeals and incorporating the terms of the Agreement as part of the Resolution.
Berg commenced preparations to construct the wall but ran into a number of
problems, one of which required that it obtain a minor privilege permit from the City. A
timely application was made for the permit on February 5, 2014 but there was a delay in
processing the application, for which the City accepted responsibility. The permit was
not actually issued until March 20. Accordingly, the City agreed to extend the time for
completion by six weeks, until May 10, 2014. No objection to that extension was made
by Burnett/Ellicott.
5
On March 25, Berg applied for a building permit for construction of the wall.
During the application process, however, sewer drains, of which Berg previously was
unaware, were discovered that blocked the anticipated location of footers for the wall,
requiring revisions to the permit. A final building permit was issued on May 1, and
Berg promptly commenced construction. DHCD inspected the site on May 13 and,
though verifying progress consistent with the permit, concluded that construction of the
wall was not materially complete. DHCD therefore issued a Notice of Default and
Order to cure the non-compliance by May 23, 2014.
Burnett/Ellicott did not wait until May 23 to act. On May 16, it filed a complaint
against Berg in the Circuit Court for Baltimore City accusing Berg of maintaining a
public and private nuisance. DHCD, having inspected the site, concluded that
satisfactory progress was being made. On May 27, Burnett/Ellicott amended its
complaint (1) to add DHCD as a defendant, and (2) to seek a declaratory judgment that
the non-conforming use at 1500 Bayard Street had been forever terminated by reason of
Berg’s failure to complete construction of the wall by May 23, 2014.
Berg responded with a request to BMZA to extend the time for completion.
BMZA denied the request on the ground that it was not a party to the agreement and had
no authority to modify it. Eventually, however, and over Burnett/Ellicott’s strenuous
objection, DHCD, through a Modified Consent Agreement with Berg, did extend the
time for completion to July 18, 2014. That agreement recited that the DHCD inspection
on May 26 showed that the wall was more than fifty percent complete, that DHCD
considered the material progress to have cured the non-compliance, and that “[i]n light
6
of the material progress, DHCD agreed to allow Berg to complete construction of the
wall in accordance with the issued building permit and agreed that Berg’s non-
conforming use had not ceased due to non-compliance with the Consent Agreement.”
The Modified Agreement noted that on July 14, 2014, “DHCD issued final building
approval of the newly constructed wall pursuant to the plans and permit issued by
DHCD.” Accordingly, the Consent Agreement was modified to require completion of
the wall by July 18, 2014.
Intent on putting Berg out of business notwithstanding that the wall it had wanted
all along had been completed, Burnett/Ellicott filed a Second Amended Complaint to
allege that “any attempt by Berg and [DHCD] to amend or modify the deadline or cure
provisions of the October 15 Agreement after May 24, 2014, without the agreement of
Plaintiffs would be impermissible, invalid or voidable for lack of consideration and
otherwise as well as under equitable principles of promissory estoppel and detrimental
reliance.” Burnett/Ellicott based its ability to enforce the October 15, 2013 Agreement
on the fact that it had participated in the negotiations leading to that Agreement and, as
part of the Agreement, had withdrawn its objections to Berg’s then-pending appeals.
After motions to dismiss and for summary judgment were denied, the case was
tried over a two-week period in July 2016. On September 26, 2016, the court entered its
findings that Burnett/Ellicott had failed to prove either a private or public nuisance and
that it lacked standing to seek the declaratory relief it requested. With respect to the
latter conclusion, the court held:
7
“[The function of DHCD] is to enforce the zoning laws of Baltimore City to
the benefit of the entirety of the citizenry of the city. The [DHCD] would
not have contemplated ceding to the Plaintiffs (or for that matter, any other
complaining constituent) the agency’s ability to enforce the zoning laws of
the City of Baltimore as under such a precedent anarchy would/could
ensue. Under such circumstances, those disgruntled with the [DHCD]’s
determinations could climb over its back and seek their own relief. Clearly,
that makes no sense from a policy and/or practice standpoint.
That the Agreement mentions that the Plaintiffs had agreed to drop their
opposition to Berg’s appeal then pending in front of BMZA, is evidence not
of the parties’ intention to consider the Plaintiffs as third party beneficiaries
to the Agreement, but is instead of [sic]evidence of the Plaintiffs’
satisfaction with the proposed resolution of this continuing conflict. To be
clear, [DHCD] and Berg were the actual parties to the appeal, and they
alone had the ability to continue with the appellate process before BMZA
or not.”
In this appeal, Burnett/Ellicott has abandoned its claims of public and private
nuisance and complains only about the court’s ruling in its declaratory judgment action.
It argues that it had the requisite legal interests for standing based on (1) its status as an
intended third-party beneficiary of the October 15, 2013 Consent Agreement, and (2) its
detrimental reliance on that Agreement. We disagree and shall affirm the judgment of
the Circuit Court.
THIRD-PARTY BENEFICIARY
It was in Mackubin v. Curtiss-Wright Corp., 190 Md. 52 (1948) that the Court of
Appeals first addressed whether a non-party to a contract should be allowed to enforce
the contract on the premise that he (or she or it) was the intended beneficiary of the
contract. The Court noted that the common law initially did not allow such an extended
benefit – the right to enforce a promise for which no consideration was given – but that
8
there had been a gradual relaxation of that rule and that courts had come to recognize the
right of a third-party beneficiary to sue on a contract “made expressly for the benefit of
either a donee beneficiary or creditor beneficiary.” Id. at 56 (Emphasis added).
A person is a donee beneficiary, the Court said, “where it appears that the purpose
of the promisee in obtaining the promise of the performance thereof is to make a gift to
the beneficiary or to confer upon him a right against the promisor to some performance
neither due nor asserted to be due from the promisee to the beneficiary.” Id. at 56-57. A
third person could be a creditor beneficiary “where no purpose to make a gift appears
and performance of the promise will satisfy an actual or supposed or asserted duty of the
promisee to the beneficiary. . . .”
Sixty-one years later, in Lovell Land v. SHA, 408 Md. 242 (2009), the Court
brought the law governing third-party beneficiaries up to date, explaining in more detail
the principles that govern whether and under what circumstances a non-party to a
contract may be permitted to enforce the contract as a third-party beneficiary. The issue
in Lovell was whether a former owner of a parcel of land was entitled to enforce a
reverter clause in a deed between the State Highway Administration and Howard County
to which the former owner was not a party, and the answer was “no.”
The critical distinction, the Court concluded, was not between donee and creditor
beneficiaries, but between “intended” and “incidental” beneficiaries. Confirming what
the Court had held in Mackubin, the Court repeated that, in order to recover as an
intended beneficiary, “it is essential that the beneficiary shall be the real promisee; i.e.,
that the promise shall be made to him in fact, though not in form” and that “[i]t is not
9
enough that the contract may operate to his benefit. It must clearly appear that the
parties intend to recognize him as the primary party in interest and as privy to the
promise.” (Emphasis in Lovell). The Lovell Land Court added that “[a]n incidental
beneficiary acquires by virtue of the promise no right against the promisor or the
promise.” That language was repeated and confirmed more recently in 120 W. Fayette
v. Baltimore, 426 Md. 14, 36 (2012); see also Yaffe v. Scarlett Place, 205 Md. App. 429,
442-43 (2012).
In determining whether that standard is met, the court looks to “the intention of the
parties to recognize a person or class as a primary party in interest as expressed in the
language of the instrument and consideration of the surrounding circumstances as
reflecting upon the parties’ intention.” CR-RSC Tower v. RSC Tower, 429 Md. 387, 458
(2012). The focus of the standard is on the intent of “the parties” to the Agreement – in
this case DHDC and Berg – and that intent clearly must be to recognize Burnett/Ellicott
as “the primary party in interest” – an interest at least equal if not paramount to that of
DHCD and Berg.
Applying that standard, we look first to the language of the October 15
Agreement. The intent of the Agreement, as recited in the first paragraph, was to resolve
outstanding violation notices and appeals therefrom. Burnett/Ellicott certainly had an
interest in the disposition of those violation notices, but we would be hard-pressed to
conclude that its interest in such a disposition was paramount to that of DHCD or Berg,
who were the only persons directly affected by them. With respect to the pending
appeals, in light of its oppositions and the fact that it was an adjoining property owner,
10
Burnett/Ellicott would be regarded as an interested party entitled to participate in a
hearing and to seek judicial review if aggrieved by an adverse BMZA ruling, although it
is of interest to note that, in the October 2013 Consent Agreement, it was not mentioned
as a party to those appeals. As noted, the Consent Agreement defined the parties to the
appeals as being only DHCD and Berg. Whether that omission was right or wrong, it
does have a bearing on whether DHCD and Berg regarded Burnett/Ellicott as the
primary party in interest with respect to the Consent Agreement.
Burnett/Ellicott is mentioned five times in the Consent Agreement. In ¶3, in
connection with Berg’s request for a variance for a fence 10 feet high and 550 feet long,
the Agreement noted that such a variance would directly affect Burnett/Ellicott and that
it had filed an opposition to the request. In ¶4, it noted, without comment, that
Burnett/Ellicott had filed an opposition to Berg’s appeal of Violation Notice 790403A-2
regarding the fencing at 1500 Bayard Street, and in ¶5, the Agreement recited, also
without comment, that Burnett/Ellicott had filed an objection to Berg’s appeal of the
alleged use by Berg of the Bayard Street property without a proper occupancy permit.
In ¶6, the Agreement noted that, as a result of the Agreement, Burnett/Ellicott had
agreed to withdraw its opposition to Berg’s appeals. Finally, in ¶7, the Agreement stated
that the terms of the Agreement did not limit “the legal, equitable, or administrative
rights” of Burnett/Ellicott. Despite its argument to the contrary, none of those references
suffice to show a clear intent to recognize Burnett/Ellicott as the “primary party in
interest,” sufficient to permit it to seek remedies and interpretations contrary to those
desired by DHCD and Berg or to be able to block interpretations or remedies desired by
11
them. In particular, the reference in ¶ 7 does not purport to recognize that
Burnett/Ellicott had any enforceable legal, equitable, or administrative rights but only
that the Agreement was not intended to affect any such rights that it may have.
Of particular relevance in that regard is something that Burnett/Ellicott had
demanded that was not included in the Agreement. As noted, Burnett/Ellicott was
involved in the negotiations that ultimately led to the October agreement, and that really
is the basis for its claim of third-party beneficiary status. One of its “demands,” listed
on the agenda for a July 9, 2013 meeting between representatives of Burnett/Ellicott and
Berg was that Berg post a $500,000 performance bond or place that amount in escrow
“to Secure Burnett/STX/Ellicott Dredges and the City in the Timely Performance of the
Item 1 and 3 Obligations, With Burnett/STX/Ellicott Dredges Having the Full and
Unfettered Right to Undertake or Complete the Performance If Berg Fails to Fully
Perform By December 31, 2013.”3 (Emphasis added). Had that provision been included
in the Consent Agreement, Burnett/Ellicott’s claim of third-party beneficiary status
would have been far more substantial, but the fact is that it was not included, which
indicates the converse intent that Burnett/Ellicott was not to have that status.
Apart from the text of the Consent Agreement is the public policy implication of
recognizing a right of Burnett/Ellicott to enforce the terms of that Agreement. As we
3
Item 1 on the Agenda was “Use and Fence Violations Summarized in May 15 letter,”
which we assume was the letter of that date sent by DHCD to Berg outlining the nature of
the violations alleged by that agency, including those related to the fencing. Item 3 refers
to a Burnett/Ellicott Position Statement of February 21, 2013, which set forth its position
regarding what it regarded to be the unlawful use of the Berg properties.
12
have observed several times, the purpose of the Agreement was to resolve the building
and zoning violations alleged by DHCD. The authority and duty to enforce the City
building and zoning laws are committed by statute to DHCD. See Baltimore City Code,
Art. 3, §§ 2-3(a)(9) and (10) and 2-7 (u) and (v).4 The Code anticipates that DHCD
would exercise that authority directly and, except as may be provided by other law,
exclusively. 5
The Court of Appeals has treated local zoning authority as an exercise of the
police power of the State (Queen Anne’s County v. Miles, 246 Md. 355, 364 (1967)) and,
in light of that, has adopted “the familiar premise that a municipality may not contract
away the exercise of its zoning powers.” Attman v. Mayor, 314 Md. 675, 685 (1989);
Montgomery County v. Revere, 341 Md. 366, 385 (1996). That Court also has expressed
4
Section 2-3(a)(9) authorizes DHCD to exercise the powers and to perform the duties
conferred on the Zoning Commissioner. Section 2-3(a)(10) authorizes DHCD to
administer and enforce the City’s Building, Fire, and Related Codes Article and all other
City regulatory codes that relate to buildings, housing, or sanitation, except where such
administration or enforcement is committed by the City Charter to another City agency.
Section 2-7(u) authorizes DHCD to enforce the City zoning laws, including the location
and use of building, structures, and land for industrial or other purposes. Section 2-7(v)
vests in DHCD the power to issue permits for and exercise supervision and inspection
over building construction and installation, the use of land and buildings, the alteration,
relocation, repair, and reconstruction.
5
Section 2-7(kk) of the City Code acknowledges that it may be appropriate for DHCD
to contract with another person or persons for the continuing implementation of some or
all of the functions and duties authorized by §2-7, but requires that any such contractual
arrangements provide for submittal to and approval by the Mayor and City Council of
the annual budget and operations of such persons, which, so far as the record in this case
reveals, was never contemplated or done with respect to the October Consent
Agreement.
13
its adherence “to the general rule that parties to a contract are presumed to contract
mindful of the existing law and that all applicable or relevant laws must be read into the
agreement of the parties just as if expressly provided by them, except where a contrary
intention is evident.” Auction Reps. v. Ashton, 354 Md. 333, 344 (1999).
These confirmed principles provide a dimension to the ultimate determination of
the parties’ intent that may not be present when the obligations sought to be enforced by a
private person claiming to be a third-party beneficiary do not involve, much less intrude
upon, the exercise of governmental authority. See Beckett v. Air Line Pilots Ass’n., 995
F.2d 280, 288 (D.C. Cir. 1993); Moore v. Gaither, 767 A.2d 278 (D.C. 2001); and Fort
Lincoln Civic Ass’n, Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055, 1065 (D.C.
2008) (“[T]hird party beneficiaries of a Government contract are generally assumed to be
merely incidental beneficiaries and may not enforce the contract absent clear intent to the
contrary”). Cf. Astra USA, Inc. v. Santa Clara County, Cal., 563 U.S. 110 (2011).
Having withdrawn its objections to the pending appeals and thereby having
become a complete stranger to the disputes between DHCD and Berg, Burnett/Ellicott
seeks to assert a right under a Consent Agreement to which it was not a party to thwart
the right of DHCD, in the exercise of its statutory authority to administer the City zoning
and land use laws, to extend briefly the time for completion of a project that DHCD
believed was reasonable under the circumstances and thereby terminate the right of Berg
to continue using its property in a manner that DHCD found was permissible under the
zoning laws it was authorized to enforce.
14
The question is whether DHCD and Berg intended for Burnett/Ellicott to have that
authority. The Circuit Court, on extensive evidence (filling four cartons), concluded that
the answer was “no,” and, for the reasons noted above, we find no legal error or abuse of
discretion in its making that finding.6 In light of that conclusion, we need not consider
whether, under the principles stated in Restatement (Second) of Contracts, §311 and
Spates v. Spates, 267 Md. 72, 77 (1972), DHCD and Berg had the authority to modify
the time deadline even if Burnett/Ellicott were a third-party beneficiary.
PROMISSORY ESTOPPEL
There was not a separate Count in the Second Amended Complaint based on
promissory estoppel. Rather, in Count 2 – the Count for declaratory judgment –
Burnett/Ellicott averred that “[f]urthermore, any attempt by Berg and the Department to
amend or modify the deadline or cure provisions of the October 15 Agreement after May
24, 2014, without the agreement of Plaintiffs would be impermissible, invalid and void
or voidable for lack of consideration and otherwise as well as under equitable principles
of promissory estoppel and detrimental reliance.” No factual allegations specific to that
6
Although the only provision in the October Consent Agreement that Burnett/Ellicott
seeks in this case to enforce is the May 23, 2014 time limitation on constructing the wall,
recognition of its status as a third-party beneficiary would have given it the right to
challenge the exercise of DHCD’s discretion in interpreting, or agreeing to a minor
modification of, other provisions as well, including a determination by DHCD that Berg
was operating the structures on its property in compliance with the City zoning code or
whether the wall was substantially complete at any particular time.
15
averment are to be found, a point made by Berg both in the Circuit Court and in this
Court.
The doctrine of promissory estoppel or detrimental reliance is treated in the
Restatement (Second) of Contracts, §90(1) as an example of a contract without
consideration. It is captioned as “Promise Reasonably Inducing Action or Forbearance”
and provides, in relevant part:
“A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does
induce such action or forbearance is binding if injustice can be avoided only by
enforcement of the promise. The remedy granted for breach may be limited as
justice requires.” (Emphasis added).
In Pavel v. A.S. Johnson, 342 Md. 143, 166 (1996), the Court adopted that
doctrine but recast the Restatement language as a four-part test:
(1) A clear and definite promise;
(2) Where the promisor has a reasonable expectation that the offer will
induce action or forbearance on the part of the promisee;
(3) Which does induce actual and reasonable action or forbearance by the
promisee; and
(4) Causes a detriment which can only be avoided by the enforcement of
the promise.
Although the Court regarded its formulation as a mere recasting of the
Restatement provision, there is one significant difference. The Court’s version did not
include “a third person” as one whose forbearance would allow it to enforce the promise;
nor did this Court do so when quoting the Pavel language in Citiroof v. Tech
Contracting, 159 Md. App. 578, 589 (2004); MTA Lodge No. 34 v. MTA, 195 Md. App.
16124, 209 (2010); or Bessette v. Weitz, 148 Md. App. 215, 235 (2002). Had the Pavel
Court’s omission been in a purported verbatim quotation of the Restatement language,
we might suspect that it was simply a typographical error, but as it declined, in its own
restatement of the rule as a tenet of Maryland law, to include detrimental reliance on a
promise by a third person, we are not at liberty to treat the omission so cavalierly.7 Until
the Court of Appeals instructs us otherwise, we must assume that it meant what it said,
and not what it could have said but didn’t say.8 Accordingly, even if we were to regard
7
The Restatement’s allowance of third parties to enforce a promise made for their benefit,
with one caveat, was deliberate. Comment c. to §90(1) states:
“If a promise is made to one party for the benefit of another, it is often foreseeable
that the beneficiary will rely on the promise. Enforcement of the promise in such
cases of reliance rests on the same basis and depends on the same factors as in
cases of reliance by the promise. Justifiable reliance by third persons who are not
beneficiaries is less likely, but may sometimes reinforce the claim of the promise or
beneficiary.”
See also Murray on Contracts (5th ed.) §67[B][4] (“To permit a promisee to recover on
the basis of detrimental reliance, but to preclude a recovery for a third party who is
equally justified in relying on the promise, is unsound”). Nonetheless, as Murray
acknowledges, not all courts hold that view. See Lee v. Paragon Group Contractors, 337
S.E.2d 132 (N.C. App. 1985) and Bolden v. General Accident, Fire and Life Assurance
Corp., 456 N.E.2d 306 (1983). In Pennsy Supply, Inc. v. American Ash Recycling Corp.,
895 A.2d 595 (2006), the Pennsylvania Superior Court noted the extension in
Restatement (Second) §90(1) to third parties and observed that “[a]pplication of this
section, while clearest in the case of an intended third party beneficiary, is not limited to
such.”
8
We do note that, in Oliveira v. Sugarman, 451 Md. 208, 236 (2017), the Court cited
Pavel as “adopting the elements for promissory estoppel from Restatement (Second) of
Contracts §90(10) (1979) as Maryland law.” The heart of the issue in that case was
whether an executive compensation plan recommended by the Board of Directors of a
corporation and approved by the stockholders in 2009 constituted a contract between the
Board and the stockholders such that the contract could not be modified without further
stockholder approval. The Court held that, because the stockholders had failed to allege
any individual damages from their 2009 approval of the plan, that approval failed to
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the sanction for failure to complete the wall within the time set forth in the October
Consent Agreement as a promise, Burnett/Ellicott, at best an incidental beneficiary, has
no standing to enforce it and therefore no right to a declaratory judgment that it had such
a right.
We add, as a contingent alternative view, that even if Burnett/Ellicott were
legitimately entitled to claim promissory estoppel based on forbearance – the withdrawal
of its objections to Berg’s appeals – it would not be entitled to a declaration that Berg’s
non-conforming use terminated on May 24, 2014. The concluding statement in §90(1)
of the Restatement is that “[t]he remedy granted for breach [of the promise inducing
forbearance] may be limited as justice requires.” We would find no justice whatever in
forfeiting Berg’s lawful non-conforming use because the wall was not completed by
May 23, 2014, (1) given the extreme economic detriment to Berg from such a result and
no allegation, much less proof, of any harm or damage to Burnett/Ellicott from the two-
month delay, and (2) where (A) construction of the wall was what Burnett/Ellicott
principally wanted and received, (B) delays in construction were caused by unforeseen
circumstances, and (C) DHCD had concluded that the extension to July was warranted
as a matter of sound and fair zoning administration.
JUDGMENT AFFIRMED; APPELLANTS TO PAY THE
COSTS.
support a promissory estoppel claim. Id. at 240. The Court did not quote the language
from Pavel or comment on the omission in that language of any reference to third parties.
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