Falls Garden Condominium Ass'n v. Falls Homeowners Ass'n ( 2015 )

Falls Garden Condominium Ass’n, Inc. v. Falls Homeowners Ass’n, Inc., No. 30, Sept.
Term 2014, Opinion by Battaglia, J.
CONTRACTS – FORMAL REQUISITES – LETTERS OF INTENT
Letter of intent executed by parties was enforceable as a binding contract when the plain
language of the letter demonstrated the parties intended to be bound and it expressed
definite agreement on all material terms.
1
Circuit Court for Baltimore County,
Maryland
Case No. 03-C-10-013994
Argued: December 9, 2014
IN THE COURT OF APPEALS
OF MARYLAND
No. 30
September Term, 2014
FALLS GARDEN CONDOMINIUM
ASSOCIATION, INC.
v.
FALLS HOMEOWNERS
ASSOCIATION, INC.
Barbera, C.J.
Harrell
Battaglia
Greene
Adkins
McDonald
Watts,
JJ.
Opinion by Battaglia, J.
Filed: January 27, 2015
2
“The way humans hunt for parking and the way animals hunt for food are
not as different as you might think.”
Tom Vanderbilt, Traffic: Why We Drive the Way We Do 145 (2008).
Hunting and gathering spaces for parking a car not only consumes much of our
personal time, but can also exacerbate tensions between neighboring communities, as in
the present case. This appeal arises out of the execution of a letter of intent in settlement of
litigation originating out of a contest over ownership of parking spaces situated between
two entities, The Falls Homeowners Association (hereinafter “The Falls”) and Falls Garden
Condominium Association (hereinafter “Falls Garden”), both located in Baltimore County,
Maryland.
At the end of 2010, Falls Garden, an association comprised of a cluster of
condominiums located in the Summit Ridge area, filed a Complaint for Declaratory
Judgment in the Circuit Court for Baltimore County asking for a determination that it was
the owner of thirty-nine of sixty-seven parking spots that are located between its
condominiums and the townhouses that are a part of The Falls, an association comprised
of 112 townhomes. Falls Garden alleged that starting in 1985 and continuing through 2008,
it believed that it held title to all sixty-seven parking spaces, but discovered in 2009 that it
did not, in fact, own title to the spaces. It argued that, during the twenty-plus years, it
obtained title to thirty-nine parking spaces through adverse possession as a result of its
exclusive use and maintenance of those parking spaces, or in the alternative, that it obtained
an easement by prescription or by necessity. Falls Garden asserted that, in 2010, The Falls
began interposing ownership rights to all of the parking spaces by posting prohibitory
1
towing signs and painting curb markers.1 The Falls answered the Complaint and denied
Falls Garden’s claims, as well as counterclaimed, alleging trespass.
As the trial date approached, the parties attempted to negotiate a settlement
agreement. In a joint motion to continue the trial date, they requested a second settlement
conference, stating that they had attended a settlement conference before Judge Edward P.
Murphy and “made progress in the discussion but reached a point which exceeded the
authority given to the corporate designee” of The Falls. As another trial date drew near, a
second settlement conference was held, whereupon the parties filed another joint motion
to continue the trial date, which included the following:
2. On August 15, 2011, the parties came to an agreement in principal
regarding this dispute, however the parties need more to time [sic]
memorialize the terms of the agreement which includes the preparation of a
lease for a term of 99 years.
3. The parties believe that said agreement will be drafted and properly
executed no later than 90 days from the date of this Motion. Once the
agreement is properly executed the parties will file a Motion to Dismiss the
Complaint and Counter-claim with prejudice.
In the following days, counsel for The Falls and Falls Garden exchanged emails,
culminating in the parties executing a Letter of Intent. Problems arose, and The Falls filed
a Motion to Enforce Settlement Agreement to implement the Letter of Intent. The Motion
to Enforce professed that, in accordance with the Letter of Intent, The Falls successfully
1
Interactions regarding the parking strip became quite heated. Falls Garden alleged that
The Falls posted prohibitory signs indicating that the parking spaces were for its exclusive
use and, after The Falls declined to remove the signs, Falls Garden removed the signs itself.
Following the removal of the signs, according to Falls Garden’s complaint, The Falls then
painted curb markers to exhort its dominion over the spaces.
2
obtained the requisite votes of the members of its Association2 and, thereafter, sent a
proposed lease to Falls Garden’s counsel by email for “review, comment and execution”.
Falls Garden did not respond to the email containing the proposed lease, according to the
Motion, and, subsequently, disavowed the Letter of Intent by inquiring about “returning to
pre-litigation status.”3 Falls Garden responded to the Motion, asserting that the Letter of
Intent was not enforceable and that it objected to terms included in the proposed lease.
The Letter of Intent, in its entirety, recited:
This Letter of Intent dated this 17th day of August, 2011, is meant to
memorialize certain aspects of a formal Settlement Agreement and separate
Lease to be entered into between Falls Garden Condominium, Inc. (“Falls
Garden”) and The Falls Homeowners Association, Inc. (“The Falls”).
The proposed Lease will contain the following provisions:
1. The term of the Lease will be 99 years, with The Falls as Lessor and
Falls Garden as Lessee;
2. The property to be leased will be 24 parking spaces on the east side
of Clearwind Court;
3. The 24 parking spaces will start at the island closest to Falls Garden
Condominium Building #1 (6927-6933 Clearwind Court) on the
northerly end of Clearwind Court and run continuously southerly
toward Ten Timbers Lane;
4. The rent will be $20.00 per month per parking space;
5. The parking spaces shall be maintained, repaired and replaced by
Falls Garden;
2
According to The Falls’s Motion to Enforce Settlement Agreement, as a Homeowners
Association, under the terms of the Amendment to the Amended Declaration of Covenants,
Conditions and Restrictions, at least two-thirds of the members must consent to leasing
property owned by The Falls’s Association for a term longer than one year. In the Motion,
The Falls stated that it obtained approval of eighty-one of the 112 members of the
Homeowners Association to lease the property.
3
According to The Falls’s Motion to Enforce Settlement Agreement, counsel representing
Falls Garden, who replaced original counsel, sent the email rejecting the Letter of Intent.
3
6. Falls Garden shall be responsible for any real estate taxes assessed
against the 24 parking spaces;
7. Falls Garden shall carry insurance in amounts reasonably requested
by The Falls for liability and property damage;
8. Falls Garden shall indemnify The Falls with respect to any claims
occurring on the 24 parking spaces;
9. The Lease shall contain the usual and customary provisions
regarding dates and methods of payment, provisions for default and
breach, severability, signs, quiet enjoyment, waiver, and the like.
The proposed Settlement Agreement will contain the following
provisions:
1. The case filed by Falls Garden Condominium, Inc. against The Falls
Homeowners Association, Inc., and the counterclaim filed by The Falls,
in the Circuit Court for Baltimore County, Civil Case No. 03-C-10-
013994, will be dismissed with prejudice;
2. Falls Garden will release The Falls from any claim of ownership of
the 39 parking spaces on the east side of Clearwind Court running from
Falls Garden Condominium Building #1 (6927-6933 Clearwind Court)
southerly to Ten Timbers Lane;
3. On and after the date of the Lease and for the entire term of the Lease
between the parties, Falls Garden may, but is not obligated to place
signs on its property or on the 24 leased parking spaces indicating that
they are exclusively for the use of the Unit Owners in Falls Garden and
that Falls Garden shall have the right to tow any unauthorized vehicles
from those parking spaces;
4. Neither party will take any action to disturb the status quo of head-
in parking along Clearwind Court. However, if Baltimore County alters
the current manner of head-in parking, the Lease will continue to
encompass the land area that currently composes the 24 parking spaces
that are the subject of the Lease.
5. The Falls shall prepare the Lease and submit the same to Falls Garden
for review, comment and execution;
6. All costs attendant to the recording of the lease shall be paid by Falls
Garden, in advance of recording among the Land Records of Baltimore
County by The Falls;
7. The Settlement Agreement shall contain the usual and customary
provisions found in settlement agreements regarding claims to property
and the like.
This Letter of Intent and the undertakings of The Falls as to the
Settlement Agreement and the Lease are contingent and conditioned upon
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the Board of Directors of The Falls obtaining the affirmative vote of two
thirds (2/3) of the members of the Homeowners Association to Lease the
property described above.
Signed and dated the date first written above by the respective
attorneys for Falls Garden Condominium, Inc. and The Falls Homeowners
Association, Inc.
The Letter of Intent was signed by P. Michael Nagle, then counsel for Falls Garden, and
Michael H. Mannes, counsel for The Falls.
During the hearing on the Motion to Enforce the Settlement Agreement, new
counsel for Falls Garden argued that it had not intended to be bound by the Letter of Intent,
offering testimony to that effect:
The terms of the proposed lease are not acceptable to the condo and I would
proffer, Your Honor, that I have people here who can testify if you need to
hear. That their understanding was that they didn’t have an agreement until
these things were negotiated, signed and executed.
No testimony was taken, however. The Circuit Court Judge, after hearing the parties’
arguments as well as reviewing the email exchange, Letter of Intent and proposed lease,
made various findings, ultimately granting The Falls’s Motion:
So, the Court finds that the parties had negotiated or attempted to
negotiate a final resolution to this matter and the question then becomes
whether or not the letter of intent constitutes a contract and, as both counsel
knows, letters of intent can constitute a contract and in one of the cases that
[counsel for Falls Garden] cited, there’s actually a discussion concerning
how letters of intent are generally looked at in four broad areas and they talk
about various extremes and one extreme is the party may say specifically that
they intend not to be bound until a formal writing is executed. There’s,
there’s no specific language that this Court can find, either in the letter of
intent or the negotiations back and forth to create the letter of intent, that that
is specifically contemplated. At the other end of the extreme is the, the review
of the letter of intent to determine whether the intent of the parties was to be
bound by what was contained in the letter of intent that was ultimately
simply, and I say simply, to be reduced to writing. Based on what this Court
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has reviewed in terms of the negotiations, the letter of intent. The letter of
intent could have been simply signed by both parties and constituted, in this
Court’s judgment, the agreement that the parties have reached. The Court
finds, as a matter of law and fact, that the parties did enter into an agreement
that was memorialized in the letter of intent, therefore, the request to enforce
the agreement will be granted.
A written order was entered directing The Falls to prepare a settlement agreement
and a release of all claims, consistent with the Letter of Intent, and instructing Falls Garden
to execute the settlement agreement and proposed lease within five days of receipt. The
Order also stated that the complaint and counter-complaint would be dismissed with
prejudice within ten days after the execution of the lease and settlement agreement.
Falls Garden filed a Motion for Modification of Order Enforcing Settlement
Agreement, stating that by complying with the Order, it could potentially waive its right to
appeal, because of the language regarding release of claims in the documents. After The
Falls opposed the Motion, the trial judge issued an Order affirming in part and denying in
part the Order Enforcing the Settlement Agreement, declaring that the matter was ripe for
interlocutory appeal and also that the matter was stayed pending the outcome of appeal.
Falls Garden noted an appeal, and the Court of Special Appeals affirmed in a
reported opinion.4 215 Md. App. 115, 132, 79 A.3d 950, 960 (2013). In so doing, our
4
Before the Court of Special Appeals, Falls Garden presented the following questions:
1. Whether the trial court erred by granting the HOA’s Motion to Enforce
Settlement Agreement.
2. Whether the trial court erred by failing to hold a full plenary hearing on
the Motion to Enforce Settlement Agreement since the existence of a binding
an[d] enforceable agreement was contested and there were contradicting
proffers regarding a material issue in the case, i.e. whether the parties
intended to be bound by the Letter of Intent.
(continued . . .)
6
intermediate appellate court determined that Falls Garden, in exchange for a leasehold
interest in the parking spaces, agreed to discharge its claim against The Falls and that the
Letter of Intent memorialized the agreement. Id. at 130, 79 A.3d at 958. The court also
addressed Falls Garden’s claim that the Circuit Court erred in failing to hold a full hearing
on the merits and reasoned that Falls Garden did not request an evidentiary hearing, but at
best, had merely proffered that Falls Garden could produce testimony to support its
position. Id. at 132, 79 A.3d at 959. The Letter of Intent was unambiguous, the Court of
Special Appeals reasoned, such that a reasonable observer would conclude the parties
intended to be bound. Id. The court held, therefore, that “an evidentiary hearing was not
necessary in this case because there was sufficient evidence to support [the Circuit Court’s]
decision.” Id.
Falls Garden then filed a petition for a writ of certiorari, which we granted, 437 Md.
422, 86 A.3d 1274 (2014), to consider the following questions:
1. Whether it was error to enforce the Letter of Intent given the parties never
intended to be bound by the Letter of Intent and the Letter of Intent does not
contain all material terms.
2. Whether it was error to fail to hold a full plenary hearing on the Motion to
Enforce Settlement Agreement since the existence of a binding an[d]
enforceable agreement was contested and there were contradicting proffers
regarding a material issue, i.e. whether the parties intended to be bound by
the Letter of Intent.
(. . . continued)
The Falls cast the questions as follows:
1. Did the trial court properly conclude as a matter of law and fact that the
parties entered into a binding and enforceable settlement agreement, which
was memorialized in the Letter of Intent?
2. Did the trial court deny Falls Garden a plenary hearing?
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We shall hold that the Letter of Intent is an enforceable contract to which the parties
intended to be bound and shall order its enforcement. We also shall hold that, because the
Letter of Intent is unambiguous and constitutes an enforceable contract, it was unnecessary
to have a plenary5 hearing on the merits of the Motion to Enforce Settlement Agreement.
We have had limited experience jurisprudentially with letters of intent; both parties
before us rely primarily upon one of our only pertinent cases, Cochran v. Norkunas, 398
Md. 1, 919 A.2d 700 (2007). In Cochran, we determined that a letter of intent executed by
the buyers and seller of real property was unenforceable, because the parties did not intend
to be bound. We recognized, nonetheless, that a letter of intent can constitute a valid
enforceable contract. We noted that the mere fact that a letter of intent explicitly
contemplates future agreements does not make it unenforceable, because “some letters of
intent are signed with the belief that they are letters of commitment and, assuming this
belief is shared by the parties, the letter is a memorial of a contract.” Id. at 13, 919 A.2d at
709, citing 1 Joseph M. Perillo, Corbin on Contracts § 1.16, p. 46 (Rev. ed. 1993).
The letter of intent in Cochran stated:
3/7/04
LETTER OF INTENT
We, Rebecca Cochran, Robert Cochran, Hope Grove and Robert Grove,
Buyers—offer to buy 835 McHenry Street, Baltimore, Md. 21230 for
$162,000. Payment by $5,000 check, this date and $157,000 by certified or
cashiers funds not later than April 17, 2004.
5
Black’s Law Dictionary defines the word “plenary” as “[f]ull; complete; entire”. Black’s
Law Dictionary 1313 (10th ed. 2014).
8
A standard form Maryland Realtors contract will be delivered to Seller
within 48 hours. Seller to pay only 1/2 normal transfer taxes and a 3%
commission to Long & Foster. All other costs of closing to be paid by
buyers.
The contract will contain a financing requirement for buyers, but buyers
will guarantee closing and not invoke the financing contingency.
We will delete the standard home inspection contingency.
[written in margin:] Buyer to honor seller’s lease and offer tenants any
renewal up to 12 months.
Id. at 6, 919 A.2d at 703-04. The letter of intent was executed by the parties and the $5,000
deposit was forwarded to the seller, although the check was not negotiated. After the seller
received a package of documents, including a standard form Maryland Realtors contract,
she began having second thoughts and removed the property from the market. Although
the seller had signed various of the forms, she had not returned them nor indicated her
acceptance to the buyers. The buyers filed suit seeking specific performance.
In Cochran, we acknowledged that when analyzing cases in which letters of intent
have been in issue, the iconic Corbin had grouped those cases into four distinct categories:
(1) At one extreme, the parties may say specifically that they intend not to be
bound until the formal writing is executed, or one of the parties has
announced to the other such an intention. (2) Next, there are cases in which
they clearly point out one or more specific matters on which they must yet
agree before negotiations are concluded. (3) There are many cases in which
the parties express definite agreement on all necessary terms, and say nothing
as to other relevant matters that are not essential, but that other people often
include in similar contracts. (4) At the opposite extreme are cases like those
of the third class, with the addition that the parties expressly state that they
intend their present expressions to be a binding agreement or contract; such
an express statement should be conclusive on the question of their
‘intention.’
9
Id. at 13, 919 A.2d at 707-08, quoting Corbin on Contracts, supra, § 2.9, p. 157-58. We
recognized that “[a] valid contract generally has been made if a letter of intent properly
falls within either the third or the fourth category.” Id. at 14, 919 A.2d at 708, citing Corbin
on Contracts, supra, § 2.9, p. 158.
In determining whether there was an enforceable contract, we began our analysis by
discussing the essential prerequisite of mutual assent to the formation of a contract, which
depends upon the parties’ intent to be bound and the definiteness of terms in the letter of
intent:
It is universally accepted that a manifestation of mutual assent is an
essential prerequisite to the creation or formation of a contract. See Creel v.
Lilly, 354 Md. 77, 101, 729 A.2d 385, 398 (1999); Eastover Stores, Inc. v.
Minnix, 219 Md. 658, 665, 150 A.2d 884, 888 (1959). Manifestation of
mutual assent includes two issues: (1) intent to be bound, and (2) definiteness
of terms. See CORBIN ON CONTRACTS, supra at § 2.8, p. 131. Failure of
parties to agree on an essential term of a contract may indicate that the mutual
assent required to make a contract is lacking. See Safeway Stores v. Altman,
296 Md. 486, 489–90, 463 A.2d 829, 831 (1983); Klein v. Weiss, 284 Md.
36, 63, 395 A.2d 126, 141 (1978).
Id. at 14, 919 A.2d at 708. We recognized that, “[i]f the parties do not intend to be bound
until a final agreement is executed, there is no contract.” Id.
In our subsequent discussion in Cochran, we adopted and implemented the structure
for evaluating intent to be bound suggested by Judge Pierre N. Leval, of the United States
District Court for the Southern District of New York, in which he referred to the following:
(1) the language of the preliminary agreement, (2) the existence of open
terms, (3) whether partial performance has occurred, (4) the context of the
negotiations, and (5) the custom of such transactions, such as whether a
standard form contract is widely used in similar transactions.
10
Id. at 15, 919 A.2d at 708-09, citing Teachers Ins. and Annuity Ass’n v. Tribune Co., 670
F. Supp. 491, 499-503 (S.D.N.Y.1987). We also alluded to additional considerations
contained in Section 27, comment c, of the Restatement (Second) of Contracts including:
“(1) whether the agreement has few or many details, (2) whether the amount involved is
large or small, and (3) whether it is a common or unusual contract.” Id. at 15, 919 A.2d at
709.
In discerning intent to be bound, according to the principle of the “objective”
interpretation of contracts, we looked to “what a reasonably prudent person in the same
position would have understood as to the meaning of the agreement.” Id. at 17, 919 A.2d
at 710.6 We noted that, “[i]f the language of a contract is unambiguous, we give effect to
its plain meaning and do not contemplate what the parties may have subjectively intended
by certain terms at the time of formation”, such that, the search to determine the meaning
of a contract is limited to the face of the document itself. Id. at 16-17, 919 A.2d at 709-10.
We defined ambiguity as extant when, to a reasonable person, the language of the
document “is susceptible to more than one meaning or is of doubtful meaning.” Id. at 17,
6
In General Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261, 492 A.2d 1306, 1310
(1985), which we cited in Cochran, we articulated the process of interpreting an agreement
under the “objective” theory:
A court construing an agreement under [the objective theory] must first
determine from the language of the agreement itself what a reasonable person
in the position of the parties would have meant at the time it was effectuated.
In addition, when the language of the contract is plain and unambiguous there
is no room for construction, and a court must presume that the parties meant
what they expressed. In these circumstances, the true test of what is meant is
not what the parties to the contract intended it to mean, but what a reasonable
person in the position of the parties would have thought it meant.
11
919 A.2d at 710. When determining intent, we noted that the “‘customary, ordinary, and
accepted meaning’ of the language is used.” Id., quoting Walton v. Mariner Health of
Maryland, Inc., 391 Md. 643, 660, 894 A.2d 584, 594 (2006).
In employing the objective theory, we perused the language of the letter of intent at
issue and ultimately determined that the Cochran parties did not manifest the requisite
intent to be bound. We opined that, “a reasonable person would have understood the letter
of intent to mean that a formal contract offer was to follow the letter of intent”, because
three of the four paragraphs of the one-page letter directly referenced a forthcoming
Maryland Realtors contract. Id. at 18, 919 A.2d at 710-11. We concluded, therefore, that
the Cochran letter was unenforceable as a contract because it fell under Corbin’s category
two, “cases in which [the parties] clearly point out one or more specific matters on which
they must yet agree before negotiations are concluded.” Corbin on Contracts, supra, § 2.9,
p. 157-58.
We begin here by looking at the express language of the Letter of Intent. Because
the Letter of Intent does not, by its terms, state whether the parties intend to be bound, in
accordance with Corbin’s first and fourth categories, we turn to whether it fits into category
two, “cases in which [the parties] clearly point out one or more specific matters on which
they must yet agree before negotiations are concluded”, or three, “cases in which the parties
express definite agreement on all necessary terms, and say nothing as to other relevant
matters that are not essential, but that other people often include in similar contracts.” Id.
The essential distinction between categories two and three manifests about whether
the terms included in the document are definite or indefinite, which informs the central
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question of whether there was an intent to be bound and, thus, mutual assent. See Cochran,
398 Md. at 14, 919 A.2d at 708. The “indefiniteness of terms bears upon the solution of
both” intent to be bound and definiteness of terms, because “[d]efiniteness may show
finality and the presence of an intention to be bound.” Corbin on Contracts, supra, § 2.8,
p. 131. Nonetheless, “[e]ven if an intention to be bound is manifested by both parties, too
much indefiniteness [of terms] may invalidate the agreement, because of the difficulty of
administering the agreement.” Id.
The terms under scrutiny must be material terms, because “[a] contract, to be final,
must extend to all the terms which the parties intend to introduce, and material terms cannot
be left for future settlement.” Peoples Drug Stores, Inc. v. Fenton Realty Corp., 191 Md.
489, 494, 62 A.2d 273, 276 (1948). “Failure of parties to agree on an essential term of a
contract may indicate that the mutual assent required to make a contract is lacking.”
Cochran, 398 Md. at 14, 919 A.2d at 708. Every possible term does not need to be included,
however, because “[e]ven though certain matters are expressly left to be agreed upon in the
future, they may not be regarded by the parties as essential to their present agreement.” See
Corbin on Contracts, supra, § 2.8, p. 138. As stated in Corbin on Contracts:
It is quite possible for parties to make an enforceable contract binding them
to prepare and execute a subsequent final agreement. In order that such may
be the effect, it is necessary that agreement shall have been expressed on all
essential terms that are to be incorporated in the document. That document
is understood to be a mere memorial of the agreement already reached. If the
document or contract that the parties agree to make is to contain any material
term that is not already agreed on, no contract has yet been made; the so-
called ‘contract to make a contract’ is not a contract at all.
13
Id. at § 2.8, p. 133-34. In essence, a letter of intent may be enforced if it is inclusive, on its
face, of all definite material terms, utilizing the distinction between Corbin’s categories
two and three.
Here, the Circuit Court Judge and Court of Special Appeals both agreed that the
Letter of Intent included all the material terms and that they were definite. The Circuit
Court Judge found that the “letter of intent could have been simply signed by both parties
and constituted, in this Court’s judgment, the agreement that the parties have reached.” The
Court of Special Appeals concluded that the Circuit Court Judge “correctly found that the
Letter of Intent contained all necessary terms of the parties’ basic agreement to lease
twenty-four specific parking spaces for a term of ninety-nine years at a rate of $20.00 per
space per month.” 215 Md. App. 115, 128, 79 A.3d 950, 957.
Falls Garden argues, however, that the Letter of Intent is not binding, because the
parties did not intend to be bound and the Letter does not contain all material terms. Falls
Garden contends that, at best, the Letter of Intent was merely a “framework” for the
subsequent lease and settlement agreement and, by its very terms, operated only as “an
intent to try to work with The Falls” to draft a lease and settlement agreement “that would
contain all material terms.” Falls Garden continues that the Letter of Intent only
memorialized “certain aspects” of the lease and settlement agreement, the lease and
settlement were “proposed”, not final, and that the Letter of Intent noted that the lease was
subject to “review” and “comment.” It argues that the Letter of Intent did not include all
the material terms, because the proposed lease agreement included terms that were not
contemplated or agreed upon at the time the Letter of Intent was executed. Falls Garden
14
argues that the proposed lease included material terms such as the forfeiture of the entire
lease upon occurrence of certain circumstances; a limitation of the liability of The Falls in
the event it is a joint tortfeasor; Falls Garden’s responsibility for taxes other than Real
Estate taxes (i.e. the Stormwater Remediation Fee7); Falls Garden being responsible for
maintaining insurance of not less than “$1 million combined single limit”, with The Falls
reserving a right to increase the insurance; and Falls Garden being responsible for “all
necessary repairs and replacements” to the property. It also argues that the proposed lease
is silent as to material terms such as provisions related to the responsibility of towing,
which it claims it would have required to be a part of a final agreement. Falls Garden
argues, additionally, that even if the Letter of Intent did contain all material terms, it would
not be binding because it contemplated that the terms would be reduced to a final writing
by way of the execution of a lease.
The Letter of Intent in issue is inclusive and definite as to all material terms. With
regard to leasing the parking spaces, the terms were definite, as they include: the length of
the lease, “99 years”; the number of parking spaces, “24”; the location, on Clearwind Court
starting “at the island closest to Falls Garden Condominium Building #1 (6927-6933
Clearwind Court) on the northerly end of Clearwind Court and run[ning] continuously
southerly toward Ten Timbers Lane;” and the price, “rent will be $20.00 per month per
7
Falls Garden argues that, when the Letter of Intent was executed, it only agreed to pay
real estate taxes and the proposed lease expanded its tax liability to “all taxes and
assessments of every kind”. Falls Garden argues that this would expand their liability to
include fees such as the Stormwater Remediation Fee, commonly referred to as the “Rain
Tax”, which was enacted by the General Assembly as part of the Stormwater Management
– Watershed Protection and Restoration Program. 2012 Md. Laws 941.
15
parking space”. It professes that Falls Garden is responsible for maintenance and real estate
taxes, and that Falls Garden must carry the burden of insurance “in amounts reasonably
requested by The Falls for liability and property damage” and must indemnify The Falls
for any claims “occurring on the 24 parking spaces”. The Letter of Intent, additionally,
declares that the lease will include that Falls Garden has the right to place signs on the
property and to tow unauthorized vehicles, and asserts that if Baltimore County were to
change the “current manner of head-in parking,” then the lease would continue to include
the area of land where the parking spaces are located. The only contingency, dependent
upon action by The Falls, not Falls Garden, provides that the Letter and any future
agreements “are contingent and conditioned upon the Board of Directors of The Falls
obtaining the affirmative vote of two thirds (2/3) of the members of the Homeowners
Association to Lease the property”.
The provisions regarding settlement are also definite on their face; settlement
included that “The case filed by Falls Garden Condominium, Inc. against The Falls
Homeowners Association, Inc., and the counterclaim filed by The Falls, in the Circuit
Court for Baltimore County, Civil Case No. 03-C-10-013994, will be dismissed with
prejudice” and that “Falls Garden will release The Falls from any claim of ownership of
the 39 parking spaces on the east side of Clearwind Court running from Falls Garden
Condominium Building #1 (6927-6933 Clearwind Court) southerly to Ten Timbers Lane”.
The only glitch appears to be in the Letter of Intent’s inclusion of the provision that
“The Falls shall prepare the Lease and submit the same to Falls Garden for review,
comment and execution”. Falls Garden argues that this addition of the lease language
16
compels the same result as Cochran, because like Cochran, the Letter of Intent “indicates
clearly that the parties intended to finalize” their agreement through a future agreement.
See Cochran, 398 Md. at 18, 919 A.2d at 711. We disagree.
Definite material terms of a lease were already included between the parties in the
Letter of Intent, rendering the execution of a subsequent agreement unnecessary. Unlike
Cochran, where the parties’ lack of mutual assent could be discerned from the face of the
letter of intent, because it was dependent on the execution of a standard form Maryland
Realtors Contract, the explicit contemplation of future agreements, in the present Letter of
Intent, does not render its terms indefinite.
The present Letter of Intent, thus, falls within Corbin’s third category, which are
those “cases in which the parties express definite agreement on all necessary terms, and
say nothing as to other relevant matters that are not essential, but that other people often
include in similar contracts.” Corbin on Contracts, supra, at § 2.9, p. 158. It is, therefore,
enforceable on its face, without reliance on the Lease thereafter prepared by The Falls.8
The lease sent for “review, comment and execution” was clearly, and in of itself, lacking
in mutual assent and did not manifest the parties’ intent to be bound to it. The lease, then,
is not enforceable between the parties, only the Letter of Intent.
8
This holding is limited to the Letter of Intent and not the enforcement of the proposed
lease. Unlike the Circuit Court Judge and the Court of Special Appeals, we decline to
enforce the proposed lease. The proposed lease was a draft that was not assented to by Falls
Garden and, thus, not a binding contract. Specific performance is an “extraordinary”
contract remedy that is only available to enforce a valid contract against one party. See
Barranco v. Kostens, 189 Md. 94, 97, 54 A.2d 326, 328 (1947).
17
We now turn to the second question queued up by Falls Garden, in which it contends
that the Circuit Court Judge erred in failing to hold a plenary hearing when Falls Garden
proffered that it would produce testimony with respect to the issue of whether it intended
to be bound by the Letter of Intent. Falls Garden contends that the Circuit Court Judge
considered extrinsic evidence of emails and claims that the Circuit Court Judge was
required “to either (1) make a finding on the record that such testimony was not a material
fact concerning the existence of an agreement to settle or (2) conduct a full plenary hearing
to evaluate the witnesses [sic] testimony and credibility regarding the issue.” Falls Garden
relies on one case from the Court of Special Appeals, In re Damien F., 182 Md. App. 546,
958 A.2d 402 (2008), in which our intermediate appellate court, in a child in need of
assistance case, determined that when a shelter care hearing is held pursuant to Section 3-
815(c)(2)(i) of the Courts and Judicial Proceedings Article of the Maryland Code,
testimony must be received as to the “material, disputed allegations”, such that, “a denial
of the request to produce witnesses, in that instance, is an abuse of discretion.” Id. at 584,
958 A.2d at 424. In Re Damien, thus, is totally inapposite.
We have determined that the Letter of Intent included definite material terms,
without ambiguity. As we stated in Cochran, “[i]f the language of a contract is
unambiguous, we give effect to its plain meaning and do not contemplate what the parties
may have subjectively intended by certain terms at the time of formation.” Cochran, 398
Md. at 16, 919 A.2d at 709. A trial judge need not entertain extrinsic evidence in the
absence of ambiguous terms, especially evidence of a self-serving nature, as here, where
18
Falls Garden association members were offered to testify about their understanding of the
Letter of Intent.
In summation, the Letter of Intent in issue between Falls Garden and The Falls is
enforceable by its very terms, without our having to mandate enforcement of the lease
submitted for “review, comment and execution”.
JUDGMENT OF THE COURT OF
SPECIAL APPEALS VACATED.
CASE REMANDED TO THAT
COURT WITH INSTRUCTIONS TO
REMAND THE CASE TO THE
CIRCUIT COURT FOR
BALTIMORE COUNTY FOR
ENTRY OF AN ORDER
CONSISTENT WITH THIS
OPINION. COSTS IN THIS COURT
AND THE COURT OF SPECIAL
APPEALS TO BE PAID BY
PETITIONER.
19