CDC-LCGH, LLC v. Mayor and City Council

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-1332
CDC-LCGH, LLC,
Plaintiff - Appellant,
v.
MAYOR AND CITY COUNCIL OF BALTIMORE,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District
Judge. (1:06-cv-02235-WDQ)
Argued: January 29, 2009 Decided: February 26, 2009
Before GREGORY and DUNCAN, Circuit Judges, and Arthur L.
ALARCÓN, Senior Circuit Judge of the United States Court of
Appeals for the Ninth Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Paul Reinherz Wolfson, WILMER, CUTLER, PICKERING, HALE &
DORR, L.L.P., Washington, D.C., for Appellant. David Eugene
Ralph, Mark Houston Grimes, BALTIMORE CITY DEPARTMENT OF LAW,
Baltimore, Maryland, for Appellee. ON BRIEF: Andrew H. Baida,
Caroline L. Hecker, ROSENBERG│MARTIN│GREENBERG, L.L.P.,
Baltimore, Maryland; Andrew D. Freeman, BROWN, GOLDSTEIN & LEVY,
L.L.P., Baltimore, Maryland, for Appellant. George A. Nilson,
City Solicitor, Justin S. Conroy, Assistant Solicitor, BALTIMORE
CITY DEPARTMENT OF LAW, Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Appellant, CDC-LCGH, LLC (“CDC”), sued the Mayor and City
Council of Baltimore, Maryland (“City”), for breach of contract
and other claims arising out of the expiration of a lease
agreement on an historic City-owned building. CDC had hoped to
extend the lease and renovate the building for use as its
headquarters. However, CDC failed to obtain zoning approval for
the proposed use of the property, and such approval was an
express condition precedent to extension of the lease. The
district court granted summary judgment to the City, and CDC
appealed. For the reasons discussed below, we affirm.
I.
CDC is a Delaware limited liability company whose principal
place of business is Delaware. CDC is engaged in the business
of renovating, restoring, and preserving historic properties.
In 2001, CDC became interested in the Gatehouse, an eight-
sided Gothic revival stone and tile-roof structure built in the
1880s and located in Baltimore’s Lake Clifton Park. At the
time, the building was dilapidated as a result of years of
disuse. CDC began negotiations with the City to acquire and
rehabilitate the Gatehouse for its use as CDC’s headquarters.
The City preferred a long-term lease to an outright sale.
3
On August 21, 2002, CDC and the City executed a written
lease. 1 It provided for an “Initial Term” of three years “for
the Lessee [CDC] to perform all necessary requirements for the
review, design and structural ‘Study’ of the Leased Premises.”
JA at 62. 2 If CDC obtained certain required approvals, including
“approval from the Board of Municipal and Zoning Appeals,” and
satisfied certain other conditions, including demonstrating
adequate financing, the lease would extend for an additional
forty-seven-year term. Id. If CDC failed to meet the various
conditions, the lease would terminate.
The lease provided that, during the Initial Term, the
property “shall be used solely for the review, design and
structural ‘Study’ of the leased premises.” JA at 61.
Thereafter, if the lease were extended, the property “shall be
used as office space by Lessee.” JA at 62. The lease further
provided that, upon termination,
all alterations, additions or improvements made by
either of the parties hereto upon the premises . . .
shall be the property of the Lessor, and shall remain
upon and be surrendered with the premises at the
1
The lease was executed by Center Development Corporation, a
Maryland corporation, and then assigned to CDC.
2
Citations to “JA” are to the Joint Appendix submitted by
the parties.
4
termination of this Lease, without molestation or
injury.
JA at 75.
CDC made improvements to the property during the Initial
Term. In November 2003, for example, CDC applied for and
received building permits to restore the Gatehouse. CDC
installed approximately 650 feet of water and sewer lines and
performed structural repairs. CDC asserts that it discussed
this work with the City before, during, and after the time the
improvements were made.
In 2004, CDC began to seek zoning approval from the Board
of Municipal and Zoning Appeals (“Zoning Board”). Although the
lease called for the property to be used “as office space by
Lessee,” CDC sought approval to use it as a “multi-purpose
center.” It did so because the Zoning Board informed it that
this was the only permissible use under the applicable
regulations. Nevertheless, the Zoning Board ultimately denied
the application, however, because CDC’s description of the
project did not include the kinds of governmental or community
activities required to qualify as a multi-purpose center as
contemplated by the regulations. CDC did not seek judicial
review of this decision in Maryland state courts.
On August 29, 2005, the City informed CDC that it believed
the lease had terminated upon the expiration of the Initial Term
5
due to CDC’s failures to demonstrate adequate funding and to
obtain Zoning Board approval.
In August 2006, CDC brought an action against the City
alleging, inter alia, breach of contract, unjust enrichment, and
promissory estoppel. 3 The district court granted summary
judgment to the City on all claims, and this appeal followed.
II.
We review a district court’s grant of summary judgment de
novo, taking all facts and permissible inferences in the light
most favorable to the appellant. Castillo v. Emergency Med.
Assoc., P.A., 372 F.3d 643, 646 (4th Cir. 2004). As a federal
court sitting in diversity, we apply the substantive law of
Maryland, the state in which the action arose. Id. We address
CDC’s arguments in turn.
A.
CDC claims the City breached its contract by terminating
the lease at the end of the Initial Term. The district court
held there was no breach because the lease expired by its own
3
CDC also alleged fraud in the inducement, fraud by
concealment, and negligent misrepresentation, but those claims
have not been pursued on appeal.
6
terms when CDC failed to secure Zoning Board approval by the end
of the Initial Term. We agree.
The lease expressly provided, as a condition precedent to
its extension, that “Lessee must acquire approval from the Board
of Municipal and Zoning Appeals.” CDC does not dispute that it
sought, but failed to acquire, approval by the Zoning Board to
use the property as private office space. CDC contended below
that its failure to obtain the approval of the Zoning Board was
excused because of impossibility of performance. It argued,
somewhat circularly, that because the proposed use for the
Gatehouse was incompatible with applicable zoning, CDC ought to
be “excused” from a lease provision that conditioned extension
of the lease on CDC’s obtaining the approval of the Zoning
Board.
CDC’s theory on appeal has evolved significantly. It now
argues that the lease never required it to obtain the Zoning
Board’s approval of the proposed use of the property. CDC
contends that the district court erred in “rewriting” the lease
by construing the phrase “approval of the Board of Municipal and
Zoning Appeals” as meaning Zoning Board approval “of the use” of
the property. See Appellant’s Br. at 15-16. CDC argues it was
error for the district court to interpret the lease “in a manner
that renders it impossible to perform.” Id. at 16. Instead,
CDC urges us to read the lease as requiring “[Zoning Board]
7
approval only to the extent such approval was necessary and
within the [Zoning Board]’s authority to provide.” Id. at 12.
CDC suggests that “approval” in this context means approval for
such matters as parking, signage, bulk dimensions, and lot
coverage, but not for “use.”
CDC’s contract-interpretation theory was not advanced
below, 4 and we generally do not consider new arguments raised for
the first time on appeal. Muth v. United States, 1 F.3d 246,
250 (4th Cir. 1993). “Exceptions to this general rule are made
only in very limited circumstances, such as where refusal to
consider the newly-raised issue would be plain error or would
result in a fundamental miscarriage of justice.” Id. Such is
clearly not the case here.
In any event, CDC’s newly minted contention is without
merit. “Maryland courts have long adhered to the principle of
the objective interpretation of contracts.” Wells v. Chevy
Chase Bank, F.S.B., 363 Md. 232, 250-51 (2001). Under this
approach, “where the language employed in a contract is
4
Although CDC argued below that its failure to acquire
Zoning Board approval was excused because of impossibility of
performance, that is a different argument from the one advanced
here. CDC’s initial argument was that a failure to obtain the
Zoning Board’s approval of the proposed use of the building,
even if it were required, was nevertheless excused. CDC’s
present assertion is that the lease should be interpreted as
having never included such a condition.
8
unambiguous, a court shall give effect to its plain meaning and
there is no need for further construction by the court.” Id.
That is, “[t]he words employed in the contract are to be given
their ordinary and usual meaning, in light of the context within
which they are employed.” Id. at 251. And, although Maryland
“courts will prefer a construction which will make the contract
effective rather than one which will make it illusory or
unenforceable,” that canon of construction applies only when a
provision is ambiguous. Cadem v. Nanna, 243 Md. 536, 544 (1966)
(“Inasmuch as the provision is clear and unambiguous[,] resort
to the rules of construction . . . need not be had.”).
There is no ambiguity here. The text of the lease
provided, as a condition precedent to its extension beyond the
Initial Term, that the “Lessee must acquire approval from the
Board of Municipal and Zoning Appeals.” The most natural
reading of this provision is that it requires Zoning Board
approval of the object of the lease: renovation of the Gatehouse
by CDC for use as office space. While the language might be
read as also requiring Zoning Board approval for things like
signage and parking, it would make little sense to interpret the
text of the provision as referring to such collateral matters
while not referring as well to the proposed use of the property.
CDC offers no support for such a novel construction.
9
Further, the fact remains that CDC did seek approval of the
Zoning Board for the proposed use and was unable to acquire it.
Given the text of the lease and the undisputed fact that the
Zoning Board denied CDC’s application, the only reasonable
interpretation is that CDC failed to satisfy the express
condition that the “Lessee acquire the approval of the Board of
Municipal and Zoning Appeals.” Because a condition precedent to
extension of the lease was not satisfied, the lease expired by
its own terms at the end of the three-year Initial Term. 5
B.
CDC also appeals the district court’s grant of summary
judgment to the City on CDC’s claims of unjust enrichment and
promissory estoppel. In this regard, CDC argues that the City
was unjustly enriched by the value of improvements CDC made to
the Gatehouse property before the lease terminated and that CDC
relied to its detriment on “promises” by the City regarding the
5
In further support of its argument that the lease should be
construed as not requiring Zoning Board approval of the
building’s proposed use, CDC also contends (1) that the City’s
Department of Recreation and Parks, and not the Zoning Board,
had authority to approve of the property’s use, and (2) that
interpretation of the lease is subject to the rule that
contracts be construed against the party that prepared them.
Because we find no ambiguity in the text of the lease regarding
the Zoning Board’s authority, we need not reach these points.
10
permissibility of use of the Gatehouse as offices and CDC’s
satisfaction of certain lease-extension conditions.
These claims are alternatives to the breach-of-contract
claim because in Maryland, as elsewhere, “[t]he general rule is
that no quasi-contractual claim can arise when a contract exists
between the parties concerning the same subject matter on which
the quasi-contractual claim rests.” County Comm’rs v. J. Roland
Dashiell & Sons, Inc., 358 Md. 83, 96 (2000); see also Ver
Brycke v. Ver Brycke, 379 Md. 669, 693 n.9 (2004) (“We observe
that the Ver Bryckes’ unjust enrichment and promissory estoppel
claims, which are quasi-contract claims, would have been
untenable had they argued that a contract had existed between
them.”).
CDC generally acknowledges that, if the lease was valid,
its quasi-contractual claims fail. 6 Thus, CDC argues that the
lease was invalid to the extent it required Zoning Board
approval of the proposed use of the property. See Konig v.
Mayor and City Council of Baltimore, 128 Md. 465, 465 (1916)
6
CDC’s only argument to the contrary is that the unjust
enrichment claim survives because a “Cancellation Clause” in the
lease provided for reimbursements by the City of certain costs
if the City terminated the lease early. That provision does not
apply here because, as discussed, the City did not terminate the
lease early.
11
(allowing a claim in quasi-contract where an express contract
was held invalid).
CDC fails, however, to demonstrate that the lease here is
invalid. At best, CDC argues the Zoning Board’s approval was
impossible to obtain, either because the use required by the
lease was incompatible with applicable zoning or because the
Zoning Board did not actually have the authority to approve of
the use of the property. 7 Although impossibility may excuse a
failure to perform a particular contractual obligation in some
circumstances, see, e.g., Acme Moving and Storage Corp. v.
Bower, 269 Md. 478, 483 (1973), CDC has failed to cite any
Maryland authority for the proposition that mere impossibility
of a condition precedent can invalidate a contract ab initio.
Even assuming, arguendo, that it could, CDC’s case for
impossibility falls short. Impossibility provides an excuse
only when the risk of impossibility was not assumed by the
promisor and was not foreseeable at the time of contracting.
7
Although CDC asserts in this litigation that the Zoning
Board lacked authority to approve of the use of the property
because that authority resided in the Department of Recreation
and Parks, CDC nevertheless did seek the Zoning Board’s approval
of its proposed use of the property, and the Zoning Board
rendered a decision on the merits. The record indicates that
CDC did not challenge the jurisdiction or authority of the
Zoning Board to render its decision, nor did it appeal the
decision in Maryland state courts, as it could have. See Md.
Code. Art. 66B, § 2.09.
12
Acme, 269 Md. at 483. This makes sense: contracting parties
regularly manage uncertainties by allocating the risks between
them, and courts should avoid upsetting bargained-for
expectations. Here, the language and structure of the lease
readily inform the conclusion that CDC assumed the risk that
Zoning Board approval might not be obtainable. The lease
provided for two separate terms. The Initial Term of three
years was “for the Lessee to perform all necessary requirements
for the review, design and structural ‘Study’ of the Leased
Premises.” Thereafter, if (and only if) CDC were able to meet
all of several express conditions would the lease extend for an
additional forty-seven year term. The lease term was bifurcated
to account for the possibility that one or more of the
conditions could not be satisfied. The responsibility to
satisfy each and every condition was assigned to CDC. The risk
of failure to obtain Zoning Board approval could scarcely have
been more clearly allocated to CDC.
Therefore, because CDC assumed the risk that Zoning Board
approval might not be obtainable, it is unable to claim that the
impossibility of obtaining that approval rendered the lease
invalid. Moreover, because the lease is valid, it precludes
CDC’s quasi-contractual claims for unjust enrichment and
promissory estoppel. County Comm’rs, 358 Md. at 96.
13
III.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.
14