Shader v. Hampton Improvement Ass'n.

REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 845
September Term, 2013
SCOTT SHADER, ET UX.
v.
HAMPTON IMPROVEMENT
ASSOCIATION, INC.
Hotten,
Nazarian,
Leahy,
JJ.
Opinion by Leahy, J.
Filed: June 26, 2014
Hampton is a residential community surrounding the grand Hampton Mansion and
estate, a National Historic Site in Baltimore County. Since 1931, the Hampton
community has been subject to restrictive covenants that operate mainly to limit
residential density, preserve spacious lots, restrict development to single-family homes,
and harmonize, to some extent, the appearance of homes and lots in the neighborhood. In
2004, Appellants Scott and Anna Shader (“the Shaders”) reconfigured the lots underlying
their property at 606 East Seminary Avenue in Hampton to create two separately
addressed properties: 606 and 606A East Seminary Avenue. They ultimately filed a
declaratory judgment action in the Circuit Court for Baltimore County against the
Hampton Improvement Association (“HIA”), seeking a declaration that they were not
prohibited from constructing a dwelling on 606A East Seminary Avenue because the HIA
had waived by abandonment a restriction contained in Paragraph C of the covenants that
precluded property owners from building more than one residential dwelling per lot,
consistent with the original Plat filed in 1930. In the same action, the Shaders filed a
motion for summary judgment raising offensive nonmutual collateral estoppel based on a
prior judgment against the HIA in Cortezi v. Duval Four-A, LLC, No. C-07-02587 (Cir.
Ct. Balt. Cnty. 2008) (“Duval”). The court denied this motion and, after a bench trial,
found that the HIA did not waive the covenants and could enforce the restriction against
606A East Seminary Avenue.
The Shaders present two questions on appeal:
I. Did the lower court err in denying the motion for summary judgment
1
based upon the prior ruling in Duval Four-A in which it was held
that the HIA had waived restriction of the one house per lot as lot
was shown on the 1930 Plat by abandonment?
II. Did the lower court err when it failed to declare that the one house
per lot as lot was shown on the 1930 Plat had been waived by
abandonment?
With regard to question one, we hold that the circuit court properly declined to
apply offensive nonmutual collateral estoppel because the issues in Duval and the instant
case are not identical and because application of offensive nonmutual collateral estoppel
would be unfair to the HIA according to the precepts established by the Supreme Court in
Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979). In response to question two, we
hold that the circuit court was not clearly erroneous in finding that the HIA did not
abandon Paragraph C of the covenants based on the evidence presented at trial, including
testimony that the HIA has persistently enforced the restriction in dispute. We therefore
affirm the judgment of the Circuit Court for Baltimore County.
BACKGROUND
A. The Hampton Covenants
Before it was a National Historic Site, the Hampton Mansion and estate was
privately owned by the Ridgely family since the mid-1700s.1 In 1929, John Ridgely, Jr.
1
L YNNE D AKIN H ASTINGS, A G UIDEBOOK TO H AMPTON N ATIONAL H ISTORIC S ITE 19
(Margaret Worrall ed., 1986). By way of background, Hampton originated in 1695 when
Colonel Henry Darnall, a relative of Lord Baltimore, acquired the 1500-acre parcel
constituting the Hampton property. Id. at 3. In 1745, Colonel Charles Ridgely purchased the
property from Colonel Darnall’s heirs. Id. Charles Ridgely, Jr. later constructed a Georgian-
style mansion from 1783 through 1790. Id. at 4, 7. The mansion and the surrounding
2
established the Hampton Company and began developing a portion of the estate’s land.
The Hampton Company recorded Plat No. 1 of the Hampton community in 1930 (“1930
Plat”).2 On April 6, 1931, the Company recorded a “Schedule of Restrictive Covenants
and Easements” (“Covenants”), which specifies that its provisions “are to be a part of
each Deed of any part of the land shown on [Plat No. 1] from the Hampton Company to
any and every purchaser.” Paragraph C of the Covenants sets out the “Restrictions as to
Use”:
The land included in said tract except as hereinafter provided shall
be used for private residence purposes only and no building of any kind
whatsoever shall be erected or maintained thereon except private dwelling
houses each dwelling being designed for occupation by a single family and
private garages for the sole use of the respective owners or occupants of the
plots upon which such garages are erected there shall not be erected or
maintained on said tract of land an apartment house or house designed or
altered for occupation by more than one family and no more than one
dwelling may be erected on a Lot.
Buildings to be used for schools churches libraries art galleries
museums clubs offices and studios or for recreative educational religious or
philanthropic purposes may be erected or maintained in locations approved
by the company.
The Covenants define “Lot” as “one unit of said tract as at present above by the
recorded map of said tract” and “Building” as “one detached building.”3 A “Plot” may
property remained in the Ridgely family until John Ridgely, Jr. sold the mansion and estate
to the National Park Service, which assumed full administration in 1979. Id. at 21, 23.
2
The Hampton Company later recorded Plats Nos. 2 and 3 along with
corresponding restrictive covenants and easements substantially similar to the Covenants
applicable to Plat No. 1.
3
The Covenants do not set out the definition of a “dwelling”; however, in 1929, a
“dwelling” was defined as “habitation; place or house in which a person lives; abode;
3
“consist of a single lot or more or less than a single lot.”
Paragraph H concerns the duration of the Covenants and provides that the
“restrictions[,] conditions[,] covenants[,] easements and agreements” shall run in
perpetuity, provided, however:
[T]hat at any time after December 31, 1960 any of the provisions contained
in Paragraphs C D and K hereof may be cancelled or abrogated in whole or
in part by the recording in the proper public Land Records of an appropriate
instrument or instruments in writing executed by the then owners (not
including mortgagees) of a majority in area of the land included in said tract
exclusive of streets and other land then devoted to public use . . . .
In 1939, the Hampton Company recorded a revised version of Plat No. 1 that
reconfigured lots 40, 42, and 44-54 (“1939 Plat”). The Company also recorded another
revised version of Plat No. 1 in 1949 (“1949 Plat”).
B. The Shader Property
In 2002, the Shaders purchased the real property located at 606 East Seminary
Avenue in Hampton from William and Theresa Valente. The property comprised two
parcels: Lot 59, a 2.246-acre parcel, and the eastern portion of Lot 75, a 1.457-acre
parcel north of Lot 59. Back in the late 1940s, the Hampton Company divided Lot 75 by
conveying the 1.457-acre parcel to Raymond and Louise Moore who owned a contiguous
property, Lot 59. A residential dwelling remains to this day on the balance of Lot 75.
The deed conveying the 1.457-acre parcel from Lot 75 to the Moores (“1948 Moore
Deed”) provided:
It is expressly covenanted and agreed as a part of the consideration for this
residence; domicile.” W EBSTER’S N EW INTERNATIONAL D ICTIONARY 687 (1929 ed.).
4
deed by the said Raymond L. Moore and Louise B. Moore his wife for
themselves their heirs and assigns with the said The Hampton Company for
itself its successors and assigns that at no time shall any dwelling be erected
on the lot hereby conveyed.
(emphasis added). The 1948 Moore Deed also expressly incorporated the agreements and
restrictions contained in the Covenants and stated that the Covenants were “binding upon
. . . [the Hampton] Company its successors and assigns.” In 1986, following Raymond
Moore’s death, the Valentes acquired the property.
The Shaders later decided to reconfigure the lots they purchased from the Valentes
to create two separately addressed properties. On September 10, 2004, they executed two
deeds that created two vertical properties with the addresses of 606 East Seminary
Avenue, upon which the Shaders’ home is located, and 606A East Seminary Avenue.
The Shaders recorded the deeds in the Baltimore County Land Records in 2004.
In 2009, the Shaders listed their home on 606 East Seminary Avenue for sale and,
at the same time, listed the 606A East Seminary Avenue property for sale as a buildable
lot. In a letter dated September 21, 2009, copy of which was sent to Mr. and Mrs. Scott
Shader, HIA President Eric Krali reminded the Shaders’ listing agents of the restrictive
covenants, including the prohibition against “the erection of more than one house per
deeded lot, as shown on the original Plat Map at the time the property was recorded.”
More than one year later, on February 4, 2011, the Shaders initiated a quiet title
action against the Hampton Company (a defunct company) and its original incorporators,
seeking to establish that the covenant in the chain of title for their portion of Lot
5
75—specifically, the covenant contained in the 1948 Moore Deed—was unenforceable.4
When no answer was filed, the court entered an Order of Default and thereafter a
Judgment of Default declaring that the covenant in the 1948 Moore Deed was void.
C. The Declaratory Judgment Action
On November 7, 2012, the Shaders filed a Complaint for Declaratory Judgment
against the HIA in the Circuit Court for Baltimore County, seeking a declaration that the
Covenants do not prohibit the building of a home on 606A East Seminary Avenue.
1. Plaintiffs Contend the HIA Is Collaterally Estopped from Enforcing the
One-Dwelling-Per-Lot Restriction
The Shaders filed a motion for summary judgment on March 13, 2013, arguing
that the circuit court should apply the doctrine of collateral estoppel based on the ruling in
Duval.5 The Shaders claimed that Duval precluded the HIA from re-litigating whether it
waived Paragraph C of the Covenants by abandonment.
In Duval, the HIA and individual homeowners in Hampton filed an action for
declaratory and injunctive relief against Duval Four-A, LLC (“Duval”), a property owner
in the Hampton community. The HIA sued to stop construction of a dwelling on Duval’s
reconfigured lot and invoked the original configuration of the lot as it was shown on the
1930 Plat. The circuit court observed that the revised 1949 Plat “reconfigured the lot
lines for several lots, and in fact, created Lot 4A, the lot owned by [Duval] and Lot 4B.”
4
The HIA was not a party to the action.
5
The court denied the HIA’s motion for summary judgment, in which the HIA argued that
the statute of limitations had run on the Shaders’ claim.
6
In its Order, the court included the following findings:
3. There is no evidence that any of the lot owners in Hampton ever objected
to the construction of more than one house per lot as the lots were depicted
on the 1930 Plat in these three other cases (Lots 18, 24, and 25). There is
no evidence that the Hampton Improvement Association, Inc. ever objected.
Neither the Plaintiffs, nor any of the other property owners in the
subdivision sued or otherwise sought to enforce this interpretation of the
covenant in these three situations, each of which involved lots oriented just
adjacent to Lot 4A.
4. In addition, the testimony was undisputed that in some 30 instances in
the subdivision, the Plaintiffs and their predecessors have permitted lot
owners in Hampton to erect and maintain buildings other than single family
dwellings and garages on their lots in violation of the very same covenant
which they seek to enforce in this action.
(footnote omitted). The court determined that because “the Plat presently in effect
portrays this Defendant’s property as a separate lot, designated Lot 4A, the construction
of Defendant’s dwelling, as planned, will not frustrate the original intent or purpose of the
covenants,” which was to limit the density of homes in Hampton. Based on these
findings, the court held that “the Plaintiffs and their predecessors, with regard to the
proposed dwelling construction planned by the Defendant, have waived the right to seek
to enforce the provisions of Paragraph C of the Covenants by abandonment” and that
“Paragraph C of the Covenants does not preclude or prohibit construction of the dwelling
contemplated by the Defendant, and the Defendant may construct a house on Lot 4-A.”
In a footnote, the court included the following instruction:
The decision in this matter is limited to the facts of this case. This Court
specifically does not conclude that the covenants are ‘void.’ This Court
specifically does not conclude that the waiver defense would apply in any
other action to enforce covenants in the future.
7
On April 10, 2013, a motions judge denied the Shaders’ motion, stating:
First, I do not feel that “collateral estoppel” is able to be applied here. . . .
[This doctrine] require[s] the placing of one face plate over another to see if
the issues are the same and if the parties are fundamentally the same so as
to be bound by a prior decision. There is nothing in the Shader motion that
would allow me to see the face plate of the actual controversy before [the
Duval court] and the decision by [the Duval court] as to the structures or
buildings to which it refers as a violation of what covenant or issue
presented. Second, the Response . . . makes an important distinction
between the erection of houses as opposed to other sheds or buildings, the
fact that there is argued not to have been an abandonment of covenants for
Plat # 1, differences that may exist between the covenants, and application
of the covenants as to different plats. That all means that a significant
amount of additional facts needs to be gone through by the court before
summary judgment or any judgment would be able to be entered.
A nonjury trial commenced on May 15, 2013, at which time the Shaders renewed
their motion for summary judgment.6 During argument on the Shaders’ motion, the HIA
countered with a disparate case, arguing that the court must also consider the prior ruling
in Cully v. Hampton Improvement Ass’n, Inc., No. 91CG-655 90/284 (Cir. Ct. Balt. Cnty.
1992). Five years after purchasing Lot 10, a three-acre parcel in the Hampton
subdivision, David and Carol Cully subdivided their lot to create Lot 10, a two-acre
parcel upon which their home was located, and Lot 10A, a vacant one-acre parcel. The
Cullys then sought permission from the HIA to construct a house on Lot 10A. When the
HIA denied their request, the Cullys filed a declaratory judgment action in the Circuit
Court for Baltimore County seeking a declaration that Paragraph C of the Covenants was
void or waived. The Cullys argued, inter alia, that the construction of homes on nearby
6
The court reserved its ruling until after the close of evidence, but ultimately held
the matter sub curiae.
8
lots created by the revised 1939 Plat operated as a waiver of Paragraph C of the
Covenants. In surveying the evidence adduced at trial, the circuit court found:
There was testimony from a number of owners in the sub-division . . . that
the Association always attempted to work with the home owners in matters
involving such matters as fences and the enclosure of porches. They also
testified that they were always careful to insist on prior approval for any
major structural changes and they never permitted the building of an
additional house on a lot. There was further testimony that the
Architectural Committee is quite active and takes a flexible, practical
approach to requests from members of the Association to make changes to
their property.
Accordingly, the Cully court concluded that the HIA did not waive Paragraph C of the
Covenants based on the testimony presented that the HIA continued to enforce the
Covenants.7 The court decided, therefore, that the Covenants prohibited the construction
of a home on Lot 10A.
Returning to the matter at bar, following trial, the court denied the Shaders’ motion
for summary judgment in a Memorandum Opinion dated June 4, 2013.8 The court
recognized that Plaintiffs were invoking the doctrine of offensive nonmutual collateral
estoppel by claiming that the prior ruling against the HIA in Duval estopped the
Defendant HIA. The court concluded, however, that because the issues in Duval and the
issues in the Shaders’ action were not identical, the threshold requirement of collateral
7
The court found that because the Hampton Company failed to obtain the consent of
all of the lot owners, the agreement to revise the Hampton plat and modify the original
covenants via the recordation of the 1939 Plat was void. The court concluded, however, that
after more than 50 years, the equitable doctrine of laches would bar any party from
challenging the construction of the existing homes on the lots created by the 1939 Plat.
8
The Order and Opinion were entered on the docket on June 21, 2013.
9
estoppel was not met. Specifically, the court explained:
While the issues are clearly related, the Shaders’ property consists of one
“original” lot and a portion of another lot that were joined in one parcel.
The Shaders then sought to re-configure the lot line between these two
parcels. In this manner, the Shaders argue that they have two buildable lots.
[The court’s] ruling in the Duval matter is specifically tied to a revision in
the subdivision plat that was filed in 1949 that reconfigured some of the
original lot lines and created at least two new lots, including Lot 4-A. [The
court’s] decision related narrowly to this portion of the Hampton
subdivision . . . .
For these reasons, the court denied the Shaders’ motion for summary judgment.
2. Plaintiffs Assert the HIA Abandoned Paragraph C of the Covenants
At trial, the Shaders argued that the existence of various buildings throughout the
neighborhood demonstrated that the HIA had abandoned Paragraph C of the Covenants.
Pictures exhibiting these structures were admitted into evidence. Mrs. Shader recounted,
for example, that when she viewed 610 East Seminary Avenue, the property included a
house, a pool house, and a guesthouse with two bedrooms, a living space, a kitchen, and a
bathroom. Scott Shader provided similar testimony about observing violations of the
Covenants; specifically, that “there are out buildings, there are detached garages, there are
very large sheds, there are gazebos, there are guest houses.” He had also observed
violations of Paragraph D of the Covenants, which requires unattached garages to be
within 50 feet of a residence.
The Shaders had counted on creating a separate lot; as Mrs. Shader explained, “we
really believed . . . we would have the one piece of property to sell with the house and the
other piece of property to sell for development or to put a house on so that would help us
in our retirement.” When asked during cross-examination whether she was told that the
10
Covenants existed, she stated, “I’m sure when we signed the paperwork at the round table
and hundreds of papers are tossed at you, we signed something, yes.” Mrs. Shader
testified that the real estate agent and the information supplied by the Valentes, the
previous owners, led her and her husband to believe that reconfiguration of the property
would be possible.
Two HIA representatives also testified. Anna Von Lunz, a lifetime resident of
Hampton and member of the HIA’s architectural review committee, opined that the HIA,
formed in the 1950s by John Ridgely, Jr., is a successor to the Hampton Company. She
testified that the HIA has interpreted Paragraph C of the Covenants to prohibit more than
one residential dwelling on one platted lot and that the purpose of the Covenants is to
“protect[] the density and the character and the landscape of the community.” Ms. Von
Lunz explained that when homeowners planned to build on their property, the HIA would
send a letter explaining the Covenants to the homeowners or their realtors. When asked
what the HIA does with regard to the construction of a pool house or shed, Ms. Von Lunz
explained that “it wasn’t considered a second residential dwelling on a platted lot.” She
believed the residential character of the neighborhood has remained the same, stating that
“[p]eople drive through that community just because of the pleasure of going through a
community that has open spaces and homes that are well designed and fit on the lots and
aren’t overcrowded.” When asked what would happen if the Covenants were abandoned,
she responded that the result would “look like a downtown Towson subdivision” and
“take all that open space away in front of the watershed.”
Dwight Kines, the current president of the HIA, described the neighborhood as
11
“[l]arge lots, open spaces, quiet. It is a great place to live.” He testified that the HIA has
maintained and enforced the position that there can be no more than one residential
dwelling per lot. When asked whether the structures identified by the Shaders violated
Paragraph C, Mr. Kines answered “absolutely not . . . because none of these were
dwellings, residential dwellings.” He stated that “[t]he difference is that we are talking
[about] a residential dwelling here and not a pool house or gazebo or a guest house or a
garage.” If the Covenants were no longer in force, he believed that “it would increase the
density significantly.”
After hearing all of the evidence presented at trial, the circuit court found that the
“Hampton Company intended Paragraph C of the Covenants to be an enforceable
restrictive covenant, to run with the land, and to create a uniform general scheme or plan
of development.” The court determined that the Shaders had constructive notice of the
Covenants at the time they purchased the property, and noted that the covenant contained
in the 1948 Moore Deed specifically prohibited the construction of a home on the
conveyed eastern portion of Lot 75.9 Finding the HIA did not waive Paragraph C of the
Covenants by abandonment, the court explained:
Although the Shaders were able to show numerous instances of violations
based on the construction of separate structures on properties throughout the
community, they were unable to demonstrate construction of a second
residence on a single lot. Rather, the evidence demonstrates that the HIA
has consistently taken action to enforce the restriction in the Covenants that
requires “no more than one dwelling may be erected on a Lot.”
9
Although not specifically noted in the court’s Opinion, the 1948 Moore Deed also
expressly incorporated the Covenants and stated that the Covenants were “binding upon . .
. [the Hampton] Company its successors and assigns.”
12
The court observed: “Maryland law holds that restrictive covenants may be abandoned in
part without resulting in a wholesale abandonment of all restrictive Covenants,” citing
King v. Waigand, 208 Md. 308, 313 (1955). Accordingly, it determined that “violations
of the portion of the covenant prohibiting the construction of buildings other than
residential dwellings does [sic] not necessarily mean that the restriction on building more
than one residence per lot has been abandoned.” The court found that the evidence
demonstrated the HIA has continually enforced the one-house-per-lot restriction, which
has “allowed Hampton to remain a neighborhood of large, single family properties, with
low population density.”
The circuit court held that Paragraph C of the Covenants prohibits the construction
of a home on 606A East Seminary Avenue. On June 28, 2013, the Shaders filed a timely
notice of appeal.
DISCUSSION
We first address whether the Shaders may raise the Duval decision in their
declaratory judgment action to collaterally estop the HIA from litigating whether it
waived Paragraph C of the Covenants by abandonment. After concluding that collateral
estoppel does not apply, we explain why the circuit court did not err in refusing to declare
that the HIA waived Paragraph C of the Covenants by abandonment.
I.Collateral Estoppel
The Shaders contend the circuit court erred in denying their motion for summary
judgment in which they argued the Duval judgment collaterally estopped the HIA from
13
defending against the allegation that it waived Paragraph C of the Covenants by
abandonment. First, the Shaders claim that the issues in Duval and the underlying case
are identical and that the circuit court erred in concluding they are not. Second, the
Shaders argue the Duval decision mandated judgment in their favor under the doctrine of
offensive nonmutual collateral estoppel. We disagree.
A. Standard of Review
Although we generally apply an abuse of discretion standard when reviewing a
circuit court’s denial of a motion for summary judgment in favor of further proceedings,
Hous. Auth. of Balt. City v. Woodland, No. 18, Sept. Term, 2013 (Md. App. Mar. 26,
2014), slip op. at 6 (citing Metro. Mortgage Fund, Inc. v. Basiliko, 288 Md. 25, 29
(1980)), this deferential standard of review does not extend to the court’s post-trial denial
of the Shaders’ motion for summary judgment raising the legal issue of collateral
estoppel. See Presbyterian Univ. Hosp. v. Wilson, 99 Md. App. 305, 313-15 (1994),
aff’d, 337 Md. 541 (1995). We explain.
In Basiliko, supra, 288 Md. at 26, the Court of Appeals addressed the narrow
question of whether an appellate court may review a denial of a pretrial motion for
summary judgment other than for abuse of discretion. In this case, the Metropolitan
Mortgage Fund sued the Basilikos for breach of written guaranty agreements. Id.
Metropolitan filed three motions for summary judgment, which the circuit court denied.
Id. at 26-27. After a bench trial, the circuit court concluded that the Basilikos did not sign
the agreements and therefore entered judgment in the Basilikos’ favor. Id. at 27. This
Court affirmed, and the Court of Appeals granted certiorari to address the scope of
14
appellate review. Id. The Court explained that although a court “cannot draw upon any
discretionary power to grant summary judgment,” a court ordinarily has discretion to
defer ruling on a pretrial motion for summary judgment until later in the proceedings or to
deny the motion in favor of a trial on the merits, even if all technical requirements for
summary judgment are met.10 Id. at 27-28 (citations omitted) (internal quotation marks
omitted). The Court expounded:
Thus, while . . . [the Maryland Rule for Summary Judgment] states that
when a movant is entitled to judgment as a matter of law, the court should
render judgment forthwith, this does not mean that entry of judgment may
not be delayed until after a trial on the merits, should, in the court’s mind,
the promotion of justice require it. It is our view that an appellate court
should be loath indeed to overturn, on a very narrow procedural ground, a
final judgment on the merits entered in favor of the party resisting the
summary judgment motion. . . . To turn the tables in this manner would be
nothing short of substituting a known unjust result for a known just one.
Id. at 28-29 (internal citations omitted). The Court therefore held:
10
In Commercial Union Insurance Co. v. Porter Hayden Co., 116 Md. App. 605
(1997), Judge Moylan, writing for this Court, discussed different scenarios in which a
circuit court may decide to deny a motion for summary judgment. The most common
denial would be based on the existence of a genuine issue of material fact necessitating
resolution via submission to a trier of fact. Id. at 628-29. Another scenario would be
one contemplated by Basiliko:
In . . . [a] discretionary scenario, where the circumstances would permit the
grant of summary judgment but where the judge chooses to deny the grant
entirely or simply to defer it, two denouements are possible. The judge, in
his discretion, might choose to submit the material factual issues to a jury
(or engage in such fact finding himself) notwithstanding the literal absence
of a genuine dispute. The judge might, on the other hand, choose to grant
summary judgment at some later time in lieu of any further fact finding.
The only inhibition would be that he not abuse his discretion.
Id. at 632.
15
[A] denial (as distinguished from a grant) of a summary judgment motion,
as well as foregoing the ruling on such a motion either temporarily until
later in the proceedings or for resolution by trial of the general issue,
involves not only pure legal questions but also an exercise of discretion as
to whether the decision should be postponed until it can be supported by a
complete factual record; and we further hold that on appeal, absent clear
abuse (not present in this case), the manner in which this discretion is
exercised will not be disturbed.
Id. at 29; see, e.g., Woodland, supra, slip op. at 6-7; Dashiell v. Meeks, 396 Md. 149, 164-
65 (2006).
Later, in Presbyterian University Hospital, supra, 99 Md. App. at 313-15, this
Court declined to extend the Basiliko holding to review a denial of a summary judgment
motion that raised the purely legal issue of personal jurisdiction. In this case, the plaintiff
filed a lawsuit against the defendant-hospital, located in Pittsburgh, PA, in the Circuit
Court for Baltimore City. Id. at 309. The hospital filed a motion to dismiss for lack of
personal jurisdiction, which the circuit court denied. Id. The court also denied the
hospital’s motion for summary judgment, again raising lack of personal jurisdiction. Id.
at 310. The jury ultimately found in favor of the plaintiff, and the hospital appealed. Id.
The plaintiff then filed a motion to dismiss the appeal, arguing that review of a denial of
summary judgment after final judgment is prohibited or, alternatively, that review is
limited to whether the court abused its discretion under Basiliko. Id. at 311. After
reviewing the facts and holding of Basiliko, which we classified as a “garden-variety
factual dispute,” we concluded:
[I]t is clear that the reach of Basiliko is limited; it was intended to apply to
those cases in which there are factual controversies—in which the ultimate
results would be determined by resolution of facts. Where the material
facts are genuinely disputed, summary judgment must be denied; where
16
they are not, the trial court in its discretion may still defer or deny a
summary judgment motion. Where, however, a motion for summary
judgment is based upon a pure issue of law that could not properly be
submitted to a trier of fact, as such, to resolve, the conclusion in Basiliko
that the denial of a summary judgment will not be reviewed on appeal is
inapplicable. The trier of fact, whether it be a jury or a judge sitting in that
capacity, could not determine the issue of personal jurisdiction, as raised in
this case.
Id. at 311-14. Accordingly, we denied the motion to dismiss and identified the standard
of review as “whether the trial court was legally correct.” Id. at 315. The Court of
Appeals affirmed:
We . . . agree with the Court of Special Appeals’s recognition that to the
extent that the issue of personal jurisdiction is a question of law, it is not
properly submitted to the trier of fact to resolve. We therefore find nothing
to preclude our review of the issue.
Presbyterian Univ. Hosp. v. Wilson, 337 Md. 541, 549 (1995).
Applying the rationales of Basiliko and Presbyterian University Hospital to the
instant case, we find that it was within the motions court’s discretion to deny the Shaders’
motion for summary judgment before trial, and that it was also within the circuit court’s
discretion to defer, as it did, ruling on the motion until after the factual support for the
motion came into full relief following trial. The Shaders’ motion for summary judgment,
however, raised the legal doctrine of collateral estoppel, and whether this doctrine should
be applied is ultimately a question of law for the court. Therefore, we examine de novo
the court’s legal determination of whether collateral estoppel should apply based on the
court’s sustainable findings of fact.
B. Identity of the Issues
The doctrine of collateral estoppel precludes a party from re-litigating a factual
17
issue that was essential to a valid and final judgment against the same party in a prior
action. Welsh v. Gerber Prods., Inc., 315 Md. 510, 516 (1989). Maryland has adopted a
four-pronged test that must be satisfied in order to apply collateral estoppel:
1. Was the issue decided in the prior adjudication identical with the one
presented in the action in question?
2. Was there a final judgment on the merits?
3. Was the party against whom the plea is asserted a party or in privity
with a party to the prior adjudication?
4. Was the party against whom the plea is asserted given a fair opportunity
to be heard on the issue?
Pat Perusse Realty Co. v. Lingo, 249 Md. 33, 45 (1968); accord Wash. Suburban
Sanitary Comm’n v. TKU Assocs., 281 Md. 1, 18–19 (1977). In this case, the first and
third prongs of the test are at issue.
“[F]or the doctrine of collateral estoppel to apply, the probable fact-finding that
undergirds the judgment used to estop must be scrutinized to determine if the issues
raised in that proceeding were actually litigated, or facts necessary to resolve the pertinent
issues were adjudicated in that action.” Colandrea v. Wilde Lake Cmty. Ass'n, Inc., 361
Md. 371, 391–92 (2000) (citing Burkett v. State, 98 Md. App. 459, 466 (1993)). The
Shaders contend that the issues in Duval are identical to the issues presented here. But
the Duval case involved a lot—Lot 4-A—that was created more than 50 years prior by the
Hampton Company as shown on the 1949 Plat. Accordingly, the circuit court
distinguished Duval from the instant case:
While the issues are clearly related, the Shaders’ property consists of one
“original” lot and a portion of another lot that were joined in one parcel.
The Shaders then sought to re-configure the lot line between these two
parcels. . . . [the court’s] ruling in the Duval matter is specifically tied to a
revision in the subdivision plat that was filed in 1949 that reconfigured
18
some of the original lot lines and created at least two new lots, including
Lot 4-A. [The court’s] decision related narrowly to this portion of the
Hampton subdivision , and he found that the HIA had abandoned its right to
seek to enforce any Covenant to restrict construction of a dwelling on Lot
4-A. However his Memorandum Opinion expressly noted that it did not
involve a broad determination of the viability of the covenants within the
subdivision. . . . Under these circumstances, there are subtle but distinct
differences between the issues addressed in the Duval decision and those
presented in this matter. . .
Underscoring the circuit court’s conclusion that the issues decided in both cases were not
identical was the Duval court’s declaration that its ruling was limited to the case before
it.11 We find that the circuit court correctly determined that the issues presented in
Duval and the case sub judice were not identical.
C. Mutuality of Parties and the Doctrine of Offensive Nonmutual
11
The Duval court made what appear to be two legally incongruous rulings: first, that the
HIA waived Paragraph C by abandonment; and second, that the court’s ruling applied only to the
Duval property and not to any other future action to enforce the Covenants. As will be discussed
infra, “[w]aiver by abandonment concerns violative uses of the land subject to a restrictive
covenant carried out by covenantors other than the one sought to be enjoined.” City of Bowie v.
MIE Props., Inc., 398 Md. 657, 698 n.27 (2007) (emphasis omitted). In other words, when a
party asserts the defense of waiver by abandonment, the focus is not on the party-covenantor and
his particular lot, but on other covenantors and other lots. Therefore, the Duval court’s
holding—that the HIA waived Paragraph C by abandonment only as to the lot owned by
Duval—was an inaccurate application of the case law governing waiver by abandonment.
Another way the Duval case could be viewed, however, is that because waiver is an equitable
defense, the court applied equitable principles to bar the HIA from enforcing the Covenants
against Duval’s property because Lot 4A was created more than a half century earlier by the
Hampton Company, the HIA’s predecessor in interest. See, e.g., Speer v. Turner, 33 Md. App.
716, 728 (1976)
(“‘[E]stoppel rests upon a detrimental change of position induced by the acts or conduct of the
party estopped.’” (quoting Gould v. Transamerican, 224 Md. 285, 295 (1961))). Our ultimate
decision on collateral estoppel in this case obviates any need for us to opine definitively on the
correctness of the Duval court’s ruling, which, in any event, is a circuit court decision that does
not bind this Court or other circuit courts.
19
Collateral Estoppel
The Shaders argue that their use of nonmutual collateral estoppel should not be
considered offensive, given that their position is defensive in nature, or, alternatively, that
this Court is permitted to and should apply the doctrine of offensive nonmutual collateral
estoppel in this case. The question, then, is whether a plaintiff in an action for declaratory
judgment, often a posture that is substantively defensive, may raise the claim of
nonmutual collateral estoppel and if so, whether the claim considered defensive or
offensive. In accordance with Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979),
Burruss v. Board of Commissioners of Frederick County, 427 Md. 231 (2012), and
Culver v. Maryland Insurance Commissioner, 175 Md. App. 645 (2007),12 we hold that
regardless of whether the action is one for declaratory judgment, a plaintiff who invokes
nonmutual collateral estoppel against a defendant does so offensively, and may proceed
so long as raising the prior case against the defendant(s) in the action does not offend the
Parklane factors.
Traditionally, collateral estoppel required a mutuality of parties; that is, “in a
second suit between the same parties . . . any determination of fact, which was actually
litigated in the first case, is conclusive in the second case.” Sterling v. Local 438, 207
Md. 132, 140-41 (1955) (emphasis added) (citing Le Brun v. Marcey, 199 Md. 223, 226
(1952)), cert. denied, 350 U.S. 875 (1955). Over time, courts have modified the
mutuality requirement in order to apply collateral estoppel when one or both of the parties
12
Discussed infra.
20
were neither a party nor in privity with a party in the previous litigation. Blonder-Tongue
Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 322 (1971); Pat Perusse Realty Co.,
supra, 249 Md. at 36–40. The Court of Appeals has cautioned:
This principle [of nonmutual collateral estoppel] . . . is almost as simple in
concept as it is difficult in application. Conceptually, there will be
instances in which a party who has had the benefit of a full and fair
adjudication of an issue should be bound by that adjudication, even in a
subsequent proceeding involving a different party. The difficulty is,
however, that there are many situations where application of the doctrine of
nonmutual collateral estoppel would be manifestly unfair.
Welsh, supra, 315 Md. at 517.
A party can invoke nonmutual collateral estoppel either offensively or defensively.
“Offensive use of nonmutual collateral estoppel occurs when a plaintiff seeks to foreclose
a defendant from relitigating an issue the defendant has previously litigated
unsuccessfully in another action against a different party,” whereas “[d]efensive use of
nonmutual collateral estoppel occurs when a defendant seeks to prevent a plaintiff from
relitigating an issue the plaintiff has previously litigated unsuccessfully in another action
against a different party.” Id. at 517 n.6 (citing United States v. Mendoza, 464 U.S. 154,
159 n.4 (1984)). Courts have not applied offensive nonmutual collateral estoppel as
willingly as defensive nonmutual collateral estoppel.
In Parklane Hosiery Co., supra, 439 U.S. at 329–31, still the leading case on point,
the Supreme Court identified several reasons (hereinafter “Parklane factors”) why courts
should treat offensive and defensive nonmutual collateral estoppel differently. First, as a
matter of judicial economy, defensive collateral estoppel incentivizes plaintiffs to join in
the first action, whereas offensive collateral estoppel does not. Id. at 329–30. “Since a
21
plaintiff will be able to rely on a previous judgment against a defendant but will not be
bound by that judgment if the defendant wins, the plaintiff has every incentive to adopt a
‘wait and see’ attitude, in the hope that the first action by another plaintiff will result in a
favorable judgment.” Id. at 330. Second, offensive nonmutual collateral estoppel may be
unfair to the defendant for several reasons: (1) “[i]f a defendant in the first action is sued
for small or nominal damages, he may have little incentive to defend vigorously,
particularly if future suits are not foreseeable;” (2) “the judgment relied upon as a basis
for the estoppel [may be] inconsistent with one or more previous judgments in favor of
the defendant;” and (3) “the second action [may] afford[] the defendant procedural
opportunities unavailable in the first action that could readily cause a different result.” Id.
at 330–31. The Supreme Court concluded:
The general rule should be that in cases where a plaintiff could easily have
joined in the earlier action or where, either for the reasons discussed above
or for other reasons, the application of offensive estoppel would be unfair to
a defendant, a trial judge should not allow the use of offensive collateral
estoppel.
Id. at 331.
Maryland courts have embraced the Supreme Court’s rationale in Parklane. See
Rourke v. Amchem Prods., Inc., 384 Md. 329, 349–50 (2004); Burruss v. Bd. of Cnty.
Comm’rs of Frederick Cnty., 427 Md. 231, 252 (2012). In Rourke, the Court of Appeals
first discussed the offensive use of nonmutual collateral estoppel, albeit briefly, in the
context of applying full faith and credit to a Virginia judgment. Rourke, supra, 384 Md.
at 349–51. In doing so, the Court noted that Maryland had not yet formally applied
offensive nonmutual collateral estoppel and recapitulated Parklane’s analysis of the
22
doctrine. Id. at 349–50. In applying full faith and credit to a Virginia judgment, the
Court of Appeals was required to apply Virginia law, which had not adopted offensive
nonmutual collateral estoppel. Id. at 350–52. Accordingly, the Court held that collateral
estoppel could not be applied because there was no mutuality of the parties. Id. at 352.
In Burruss, supra, 427 Md. at 241, 244, the Board of County Commissioners of
Frederick County appointed a nine-member charter board to draft and present a charter to
Frederick voters pursuant to Article XI–A, § 1A of the Maryland Constitution. The
petitioners submitted a petition, purportedly signed by 2,915 registered voters, seeking
Board membership via special election. Id. at 244. The Board declined to hold a special
election after concluding that the petition did not contain a sufficient number of valid
signatures under section 6-203 of Maryland’s Election Law Article. Id. The petitioners
then filed a petition for judicial review in the Circuit Court for Frederick County, seeking
a declaratory judgment regarding the correct legal standard for determining the validity of
petition signatures. Id. at 244–45. The petitioners argued that the circuit court should
apply offensive nonmutual collateral estoppel based on a prior ruling in the Circuit Court
for Anne Arundel County that adopted the legal standard advanced by petitioners. Id. at
245. The circuit court affirmed the Board’s decision, declining to apply offensive
nonmutual collateral estoppel because it found that the issues were not identical and there
was no mutuality of the parties. Id. at 245–46. Before this Court heard the case, the
Court of Appeals granted certiorari. Id. at 238–39. The Court of Appeals determined that
offensive nonmutual collateral estoppel was not permissible under the circumstances. Id.
at 252. Applying the Parklane factors, the Court concluded that the Circuit Court for
23
Anne Arundel County’s ruling was inconsistent with prior Court of Appeals’ rulings and
that “[i]t would be unfair to bind Respondents to an incorrect interpretation of the law, as
determined by another trial court, that could have been, and should have been, interpreted
correctly by that trial court.” Id.
The application of offensive nonmutual collateral estoppel was affirmed by this
Court in the context of an administrative appeal in Culver v. Maryland Insurance
Commissioner, 175 Md. App. 645 (2007). In Culver, the Maryland Insurance
Administration (“MIA”) revoked the defendant’s insurance producer’s license. Id. at 649.
When the defendant sought to challenge the revocation, the MIA moved for summary
disposition, arguing that a prior Court of Appeals decision, in which the Court disbarred
the same defendant for various ethics violations, established that the defendant was
untrustworthy and, therefore, the defendant could not satisfy statutory licensing
requirements.13 Id. at 649–50. The presiding administrative law judge concluded that
the prior decision precluded the defendant from re-litigating the Court’s factual findings
and issued a recommendation to that effect. Id. at 650–51. The MIA adopted the judge’s
recommendations and issued a final revocation order. Id. at 651. On appeal, the Circuit
Court for Baltimore City affirmed. Id. This Court also affirmed after applying the
Parklane factors and finding that the possible detriments of offensive nonmutual
13
Sections 10-126(a)(2), 10-126(a)(3), 10-126(a)(13), and 10-126(f) of the Insurance
Article of the Maryland Code (2003 Repl. Vol.) contained the relevant licensing
requirements. Section 10-126(a)(13) stated that a Commissioner could deny a license to an
applicant if the applicant had “otherwise shown a lack of trustworthiness or incompetence
to act as an insurance producer.”
24
collateral estoppel articulated in Parklane and reiterated in Rourke were not present. Id.
at 656–57. The MIA, as a regulatory body for insurance licensing, was not a plaintiff
“seeking a windfall without any work.” Id. at 656. Preclusion also would not be unfair to
the defendant because (1) the defendant had the opportunity to defend his prior case
vigorously; (2) the Court of Appeals decision was not inconsistent with other prior
decisions; and (3) the MIA hearing would not provide the defendant with procedural
protections that could have led to a different result. Id.
The Shaders argue that although they are the plaintiffs in this action, their use of
nonmutual collateral estoppel should not be considered offensive in the context of a
declaratory judgment action when their claim is substantively defensive in nature.
Instead of proactively seeking a judicial determination of their rights, the Shaders
emphasize that they could have commenced the construction of a dwelling or the sale of
606A East Seminary Avenue as a buildable lot and awaited the HIA’s eventual lawsuit
against them. If the Shaders had taken the latter route, their use of collateral estoppel
would have been defensive. In Burruss, supra, the underlying action involved a petition
for judicial review that sought a declaratory judgment. 427 Md. at 237. The Court of
Appeals applied the Parklane factors in deciding whether offensive nonmutual collateral
estoppel was appropriate, without ruling specifically whether the doctrine applies in
declaratory judgment actions generally.14
14
It does not appear that the petitioners argued that their use of collateral estoppel
should not be considered offensive. See id. at 239 n.8.
25
Other state courts have opined on whether a plaintiff’s use of collateral estoppel in
a declaratory judgment action should be treated as offensive or defensive. In Mann v. Old
Republic National Title Insurance Co., 975 S.W.2d 347, 349 (Tex. App. 1998), Old
Republic National Title Insurance Co. (“Old Republic”) filed a declaratory judgment
action against Mann, seeking a determination that Mann was excluded from coverage
under Old Republic’s title insurance policy based on his knowledge of the easements
existing on the property he purchased.15 Old Republic then filed a motion for summary
judgment, arguing that a prior judgment imputed Mann with knowledge of the easements
and was therefore binding on this issue. Id. The trial court granted the motion. Id. On
appeal, Mann argued that the trial court erred in applying offensive nonmutual collateral
estoppel without considering the Parklane factors. Id. at 351. The Court of Appeals of
Texas disagreed on the basis that Old Republic’s initiation of the declaratory judgment
action after receiving a claim from Mann was defensive in nature. Id. As a result, the
court viewed Old Republic’s position as plaintiff to be “insignificant” and held that Old
Republic’s defensive use of collateral estoppel did not require the trial court to consider
Parklane factors. Id.; cf. Burlington Nat’l R.R. v. Hyundai Merch. Marine Co., 63 F.3d
1227, 1228–29 & n.4 (3d Cir. 1995) (looking to the structural essence of the case to
determine whether a party’s use of nonmutual collateral estoppel is offensive or
15
The insurance policy did not cover “either loss or damage caused by any
easements on the purchased land disclosed by a physical inspection, or encumbrances
known to the insured, not shown by public records and not known to the company.” Id. at
348. When Mann purchased the subject property, there were two unrecorded easements
on the property. Id.
26
defensive); Aetna Cas. & Surety Co. v. Jones, 220 Conn. 285 (1991) (concluding that use
of offensive nonmutual collateral estoppel in a declaratory judgment action is a “hybrid
form of collateral estoppel,” but concluding that there is no “formalistic delineation”
between offensive and defensive collateral estoppel).
Other courts have determined that a plaintiff’s use of nonmutual collateral estoppel
in a declaratory judgment action remains offensive in nature. In American Family Mutual
Insurance Co. v. Savickas, 193 Ill. 2d 378, 381–82 (2000), American Family Mutual
Insurance Co. (“American Family”) filed a declaratory judgment action against Savickas,
the insured, seeking a determination that it was not required to defend or indemnify
Savickas in a wrongful death action when Savickas had already been convicted of
murder. The trial court granted summary judgment in favor of American Family based
on collateral estoppel. Id. at 382. The Supreme Court of Illinois concluded that
American Family’s use of collateral estoppel was “technically offensive.” Id. at 390.
The court expounded:
[W]e note that although this case does fit the technical definition of
“offensive” collateral estoppel, in that the plaintiff is seeking to estop the
defendants, a declaratory judgment action is somewhat different in nature
than most lawsuits. Rather than the plaintiff attempting to obtain redress for
a past wrong, the plaintiff in a declaratory judgment action simply seeks
construction of a governmental regulation or written instrument and a
declaration of the rights of the parties involved. In this suit, American
Family is attempting to determine its obligations in advance in order to
preempt a subsequent suit in which it would be named defendant. It is
debatable whether this case should be treated as one involving “offensive”
collateral estoppel.
Id. at 390–91 (citations omitted). Despite this hesitancy, the court held that even if the
court were to consider American Family’s use of collateral estoppel as offensive, the
27
application of nonmutual collateral estoppel to the facts of that case would not raise the
concerns identified in Parklane; therefore, the court affirmed the trial court’s ruling. Id.
at 391.
We recognize that the Shaders’ preemptive use of nonmutual collateral estoppel in
this declaratory judgment action is distinguishable from a typical litigation action. We
are not persuaded, however, that this distinction should alter our classification of the
Shaders’ use of collateral estoppel as offensive. Based on our reading of Burruss,
Rourke, Welsh, and Culver, the labeling of nonmutual collateral estoppel as offensive or
defensive is not dispositive as to whether collateral estoppel will be applied; rather, a
plaintiff’s assertion of nonmutual collateral estoppel prompts an evaluation of whether the
concerns articulated in Parklane are present. Applying the rationale of the Court of
Appeals in Burruss, Maryland courts may apply offensive nonmutual collateral estoppel
in a declaratory judgment action, but only if the concerns identified in Parklane are not
present. See Burruss, supra, 427 Md. at 252 (declining the opportunity to apply offensive
nonmutual collateral estoppel specifically to the facts of that case based on unfairness to
the defendants); see, e.g., Savickas, supra, 193 Ill.2d at 391. Consideration of Parklane
factors serves as an important additional safeguard against a potentially unjust application
of nonmutual collateral estoppel. See Welsh, supra, 315 Md. at 517 (noting that “there
are many situations where application of the doctrine of nonmutual collateral estoppel
would be manifestly unfair”).
Applying the Parklane factors to this case, we begin by stating that we do not view
the Shaders’ use of nonmutual collateral estoppel as an impediment to judicial economy.
28
The HIA contends that the Shaders waited to file their case until almost five years after
the filing of Duval with the hope that Duval would result in a favorable judgment. Given
that Duval Four-A, LLC was the defendant in Duval, we are not persuaded that the
Shaders were waiting to see whether another plaintiff’s action would be successful
without shouldering any of the work. See Parklane, supra 439 U.S. at 330; Culver, 175
Md. App. at 656 (concluding that the plaintiff was not “seeking a windfall without any
work”). To the contrary, we find the Shaders’ filing of this action to promote judicial
economy by seeking a declaration of their rights before constructing a home on 606A or
selling 606A as a buildable lot. We encourage parties to ascertain their rights before
engaging in conduct that risks violating obligations or restrictions.
We do, however, believe that the application of offensive nonmutual collateral
estoppel would be unfair to the HIA under the facts presented. First, it would be unfair to
bind the HIA to an inaccurate interpretation of the law. See Burruss, supra, 427 Md. at
252. The Duval court’s holding—that the HIA waived Paragraph C by abandonment only
as to the lot owned by Duval—was an inaccurate application of the case law governing
waiver by abandonment.16 “Waiver by abandonment concerns violative uses of the land
subject to a restrictive covenant carried out by covenantors other than the one sought to
be enjoined.” City of Bowie v. MIE Props., Inc., 398 Md. 657, 698 n.27 (2007). In other
words, when a party asserts the defense of waiver by abandonment, the focus is not on the
16
See supra footnote 11. We believe, however, that the court reached an accurate
resolution of the case via the application of equitable principles to bar the HIA from enforcing
the Covenants against Duval’s property as it was depicted in the 1930 Plat.
29
party-covenantor and his particular lot, but on other covenantors and other lots.
Second, it is also possible that the HIA lacked an incentive to appeal because the
Duval court limited its ruling to the facts in Duval and specified that his judgment would
not apply in future actions to enforce the covenant. The Supreme Court recognized in
Parklane that parties may have little incentive to defend in cases involving nominal
damages or cases in which future suits are not foreseeable. Parklane, supra, 439 U.S. at
330. As an illustration, the Court cited the case of Berner v. British Commonwealth
Pacific Airlines, Ltd., 346 F.2d 532 (2d Cir. 1965), for an example of when the
“application of offensive collateral estoppel [was] denied where defendant did not appeal
an adverse judgment awarding damages of $35,000 and defendant was later sued for over
$7 million.” Parklane, supra, 439 U.S. at 330.
Third, the application of collateral estoppel would also be unfair because the Duval
court’s ruling is inconsistent with the Cully court’s ruling. In Cully, the court considered
whether the construction of dwellings on the lots created by the revised 1939 Plat
constituted an abandonment of Paragraph C. The Cully court evaluated this evidence, as
well as the testimony at trial that the HIA never permitted the construction of more than
one house per lot, and found that the HIA did not waive the restriction. In Duval, the
court considered whether the construction of more than one dwelling on three lots, as
those lots were depicted in the 1930 Plat, and the erection of structures other than houses
and garages constituted an abandonment of Paragraph C. The Duval court evaluated this
evidence and found that the HIA waived Paragraph C by abandonment. In our view, both
courts considered evidence of more than one dwelling per lot as lots were delineated on
30
the 1930 Plat and reached opposite conclusions. Applying the Parklane factors to this
case, therefore, we find that the circuit court correctly refused to apply the Duval decision
to collaterally estop the HIA from defending against the allegation that it waived by
abandonment the restriction precluding property owners from building more than one
residential dwelling per lot as delineated on the 1930 Plat.
II. Waiver
Maryland Rule 8-131(c) governs our review of a circuit court’s ruling on
declaratory relief after a nonjury trial. MBC Realty, LLC v. Mayor & City Council of
Balt., 192 Md. App. 218, 233 (2010). Rule 8-131(c) states:
When an action has been tried without a jury, the appellate court will
review the case on both the law and the evidence. It will not set aside the
judgment of the trial court on the evidence unless clearly erroneous, and
will give due regard to the opportunity of the trial court to judge the
credibility of the witnesses.
To this end, “we must consider the evidence in the light most favorable to the prevailing
party and decide not whether the trial judge’s conclusions of fact were correct, but only
whether they were supported by a preponderance of the evidence.” MIE Props., Inc.,
supra, 398 Md. at 676-77 (quoting Colandrea, supra, 361 Md. at 393–94 (citations
omitted)). We review issues of law decided by the circuit court de novo based on the
court’s sustainable findings of fact, id., but “whether waiver has occurred is a question of
fact . . . which is reviewed for clear error.” Id. at 699 (internal citations omitted).
A. Interpretation of the Covenants
During trial, the parties presented different interpretations of the purpose of the
Covenants. The Shaders urged that Paragraph C of the Covenants was intended to
31
preclude the construction of any building whatsoever other than a single-family dwelling
or garage on each lot. Pointing to the existence of structures other than dwellings or
garages on various properties throughout Hampton, the Shaders argued that the overall
purpose of the Covenants—to maintain a certain appearance in Hampton—had been
abandoned. The HIA, on the other hand, argued that the purpose of Paragraph C of the
Covenants, which it duly enforced, is to limit residential density by precluding the
building of more than one residential dwelling on each lot.
In the seminal case of Belleview Construction Co. v. Rugby Hall Community
Ass’n, 321 Md. 152, 157–58 (1990), the Court of Appeals stated:
In construing covenants, “[i]t is a cardinal principle . . . that the court should
be governed by the intention of the parties as it appears or is implied from
the instrument itself.” The language of the instrument is properly
“considered in connection with the object in view of the parties and the
circumstances and conditions affecting the parties and the property . . . .”
This principle is consistent with the general law of contracts. If the
meaning of the instrument is not clear from its terms, the circumstances
surrounding the execution of the instrument should be considered in
arriving at the intention of the parties, and the apparent meaning and object
of their stipulations should be gathered from all possible sources.”
(citations omitted). The Court later provided:
As with contracts generally, a covenant is ambiguous if its language is
susceptible to multiple interpretations by a reasonable person. “An
ambiguity does not exist simply because a strained or conjectural
construction can be given to a word.” The first step is to “[d]etermine 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,” and
if “the language of the contract is plain and unambiguous there is no room
for construction.”
Dumbarton Imp. Ass’n v. Druid Ridge Cemetery Co., 434 Md. 37, 53–54 (2013) (citations
omitted). Extrinsic evidence should only be considered “when the intent of the parties
32
and the purpose of a restrictive covenant cannot be divined from the actual language of
the covenant in question, necessitating a reasonable interpretation of the language in light
of the circumstances surrounding its adoption.” MIE Props., Inc., supra, 398 Md. at 681.
If the court’s consideration of extrinsic evidence fails to shed light on its analysis, the
court should apply the rule of strict construction in favor of free alienability and use of
land. Id. (citing Belleview Constr. Co., supra, 321 Md. at 158).
We conclude that Paragraph C of the Covenants is not ambiguous as a matter of
law. The intention of the parties and purpose of Paragraph C is clear: to restrict the use
of each lot in Hampton to residential, single-family purposes. Even if Paragraph C was
ambiguous, the circuit court was not clearly erroneous in its factual finding as to
Paragraph C’s purpose. The circuit court heard testimony from the President of the HIA
and a member of the HIA’s architectural review committee that Paragraph C’s purpose
was to preserve the residential density and character of the neighborhood. We afford
great deference to the circuit court’s factual findings, and based on the evidence presented
at trial, we do not find clear error.
B. Waiver by Abandonment
Waiver is a long-recognized defense to the equitable enforcement of restrictive
covenants. MIE Props., Inc., supra, 398 Md. at 679. Waiver may occur either by
acquiescence, which involves “a covenantee abiding the violative actions of the
covenantor,” or by abandonment, which involves “the covenantee abiding the violative
actions of others besides the covenantor defendant which are taken as also waiving
impliedly violative actions of the covenantor defendant.” Id. (citing Kirkley v. Seipelt,
33
212 Md. 127, 136 (1957)). A covenant will not be enforced if the original plan of
improvement has been abandoned. Kirkley, supra, 212 Md. at 135 (citing T IFFANY ON
R EAL P ROPERTY § 587 (abridged ed. 1940)). “The question of whether there has been
such an abandonment is in each case a question of fact and must be established by
evidence clear and unequivocal of acts of a decisive nature.” Lindner v. Woytowitz, 37
Md. App. 652, 658 (1977).
As a threshold matter, we note that parties often conflate the standard for
determining waiver by abandonment and the standard for determining a covenant’s
continued validity in light of changed relevant circumstances in the neighborhood. The
latter standard is applied where a party challenges the enforceability of a restrictive
covenant when “there has been ‘deterioration in the residential character of the
neighborhood or a failure from the beginning of the restricted development, so that the
restrictions no longer served their intended purpose.’” Chevy Chase Vill. v. Jaggers, 261
Md. 309, 316 (1971) (quoting Texas Co. v. Harker, 212 Md. 188, 196–97 (1957)). The
inquiry in this context is “whether there has been a complete or radical change in the
neighborhood causing the restrictions to outlive their usefulness.” Id. (citations omitted).
Although this standard and the standard for waiver by abandonment share similarities, the
Court of Appeals clarified the differences between the two in MIE Props., Inc., supra,
398 Md. at 698 n.27. Specifically, the two standards are distinguished by “where the
inconsistent use is taking place and by whom.” Id. “[T]he change in circumstances
standard often involves changes to the surrounding neighborhood of the subject land that
are inconsistent with the covenant’s restrictions, but are neither carried out on the subject
34
land itself, nor by any covenantor,” whereas “[w]aiver by abandonment concerns
violative uses of the land subject to a restrictive covenant carried out by covenators other
than the one sought to be enjoined.” Id. Because the circuit court in the case sub judice
did not highlight this distinction, we do so now. We further note that the court did not
find that the residential character of the neighborhood had so radically deteriorated as to
render the covenants invalid.
In support of their waiver by abandonment argument, the Shaders first maintain
that the evidence produced at trial demonstrated that the HIA waived the restriction
against more than one dwelling per lot as shown on the 1930 Plat. The Shaders, as the
party seeking to prove waiver, bore the burden of proof. MIE Props., Inc., supra, 398
Md. at 699 (citing Canaras v. Lift Truck Servs., Inc., 272 Md. 337, 361 (1974)). The
Shaders first point to the Duval court’s factual findings that more than one house existed
on several lots as those lots were delineated on the 1930 Plat and emphasize that the HIA
did not dispute these findings in this case. A circuit court, however, is not generally
bound by another circuit court’s rulings, see, e.g., Nat'l Liberty Ins. Co. of Am. v. Thrall,
181 Md. 19, 22-23 (1942), and the record does not reflect that the Shaders introduced
evidence of these violations beyond merely citing to the court’s findings in Duval. At
trial, the Shaders personally testified about witnessing violations of Paragraph C’s
prohibition against the erection of any building other than a dwelling or garage. These
violations consisted of pool houses, guest houses, gazebos, sheds, and unattached garages.
The only testimony to support the existence of more than one house per lot was Mrs.
35
Shader’s description of the “guesthouse” on 610 East Seminary Avenue and Mr. Shader’s
reference to the findings in Duval.
On behalf of the HIA, two representatives testified that the purpose of Paragraph C
was to restrict the residential density of Hampton and that the HIA has enforced
Paragraph C to ensure that only one residential house is located on each lot. The
President of the HIA testified that he did not consider sheds and garages to be in violation
of Paragraph C’s one-dwelling-per-lot restriction. The circuit court concluded,
“[a]lthough the Shaders were able to show numerous instances of violations based on
upon the construction of separate structures on properties throughout the community, they
were unable to demonstrate construction of a second residence on a single lot.” Instead,
the circuit court found that the “the evidence demonstrate[d] that the HIA has consistently
taken action to enforce the restriction in the Covenants that requires ‘no more than one
dwelling may be erected on a Lot.’”
The Shaders also argue that the court cannot permit the selective enforcement of
covenants; in other words, the court cannot allow the HIA to abandon the restriction
against the erection of buildings other than dwellings and garages, but enforce the
restriction against more than one house per lot. The Shaders cite two out-of-state cases in
support of this position: Johnstone v. Bettencourt, 195 Cal. App. 2d 538 (Cal. Dist. Ct.
App. 1961); Moore v. Adams, 141 S.W.2d 46 (Ark. 1940). Both cases are unpersuasive.
Neither case addresses whether a restriction contained in a set of covenants is severable.
As accurately noted by the circuit court, the Maryland Court of Appeals has ruled
that restrictions in a set of covenants may be severable. In King v. Waigand, 208 Md.
36
308, 309 (1955), the defendants operated a store licensed to sell beer and wine in the
Riverdale Park subdivision. When the defendants later obtained a license to begin selling
spirituous liquor, plaintiffs sought to enjoin the defendants based on a restrictive covenant
applicable to the subdivision, which provided:
That no blacksmith or other shop, no manufactory of any kind, no livery
stables, pig pen, or bone boiling or similar establishment shall be erected or
permitted on said lots. That no spirituous or malt liquors shall be made,
sold or kept for sale upon said premises; that no nuisance or offensive,
noisy or illegal trade, calling or transaction shall be done, suffered or
permitted thereon, and that no part of said premises shall be
so used or occupied as to injuriously affect the use, occupation or value of
the adjoining or adjacent premises for residence purposes, or the
neighborhood wherein said premises are situated. * * * And any breach or
threatened breach of this covenant may be enjoined upon the application of
said grantor, their successors or assigns (assigns shall include any person
deriving title to any lot in said Riverdale Park from the grantors), and said
grantors, and their successors shall also have the right to recover the sum of
$1,000.00 as liquidated damages for every breach. These covenants are to
be taken and construed as running with the land.’
Id. at 310–11 (emphasis added). The defendants argued that the plaintiffs waived their
right to enforce the covenant because other establishments in the subdivision had sold
malt liquor and wine. Id. at 310. The chancellor granted the injunction on the ground
that “an abandonment of the restriction against malt liquors does not necessarily mean an
abandonment of the restriction against spirituous liquors.” Id. at 311. On appeal, the
Court of Appeals first noted that “[t]he obvious purpose of the covenant was to prevent
any establishments or activities that might detract from the subdivision as a residential
area.” Id. at 312. On the issue of whether the covenant was severable, the Court
concluded:
37
Th[e] restriction is in the disjunctive. The distinction between ‘spirituous
liquors' and ‘malt liquors' is perfectly clear and commonly known. We hold
that the restriction is severable. ‘Spirituous liquors' and ‘malt liquors' are
not synonymous terms.
Id. at 313. Other jurisdictions have reached similar conclusions. See Dauphin Island
Prop. Owners Ass'n v. Kuppersmith, 371 So. 2d 31, 34 (Ala. 1979) (“[W]e hold that any
failure of the Association to enforce the two-tie pilings restriction did not constitute
estoppel by acquiescence to assert either the height and roof restrictions or the building
permit restriction.”); Swaggerty v. Petersen, 280 Or. 739, 746 (1977) (“Assuming that
plaintiffs were, or should have been, aware of [numerous violations of the restrictions
elsewhere in the subdivision] . . . and failed to object to them does not preclude them
from suing to enforce the density restrictions. The right to enforce one restrictive
covenant is not lost by acquiescence in the violation of another restriction.” (citations
omitted)); see also 9 R ICHARD R. P OWELL, P OWELL ON R EAL P ROPERTY § 60.10[1]
(2000) (“Acquiescence in the violation of one restriction does not constitute acquiescence
in the violation of a different restriction unless the violation defeats the object of the
entire plan.” (footnote omitted)).
The circuit court here correctly concluded that the “restrictive Covenants may be
abandoned in part without resulting in a wholesale abandonment of all restrictive
Covenants.” Although the 1931 Covenants lack punctuation, the first paragraph of
Paragraph C technically comprises four independent clauses, and each serves as a
restriction. For visual clarity, we have separated the clauses as follows:
1. The land included in said tract except as hereinafter provided shall be
used for private residence purposes only and
38
2. no building of any kind whatsoever shall be erected or maintained
thereon except private dwelling houses each dwelling being designed for
occupation by a single family and private garages for the sole use of the
respective owners or occupants of the plots upon which such garages are
erected
3. there shall not be erected or maintained on said tract of land an
apartment house or house designed or altered for occupation by more
than one family and
4. no more than one dwelling may be erected on a Lot.
The final clause provides the definitive construct of the paragraph: that each lot is
restricted to no more than one family home, as “dwelling” was defined to apply to one’s
domicile or residence at the time the Covenants were drafted.17 The first clause instructs
that the use must be private, and the third clause clarifies that the use is for single family
occupancy. The second clause, which defines the acceptable appurtenances for each
single family dwelling, is the clause that the circuit court found was violated due to
evidence of additional buildings, such as sheds, gazebos and pool houses on various lots
in Hampton. Permitting the HIA to expand the concept of garage or building does not
destroy the purpose of Paragraph C, so long as these buildings are appurtenant to and for
the use of one single family dwelling. For this Court to hold that the abandonment of one
restriction in Paragraph C results in the abandonment of all restrictions would be
inequitable.18 Hampton could lose its aesthetic character and low residential density, as
17
See supra footnote 3.
18
Indeed, other portions of these Covenants are void and unenforceable. For example,
Paragraph B of the Covenants, entitled “Absolute Restrictions,” states, in part,
At no time shall the land included in said tract or any part thereof or any
building erected thereon be occupied by any negro or person of negro
39
homeowners would be able to subdivide their lots and construct multiple dwellings and
units to the limits of applicable zoning regulations. This would defy the clear intent of
Paragraph C of the Covenants: to restrict the use of each lot in Hampton to residential,
single-family purposes. As the Court of Appeals has instructed, we “‘are under a duty to
effectuate rather than defeat an intention which is clear from the context, the objective
sought to be accomplished by the restriction and from the result that would arise from a
different construction.’” MIE Props., Inc., supra, 398 Md. at 680 (quoting Belleview
Construction Co., supra, 321 Md. at 157-58). Therefore, we hold that the circuit court
did not err in concluding that the HIA did not waive the restriction prohibiting more than
one house per lot, consistent with the original Plat filed in 1930.
JUDGMENT AFFIRMED;
COSTS TO BE PAID BY APPELLANTS.
extraction This prohibition however is not intended to include the occupancy
by a negro domestic servant or other person while employed in or about the
premises by the owner or occupant of any land included in said tract.
Obviously State courts cannot enforce these covenants if requested to do so, as the
enforcement of such restrictions would violate the Equal Protection Clause of the Fourteenth
Amendment, which establishes “equality in the enjoyment of basic civil and political rights”
and preserves “those rights from discriminatory action on the part of the States based on
considerations of race or color.” Shelley v. Kraemer, 334 U.S. 1, 20–21, 23 (1948). The
unenforceability of this restriction does not render the balance of the restrictions
unenforceable so long as they are legal, reasonable, and viable. See, e.g., Viking Props., Inc.
v. Holm, 155 Wash.2d 112, 122–24 (2005) (en banc) (finding that a decades-old covenant
barring racial minorities from land ownership was severable from the density limitation
providing that only one dwelling may be on each one-half acre).
40