CDC-LCGH, LLC v. Mayor and City Council of Balt

Filing 920090226

Opinion

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT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 ALARCÓN, Senior Circuit Judge of the United States Court Appeals for the Ninth Circuit, sitting by designation.

L. of

Affirmed by unpublished per curiam opinion.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, ROSENBERGMARTINGREENBERG, 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Unpublished opinions are not binding precedent in this circuit.

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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. extend the lease and renovate the building

CDC had hoped to for use as its

headquarters. the proposed

However, CDC failed to obtain zoning approval for use of the property, to and such of approval the was an The

express

condition

precedent

extension

lease.

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 eightsided Gothic revival stone and tile-roof structure built in the 1880s and located in Baltimore's Lake Clifton Park. time, the building was dilapidated as a result of At the 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.

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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 property lease "shall provided be used of that, during for the the Initial review, Term, design JA at the and 61.

solely the

structural

`Study'

leased

premises."

Thereafter, if the lease were extended, the property "shall be used as office space by Lessee." 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 JA at 62. The lease further

The lease was executed by Center Development Corporation, a Maryland corporation, and then assigned to CDC. Citations to "JA" are to the Joint Appendix submitted by the parties.
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termination injury. JA at 75.

of

this

Lease,

without

molestation

or

CDC made improvements to the property during the Initial Term. received In November 2003, for to example, restore CDC the applied for and CDC

building

permits

Gatehouse.

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," center." this was CDC sought approval to use it as a "multi-purpose

It did so because the Zoning Board informed it that the only permissible use under the applicable

regulations. the

Nevertheless, the Zoning Board ultimately denied however, because CDC's description of the

application,

project did not include the kinds of governmental or community activities required by the to qualify as a CDC multi-purpose did not center as

contemplated

regulations.

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

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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. As a federal law of

Assoc., P.A., 372 F.3d 643, 646 (4th Cir. 2004). court sitting in diversity, we apply the

substantive Id.

Maryland, the state in which the action arose. CDC's arguments in turn.

We address

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

CDC also alleged fraud in the inducement, fraud by concealment, and negligent misrepresentation, but those claims have not been pursued on appeal.

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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. somewhat circularly, that because the proposed It argued, 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. 250 (4th Cir. 1993). Muth v. United States, 1 F.3d 246,

"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." clearly not the case here. In merit. the any event, CDC's newly minted contention is without Id. Such is

"Maryland courts have long adhered to the principle of interpretation of contracts." Wells v. Chevy

objective

Chase Bank, F.S.B., 363 Md. 232, 250-51 (2001). approach, "where the language employed in a

Under this contract is

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.

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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 this and Zoning is Appeals." that it The most natural Board

reading

of

provision

requires

Zoning

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.

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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 is CDC's CDC application, failed to the only reasonable express

interpretation

that

satisfy

the

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

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.

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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 lease was invalid to the extent Thus, CDC argues that the 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)

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.

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(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, falls risk arguendo, short. of that it could, CDC's case an for

impossibility only when the

Impossibility was

provides not

excuse by the

impossibility

assumed

promisor and was not foreseeable at the time of contracting.

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.

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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. to account for could the not possibility be The lease term was bifurcated that one The or more of the to

conditions

satisfied.

responsibility

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 invalid. CDC's of obtaining that approval rendered the lease

Moreover, because the lease is valid, it precludes claims for unjust enrichment and

quasi-contractual

promissory estoppel.

County Comm'rs, 358 Md. at 96.

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III. For the foregoing reasons, the judgment of the district court is AFFIRMED.

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