U.S. Home Corporation v. Settlers Crossing, L.L.C. et al

Filing 730

MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 1/22/2015. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
U.S. HOME CORPORATION
:
v.

:

Civil Action No. DKC 08-1863

:
SETTLERS CROSSING, LLC, et al.
:
MEMORANDUM OPINION
In this continuing litigation involving a contract dispute
over the sale of 1,250 acres of land in Prince George’s County,
Maryland

(the

primarily

to

“Property”),
2013

zoning

several

changes

narrow

that

issues

impacted

the

relating
Property

remained after the bench trial that resolved the primary issues.1
The parties submitted post-trial briefs and a hearing was held.
After

considering

the

parties’

arguments,

the

parties’

Agreement,2 and the evidence adduced at trial, the court now

1

This memorandum opinion includes only the facts and
arguments relevant to the narrow issues remaining in this case.
A full factual description of the dispute between the parties
can be found in previous opinions. (ECF Nos. 41, 95, 433, 445,
484, 493, 548, 603, 624, and 707).
2

The parties’ Purchase Agreement (JTX 41) and Second
Amendment to the Purchase Agreement (JTX 56), capture the major
terms of their agreement. The parties also executed a Contract
for Services (JTX 42), Consent and Estoppel Agreement (DTX 259),
and several other documents and amendments, which provide other
relevant details of their bargain.

issues

findings

of

fact

and

conclusions

of

law

pursuant

to

Federal Rule of Civil Procedure 52(a).3
I.

Background
On

July

18,

2014,

the

undersigned

found

that

Plaintiff/Counter-Defendant U.S. Home Corporation, a subsidiary
of

Counter-Defendant

Lennar

Corporation

(collectively

“Purchaser”), had not met its burden at trial of proving its
claims.

It

was

also

found

that

Defendant/Counter-Plaintiff

iStar Financial, Inc. was entitled to declaratory relief, namely
that “Purchaser was ‘obligat[ed] to settle . . . and pay the
considerations

due

under

the

[Purchase

Agreement]

Contract for Services on May 27, 2008[.]’”
73).

and

the

(ECF No. 707, at

In addition, the opinion noted that:
iStar appears to be entitled to relief under
the Purchase Agreement upon Purchaser’s
default.
Pursuant to § 15(a), as modified
by the Second Amendment, upon default by
U.S. Home, “Settlers Crossing shall be
entitled to specific performance . . . to
complete the Settlement in accordance with
the Agreement and pay the Purchase Price to
Settlers Crossing.
(JTX 56 ¶ 27 (modifying
§ 15(a)).

(Id. at 73-74).

3

Rule 52(a) provides that “[i]n an action tried on the
facts without a jury . . . , the court must find the facts
specially and state its conclusions of law separately.
The
findings and conclusions . . . may appear in an opinion or a
memorandum of decision filed by the court.”
2

Finally, the opinion concluded that “[b]efore judgment may
be entered, . . . a question remains as to whether iStar can
deliver

the

Agreement.”
zoning

Property

that

(Id. at 74).

regulations

in

was

promised

in

the

Purchase

Prince George’s County passed new

April

and

development on the Property.

July

2013

that

(ECF No. 611).

may

impact

Purchaser was

previously denied the opportunity to file supplemental briefing
regarding the rezoning of the Property because the court found
that “rezoning is only relevant insofar as it might affect an
award of damages if iStar were ultimately to prevail.”
624, at 2 n.1).
opinion

that

(ECF No.

Accordingly, the parties were informed in the

“[f]urther

proceedings

will

be

necessary

to

determine whether, or to what extent, the lapsed zoning affects
iStar’s remedy and the measure of damages in this case.”

(ECF

No. 707, at 75).
Following

the

issuance

of

the

July

18,

2014

memorandum

opinion, a teleconference was held with the parties on July 31,
2014, during which the remaining issues related to zoning were
discussed and a briefing schedule was set.
briefing

schedule,

Purchaser

submitted

remaining issues on September 12, 2014.

its

Pursuant to this
brief

on

the

(ECF No. 720).

On

October 3, 2014, iStar submitted its opposition (ECF No. 724),
along with a motion to strike portions of Purchaser’s brief (ECF
No. 723).

On October 17, 2014, Purchaser filed a reply (ECF No.
3

726), along with an opposition to iStar’s motion to strike (ECF
No. 725).

iStar replied to Purchaser’s opposition to the motion

to strike on October 29, 2014.
was heard on November 3, 2014.
II.

(ECF No. 727).

Further argument

(ECF No. 728).

Findings of Fact and Conclusions of Law
A.

The Impact
Remedy

of

2013

Zoning

Regulations

on

iStar’s

The first issue concerns which party bears the risk of loss
for zoning changes occurring in 2013 based on the language of
the Agreement, and the related issues of whether the rezoning of
the Property has changed the condition of the Property such that
specific performance is not warranted or whether Purchaser is
entitled to a reduction in the Purchase Price.
1.

The PSA’s Risk of Loss Provision Does Not Place Risk
of Plat Density Changes on Seller through Settlement

Purchaser

argues

that

under

the

Purchase

and

Sale

Agreement’s (“PSA”) risk of loss provision, Seller bears the
risk of loss for any decreases in the Property’s value resulting
from the 2013 changes in zoning and 2007 changes in stormwater
management regulations.4

Purchaser alleges that due to these

changes, the maximum plat density allowed on the Property under
the

current

zoning

has

been

reduced

4

from

1867

to

900,

“a

Purchaser’s arguments regarding the impact of stormwater
management regulation changes on the Property’s condition are
addressed infra in part II.B.
4

fraction of what the parties contemplated in the PSA.”5
720, at 18).
its

(ECF No.

Purchaser asserts that it will not be able to use

already-approved

development

plan

due

to

the

regulation

changes, but will be required to obtain new plan approvals that
comply

with

current

zoning,

which

may

be

costly.

(Id.).

Purchaser argues that the parties shifted risk for these changes
to Seller under the PSA by allocating risk of loss to Seller
until “Settlement,” which is defined in Section 5 of the PSA as
“[t]he consummation of the purchase and sale.”
56 § 5).6

(JTX 41 § 5; JTX

Purchaser contends that because Settlement has not yet

occurred, the risk of loss remains with Seller and any zoning
changes that have impacted the Property’s value are “losses” —
falling within the PSA’s risk of loss provision — for which
Seller is accountable.

Purchaser asserts that because “loss” is

not defined in the PSA, it is not subject to any limitations.
5

The term plat density refers to the number of units that
may be built on each portion of the Property. (ECF No. 720, at
15).
Purchaser argues that due to the zoning changes, plat
density potentially will be reduced, meaning the total number of
units that can be built in the development will be reduced,
which will decrease the value of the project.
(Id. at 15-18).
According
to
Purchaser,
plat
density
was
a
material
consideration under the PSA, and because it has been altered the
“Court must reduce the purchase price to honor the terms of the
agreement.” (Id. at 29 n.13).
6

The designation “JTX” refers to joint trial exhibits;
“PTX” refers to exhibits offered by Purchaser (U.S. Home and
Lennar); and “DTX” refers to exhibits offered by Seller (iStar).
References to trial testimony are designated by “T.” followed by
the date of the testimony.
5

It

contends

that

the

court

should

meaning, which it states is:

give

“loss”

its

ordinary

“the disappearance or diminution

of value, usu[ally] in an unexpected or relatively unpredictable
way.”

(ECF No. 720, at 22) (citing Black’s Law Dictionary 1087

(10th ed. 2014)).

Purchaser asserts that under this definition

and

with

in

zoning

accordance
and

entitlements

custom
that

in

the

industry,

“changes

decrease

permitted

density

in
and

increase development costs of a property that is being sold for
development”

are

“losses”

covered

by

most

risk

of

loss

provisions including that in the parties’ PSA.
In addition, Purchaser asserts that if the PSA is read as a
whole it supports the conclusion that any losses resulting from
zoning

changes

occurs.
of

Loss

are

Seller’s

responsibility

until

Settlement

It points to the language in Section 18(H) — the Risk
provision

—

which

keeps

risk

“[e]xcept as otherwise provided herein.”

of

loss

on

Sellers

Purchaser states that

the parties provided for different risk allocations in several
other sections of the PSA, namely:
Section 14 in the event of condemnation; and
Section 3 in the event that Sellers failed
to initially record plats for Bevard East,
Bevard North, and Bevard West.
See PSA §§
14, 3(d).
But neither of these provisions,
nor any other provision in the contract,
provides a special risk allocation of risk
for losses related to zoning or other
regulations affecting the permitted density
of the property subsequent to recordation of
plats.
6

(Id. at 23-24).
otherwise

Purchaser argues that because the PSA does not

provide

for

risk

of

loss

for

zoning

changes

but

specifically accounts for other losses, losses attributable to
zoning should be covered by the general risk of loss provision.
iStar counters that the PSA, when evaluated as a whole,
does

not

Seller.

place

the

risk

of

2013

zoning-related

changes

on

iStar contends that the intent of the parties with

regard to zoning changes is not demonstrated through the risk of
loss provision, but through several other PSA provisions:
[First,] the PSA required [] Sellers [to
make] an accurate certification [to] WPE
that, as of November 15, 2005, it had ‘no
knowledge of any published preliminary or
adopted land use plan (or adopted zoning Map
Amendment) which may result in condemnation
or taking of any part of the Land.’ JTX 41,
§ 19(B).
It also required that, as a
condition precedent to closing, Sellers
obtain
and
record
certain
plats
that
reflected agreed-upon lot densities. JTX 56
¶ 4 (amending PSA Section 3(d)). The Court
has already held that Sellers satisfied that
condition well in advance of the May 27,
2008 settlement date.
The PSA only called
for a reduction in the Purchase Price if the
lots dipped below threshold levels in those
recorded
plats.
Id.
Once
Sellers
accomplished plat recordation, Sellers[‘]
density-related obligations were complete.
The PSA is silent as to subsequent zoning
changes — except where it places the onus on
Lennar
to
monitor
publicly
available
information regarding same.
JTX 41, §
19(B).

7

(ECF No. 724, at 19-20).

iStar argues that the parties’ intent

with regard to plat density obligations on the Property, which
may

be

affected

by

zoning,

is

demonstrated

by

Seller’s

PSA

obligation to obtain and record certain plat densities by March
15, 2009.
record

Seller’s requirements to obtain approval for and to

certain

plat

densities

were

conditions

precedent

to

Settlement, conditions which the court found had been satisfied
by May 27, 2008.

(Id. at 20).

Seller contends that at the time

the contract was entered, the parties’ intent could not have
been for risk of loss for zoning and plat density changes to
remain with Sellers through 2013, as the PSA contemplated that
“Sellers would satisfy all conditions precedent no later than
March 15, 2009 and that Settlement, at the latest, would be
thirty days thereafter.”7

(Id.).

Accordingly, iStar argues that

the risk of loss provision was not meant to cover plat density
changes caused by zoning regulations passed in 2013, as its
obligations surrounding plat density were time sensitive and its
responsibility for any plat changes ended at the latest in March
2009.

7

Seller points to the “time is of the essence” provision in
Section 18(D) of the PSA to emphasize that under the parties’
Agreement it was essential that all matters were completed
within the appropriate timeframes.
8

Furthermore, iStar takes issue with Purchaser’s argument
regarding when risk of loss was due to shift to Purchaser.8
Seller argues that even though it bore the risk of loss through
“Settlement,” the “Court has already held that Settlement was to
occur on May 27, 2008.”

(ECF No. 724, at 21).

iStar contends

that because the “PSA did not contemplate the possibility of
‘Settlement’

beyond

2009,

and

certainly

never

into

2013,

purported losses occurring over four years later could not and
did not remain with Sellers and iStar.”

(Id.).

iStar adds that

because the court found that Purchaser was in default as of May
27, 2008 for failing to settle, Purchaser thereafter does not
get to enforce the risk of loss provision which shifted risk to
Purchaser upon settlement.

(Id. at 22).

In sum, iStar argues

that the “parties allocated risk [for possible zoning changes]
by creating the condition precedent requiring Sellers to obtain
and

record

obtained

the

all

record

necessary

plats.

Having

approvals,

8

the

done
risk

so,

and

shifted

having
back

to

Purchaser has distinguished that under the PSA, risk of
loss remained with Seller through “Settlement” rather than the
“Settlement Date.” iStar notes that while the PSA defines the
“Settlement Date” as (A) thirty days after all conditions
precedent have been met by Sellers, or (B) the “Outside
Settlement Date,” the PSA also makes Settlement mandatory on the
earlier of (A) or (B), noting that “Settlement shall take place
on that date[.]”
(ECF No. 20-21).
iStar argues that “the
avoidance of Settlement on the Settlement Date was Lennar’s own
doing, and Sellers held Lennar accountable for it with a timely
notice of default.” (ECF No. 724, at 21).
9

Lennar to put those plats and approvals to actual use in a
timely fashion.”

(Id. at 22-23).

Purchaser responds that regardless of whether it was in
default under the PSA and despite Seller’s argument that it had
no affirmative contract obligation to maintain zoning after May
27,

2008,

the

“allocates
duties.”

risk

risk
among

of

loss

provision

parties

(ECF No. 726, at 9).

without

prevails
regard

because

to

it

contractual

Purchaser argues that “[w]hen an

event for which the parties have allocated risk occurs, the
risk-bearing party bears the losses occasioned by the event,
irrespective of either party’s breach.”
v.

Lehmann,

proposition

19
that

Ill.App.3d
“where

a

557

(Id.).

(1974),

property’s

as

value

It cites Geist
supporting
was

the

affected

by

events outside the parties’ control — [] risk of loss principles
rather than obligation and breach analysis [applies.]”

(ECF No.

726, at 9).
When read as a whole, the parties’ Agreement does not place
risk of loss on Sellers for zoning changes occurring after the
“Settlement

Date.”

Both

parties

acknowledge

that

when

evaluating the meaning of a specific contract provision, it must
be

read

“in

light

of

the

language

of

the

entire

contract.”

Weichert Co. of Md., Inc. v. Faust, 419 Md. 306, 324 (2011).
Here, the PSA’s risk of loss provision in Section 18(H) does not
specifically address which risks are covered; rather, it states
10

only that “[e]xcept as otherwise provided herein, the risk of
loss

shall

remain

with

WPE

and

simultaneously at Settlement.”9

shall

pass

PSA § 18(H).

to

Purchaser

This provision

alone does not clarify the parties’ intent regarding which party
bears

the

highlight

risk
several

of

loss

other

for

zoning

sections

in

changes.
the

PSA,

The

parties

however,

which

provide additional guidance.
Purchaser highlights Sections 3 and 14, stating that they
exemplify where risks were “otherwise provided” for, and that
all

other

risks

not

specifically

addressed,

including

zoning

changes, are covered by the general risk of loss provision.
Both

Sections

3

and

14,

however,

relate

to

zoning

and

plat

density on the Property and provide insight into the parties’
intentions with regard to land use changes.

Section 3(d) of the

original and of the Second Amended PSA encompasses the parties’
9

Purchaser points to Geist, 19 Ill.App.3d 557, stating that
courts “[i]nterpreting analogous [risk of loss] provisions in
similar circumstances . . . have concluded that risk of loss
remains with a seller — including during the pendency of a legal
dispute.” (ECF No. 720, at 20). The provision allocating risk
of loss for fire damage in Geist, which provided that “if prior
to closing, improvements on said premises shall be destroyed,
materially damaged by fire or other casualty, this contract at
the option of Purchaser shall become null and void[,]” is easily
distinguishable from the allocation of risk for plat density
changes in the present case.
In Geist, material losses due to
fire damage between the date the contract was executed and
closing were expressly addressed in the risk of loss provision,
whereas here, the boilerplate risk of loss provision does not
address losses due to zoning changes; rather, these risks are
addressed elsewhere in the PSA.
11

expectations
plat

density

provided

for

regarding

any

Purchase

changes.

In

a

Price

Purchase

the

Price

original

adjustments
PSA,

reimbursement

due

section

schedule,

to

3(d)
under

which Settlers Crossing would reimburse Purchaser part of the
Purchase Price “[i]f, and only if, the Record Plat(s) Approval
for the . . . Property [were] collectively approved for less
[than] one thousand eight hundred fifty (1,850) Units[.]”10
41).

(JTX

The Second Amended PSA maintained a similar Purchase Price

reduction schedule based on the number of Record Plats initially
approved.
Section

(JTX 56 § 3(d)).

3(d)

provide

a

Thus, the original and the amended

specific

bargained-for

mechanism

for

reducing the Purchase Price under a singular condition — “if,
and only if” the number of record plats originally approved was
less than the required density.
getting
recorded

the

requisite

within

the

number

required

Seller met its obligations by
of

Record

timeframe,

Plats

approved

satisfying

its

and
plat

density obligations.11

10

Furthermore, Section 3(d) of the Second Amended PSA adds
a requirement that “Settlers Crossing and WPE shall not cause
the number of Units contained on the Record Plat(s) for the
Property to be reduced[.]”
(JTX 56).
Any plat reductions on
the Property following the Settlement Date, however, have been
due to actions of the County government, not Seller.
11

In the last two paragraphs of Section 11, as altered by
the Second Amendment, all Conditions Precedent to Settlement —
including Plats Recordation (§ 11(l)) — were required to have
been satisfied at the latest by March 15, 2009, otherwise
Purchaser had the right to waive the unsatisfied conditions and
12

Section 14 of the PSA, like Section 3, does not support
Purchaser’s
requires

argument

Seller

occurred

in

to

event

that

a

the

cover

2013,

Settlement Date.

that

PSA’s

losses

years

due

after

risk
to

the

of

loss

zoning

provision

changes

Agreement’s

that

required

Section 14 provides the parties’ rights in the

“governmental

or

quasi-governmental

authority”

condemns or takes the Property pursuant to its eminent domain
powers.

Specifically, if a “taking of all of the Land or any

material portion thereof occurs[,]” Seller was required promptly
to notify Purchaser and Purchaser had twenty days to decide
whether to terminate the Agreement and get back its deposit or
to continue with the transaction.12

Government regulation of

private property, including zoning, if it deprives the property
owner of “all economically beneficial us[e]” of the property, is
considered

a

“regulatory

Takings Clause.
528,

537-40

taking

under

under

the

Fifth

Amendment’s

See Lingle v. Chevron U.S.A. Inc., 544 U.S.

(2005)
the

taking”

(describing
Fifth

what

Amendment)

constitutes
(alteration

a

regulatory

in

original).

Neither party has argued that the zoning changes at issue are a
proceed to Settlement or terminate the agreement.
Seller met
its deadline, as it has been found that all Conditions Precedent
were satisfied and Purchaser was obligated to settle on May 27,
2008. (ECF No. 707, at 73).
12

Following a government taking of the Property, if
Purchaser elected to continue with the agreement, Section 14 of
the PSA provided the parties a financial fallout plan, including
how the Purchase Price would be calculated and paid.
13

taking of the property, nor could they.

The PSA addresses the

allocation of financial risk for both minor plat density changes
in Section 3(d) (Purchase Price reductions due to minor plat
changes) via zoning or otherwise, and a complete taking of the
Property

in

Section

parties’

other

14

rights

(Purchase

following

zoning or otherwise.

Price

calculation

extreme

zoning

and

the

changes)

via

Thus, the parties considered the full

range of possible land use changes when drafting the PSA and
addressed

them

via

specific

provisions

rather

additional

PSA

than

in

the

general risk of loss provision.
iStar

points

to

several

provisions

that

similarly reflect that the risk of loss provision was not meant
to address zoning changes occurring after the PSA’s required
Settlement

Date.

As

iStar

points

out,

its

plat

density

obligations were part of the Conditions Precedent to Settlement,
which it was required to satisfy by the Settlement Date, or at
the latest, the outside Settlement Date of March 15, 2009.

(JTX

56

that

§

11).

At

the

hearing,

however,

Purchaser

argued

section 11(i) — a Condition Precedent which placed the risk of
future government moratoriums on Seller — contradicts Seller’s
argument that the recording of the plats terminated all of its
plat density obligations.13

Purchaser is correct that the risk

13

Section 11(i) placed the risk on Seller that, prior to
the Settlement Date, no government moratoriums on construction
14

of a government moratorium remained with Seller beyond the time
when it recorded the Plats, but 11(i) still does not support
Purchaser’s

ultimate

argument

that

Seller’s

obligations extend beyond the Settlement Date.
the

plain

Conditions

language
Precedent

in

the

Section

introductory
(Second

plat

density

Indeed, based on

statement

Amended

to

Section

the
11),

Seller’s accountability for the Conditions Precedent was that
“all such conditions must, in fact, be and remain satisfied as
of the Settlement Date.”

Importantly, the Conditions Precedent

section included multiple conditions related to plat density on
the Property.14

Thus, Seller was required initially to satisfy

these conditions, then ensure they remained satisfied until the
Settlement Date, but Seller had no obligation to maintain the
Conditions Precedent following the Settlement Date.
iStar also points to PSA Section 19(B) (“Prince George’s
County Disclosures”), wherein Seller was required to make an
initial disclosure on the Agreement’s original Effective Date,
or development would occur delaying or prohibiting Purchaser’s
project.
If the risk transpired prior to the Settlement Date,
then Seller would have been unable to satisfy the Conditions
Precedent, and Purchaser could have terminated the deal. Thus,
as with the parties’ allocation of risk for the record plats,
Seller was only on-the-hook for the occurrence of government
moratoriums prior to the Settlement Date.
14

Section 11 of the original PSA and Second Amended PSA,
includes multiple provisions related to zoning and plat density:
11(e) Record Plat Approvals; 11(g) Zoning for Bevard East Land;
11(i) government moratoriums on construction; and 11(L) Plat
Recordation.
15

November 15, 2005, concerning any future land use plans on the
Property.

Following

this

disclosure,

however,

Purchaser

acknowledged that it was “aware that information relating to (a)
government

plans

for

land

use,

roads,

highways,

parks,

transportation and other matters, and (b) rezoning, is available
for inspection [in] the County[.]”

PSA § 19(B).

Thus, after

Seller’s initial disclosure of its knowledge of future land use
plans for the Property, Purchaser was charged with monitoring
the County’s future zoning plans.
Section

19(B)

along

with

the

aforementioned

provisions

specifically address the parties’ expectations for plat density
changes due to zoning changes.

In contrast, the boilerplate

risk of loss provision says nothing about plat density or losses
due

to

zoning

changes.

A

common

principle

of

contract

interpretation is that when two contract provisions conflict,
the

specific

provision.

contract

provision

controls

the

more

general

See Heist v. E. Sav. Bank, FSB, 165 Md.App. 144, 151

(2005) (quoting Fed. Ins. Co. v. Allstate Ins. Co., 275 Md. 460,
472

(1975))

(“[W]here

two

clauses

or

parts

of

a

written

agreement are apparently in conflict, and one is general in
character and the other is specific, the specific stipulation
will take precedence over the general, and control it.); see
also Macke Laundry Serv. Ltd. P’ship v. Alleco Inc., 743 F.Supp.
382, 386 (D.Md. 1989) (noting the “well-settled rule of contract
16

construction
general

that

a

provision

conflict”).

specific
where

Accordingly,

provision

such
the

will

provisions
PSA’s

control

are

provisions

over

arguably
that

a
in

directly

address plat density changes control the general risk of loss
provision, meaning risk was allocated to Seller for any plat
density or zoning changes occurring prior to the Settlement Date
according

to

adjustments

Sections

based

on

5(a)
plat

and

11,

density

and

any

changes

Purchase

are

Price

controlled

by

Sections 3(d) and 14.
The PSA also includes a “time is of the essence” provision
(Section 18(D)) as well as several explicit timeframes within
which the parties were required to fulfill their PSA obligations
that demonstrate when the risk of plat density changes remained
with Seller and when it shifted to Purchaser.

See Williams v.

Fed. Home Loan Mortg. Corp., No. PWG-13-2453, 2013 WL 6713278,
at *1 (D.Md. Dec. 18, 2013) (finding that plaintiff breached by
failing to perform (making full payment) by the date specified
in

the

contract,

which

had

a

“time

is

of

the

essence”

provision).

The parties appreciated the time sensitivity for

certain

obligations,

PSA

timeframes

into

their

which

is

Agreement.

why

they

These

expressly

timeframes

built

further

clarify whether Seller was responsible for retaining all zoning
requirements in the Conditions Precedent section, including plat
densities, through 2013.

Seller’s major deadline was to meet
17

all

Conditions

Precedent

in

Section

11,

including

receiving

approval for the Record Plats and obtaining category R-L Zoning
for Bevard East, by May 15, 2009.
Conditions

Precedent,

settlement

was

Second

Amended

Purchaser’s

activated.
PSA,

Once Seller satisfied all

As

obligation

noted

“[s]ubject

to

in

the

to

Section
terms

proceed
5(a)

and

of

to
the

conditions

contained in the last paragraph of Section 11, and provided all
conditions precedent to Settlement contained in Section 11 of
this Agreement are satisfied, Settlement shall take place on
December 5, 2007 (“the Settlement Date”)[.]”

(emphasis added).

These provisions show that the parties contemplated that prompt
action

on

the

part

of

Purchaser

was

necessary

once

the

Conditions Precedent were met due to the potential variability
of conditions on the Property.15

Moreover, Section 5(a) sets a

mandatory and finite Settlement Date, memorializing the parties’
intent that Purchaser proceed to Settlement promptly within 30
days of Seller’s satisfaction of the Conditions Precedent.
§§ 5(A), 11.
loss

for

PSA

Accordingly, Purchaser’s argument that the risk of

rezoning

remained

with

Seller

through

2013

because

“Settlement,” as defined by the PSA, has not yet occurred is
insidious.

Purchaser holds tightly to the PSA’s language to

15

For instance, both parties acknowledged at the hearing
that development plan approvals and construction permits do not
last
forever,
rather
the
developer
must
reach
certain
development milestones to vest zoning and entitlements.
18

distinguish

that

risk

of

loss

passes

to

it

at

“Settlement”

rather than the “Settlement Date.” Purchaser, however, glosses
over the fact that the PSA’s language also required that it
proceed to “Settlement” on the contractually-fixed “Settlement
Date.”
was

The parties’ intention, as expressed through the PSA,

that

Purchaser

settle

once

Seller’s

Conditions

Precedent

were met, which was also when the risk of any plat density
changes

—

Purchaser.
it

be

due

to

rezoning

or

otherwise

—

was

to

shift

to

Had Purchaser settled when required, not only would

accountable

for

any

losses

caused

by

the

2013

zoning

changes, but the 2013 zoning changes would likely be a non-issue
because

construction

already

begun

or

of

been

Purchaser’s
completed,

desired zoning specifications.16

development

grandfathering

would

have

Purchaser’s

When the parties’ Agreement

provides that Settlement is to occur timely due to changing land
use regulations, Purchaser’s failure to settle does not entitle
it to a reduced purchase price for plat density changes caused
by rezoning of the Property that occurred six years after the
risk of plat density changes should have shifted to Purchaser.

16

As Seller points out, “while this litigation was pending,
iStar could not begin its own build-out of the Bevard property
‘with the intention to continue with the construction and to
carry it through to completion,’ which is the only way that
entitlements and zoning may vest.”
(ECF No. 724, at 36 n.15)
(quoting Trinity outdoor, L.L.C. v. City of Rockville, Md., No.
JFM-03-2372, 2004 WL 78054, at *3 (D.Md. Jan. 15, 2004)).
19

2.

iStar is Entitled to Specific Performance without Any
Reduction in the Purchase Price Under the Terms of the
PSA and Consistent with Equitable Principles

Although

specific

performance

is

generally

an

equitable

remedy, in this case the parties included specific performance
in

the

PSA

as

a

contract

remedy.

Seller’s

entitlement

to

specific performance under the PSA was discussed in the July 18,
2014

memorandum

opinion,

and

Purchaser’s

entitlement

to

a

reduction in the Purchase Price based on the PSA’s risk of loss
provision
Purchaser’s

is

discussed

arguments

above

and

in

part

supporting

II.A.1.

case

law

Some
—

of

involving

whether specific performance is warranted or a reduction in the
purchase price is necessary due to the changed condition of the
property — are based on equitable principles, however.

Although

it has been found that specific performance is warranted based
on the terms of the PSA, granting specific performance is always
within the discretion of the court, thus Purchaser’s equitable
arguments will briefly be considered.17

17

See Data Consultants,

When parties pursue equitable relief, the court is not
held to a narrow reading of the record; rather, it must “look to
all the facts and circumstances of the case and weigh the
equities of the parties.”
Gasser Chair Co. v. Infanti Chair
Mfg. Corp., 60 F.3d 770, 773 (Fed. Cir. 1995); see also State
Ctr., LLC v. Lexington Charles Ltd. P’Ship, 438 Md. 451, 608
(2014) (“Equity is not limited, however, to such a tunneled
vision of the circumstances. Instead, we are permitted to weigh
all the facts.
In doing so, the motivations of the parties
matter[.]”). Accordingly, the issue of whether the court should
refuse an award of specific performance or reduce the Purchase
Price due to zoning changes that occurred in 2013 will not be
20

Inc. v. Traywick, 593 F.Supp. 447, 453 (D.Md. 1983) (“Specific
performance
discretion

of

a

contract

controlled

by

is

a

matter

established

of

sound

principles

of

judicial
equity.”)

(internal citations omitted); see also Namleb Corp. v. Garrett,
149

Md.App.

163,

174

(2002)

(“Specific

performance

may

be

granted in an appropriate case on the basis of the strength of
the circumstances and equities of each party.”).
Purchaser argues that in order for Seller to be entitled to
specific

performance,

it

must

show

that

there

has

been

no

“adverse material change that affects the seller’s ability to
convey the property [as] contemplated by the agreement[.]”
No. 720, at 24).

(ECF

Purchaser asserts that because the new zoning

regulations prohibit it from developing the Property according
to its original development plan, the court should terminate the
contract

and

give

Seller

the

alternative

retaining Purchaser’s deposit.

contract

remedy

of

In the alternative, Purchaser

argues that if the court orders specific performance, it must
reduce the Purchase Price to account for the changed condition
of the Property due to rezoning.

(Id. at 25-26).

Seller counters that the 2013 zoning regulations did not
change the permissible use of the Property in any material way.
iStar distinguishes the current situation from the cases relied

viewed in isolation, but in conjunction with all relevant facts
and circumstances in this case.
21

upon by Purchaser, noting that this is not a situation “where
drastic zoning changes have occurred, rendering the anticipated
uses impossible or illegal” (ECF No. 724, at 23), nor is it a
situation where the Property has undergone substantial damages
due to a casualty event or due to any fault of Seller (Id. at
33-35).
674,

Seller cites Archway Motors, Inc. v. Herman, 37 Md.App.

683-87

(1977),

for

the

proposition

that

“no

subsequent

change [in law] which may make [a contract] less beneficial to
one of the parties is material ‘unless the change is in some way
the fault of the party seeking its specific execution.’”
Nos. 612, at 9 and 724, at 16).

(ECF

iStar also argues that when a

party defaults by wrongfully failing to settle on a certain date
as required by the parties’ contract, zoning regulations that
are passed years later that impact the condition of the Property
are not relevant to the non-breaching party’s remedy.
equitable

principles,

it

argues

that

should not be converted to its advantage.

Purchaser’s

Based on
own

delay

(ECF No. 724, at 18-

19) (citing Nat’l Waste Managers, Inc. v. Anne Arundel County,
135 Md.App. 585 (2000)).
Although

the

2013

zoning

regulations

may

impact

the

condition and ultimately the value of the Property, the zoning
occurred

long-after

iStar

had

already

met

its

contractual

obligations and after Purchaser was contractually obligated to
settle but failed to do so.

As Seller points out, in Archway
22

Motors,

37

Md.App.

at

686,

the

court

clarified

that

“[t]he

fairness or hardship of a contract is to be judged as of the
time when it was made and no subsequent change which may make it
less beneficial to one of the parties is material unless the
change

is

in

some

way

specific execution.”18

the

fault

of

the

party

seeking

its

Id. (citing Glendale Corp. v. Crawford,

114 A.2d 33, 36 (Md. 1954)) (finding that any potential hardship
caused to the land purchaser based on notices, issued by the
city

government

subsequent

to

the

execution

of

the

purchase

agreement, that the property was in violation of the city code
were not a bar to specific performance); see also Latipac Corp.
v. BMH Realty LLC, 93 A.D.3d 115, 129-30 (Ny. App. Div. 2012)
(holding that an adverse change in the law, occurring between
the time the contract was entered and closing, that impacted the

18

Purchaser’s request for additional discovery on the issue
of Seller’s fault for the changed zoning of the Property is also
not warranted, as rezoning is not something that was within
iStar’s control.
See Archway, 37 Md.App. at 686 (finding that
seller was in no way at “fault” when the city government issued
violation notices post execution of the contract regarding the
property’s compliance with the city code); see also Schneider v.
Saul, 224 Md. 454, 461 (1961) (indicating that a seller is “not
in any way responsible for the delays occurring after the date
of settlement” caused by the county’s sua sponte revocation of a
special exception to a zoning ordinance).
Moreover, to the
extent it could influence zoning of the Property, iStar sought
to retain the zoning specified in the PSA. (ECF No. 724, at 1416) (providing evidence that iStar’s counsel appeared before the
County Council to argue against zoning changes on Bevard North,
and successfully sought judicial review of zoning changes the
Council passed for Bevard East).
23

value

of

the

apartments

to

be

purchased

did

not

alter

purchaser’s obligation to close).
Furthermore, if Purchaser had settled when it was required
to on May 27, 2008, it would have obtained exactly what it
bargained for under the PSA, which was the Property with the
specific

zoning

development plan.

specifications

that

met

its

then-approved

Purchaser’s delay in proceeding to settlement

requires that it absorb any losses incurred during its delay.19

19

Purchaser and Seller in this case are similarly situated
to the buyer and seller in Latipac.
The Latipac court found
that when a buyer refuses to proceed to closing for a “time-isof-the-essence” closing date, as required under its contract,
and instead institutes a court proceeding, there is no reason to
shift to seller “the risk of an adverse change in the law or
other development that would excuse [purchaser’s] performance as
buyer” when the proceeding is ultimately found to be meritless.
93 A.D.3d at 129-30. Although Latipac involved a buyer filing a
temporary restraining order (“TRO”) rather than seeking a
declaratory judgment to resolve a dispute, the principles behind
the Latipac court’s decision are equally applicable here:
Latipac [the buyer] — which, but for the
TRO, plainly would have been in default had
it refused to close on January 30 [the
closing date] — now asks this Court to
reward it for having delayed the closing by
making a meritless motion.
Latipac was
entitled to make the motion . . . but, the
motion having been denied and the denial
having been affirmed on appeal, there is no
reason, in equity and good conscience, to
allow dilatory tactics of this sort to shift
to [seller] . . . the risk of an adverse
change in the law or other development that
would excuse Latipac’s performance as buyer.
Id.
24

Cf.

Nat’l

Waste

developer’s

Managers,

two-year

period

135

Md.App.

to

commence

at

607-08

(tolling

construction

under

a
a

zoning special exception due to the county’s repeated attempts
to thwart the developer’s construction of its landfill by filing
litigation, reasoning that “a developer facing a time-related
condition could almost always be thwarted in its efforts by the
inevitable delay resulting from litigation, regardless of the
merits”); Latipac, 93 A.D.3d at 129-30 (finding that a buyer’s
delay tactic in refusing to close and instead filing a TRO to
avoid closing, would not permit the buyer to shift the risk of
an adverse change in the law that occurred after the required
closing

date

Cal.App.2d
estopped

to

291,
from

the
293-96

claiming

seller);
(1958)
the

cf.

Tinker

(finding

benefit

v.

that

from

the

McLellan,
purchasers
risk

of

165
were
loss

provision when the property was damaged by a flood after the
date on which closing was to occur, when purchasers had delayed
closing by failing to honor their promise to pay closing costs).
Purchaser will receive the Property in substantially the
same condition it bargained for,20 except it will be required to

20

Contrary to Purchaser’s assertions, iStar can still
deliver the same Property that was promised in the PSA — there
have not been any substantial or material changes to the
condition of the Property that would render specific performance
inequitable. Although the new zoning regulations may impact the
value of the property by reducing the number of residential
units that may be built, they do not prohibit Purchaser from
pursuing its main purpose.
Unlike in the cases cited by
25

seek special exceptions from the County in order to pursue its
previously approved development plan.

In the alternative, it

could continue development under the current zoning, but may be
unable to develop the same density of residential units that it
originally

planned.

Either

way,

specific

performance

is

warranted based on the facts and circumstances of this case.
Moreover, neither the contractual allocation of risk for plat
density changes, nor equitable factors support a reduction in
the Purchase Price.21

Purchaser, the rezoning in this case does not render Purchaser’s
purpose for the Property — residential development — impossible.
See Anderson v. Steinway & Sons, 178 A.D. 507, 512-15 (Ny. App.
Div. 1917) (refusing to compel specific performance when the
subject property was rezoned for solely residential use between
the date the contract was executed and closing, prohibiting the
purchaser’s intended purpose for the property of building a
factory for his business); see also Clay v. Landreth, 187 Va.
169, 172-80 (1948) (affirming the lower court’s decision to deny
a decree of specific performance when the purpose for which the
land was sold — to build a storage plant — was defeated by a
subsequent unanticipated zoning ordinance changing the lot from
a business use property to a residential use property); see also
Kend v. Crestwood Realty Co., 246 N.W. 311, 312-13 (Wis. 1933)
(finding that the “equitable relief of specific performance
[was] unfair or unjust”
where a purchaser entered into a land
contract in which seller warranted that the premises were zoned
for business purposes, but subsequently the premises were
rezoned for exclusively residential purposes).
21

Under Maryland law, when a court orders specific
performance of a land sale contract, equitable abatement of the
purchase price may be warranted but only to compensate purchaser
for a minor breach by the seller.
See, e.g., Senick v. Lucas,
234 Md. 373, 378-81 (1964) (holding that purchaser was not
entitled to rescind the land sale contract, but could receive
compensation for seller’s slight breach in reducing the size of
a tool shed on the property).
Here, Purchaser is not entitled
26

B.

The Impact of 2007 Stormwater Management Regulations
on iStar’s Remedy

In addition to Purchaser’s concerns over the impact of the
2013

zoning

changes

on

the

Property,

Purchaser

also

raised

similar concerns regarding 2007 changes to Maryland’s stormwater
management

regulations.

Purchaser

argues

that

“while

the

parties litigated their dispute . . . Maryland promulgated new
storm water regulations affecting the entire property.
changes

prevent

the

owner

of

the

property

from

These

obtaining

construction permits and proceeding with the previously-recorded
development plan for the Property.”

(ECF No. 720, at 14-15).

Purchaser asserts that these new regulations may increase costs
of the project and delay construction by requiring it to seek
approval of new site plans.
iStar

asserts

that

(Id.).

this

never-before-raised

argument

by

Purchaser is untimely and irrelevant to iStar’s entitlement to
specific

performance.

iStar

moved

to

strike

this

argument,

asserting that Purchaser waived it by never raising it, “in any
operative

pleading,

not

during

summary

pretrial order, and not during trial.”

judgment,

not

in

the

(ECF No. 724, at 37).

iStar emphasizes that Purchaser had ample opportunity to address
this issue as the new regulations were passed on April 24, 2007,
to any reduction in the Purchase Price because there was no
default by Seller, as it fully satisfied the PSA’s Conditions
Precedent and was prepared to deliver the Property with
Purchaser’s specified zoning by the Settlement Date.
27

became effective on May 5, 2009, were brought to Purchaser’s
attention

by

its

engineers

in

2009,

and

were

specifically

discussed in a deposition in 2011.
Purchaser contends that it is not arguing that specific
performance is improper because of the stormwater regulations,
but that these regulations should be “factored into the reduced
purchase price[.]”

(ECF No. 725, at 14).

Purchaser asserts

that the stormwater management argument was “not ripe until the
zoning changes came to light, and it would make little legal or
practical sense for the Court to ignore these actual, real-world
developments when calculating the real value of the property.”
(Id.).
Purchaser

treats

the

zoning

and

stormwater

regulations

changes as if they are one and the same, combining these issues
in several parts of its brief.

(ECF No. 720, at 19).

Unlike

Purchaser’s efforts to raise and preserve the issue regarding
zoning

regulations

(see

ECF

Nos.

611

and

614),

however,

Purchaser raised stormwater management regulations for the first
time post-trial and therefore has waived this issue.

See McLean

Contracting Co. v. Waterman Steamship Corp., 277 F.3d 477, 480
(4th Cir. 2002); see also Westfarm Assocs. Ltd. P’ship v. Int’l
Fabricare Inst., 846 F.Supp. 439, 441 (D.Md. 1993) (holding that
a party’s failure to plead a liability cap in its answer or
raise it at any time until after the trial constituted a waiver
28

of that defense).

Purchaser was aware of the 2007 stormwater

management changes as early as May 20, 2009, when Mr. Alejandro
Villegas of Dewberry & Davis, the engineering firm hired by
Purchaser and Seller, contacted U.S. Home and Lennar regarding
the

changes

in

the

stormwater

regulations.

At

the

latest,

Purchaser was aware of the 2007 stormwater regulation changes on
October 12, 2011, when Mr. Villegas was deposed and he described
in

detail

to

Purchaser’s

counsel

what

impact

the

stormwater

regulations could have on the project if the project was not
grandfathered under the prior regulations.22
3).

(ECF No. 723-5, at

If Purchaser believed that these regulations would have a

material impact on the Property, then it could have performed
more extensive discovery on this issue and included it in its
summary judgment briefs or addressed it at trial.

Unlike the

April 2013 zoning regulation changes, which Purchaser allegedly
did not discover until October 2013 (after the summary judgment
briefing had already been submitted), Purchaser had knowledge of
the

stormwater

management

regulations

22

for

years

prior

to

Mr. Villegas’s statements during his October 12, 2011
deposition should have put Purchaser on notice that the
regulatory changes would make stormwater management more
expensive if the project could not be grandfathered.
For
instance, he noted that due to the regulation changes,
“[Purchaser] probably would have to reassign and review a lot of
the entitlements, construction drawings, and potentially lose
the entity.” (ECF No. 723-5, at 3).
29

submitting its pre-trial motions.23
trial

to

address

this

issue

when

There is no reason postit

could

have

been

timely

raised by Purchaser.24
Furthermore, Purchaser implicitly acknowledges in its brief
that, at least for the stormwater management regulations, its
development plan could have been “grandfathered” under the prior
more

favorable

stormwater

regulations

if

the

developer

achieved certain milestones by the necessary dates.25

had

(ECF No.

23

In Purchaser’s October 31, 2013 motion requesting leave
to file a supplement regarding the 2013 zoning changes,
Purchaser
never
mentions
the
2007
stormwater
management
regulations. The court denied this motion and tabled the issue
of zoning for later resolution.
Although the zoning issue is
now ripe for review, this does not necessarily open up all
issues impacting the Property’s value for litigation.
24

Purchaser’s
attempt
to
lump
together
stormwater
management regulations and zoning regulations because they both
potentially impact the Property’s permitted plat density and
ultimately its value, is unpersuasive.
The regulations
themselves are separate:
stormwater management regulations are
environmental regulations which are overseen by the Department
of the Environment, whereas zoning regulations are land use
regulations which are overseen the Prince George’s County
Council.
Moreover, under the PSA, the parties’ obligations,
representations,
and
warranties
regarding
environmental
conditions on the Property and zoning conditions on the Property
were separate.
There is no reason to group together these
separate issues under the same umbrella of “zoning issues.”
25

Purchaser argues that due to Seller’s failure to
grandfather the previous stormwater management plans, the plans
lapsed.
By Purchaser’s own admission, however, in order to
“grandfather” the original plans, Seller would have been
required
to,
among
other
things,
commence
and
complete
construction of the previously approved stormwater maintenance
facilities. (ECF No. 720, at 17-18). Under PSA Section 12.3(c)
(“Raw Land”), Purchaser acknowledged that “[Seller] ha[s] no
30

720, at 17).

Accordingly, Purchaser cannot seek to benefit from

a price reduction for the stormwater regulation changes, when it
could

have

grandfathered

its

original

plans

under

the

more

favorable regulations had it timely proceeded to settlement.
C.

iStar’s Entitlement to Contractual Interest as Part of
the Purchase Price

Purchaser contends that under Section 3(a) of the Second
Amended PSA, Seller is only entitled to 12% interest on the
Purchase Price if it proves that Purchaser “wrongfully fails to
make Settlement.”26

(ECF No. 720, at 31).

It asserts that

“wrongful” was a bargained for term in this provision and must
be given effect, otherwise its inclusion in the PSA would be
rendered superfluous.

It argues that because “wrongful” is not

development or construction obligations under this Agreement.”
It would be unreasonable to reduce Seller’s Purchase Price for
failing to commence construction, when Seller had no obligation
to construct anything and Seller has been uncertain since 2007
whether Purchaser would even proceed to Settlement.
26

Section 3(a) of the PSA expressly states that:
If
Purchaser
wrongfully
fails
to
make
Settlement hereunder for any reason, other
than a default by Settlers Crossing or WPE
under the terms of this Agreement, and such
failure of Purchaser is not cured within any
applicable notice and cure period, then the
Purchase Price shall accrue interest at a
rate of twelve percent (12%) per annum to be
calculated on a per diem basis from the
Settlement Date until Purchaser proceeds to
Settlement
in
accordance
with
this
Agreement.
31

defined in the PSA, it should be interpreted as asking whether
Purchaser’s conduct was “objectively unreasonable.”27
720, at 32).

(ECF No.

Purchaser contends that its conduct, given the

facts and circumstances surrounding its failure to settle on May
27, 2008, was not wrongful; instead, it asserts that its failure
to settle in May 2008 was objectively reasonable because it was
seeking adjudication of legitimate contract disputes, namely,
whether the Seller’s failure to provide access to the Property
was a default under the PSA and whether the Seller was in breach
of its environmental representations and warranties.
argues

that

the

reasonableness

of

its

legal

Purchaser

positions

is

evidenced by the court’s denial of Seller’s motion for summary
judgment and the subsequent trial that was required to resolve
these disputed issues.

Thus, it argues that despite the court’s

ultimate ruling in favor of Seller, Purchaser’s refusal to make
Settlement in May 2008 while its dispute with Seller was pending
was not wrongful, and therefore, should not trigger the accrual
of interest under the PSA.

27

Purchaser
argues
that
when
“imprecise
normative
standard[s] ha[ve] not been specifically defined, Maryland
courts ask whether the conduct was objectively unreasonable.”
(ECF No. 720, at 32).
Purchaser cites Galloway v. State, 130
Md. App. 89, 94-95 (2000), and Eanes v. State, 318 Md. 436, 46162 (1990) for the proposition that “[t]he objective reasonable
test is used in many areas of the law as an appropriate
determinant of liability and thus a guide to conduct.”
(Id.)
(internal quotation marks omitted).
32

iStar responds that Purchaser’s argument, regarding iStar’s
entitlement to contractual interest, is unrelated to the 2013
zoning changes that the court asked the parties to brief.

iStar

contends that Purchaser is barred from raising this argument
because it was never raised at trial and cannot be raised for
the first time post-trial and has moved to strike this argument.
iStar asserts that raising this issue post-trial is “litigation
gamesmanship

at

its

worst

because,

first

and

foremost,

the

parties tried both liability and the underlying damages claims
and

defenses

matter.”

in

(ECF

April
No

[2014],

724,

at

and
37)

the

Court

(emphasis

ruled
in

on

the

original).

Accordingly, iStar argues that Purchaser’s argument that iStar
is required to show Purchaser’s “wrongfulness” in order to be
entitled to contractual interest, is waived.28
iStar adds that Purchaser’s argument regarding its right to
contractual interest is not only untimely but also meritless, as
it contradicts the unambiguous terms of the PSA.
at 40-42).

(ECF No. 724,

iStar contends that “[t]he language of the PSA is

clear — if Lennar wrongfully fails to close for any reason,
28

iStar contends that “[a] party cannot raise an
affirmative defense after trial for the first time as such a
delay ‘prejudices both the plaintiffs and the adjudicatory
process.’”
(ECF No. 724, at 39) (quoting Sufi Network Servs.,
Inc. v. United States, 113 Fed.Cl. 140, 145 (2013)).
iStar
argues
that
Purchaser
chose
to
“abandon[]
many
issues,
arguments, and theories when it voluntarily elected to shorten
its case in chief to days rather than weeks and effectively
waived any rebuttal case.” (ECF No. 724, at 42).
33

other than the limited, enumerated rightful reason [a default by
Seller], then it must pay the Purchase Price, a clearly defined
term that includes interest.”
original).

(ECF No. 724, at 40) (emphasis in

iStar asserts that “[t]here is no reason to give a

different meaning to the word ‘wrongfully’ when there is no
indication that the parties meant for it to carry a unique or
technical meaning [such as objectively unreasonable.]”
40-41).

(Id. at

iStar also argues that in the previous opinion it was

found that Purchaser “wrongfully fail[ed] to make Settlement”
under Section 15(a)(i).

iStar points to the parallel language

in PSA Sections 15(a)(i) and 3(a), which it contends, when read
together
interest:

logically

require

the

grant

of

the

contractual

12%

“The predicate language in Section 15(a)(i) — ‘If

Purchaser . . . wrongfully fail[s] to make Settlement hereunder
for any reason other than a default by [Sellers]’ — is the same
predicate language that appears in Section 3(a), which defines
the ‘Purchase Price’ as including the 12% interest rate.”29
No. 724, at 38) (alteration in original).

(ECF

iStar also challenges

Purchaser’s assertion — that it acted reasonably in exercising
its rights under the contract and filing suit — stating that
29

iStar argues that “[i]f Lennar’s wrongful failure to make
Settlement under Section 15(a) entitled iStar to specific
performance and payment of the Purchase Price, then the same
wrongful failure to make Settlement entitles iStar to the
Purchase Price as unambiguously defined, with the requisite
interest, as set forth in Section 3(a) [of the PSA.]” (Id. at
38-39).
34

Purchaser’s reasonableness is “belied by the myriad findings by
this Court that Lennar acted in bad faith and schemed to avoid
performing under the PSA and related contracts.”
at 41-42).
terms

(ECF No. 724,

iStar concludes that “[t]hough the PSA by its plain

does

not

equate

‘wrongful’

with

‘objectively

unreasonable,’ even under Lennar’s half-baked standard, it would
fail.”

(Id. at 42).

In

response,

Purchaser

argues

that

the

court

previously

found that it defaulted under PSA Section 15(a), but did not
specify that its default was due to a wrongful failure to settle
under

15(a)(i).

Accordingly,

Purchaser

contends

that

“Seller[‘s] entitlement to interest is a material issue that
remains unsolved[,]” as the court’s July 18, 2014 decision did
not analyze PSA Section 3(a), nor did it address entitlement to
interest

or

fix

the

amount

of

interest

due.30

Purchaser

reiterates that because its “refusal to settle on May 27, 2008
was objectively reasonable — i.e., not wrongful — Sellers have
not

satisfied

interest.”

their

burden

of

establishing

entitlement

to

(ECF No. 726, at 30).

30

Purchaser argues that specific performance could be
awarded for its default for “incorrectly” failing to settle
under Section 15(a)(ii) or (iii), which unlike a default under
15(a)(i), would not require an award of interest under Section
3(a).
At the hearing, however, Purchaser could not point to a
PSA provision supporting this supposed default.
35

Based on the language and construction of the PSA, iStar is
entitled to the contractual interest rate set forth in Section
3(a) of the Second Amended PSA.

Although the court did not

specify in its July 18, 2014 opinion that Purchaser’s default
was under Section 15(a)(i), when the opinion is read in its
entirety and in conjunction with the court’s prior opinions and
the operative pleadings, it is clear that Purchaser’s default
was

for

“wrongfully

15(a)(i).

fail[ing]

to

make

Settlement”

under

For instance, Seller’s initial notice of default sent

to Purchaser on May 30, 2008 asserted that it had “wrongfully
failed to make [s]ettlement[.]”

(ECF No. 707, at 24; DTX 458).

Seller’s first amended counterclaim also expressly stated that
iStar

was

refusal

bringing

to

an

‘settle’”

action

and

Price at a rate of 12%.

due

to

requested

Purchaser’s

interest

on

“bad-faith

the

(ECF No. 447 ¶¶ 1, 84).

Purchase

Furthermore,

the entire trial involved resolving the disputed issue of which
party was truly in default under the PSA, requiring the court to
choose:

(1)

whether

Seller

had

defaulted

under

the

PSA

by

failing to grant Purchaser access to the Property or breaching
its

environmental

representations

and

warranties,

permitting

Purchaser to exercise its right to terminate the Agreement and
get back its deposit, or (2) whether Purchaser’s failure to
settle

was

wrongful

(i.e.,

unjustified

based

on

the

parties

obligations under the PSA), permitting Seller to exercise its
36

right to select a remedy of Specific Performance.
at 32).

(ECF No. 707,

The court expressly found for Seller, holding that

Seller was not in default of its environmental representations
and warranties (ECF No. 707, at 61-63), nor did it default by
refusing

to

grant

Purchaser

access

to

the

Property

as

Purchaser’s request was not made in good faith (Id. at 71-73).
Because

Seller

was

not

in

default

and

had

performed

its

contractual obligation to satisfy the Conditions Precedent, it
was Purchaser who was found to be in default for failing to
settle after it was required to under the PSA.
on

the

evidence

presented

at

trial,

it

was

Moreover, based
also

found

that

Purchaser, from October 1, 2007 onwards, was actively trying to
back out of its contractual obligations with Seller despite the
fact that it received a substantially reduced purchase price in
exchange for its promise to settle upon satisfaction of the
Conditions Precedent.31

Accordingly, the court declared that

under the parties’ Agreement, Purchaser had defaulted because it
was “obligat[ed] to settle . . . and pay the considerations due
under the [Purchase Agreement] and the Contract for Services on
May 27, 2008 (ECF No. 447 ¶ 82.a(2))” (ECF No. 707, at 73)
31

Indeed, Purchaser “retained ‘a team of high priced
lawyers and consultants’ (DTX 380) to search for an ‘escape
clause’ in the Purchase Agreement (T. 3/31/14, at 184).”
(Id.
at 71). As part of this endeavor, Purchaser requested access to
the Property “to delay closing while it settled on a strategy to
avoid its obligations under the Bevard contracts.” (Id. at 72).
37

(internal quotation marks omitted) (alterations in original).
Although the exact default provision under Section 15(a) of the
Second

Amended

decision,

it

“wrongfully
Seller

did

wrongful
single

PSA
is

was
clear

fail[ing]
not

to

contractual

expressly

that

to

allege

failure

not

Purchaser’s

make

any

provided

settle,

nor

provision

at

default
could
the

the

default

Settlement”

other

in

under

besides

Purchaser

hearing

to

prior

was

for

15(a)(i).
Purchaser’s

point
support

to

a

its

argument that its default was under Section 15(a)(iii).32
Furthermore, Purchaser’s argument that “wrongful” should be
interpreted as meaning “objectively unreasonable” is contrary to
contract interpretation principles under Maryland law.

Although

“wrongful” is not defined within the PSA, there is no reason to
reference Maryland courts’ interpretations of other “normative
standards”

in

order

to

determine

32

the

meaning

of

the

word

Purchaser argues that its default was under 15(a)(iii)
for failing to settle based on an “incorrect” legal stance
regarding whether Seller was in default. Purchaser’s assertion
— that it could be “incorrect” concerning Seller’s default
without its conduct in failing to settle being deemed “wrongful”
— would be more persuasive had Purchaser’s refusal to settle
been based on an honest, good-faith belief that Seller was
actually in default.
The evidence adduced at trial shows that
Purchaser sought to avoid its contractual duties starting in
September 2007 at which point there was no indication Seller was
in default. As part of this effort, it made an official request
to access the Property in January 2008 with the purpose of
delaying settlement and contriving a technical default on
Seller’s part in order to terminate the Agreement.
(ECF No.
707, at 16-21).
38

“wrongful” within the PSA.

Instead, under the objective theory

of contract interpretation that applies in Maryland, a court
must “give effect to the plain meaning of an unambiguous term,
and will evaluate a specific provision in light of the language
of the entire contract.”
324.

Contract

terms

Weichert Co. of Md., Inc., 419 Md. at
must

be

construed

according

to

their

“customary, ordinary and accepted meaning,” regardless of the
parties’ intentions at the time the contract was formed.

Nova

Research, Inc. v. Penske Truck Leasing Co., 405 Md. 435, 448
(2008).

Therefore, when interpreting a contract, the court’s

task

to

is

“[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.”
Woods,

353

Md.

425,

436

(1999)

(internal

Calomiris v.

quotation

marks

omitted).
The ordinary meaning of “wrongful” as applied to actions is
something “[p]erformed, executed, or done unjustly, unfairly, or
harmfully[.]”

Oxford

English

(last visited Nov. 7, 2014).
is

further

elucidated

Dictionary,

http://www.oed.com

The use and meaning of this term

through

the

facts

and

circumstances

surrounding the execution of the Second Amended PSA, and what
reasonable persons in the position of the parties would have
meant.

At the time the parties executed the Second Amended PSA,

the residential housing market was in decline.
39

The Agreement

was heavily negotiated in order to preserve the transaction, and
among some of the bargains made by the parties, Seller agreed to
a

substantially

reduced

purchase

price

in

exchange

for

a

guaranty of specific performance from Purchaser to proceed to
settlement and pay the Purchase Price if Seller satisfied all
conditions

under

Accordingly,
satisfied

if

all

the
Seller

contract.

(ECF

performed

conditions

its

precedent,

No.

part

707,
of

the

requiring

it

at

12-13).

bargain
to

—

expend

substantial effort and resources — a reasonable person in the
position of the parties would think it “wrongful” (i.e., unjust,
unfair, or inequitable) for Purchaser then to refuse to settle
as was required under its part of the bargain.

The parties seem

to have contemplated this exact situation, which is undoubtedly
why they altered the interest provision in the Second Amended
PSA to protect Seller should such a scenario occur.33

The new

interest provision added to the Second Amended PSA only requires
Purchaser

to

pay

interest

on

the

Purchase

Price

from

the

“Settlement Date” until “Settlement” (JTX 56 § 3(a)), meaning
Purchaser could have avoided paying interest altogether if it
proceeded to settlement on the “Settlement Date” as required
33

Under the original PSA, Purchaser was required to pay
interest accruing at “the rate of seven percent (7%) per annum,
to be calculated on a per diem basis and interest to [be] paid
on a quarterly basis[,]” on the portion of the Purchase Price
secured by promissory notes ($135,025,000). (JTX 41, at § 3(b)(c)).
40

under the PSA.34

(Id. § 5(a)).

Because Purchaser defaulted by

“wrongfully fail[ing] to make Settlement for [a] reason other
than

a

default

by

[Seller}”

(JTX

56

§

15(a)(i)),

Seller

is

entitled to the 12% contractual interest that was added to the
parties’ bargain in contemplation of the exact default by Seller
that actually transpired.35
D.

Total Amount Purchaser Owes Seller as Specified By the
Parties’ Agreement

Parties
contractual

to

a

remedies

contract
to

are

exclude

permitted
an

award

to
of

limit

their

damages.

For

34

The Second Amended PSA states that as long as “all
conditions precedent to Settlement contained in Section 11 of
this Agreement are satisfied, Settlement shall take place on
December 5, 2007 (the “Settlement Date”).”
(JTX 56 § 5(a)).
Therefore, based on the structure of the interest provision in
Section 3(a) of the Second Amended PSA, the parties contemplated
that there may be a situation where the parties were obligated
to settle based on the contractually fixed “Settlement Date,”
but where Settlement did not actually occur.
The interest
provision was added to compensate Seller for this time period,
and more importantly, to entice Purchaser to proceed to
Settlement to avoid paying interest.
35

Because the prior opinion did not expressly state which
Section of the PSA Purchaser’s default fell under, the court has
resolved this alleged ambiguity as well as the corresponding
interest issue on the merits to foreclose any further debate.
As iStar points out, however, Purchaser’s argument, challenging
iStar’s entitlement to the contractual interest rate, should
have been raised prior to trial and addressed at trial.
The
interpretation of “wrongfully” within PSA Section 3(a) relates
to Purchasers’ liability for interest, and the interest
calculation greatly impacts the total Purchase Price Seller will
be awarded. At trial, the interest issue was briefly raised by
iStar’s
witness,
Executive
Vice
President
Steven
Magee.
Purchaser did not raise any contractual or other arguments
regarding interest at that time. (ECF No. 723-1, at 16).
41

instance, in a land sale transaction, the parties may agree to
limit

the

non-breaching

retaining

the

seller

purchaser’s

to

the

deposit

exclusive
or

remedies

of

seeking

specific

performance, as the parties have done in this case.36

See Leet

v. Totah, 329 Md. 645, 660-62 (1993) (holding that the parties’
contract

provision,

seller’s

default

to

which

limited

specific

purchaser’s

performance

or

remedies

for

rescission

and

return of the purchaser’s deposit, was enforceable).
clearly

prohibited

by

statute,

contractual

“[U]nless

limitations

on

judicial remedies will be enforced, absent a positive showing of
fraud, misrepresentation, overreaching, or other unconscionable
conduct on the part of the party seeking enforcement.”

Id. at

660 (quoting Maryland-Nat’l Capital Park & Planning Comm’n v.
Washington Nat’l Arena, 282 Md. 588, 611 (1978)) (alteration in
original).
Pursuant to the parties’ Second Amended PSA, once Purchaser
defaulted

by

“wrongfully

fail[ing]

to

make

Settlement”

under

Section 15(a)(i),37 iStar exercised its right “as its sole and

36

The parties limited Seller’s remedies under the Second
Amended PSA Section 15(a) to either:
(1) termination of the
Agreement and retention of the deposit fee as liquidated
damages, or (2) specific performance and injunctive relief,
including a court order requiring Purchaser to proceed to
settlement and pay the Purchase Price.
37

As noted in the March 11, 2010 memorandum opinion, by
granting Seller’s requested declaratory relief in this case —
that Purchaser defaulted by “wrongfully fail[ing] to make
42

exclusive remedy” to select specific performance and injunctive
relief against Purchaser by requesting a court order, a remedy
that requires Purchaser to “complete Settlement in accordance
with the Agreement and pay the Purchase Price” to Seller.
15(a)(2).

PSA §

Because Seller selected this remedy, Purchaser is

required to pay $114,000,000, the principal amount due under the
PSA and Contract for Services.38
defaulted

under

Section

As discussed above, Purchaser

15(a)(i),

therefore,

Seller

is

also

entitled to interest on the Purchase Price and Development Fee
at a rate of “twelve percent (12%) per annum to be calculated on

Settlement” on May 27, 2008 — it settles all aspects of this
controversy, because Seller’s rights and Purchaser’s obligations
upon Purchaser’s default are clearly defined in the PSA.
(ECF
No. 95, at 24-25).
Seller’s claim for declaratory relief is
closely tied to its claim for injunctive relief based on the
terms of the parties’ Agreement, because once Purchaser is found
to be in default, the PSA entitles Seller to a court order
requiring Purchaser to perform its PSA obligations, including
“to complete the Settlement in accordance with the Agreement and
pay the Purchase Price to [Seller].”
(JTX 56 § 15(a)(2)).
Accordingly, Seller will be granted declaratory and injunctive
relief in order fully to resolve the rights and obligations of
the parties.
38

The Purchase Price, which is defined in Section 3(a) of
the Second Amended PSA, is $103,000,000. Purchaser owes Seller
an additional $4,200,000 for the Kalapacha Property as noted in
Section 5(b). (JTX 55, exhibit P § 2). In addition to the PSA
Purchase Price, Purchaser is required to pay Seller the
Development Fee under the First Amended Contract for Services in
the amount of $26,800,000.
(JTX 55 § 1).
The total amount
Purchaser is required to pay Seller under the PSA and Contract
for Services is $134,000,000.
Purchaser already paid Seller a
deposit of $20,000,000, however, bringing the outstanding amount
due to $114,000,000. (ECF No. 649 ¶ 15).
43

a per diem basis” from May 27, 2008, the required “Settlement
Date” under the PSA, until Purchaser proceeds to Settlement.39
(JTX 56 § 3(a); JTX 55 § 1).

In addition, Seller is entitled to

reimbursement for the real estate taxes it paid on the Property
under Section 10(b) of the PSA.40

Finally, under Section 18(K)

39

Section 3(a) of the Second Amended PSA, clarifies that
“any interest accrued on the Purchase Price shall be deemed to
be an addition to the Purchase Price hereunder.”
The interest
provisions that were added to the Second Amended PSA (JTX 56 §
3(a)) and the First Amended Contract for Services (JTX 55 § 1),
both executed on May 16, 2007, mirror one another, calling for
12% interest in the event Purchaser “wrongfully fails to make
Settlement” under the PSA.
40

Section 10(b) requires Purchaser to pay any Increased
Real Estate Taxes incurred by Seller after the Plats were
recorded. In relevant part, it states that:
If, after Plat(s) Recordation and prior to
Settlement, [Seller] receives an increased
real property assessment and is required to
pay an increase in the real property taxes
for the Property . . . , then [Seller] shall
provide Purchaser with a copy of such
increased assessment and shall pay any such
increased real property taxes (in addition
to any other real property taxes due and
payable). . . .
At Settlement hereunder,
Purchaser agrees to reimburse [Seller] for
the Increased Real Estate Taxes actually
paid by [Seller] to Prince George’s County
pro
rated
from
the
date
of
Plat(s)
Recordation until the Settlement Date[.]
At trial, Seller presented evidence verifying the real estate
taxes it has paid on the Property since 2008. (ECF No. 702, T.
4/11/14, at 10-11).
Seller’s evidence shows that it paid:
$618,348.47 from 2008-2009 (DTX 487); $278,584.82 in 2011 (DTX
517); $278,425.13 in 2012 (DTX 526); and $380,844.90 in 2013
(DTX 544).
These expenses, totaling $1,556,203.32, will be
awarded to Seller as they were not challenged by Purchaser.
44

of the PSA and Section 8 of the Contract for Services, iStar is
entitled, as the prevailing party, to recover “costs, fees and
expenses

incurred

in

[]

litigation,

including

actual

and

reasonable attorneys’ fees and court costs.”41
III. Conclusion
Judgment will be entered in favor of iStar and against U.S.
Home and Lennar on Counts I-III of iStar’s amended counterclaim
(ECF No. 447), in the amount of $114,000,000 plus interest at a
rate of 12% per annum, calculated on a per diem basis from May
27,

2008

until

Purchaser

proceeds

to

Settlement,

estate taxes in the amount of $1,556,203.32.

plus

real

A separate order

will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

41

Under Local Rule 109.2(a), motions “requesting the award
of attorneys’ fees must be filed within fourteen (14) days of
the entry of judgment.”
The memorandum supporting such a
request “must be filed within thirty-five (35) days from the
date the motion is filed,” except in the event that an appeal is
filed. Local Rule 109.2(a).
45