Hovnanian Land Inv. Group Llc v. Annapolis Towne Ctr. At Parole Llc.

• Citation: 25 A.3d 967,421 Md. 94
• Decision Date: 20 July 2011
• Docket Number: Sept. Term,No. 71,2010.,71
• Parties: HOVNANIAN LAND INVESTMENT GROUP, LLC, et al.v.ANNAPOLIS TOWNE CENTRE AT PAROLE, LLC.
• Court: Maryland Court of Appeals

421 Md. 94

25 A.3d 967

HOVNANIAN LAND INVESTMENT GROUP, LLC, et al.

v.ANNAPOLIS TOWNE CENTRE AT PAROLE, LLC.

No. 71

Sept. Term

2010.

Court of Appeals of Maryland.

July 20, 2011.

Philip A. Sechler (David M. Krinsky of Williams & Connolly LLP, Washington, D.C.); 1 James A. McGuire (McGuire, McGuire & Linden, P.A., Edgewater, MD), on brief, for petitioners.Ira L. Oring (Brandi Phillips of Fedder and Garten Professional Association, Baltimore, MD), on brief, for respondent.Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and BARBERA, JJ.ADKINS, J.

In this case, we must revisit contracts with “non-waiver” clauses and determine whether and how a party to such a contract can waive its requirements and conditions. Respondent, the owner of a large, mixed-use development near Annapolis, Maryland, agreed to sell a portion of the property to Petitioner, a developer, for the construction of a residential tower. The contract required certain conditions to be met by Respondent prior to the closing, and also contained a clause saying that any waiver or modification of the contract had to be in writing. After two years of negotiation by the parties, Petitioner terminated the agreement and refused to go to closing, alleging that Respondent failed to meet a condition precedent regarding the establishment of a maintenance fee system for the development's common areas.

Respondent filed a complaint in the Circuit Court for Anne Arundel County, seeking a declaratory judgment that Petitioner breached the contract. Petitioner, in its answer, alleged that the Respondent failed to meet the condition precedent regarding common area maintenance funding, and that this breach relieved it of its obligation to purchase the land at closing. The trial court, in granting summary judgment, held that the Petitioner waived the condition precedent regarding common area maintenance funding, even though there was no written waiver as required by the contract's non-waiver clause. The Court of Special Appeals affirmed. We granted certiorari, Hovnanian Land v. Annapolis Towne Centre, 415 Md. 337, 1 A.3d 467 (2010), to answer the following questions, rephrased for brevity and clarity: ¹

1) Can waiver of a contract right be inferred from a party's conduct where the contract contains an express “non-waiver” provision requiring any waiver to be in writing?

2) Did the Circuit Court err in finding that Petitioner waived the condition precedent in this case, when there was no signed waiver?

3) Did the seller strictly fulfill a condition precedent requiring it to “provide annual assessments against the office and retail portions of the Development” when it recorded a declaration that the seller will enter into separate, unrecorded contracts with “some of all Parcel Owners”?

We shall hold that a condition precedent may be waived by a party's conduct, despite a non-waiver clause. Whether Hovnanian's actions amounted to a waiver, however, was a dispute of material fact that could not be resolved on summary judgment. The question of whether Respondent strictly fulfilled the condition set forth in question (3) also involved material questions of fact, and so summary judgment was inappropriate. We shall therefore reverse and remand for further proceedings.

FACTS AND LEGAL PROCEEDINGS

1. The Annapolis Towne Centre and The Purchase Agreement

Annapolis Towne Centre at Parole, LLC (“ATC”), the Respondent, is the owner and developer of a 33–acre, mixed-use development known as the Annapolis Towne Center at Parole (the “Development”). As contemplated by ATC, the entire project would be declared a land condominium pursuant to the Maryland Condominium Act. See Maryland Code, (1974, 2003 Repl.Vol.), § 11–101, et seq. of the Real Property Article. The “units” of ATC's land condominium were a mixture of office, retail, and residential parcels. ² The Development also had one additional and unusual feature—the Declaration and plat showed a nominal common element of only one square foot. Areas that would typically be included in a common area were instead designated as the “ Common Facilities Parcel.” ³ ATC retained ownership of the Common Facilities Parcel even after the other parcels were sold, and planned to pay for its upkeep by collecting annual common area maintenance (“CAM”) fees from each of the parcel owners.

This case deals with “Parcel 14” and “Parcel 15,” residential parcels at the western end of the development, abutting Riva Road. As with the other residential parcels, ATC sought a residential developer to purchase these parcels and construct residential towers and parking garages. Petitioner Hovnanian Land Investment Group, LLC (“Hovnanian”),⁴ a residential developer who, on March 3, 2005, entered into a Purchase and Development Agreement (the “Purchase Agreement”) with HTC for Parcels 14 and 15. Under the Purchase Agreement, Hovnanian was to construct three residential towers on the properties, containing 550 residential units, each with a minimum of 1,300 net useable square feet.

Section 14 of the Purchase Agreement, titled “Seller's Undertakings,” required ATC to meet certain obligations prior to the closing. Relevant here, Section 14(d) addressed the funding of common area maintenance (“CAM”):

... [ATC] shall be solely responsible for ... recording a declaration (the “Declaration”) for the maintenance of the common areas of the Development ⁵.... The Declaration ... shall provide annual assessments against the office and retail portions of the Development for the purpose of providing funds for the maintenance of the office and retail buildings and associated common areas.... The Declaration ... shall also provide that each owner of a condominium unit shall pay an annual fee of [$1,200], which annual fee shall increase at the rate of three percent (3%) per annum to be calculated on a per diem basis.

(Emphasis added).⁶ The Purchase Agreement thus required ATC to establish predetermined CAM fees for Hovnanian's parcel, and provide CAM funding for the other parcels.

The Purchase Agreement stated that Hovnanian's obligation to go to closing “shall be conditioned upon completion” of the conditions precedent, and gave Hovnanian certain remedies in case ATC failed to meet them:

If [ATC] is unable or unwilling to complete or fulfill its obligations as set forth ... for the parcels to be closed upon, [Hovnanian] may at its option (i) close on said parcels to be closed upon notwithstanding [ATC's] failure but without waiving [ATC's] obligations to perform hereunder, or (ii) delay the applicable Closing until after [ATC] has satisfied its obligations, or (iii) terminate this Agreement and have its Deposit returned[.]

The Purchase Agreement also contained a non-waiver clause:

No change or modification of this Agreement shall be valid unless the same is in writing and signed by Purchaser and Seller. No purported or alleged waiver of any of the provisions of this Agreement shall be binding or effective unless in writing and signed by the party against whom it is sought to be enforced.

2. The Declaration and Dispute over Common Area Maintenance Funding

As described above, the Purchase Agreement required ATC to record a declaration providing for (1) a $1,200 annual CAM fee for residential unit holders and (2) annual assessments against the other parcel owners in the development. ATC drafted the provision for Common Area Maintenance in Section 10.2.4 of the Declaration, which read as follows:

Payment of Common Area Maintenance Costs. While this Towne Centre Declaration is in effect, some or all Parcel Owners, Tier 2 Councils, Tier 2 Owners and/or other Persons shall periodically pay to [ATC] respective shares of the Common Area Maintenance Costs (each of which payments required to be made by any Person is referred to herein as a CAM charge) pursuant to one or more Recorded Supplemental Agreements between [ATC] and one or more of those Persons. [ATC] shall be responsible for payment of the rest of the Common Area Maintenance Costs, which [ATC] shall allocate among the parts of the Retail Component (except for the Target Parcel 11 Unit). ⁷

The Declaration thus addressed the CAM funding responsibilities of other parcels with a placeholder provision, which promised future agreements with parcel owners in lieu of establishing, in the Declaration, a detailed funding mechanism in the Declaration.⁸

On May 11, 2006, ATC first provided Hovnanian with a draft of the Declaration, and a proposed Supplemental Agreement between Hovnanian and ATC. The draft Declaration indicated that CAM funding details would be handled in Supplemental Agreements with the parcel owners, and the draft Supplemental Agreement for Hovnanian included such a provision.

Counsel for Hovnanian responded on July 20, 2006, with a memo including questions and comments. Relevant here, Hovnanian posed four questions:

1) If Target stops paying its annual fees, what are the remedies? Who is authorized to pursue them? What are obligations of developer to pursue them?

2) Is developer also obligated to pay fees based upon square footage it owns or controls? If developer stops paying for any reason, what are the remedies and who is authorized to pursue them?

3) Why does 10.2.4 provide that “some” Parcel Owners etc shall pay share of CAM and not all? Who will not be obligated to pay?

* * *

5) Section 10 of Supplemental Agreement provides for recordation of Memorandum and not the Supplemental Agreement. Why? Aren't purchasers of residential units entitled to see the entire Supplemental Agreement since they are paying these monthly, annual fees beginning at $1200 per year and with 3% increases annually?

Hovnanian also provided comments regarding the draft Supplemental Agreement, stating: “[Hovnanian] wants the fees to be payable by unit owners and not by [Hovnanian,]” and that “it must be clear that each unit owner must pay the annual fees directly to [ATC].” Hovnanian thus flagged the CAM...