Antigua Condominium Ass'n v. Melba Investors Atlantic, Inc., 31

• Citation: 517 A.2d 75,307 Md. 700
• Decision Date: 01 September 1986
• Docket Number: No. 31,31
• Parties: ANTIGUA CONDOMINIUM ASSOCIATION et al. v. MELBA INVESTORS ATLANTIC, INC. et al. ,
• Court: Court of Appeals of Maryland

Page 700

307 Md. 700

517 A.2d 75

ANTIGUA CONDOMINIUM ASSOCIATION et al. v. MELBA INVESTORS ATLANTIC, INC. et al.

No. 31, Sept. Term, 1986.

Court of Appeals of Maryland.

Nov. 12, 1986.

Barry L. Steelman and Kevin Thornton (Kaplan, Kaplan & Steelman, on the brief), Baltimore, for appellants.

Judith D. O'Neill and Steven M. Caplan, Weinberg & Green, Baltimore, for Bankers Trust Co.

Jonathan D. Claiborne, Whiteford, Taylor, Preston, Trimble & Johnston, Baltimore, for Melba Investors Atlantic, Inc.

Argued before MURPHY, C.J., ELDRIDGE, COLE, RODOWSKY, COUCH and McAULIFFE, JJ., and MARVIN H SMITH, Associate Judge of the Court of Appeals of Maryland (retired), Specially Assigned.

RODOWSKY, Judge.

Principal among the many issues in this case are those involving limitations on claimed breaches of warranty and of covenant which were asserted by unit owners and their council against a residential condominium developer and its parent corporation. The issues were decided on motions to dismiss for failure of the complaint to state a claim.

Antigua Condominium (Antigua) is a fourteen-story structure containing 104 units on 1.84 acres in Ocean City, Maryland. The owners of forty-five units at Antigua (Unit Owners) and the Antigua council of unit owners (Council), hereinafter collectively "Plaintiffs," are suing Melba Investors Atlantic, Inc. (Melba) and Bankers Trust Company (Bankers), hereinafter collectively "Defendants." Bankers had been the construction lender to the original Antigua developer who defaulted before construction was completed. That borrower and Bankers agreed to a deed in lieu of foreclosure under which the property was conveyed to Melba, a wholly owned subsidiary of Bankers. Melba completed the construction at Antigua and was the original vendor of the units.

On September 24, 1981, the Council and the owners of thirteen Antigua units sued the Defendants in one of the former equity courts in the Eighth Judicial Circuit (Baltimore City). On November 23, 1981, the owners of other units at Antigua sued the Defendants in the same court. Both suits sought (1) money damages for alleged construction defects and (2) equitable relief, by way of confirmatory deeds and certificates of title. The trial court ordered the two classes of claims to be segregated into separate actions, one at law and the other in equity. The bill of complaint in the earlier filed action to which the Council was a party, having been amended to include all of the Plaintiffs and to assert only claims for money damages, is the action now before us. ¹

Defendants responded to Plaintiffs' amended declaration by a motion for production of documents under former Maryland Rule 326. ² This motion sought the sales contracts and deeds of each of the Unit Owners and the Antigua condominium declaration. Plaintiffs raised no objection to the motion and eventually filed the requested documents in court. Under Md.R. 326, then in effect, those written instruments thereby became part of Plaintiffs' amended declaration. ³

The Defendants prepared from the deeds a schedule listing the Unit Owners chronologically by date of deed and indicating whether the deed was directly from Melba. Unit Owners who did not buy directly from Melba are called "nonoriginal purchasers." That schedule is attached to this opinion as Appendix A. Using this information the Defendants demurred with Melba arguing, inter alia, that the amended declaration on its face disclosed that limitations had run. ⁴

Those demurrers were sustained with leave to amend. Plaintiffs then filed a second amended declaration to which Bankers again demurred and to which Melba filed a second demand for production of written instruments under former Md.R. 326. This second demand sought "[e]ach and every 'timely notice' of defect, breach of contract or breach of warranty given by any Plaintiff by certified mail ... or by personal delivery to Melba...."

The trial court issued an order sustaining Bankers' demurrer and prohibited the Plaintiffs from further amending as to that defendant. Although the court's order did not state its reasoning, its memorandum opinion sustaining Bankers' preceding demurrer had found the allegations insufficient to pierce Melba's corporate veil and to impose liability on Melba's sole stockholder, Bankers.

On July 1, 1984, the current Maryland Rules of Procedure came into effect and former Md.R. 326 was rescinded. On July 26, Plaintiffs filed five letters as their answer to Melba's motion to produce written instruments. Melba, on August 27, filed a "demurrer" based on limitations to Plaintiffs' second amended complaint. Before any ruling on that "demurrer" Plaintiffs filed a "revised second amended declaration" on December 3, 1984, i.e., a third amended complaint. Melba countered with a "motion ne recipiatur and to strike, renewal of demurrer and third demurrer", filed December 7. The trial court, with memorandum opinion, granted Melba's motions without leave to amend.

The Court of Special Appeals affirmed in part and reversed in part. Antigua Condominium Association v. Melba Investors Atlantic, Inc., 65 Md.App. 726, 501 A.2d 1359 (1986). We granted cross-petitions for certiorari.

I. The Allegations

Plaintiffs allege that the condominium declaration was recorded July 25, 1977, that the first sales of units were made in August, that the first deeds of units by Melba were made on September 17, 1977, and that control of the condominium Council passed from the Defendants to the owners of units on October 7, 1978. In selling units at Antigua, Melba used a standard form of contract containing the following provisions which are central to the instant controversy:

The building has been erected on the land, at Seller's cost and expense, and, except to the extent otherwise expressly provided herein, conforms substantially to the construction plans and specification (construction plans).... Seller is making certain additions to the building as shown on the drawings attached hereto.

....

The condominium unit sold under this contract has been or is being constructed substantially in accordance with the construction evidence [sic ] that Seller has fully complied with all its obligations hereunder and that Buyer has approved and accepts the condominium unit, building and property as they stand, "as is", and as being satisfactorily built, equipped and completed, and thereafter no further performance can or shall be required of Seller, except as follows: Seller will make any necessary repairs, adjustments or replacements to the condominium unit and item of personal property specified herein or the common elements of the condominium required as the result of faulty construction, faulty material, faulty manufacture or faulty installation, provided that notice of the defect shall be given Seller within a period of one (1) year accounting from the date of settlement under this Contract.

We shall call the immediately preceding provision the "Repair Clause."

Count one asserts claims on behalf of the Council, both for itself and as a representative of the Unit Owners. That count is predicated, at least in part, on the Repair Clause. Paragraph 11 of the count states that the Council, within the year following September 17, 1977, "notified the [D]efendants ... of all of the construction defects discovered in the common elements and in the individual units which defects are hereinafter detailed in paragraph 12." Paragraph 12 alleges a long list of defects (the p 12 defects), including "[h]oles and cracks in walls causing severe water damage into the common elements and into the individual [units.]" Paragraph 11 further alleges "[t]hat from the time of the first such notice of defect through May 6, 1980, the Defendants received all notices of defects and agreed to repair all defects.... [and] actually started making repairs to correct the water seepage into the units and common elements[.]"

Paragraph 11 goes on to say that the Council first learned of the Defendants' intentions concerning repairs by a letter of May 6, 1980, from Melba. That letter is an exhibit to the complaint. In the letter Melba responds to eight categories of complaints which had apparently been made in a letter of September 10, 1979, by the Council. With respect to "Waterproofing," Melba replied:

The resealing of the building resumed on April 10, 1980 after a winter recess, and we have been advised by the contractor that the work should be completed within two or three weeks depending on weather conditions. At the same time another contractor, Clifton Gray and his crew has been working incessantly throughout the winter correcting water related damages within each unit and has assured us that the interior work will be completed in 3 to 4 weeks. Also we have a project engineer who monitors the quality of the work and its progress. In light of the above, the concern expressed by the Board about "delays" appears unfounded and unjustified since we wasted no time at all in moving toward completion.

With respect to the other seven categories of alleged defects the May 6, 1980, letter denied that Melba had any obligation to repair them. Melba's letter concluded by saying: "We further feel that the warranty work which has been on going for quite some time extended far beyond our legal obligation."

Count one is followed by ninety-three more counts in the complaint. Each of them, from count two through count ninety-four, incorporates the first twelve paragraphs of the complaint wherein are found the allegations reviewed above. Counts two through four also claim damages for the p 12 defects.

In count two the Council, for itself and in a representative capacity, claims damages on the theory that the p 12 defects constitute breaches of express and implied warranties. Count three undertakes to claim for all of the Unit Owners based on the Repair Clause with respect to the p 12 defects. In count four all Unit Owners...