Boucher Investments, LP v. ANNAPOLIS-WEST LTD.

• Decision Date: 31 October 2001
• Docket Number: No. 333,333
• Citation: 784 A.2d 39,141 Md. App. 1
• Parties: BOUCHER INVESTMENTS, L.P. v. ANNAPOLIS-WEST LIMITED PARTNERSHIP, et al.
• Court: Court of Special Appeals of Maryland

784 A.2d 39

141 Md. App. 1

BOUCHER INVESTMENTS, L.P. v. ANNAPOLIS-WEST LIMITED PARTNERSHIP, et al.

No. 333, Sept. Term, 2000.

Court of Special Appeals of Maryland.

October 31, 2001.

Thomas Gisriel (Christopher W. Poverman, Betty Sue Diener and Hodes, Ulman, Pessin & Katz, P.A. on the brief), Towson, for appellant.

Susan Wilkens (Howard Cassin and Wartzman, Omansky, Blibaum, Simons, Cassin & Sagal, P.A. on the brief), Towson, for appellees.

Argued Before KRAUSER, JOHN J. BISHOP, JR., (Retired, specially assigned), RAYMOND G. THIEME, JR., (Retired, specially assigned), JJ. KRAUSER, Judge.

The question before us is what constitutes "waste," a question which, notwithstanding its medieval roots, has largely evaded contemporary appellate scrutiny in this State and others. Indeed, our research has failed to disclose any Maryland cases during the past century that speak to this issue in the context of the mortgagor-mortgagee relationship, the relationship between the parties to this appeal.

This question is now before us as a result of a claim of waste made by the holder of a second mortgage on commercial property against the mortgagors (grantors of the Deed of Trust), after the holder failed to recover its loan amount when the property was sold at foreclosure. Appellant, Boucher Investments, L.P., the holder of that second mortgage, asserts, as it did below, that the failure of the mortgagors—appellees Annapolis-West Limited Partnership, A-W GP Corporation, Lawrence Posner, and Lawrence Volper¹—"to negotiate parking access" for the commercial property in question ("Property") resulted in a substantial reduction in value of that property at foreclosure, and thus constituted waste. The Circuit Court for Anne Arundel County disagreed, and we do too. We shall therefore affirm the judgment of that court.

BACKGROUND

The commercial property securing the Deed of Trust and the Note held by appellant is located at 2083 West Street in Annapolis, Maryland. The Deed of Trust was originally granted by appellees in 1984 to secure a debt to James Hightower. In 1988, Hightower assigned the Deed of Trust and Note to B & B Defined Benefit Plan. Appellant acquired the Note in 1988 when B & B Defined Benefit Plan was liquidated.

The Property consists of an office building and a parking area capable of accommodating approximately ten to twelve cars. To provide for additional parking, a previous owner of the Property had entered into a twenty-year contract with Parole Shopping Center, Inc. for the use of its parking lot, which is adjacent to the Property. Despite the expiration of the contract in 1991, the tenants of the Property continued to use the lot until 1996, at which time a fence was erected to prevent unauthorized parking.

Both the Deed of Trust and the Note evidencing the debt secured thereby contained non-recourse clauses.² The Property, as well as rents generated by the property,³ served as security for the loan. In addition, the Deed of Trust contained a provision stating in part that the "[b]orrower shall keep the Property in good repair and shall not commit waste or permit impairment or deterioration of the Property...." In 1991, appellees defaulted on the Note. To avoid foreclosure, the parties entered into a Note Modification Agreement. In 1996, appellees defaulted on the modified Note. Once again, to avoid foreclosure, the parties attempted to renegotiate payment of the Note. In 1998 appellees defaulted on the first mortgage on the Property, and the first mortgagee instituted foreclosure proceedings that resulted in a foreclosure sale. The proceeds from that sale were not sufficient to repay appellees' debt to appellant.

Consequently, on August 2, 1999, appellant filed a complaint in the Circuit Court for Anne Arundel County, alleging, among other things, that appellees' failure "to negotiate parking access for the [Property]" constituted "permissive waste of the property" because the lack of parking resulted in a "loss of tenants [and] ... income to the property." Appellant also claimed that the "City of Annapolis Planning Commission ha[d] confirmed that, unless adequate parking spaces are made available, the current occupancy permit will be rescinded and the permitted occupancy of the building will be lowered." No evidence, however, was ever presented that the City of Annapolis was planning to, or ever did, rescind appellees' occupancy permit. In brief, appellant asserted that the failure "to negotiate parking access for the [Property]" led to the diminution in value of the Property and foreclosure, which caused financial harm to appellant.

On October 15, 1999, appellees filed in the United States District Court for the District of Maryland a Notice of Removal. Shortly thereafter, the parties filed a "Stipulation of Remand," and on November 3, 1999, the district court filed an order sending the case back to the circuit court.

On November 22, 1999, appellees filed a motion entitled "Motion To Dismiss, Or In The Alternative, For Summary Judgment." Attached to that motion were several exhibits, including the Deed of Trust and Note. In support of that motion, appellees claimed: first, that the non-recourse provision in the Deed of Trust and the Note relieved appellees of any personal liability for monies owed pursuant to the Note; second, that "the alleged failure to contract for additional parking does not constitute waste;" and third, that appellant's waste claim was barred by the statute of limitations. In reply, appellant filed an opposition. In that opposition, appellant asserted that appellees' motion "should be viewed as a Motion for Summary Judgment" because appellees attached to their motion "several exhibits," thus requiring the court "to look beyond the complaint and consider matters outside of the pleadings." That assertion, as we discuss below, conflicts with its later claim that appellees' motion was not one for summary judgment. Appellant further asserted, among other things, that summary judgment was inappropriate because there were "genuine disputes of material fact" and that, "before conducting discovery, it is very difficult, if not impossible, to accurately identify all material facts." On February 22, 2000, the trial court conducted a hearing on appellees' motion. Before the court, counsel for appellant stated that it was "[his] understanding [that appellees] did not negotiate with Parole in good faith" and that, therefore, a "factual dispute" existed. Appellant also argued that "a waste claim can go forward in spite of a non-recourse agreement," and that there was a factual dispute regarding the statute of limitations.

After the hearing, the parties submitted supplemental memoranda. Appellant, in its supplemental memorandum, argued that waste is "conduct, including both acts of commission and of omission, on the part of a person in possession of land which is detrimental to the interests of another with an interest in the land," and that "[w]hat constitutes waste in any given case is an issue of fact." Appellant admitted, however, that it could "find no cases in which the failure to negotiate a lease for parking lot space constituted waste" but nonetheless urged that summary judgment was improper because "the issue of whether the alleged actions constitute waste is inherently for the finder of fact" and that discovery was necessary "to learn, among other things, [appellees'] motives and actions in the handling of 2083 West Street."

On March 20, 2000, the trial court filed a Memorandum Opinion and Order. After setting forth findings of fact, the court declared that because appellees' "Motion To Dismiss, Or In The Alternative, Motion For Summary Judgment" contained attachments, it "should be considered a motion for summary judgment pursuant to [Maryland] Rule 2-501." The circuit court then noted that a non-moving party could be prejudiced when a motion to dismiss is treated as a motion for summary judgment, "because the non-moving party may not have the opportunity to put forth evidence relevant to a summary judgment determination." In the instant case, however, the court found that appellant would not be so prejudiced. After noting that appellant itself had argued in its initial response to appellees' motion, that appellees' motion should be treated as one for summary judgment, the court declared that appellant had ample opportunity to provide information to the court, and had taken "full advantage of this opportunity by filing three memorandums, including one following the hearing before this Court."

The court then summarized the parties' respective positions. Noting that appellant had argued, among other things, that summary judgment should not be granted "because there are some facts, not yet known, which would be at issue at a trial on the merits," the court found that because appellant "did not specifically mention which facts were in dispute, its argument amounts to no more [than] a mere allegation."

Applying definitions of waste set forth in Jaffe-Spindler Co. v. Genesco, Inc. 747 F.2d 253 (4th Cir.1984), and the Restatement (Third) of Property: Mortgages § 4.6 (Tentative Draft No. 3, 1994), the circuit court declared that there had been no "destruction, misuse, alteration or neglect" by appellees. It further found that none of the criteria for waste as set forth in the tentative draft of the Restatement had been met "because there [was] no allegation that the property [was] in disrepair, that taxes [had] not been paid, or that any other monies [had] been wrongfully withheld." It therefore concluded "as a matter of law" that appellees had not committed waste. Having so ruled, the court declared that "the issues of the non-recourse clause and the statute of limitations [did] not need to be addressed." From that order, appellants noted this appeal.

DISCUSSION

I

Before reaching the question of what constitutes waste and whether, under that definition, appellees...