Bowie v. Mie

• Decision Date: 04 May 2007
• Docket Number: No. 57, September Term, 2006.,57, September Term, 2006.
• Citation: 398 Md. 657,922 A.2d 509
• Parties: CITY OF BOWIE, Maryland v. MIE, PROPERTIES, INC., et al.
• Court: Court of Special Appeals of Maryland

922 A.2d 509

398 Md. 657

CITY OF BOWIE, Maryland v. MIE, PROPERTIES, INC., et al.

No. 57, September Term, 2006.

Court of Appeals of Maryland.

May 4, 2007.

Elisssa D. Levan (Robert H. Lean, Levan, Ferguson & Levan, P.A., on brief), Columbia, for petitioner/cross-respondent.

Charles S. Hirsch (Robert A. Scott, Ballard, Spahr, Andrews & Ingersoll, LLP, on brief, Baltimore, Sager A. Williams, Jr., Blumenthal, Delavan & Williams, P.A., Annapolis, on brief), for respondents/cross-petitioners.

Argued before BELL, C.J., RAKER, CATHELL, HARRELL, BATTAGLIA, GREENE and ALAN M. WILNER (Retired, specially assigned), JJ.

HARRELL, J.

We concern ourselves here with the standard for determining a challenge to the continuing vitality of restrictive covenants on real property. This case involves a set of restrictive covenants, recorded in 1986, encumbering originally a 466 acre parcel of land ("the Property") in Prince George's County. The current parties to the covenants are the City of Bowie, Maryland ("the City"), an original covenantee, and MIE, Inc. ("MIE"), a successor covenantor and current owner of the remainder of the Property. MIE's predecessor in title agreed with the City to a Declaration of Covenants ("the Covenants") which limits the development of the Property to 14 permissible uses. Contemporaneous with entering into the Covenants, an Annexation Agreement ("the Agreement") also was executed with the City, bringing the affected parcel, then undeveloped, within the City's corporate limits. The Agreement contemplated the development of a "science and technology, research and office park" on the Property, hopefully with the support of the University of Maryland.

MIE challenges the continuing vitality of the Covenants, principally on the basis that changes in circumstances since the recording of the Covenants obviates the purpose for the Covenants. The City counters that the Property may be, and is being, developed in accord with the Covenants. The Circuit Court for Prince George's County upheld the continuing validity of the Covenants. The Court of Special Appeals, however, reversed the judgment of the trial court, concluding that the trial judge applied the wrong standard for determining the ongoing validity of restrictive covenants. We shall reverse the judgment of the intermediate appellate court and remand with directions to affirm the judgment of the Circuit Court.

I. FACTS

Although the record reveals considerable dispute between the parties as to the purpose of the Covenants imposed on the Property, there is little controversy regarding the generic formative history of the Covenants. Approximately twenty years ago, the corporate limits of the City were expanded as a result of the annexation¹ of the Property, located in the northeast quadrant of the intersection of U.S. Route 50 and Maryland Route 3/U.S. Route 301 in Prince George's County. The annexation process was initiated in 1985 by the application of the then — owners of the Property, Carley Capital Group and the University of Maryland Foundation, Inc. ("the Developers"). An Annexation Agreement was executed on 19 August 1985 between the Developers and the City and recorded in the land records of Prince George's County on 16 January 1986.² In consideration for the annexation of the Property, the City agreed to extend roadways, water and storm water management, and other public facilities to the Property at a cost of $1 million to the City and $3 million worth of Tax Increment Financing bonds to be recouped by the City through a special taxing district planned for the Property. The Agreement obligated the Developers to "develop," and the City to "fully support [] the development" of, the Property as "a science and technology, research and office park." The Agreement referred generally to the Developers' "current intention" to "improve the Property and to sell portions thereof for mixed use commercial development . . . to be known as the `University of Maryland Science and Technology Center' (although the [Developers] may change such name as it from time to time deems appropriate). . . ."

On 19 December 1985, the Developers executed the Covenants in favor of the City, establishing a list of permitted uses for the Property.³ The Covenants provided, in relevant part:

Uses permitted on the property shall be the following and no other:

1) Office buildings for science, technology, research and related issues;

2) Accessory buildings and uses, such as offices, laboratories, off-street parking, enclosed storage areas, conveyor systems, towers, and signs to serve a principal permitted use;

3) administrative, executive and research facilities, including the following, subject to the provisions of Section 27-331 of the Prince George's County Code:⁴

(i) banks, savings and loans associations, or other savings and/or lending establishments;

(ii) business and professional offices;

(iii) communications offices (e.g., telephone, telegraph, and the like);

(iv) data processing

(v) public utility offices; and

(vi) research, development and testing laboratories, including testing facilities and equipment, and the manufacture and/or fabrication of the same incidental to such research and development;

4) convenience commercial establishments, including the following, to serve the principal users (and the employees thereof) on the Property, subject to the provisions of Section 27-331 of the Prince George[']s County Code:

(i) barber and beauty shops;

(ii) medical and dental clinics;

(iii) commercial outlets engaged in the sale or display of items produced on the premises;

(iv) eating and drinking establishments;

(v) financial offices, such as banks or lending agencies, the principal services of which will be rendered to the surrounding industrial establishments; and

(vi) laundry and dry cleaning pick-up stations;

5) bio-medical laboratories;

6) hotels and motels, which may include convention facilities and reducing/exercise salons and health clubs;

7) institutional uses of an educational, medical, religious or research nature;

8) technological activities oriented to telecommunications products and systems, including satellite communications;

9) public and quasi-public uses of an educational or recreational nature;

10) public utility buildings and lines;

11) printing and publishing of newsletters, periodicals, and similar products and photostatting, blueprinting, or other photocopying establishments;

12) medical and dental laboratories;

13) radio and television broadcasting studios; and

14) on an interim basis, agricultural uses, including farming, horticulture and similar uses.

The Covenants were duly recorded in the land records of Prince George's County in January 1986.

It appears that the impetus for annexing the Property and the execution of the Covenants was for the Developers to gain the City's infrastructure and political support for the development of a high-technology research park on the Property. As the Developers and the City originally conceived, the affiliation of the University of Maryland was viewed as a vital component to the hoped-for success of the research park concept, as most such existing parks generally had some association with a research university as a means of attracting tenants. Unfortunately, the level of success expected for development of the Property did not materialize readily and, around 1999, the University of Maryland Foundation, Inc. completely extricated itself from the development project for financial reasons. Carley Capital Group, the other developer, contemporaneously filed for bankruptcy.

Ownership of the Property changed several times since 1985;⁵ however, the terms of both instruments remained undisturbed in the main.⁶ Eventually, around 2000, MIE and its related entities became the owners of the remaining portions of the Property and began developing part of it with 150,000 square feet of "flex-space" buildings to accommodate various tenants. In 2001, MIE leased a portion of this space to C & C Dance Studio ("the Dance Studio"), a use which the City contended was in violation of the Covenants. MIE countered that the City previously had approved of the Dance Studio's tenancy, but reneged on that approval in retribution for MIE's refusal to construct a large, multi-story office building on the Property requested by the City. The City commenced this litigation to prevent the Dance Studio's further use of its leased space.

II. PROCEDURAL HISTORY

The City filed on 24 October 2002 a complaint in the Circuit Court for Prince George's County seeking a declaration that the Dance Studio's use was in violation of the Agreement and Covenants and further requesting a permanent injunction against the continued use of the building space by the Dance Studio. After extensive discovery, MIE filed on 26 November 2003 a counterclaim for a declaratory judgment that the Covenants and portions of the Agreement restricting the permitted uses of the Property were invalid and unenforceable. A bench trial was conducted over the course of three days beginning on 29 March 2004. The Circuit Court determined ultimately that the Covenants were valid and enforceable against MIE and that MIE had violated the Covenants by permitting the Dance Studio to use and occupy leased space on the Property, a use prohibited by the Covenants. Accordingly, the Circuit Court enjoined MIE from permitting the Dance Studio to use and occupy any space on the Property. MIE's counterclaim was denied.

The Circuit Court reasoned that there had been "no radical change to the character of the neighborhood [of the Property] so as to defeat the purpose [] embodied in the Covenants and the Annexation Agreement." The court was persuaded by the City's expert witness, Alfred Blumberg II,⁷ that the mixed-use development and zoning changes that occurred in the area surrounding the Property since 1985 did not render the Covenants' purposes meaningless,...