Maxima Corp. v. Cystic Fibrosis Foundation

• Decision Date: 01 September 1989
• Docket Number: No. 696,696
• Citation: 81 Md.App. 602,568 A.2d 1170
• Parties: The MAXIMA CORPORATION v. CYSTIC FIBROSIS FOUNDATION, et al. CYSTIC FIBROSIS FOUNDATION v. The MAXIMA CORPORATION, et al. ,
• Court: Court of Special Appeals of Maryland

Page 602

81 Md.App. 602

568 A.2d 1170

The MAXIMA CORPORATION v. CYSTIC FIBROSIS FOUNDATION, et al.

CYSTIC FIBROSIS FOUNDATION v. The MAXIMA CORPORATION, et al.

No. 696, Sept. Term, 1989.

Court of Special Appeals of Maryland.

Feb. 6, 1990.

Dale A. Cooter (Cooter & Gell, Washington, D.C. and David R. Smith, Rockville, on the brief), for appellant/cross-appellee, The Maxima Corp

Peter Barnes (Swidler & Berlin, Chartered and Elaine R. Lubin, on the brief), Washington, D.C., for appellee/cross-appellant, Cystic Fibrosis Foundation.

Jack A. Garson (Stuart S. Greenfeig and Stein, Sperling, et al., on the brief), Rockville, for appellee/cross-appellant.

Argued before GARRITY, ALPERT and KARWACKI, JJ.

GARRITY, Judge.

This appeal involves a dispute over the provisions and implementation of a lease. The parties are 6933 Arlington Development Limited Partnership (hereinafter "Arlington"), the lessor, The Maxima Corporation (hereinafter "Maxima"), an assignee of the original lessee, and Cystic Fibrosis Foundation (hereinafter "Cystic"), a subtenant of Maxima. By order of March 7, 1989, the Circuit Court for Montgomery County (Raker, J.) found that Maxima had breached its lease with Arlington, and ordered it to pay damages to both Arlington and Cystic. Each party raises several questions for our consideration:

MAXIMA'S QUESTIONS

I. Whether the court erred in finding Maxima in breach of the lease and liable for damages;

II. Whether the court erred in its measure of damages;

ARLINGTON'S QUESTIONS

III. Whether the court erred in allowing Cystic to remain in possession of the leased premises despite its finding that Maxima breached the lease;

IV. Whether the court erred in denying Arlington's claim against Cystic for hold over rent;

V. Whether the court erred in denying Arlington's claim for refund of incentive payments made pursuant to the lease;

CYSTIC'S QUESTIONS

VI. Whether the court erred in denying Cystic's claims against Maxima for attorneys' fees and costs; and

VII. Whether the court erred in denying Cystic's claim against Arlington for $170,000.00 in damages.

FACTUAL BACKGROUND

On March 11, 1986, Arlington entered into a lease and addendum to lease (collectively referred to herein as "Master Lease") with Technassociates, Inc. (hereinafter "TI") for Arlington's building then under construction at 6931 Arlington Boulevard, Bethesda, Maryland. The premises leased were the entire second floor of the building ("Suite 200") and approximately 5000 square feet in the basement of the building (Space "T100"). Arlington and TI agreed on specifications for the construction of both spaces, and construction began on Suite 200. Completion was initially scheduled for August, 1986 but later moved to September, 1986.

Because Arlington considered Suites 200 and T100 difficult to rent, it offered TI various incentives to enter into the lease. ¹ Among them, Arlington agreed to waive the first six months of rent; to pay $260,000.00 to Technassociates as a "Signing Payment" upon execution of the lease; to pay $260,000.00 as an "Occupancy Payment" upon TI's occupying the premises; and to pay a final $200,000.00 as an "Anniversary Payment" on the first anniversary of the commencement of the leased term.

In accordance with the lease, Arlington paid TI the Signing Payment. In May, 1986, Arlington also began preparing the leased premises for occupancy. Work continued on TI then requested that Arlington consent to an assignment of the lease to Maxima and to a subletting of Suite 200 to the Cystic Fibrosis Foundation. In mid-July Arlington received an initial set of revised plans for Cystic's use of Suite 200. Those plans were finalized in mid-August, after which Arlington resumed preparation of Suite 200 alone. In a letter dated September 4, 1986, Arlington consented to a subletting of Suite 200 by Maxima to Cystic. On September 18, 1986, Maxima and Cystic entered into a "Sublease Agreement" which pertained only to Suite 200 and contained a termination date of August 31, 1992.

                both the second floor and the basement until the end of June 1986.   At that time, a representative of Maxima contacted Joel Fernebok, general partner of [568 A.2d 1173] Arlington, and told him that Maxima had acquired TI and TI's interest in the lease, and that Maxima did not know if it would be moving into the leased premises.   At that point, June 30, 1986, Arlington stopped preparation of the premises, leaving both suites approximately half completed
                

When Cystic moved into Suite 200 on October 3, 1986, Maxima demanded the $260,000.00 Occupancy Payment from Arlington. Arlington maintained that it was not obligated to make the payment because the T100 space remained unoccupied. Arlington further determined that Maxima was responsible for a 30-day delay in occupancy of the premises leased to Cystic. It offered Maxima part of the Occupancy Payment, nevertheless, if Maxima would acknowledge responsibility for the 30-day delay. In a November, 1986 letter Arlington tendered to Maxima a $204,441.55 check, the negotiability of which was conditioned on Maxima signing an attached addendum to the lease recognizing September 3, 1986 as the commencement date of the lease. Arlington sought such a recognition to establish that the rent payments for the entire leased premises would begin March 3, 1987 (following the six month waiver period). Maxima negotiated Arlington's check but On November 11, 1986, Maxima Vice President and General Counsel David R. Smith wrote the following to Arlington's counsel:

did not sign the attached addendum. ²

Please be advised that TI/Maxima intends on occupying the 5000 square feet of space at the Leased Premises not sublet to Cystic on or about December 15, 1986. We have reviewed the Premises and noted that a substantial amount of work is yet to be done in order to effect occupancy. We believe that work must commence immediately.

On December 23, 1986, however, a Maxima representative offered Arlington $175,000.00 in consideration for being released from its obligations with regard to T100, an offer that Arlington rejected. In May, 1987 Maxima notified Arlington that, "[s]ince [Arlington] has stopped work on Suite T100, it is our belief that [Arlington] has breached [Arlington's] obligation to complete said suite in a timely manner; thus, we do not feel obligated to accept the premises if completed." Maxima qualified this position in June, 1987, however, by a letter that stated inter alia, "Maxima offers the same buy-out proposal it made previously."

In July, 1987, Arlington completed preparation of T100 pursuant to TI's original plans. By letter of July 7, 1987, Arlington notified Maxima that T100 was ready for occupancy. When Maxima did not occupy and pay rent for T100 by August, 1987, Arlington advised Maxima that it was in default of the lease and that Maxima had ten days in which to cure its default. In September, 1987, Maxima proposed a sublease of Suite T100 to Cystic, and in a letter of September 10, 1987, represented the following Please be advised that tenant intends to be responsible for Suite T100 and honor our responsibilities and obligations as set forth in the Lease as of the date of the signing of the Sublease of T100 with Cystic Fibrosis Foundation contingent upon the Landlord's consent to the Sublease of Suite T100 with Cystic Fibrosis Foundation.

Arlington rejected this proposal, and on September 21, 1987, notified Maxima of a failure to cure the default that, in its view, entitled it to terminate the lease and hence Maxima's right to occupy the leased premises. On October 9, 1987, Arlington notified both Maxima and Cystic that the lease was terminated and that it would repossess the premises by November 30, 1987. Cystic responded by filing a complaint seeking a declaration that it was entitled to remain in Suite 200, and seeking a monetary award for tenant incentive payments. Maxima, in turn, cross-claimed against Arlington seeking damages for breach of the Master Lease, indemnity, and declaratory relief. Arlington completed the picture by counterclaiming against Cystic for holdover rent as to Suite 200, and cross-claimed against Maxima for indemnity. The trial court declared, inter alia, Maxima to be in default of its lease with Arlington and entered awards in favor of both Cystic and Arlington. ³

DISCUSSION

I.

A. Default and Failure to Cure

The trial judge determined that Maxima was in default of its lease with Arlington by failing to occupy and pay rent on the T100 space. She also found that Maxima had failed to cure the default, stating:

I find that Maxima told Joel Fernebok to stop building-out the T100 space because they didn't know what the use of that space would be. Based on all of the evidence that I have heard, I don't believe that Maxima intended to occupy T100, which is why they never directed him how to build it out, notwithstanding the November '86 letter to Joel Fernebok to build the space, or at the same time negotiating a buy-out. No rent has been paid by Maxima for the T100 space ... I find a breach on the part of Maxima, and I find that Joel Fernebok's failure to complete the buildout earlier was due to Maxima's conduct.... I find that Maxima did not cure but instead sought consent to sublet to Cystic which [Arlington] refused.... I find that [Arlington] did not unreasonably withhold their consent and that Maxima is in default, they paid no rent, and I believe they were stalling with respect to how they wanted it built out.

We review the trial judge's findings of Maxima's default and failure to cure under the clearly erroneous standard. Messall v. Merlands Club, Inc., 233 Md. 29, 39, 194 A.2d 793 (1963). That standard requires that we decide only whether there is any competent, material evidence legally sufficient to support the trial judge's findings. In making this determination, we assume the truth of all the evidence and of all the favorable inferences fairly deducible...