Sheikh v. Farooq

Decision Date24 January 2022
Docket Number188-2021
PartiesIBRAHIM SHEIKH, et. al., v. M. ALI FAROOQ
CourtCourt of Special Appeals of Maryland

Circuit Court for Baltimore City Case No. 24C16007112

Graeff, Berger, Raker, Irma S. (Senior Judge, Specially Assigned), JJ.

OPINION [*]

Graeff, J.

In 2016, Mr. M. Ali Farooq, appellee, filed suit against Mr Ibrahim Sheikh and Management Restoration Services, LLC ("MRS"), ("Mr. Sheikh") appellants, in the Circuit Court for Baltimore City. He alleged breach of contract, fraud, and unjust enrichment for claims relating to real property located in Baltimore City at 240 North Milton Avenue ("the property").[1] The parties negotiated a settlement right before the scheduled trial date in 2018, and they put on the record the essential terms of the agreement, with the plan to draft a written agreement encompassing these terms. A written agreement, however, proved elusive. In 2020, Mr. Farooq filed in the Circuit Court for Baltimore City a motion to enforce settlement agreement, which the court granted.

On appeal, Mr. Sheikh presents the following questions for this Court's review, which we have rephrased slightly, as follows:

1. Did the circuit court err in denying Mr. Sheikh's defense of laches to bar Mr. Farooq's motion to enforce settlement?
2. Did the circuit court improperly modify the agreement entered into by the parties in its settlement agreement?

For the reasons set forth below, we shall affirm the judgment of the circuit court.

FACTUAL AND PROCEDURAL BACKGROUND

On December 30, 2016, Mr. Farooq filed a complaint in the Circuit Court for Baltimore City against Mr. Sheikh, alleging breach of contract, fraud, and unjust enrichment. He alleged that Mr. Sheikh, his business partner, bought the property from Mr. Farooq through Mr. Sheikh's business, MRS, for $151, 197.50. Mr. Farooq loaned the entirety of the payment to Mr. Sheikh, and Mr. Sheikh agreed that he would repay the loan when Mr. Farooq demanded repayment. The complaint alleged that, after Mr. Sheikh obtained title to the property, he "began to disassociate himself from" Mr. Farooq.

On March 1, 2014, Mr. Farooq requested payment of the loan. Mr. Sheikh said that he was unable to pay the loan, but he offered to execute a deed to transfer the property back to Mr. Farooq in lieu of payment for the loan. Mr. Sheikh, however, had used the property to secure a loan of $100, 000, none of which was used to repay Mr. Farooq, but instead was used to purchase a different property.

Mr. Farooq alleged that Mr. Sheikh "intentionally misrepresented" that he would transfer the property if he did not repay the loan, when Mr. Sheikh knew that he would not do so, and Mr. Farooq relied on those representations to his detriment. Mr. Farooq requested judgment in excess of $75, 000, plus interest, costs, and attorneys' fees, transfer of the ownership of the property, and for the fraud claim, punitive damages.

In Mr. Sheikh's answer to the complaint, he denied "the execution or existence of written financing instruments or agreements with [Mr. Farooq] regarding the subject property." Mr. Sheikh denied most other factual claims, including the allegations that Mr. Sheikh was indebted to Mr. Farooq and that he used the $100, 000 to purchase 1618 Bank Street.

Trial was set for June 26, 2018. Shortly before the trial, the parties agreed to settle the case. The parties appeared in court on the trial date, and counsel for Mr. Farooq, F. Greggory Shepperd, advised that the parties had reached a settlement, and although the parties "anticipate[d] a written settlement agreement to be exchanged," and although "there's always negotiation of language of that," they "thought it would be prudent to put the essential terms of the agreement on the record" and "have the parties affirmatively assent to it."

Counsel stated that the agreement was for Mr. Sheikh to transfer the property to Mr. Farooq or his designee. The parties estimated that the $100, 000 loan on the property had a balance of $85, 000, with "monthly payments of approximately $650."

Counsel continued:

[COUNSEL FOR PLAINTIFF]: But the agreement is, is that Mr. Farooq or a designee will take the property still encumbered by that loan. Mr. Sheikh will make monthly payments to Mr. Farooq of the same amount that he's currently making to service the loan on a monthly basis due the 1st of the month in the approximate $650 balance until he has paid $65, 000 of that balance. There will be final language about this.
I believe in Baltimore City there may be rights of first refusal for tenants, the seller will obviously do whatever they have to do to be able to make that transfer. You know, security for this installment payment period will be negotiated by counsel. We don't anticipate a problem there.
There will be a ten percent late fee if payments aren't on time. I understand that there's going to be a 15-day cure period.
There will be a confessed judgment in the amount of the $65, 000 obviously to be adjusted as payments reduce that balance.
There will be no admission of liability on behalf of either Defendant.
And the mutual [re]leases will be exchanged, the releases to be limited exclusively to claims arising out of the 240 Milton property and any claims the parties may have.[2]
I believe according to my notes that that's - those are the terms that we've agreed on. There will be obviously standard terms about notices and things like that that will get ironed out in the paperwork.

Counsel for Mr. Sheikh, Stanley Alpert, advised that this captured the parties' agreement. Counsel confirmed with their clients on the record that they understood and agreed to these terms and had entered into this agreement of their own free will.

On October 8, 2018, counsel for Mr. Farooq wrote to Mr. Alpert advising that he had contacted the title company regarding the transfer of the property pursuant to the agreement, that the title work had been completed, and Mr. Sheikh needed to sign the necessary papers. He attached for Mr. Alpert's review a written agreement, which provided that Mr. Sheikh would transfer title of the property to Mr. Farooq subject to the indebtedness that existed at the time of the settlement, which was approximately $86, 500, and Mr. Sheikh would continue "making the monthly payments to the Lender" until Mr. Sheikh transferred the title to Mr. Farooq or his designee. The agreement provided that Mr. Sheikh also would pay Mr. Farooq an additional $65, 000, in monthly installments of $681.65, beginning on the first day of the month, after title was transferred, until the entire $65, 000 and any unpaid late fees were paid in full. It stated that the parties agreed to a ten percent late fee, with a ten-day period to cure. Mr. Sheikh would "execute a confessed judgment note" in Mr. Farooq's favor in the amount of $65, 000. The agreement provided that it "[did] not affect the status of any other litigation existing between" the parties, including their ongoing litigation in New York.[3]

The terms of the agreement incorporated these conditions. It also provided that Mr. Sheikh pay down the balance due on any loan secured by the property so the balance did not exceed $86, 500 at the time of the transfer.

The attorneys discussed the draft. On November 8, 2018, counsel for Mr. Farooq sent another draft of the agreement. In this agreement, Mr. Farooq agreed to pay off the loan on the property, rather than take ownership of it subject to the loan, when it was transferred, and Mr. Sheikh would make monthly payments of $650 until $65, 000 was paid. Mr. Farooq would pay closing costs, and the parties would split any taxes related to the transfer. The grace period to cure money due was extended from 10 days to 15 days. Counsel for Mr. Farooq, however, did not include credits for the mortgage payments made by Mr. Sheikh since the trial date because Mr. Sheikh had collected and retained rental payments during that time.

A series of emails followed. Mr. Alpert stated that the settlement agreement was subject to an agreed written document that contained the settlement terms. He advised counsel for Mr. Farooq to "look at the language put on the record for releases." He further advised that Mr. Sheikh did not have a tenant, and he should be given credit for the mortgage he paid for the five months since trial because Mr. Farooq was getting a reduction in the principal that he would be paying off at the closing. Mr. Sheikh also took issue with the parties splitting transfer taxes, stating that there was no agreement on that.

Counsel for Mr. Farooq noted that the transcript of the settlement agreement did not say that Mr. Farooq would pay off the loan, but he was willing to do that at Mr. Sheikh's request. He also noted that, although the transcript did not address the payment or recordation of transfer taxes, the Maryland Code provided that, unless otherwise agreed, it was presumed that these costs would be shared equally.[4]

On November 12, 2018, counsel for Mr. Farooq sent another draft of the agreement, which included only minor changes. The wording of the agreement on closing costs and taxes changed slightly, but it still provided that Mr. Farooq would pay closing costs and that the parties would split taxes associated with the transfer. Language regarding the release was modified to read as follows: "The parties mutually release each other but the mutual release is limited exclusively to claims arising out of the [p]roperty."

On November 14, 2018, Mr. Sheikh's counsel responded to this draft, listing several concerns. First, he stated that, due to Mr. Farooq's "failure to proceed with the Settlement Agreement and transfer of the property," Mr Sheikh had incurred additional expenses. He noted that the...

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