600 North Frederick Road, LLC v. Burlington Coat Factory

HARRELL, J. “Gallia est omnis divisa in partes tres....” 1 As the tribes of the three parts of ancient Gaul presented unique problems for Julius Caesar, an owner and a tenant, among the three ⁴¹⁷ parcels comprising the subject real property of this case, present us with a matter of first impression in Maryland law. This case requires us to determine if and when a declaration of covenants regarding real property (essentially a contract), which requires the owner(s) to be signatories to any modification in order to be effective, may be modified by the written consent of less than all of the owners. 600 North Frederick Road, LLC (“Petitioner”)—owner of one parcel of the three-parcel tract of land in Montgomery County—appeals here from the judgment of the Court of Special Appeals affirming the judgment of the Circuit Court for Montgomery County approving such a modification. The Circuit Court held that Petitioner’s predecessor in interest and the owner of one of the other parcels could modify bilaterally an earlier declaration executed and recorded by a single predecessor owner at a time when all three parcels were under single ownership—a modification that now limits Petitioner’s development rights on its later-acquired parcel—notwithstanding that the earlier of the two declarations provided that any purported modification required the consent of the owner(s) of all three parcels. Further, the Circuit Court ruled that the revised declaration applied not only to any third-party (i.e., non-owner) developer of the restricted parcel, but to Petitioner as owner of the proposed-for-development restricted parcel.

Petitioner claims here, as it did before the trial and intermediate appellate courts, that, because the original declaration required expressly the consent of the owner or owners of all of the parcels, an attempt to modify the agreement in a writing executed by less than all of the owners (or their successors or assigns) is ineffective, and, as such, the revised declaration is invalid and unenforceable. In response, Burlington Coat Factory of Maryland, LLC (“Burlington” or “BCF”), assigneeleaseholder on one of the parcels and an express beneficiary of the revised declaration, relies on authorities from other jurisdictions which hold effectively that two parties to a tripartite agreement may modify that agreement, in writing, provided that the modifications do not prejudice the non-signatory party. We hold, for reasons to be explained more fully infra, ⁴¹⁸ that, because the foreign authorities upon which Burlington relies are consistent with Maryland appellate courts’ longstanding jurisprudence regarding modification of contracts, the modifications in the revised declaration are valid and enforceable absent an adequate showing of prejudice by the non-consenting parcel’s owners. Further, we hold that the restrictions contained in the revised declaration apply, not only to third-party developers of the restricted parcel, but also to Petitioner as owner of that parcel.

Accordingly, although we agree with virtually everything held by the Court of Special Appeals, this case must be remanded to the Circuit Court for further proceedings not inconsistent with this opinion. I. FACTS AND LEGAL PROCEEDINGS This case involves a tract of land in Gaithersburg, Montgomery County, Maryland. At some point prior to 1976, the tract was subdivided into three parcels, denominated as “Parcel One,” “Parcel Two,” and “Parcel Three.” Parcel One, the smallest of the three lots (approximately 2.47 square acres in area), is situated on the northeast corner of the tract, at the intersection of Perry Parkway and North Frederick Avenue (Maryland Route 355). Parcel Two (approximately 7.53 square acres) is west of Parcel One, and also abuts Perry Parkway and Route 355.

Parcel Three, the largest of the lots, is west of Parcels One and Two, and abuts Perry Parkway on the south, Montgomery Village Avenue on the northwest, and Route 355 on the northeast. In 1976, all of the parcels were owned by Danac Real Estate Investment Corporation (“Danac”). On 22 April 1976, Danac entered into a thirty-year lease with Montgomery Ward & Co, Inc. (“Ward”) involving Parcels One and Two. Pursuant to the lease, Ward constructed a retail store on Parcel One (the Leasehold) and the majority of its supporting surface parking on Parcel Two (the easement).

Ward’s use of Parcel Two for parking was subject expressly to Danac’s right to develop Parcel Two. Ward’s need for parking on Parcel Two would be accommodated in any development proposal by Danac, pre ⁴¹⁹ sumably by a parking structure or structures. The lease provided further that Danac was required to seek and obtain Ward’s consent before commencing development on Parcels Two and/or Three, which consent was not to be withheld unreasonably. The lease was silent as to the precise location or types of any such future development.

At the end of the original thirty-year lease term, Ward had the option, provided it was not in default at the time of its obligations under the Lease, to extend the lease for a period of ten additional years, with two additional options, each for a like period. In 1980, 2 Danac entered into a contract with Realty Dealership Corporation (“RDC”), by which RDC was to acquire fee-simple title to Parcels One and Two, in the name of a wholly-owned subsidiary, Eretz Land Corporation (“Eretz”). Danac, prior to closing on the sale, agreed (and was permitted) to execute and record covenants reserving to itself development rights to Parcel Two. On 30 January 1981, Danac executed a “Declaration of Easement and Covenant” (“1981 Declaration”).

The 1981 Declaration provided that, should Danac cease to be the fee simple owner of Parcel Two, Danac reserved the right, until 1 January 2001, to enter into a fifty-year ground lease with the owner, for an annual rent of $1,000.00. The proposed ground lease would grant Danac development rights on Parcel Two, provided that Danac would agree that “at the time [it] commences construction of any improvement on Parcel 2 ..., then such construction shall not commence until the owner of Parcel [One] shall have given its written consent to such construction, which consent shall not be unreasonably withheld.” 3 Further, the 1981 Declaration re-affirmed expressly ⁴²⁰ the rights in Parcel Two of the tenant on Parcel One as granted by the 1976 Lease. Of particular importance to the present case, the 1981 Declaration provided that “[t]his declaration may be modified or canceled only by written instrument signed by the owners of the Parcels.” 4 Danac conveyed Parcels One and Two to Eretz on 30 January 1981. The 1981 Declaration and the deed were recorded on 13 February 1981.

In October 1983, Danac sought Ward’s consent (as required under the 1976 Lease and affirmed in the 1981 Declaration) to develop Parcel Two with an office complex. Ward—which closed its retail store on Parcel One in March 1983 (the building continued apparently to house two minor sub-tenants) and apparently was in negotiations with prospective assignees of its interest in the Lease—objected to Danac’s plan, asserting that proposed buildings would destroy the line of sight of occupants of vehicles on Route 355 to Ward’s store entrance, as well as the majority of the surface parking in front of the store. Believing apparently that the development as proposed would interfere with its ability to negotiate a favorable assignment of the Lease, Ward filed a complaint, on 16 October 1984, for declaratory judgment in the Circuit Court for Montgomery County against Danac and Eretz, asking the Circuit Court to: Enter an Order declaring that neither Danac, nor any of its successors or assigns, has any rights arising under the Declaration of Covenant and Easement dated January 30, 1981 and recorded February 13, 1981, or, in the alternative, should the Court find that Danac has development rights under the Declaration, then declaring exactly what rights Danac has thereunder. ⁴²¹ Danac filed an answer and asserted various counterclaims, alleging that Ward “intentionally interfered with Danac’s use and enjoyment of its rights by their refusal and failure to permit Danac to commence construction on Parcel [Two].” During the pendency of that litigation, throughout 1987 and 1988, most 5 of Parcel Three was conveyed to the State Highway Administration, Corner Limited Partnership, and Point Limited Partnership. Further, while the litigation was ongoing, Danac and Ward continued negotiations regarding the scope of Danac’s proposed development of Parcel Two.

These negotiations culminated in the execution of an “Amended and Restated Declaration of Easements and Covenants” (“1992 Declaration”)—signed by representatives of Purcell Investment Corporation (Danac’s new name) (the developer of Parcel Two) and Eretz (the owner of Parcels One and Two)— whose purpose was to “amend and restate the [1981] Declaration in its entirety----” The 1992 Declaration reiterated that it was “intended to supersede and replace in its entirety the [1981] Declaration and any other documents granting development rights to Declarant[ 6 ] in Parcel [Two],” with “all such rights being hereinafter void ab initio.” The 1992 Declaration restated Purcell/Danac’s option, exercisable until 1 January 2001, to enter into a ground lease with the owner of Parcel Two, at $1,000.00 monthly. Importantly, the 1992 Declaration delineated (with somewhat greater specificity than the 1981 Declaration) restrictions on any future development on Parcel Two, limiting it to a specified “Restricted Development Area,” and emphasizing that the 1992 Declaration’s provisions “shall apply to and govern the construction of any Future Improvements on Parcel [Two], whether or not the same shall be undertaken pursuant to the ground lease described .... ⁴²² above.” 7 (Emphasis added.) To illustrate graphically the layout, configuration, and ownership interests of the three parcels at the time critical to resolution of this case in its present posture, we insert here Figure One, which we created based on an exhibit in evidence at trial, superimposed with other uncontested facts. 8 Figure One Owners of the Three Parcels as of the Execution of the 1992 Declaration ⁴²³ [[Image here]] To illustrate the location of the Restricted Development Area delineated in the 1992 Declaration, we insert here Figure Two, which reflects the RDA in cross-hatching and is based on an exhibit in evidence below, modified slightly for clarity purposes. ⁴²⁴ [[Image here]] On 22 July 1994, after the 1992 Declaration was executed (on 14 July 1992) and recorded (sometime between 14 and 22 July 1994), the 1984 litigation was dismissed with prejudice. At some point prior to 1998, Burlington Coat Factory (“BCF”) began investigating whether the largely vacant Ward store on Parcel One would be a suitable site in which to open one of its retail clothing stores. Robert Grapski (“Grapski”), BCF’s Senior Vice President of Real Estate, explained that the covenant in the 1992 Declaration prohibiting residential development on Parcel Two was attractive to BCF as a potential tenant of the Ward store, opining that “residential mixed with retail [in close proximity] ... is not a healthy mix.” ⁴²⁵ Further, Grapski explained that the covenant against construction activities on Parcel Two during the Thanksgiving-Christmas holiday season was desirable to BCF, as BCF does sixty-to-seventy percent of its business in the holiday shopping season, and “to be under construction during that time of the year is suicidal.” Ultimately, on 23 October 1998, Ward assigned to BCF its interest as tenant under the 1976 Lease and, thereafter, BCF began operating a retail store in the building on Parcel One, while continuing the subleases of parts of the building to Toys R’ Us and a Ford automobile dealership.

The BCF operation on Parcel One became one if its best stores in Maryland, placing in the top one-third based on net operating income. In the Fall of 2003, Petitioner became interested in acquiring Parcels One and Two. After conducting a due diligence review, outside counsel for Petitioner determined that the 1992 Declaration was not binding on the owner of Parcel Two, but, as explained more fully infra, believed the covenants applied only to third-party developers of Parcel Two. 9 As a result, Petitioner, in December 2003, purchased Parcels One and Two. Soon thereafter, Petitioner entered into a development agreement with Avalon Bay Communities, Inc. (“Avalon Bay”) to erect on Parcel Two a 394-unit apartment complex, retail stores, and a six-story parking garage.

Discussions between Grapski and Avalon Bay’s agent, who solicited BCF’s consent to Avalon Bay’s development plan, proved fruitless. Avalon Bay withdrew as a developer of Parcel Two. 10 Petitioner engaged another developer for Parcel Two, JPI Enterprises, Inc. (“JPI”). Under their agreement, JPI would purchase and develop Parcel Two, and Petitioner would re ⁴²⁶ main the owner of Parcel One. Petitioner’s counsel wrote to Grapski, explaining that JPI’s proposed development of Parcel Two included a 300-unit apartment complex, retail stores, and a parking garage.

Petitioner’s counsel expressed the view that, although Petitioner sought “to get feedback from Burlington on the plans, and obtain Burlington’s full cooperation during the construction of the project,” “[wjhether Burlington’s consent is necessary is an open question legally.... ” After additional correspondence and meetings between counsel and representatives of Petitioner, BCF, and JPI, 11 , 12 on 30 April 2007, counsel for BCF wrote to Petitioner to advise of its refusal to consent to the JPI project, explaining that the “construction would be in violation of numerous provisions of the [1992] Covenants and would substantially interfere with [BCF]’s operations at the site.” On 7 June 2007, Petitioner filed a seven-count “Complaint for Declaratory Relief” against BCF in the Circuit Court for Montgomery County, asking that the Circuit Court declare: A. That the ... 1992 Document is unenforceable; ⁴²⁷ B. That the ... 1992 Document failed to create an easement or covenant regarding Parcel [Two]; C. That ... [BCF] unreasonably withheld its consent and that the 1976 [Lease] permits construction of the J[PI] Development; D. That ... [BCF] has waived its right to approve or disapprove the J[PI] Development; E. In the alternative, that ... [Petitioner] is entitled to develop Parcel [Two] without regard to the easements and covenants Purcell and Eretz ... attempted to create in the 1992 Declaration] because the easements and covenants have outlived their usefulness; F. In the alternative, that ... [Petitioner] is entitled to develop Parcel [Two] without regard to the easements and covenants Purcell and Eretz ... attempted to create in the 1992 Declaration] because the easements and covenants are extinguished through merger of interests; G. In the alternative, [that Petitioner] is entitled to develop Parcel [Two] without regard to any easements and covenants created by Purcell and Eretz because [BCF] has an adequate remedy at law; H. That the Court award [Petitioner] its costs and other relief in this action; I. That the Court award further and supplementary relief as may be necessary or proper; and J. That the Court award such other relief as the Court deems just and proper. BCF filed an answer and counterclaim, asking the Circuit Court to declare that BCF did not withhold unreasonably its consent, and, pursuant to a fee-shifting provision in the 1976 Lease, to require Petitioner to pay its expenses and attorney’s fees, assuming that BCF would be the successful party in the litigation. On 21 January 2008, Petitioner moved for summary judgment, arguing generally that the 1992 Declaration is unen ⁴²⁸ forceable and/or void for mutual mistake and lack of consideration. BCF opposed Petitioner’s motion and filed a cross-motion for summary judgment, arguing generally that the 1992 Declaration is valid and enforceable, and that it prohibits the proposed JPI development on Parcel Two.

Following a hearing, the Circuit Court, by order and memorandum opinion, on 4 June 2008, ruled that: (1) the issue of whether there was adequate consideration for the 1992 Declaration was withdrawn by Petitioner and thus moot; (2) the 1992 Declaration did not create an interest that violates the Rule Against Perpetuities or an unreasonable restraint on alienation of property; (3) the covenants contained in the 1992 Declaration run with the land; (4) the 1992 Declaration was not based upon a mutual mistake of fact; and (5) Petitioner did not breach the 1976 Lease merely by advancing JPI’s proposal to develop Parcel Two. The Circuit Court, however, denied the parties’ competing motions for summary judgment regarding the following issues, deferring their resolution for a trial: (a) [Whether] the 1992 Declaration of Easements and Covenants [was ambiguous]. (b) The validity ... of the 1992 covenants because Eretz ... could not create easements for restrictions on its own land. (c) Whether ... there has been a [subsequent] change in circumstances in the neighborhood which would render the 1992 covenants invalid.

(d) Whether the 1992 covenants are ... subject to specific performance. (e) Whether the 1992 covenants apply to ... the owner of Parcel No. 2.[ 13 ] ⁴²⁹ (f) Whether the 1992 covenants are invalid because they only “confirm” rights in the 1981 Declaration that were allegedly invalid. (g) Whether or not [BCF] ... withheld [unreasonably] consent to the landlord’s proposed future improvements under Section 16.2 of the lease. At trial, Petitioner injected another issue, namely, whether “the 1992 Declaration is invalid because it was not signed by the owners of Parcels [One], [Two] and [Three] as required by the 1981 Declaration.” Resolution of this flagship issue is at the core of the present case.

On 27 May 2009, the Circuit Court, in a thirty-three page memorandum opinion, rejected Petitioner’s claim that “the 1992 Declaration’s restrictions on ‘Developer’ are not applicable to the Owner of Parcel [Two],” explaining rather that: The express language and structure of the 1992 Declaration make it clear that the restrictions apply not only to the construction of Future Improvements by Purcell pursuant to a ground lease, but also to any Future Improvements constructed by anyone on Parcel [Two] after the expiration of the ground lease. Next, regarding the missing-signatories argument, the Circuit Court held that the 1992 Declaration was valid and enforceable notwithstanding the fact that the owners of Parcel Three were not signatories to it, relying on the California Supreme Court case of Hotle v. Miller, 51 Cal.2d 541 , 334 P.2d 849 (1959), and explaining that, because “[t]he rights of the Parcel [Three] owner were not affected by the 1992 Declaration,” under “Maryland law, the only signatures needed were those of the owners of Parcels [One] and [Two].” ⁴³⁰ Petitioner appealed timely to the Court of Special Appeals. The Court of Special Appeals, in an unreported opinion, discussed: (1) the validity of the 1992 Declaration; (2) assuming the validity of the 1992 Declaration, the application of the 1992 Declaration to Petitioner as the owner of Parcel Two; and (3) whether BCF’s withholding of consent to development of Parcel Two was unreasonable. In agreeing with the Circuit Court regarding the missing-signatories argument, the panel of the intermediate appellate court explained: It is not uncommon in multi-party contracts covering a variety of matters for the parties to have common interests in some matters but not others.

Matter A may be of interest to only two of the parties, although all may have an interest in matter B. If the only two parties with an interest in Matter A later wish to modify their agreement as to that matter and their proposed modification would not adversely affect any other party, we see no reason why they should not be permitted to make that modification.[ 14 ] Regarding the issue of whether the 1992 Declaration applied to Petitioner as the owner of Parcel Two, or applied merely to third-party developers of Parcel Two, our appellate brethren explained: We see nothing in th[e 1992 Declaration] ... limiting those restrictions and burdens to development carried on by third-party developers or in any way exempting the owner of Parcel [Two] from them. Indeed, ¶ 2 specifies the contrary by defining “developer” as “[t]he entity undertaking any such Future Improvements ” (emphasis added), which would necessarily include any entity undertaking the improvements, whether the owner of Parcel [Two] or some other entity. ⁴³¹ Finally, regarding the issue of whether BCF’s withholding of consent to development of Parcel Two was unreasonable, the Court of Special Appeals opined: [F]rom the very beginning, the tenants on Parcel [One] objected to any development on Parcel [Two] that would substantially injure their ability to conduct their business— by interfering with the visibility of the store from Route 355 and with ingress and egress from that road to and from the parking area, and by substantially limiting the parking area necessary to attract customers. Montgomery Ward made that clear in 1983 and [BCF] made it clear when presented with the various plans. The plain, simple fact is that [Petitioner] had insisted, presumably for its own economic reasons, on utilizing nearly all of the area of Parcel [Two] for a mixed-use office, retail, and residential development and that all of the plans for that kind of development not only violate the requirement that development be restricted to the area specified in the 1992 Declaration but also would do the very thing that the [BCF] ha[s] consistently and legitimately expressed concern about and opposed.

There is substantial evidence in the record supporting the Circuit Court’s conclusion that [BCF] acted reasonably and in good faith. 600 North Frederick Road, LLC, filed timely a Petition for Writ of Certiorari, which we granted, 600 N. Frederick Road, LLC v. Burlington Coat Factory of MD, LLC, 416 Md. 272 , 6 A.3d 904 (2010), to consider: 1. Whether a recorded written instrument requiring the signatures of a defined set of property owners to cancel or modify it can be modified by fewer than all based on an allegation that extrinsic evidence shows that the non-signing property owners are not adversely affected by the modification? 2. Whether potentially perpetual restrictions on the use of land may be imposed under the rule of reasonably strict construction without applying the traditional rule of ⁴³² contract interpretation that every provision in a written instrument must be given meaning, if possible? 3. Under the rule of reasonably strict construction, may a court imply restrictions on the use and development of land or must such restrictions be clearly stated in a document applicable to the property owner?

For the reasons that follow, although we agree with the holding and much of the reasoning of the opinion of the Court of Special Appeals, we must vacate its judgment and remand the case to that court with directions to remand the case to the Circuit Court for Montgomery County for further proceedings not inconsistent with this opinion.

II

STANDARD OF REVIEW In the present case, we are reviewing the declaratory judgment of the Circuit Court for Montgomery County, issued by way of memorandum opinion following a bench trial. Maryland Rule 8-131(c) (“Action tried without a jury”) provides: When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. The question of whether circumstances exist in which a contract (even a declaration containing covenants pertaining to real property), requiring the parties to be signatories to any written modification for the modification to be effective, may be modified nonetheless with the consent of less than all of the parties, is a question of law that we review under a non-deferential standard.

See Parker v. State, 408 Md. 428, 437 , 970 A.2d 320, 325 (2009) (‘When the trial judge’s ruling involves a legal question ..., we review the trial court’s ruling de novo.”). Further, resolving Petitioner’s question relating to whether the 1992 Declaration applies to it as the owner of Parcel Two, or merely to third-party developers of Parcel ⁴³³ Two, involves the interpretation of the 1992 Declaration, a purely legal issue which we also review under a non-deferential standard. See Nova Research, Inc. v. Penske Truck Leasing Co., L.P., 405 Md. 435, 448 , 952 A.2d 275, 283 (2008) (“The interpretation of a written contract is a question of law for the court subject to de novo review.”).

III

ANALYSIS A. Justiciability In its complaint in the Circuit Court, Petitioner averred that BCF “has unreasonably withheld its consent to the construction of the J[PI] Development.” In its unreported opinion, the Court of Special Appeals concluded that “[tjhere is substantial evidence in the record supporting the Circuit Court’s conclusion that [BCF] acted reasonably and in good faith” in withholding consent to the JPI development on Parcel Two. According to BCF, “[b]ecause [Petitioner] has not challenged before this Court this separate and independent basis for the decisions of the Courts below, the questions that [Petitioner] presents before this Court as to the validity of the 1992 [Declaration] are not justiciable.” See Bailiff v. Woolman, 169 Md.App. 646, 653 , 906 A.2d 409, 413-14 (2006), cert. denied, 396 Md. 12 , 912 A.2d 648 (2006) (quoting Johnson v. Commonwealth, 45 Va.App. 113 , 609 S.E.2d 58, 60 (2005) (noting that “the majority of jurisdictions hold[ ] that in situations in which there is one or more alternative holdings on an issue, the appellant’s failure to address one of the holdings results in a waiver of any claim of error with respect to the court’s decision on that issue”)) (internal quotation marks omitted). We are unpersuaded by this argument. The Circuit Court’s rationale for why BCF’s withholding of its consent to the JPI development plan for Parcel Two was not unreasonable was not a “separate and independent basis” for the declaration by the Circuit Court.

That is, the Circuit Court, although tipping its hand as to the merits of whether the consent was withheld unreasonably, ruled ultimately that: ⁴³⁴ [T]he declaration [Petitioner] seeks is nothing more than an advisory opinion as to whether BCF was unreasonable in withholding its consent to a development contract that has since expired. The [Petitioner] cannot seek such declaration because addressing non-justiciable issues places courts in the position of rendering purely advisory opinions, a long forbidden practice in Maryland. Thus, because the Circuit Court’s memorandum opinion on this point was expressed in an “oh, by the way” manner, it cannot constitute a “separate and independent basis” for its ruling, such that the failure to point to that basis on appeal would make the issues before this Court moot. 15 See Bailiff, 169 Md.App. at 653 , 906 A.2d at 414 (quoting Johnson, 609 S.E.2d at 60 ) (stating that “we still must satisfy ourselves ... that the alternative holding is indeed the one that ... would legally constitute a freestanding basis in support of the trial court’s decision”). In any event, it is not a surprise that Petitioner does not ask us to determine whether BCF’s withholding of consent as to the development proposal for Parcel Two was unreasonable, considering, as decided correctly by the Circuit Court, that issue was rendered moot by the fact that the contracts with Avalon Bay and JPI expired.

The issues we explore today involve not the parties’ actions with respect to any potential development that was proposed in the past, but rather, the vitality and reach of the 1992 Declaration and, if effective, how the parties (and their successors and assigns) must conduct themselves under the 1992 Declaration prospectively. ⁴³⁵ B. The Case of the Missing Signatories 1. The Parties’ Contentions In its first challenge to the validity of the 1992 Declaration, Petitioner argues that “the 1992 [Declaration] was invalid because all of the Parcel owners[ 16 ] did not sign it.” More specifically, Petitioner argues that the 1992 Declaration— “intended to supersede and replace in its entirely the [1981] Declaration and any other documents granting development rights in Parcel [Two]”—could not modify or replace the 1981 Declaration without the signatures of the Parcel Three owners, considering that the 1981 Declaration provided expressly that it “may be modified or cancelled only by written instrument signed by the owners of [all] of the Parcels.” Such a result, Petitioner continues, is “required, because, in Maryland, the unambiguous language of the contract controls, and there is ‘no room for construction.’ ” (quoting Bd. of Trs. of the State Colls, of Md. v. Sherman, 280 Md. 373, 380 , 373 A.2d 626, 629 (1977)). In response, BCF contends that Petitioner’s “suggestion that the 1992 [Declaration is] invalid because the Parcel [Three] Owners did not join them is contrary to settled contract law.” Rather, BCF argues, “the parties to a contract remain free to modify the contract or create a new agreement as long as the modification does not alter or affect the rights of a party who does not join in the modification,” and that “so long as it does not affect the rights of a party that does not join, a contract modification is binding on those parties that join in the modification, but not on parties that fail to join in it.” Because BCF (and the Circuit Court and the Court of Special Appeals) rely for support on (and Petitioner attempts ⁴³⁶ to distinguish) the California Supreme Court’s opinion in Hotle, supra, we shall consider that case first. In Hotle , a husband and wife opened a bank account, executing a deposit agreement that provided: [A]ll moneys now or hereafter deposited by us or either of us with the bank in this account ... shall be the property of both of us as joint tenants and shall be payable to and collectable by either of us during our joint lives, and after death of one of us shall belong to and be the sole property of the survivor....

Hotle, 334 P.2d at 850 . More than a decade after the bank account was opened, and without the consent of or knowledge by the bank, the husband and wife “orally agreed that regardless of how title was held, all of their property had been acquired as their community property....” Id. Thereafter, the husband executed a will “in which he undertook to dispose of all of the community property, and [wife] executed a waiver of claim to her share of the community property in view of her election to accept the terms of the will.” Id. When he died, executors of his estate sought to treat the deposit agreement as modified by the couple’s subsequent agreement, such that they could distribute the balance of the bank account as community property, in accordance with the terms of the will.

Id. Executors of the now-deceased wife’s estate, argued, however, that “the [oral] agreement cannot operate to change the rights of the parties in the joint tenancy bank account, [and] that title to it therefore vested in [the wife] when she survived [the husband]....” Id. The California Supreme Court, speaking through Justice Roger Traynor, explained that although the deposit agreement—which was in conformance with a statute existing at the time the agreement was executed, but which had been repealed by the time of the filing of the court’s opinion—“is conclusive evidence of the intention of the depositors at that time to vest title in the survivor .... [i]t in no way deprives the depositors of their freedom of contract to make subsequent agreements changing their interests in the account.” Hotle, 334 P.2d at 851 . The court noted two cases—Ehrman ⁴³⁷ v. Rosenthal, 117 Cal. 491 , 49 P. 460 (1897), and Fitts v. Mission Health and Beauty Shop, 58 Cal.App. 362, 208 P. 691 (1922)—commenting that “those cases correctly hold that two parties to a tripartite agreement cannot change it to the prejudice of the third party.” Hotle, 334 P.2d at 852 ; see Lakeshore Commercial Fin.

Corp. v. Drobac, 107 Wis.2d 445 , 319 N.W.2d 839, 845 (1982) (stating that Hotle stands for the proposition that “parties can change the relationships between themselves and that a new contract is valid, although such subsequent contract cannot diminish the rights nor increase the obligations of original signatories to the agreement; but, as between themselves, the assenting parties are bound”). Interpreting Hotle in the present case, BCF contends that “the 1992 [Declaration] could supplement the 1981 [Declaration] as between the Owner and Tenant of Parcels [One] and [Two], without the agreement of the Owners of Parcel [Three], because the[ latter] had no right whatsoever under the 1981 [Declaration] to control the nature and scope of development on Parcel [Two].” In response, Petitioner argues that the rule in Hotle is “contrary to the prior holdings of this [C]ourt,---[considering that] the Court has previously held that the making of a valid contract requires signatures where ‘the parties have made them necessary at the time they expressed their assent and as a condition modifying that assent.” (quoting Porter v. Gen. Boiler Casing Co., 284 Md. 402, 410-11 , 396 A.2d 1090, 1095 (1979)). Further, Petitioner contends “the invention of the ‘no prejudice’ standard for recorded instruments is unworkable and unwise,” as “when a later modifying document is missing necessary signatures, a title searcher will have to launch an investigation to determine whether the missing parties are prejudiced by the later attempt at modification or cancellation.” Next, allowing a modification of the 1981 Declaration with less than all of the signatures required in the modification document, as Petitioner’s argument goes, runs contrary to Maryland’s approach to applying a “reasonably strict construction” when construing covenants.

And finally, Petitioner urges that Hotle is factually inapposite,