Bel Air Carpet v. Korey Homes Bldg Grp

Bel Air Carpet, Inc. v. Korey Homes Building Group, LLC, et al. No. 1006, Sept. Term, 2019 Opinion by Leahy, J. Negligence > Duty of Care > Economic Loss Doctrine Maryland has adopted the economic loss doctrine, which generally precludes tort liability for “negligence that causes purely economic harm in the absence of privity, physical injury, or risk of physical injury.” Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 451 Md. 600, 611 (2017). Negligence > Duty of Care > Economic Loss Doctrine > Intimate Nexus “Where the failure to exercise due care creates a risk of economic loss only, courts have generally required an intimate nexus between the parties as a condition to the imposition of tort liability.” UBS Fin. Servs., Inc. v. Thompson, 217 Md. App. 500, 525 (2014) (quoting 100 Inv. Ltd. P’ship v. Columbia Town Ctr.

Title Co., 430 Md. 197, 214 (2013)). “This intimate nexus is satisfied by contractual privity or its equivalent.” Jacques v. First Nat’l Bank of Md., 307 Md. 527, 534-35 (1986). Negligence > Duty of Care > Economic Loss Doctrine > Intimate Nexus In concluding our survey of the intimate nexus test, we quote Judge Adkins’s observation about the level of conduct linking the plaintiff to the defendant that is required to establish an intimate nexus: These cases illustrate that regardless of whether we apply the Credit Alliance/Walpert test, our privity-equivalent analysis in economic loss cases looks for linking conduct—enough to show the defendant knew or should have known of the plaintiff's reliance. This means, of course, that context is critical. Balfour Beatty, 451 Md. at 620-21 .

Negligence > Duty of Care > Economic Loss Doctrine > Intimate Nexus > Construction Industry > Lender We conclude that Maryland law does not recognize a general duty on the homeowner’s lender to ensure that the general contractor on a home construction project pays all of its subcontractors for work completed when the lender disburses funds to the general contractor, and where there is no privity of contract or intimate nexus between the lender and the subcontractors. The public policy of Maryland and other states disfavor imposing such a general duty of care on home construction lenders. As we note above, it would be “manifestly unfair” to make lenders the “insurer of the subcontractors’ interests” by imposing a general duty on lenders to ensure that general contractors properly pay unknown subcontractors for their work. See Richard F. Kline, Inc. v. Signet Bank/Maryland, 102 Md. App. 727, 733 (1995).

Negligence > Duty of Care > Economic Loss Doctrine > Intimate Nexus > Pleading Requirements We hold that Bel Air Carpet has failed to allege a cognizable duty of care owed to it by Hamilton Bank because Bel Air Carpet does not allege privity or any equivalent intimate nexus in the complaint. The complaint does not allege the necessary “linking conduct” between the parties to justify Bel Air Carpet’s reliance that Hamilton Bank would ensure that its borrower’s funds were paid to Bel Air Carpet. Negligence > Duty of Care > Economic Loss Doctrine > Intimate Nexus > Pleading Requirements As our review of our cases requiring an intimate nexus highlights, the plaintiff must allege “linking conduct” sufficient to “show the defendant knew or should have known of the plaintiff’s reliance.” Balfour Beatty, 451 Md. at 620-21 . Nowhere in the complaint does Bel Air Carpet allege that Hamilton Bank made a specific promise or representation to perform an obligation for Bel Air Carpet’s benefit or that Hamilton Bank knew that Bel Air Carpet was relying on it.

Bel Air Carpet seeks to cure this defect by asserting a broad- based standard in the construction industry. Unfortunately for Bel Air Carpet, neither Maryland nor most other states recognize such a broad-based duty of care that requires a lender to ensure that subcontractors and suppliers are paid. Negligence > Duty of Care Although it may be foreseeable that Hamilton Bank’s failure to request mechanic’s lien releases or inspect the properties could harm Bel Air Carpet, unless Hamilton Bank owes Bel Air Carpet a duty, Hamilton Bank cannot be liable to Bel Air Carpet in negligence. Ashburn v. Anne Arundel Co., 306 Md. 617, 628 (1986) (“[T]here is no duty to control a third person’s conduct so as to prevent personal harm to another, unless a ‘special relationship’ exists either between the actor and the third person or between the actor and the person injured.”).

Circuit Court for Harford County Case No. C-12-CV-19-000151 REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1006 September Term, 2019 ______________________________________ BEL AIR CARPET, INC. v. KOREY HOMES BUILDING GROUP, LLC, ET AL. ______________________________________ Kehoe, Nazarian, Leahy, JJ. ______________________________________ Opinion by Leahy, J. ______________________________________ Filed: January 28, 2021 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2021-04-30 15:00-04:00 Suzanne C. Johnson, Clerk The underlying lawsuit was brought by a subcontractor in the construction industry left unpaid at the end of a construction project.1 Appellant Bel Air Carpet, Inc. (“Bel Air Carpet”) was one of the last subcontractors to complete work on a series of new homes built by Korey Home Building Group, LLC (“Korey Homes”), a custom home builder with its principal place of business in Harford County. Bel Air Carpet filed a negligence action to recover damages in the Circuit Court for Harford County against Korey Homes and several other defendants. This appeal concerns just one of the defendants in that action— appellee Hamilton Bank.2 The trial court granted Hamilton Bank’s motion to dismiss the single count of negligence against it on the ground that the complaint failed to state a claim because Bel Air Carpet failed to allege any contractual relationship or intimate nexus between it and Hamilton Bank to establish a duty of care. Upon a consent motion, the circuit court certified its order as final and appealable under Maryland Rule 2-602(b). 1 Maryland has been grappling with the problem of unpaid contractors on construction projects since the time it became the seventh state to ratify the U.S. Constitution in 1788.

The General Assembly enacted the first mechanic’s lien law in the United States in December 1791 to encourage the building of Washington, D.C. by granting contractors the ability to obtain a lien on property to ensure payment for their work on a project. 1791 Md. Laws Ch. 45, § 10. 2 After the litigation was commenced, Orrstown Financial Services, Inc., the holding company for Orrstown Bank, acquired Hamilton Bancorp, Inc., which operated Hamilton Bank. Hamilton Bank is now known as Orrstown Bank. To avoid confusion, as the parties adopt in their briefs, we will continue to refer to the successor entity as Hamilton Bank. Bel Air Carpet presents two questions for our review,3 which we have recast as follows: I. Did the circuit court err in dismissing the negligence count against Hamilton Bank by finding, as a matter of law, that Hamilton Bank did not owe a duty of care to Bel Air Carpet?

II

Did the circuit court err or abuse its discretion in dismissing the negligence count against Hamilton Bank prior to discovery? Bel Air Carpet urges that we hold that Hamilton Bank owed a duty of care to the subcontractors of Korey Homes to ensure they were paid under the theory that Hamilton Bank should have required mechanics lien releases from all subcontractors and conducted independent inspections of the work. Maryland law does not support the imposition of such a duty, and we cannot step beyond the statutes and cases that the Maryland General Assembly and our Courts have established to create one. We further note that, because the existence of a duty is a legal determination, the circuit court did not abuse its discretion in dismissing the negligence count prior to discovery.

Consequently, we affirm the judgment of the circuit court. 3 The questions presented in Bel Air Carpet’s opening brief are: “1. Whether a construction lender owes a duty of care to a subcontractor where that bank releases funds to a general contractor, a portion of which belongs to the subcontractor, without requiring lien releases from subcontractors or conducting inspections to ensure the work on the custom home had been completed, which are both standard lending industry practices and a contractual condition precedent to releasing the funds to the general contractor? 2. Did the lower court err when it dismissed Bel Air Carpet’s claim for negligence prior to discovery?” 2 BACKGROUND4 Bel Air Carpet sells and installs flooring materials, including carpet, hardwood flooring and ceramic tile. As stated in Bel Air Carpet’s complaint, “[f]rom on or about March 28, 2018 through July 14, 2018, [Bel Air Carpet] and Korey Homes entered into a contract whereby [Bel Air Carpet] provided materials and labor for the installation of flooring and wall materials to all of Korey Homes’ private custom home contracts based upon building specifications provided by Korey Homes[.]” In total, Korey Homes placed orders to Bel Air Carpet to provide labor and material to install flooring at twelve different custom homes in Harford and Baltimore Counties.

In return, Korey Homes “agreed to pay [Bel Air Carpet] out of the sums obtained either directly from the homeowners or through draws issued from the buyers’ lenders, the collective sum of three-hundred thirteen thousand, nine-hundred dollars and fifty-two cents ($313,900.52) for all materials and labor.” Hamilton Bank financed seven of the twelve custom homes for which Bel Air Carpet supplied and installed flooring and related materials. Bel Air Carpet provided invoices to Korey Homes for its work on the seven homes financed by Hamilton Bank. These invoices totaled $171,167.29. 4 As this appeal is from the grant of a motion to dismiss the negligence count for failure to state a claim upon which relief can be granted, the evidentiary background will “assume the truth of all well-pleaded facts and allegations in the complaint.” Lloyd v. Gen. Motors Corp., 397 Md. 108, 121 (2007) (citing Morris v. Osmose Wood Preserving, 340 Md. 519, 531 (1995)). 3 Bel Air Carpet avers that it “provided all of the requested materials and labor” and “completed the work” for the twelve homes “in a good and workmanlike fashion.” Despite submitting invoices for this work, Korey Homes never paid Bel Air Carpet.

Mechanic’s Liens In an attempt to recover its losses, Bel Air Carpet “retained [] counsel to protect its rights utilizing the Maryland Mechanic’s Lien Statute in order to obtain payment of its outstanding invoices.” In response, Korey Homes held a meeting on September 28, 2018 with approximately twenty subcontractors and informed them that Korey Homes had no funds to pay the amounts owed. However, Korey Homes also assured the subcontractors that it would contact each subcontractor to devise a plan to pay their invoices, although most invoices would need to be reduced. Korey Homes “implored the subcontractors in attendance to continue to work on Korey Homes’ contracts and to refrain from filing mechanic’s liens because the subcontractors, including [Bel Air Carpet], would receive ‘pennies on the dollar’ from the homeowners and because it was not the buyers’ fault that Korey Homes did not pay the subcontractors[.]” Less than a week later, “on or about October 2, 2018, Korey Homes shuttered its doors and never communicated further with [Bel Air Carpet].” Complaint On February 15, 2019, Bel Air Carpet filed a seven-count complaint in the Circuit Court for Harford County against Korey Homes, the individual members of Korey Homes—Korey and Stacy Smith, and Hamilton Bank. The first six counts of the complaint included a breach of contract claim against Korey Homes and a variety of counts against 4 both Korey Homes and Korey and Stacy Smith: trover and conversion; constructive fraud and breach of fiduciary duty; intentional misrepresentation (fraud and deceit); violation of the Maryland Construction Trust Statute; and violation of the Maryland Custom Home Protection Act.

The seventh count asserted a negligence claim against Hamilton Bank. In its complaint, Bel Air Carpet alleged the following pertinent facts concerning Hamilton Bank under the heading “Facts”: • Korey Homes and Hamilton Bank had a relationship in which Hamilton Bank ignored most, if not all, standard financial practices in disbursing construction loan funds to Korey Homes on behalf of its borrowers. For example, Hamilton Bank did not require Korey Homes, Korey [Smith], or Stacy [Smith] . . . to obtain Mechanic’s Lien Releases from its subcontractors before Hamilton Bank would issue draws to Korey Homes despite Hamilton Bank’s explicit requirement that releases were a condition precedent to Korey Homes receiving draws. Hamilton Bank never required Korey Homes to furnish requisition orders prior to disbursement, which was also a condition precedent to Hamilton Bank issuing draws.

Indeed, Hamilton did not require Korey Homes to show any evidence that Korey Homes completed its work or paid its subcontractors before Hamilton released additional funds to Korey Homes. • In contrast to Hamilton Bank, other lenders required Korey Homes to obtain and forward Mechanic’s Lien Releases before releasing draws. • Hamilton Bank issued wires of its borrowers’ funds based only [on] a phone call from Korey [Smith], without additional documentation from Korey Homes. • Hamilton Bank wired hundreds of thousands of dollars to Korey Homes, some of which [Bel Air Carpet] had earned and was entitled to, into Korey Homes’ operating account without obtaining any accountability from Korey Homes that Korey Homes used that money to pay its subcontractors. In its negligence count against Hamilton Bank, Bel Air Carpet asserted that “Hamilton Bank owed a duty of care to [Bel Air Carpet] to ensure that the funds it disbursed 5 to Korey Homes w[ere], in fact, paid to [Bel Air Carpet].” Hamilton Bank breached its duty to Bel Air Carpet “by failing to obtain Mechanic’s Lien Releases . . . for work performed and materials provided to its borrowers’ custom homes,” which was “standard industry practice.” Bel Air Carpet claimed that their “losses proximately resulted from Hamilton Bank’s breach of its duty of care.” Motion to Dismiss On March 19, 2019, Hamilton Bank filed a motion to dismiss in the circuit court. In its memorandum in support of this motion, Hamilton Bank argued that Bel Air Carpet could not “prevail on its negligence claim against Hamilton Bank as a matter of law because Hamilton Bank had no obligation to ensure that Korey Homes paid subcontractors such as Bel Air [Carpet].” Invoking the economic loss rule as articulated in Jacques v. First National Bank of Maryland, 307 Md. 527, 534 (1986), Hamilton Bank asserted that “[i]t is well-settled that, ‘[w]here the failure to exercise due care creates a risk of economic loss only, courts have generally required an intimate nexus between the parties as a condition to the imposition of tort liability.’” According to Hamilton Bank, due to the intimate nexus requirement, “courts have generally concluded that a lender does not owe a duty of care to non- customers such as Bel Air [Carpet].” Hamilton Bank averred that it did not have a contract with Bel Air Carpet and that Bel Air Carpet failed to allege “the existence of any relationship between itself and Hamilton Bank, let alone a close relationship of the type that could give rise to an ‘intimate nexus.’” (Emphasis in original.) Relying on Richard F. Kline, Inc. v. Signet Bank/Maryland, 102 Md. App. 727, 735 (1995) and related cases 6 from other jurisdictions, Hamilton Bank argued that courts “uniformly hold[] that a construction lender does not owe any duty to a subcontractor, including a duty to ensure that the subcontractor is paid by the contractor that hired it.” Finally, Hamilton Bank asserted that, even if it owed a duty of care to Bel Air Carpet, the failure to obtain mechanics’ lien releases would not breach that duty or ensure that the subcontractors would have been paid. Rather, “[w]hether or not subcontractors were ultimately paid depended solely upon whether Korey Homes paid them, either from its own funds or from the proceeds of the draws advanced to it by Hamilton Bank on behalf of the [borrowers].” In its opposition, filed April 17, 2019, Bel Air Carpet argued that Kline was “inapposite to the facts of this case,” because the “Court opined that Signet owed no duty to Kline based on the facts of that case and within the context of unjust enrichment.” Bel Air Carpet asserted that it “brought a claim of negligence against Hamilton Bank for failing to ensure that its borrower’s funds were utilized by the general contractor for their express intended purpose – to pay the subcontractors.” Bel Air Carpet averred that it set out a prima facie claim for negligence by alleging: (1) Hamilton Bank had a duty to ensure that the funds it disbursed were utilized for their intended purposes; (2) [] Hamilton Bank breached its duty to [Bel Air Carpet] by failing to obtain mechanic’s lien releases, as expressly required by Hamilton Bank and in compliance with standard industry practices, before issuing draw payments to [] Korey Homes; and (3) [] this breach of duty proximately caused damages in excess of $150,000.00.

Bel Air Carpet conceded there was no contractual privity between it and Hamilton Bank but averred that it had “adequately pled ‘its equivalent.’” Specifically, relying on Walpert, 7 Smullian & Blumental, P.A. v. Katz, 361 Md. 645 (2000) and Iglesias v. Pentagon Title & Escrow, LLC, 206 Md. App. 624 (2012), Bel Air Carpet claimed that, because Hamilton Bank had an obligation to “ensure that its borrowers’ funds were properly utilized,” the bank “knew or should have known that Bel Air [Carpet] was likely to take some action based on what Hamilton Bank said or did.” Bel Air Carpet asserted that public policy requires Hamilton Bank to be held liable because “[f]ollowing their own rules and industry standards would have minimized losses by everyone involved, including the subcontractors, and would have instilled trust that everyone’s money was protected.” In reply, Hamilton Bank contended that the complaint “contains no allegations establishing the existence of an ‘intimate nexus’ . . . sufficient to constitute the ‘equivalent’ of contractual privity.” Hamilton Bank noted that the complaint did not allege that it was aware that Bel Air Carpet was one of Korey Homes’ subcontractors and asserted that the complaint “demonstrate[d] that Bel Air [Carpet] was a complete stranger whose existence was completely unknown to Hamilton Bank.” Hamilton Bank stated that it was “simply a conduit for monies owed by its borrowers to Korey Homes,” and lambasted Bel Air Carpet’s failure to cite legal authority for the proposition that a lender owes a duty to ensure that a general contractor uses disbursed funds to pay its subcontractors. According to Hamilton Bank, no such authority exists, and Bel Air Carpet’s negligence claim was not supported by public policy. Specifically, relying on Kline, 102 Md. App. at 733 , and cases from other jurisdictions, Hamilton Bank averred that “imposing a duty on construction lenders . . . to police the use 8 of funds disbursed to third parties” would “chill construction lending” and make the lender an “insurer of the subcontractors’ interests.” On June 25, 2019, the circuit court held a hearing on Hamilton Bank’s motion to dismiss. Counsel for the bank argued the points in the memoranda, adding that “in effect, the bank and Bel Air Carpet and all the other subcontractors are complete strangers.” Although counsel pointed out that “there’s really no case directly on point in Maryland,” he cited Kline for the proposition that “[y]ou can’t have a duty arising out of a relationship where the parties don’t know each other and haven’t had any prior dealings.” Counsel for Bel Air Carpet asserted that it “would be premature to dismiss [Bel Air Carpet’s] claims,” because discovery “would allow [Bel Air Carpet] and this [c]ourt to more appropriately respond to Hamilton Bank’s contentions that no duty exists between it and Bel Air Carpet.” The judge then questioned: Well, what do you expect, though, to find in those documents?

Aren’t they just typical loan documents that the homeowners have gone to the bank . . . in order to get the funds to build these homes? So, how would they know what subcontractors Korey Homes intend[ed] to use? How would the bank know that? Why would that be in any of the loan documents?

Counsel replied that the “loan documents w[ould] set forth the rules by which Hamilton Bank is going to issue the money . . . to Korey Homes intended for subcontractors.” Further, counsel asserted that the cases cited by Hamilton Bank “turned on the loan agreement,” which further supported Bel Air Carpet’s contention that the motion was premature. Counsel then asserted that “by not following their own rules[,] [Hamilton Bank] harmed Bel Air Carpet to the tune of more than $150,000.” Referencing back to Walpert and Iglesias, counsel submitted that while Hamilton Bank “may not have known 9 specifically that Bel Air Carpet was a subcontractor providing the work,” it “knew a subcontractor like Bel Air Carpet could be harmed by their failure to follow the rules and the common practices of the industry.” Finally, counsel argued that, had Hamilton Bank required mechanic’s lien releases, any failure to pay subcontractors would have been caught earlier. On rebuttal, counsel for Hamilton Bank asserted: [T]he bank’s duty and the reason why the bank has progress payments and sends inspectors out before each draw and inspects to make sure the work is done is because that home is the bank’s collateral, and the bank wants to make sure if it’s [disbursing] $100,000 that $100,000 worth of work’s been done. Once the work’s been done and the money is [disbursed], then the bank and the homeowner are protected because the value is in the ground.

Counsel for Hamilton Bank avowed that Bel Air Carpet’s “theory of recovery makes zero sense” because Bel Air Carpet admits that the work was completed, and “Korey Homes was paid for the carpet that was put in the house.” The problem, counsel concluded, was “Korey Homes didn’t turn around and pay Bel Air Carpet under its contract.” In response to a question from the court whether Hamilton Bank should have gotten a mechanic’s lien release, counsel averred, pursuant to the Maryland Custom Home Statute, “the subcontractor cannot get a mechanic’s lien against a custom home unless the owner is in default under the contract with the builder and has not paid the builder. . . . So, once the homeowner has paid the contractor. . . ., there is no liability. . . .The subcontractor, Bel Air Carpet, in this case, has to look to Korey Homes.” Ruling from the bench, the judge granted the motion to dismiss, explaining: In this case, on a motion to dismiss, the [c]ourt is required to assume the truth of all of the well-pleaded facts within the complaint and the attached 10 exhibits and any reasonable inferences that may be drawn from that, and in the light most favorable to the nonmoving party in this case, . . . the plaintiff here in this case. [O]n a claim for negligence, one really critical element is that the plaintiff must show some duty on the part of the defendants to the plaintiffs, in this case, Hamilton Bank, having a duty to the plaintiff, Bel Air Carpet, Incorporated. Even if this case gets to trial, even if after discovery, I don’t see how the plaintiff can do that. In this case, just to use [counsel for Hamilton Bank’s] words, the bank is just a conduit for the funds.

But there is no special relationship, no nexus that establishes a duty between the bank and [Bel Air Carpet] in this case. And I agree that when I read the Custom Home Statute there’s nothing that requires a mechanics lien or that permits a mechanics lien to be filed in this case or submitted in this case. So, there has to be some sort of contractual privity, and there’s none between these two parties in this case. That’s a critical element that underpins [Bel Air Carpet’s] complaint in this matter.

And without the ability to show that nexus, it’s not even a matter of just showing that there is some economic benefit that [Hamilton Bank] gained. I think that’s a stretch in this case given that based on the contract that they had with the homeowners, they’re required to make draws to the contractor, Korey Homes, in this case. But there’s nothing, then, that gives the bank some special relationship with the contractor’s subcontractor just because they’re the ones that have the money, and they’re the ones that have to pay out on it. * * * And I agree there is no Maryland law on point, but in this case, I think the just general negligence law in this matter makes it clear that you have to have some duty that’s breached in order for the Court to find that based on the four corners of the complaint, any of exhibits, and any of the reasonable inferences from that that there is going to be some duty that the bank owed to Bel Air Carpet. If that’s the case, then every lender would do so, every lender would have that same obligation to every unknown subcontractor in this case, and that’s not the intent of the public policy of any of the statutes, of any of the case law that requires that there be some duty.

So, in this case, finding that there is none, I am going to grant the motion to dismiss that the defendant, Hamilton Bank, has filed. I’ll sign an order [to] that effect. 11 On June 25, the circuit court entered a written order granting Hamilton Bank’s motion and dismissing the negligence count “WITH PREJUDICE AND WITHOUT LEAVE TO AMEND for failure to state a claim against Hamilton Bank upon which relief can be granted.” On July 26, the parties filed a consent motion to certify the circuit court’s order as a final and appealable judgment pursuant to Maryland Rule 2-602(b).5 On July 29, the circuit court granted the consent motion, finding “that there is no just reason for delay,” and ordered that the order granting the motion to dismiss “is hereby determined to be a final judgment as to [Bel Air Carpet’s] claims against Hamilton Bank pursuant to Maryland Rule 2-602(b).”6 Bel Air Carpet then noted a timely appeal on August 7, 2019. STANDARD OF REVIEW Under Maryland Rule 2-322(b)(2), a defendant may seek a dismissal of a complaint if it fails “to state a claim upon which relief can be granted[.]” While generally confining its analysis to the “four corners of the complaint and its incorporated supporting exhibits, 5 We have previously explained: “It is this Court’s duty to examine a circuit court’s certification decision under Maryland Rule 2-602.” Shofer v. Stuart Hack Co., 107 Md. App. 585, 591 (1996). Because the order is dispositive of Bel Air Carpet’s entire claim against Hamilton Bank, certification was proper.

See Snowden v. Balt. Gas & Elec. Co., 300 Md. 555, 563 (1984) (Authorization is “limited to orders which, by their nature, have a characteristic of finality. Such orders must be completely dispositive of an entire claim or party.”). 6 Following the certification of the order as final and appealable, on July 30, 2019, Korey and Stacy Smith filed a suggestion of bankruptcy in the circuit court, indicating that they had filed for bankruptcy protection in the United States Bankruptcy Court for the District of South Carolina under Chapter 7 of the United States Bankruptcy Code.

Consequently, pursuant to 11 U.S.C. § 362 , further proceedings involving the Smiths were stayed. 12 if any,” the trial court may grant a motion “only if the allegations and permissible inferences, if true, would not afford relief to the plaintiff, i.e., the allegations do not state a cause of action for which relief may be granted.” Floyd v. Mayor of Balt., 463 Md. 226, 241 (2019) (quoting State Ctr., LLC v. Lexington Charles Ltd. P’ship, 438 Md. 451 , 496– 97 (2014)).7 We “review[] the grant of a motion to dismiss for legal correctness.” Rounds v. Maryland-Nat. Capital Park & Planning Comm’n, 441 Md. 621, 635 (2015) (citing Patton v. Wells Fargo Fin. Md., Inc., 437 Md. 83, 95 (2014)). “In conducting this review, we assume the facts and allegations in the complaint, and any inferences that may be drawn from them, are true and view them in a light most favorable to the non-moving party.” Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 451 Md. 600, 609 (2017) (citation omitted). We review the denial of discovery for an abuse of discretion and will only conclude that the circuit court abused its discretion “‘where no reasonable person would take the view adopted by the [trial] court [ ]’ . . . or when the court acts ‘without reference to any guiding principles,’ and the ruling under consideration is ‘clearly against the logic and 7 Bel Air Carpet argues that it “properly relied upon Hamilton Bank’s draw schedule,” an exhibit to its memorandum, in opposing Hamilton Bank’s motion to dismiss, and that the court considered the exhibits in dismissing the negligence count.

These documents are not relevant for our review. The circuit court judge ruled on the motion to dismiss and limited herself, as she explained, to “the well-pleaded facts within the complaint and the attached exhibits.” Consequently, the circuit court correctly “confine[d] [her] review . . . to the four corners of the complaint and its incorporating supporting exhibits, if any.” Rounds v. Maryland-Nat. Capital Park & Planning Comm’n, 441 Md. 621, 636 (2015). effect of facts and inferences before the court[ ]’ . . . or when the ruling is ‘violative of fact and logic.’” Moser v. Heffington, 465 Md. 381, 400 (2019) (quoting Wilson v. Crane, 385 Md. 185, 198 (2005)). DISCUSSION I. Negligence A. Parties’ Contentions Bel Air Carpet contends that it “set forth sufficient facts to form the basis of a prima facie negligence claim against Hamilton Bank and adequately pled the equivalent of contractual privity[.]” Specifically, relying on Walpert, Smullian & Blumental, P.A. v. Katz, 361 Md. 645 (2000) and Iglesias v. Pentagon Title & Escrow, LLC, 206 Md. App. 624 (2012), Bel Air Carpet avers that, because Hamilton Bank failed to follow “banking industry standards” and its own rules concerning how draws would be issued, it breached a duty to Bel Air Carpet.

According to Bel Air Carpet, “had Hamilton Bank followed its own rules it would have ‘control[led] the risk to which [it was] exposed’ by simply obtaining mechanic’s lien releases for all of the previous work completed under successor draws and/or issuing dual-payee checks to ensure its borrowers signed off and thereby knew what work was being paid.” Further, Bel Air Carpet argues that public policy “requires that construction lenders like Hamilton Bank be held accountable for their negligence” for two reasons. First, “it seems nonsensical for construction lenders . . . to set out the non-negotiable and steadfast rules of how it will hold and disburse funds from trust that belong to borrowers and 14 subcontractors, subsequently act in bad faith by violating those very rules, and then claim that it has no liability to anyone.” Second, “[f]ollowing their own rules and industry standards would have minimized losses by everyone involved, including the subcontractors, and would have instilled trust that everyone’s money was protected.” To the contrary, Hamilton Bank asserts that “Bel Air Carpet cannot maintain a negligence claim against [it] because no contractual privity or its equivalent existed between Bel Air Carpet and Hamilton Bank.” Hamilton Bank contends that the complaint “demonstrates that Bel Air Carpet was a complete stranger” and that “Hamilton Bank’s only duty was to remit to Korey Homes the funds that [its] borrowers directed[.]” Relying on Richard F. Kline, Inc. v. Signet Bank/Maryland, 102 Md. App. 727, 735 (1995) and related cases from other jurisdictions, Hamilton Bank avers that “a construction lender does not owe a duty to ensure that subcontractors working on a job that the lender is financing are paid for their work.” Hamilton Bank urges that Bel Air Carpet’s negligence claim is not supported by public policy. Citing Kline, 102 Md. App. at 733 , and other cases, Hamilton Bank contends that the imposition of a duty to “police the funds disbursed to third parties” would “clearly chill construction lending.” In its reply, Bel Air Carpet directs us to an Ohio statute, which, Bel Air Carpet mistakenly asserts, “codifies a duty between a construction lender and a subcontractor, even where there is no direct contract between the parties.” 15 B. Foundational Elements To sustain a cause of action for negligence in Maryland, a plaintiff must allege: (1) the defendant was under a duty to protect the plaintiff from harm; (2) a breach of that duty; (3) a causal relationship between the breach and the harm; and 4) the damages suffered. Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP, 451 Md. 600, 611 (2017); 100 Inv.

Ltd. P’ship v. Columbia Town Ctr. Title Co., 430 Md. 197, 213 (2013); Walpert, Smullian & Blumenthal, P.A. v. Katz, 361 Md. 645, 655 (2000) (citing Jacques v. First Nat’l Bank of Md., 307 Md. 527, 531 (1986)). “Absent a duty of care, there can be no liability in negligence.” Walpert, 361 Md. at 655 . Maryland has adopted Prosser and Keeton’s characterization of “duty” as “an obligation, to which the law will give recognition and effect, to conform to a particular standard of conduct toward another.” 100 Inv. Ltd. P’ship, 430 Md. at 213 (quoting W. PAGE KEETON, ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 53 (5th ed. 1984)). “To determine whether a duty exists in a particular context, we examine: (1) ‘the nature of the harm likely to result from a failure to exercise due care,’ and (2) ‘the relationship that exists between the parties.’” Id. at 213-14 (citing Jacques, 307 Md. at 534 ).

The Court of Appeals has discerned: an inverse correlation exists between the nature of the risk on one hand, and the relationship of the parties on the other. As the magnitude of the risk increases, the requirement of privity is relaxed—thus justifying the imposition of a duty in favor of a large class of persons where the risk is of death or personal injury. Conversely, as the magnitude of the risk decreases, a closer relationship between the parties must be shown to support a tort duty. 16 Jacques, 307 Md. at 537 . “In essence, the determination of whether an actionable duty exists represents a policy question of whether the specific plaintiff is entitled to protection from the acts of the