Boucher Investments, L.P. v. Annapolis-West Limited Partnership

KRAUSER, Judge. The question before us is what constitutes “waste,” a question which, notwithstanding its medieval roots, has largely evaded contemporary appellate scrutiny in this State and others. Indeed, our research has failed to disclose any Maryland cases during the past century that speak to this issue in the context of the mortgagor-mortgagee relationship, the relationship between the parties to this appeal. This question is now before us as a result of a claim of waste made by the holder of a second mortgage on commercial property against the mortgagors (grantors of the Deed of Trust), after the holder failed to recover its loan amount when the property was sold at foreclosure.

Appellant, Boucher Investments, L.P., the holder of that second mortgage, asserts, as it did below, that the failure of the mortgagors— appellees Annapolis-West Limited Partnership, A-W GP Corporation, Lawrence Posner, and Lawrence Volper 1 — “to negotiate parking access” for the commercial property in question (“Property”) resulted in a substantial reduction in value of that property at foreclosure, and thus constituted waste. The Circuit Court for Anne Arundel County disagreed, and we do too. We shall therefore affirm the judgment of that court. BACKGROUND The commercial property securing the Deed of Trust and the Note held by appellant is located at 2083 West Street in ⁵ Annapolis, Maryland.

The Deed of Trust was originally granted by appellees in 1984 to secure a debt to James Hightower. In 1988, Hightower assigned the Deed of Trust and Note to B & B Defined Benefit Plan. Appellant acquired the Note in 1988 when B & B Defined Benefit Plan was liquidated. The Property consists of an office building and a parking area capable of accommodating approximately ten to twelve cars.

To provide for additional parking, a previous owner of the Property had entered into a twenty-year contract with Parole Shopping Center, Inc. for the use of its parking lot, which is adjacent to the Property. Despite the expiration of the contract in 1991, the tenants of the Property continued to use the lot until 1996, at which time a fence was erected to prevent unauthorized parking. Both the Deed of Trust and the Note evidencing the debt secured thereby contained non-recourse clauses. 2 The Property, as well as rents generated by the property, 3 served as ⁶ security for the loan. In addition, the Deed of Trust contained a provision stating in part that the “[b]orrower shall keep the Property in good repair and shall not commit waste or permit impairment or deterioration of the Property----” In 1991, appellees defaulted on the Note.

To avoid foreclosure, the parties entered into a Note Modification Agreement. In 1996, appellees defaulted on the modified Note. Once again, to avoid foreclosure, the parties attempted to renegotiate payment of the Note. In 1998 appellees defaulted on the first mortgage on the Property, and the first mortgagee instituted foreclosure proceedings that resulted in a foreclosure sale.

The proceeds from that sale were not sufficient to repay appellees’ debt to appellant. Consequently, on August 2,1999, appellant filed a complaint in the Circuit Court for Anne Arundel County, alleging, among other things, that appellees’ failure “to negotiate parking access for the [Property]” constituted “permissive waste of the property” because the lack of parking resulted in a “loss of tenants [and] ... income to the property.” Appellant also claimed that the “City of Annapolis Planning Commission ha[d] confirmed that, unless adequate parking spaces are made available, the current occupancy permit will be rescinded and the permitted occupancy of the building will be lowered.” No evidence, however, was ever presented that the City of Annapolis was planning to, or ever did, rescind appel-lees’ occupancy permit. In brief, appellant asserted that the failure “to negotiate parking access for the [Property]” led to the diminution in value of the Property and foreclosure, which caused financial harm to appellant. On October 15, 1999, appellees filed in the United States District Court for the District of Maryland a Notice of Removal.

Shortly thereafter, the parties filed a “Stipulation of Remand,” and on November 3, 1999, the district court filed an order sending the case back to the circuit court. ⁷ On November 22, 1999, appellees filed a motion entitled “Motion To Dismiss, Or In The Alternative, For Summary Judgment.” Attached to that motion were several exhibits, including the Deed of Trust and Note. In support of that motion, appellees claimed: first, that the non-recourse provision in the Deed of Trust and the Note relieved appellees of any personal liability for monies owed pursuant to the Note; second, that “the alleged failure to contract for additional parking does not constitute waste;” and third, that appellant’s waste claim was barred by the statute of limitations. In reply, appellant filed an opposition. In that opposition, appellant asserted that appellees’ motion “should be viewed as a Motion for Summary Judgment” because appellees attached to their motion “several exhibits,” thus requiring the court “to look beyond the complaint and consider matters outside of the pleadings.” That assertion, as we discuss below, conflicts with its later claim that appellees’ motion was not one for summary judgment.

Appellant further asserted, among other things, that summary judgment was inappropriate because there were “genuine disputes of material fact” and that, “before conducting discovery, it is very difficult, if not impossible, to accurately identify all material facts.” On February 22, 2000, the trial court conducted a hearing on appellees’ motion. Before the court, counsel for appellant stated that it was “[his] understanding [that appellees] did not negotiate with Parole in good faith” and that, therefore, a “factual dispute” existed. Appellant also argued that “a waste claim can go forward in spite of a non-recourse agreement,” and that there was a factual dispute regarding the statute of limitations. After the hearing, the parties submitted supplemental mem-oranda.

Appellant, in its supplemental memorandum, argued that waste is “conduct, including both acts of commission and of omission, on the part of a person in possession of land which is detrimental to the interests of another with an interest in the land,” and that “[w]hat constitutes waste in any given case is an issue of fact.” Appellant admitted, however, that it could “find no cases in which the failure to negotiate a lease for ⁸ parking lot space constituted waste” but nonetheless urged that summary judgment was improper because “the issue of whether the alleged actions constitute waste is inherently for the finder of fact” and that discovery was necessary “to learn, among other things, [appellees’] motives and actions in the handling of 2083 West Street.” On March 20, 2000, the trial court filed a Memorandum Opinion and Order. After setting forth findings of fact, the court declared that because appellees’ “Motion To Dismiss, Or In The Alternative, Motion For Summary Judgment” contained attachments, it “should be considered a motion for summary judgment pursuant to [Maryland] Rule 2-501.” The circuit court then noted that a non-moving party could be prejudiced when a motion to dismiss is treated as a motion for summary judgment, “because the non-moving party may not have the opportunity to put forth evidence relevant to a summary judgment determination.” In the instant case, however, the court found that appellant would not be so prejudiced. After noting that appellant itself had argued in its initial response to appellees’ motion, that appellees’ motion should be treated as one for summary judgment, the court declared that appellant had ample opportunity to provide information to the court, and had taken “full advantage of this opportunity by filing three memorandums, including one following the hearing before this Court.” The court then summarized the parties’ respective positions. Noting that appellant had argued, among other things, that summary judgment should not be granted “because there are some facts, not yet known, which would be at issue at a trial on the merits,” the court found that because appellant “did not specifically mention which facts were in dispute, its argument amounts to no more [than] a mere allegation.” Applying definitions of waste set forth in Jaffe-Spindler Co. v. Genesco, Inc. 747 F.2d 253 (4th Cir.1984), and the Restatement (Third) of Property: Mortgages § 4.6 (Tentative Draft No. 3, 1994), the circuit court declared that there had been no “destruction, misuse, alteration or neglect” by appellees.

It ⁹ further found that none of the criteria for waste as set forth in the tentative draft of the Restatement had been met “because there [was] no allegation that the property [was] in disrepair, that taxes [had] not been paid, or that any other monies [had] been wrongfully withheld.” It therefore concluded “as a matter of law” that appellees had not committed waste. Having so ruled, the court declared that “the issues of the non-recourse clause and the statute of limitations [did] not need to be addressed.” From that order, appellants noted this appeal. DISCUSSION I Before reaching the question of what constitutes waste and whether, under that definition, appellees committed that tort, we must first address appellant’s contention that the circuit court committed two procedural errors in granting appellees’ request for summary judgment. First, according to appellant, the circuit did not treat appellees’ motion “as one for summary judgment” because it “did not even consider in its decision the exhibits or the additional facts recited by the [appellees].” “If the court had truly considered [appellees’] motion as a motion for summary judgment,” appellant argues, “the court would have found that there were genuine disputes of material fact and that discovery needed to proceed to resolve the issues in question.” Second, appellant claims that the circuit court erred in ruling on appellees’ motion before appellant was able to conduct discovery to determine “the motives and actions of [ap-pellees] in their handling of the commercial real estate at issue.” It thereby prevented appellant from uncovering genuine issues of material fact.

Before the court may grant a motion for summary judgment under Maryland Rule 2-501, the movant must satisfy a two-part test. DeGroft v. Lancaster Silo Co. Inc., 72 Md.App. 154, 159 , 527 A.2d 1316 (1987). First, the movant “must clearly demonstrate the absence of any genuine issue of material fact.” Id. “A fact is ‘material’ if it somehow affects the ¹⁰ outcome of the case.” Id. at 160 , 527 A.2d 1316 . And second, the movant must “demonstrate that he is entitled to judgment as a matter of law.” Id. at 159 , 527 A.2d 1316 .

See also Md. Rule 2-501(a). Once the movant makes this showing, the burden shifts to the non-moving party to show “that there is a genuine dispute as to a material fact by proffering facts which would be admissible in evidence.” Beatty v. Trailmaster Products, Inc., 330 Md. 726, 737-38 , 625 A.2d 1005 (1993). “[M]ere general allegations which do not show facts in detail and with precision are insufficient to prevent summary judgment.” Id. at 738 , 625 A.2d 1005 . Moreover, “ ‘a dispute as to facts relating to grounds upon which the decision is not rested is not a dispute with respect to a material fact and such dispute does not prevent the entry of summary judgment.’ ” Matthews v. Howell, 359 Md. 152, 161 , 753 A.2d 69 (2000)(quoting Salisbury Beauty Schs. v. State Bd. of Cosmetologists, 268 Md. 32, 40 , 300 A.2d 367 (1973)). “In ruling on a motion for summary judgment, the court must consider the motion and response submitted by the parties in a light most favorable to the non-moving party.” Fearnow v. Chesapeake & Potomac Tel. Co. of Md., 104 Md.App. 1, 49 , 655 A.2d 1 (1995), aff'd in part, rev’d in part on other grounds, 342 Md. 363 , 676 A.2d 65 (1996).

On appeal, “[w]e review the same information from the record and decide the same issues of law as the trial court.” Mercantile Club, Inc. v. Scherr, 102 Md.App. 757, 764 , 651 A.2d 456 (1995). And the standard we apply is whether the court’s ruling “was legally correct.” Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 591 , 578 A.2d 1202 (1990). We begin our analysis by addressing appellant’s claim that, because the trial court did not actually “consider in its decision the exhibits or the additional facts recited by the [appellees],” there are “serious questions” as to whether the court actually treated appellees’ motion as one for summary judgment. Assuming that appellant is claiming that the circuit court actually treated appellees’ motion as a motion to dismiss and not as a motion for summary judgment, we turn to Maryland Rule 2-322, which governs preliminary motions in ¹¹ general and motions to dismiss in particular.

Section (c) of that rule states in part: If, on a motion to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 2-501, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 2-501. Thus, Maryland Rule 2-322(c) “gives the trial court discretion to convert a motion to dismiss to a motion for summary judgment by considering matters outside the pleading.” Hrehorovich v. Harbor Hosp. Ctr., Inc., 93 Md.App. 772, 784-85 , 614 A.2d 1021 (1992). If matters outside the pleading are excluded by the trial court, “then it must decide the motion based on the legal sufficiency of the pleading.” Id. at 782 , 614 A.2d 1021 .

If, on the other hand, “the trial judge does not exclude such matters, then the motion shall be treated as one for summary judgment.” Okwa v. Harper, 360 Md. 161, 177 , 757 A.2d 118 (2000). In the event that a trial court decides to treat a motion as one for summary judgment, it must provide the parties with “a reasonable opportunity to present, in a form suitable for consideration on summary judgment, additional pertinent material.” Antigua Condominium Assoc. v. Melba Investors Atlantic, Inc., 307 Md. 700, 719 , 517 A.2d 75 (1986). Indeed, a non-moving party may be prejudiced if a trial court treats a motion to dismiss as a motion for summary judgment by considering matters outside the pleading, but does not give the non-moving party “a reasonable opportunity to present material that may be pertinent to the court’s decision, as required by Md. Rule 2-501.” Green v. H & R Block, Inc., 355 Md. 488, 502 , 735 A.2d 1039 (1999). In the instant case, the circuit court had before it far more than the parties’ pleadings.

Attached to appellees’ motion, which was entitled “Motion To Dismiss, Or In The Alternative, Motion For Summary Judgment,” were the following documents: the Deed of Trust, the Promissory Note, a ¹² note modification agreement, a notice of foreclosure, a newspaper article, and a memorandum opinion and order from a contract dispute between appellees and a tenant. Moreover, in its opinion granting that motion, the circuit court noted these attachments and expressly observed that the parties’ mortgage agreement included “a non-recourse clause ... which prevents a deficiency suit under the note.” In sum, the court obviously considered “matters outside the pleading” in rendering its decision and thereby treated appellees’ motion as one for summary judgment. Lest any doubt remains, the circuit court itself declared that appellees’ “motion will be treated as one for summary judgment.” We also find no merit to appellant’s contention that “if the court had truly considered [appellees’] motion as a motion for summary judgment, the court would have found that there were genuine disputes of material fact and that discovery needed to proceed to resolve the issues in question.” As the circuit court noted, appellant argued that summary judgment was inappropriate because there were “some facts, not yet known, which would be at issue at a trial on the merits.” In the trial court’s assessment, appellant’s arguments amounted to no more than “mere allegation.” Our review of the record leads us to the same conclusion. In appellant’s opposition to appellees’ motion, appellant contended that summary judgment was inappropriate because there existed genuine disputes of material fact.

In support of that contention, appellant stated that appellees “dispute the facts alleged in the Complaint” and that “before conducting discovery, it is difficult, if not impossible, to accurately identify all material facts.” Appellant also stated that “there is a factual dispute on the statute of limitations.” At the motions hearing, moreover, counsel for appellant asserted that it was “[his] understanding [that appellees] did not negotiate with Parole in good faith” and that there was before the court a factual dispute as to “when the statute of limitations runs.” These assertions, however, failed to show “with particularity the material facts that [were] disputed.” Fearnow, 104 ¹³ Md.App. at 49, 655 A.2d 1 . Consequently, they were insufficient to defeat a motion for summary judgment. Moreover, the circuit court’s grant of summary judgment was based solely on its determination that appellees had not committed waste. Consequently, the factual dispute alleged by appellant as to the statute of limitations was not material. “ ‘[A] dispute as to facts relating to grounds upon which the decision is not rested is not a dispute with respect to a material fact and such dispute does not prevent the entry of summary judgment.’ ” Matthews, 359 Md. at 161 , 753 A.2d 69 (quoting Salisbury Beauty Schs. v. State Bd. of Cosmetologists, 268 Md. 32, 40 , 300 A.2d 367 (1973)).

Finally, we are unpersuaded by appellant’s claim that had the court treated appellees’ motion as one for summary judgment, it would have allowed appellant to conduct discovery to generate facts in support of its claim. The trial court had more than sufficient evidence with which to conduct a summary judgment analysis and it fell within its discretion to do so. Memoranda and exhibits were presented by both parties before, during, and even after the summary judgment hearing. Indeed, the court invited the parties to submit supplemental memoranda after the hearing, which they both did.

Nor was appellant prejudiced by the circuit court’s decision to treat appellee’s motion as one for summary judgment. As the circuit court noted, appellant itself had argued, in its response to appellee’s motion, that the motion should be treated as a motion for summary judgment. Moreover, as the court observed, appellant “had ample opportunity to provide any information it felt this court needed in making its decision,” and it “took full advantage of this opportunity by filing three memorandums,” including one submitted after the summary judgment hearing. We agree with that assessment.

On August 2, 1999, appellant filed its complaint in the Circuit Court for Anne Arundel County. Two and a half months later, on October 15, 1999, appellees filed a Notice of Removal