CR-RSC Tower I, LLC v. RSC Tower I, LLC

EYLER, JAMES R., J. CR-RSC Tower I, LLC, Second CR-RSC Tower I, LLC, CR-RSC Tower II, LLC, and Second CR-RSC Tower II, LLC, (appellants or CR-RSC), appeal from a judgment entered by the Circuit Court for Montgomery County in favor of RSC Tower I, LLC and RSC Tower II, LLC, (appellees or RSC). The court entered judgment after a jury verdict in favor of appellees, finding breach of two contracts for which appellants were jointly and severally liable and awarding damages for lost profits and expenses incurred in reliance on the contracts. Appellants contend that the circuit court erred in not granting their motion for judgment. In the alternative, appellants contend that the court erred in permitting certain evidence to be introduced, in its instructions to the jury, and in the wording of the verdict sheet.

In addition, appellants contend that the court erred in awarding attorneys’ fees and costs to appellees. We conclude that appellants are not jointly and severally liable. Thus, we shall remand to the circuit court with instructions to enter the judgment in favor of RSC Tower I, LLC against CR-RSC Tower I, LLC and Second CR-RSC Tower I, LLC only and the judgment in favor of RSC Tower II against CR-RSC Tower II, LLC and Second CR-RSC Tower II, LLC only. On all other issues, we shall affirm.

Factual and Procedural Background Appellants own a 53-acre tract of land in Montgomery County. On June 16, 2004, appellants as landlords entered into two 90-year ground leases with appellees as tenants. Appellees are partially owned and controlled by the Penrose Group, a real estate development company. One lease was for ³¹⁹ approximately three acres, and the other lease was for approximately two acres, together with easements to use certain common areas in the rest of the tract.

The parties executed a “DECLARATION OF EASEMENTS AND RELATED AGREEMENTS” on June 16, 2004. At that time, the parties contemplated that appellants would develop the portion of the tract not subject to the ground leases. Indeed, in 2003, the owners of the entire tract, appellants’ assignors, and Penrose Development Company, LLC entered into a Development Services Agreement pursuant to which Penrose Development Company, LLC agreed to act as a consultant to the owners in connection with development of the tract. Pursuant to the terms of the ground leases between the parties herein, each appellee agreed to construct an apartment building (hereinafter Tower I and Tower II) on its respective site.

After construction and initial rental, the parties contemplated that appellees would sell the buildings. The parties projected that construction on Tower II would begin approximately two years after construction of Tower I. The leases contained provisions obligating the parties to cooperate with each other in the development of the apartment buildings and the rest of the tract. After executing the leases, in late 2004 and early 2005, the parties modified their agreements to permit development of condominium buildings, a hotel, and spa rather than apartments (the “Canyon Ranch project”). The parties executed several agreements in furtherance of the Canyon Ranch project, but in September 2006, the parties abandoned the project and entered into a termination agreement.

Appellees then obtained county approval to revert to the original plan to build apartments. Appellees also arranged financing with Northwestern Mutual Life Insurance Company (“NML”) to construct Tower I. In late September, appellees requested appellants to execute estoppel certificates in which appellants would represent that appellees were not in default under the ground leases. The project’s financing terms required that appellees provide ³²⁰ such estoppel certificates and the leases required appellants to execute such certificates to the appellees. Specifically, paragraph 14.6 in both leases provided: Estoppel Certifícate.

Each party agrees from time to time, upon no less than fifteen (15) days’ prior written request of the other, to execute, acknowledge, and deliver to the other a statement in writing certifying (i) that this Lease is unmodified and in full force and effect (or, if there have been any modifications, that the same is in full force and effect as modified and stating the modifications), (ii) the Lease Commencement Date and Fixed Rent Commencement Date, (iii) the then current amount of the Fixed Rent, (iv) the dates to which the Fixed Rent and Additional Rent has been paid, (v) to such party’s knowledge, whether there exists any uncured default by the other party and, if so, the nature of such default, and (vi) such other matters relating to this Lease as the party requesting the statement may reasonably require. Any such statement delivered pursuant to this Section 14.6 may be relied upon by any prospective purchaser or mortgagee or any prospective holder of a sublease from Tenant or any prospective assignee of any such holder of a mortgage or sublease. Appellants disagreed with the language in the proposed certificates. The parties attempted to reach agreement on the language, were unable to do so, and appellants did not execute the certificates.

Appellants also initiated proceedings to challenge the county’s approval of appellees’ site plans and building permits. On November 8, 2006, appellees filed suit against appellants 1 in the Circuit Court for Montgomery County, alleging that appellants had breached the leases, and seeking declaratory and injunctive relief (the 2006 action), which would require appellants to perform their obligations under the leases. On January 16, 2007, the court issued a preliminary injunction, ordering appellants to deliver executed estoppel certificates to ³²¹ appellees. On January 26, 2007, appellees filed a motion for summary judgment.

On April 4, 2007, the court entered summary judgment in favor of appellees. The court, inter alia, ruled that appellants breached their obligations under the ground leases; the breaches prohibited appellees from obtaining financing; and appellees could not obtain equity investment or financing without a final order in their favor. The court ordered appellants to specifically perform their obligations under the leases, extended the term and certain due dates in the leases, and suspended payments required by appellees pending the entry of a final non-appealable order. The order included the following paragraph: Nothing in this Order prohibits Plaintiffs from pursuing any other remedies or rights they may have, including claims for monetary damages or claims under the Force Majure provision of the Ground Leases, resulting from these or other breaches by Defendants of Plaintiffs’ rights and/or the Ground Leases.

On April 16, 2007, appellants delivered estoppel certificates to appellees along with a cover letter reserving all rights under all agreements and all rights that they had asserted in the litigation. Appellees’ position was that the certificates did not comply with the terms of the leases, and no one, including lenders, could or would rely on them. On April 11, 2007, appellants appealed to this Court, arguing that the circuit court had erred in issuing the injunction and in granting summary judgment. In an unreported opinion, this Court affirmed the judgment.

Camalier Limited P’ship v. RSC Tower I, LLC, No. 2704, September Term 2006 (Md.Ct.Spec.App. Aug. 4, 2008). On September 3, 2008, this Court issued its mandate. After issuance of the mandate, appellants abandoned their challenge to the county approvals of the project. On September 8, 2008, in the 2006 action, appellees filed an “Amendment by Interlineation of Plaintiffs’ Amended Verified Complaint” and a “Motion for Supplemental Relief.” In the amendment by interlineation, appellees amended their re ³²² quests for relief, to include, for the first time, a claim for monetary damages “in an amount no less than $80 million, plus interest” and the costs and expenses of litigation including attorneys’ fees, to adjust the terms of the ground leases and certain due dates in the ground leases, and to suspend appellees’ payment obligations under the leases pending the obtainment of financing.

In the motion for supplemental relief, appellees, inter alia, alleged that the real estate and credit markets had deteriorated subsequent to the April 4, 2007 order and appellees had not been able to obtain financing for the apartment project. In addition, they alleged that Montgomery County no longer considered its prior approvals of the project to be valid. Appellees requested monetary damages and supplemental equitable relief. Appellees’ requests tracked the amended requests for relief in the amendment by interlineation.

Appellees also asked the court to extend the due dates contained in the leases and to require appellants to pay certain fees and costs while appellees determined whether the project was still viable. On December 23, 2008, appellants filed a motion to dismiss or, in the alternative, to strike appellees’ amendment by interlineation and appellees’ motion for supplemental relief. The memorandum in support of that motion is not in the record extract, but we assume that at least one of the grounds argued was that the requested relief was not available proeedurally in the 2006 action. On March 3, 2009, appellees filed a new complaint against appellants in the Circuit Court for Montgomery County (the 2009 action).

On December 8, 2009, appellees filed an amended complaint. In their amended complaint, appellees alleged essentially the same facts and sought essentially the same relief as in their amendment by interlineation and motion for supplemental relief previously filed in the 2006 action. Also on December 8, 2009, appellees filed a motion to consolidate the 2006 and 2009 actions. On February 5, 2010, the court granted that motion. ³²³ In late 2009, appellants filed a motion to dismiss the complaint, as amended, in the 2006 action, and a motion to dismiss the amended complaint in the 2009 action.

By order docketed on February 5,2010, the court denied the motions. On February 16, 2010, appellees filed a motion for leave to file a third amended complaint in the consolidated actions. By order dated March 1, 2010, the court granted the motion. Based on appellants’ breach of the lease, before and after April 4, 2007, appellees sought declaratory, injunctive, other equitable relief, and damages.

In the third amended complaint, appellees alleged that appellants’ continued refusal to execute unconditional estoppel certificates and their efforts to hinder governmental approval of the apartment project constituted continuing or successive breaches of the leases, including breach of the implied covenant of good faith and fair dealing. In addition to other allegations, appellees alleged, for the first time, that each appellee was a third party beneficiary of the other appellee’s ground lease and was entitled to enforce it because “its terms are covenants running with the land.” Based on that allegation, appellees requested that any monetary judgment be entered against appellants jointly and severally. Appellees requested damages in an amount no less that $52 million, plus interest, which amount reflects the monetary damages and losses caused by Defendants’ breaches of the Ground Leases and resulting interference with Plaintiffs’ valuable development rights; to the extent Plaintiffs reasonably determine that it is feasible to re-start and complete the Project, in an amount no less than $63 million to compensate Plaintiffs for the additional costs and additional equity to re-start and complete the Project; or, in an amount not less than $23 million which reflects Plaintiffs’ out of pocket expenditures incurred in furtherance of the development of the land and the Project. Appellees also sought the costs of litigation, including attorneys’ fees.

On March 1 through 10, 2010, the case was tried before a jury. In appellees’ words: ³²⁴ among other things, [appellees] demonstrated that, in reliance on the ground leases and its bargained-for development rights, [they] had incurred nearly $23 million in out-of-pocket expenses ($16,770,134 in connection with Phase I and $6,226,518 in connection with Phase II). [Appellees] also introduced the contemporaneous financial analyses that it and [NML] had conducted at the time of [appellants’] breaches as to the Apartment Project’s projected profits, along with the testimony of real estate experts supporting those financial analyses. Based on that evidence and the testimony of expert forensic accountants, [appellees] argued that [they] had suffered lost profits (after the return of its out-of-pocket expenses) in excess of $28 million ($18,082,103 in Phase I and $10,491,313 in Phase II.) (Extract and appendix references omitted.) At the close of appellees’ case, appellants moved for judgment in their favor on the grounds that appellees (1) had failed to prove lost profits or reliance damages with reasonable certainty; (2) had failed to prove that any damages were caused by appellants’ breach of the leases; (3) had failed to establish third party beneficiary status or any basis for joint and several liability; (4) could not use the implied covenant of good faith and fair dealing to impose additional contract obligations on appellants; and (5) had not introduced any evidence to show that any breaches subsequent to April 4, 2007 had caused damages. The court denied appellants’ motion for judgment.

Appellants renewed the motion at the close of all of the evidence. The court reserved on the motion and allowed the case to go to the jury. The jury found that each appellant had breached the ground leases after the court’s April 4, 2007 order and that each appellee was entitled to enforce the other’s ground lease either as a third party beneficiary or a “third-party entitled to the benefit of a covenant running with the land.” The jury awarded damages against appellants in the total amount of $36,350,239.00. On April 9, 2010, after the entry of final judgment, appellants noted an appeal. ³²⁵ In July 2010, appellants filed a request for an award of attorneys’ fees and costs.

In December 2010, the court granted the motion and awarded $3,654,633.40. In January 2011, the court denied appellants’ motion for judgment, treating it as a motion for judgment notwithstanding the verdict. Appellants filed new notices of appeal. We shall include additional facts when we discuss the issues.

Appellants’ Contentions As phrased by us, appellants contend that: 1. The court erred in denying appellants’ motion to dismiss and motions for judgment on the ground that (a) monetary damages could not be granted as supplemental relief in the 2006 action, which was concluded by final judgment on the merits when this Court filed its opinion on August 4, 2008, and its mandate on September 3, 2008, and (b) the 2009 action was barred by res judicata. 2. The court erred in denying appellants’ motions for judgment on the ground that appellees failed to produce legally sufficient evidence that appellants’ breaches caused any lost profits damages and failed to produce legally sufficient evidence that appellees sustained lost profits damages with reasonable certainty. 3. The court erred in denying appellants’ motions for judgment on the ground that appellees failed to produce legally sufficient evidence that appellants’ breaches caused reliance damages. 4.

The court erred in denying appellants’ motions for judgment with respect to joint and several liability and also erred in submitting a verdict sheet that contained questions relating to joint and several liability. 5. The court erred in evidentiary rulings (a) relating to expert testimony on damages; (b) in permitting bad conduct evidence relating to appellants that predated the April 4, 2007 order and excluding bad conduct evidence relating to appellees; and (c) violating appellants’ attorney client privilege. ³²⁶ 6. The court erred in its instructions to the jury. 7. If a new trial is ordered by this Court, this Court should order that the case be re-tried before a different trial judge. 8.

If this Court reverses the underlying judgment, this Court should reverse the attorneys’ fees and costs award on the ground that appellees were not the prevailing party within the meaning of the leases. Additionally, this Court should reverse the award in any event because the court abused its discretion. Discussion 1. Final Judgment and Preclusion of Issues Appellants first state that the circuit court erred in denying its motions to dismiss the 2006 and 2009 actions because (a) monetary damages could not be granted as supplemental relief in the 2006 action, which was concluded by final judgment on the merits when we filed our opinion on August 4, 2008, and the mandate on September 3, 2008 and (b) the 2009 action was barred by res judicata.

Appellants observe that, in the 2006 action, appellees asked for a declaratory judgment regarding the obligation to provide estoppel certificates but also sought and obtained injunctive relief. Appellants further observe that appellees sought damages, for the first time, in their amendment by interlineation and motion for supplemental relief, both filed in the 2006 action, and in their complaint filed in the 2009 action. They argue that the request in the 2006 action came too late to amend or alter the final judgment and that the request was not further relief within the meaning of the Maryland Declaratory Judgment Act. Maryland Code (2006 Repl.

Vol.) § 3-412(a) of the Courts and Judicial Proceedings Article (“C.J.”) (“[f]urther relief based on a declaratory judgment or decree may be granted if necessary or proper”). In response, appellees argue that this Court, in a prior unreported opinion in this case, effectively decided that the April 4, 2007 judgment did not bar further relief. CR-RSC Tower I, LLC v. RSC Tower I, LLC, No. 1605, September ³²⁷ Term 2009 (Md.Ct.Spec.App. Nov. 10, 2010). That appeal involved an award of attorneys’ fees and costs, which appellees obtained after this Court affirmed the April 4, 2007 judgment.

Appellants appealed and argued that the claim, based on contract, was barred by the final judgment. In our unreported opinion, we held that the request was proper under C.J. § 3-412. Appellees argue that, based on reasoning similar to that employed by this Court in the unreported attorneys’ fees case, appellees’ claim for damages in this case was not precluded and the law of the case doctrine applies. Appellees also argue that damages were appropriate as further relief because they were necessary to effectuate the declaratory judgment.

Finally, regardless of whether the earlier judgment barred further relief, appellees argue that the express reservation of rights provision found in the April 4, 2007 judgment entitles them to pursue their damage claim in the 2006 action as further relief and also prevented a res judicata bar of the separate 2009 action. In reviewing the circuit court’s denial of appellants’ motions to dismiss, we must examine principles of Maryland law. “[WJhere an order [of the trial court] involves an interpretation and application of Maryland constitutional, statutory or case law, our Court must determine whether the trial court’s conclusions are ‘legally correct’ under a de novo standard of review.” Schisler v. State, 394 Md. 519, 535 , 907 A.2d 175 (2006). In Maryland, there are three requirements for res judicata to act as a bar to a subsequent suit: 1) the prior suit must have resulted in a final judgment on the merits; 2) the claim involved in both actions must be substantially the same; and 3) the parties must be the same or in privity. Alvey v. Alvey, 225 Md. 386, 390 , 171 A.2d 92 (1961).

Res judicata will bar all claims that were actually decided in the prior judgment and all claims that could have been decided. Id. Res judicata does not apply, however, to claims for further relief, after a ³²⁸ declaratory judgment under C.J. § 3-412(a), if the claim for further relief is proper. As explained below, with respect to the procedural availability of appellees’ damage claims, we decline to rest our decision on the law of the case doctrine.

Moreover, Maryland law is unclear as to whether appellees could pursue their action as “further relief’ under C.J. § 3-412(a) after entry of the declaratory judgment in the 2006 action. This is because, in the 2006 action, in addition to declaratory relief, appellees sought equitable relief, and the judgment included equitable relief. Nevertheless, regardless of whether the claim for damages is pursued as “further relief’ under C.J. § 3-412(a), or whether it is pursued in a separate action, we conclude that appellees’ damage claims are not barred because of the express reservation of rights contained in the circuit court’s April 4, 2007 order. A. Law of the Case Analysis Under the law of the case doctrine, “[o]nee an appellate court has answered a question of law in a given case, the issue is settled for all future proceedings.” Stokes v. American Airlines, 142 Md.App. 440, 446 , 790 A.2d 699 (2002).

However, the law of the case doctrine is strictly limited to the specific holding of the earlier case. See Long v. Burson, 182 Md.App. 1 , 16 n. 8, 957 A.2d 173 (2008). Here, this Court, in a prior unreported opinion in this case, affirmed the award of litigation expenses to the appellees, awarded after the final judgment entered in September, 2008. CR-RSC Tower I, LLC v. RSC Tower I, LLC, No. 1605, September Term, 2009, filed November 10, 2010.

We held that the request was proper as “further relief’ under C.J. § 3-412. Appellees now contend that their claim for damages must also be considered “further relief’ under C.J. § 3-412 based on the law of the case doctrine. We decline to do so. The claim which was the subject of our prior opinion was a contractual claim for fees and expenses, not a claim for ³²⁹ damages stemming from a continuing breach after the final judgment.

While the governing principles may be the same, the holding in that case and the issue presented in this case are not sufficiently similar for the law of the case doctrine to be dispositive. B. “Further Relief’ Analysis In Maryland, it is unclear whether appellees’ claim for monetary damages qualifies as a request for “further relief’ under C.J. § 3-412(a) because, although appellees sought a declaratory judgment in the 2006 action, the appellees also sought equitable relief and received all the relief requested. Under Maryland law, the preclusive effect of a declaratory judgment is limited to matters actually raised and decided, not matters which could have been decided. Bankers and Shippers Ins.

Co. of New York v. Electro Enterprises, Inc., 287 Md. 641, 653 , 415 A.2d 278 (1980). Res adjudicata does not apply, however, when a plaintiff properly requests further relief, after a declaration of rights under C.J. § 3-412. Id.See also Nova Research, Inc. v. Penske Truck Leasing Co., 405 Md. 435, 458-461 , 952 A.2d 275 (2008) (discussing C.J. § 3-412 generally). A subsequent claim is not barred due to an earlier declaratory judgment as to the rights of the parties because declaratory relief is viewed as a judicial declaration of the relationship between the parties, not the enforcement of any claim.

Bankers, 287 Md. at 653 , 415 A.2d 278 . The Court in Bankers explicitly declined to decide the preclusive effect of a declaratory judgment, however, when the original request also included a claim for “coercive or other relief.” Id. at 655 n. 6, 415 A.2d 278 . Courts have differed on whether a request for further relief should be allowed when the earlier declaratory judgment also included a request for injunctive or other equitable relief. Id.

(listing cases). Compare Swanson v. Tearney, 87 Cal.App.2d 191, 195 , 196 P.2d 49 (1948) (holding that plaintiff was barred from seeking further damages when the original action was for both declaratory and injunctive relief) with Edward B. Marks Music Corp. v. Charles K. Harris Music Pub. Co., 255 F.2d 518, 522 (2d Cir.1958) (holding that the plaintiff was entitled to seek dam ³³⁰ ages under a federal statute identical to C.J. § 3-412(a) even though the original request was for both declaratory and injunctive relief). Applying Maryland law under diversity jurisdiction, the United States Court of Appeals for the Fourth Circuit held, consistent with other federal courts, that the declaratory judgment exception to the res judicata doctrine did not apply when the prior action sought both declaratory and injunctive relief.

Laurel Sand & Gravel, Inc. v. Wilson, 519 F.3d 156, 164 (4th Cir.2008). See also Brannock Assoc., Inc. v. Capitol 801 Corp., 807 F.Supp. 127, 134-35 (D.D.C.1992) (holding that the federal declaratory judgment act did not apply and res judicata barred a damages claim where plaintiff sought both declaratory and coercive relief in the earlier declaratory judgment action). It is unnecessary for us to decide this issue because the express reservation in the earlier judgment prevents a res judicata bar, regardless of whether the damages claim would otherwise qualify as further relief under C.J. § 3-412(a). C. Express Reservation Analysis Regardless of whether the claim for damages can be considered further relief under C.J. § 3-412(a), the express reservation provision in the earlier judgment prevents a res judicata bar, whether in the form of further relief in the declaratory action or in a separate action.

Res judicata will not act as a bar when a court expressly reserves the plaintiffs right to pursue a second action. Restatement (Second) of Judgments § 26(1)(B) (1982); 18 Charles A. Wright, Federal Practice and Procedure § 4413 (1981) (“A judgment that expressly leaves open the opportunity to bring a second action on specified parts of the claim or cause of action that was advanced in the first action should be effective to forestall preclusion.”). See, e.g., King v. Provident Life & Accident Ins. Co., 23 F.3d 926 (5th Cir.1994) (holding that a second claim was not barred under res judicata when the original judge stated that “plaintiffs, of course, retain the right to file another lawsuit”); Perroncello v. Donahue, 64 Mass.App.Ct. 564, 570 , 835 N.E.2d 256 (2005) (rejecting argument that offer of judgment for specific performance precluded a subsequent ³³¹ action for breach of contract damages when the judge stated in his order that “the remaining counts and counterclaims here shall survive, specifically allowing the parties to pursue money damages against each other”) superseded on other grounds by Perroncello v. Donahue, 448 Mass. 199 , 859 N.E.2d 827 (2007).

Generally, when a court expressly reserves a plaintiffs rights, it does so by noting that its judgment is “without prejudice,” or using similar words to that effect. Restatement (Second) of Judgments § 26(1)(b) cmt. b (1982). Here, the circuit court did not err in denying appellants’ motions to dismiss. The trial court’s reservation in its declaratory judgment allowed for the award of monetary damages as further relief in the 2006 action and prevented the application of res judicata to the 2009 action.

In its final order on April 4, 2007, the circuit court expressly reserved appellees’ rights to bring an action for damages. The circuit court’s April 4, 2007 order included the following paragraph: Nothing in this Order prohibits Plaintiffs from pursuing any other remedies or rights they may have, including claims for monetary damages or claims under the Force Majure provision of the Ground Leases, resulting from these or other breaches by Defendants of Plaintiffs’ rights and/or the Ground Leases. This express reservation of rights in the original judgment allowed appellees to pursue a request for monetary damages caused by appellants’ initial failure to supply the estoppel certificates as well as for any continuing or subsequent breach. Therefore, this express reservation allowed appellees to pursue “further relief’ in the 2006 action and also prevented res judicata from barring the 2009 action.

It should be noted, however, that principles of collateral estoppel apply, and matters finally litigated could not be re-litigated. 2. Sufficiency of Evidence for Lost Profits caused by appellants’ breach(es) Appellants allege that the circuit court erred in denying their motions for judgment because the evidence was legally ³³² insufficient to. support a finding of lost profits caused by their breaches. During"‘trial, appellees relied heavily upon real estate projections made in 2006 in order to prove damages. Gregory Leisch, a real estate consultant, opined that the 2006 projections made for Tower I and Tower II were reasonable when made.

Had the project gone forward as planned, he opined that Tower I would have been stable, or fully leased, by December, 2010, and Tower II would have been stable, or fully leased, by December, 2012. He testified that the units in Tower I would have rented at $2.85 per square foot, and a parking space would have rented at $130.00 per month. Mr. Leisch also opined that the unit would have had a 4% vacancy rate, and that rental rates would increase 3% per year over a ten year period following completion of construction and rental. He expressed an opinion as to the same issues with respect to Tower II but the numbers were higher, reflecting the fact that it was projected to be finished two years after completion of Tower I. Mr. Leisch explained that in order to determine the value of a rental building, a preferred method is to capitalize projected income.

He expressed his opinion that a conservative capitalization rate for Tower I was 6 percent at the beginning of construction and 6.5 percent at completion. Mr. Leisch opined that a conservative capitalization rate for Tower II was 6.5 percent at the beginning of construction and 7 percent at completion. Wiley Wright, an accountant, testified as an expert and, based on Mr. Leiseh’s testimony, expressed his opinion as to the market value of Tower I at the end of 2010 and Tower II at the end of 2012. Mr. Wright then subtracted the projected development costs and estimated costs of sale to determine the amount of lost profits, assuming the buildings had been completed, stabilized, and sold.

Appellees claimed lost profits in a total amount of $34,852,137.00 for Tower I and $16,717,831.00 for Tower II. Under Maryland law, in order to recover lost profits damages, a plaintiff must show that (1) the breach by the ³³³ defendant was the proximate cause of the plaintiffs loss; (2) the defendant could reasonably foresee that a loss of profits would result from the breach; and (3) the amount of lost profits can be proved with reasonable certainty. M & R Contractors & Builders, Inc. v. Michael, 215 Md. 340, 346 , 138 A.2d 350 (1958). Appellants contest the elements of proximate causation and reasonable certainty for lost profits damages.

We address both of these elements below. As noted above, in reviewing the denial of a motion for judgment or judgment notwithstanding the verdict, we review questions of law de novo. Schisler v. State, 394 Md. 519, 535 , 907 A.2d 175 (2006). For questions of fact, we must affirm the trial court and uphold the jury’s verdict as long as it is supported by legally sufficient evidence.

Evidence is legally sufficient if there is “some evidence, including all inferences that may permissibly be drawn therefrom, that, if believed and if given maximum weight, could logically establish all the elements necessary to prove” plaintiffs case. Starke v. Starke, 134 Md.App. 663, 678-79 , 761 A.2d 355 (2000). A. Proximate Causation Appellants claim that appellees failed to prove at trial that any breaches by appellants caused any damages. First, appellants assert that appellees intended to create a new entity, Sorrento, to construct the apartment buildings and that Sorrento was the proper plaintiff rather than appellees.

Second, appellants argue that the evidence was insufficient to support a finding that the failure of financing caused any loss because 1) appellants already had obtained financing through another entity; 2) other conditions precedent to financing had not been fulfilled; and 3) appellees could have constructed the development without outside financing. 1. Wrong Entity First, appellants allege that appellees did not sufficiently prove proximate causation because the real damaged party ³³⁴ was Sorrento, an un-formed entity that was to eventually construct the apartment buildings. We disagree. The fact that appellees may have subsequently assigned their interest in the ground leases to a new entity if the financing had in fact occurred does not negate causation as a matter of law for breach of contract damages.

The Memorandum of Understanding entered into between NML and appellees regarding financing for the project contemplated that the venture would either move forward by “forming” a new entity, Sorrento, or by purchasing an existing company. The loan commitment provided RSC the right to assign the loan commitment to another entity; it did not require it to do so. The loan commitment, signed by Olav Kollevoll as RSC’s representative, identified Sorrento as an entity “in the process of being formed by RSC.” Appellees held the interest in the ground leases, had obtained financing and county approvals, and had incurred significant expenses. The fact that appellees may have intended to form another entity, to serve as assignee had no breach occurred, does not change the fact that appellees were parties to the contracts and sustained damages caused by appellants’ breach(es).

The continuing nature of the initial breach prevented pursuit of the project. Furthermore, the declaratory judgment entered on April 4, 2007, affirmed on appeal, identified appellees as the damaged parties. It is too late to re-litigate this issue. 2. Failure of Financing Next, appellants argue that appellees did not sufficiently establish that appellants’ breach prevented the project from going forward.

First, appellants argue that the evidence was insufficient to support a finding that the failure to obtain financing from NML directly caused any loss because appellants already had sufficient financing through Wachovia Bank. Second, appellants claim that there was no proximate causation because there were other unfulfilled conditions precedent to obtaining financing in addition to the failure to provide the estoppel certificates. Finally, appellants claim that appellees ³³⁵ and their principals could have financed the project without obtaining financing from other sources. Appellants argue that in the fall of 2006 there was a construction loan in place with Wachovia Bank as the lender that was sufficient to construct Tower I without any additional financing from NML, and therefore, the project could have been completed regardless of appellants’ breaches.

However, evidence introduced at trial supported a contrary conclusion. Appellees produced evidence that, at the time of the breach in late 2006, appellees had a maximum of $62.5 million available through the Wachovia loan, but the cost at that time to complete Tower I was approximately $92.3 million. Furthermore, Mr. Kollevoll testified that, even if appellees pursued financing solely through Wachovia Bank, appellants still would have had to provide the contested estoppel certificates. In fact, according to Mr. Kollevoll, the estoppel certificates were initially requested for Wachovia Bank.

There was evidence to support a conclusion that appellants’ failure to provide estoppel certificates proximately caused the failure of financing to enable the project to go forward. Next, appellants argue that appellees did not establish proximate causation because appellees did not fulfill additional conditions precedent to financing other than not providing the estoppel certificates. Under Maryland law, the element of proximate causation for breach of contract lost profit damages is satisfied when the breach “was a substantial factor in causing the loss.” Hoang v. Hewitt Ave. Assocs., 177 Md.App. 562, 607, 936 A.2d 915 (2007) (citing Rumsfeld v. Applied Cos., 325 F.3d 1328, 1339 (Fed.Cir.2003) and Scott Timber Co. v. United States, 64 Fed.Cl. 130, 137-38 (2005)).

Here, Nicholas Jahnke, testifying as a representative for NML, specifically testified that appellants’ refusal to provide estoppel certificates and the subsequent reservation of rights on the estoppel certificates brought the financing effort to a halt. Thus, a jury could find that the failure to provide estoppel certificates was a substantial factor in the failure to obtain financing to fund the project. ³³⁶ Finally, appellants argue that the failure of financing was not a proximate cause of appellees’ damages because appellees could have financed the construction of the project through its investors rather than through a financing company. Specifically, appellants claim that appellees could have completed construction of the project by making a “cash call” on investors such as the Kadan family. Mr. Kollevoll testified at trial, however, that at the relevant time, the Kadans wanted out of the business deal.

He testified that if appellees had attempted to make a cash call against them, there was no method for appellees to actually obtain the money if the family was unwilling to provide it. Furthermore, appellants never established that the family actually had the financial resources to finance construction of the buildings. The evidence presented at trial was legally sufficient for a jury to find that appellants’ breach caused appellees’ damages. B. Reasonable Certainty Appellants charge that the evidence presented at trial was not legally sufficient to prove lost profits damages with reasonable certainty.

Appellants argue that 1) the circuit court erred in excluding evidence of post-breach actual market conditions and 2) appellees’ December 2006 market projections were too speculative to support an award, particularly because the claims were based on collateral, and not direct, lost profits. 1. Post-Breach Market Conditions As mentioned above, appellees’ claim for lost profits was based on market projections as of December 2006, the time of appellants’ initial breach. While this case was on appeal to this Court from the summary judgment entered in the 2006 action, the real estate market deteriorated significantly, thus making the project unfeasible. Before trial in early 2010, appellees moved in limine to exclude evidence of post-breach actual market conditions, and the court granted it.

In opposition to the motion, appellants argued that because Tower I was projected to not be fully leased until 2010 and Tower II was projected to not be fully leased until 2012, actual ³³⁷ market conditions in that time frame were relevant and would show that, had the apartment buildings been built as planned, appellees would not have made a profit because of changed market conditions. Appellees reasoned that the law provides that damages are measured as of the time of breach, and therefore, evidence of post-breach market conditions was inadmissible. “[T]he admission of evidence is committed to the considerable and sound discretion of the trial court.” Merzbacher v. State, 346 Md. 391, 404 , 697 A.2d 432 (1997). In reviewing a motion in limine, “we are generally loath to reverse a trial court” unless the evidence was plainly improperly admitted or excluded under law, “or there is a clear showing of an abuse of discretion.” Id. at 404-405 , 697 A.2d 432 . Damages for breach of contract generally include “expectancy” damages.

The traditional rule is that expectancy damages, which include lost profits, are measured at the time of the breach. Republic Ins. Co. v. Prince George’s County, 92 Md.App. 528, 533 , 608 A.2d 1301 (1992) (citation and internal quotations omitted). See also Beard v. S/E Joint Venture, 321 Md. 126, 141 , 581 A.2d 1275 (1990) (“[a]s we have seen, the ordinary rule for computing loss of the bargain damages is to value the property at the time of breach”).

Frequently, later events such as “fluctuations in value after the breach” are irrelevant for damage determinations. Republic Ins. Co., 92 Md.App. at 533 , 608 A.2d 1301 . While the Court of Appeals has stated and applied the general rule, there are very few appellate cases in Maryland in which the Courts have applied the general rule to claims for direct lost profits, when the issue was contested, and seemingly none that have applied it to claims for collateral lost profits.

Direct lost profits result “immediately from the performance of the contract broken.” M & R Contractors & Builders v. Michael, supra, (quoting Corbin, Contracts, § 1020 (1951)). Collateral lost profits result from the loss of “other contracts collateral to the one broken,” to which the ³³⁸ defendant was not a party. Id. In M & R Contractors, the Court of Appeals stated that the plaintiffs direct lost profits damages for a breach of contract should be measured “under the circumstances that existed at the time of the breach.” Id. at 349, 138 A.2d 350 (quoting Corbin, Contracts, § 1094 (1951)).

M & R Contractors favorably cited a leading American case on lost profits damages, Masterton v. Mayor of Brooklyn, in which the court held that lost profits “damages are to be settled and ascertained according to the existing state of the market at the time the cause of action arose, and not at the time fixed for full performance.” 7 Hill 61 , 71 (N.Y.Sup.Ct.1845). A possible explanation as to why there are no Maryland cases which address whether the traditional rule measuring contract damages at the time of the breach should apply to collateral lost profits cases is because, until relatively recently, collateral lost profits damages were considered too speculative to be awarded. The Court of Appeals and this Court first approved the recovery of collateral lost profits damages in the late 1970s, and then only in cases in which the plaintiff proved that collateral contracts had already been entered into at the time of the breach. See Impala Platinum, Ltd. v. Impala Sales, Inc., 283 Md. 296 , 389 A.2d 887 (1978); John D. Copanos & Sons, Inc. v. McDade Rigging & Steel Erection Co., 43 Md.App. 204 , 403 A.2d 402 (1979); Sergeant Co. v. Clifton Building Corp., 47 Md.App. 307 , 423 A.2d 257 (1981).

See also Hoang v. Hewitt Ave. Assocs., 177 Md.App. 562, 597-604 , 936 A.2d 915 (2007) (discussing the history of collateral lost profits damages cases in Maryland). Only in 2007 did this Court first uphold an award of collateral lost profits damages in a case in which there were no existing collateral contracts at the time of breach. See Hoang, 177 Md.App. at 609 , 936 A.2d 915 (stating that “[t]he cases do not hold, however, that such evidence is necessary to the recovery of collateral lost profits, i.e., that without evidence of third party contracts in hand when the contract at issue is made, collateral lost profits are not recoverable”).

Hoang involved a breach of contract for the sale of real estate. In ³³⁹ Hoang , the use or non-use of post-breach market conditions was not addressed, but this Court referred to expert testimony regarding “the prices the finished town houses would have fetched on the real estate market as it existed at the relevant time” helped prove collateral lost profits damages with reasonable certainty. Id. at 610-11 , 936 A.2d 915 . That expert testified on the basis of projections of the real estate market, as the trial took place in 2004 and early 2005 and the town houses were not slated to be completed until the summer of 2007.

Id. at 571 , 936 A.2d 915 . Thus, the Court of Appeals and this Court have not directly addressed whether it is proper to award collateral lost profits damages on the basis of otherwise reasonable projections at the time of the breach without consideration of post breach market conditions. Other jurisdictions have differed on whether lost profit contract damages should be measured at the time of the breach. The Supreme Court touched on this issue in a breach of contract action for failure to execute applications for a patent.

Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U.S. 689, 697-98 , 53 S.Ct. 736 , 77 L.Ed. 1449 (1933). The Court noted that determining the market value for a patent at the time of breach is difficult because “[a] patent is a thing unique.” Id. at 697 , 53 S.Ct. 736 . Instead, the Court reasoned that in order to determine the value of the patent at the time of the breach, and thus to determine damages, experts can testify based on the “state of the art, the character of the improvement, and the probable increase of efficiency or saving of expense” if “the trial follows quickly after the issue of the patent.” Id. at 698 , 53 S.Ct. 736 . The Court went on to say that “a different situation is presented if years have gone by before the evidence is offered.” In that case, the Court reasoned that “[e'lxperience is then available to correct uncertain prophecy.

Here is a book of wisdom that courts may not neglect. We find no rule of law that sets a clasp upon its pages, and forbids us to look within.” Id. at 698 , 53 S.Ct. 736 . The Court explained that “[t]o correct uncertain prophecies in [breach of contract or tort cases] is not to charge the offender with elements of value non-existent at the time of his ³⁴⁰ offense” but rather “it is to bring out and expose to light the elements of value that were there from the beginning.” Id. See also Advent Sys.

Ltd. v. Unisys Corp., 925 F.2d 670 (3rd Cir.1991) (holding that lost profits damages were not established with reasonable certainty when a damages expert testified, after the damages period had expired, as to projections made at the time of the breach that were significantly higher than actual market value during the period in question); Sun Ins. Marketing Network, Inc. v. AIG Life Insurance Co., 254 F.Supp.2d 1239 (M.D.Fla.2003) (actual market conditions should be considered when the time period during which damages were projected had already expired). In contrast, the United States Court of Appeals for the District of Columbia Circuit held that evidence of favorable post-breach market conditions is inadmissible to show increased direct lost profits. J.D. Hedin Constr.

Co. v. F.S. Bowen Elec. Co., 273 F.2d 511, 513 (D.C.Cir.1960). J.D. Hedin concerned the breach of a sub-contract under a construction contract. Id.

The trial court admitted plaintiffs evidence of post-breach market conditions that showed increased lost profits due to diminished costs of performance. Id. The United States Circuit Court of Appeals for the District of Columbia found that the trial court committed reversible error because “[s]uch costs are to be estimated as nearly as may be according to ‘the circumstances that existed at the time of breach’ ” and should not reflect “events which occurred after the contract was executed, and after its breach.” Id. (citing Corbin, Contracts, § 1094 (1951)).

Similarly, the Arizona Court of Appeals upheld a finding of lost profits for a development project based upon projections made at the time of the breach. Rhue v. Dawson, 173 Ariz. 220 , 841 P.2d 215 (Ariz.Ct.App.1992). Rhue concerned a partnership dispute where the defendant attempted to introduce evidence that the real estate market deteriorated after his breach in order to show that he should not have to pay the value of partnership property at the time of the breach. Id. at 230 , 841 P.2d 215 .

The Court in Rhue specifically held that the fact that the real estate market deteriorated after the ³⁴¹ defendant’s breach was irrelevant and violated the “general contract rule” that measures damages at the time of the breach. Id. The Court stated that measuring damages at the date of the breach is “sound policy” because “[t]he adverse consequences of a controlling partner’s delays and decisions which prevent the partnership from realizing the profits should be at that partner’s risk, not at the risk of the ousted, innocent partner.” Id. at 230-31 , 841 P.2d 215 . Citing 22 Am.Jur.2d Damages § 78 (2011), appellants argue that the general rule that contract damages are measured at the time of the breach does not apply to “anticipated profits or to other expectancy damages that, absent the breach, would have accrued on an ongoing basis over the course of the contract.” We note that the case cited in Am.Jur. for that proposition, Energy Capital Corp. v. United States, merely reduced to present value the damages that would have arisen after the date of judgment (“future lost profits”). 302 F.3d 1314, 1330 (Fed.Cir.2002).

The Court did not apply this principle to hold that the amount of lost profits should be determined by market value at some date later than at the time of the breach. However, citing Energy Capital Corp., the United States Court of Appeals for the Federal Circuit recently held that the trial court did not abuse its discretion by considering post-breach evidence in order to determine direct lost profits damages. Anchor Sav. Bank, FSB v. United States, 597 F.3d 1356 (Fed.Cir.2010).

The Court in Anchor, citing and relying upon other Federal Circuit decisions, reasoned that the general rule favoring the measurement of damages at the time of the breach should not apply to profits that would have accrued over the course of a contract because it “may not result in the most accurate assessment of expectancy damages.” Id. at 1369 (quoting Fifth Third Bank v. United States, 518 F.3d 1368, 1377 (Fed.Cir.2008)). In that case, the plaintiffs recovered damages based on the sale of assets it otherwise would not have sold but for the defendants’ breach. The assets would have accrued profits over time, so the Court admitted post-breach evidence to determine the amount of lost profits. ³⁴² The Court stated that a court can consider post-breach evidence “in order to place the non-breaching party in as good a position as he would have been had the contract been performed.” Id. at 1370 (quoting Fifth Third Bank v. United States, 518 F.3d 1368, 1377 (Fed.Cir.2008)). Maryland cases have been consistent with the principle set forth in Am.Jur., although they do not cite to it directly.

The Court of Appeals in Macke Co. v. Pizza of Gaithersburg, Inc., 259 Md. 479, 492 , 270 A.2d 645 (1970), stated that actual experience after the breach could be used in measuring direct lost profits. In Macke Co., on December 30, 1966, Macke Co. placed vending machines at certain locations pursuant to contracts with an automatically renewable term of one year. The owner of the premises was to be paid a percentage of gross revenue realized from the machines. In January and February, 1968, the owner of the premises terminated the contracts.

Id. at 481 , 270 A.2d 645 . Macke Co. sued for breach of contract. Id. The trial court found that the owners breached the contracts but that Macke Co. failed to prove damages with reasonable certainty.

Id. at 482 , 270 A.2d 645 . At trial, Macke Co. had attempted to prove damages by putting in evidence gross sales figures for the month of January, 1968 at the locations in question. Id. at 489-490 , 270 A.2d 645 . Even though an extrapolation for the rest of 1968 was in existence, Macke Co. did not introduce any evidence projecting losses for the rest of 1968.

Id. at 490 , 270 A.2d 645 . Macke Co. also called one of the defendants to testify, who stated that he received a certain amount of money from the machines in 1967. Id. Based on that testimony, Macke Co. submitted to the court an extrapolation of 1967 figures to show a projection of profits lost in 1968.

Id. The Court concluded that the trial court erred when it concluded that damages could not be proved and remanded for the trial court to reconsider the issue of damages. Id. at 491 , 270 A.2d 645 . The Court stated that instead of relying on the two varying projections based on past performance in 1967 and January 1968, the trial court could consider whether the defendants had obtained other vending machines, and if so, it could ³⁴³ consider the actual experience with those machines during 1968.

Id. at 492 , 270 A.2d 645 . The Court noted that the defendants’ actual earnings during the time period in question would be a “more appropriate measure of damages” than the projections, particularly in light of evidence that factors potentially affecting the vending machines’ earnings had changed from 1967 to 1968. Id. Similarly, in Fowler v. Printers II, Inc., this Court advocated the use of actual experience during the post-breach period when projections based on past profits for the business were too speculative. 89 Md.App. 448 , 598 A.2d 794 (1991).

In Fowler, the appellant-defendant had breached a restrictive covenant with her old employer by using her business contacts with a new company. Id. at 458 , 598 A.2d 794 . In order to prove the damages incurred by the old employer, the appelleeplaintiff presented evidence of lost profits for the accounts which followed the defendant to her new company. Id. at 473 , 598 A.2d 794 .

Specifically, the plaintiff presented evidence of profits gained by the new company from the accounts in 1990 rather than basing damages on profits gained by the old company from the accounts in 1989. Id. at 476 , 598 A.2d 794 . This Court upheld the use of these figures, reasoning that the evidence of profits earned by the old company in 1989 would be too speculative, particularly in light of “substantial evidence” that several independent factors may have resulted in a decrease in the plaintiffs business in 1990. Id. at 476-77 , 598 A.2d 794 .

In both Macke and Fowler, the Court determined that using past profits of the business for the damages period would be speculative because of evidence that factors affecting profits during that period may have changed significantly from the past. The Court then allowed the parties to present post-breach evidence of lost profits based on profits made by others related to the contract. However, both cases are distinguishable from this case. The claimed lost profits in Macke and Fowler, and the other cases cited above in support of the statement in Am.Jur. § 78, would have been ongoing over the course of the contract, absent the breach.

Here, the non- ³⁴⁴ breaching parties were not operating businesses which were expected to produce profits on an ongoing periodic basis over the course of the contract. Instead, appellees claimed profits that would have accrued once: on sale after the apartments had stabilized. In addition, in those cases there was actual substituted performance. Here, the buildings were not constructed.

Under the current state of Maryland law, the general principle is that breach of contract damages are measured at the time of the breach. We see no distinction, relevant to this issue, between direct and collateral lost profits. Thus, the circuit court did not abuse its discretion in barring evidence of post-breach market conditions. 2. Reasonable Certainty of the 2006 Damage Projections Even if evidence of post-breach market conditions was properly excluded, appellants claim that the 2006 damage projections used to determine lost profits were legally insufficient to prove damages with reasonable certainty.

Appellants argue that it was pure speculation whether Tower I would be constructed, leased, and sold. In addition to the requirements that damages must be both foreseeable and proximately caused by the breach, damages must also be established at trial with reasonable certainty. Reasonable certainty means that evidence must demonstrate “the likelihood of damages being incurred as a consequence of the breach, and their probable amount.” Hoang v. Hewitt Ave. Assocs., 177 Md.App. 562, 595, 936 A.2d 915 (2007).

The standard for proving “reasonable certainty” depends upon the type of lost profits damages being sought: direct or collateral. Proving collateral lost profits damages with reasonable certainty is more difficult than proving direct lost profits because the legal standard is strictly applied, id. at 610 , 936 A.2d 915 , and collateral lost profits may be considered too “speculative, hypothetical, remote, or contingent either in eventuality or amount.” Id. at 595 , 936 A.2d 915 . However, the fact that “more stringent proof is required where the ³⁴⁵ anticipated profits stem from collateral transactions does not warrant a prohibition on such proof.” John D. Copanos & Sons, Inc. v. McDade Rigging & Steel Erection Co., 43 Md.App. 204, 210 , 403 A.2d 402 (1979). This Court recently examined the case law behind collateral lost profits damages in Hoang , which involved a breach of contract for the sale of real estate.

We held that collateral lost profits were proved at trial with reasonable certainty even though the development was in the “planning stage” and there were not yet any “collateral re-sale contracts from which its profits would be generated.” Id. at 608 , 936 A.2d 915 . We based our decision partly on the fact that the non-breaching party had a very strong reputation for the prior 25 years for developing successful residential properties in the community. Id. at 609 , 936 A.2d 915 . In Hoang , the actual amount of damages was proved with reasonable certainty because the non-breaching party presented expert testimony about the costs incurred as well as projections regarding the probability of sale of the town houses, the prices of the finished townhouses “at the relevant time,” and the profit that would have been returned to it.

Id. at 610 , 936 A.2d 915 . See also Lanahan v. Heaver, 79 Md. 413 , 29 A. 1036 (1894) (reversing a judgment for collateral lost profits damages because plaintiffs did not show “a particle of evidence” regarding the projected price or market value of the homes involved in the breach of contract); John D. Copanos & Sons, Inc., 43 Md.App. at 208 , 403 A.2d 402 (holding that collateral lost profit damages were proved with reasonable certainty when the non-breaching party was an “established firm embarking on a new method of manufacture”). The evidence of collateral lost profit damages in this case was sufficient to create a jury question. Similar to the non-breaching party in Hoang , Penrose Group, appellees’ parent company, is a successful real estate development company that has developed a variety of different buildings in Montgomery County for over 20 years.

Floyd E. Davis III, president of one of the original landlord entities in the ground leases who testified on behalf of appellants at trial, admitted that appel ³⁴⁶ lants decided to partner with Penrose as a development company because it had an excellent reputation. Mr. Wright used a “stabilized pro forma” model to project profits for the Tower I building in 2010, the first year it was expected to be fully leased. Mr. Wright’s findings were corroborated by the testimony and findings of Gregory Leisch, a real estate expert, as well as Nicholas Jahnke, representative of NML, who authorized a financing commitment to the project on the basis of the same pro forma projections. This case falls within Hoang’s purview; thus, the evidence below was sufficient to support a finding that appellees proved collateral lost profit damages with reasonable certainty. 3.

Sufficiency of Evidence for Reliance Damages Next, appellants claim, in various parts of their brief, that appellees failed