Lerner Corp. v. Three Winthrop Properties, Inc.

EYLER, Judge. This case concerns the interpretation of a management and leasing agreement dated January 16, 1985 (the Agreement) between Lerner Corporation, appellant, the exclusive leasing and management agent for the Springhill Lake Apartments located in Greenbelt, Maryland, and Three Winthrop Properties, Inc,, appellee, the agent of the owners of the apartments. 1 ⁶⁸² The section of the Agreement in dispute is 14(b), which provides as follows: Owner shall have the right, without liability and without cause to terminate at any time from and after the last day of the calendar month in which occurs the tenth (10th) anniversary of the date of this Agreement by giving Agent written notice of its election to do so. Such notice shall specify the effective date of such termination (which shall be a “Termination Date”), which date shall be not earlier than 90 days after such notice is given. The parties agree that January 31, 1995 was “the last day of the calendar month in which occurs the tenth (10th) anniversary of the date of this Agreement.” On October 17, 1994, appellee gave written notice to appellant, in which it stated its intent to terminate the Agreement effective January 31, 1995.

Appellant responded that the notice could not be given until January 31, 1995, and would not be effective until 90 days thereafter. Appellant further stated that it would continue as leasing and management agent until that time. On November 18, 1994, appellee filed suit in the Circuit Court for Montgomery County. In Count One, appellee sought a declaration of the rights of the parties and specifically an interpretation of § 14(b).

In Count Two, appellee sought damages for breach of contract in anticipation of appellant’s failure to honor the asserted termination of the contract on January 31, 1995. Appellee filed a motion for partial summary judgment with respect to Count One, and on February 14, 1995, the circuit court granted it. In doing so, the circuit court ruled that the Agreement terminated on January 31, 1995. Appellant appealed to this Court, but in January 1996, this Court dismissed the appeal because of the lack of a final appealable judgment.

On October 10, 1997, appellee filed a motion for partial summary judgment with respect to Count Two, seeking dam ⁶⁸³ ages for appellant’s management of the apartments for a three month period after January 31,1995. During the three month period, appellant continued to manage the apartments pursuant to its interpretation of the Agreement, despite the circuit court’s February 14, 1995 ruling on appellee’s motion for partial summary judgment. On November 20, 1997, the circuit court granted appellee’s motion for partial summary judgment on Count Two and awarded appellee all the management fees received by appellant for the three month period in question, which totaled $226,954. After the circuit court entered an order disposing of the question of attorney’s fees, 2 the last open issue in the case, appellant noted this appeal.

Questions Presented and Contentions of Parties Appellant presents four separate questions, but the essence can be restated as follows: 1. Is the relevant language in the Agreement clear and unambiguous and was the circuit court’s decision legally correct? 2. On the issue of damages, was a judgment for the full amount of the management fees legally correct? With respect to the first question, appellant argues that the language in the Agreement was, at a minimum, ambiguous, thus making summary judgment improper.

Appellant relies on (1) the plain language in the Agreement; (2) the language considered in context; and (3) appellee’s interpretation of the Agreement contained in public documents prepared by appellee prior to the recent controversy between the parties. With respect to appellee’s publicly stated interpretation, appellant argues that (1) it is relevant to the interpretation of the Agreement and (2) it forms the basis for equitable estoppel. With respect to the second question, appellant asserts that, even if appellee’s interpretation is correct, appellee is not entitled as a matter of law to all management fees received by appellant during the three month period in question. Appel ⁶⁸⁴ lant argues that Count Two sounded in breach of contract and the measure of damages is that amount of compensation which would place appellee in the position in which it would have been if appellant had relinquished its duties on.

January 31, 1995. Appellant argues that another management company would have been paid a fee during the three month period and that the amount of damages should have been the difference between appellant’s fees and what appellee would have paid to another management company, if less than appellant’s fees. Appellant also argues that damages in the full amount of the management fees cannot be justified on a theory of unjust enrichment. With respect to the first question, appellee asserts that the language in the Agreement is unambiguous and, when considered in context, calls for a reasonable result.

Appellee argues that the Agreement was for a ten-year term and that appellee had the right to terminate the Agreement as of January 31, 1995; it did not have merely the right to give notice as of that date. Appellee also asserts that there are no prior inconsistent statements relating to its interpretation of the Agreement and that any such statements are irrelevant in any event. With respect to appellant’s estoppel argument, appellee states that the prior statements were not directed to appellant, and appellant did not rely on such statements. On the issue of damages, appellee asserts that appellant had no contractual right to management fees once the contract had been terminated and that appellant took fees from the rental proceeds without authorization.

Appellee also points out that appellant did not file a counterclaim seeking payment, but even if the filing was unnecessary, appellant would not be entitled to compensation under theories of unjust enrichment or quantum, meruit, because its services were unwanted and had been rendered gratuitously. Discussion I. Contract Interpretation The construction of contractual language is, in the first instance, “a question of law for the court to resolve.” ⁶⁸⁵ Shapiro v. Massengill, 105 Md.App. 743, 754 , 661 A.2d 202 (1995). A contract is not ambiguous merely because the parties disagree as to its interpretation. Fultz v. Shaffer, 111 Md.App. 278, 299 , 681 A.2d 568 (1996).

Rather, if the disputed term “is clear as to its meaning, there is no room for construction and it must be presumed that the parties meant what they expressed.” Fultz, 111 Md.App. at 298 , 681 A.2d 568 ; Feick v. Thrutchley, 322 Md. 111, 114 , 586 A.2d 3 (1991); Fasten Constr. v. Rod Enters., 268 Md. 318, 328 , 301 A.2d 12 (1973). We shall review the circuit court’s conclusions on partial summary judgment to determine whether they were legally correct. See Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 591 , 578 A.2d 1202 (1990); IA Constr. Corp. v. Carney, 104 Md.App. 378, 384 , 656 A.2d 369 (1995), aff'd, 341 Md. 703 , 672 A.2d 650 (1996).

With respect to the first issue, we agree with the circuit court that the disputed contract provision is unambiguous and susceptible of only one meaning. There is no dispute that the provision specifies a target date for the earliest occurrence of either termination or notice of termination— January 31, 1995. The parties dispute whether termination or only notice of termination can occur on that date. Section 14(b) grants to the Owner the power “to terminate” the Agreement on this target date “by giving Agent written notice of its election to do so.” This power to terminate may be exercised “at any time from and after” the target date.

The concluding phrase of this sentence merely provides for advance notice of the intended action. Thus, the subject of the sentence, termination, is modified by two succeeding phrases, the first specifying the timing of termination, and the second providing for advance notice of that termination. Appellant would, in effect, have us rewrite the first sentence of subsection (b) so that notice is its subject. Plainly, it is not.

The Agreement also indicates in several places that it was for a specific “term” subject to renewal. Section 2 of the Agreement provides that the managing agent, appellant, is retained for the “term” specified in § 14. In § 12 of the ⁶⁸⁶ Agreement, dealing with the managing agent’s compensation, it provides that the managing agent is entitled to 4% of the gross rentals received for each month “throughout the term of this Agreement.” Additionally, section 14(e) provides that, in the event that either of the parties should elect to terminate the Agreement pursuant to subsections (b), (c), (d), or § 14.A, 3 “this Agreement shall terminate on the Termination Date with the same force and effect as if the Termination Date were the same date set forth in subsection (a) for the expiration of the term hereof.” Subsection 14(a) therefore contains the natural term of the agreement, which may be modified according to other provisions. Subsection (a) provides: This Agreement shall be in effect from and after the date hereof until the expiration of the last day of the calendar year which completes 10 full calendar years after the date hereof, and shall, without further action by Owner or Agent, be automatically renewed for successive one year terms, on the same terms and conditions as set forth in this Agreement provided, however, that this Agreement is subject to termination at any time pursuant to, and on the conditions set forth in this Section and Section 14.A. Though providing for a term based on calendar years rather than calendar months, subsection (a), in defining the natural effective term of the Agreement, uses language remarkably similar to the language in subsection (b) pertaining to termi ⁶⁸⁷ nation.

The beginning structure of the paragraphs is the same in that the respective subjects are named first, and are followed by a description of the method for computing when those subjects are triggered. This similarity in the drafting of subsections (a) and (b) also supports the circuit court’s conclusion that the target date of subsection (b) describes the end of the term rather than the date on which notice may be given. The alleged inconsistent statements on which appellant relies are statements contained in an offering memorandum dated January 16,1985, directed to potential investors and in a Form 10-K filed with the U.S. Securities & Exchange Commission on March 31, 1994. The language of these documents is substantially the same.

The offering memorandum provides: The Management Agreement may not be terminated by the Investor Partnership without cause for 10 years from the date of the agreement. Thereafter, termination by the Investor Partnership is permitted upon 90 days notice. The statements contained in these documents are not inconsistent with the position taken by appellee in this case. Like § 14(b), the documents are silent as to when notice is to be given vis-a-vis the end of the term, but state unequivocally that the Agreement may not be terminated until the expiration of a specified term.

Accordingly, the circuit court did not err in declaring the disputed provision unambiguous and in declaring that appellee’s notice of termination was properly tendered.

II

Damages By the express language of the management Agreement, appellant, named “Agent” for purposes of the Agreement, was under a fiduciary duty with respect to its management of the property for appellee. Section 4(r) of the Agreement provides: Agent shall otherwise manage and operate the Project in the best interests of Owner in accordance with this Agree ⁶⁸⁸ ment and act as a fiduciary to Owner in protecting and accounting for Owner’s assets and property. Section 7 of the Agreement details the status and handling of a “Rental Agency Account,” out of which appellant was authorized to pay itself for services rendered, subject to restrictions in the Agreement. Section 7 provides in part, All monies received by Agent for or on behalf of Owner shall be deposited in an account or accounts (collectively, the “Rental Agency Account”) to be maintained by Agent in American Security Bank, N.A., Washington, D.C., or in one or more other commercial banks which may be designated by Owner.

Agent shall pay from the Rental Agency Account all sums due and payable by the Owner as an expense of the Project and the Management fee to itself____ All funds held by Agent for Owner’s account shall be trust funds in the hands of Agent. Under the Agreement, appellee gave appellant sufficient information and power to exercise control over the Rental Agency Account and authorization to pay itself out of the account, but charged appellant with managing the property in appellee’s best interests and “protecting and accounting for” appellee’s assets. The record demonstrates that appellant breached the Agreement and its fiduciary duty by refusing to abide by the notice of termination and, more important, by exploiting its previous position and access to confidential information in continuing to pay itself unauthorized compensation after the Agreement had terminated. We conclude that appellant’s actions after the Agreement had terminated were not only unauthorized by appellee but inconsistent with a standing court order construing the termination date in favor of appellee and declaring that notice of termination was properly given.