Miller & Smith at Quercus, LLC v. Casey PMN, LLC

BATTAGLIA, J. In 1998, Miller and Smith, a Maryland limited liability company, executed a promissory note titled “Deferred Purchase Money Promissory Note II” 1 in which it promised to pay $3,296,000, with interest, to Potomac Capital Investment Corporation, an affiliate of Potomac Electric Power Company (PEPCO), in order to purchase approximately 258 acres of land in Montgomery County. In addition to the repayment of principal and its attendant interest upon maturity or sale of all or any portion of the property, the promise to pay also included a provision for payment of “Additional Contingent Interest,” “[i]n order to compensate the Holder for accepting an interest rate equal to the Libor Rate, and further to compensate the Holder for granting the Borrower the exculpation from liability provided in [the Note].” Additional Contingent Interest was defined as “35% of the difference between Gross Revenue and Approved Costs, calculated at a time or times specified in this Note,” while Gross Revenue was defined as “the greater of the sales price or gross sales proceeds payable in connection with the sale of all or any portion of the Property securing this Note.” A Deed of Trust and Security Agreement also were executed on the same day, as well as a Guaranty Agreement executed by Miller and Smith Holding, Inc., a Virginia corporation. 2 In 2001, Potomac transferred its rights under the Note and the Guaranty to Casey PMN, LLC which then became the Holder under the Note and the Guaranty and the Beneficiary under the Deed of Trust. ²³³ In 2002, under threat of imminent condemnation of the property, Miller and Smith entered into an Agreement with Montgomery County for the sale of the property, for the purpose of open space conservation. Under the Agreement, the property was divided into six parcels, and the County was to make five cash payments between November 2002 and July 2006 totaling $9,025,500 to Miller and Smith upon the conveyance of the six separate parcels of land, as follows: Parcel 1 (85.79 acres) for $3,000,000 on November 15, 2002; Parcel 2 (63.52 acres) for $2,221,500 on July 1, 2003; Parcel 3 (50.16 acres) for $1,754,000 on July 1, 2004; Parcels 4A and 4B (27.91 and 16.41 acres, respectively) for $1,550,000 on July 1, 2005; and Parcel 5 (14.3 acres) for $500,000 on July 1, 2006. Montgomery County also agreed to provide a letter to the Internal Revenue Service “acknowledging that [Miller and Smith] was paid the above amounts for the Property and acknowledging that [Miller and Smith] claims that the fair market value of the Property is not less than $17,100,000.” The County took no position on the actual fair market value of the property, but included $17,100,000 in the Agreement to enable Miller and Smith to attempt to take advantage of any possible tax benefits.

According to the parties, the entire $9,025,500 has been paid to Miller and Smith and, in turn, Miller and Smith has transferred all parcels of the property to the County. Miller and Smith paid Casey Additional Contingent Interest under the promissory note, based on the $9,025,500 paid by Montgomery County, but Casey did not agree with the computation and claimed that the calculation should have included not only the $9 million, but additional tax benefits. Casey, thereafter, filed a four count complaint in the Circuit Court for Montgomery County against Miller and Smith and Miller and Smith Holding, Inc., alleging that Miller and Smith had “not properly calculated and paid Additional Contingent Interest to Casey based on the fair market value of the Property, as contemplated by the Note and Deed of Trust ....,” prefacing the following four Counts with the factual recitations noted above: ²³⁴ COUNT I (BREACH OF NOTE AND DEED OF TRUST—DAMAGES) 18. Casey incorporates the preceding paragraphs of its Complaint by reference as if set forth herein. 19.

Miller and Smith’s failure to pay Casey the full amount of Additional Contingent Interest due under the Note, calculated as 35% of the fair market value of the Property, as contemplated by the terms of the Note, constitutes a breach of the Note and the Deed of Trust. 20. As a result of Miller and Smith’s breach of the Note and the Deed of Trust, Casey has suffered substantial financial harm. 21. Under the terms of the Note, in addition to the Additional Contingent Interest due but unpaid, Miller and Smith is liable to Casey for all reasonable costs of collection of amounts due under the Note, including reasonable attorneys’ fees. COUNT II (ALTERNATIVE: BREACH OF NOTE AND DEED OF TRUST—DAMAGES) 22.

Casey incorporates the preceding paragraphs of its Complaint by reference as if set forth herein. 23. Miller and Smith’s failure to pay Casey the full amount of Additional Contingent Interest due under the Note, calculated as 35% of all compensation received by its members, including by their use of the charitable deductions derived from the sale of the Property to the County at below fair market value, constitutes a breach of the Note and the Deed of Trust. COUNT III (BREACH OF THE NOTE AND DEED OF TRUST SPECIFIC PERFORMANCEINJUNCTIVE RELIEF) 24. Casey incorporates the preceding paragraphs of its Complaint by reference as if set forth herein. ²³⁵ 25.

Miller and Smith’s refusal to permit Casey to inspect its books and records for the purpose of, inter alia, assessing whether Miller and Smith has accurately calculated the Approved Costs that it is permitted to deduct from “Gross Revenue” in determining the amount of Additional Contingent Interest due under the Note constitutes a breach of the terms of the Note and the Deed of Trust. 26. Without inspecting and examining the books and records maintained by Miller & Smith, Casey has not been able to determine whether Miller and Smith has deducted more as “Approved Costs” from “Gross Revenue” in making payments of Additional Contingent Interest to Casey under the Note than is proper. COUNT IV (BREACH OF THE GUARANTY) 27. Casey incorporates the preceding paragraphs of its Complaint by reference as if set forth herein. 28.

Under the Guaranty, M & S Holding is jointly and severally liable with Miller & Smith to Casey for injury it suffers as a result of Miller and Smith’s failure to make proper payment of Additional Contingent Interest and Miller and Smith’s failure to meet other obligations under the terms of the Note and the Deed of Trust. 29. As a result of Miller and Smith’s breach of the Note and the Deed of Trust, Casey has suffered substantial injury for which M & S is liable to Casey. WHEREFORE, Plaintiff, Casey PMN, LLC, respectfully demands that the Court enter judgment in its favor against Defendants Miller and Smith at Quercus, LLC and M & S Holding, Inc., jointly and severally, (a) awarding Casey PMN, LLC, compensatory damages in an amount to be proven at trial for unpaid Additional Contingent Interest, together with court costs and pre-and post-judgment interest, and costs of collection, including reasonable attorneys’ fees, costs and expenses; (b) ordering Defendant Miller and Smith at Quercus to permit Casey PMN, LLC to inspect, examine and copy its books and records; and (c) granting ²³⁶ such other and further relief as the Court deems just and proper. Miller and Smith filed a Motion to Dismiss Count II, as well as an Answer to the remaining three counts of the Complaint, generally denying liability pursuant to Rule 2-323(d), 3 after which Casey filed an Opposition to the Motion to Dismiss.

Miller and Smith filed a Counterclaim for Declaratory Judgment alleging entitlement to damages based on Casey’s wrongful claim that Miller and Smith and its holding company were obligated to pay Additional Contingent Interest based on $17,100,000 rather than the purchase price of $9,025,500; Casey filed an Answer to the Counterclaim generally denying liability. The Circuit Court thereupon held a hearing on the Motion to Dismiss and in a written “Opinion and Order,” found that the terms of the contract were “clear and unambiguous,” and charitable tax deductions from the sale of land did not constitute “Additional Contingent Interest,” thereby granting Miller and Smith’s Motion to Dismiss Count II of the Complaint, and the docket entry reflected the fact that the case was not closed based on the partial judgment. 4 The parties, on August 22, 2007, then filed a joint “Stipulation of Dismissal” pursuant to Rule 2-506, 5 dismissing “with prejudice” Counts I and III of ²³⁷ the Complaint and also purportedly dismissing Count IV and the Counterclaim “with prejudice,” but with an important caveat: (a) Plaintiff is hereby dismissing Counts I and III of its Complaint with prejudice (Count II having previously been dismissed by interlocutory Opinion and Order granting Defendants’ Motion to Dismiss Count II); (b) Plaintiff is hereby dismissing Count IV of its Complaint, with prejudice, except that, since Count IV includes a claim that Defendant Miller & Smith Holding, Inc., is a guarantor with respect to the liability of Defendant Miller & Smith at Quercus, LLC, as alleged in Count II, such dismissal shall be without prejudice to the extent that the Court’s earlier interlocutory Opinion and Order dismissing Count II, is vacated or reversed on appeal and remanded to this Court; and (c) Defendant is hereby dismissing its Counterclaim with prejudice, except that such dismissal shall be without prejudice to the extent that the Court’s earlier, interlocutory Opinion and Order dismissing Count II, is vacated or reversed on appeal and remanded to this Court. ²³⁸ Casey subsequently filed a Notice of Appeal stating that it “notices its appeal of the Court’s Opinion and Order dismissing Count II of Plaintiffs Complaint in the above-captioned action, which Order became a final judgment upon the filing of a Stipulation of Dismissal, dismissing all then-pending claims and counterclaims in this matter on August 22, 2007.” The Court of Special Appeals reached the merits of. the controversy and reversed the Circuit Court, but, in a footnote, recognized the problem with the conditional language of the dismissal of Count IV and the Counterclaim: The Stipulation was subject to the exception that the dismissal of the counterclaim and appellant’s fourth count (against Miller & Smith Holding as guarantor of the Note) would be without prejudice if the Opinion and Order dismissing Count II were vacated or reversed on appeal and remanded. Ordinarily, “[tjhere can be no final judgment until every claim is resolved, [but] dismissal is one of the means by which claims may be resolved for the purposes of the pending litigation.” Tierco Maryland, Inc. v. Williams, 381 Md. 378, 393 , 849 A.2d 504 (2004). Maryland Rule 2-506(a)(2) provides that parties may “dismiss all or part of [a] claim without leave of court ... by filing a stipulation of dismissal signed by all parties to the claim being dismissed.” In this case, although the circuit court’s grant of appellee’s Motion to Dismiss Count II was not a final judgment, the parties’ voluntary dismissal of the remaining claims, with prejudice, imparted finality to the court’s Opinion and Order.

We elaborate. In Collins v. Li, 158 Md.App. 252 , 857 A.2d 135 (2004), we determined that Maryland adheres to the majority rule “ ‘that a plaintiff cannot appeal from the dismissal of some claims when the balance of his or her claims have been voluntarily dismissed without prejudice.’ ” Id. at 267 , 857 A.2d 135 (quoting and adopting Smith v. Lincoln Meadows Homeowners Ass’n, Inc., 267 Neb. 849 , 678 N.W.2d 726, 731 (2004)) (emphasis added.) See also Cheng v. Comm’r of ²³⁹ IRS, 878 F.2d 306, 308-11 (9th Cir.1989) (also followed in Collins). We do not perceive the parties’ Stipulation of Dismissal to flout the final judgment rule, despite its caveat that appellee’s counterclaim and “Count IV” of appellant’s complaint were dismissed without prejudice to the extent that we vacate or reverse. On review of the record, appellee’s counterclaim for declaratory judgment is limited to the same question presented by appellant’s Count II, which was the subject of the circuit court’s Opinion and Order: whether the term “gross sales proceeds payable” in the Note encompasses the financial gain realized from the charitable tax deductions at issue.

Moreover, “Count IV” does not allege a separate substantive cause of action; it merely provides the basis for the joint and several liability of both appellees. The remaining substantive counts of appellant’s complaint, Counts I and III, were dismissed “with prejudice.” Thus, the parties have effectively reserved only the right to continue to litigate on the substantive grounds encompassed by Count II of appellant’s complaint. The parties’ stipulation, which has enabled this appeal to proceed, means that they may no longer litigate any other issues implicated by appellant’s complaint. Miller and Smith petitioned this Court for a writ of certiorari, which we granted, 408 Md. 148 , 968 A.2d 1064 (2009), to address the following questions, which we have reordered: I. May a party, through a voluntary dismissal without prejudice, cause a non-final judgment to become final?

II

Does the term “sales proceeds payable” as used in a private contract incorporating Md.Code. Ann., Comm. Law, § 9-102(A)(65) include tax deductions for which the seller might be eligible?

III

May an appellate court construe an ambiguous contract as a matter of law without giving the parties an ²⁴⁰ opportunity to present extrinsic evidence? [ 6 ] (Italics in original). Discussion Our jurisprudence is replete with references to the fact that parties cannot agree to the exercise of our appellate jurisdiction, even when the Court of Special Appeals has exercised its review, because our jurisdiction is governed only by the Constitution, statutes, and the Rules. See East v. Gilchrist, 293 Md. 453, 458 , 445 A.2d 343, 345 (1982); Lewis v. Lewis, 290 Md. 175, 179 , 428 A.2d 454, 456 (1981); Clark v. Elza, 286 Md. 208, 211-12 , 406 A.2d 922, 924 (1979), quoting Biro v. Schombert, 285 Md. 290, 293 , 402 A.2d 71, 73 (1979). Judge John C. Eldridge, writing for the Court in Biro , observed that parties cannot confer jurisdiction on our Court, and we must dismiss a case sua sponte on a finding that we do not have jurisdiction: The apparent acquiescence of the parties to the exercise of appellate jurisdiction by the Court of Special Appeals does not enable us to overlook the matter.

As we stated in Eastgate Associates v. Apper, 276 Md. 698, 700-701 , 350 A.2d 661 (1976): “The jurisdiction of this Court, and the Court of Special Appeals, is determined by constitutional provisions, statutory provisions and rules; jurisdiction cannot be conferred by consent of the parties.” Consequently, “this Court will dismiss an appeal sua sponte when it notices that appellate jurisdiction is lacking.” Smith v. Taylor, 285 Md. 143 , 400 A.2d 1130 (1979). See Rule 835 a 1. Similarly, where the Court of Special Appeals has entertained an appeal without having jurisdiction to do so, and the case is timely brought to our attention (such as by a petition for a writ of certiorari dealing with the merits of the appeal), we will issue a writ of certiorari and sua sponte consider the jurisdiction of the intermediate appellate court. Eastgate ²⁴¹ Associates v. Apper, supra.

See also Liberty Mut. Ins. Co. v. Wetzel, 424 U.S. 737, 740 , 96 S.Ct. 1202, 1204 , 47 L.Ed.2d 435 (1976) (“Though neither party has questioned the jurisdiction of the Court of Appeals to entertain the appeal, we are obligated to do so on our own motion if a question thereto exists.”). Id. at 293, 402 A.2d at 73 .

In this regard, we may generally exercise jurisdiction over a case on appeal if there exists a final judgment, which disposes of all claims against all parties and concludes the case. See Nnoli v. Nnoli, 389 Md. 315, 323 , 884 A.2d 1215, 1219 (2005) (“The general rule as to appeals is that, subject to a few, limited exceptions, a party may appeal only from a final judgment.”). 7 We have often stated that appeals may be taken to the Court of Special Appeals under Section 12-301 of the Courts and Judicial Proceedings Article (1974, 2006 RepLVol.), 8 with exceptions not relevant here, only from a final judgment entered in a civil or criminal case by a circuit court. See Addison v. Lochearn, 411 Md. 251, 261 , 983 A.2d 138, 144 (2009); Gruber v. Gruber, 369 Md. 540, 546 , 801 A.2d 1013, 1016 (2002). A “final judgment” is defined in Section 12—101(f) of the Courts and Judicial Proceedings Article as “a judgment, decree, sentence, order, determination, decision, or other action by a court ... from which an appeal ... may be taken.” See Anthony v. Clark, 335 Md. 579, 587 , 644 A.2d 1070, 1074 (1994). “The final judgment rule derives originally from the ²⁴² English common law principle that a writ of error ordinarily would not lie until there had been a final disposition of an entire controversy.” Brewster v. Woodhaven Bldg. & Dev., 360 Md. 602, 609-10 , 759 A.2d 738, 742 (2000) (citations and footnote omitted) (“The core of the final judgment rule is thus that a trial court’s decision disposing of the merits of the parties’ claims may be appealed.”).

Our “bedrock” principles of jurisdiction indicate that, ordinarily, appellate jurisdiction is dependent upon “the entry of a final judgment, disposing of all claims against all parties,” with limited exceptions. See Kennedy v. Lasting Paints, Inc., 404 Md. 427, 449 , 947 A.2d 503, 516 (2008), citing Smith v. Lead Indus. Assoc., Inc., 386 Md. 12, 21 , 871 A.2d 545, 550 (2005), quoting Shoemaker v. Smith, 353 Md. 143, 165 , 725 A.2d 549, 560 (1999); see also Silbersack v. AC and S, Inc., 402 Md. 673, 678 , 938 A.2d 855, 857-58 (2008); Rule 2-602(a). 9 In Silbersack , we discussed our “bedrock” principles of appellate jurisdiction: To set the context, there is a long-standing bedrock rule of appellate jurisdiction, practice, and procedure that, unless otherwise provided by law, the right to seek appellate review in this Court or the Court of Special Appeals ordinarily must await the entry of a final judgment that disposes of all claims against all parties. Id. at 678 , 938 A.2d at 858 (citations omitted).

To qualify as a final judgment, an order “must either decide and conclude the ²⁴³ rights of the parties involved or deny a party the means to prosecute or defend rights and interests in the subject matter of the proceeding,” Nnoli, 389 Md. at 324 , 884 A.2d at 1219-20 , and must, ordinarily, satisfy three criteria: (1) [I]t must be intended by the court as an unqualified, final disposition of the matter in controversy, (2) unless the court properly acts pursuant to Md. Rule 2-602(b), it must adjudicate or complete the adjudication of all claims against all parties, and (3) the clerk must make a proper record of it in accordance with Md. Rule 2-601. Rohrbeck v. Rohrbeck, 318 Md. 28, 41 , 566 A.2d 767, 773 (1989). In considering whether a particular court order or ruling constitutes a final, appealable judgment, we have looked to whether the order was “unqualified,” and whether there was “any contemplation that a further order [was to] be issued or that anything more [was to] be done.” Rohrbeck, 318 Md. at 41-42 , 566 A.2d at 774 (citations omitted) (alterations in original). It is clear that when there is a disposition of all claims against all parties, there is a final judgment.

We have held that an unqualified order granting a motion to dismiss or to strike a plaintiffs entire initial pleading, without granting leave to amend, absent counterclaims, cross-claims, or third-party claims, puts the plaintiffs out of court, and terminates the particular action in the trial court, is final and appealable. See Houghton v. County Comm’rs of Kent County, 305 Md. 407, 412 , 504 A.2d 1145, 1148 (1986), aff'd upon reconsideration, 307 Md. 216, 221 , 513 A.2d 291, 293-94 (1986) (citations omitted). See also Moore v. Pomory, 329 Md. 428, 432 , 620 A.2d 323, 325 (1993) (holding that a court’s dismissal of a plaintiffs entire complaint without prejudice was a final and appealable judgment). In Houghton , Edward and Elizabeth Houghton filed a three count complaint in the Circuit Court for Kent County against the County Commissioners, alleging questionable conduct regarding voting in connection with a particular public project.

The Commissioners filed a Motion to Dismiss the complaint, which the Circuit Court granted with regard to Counts I and III for failure to state a claim ²⁴⁴ upon which relief could be granted, but denied Count II. 10 Two days later, the plaintiffs filed a notice voluntarily dismissing Count II of their complaint with prejudice, which was entered on the docket the same day; we held that as of the day Count II was dismissed with prejudice, there was a final disposition. The rub comes, however, because of the complexity of our modern practice of pleading. We already have noted that our long held belief that a judgment which “decides or settles the ‘very matter in controversy between the parties’ and determines ‘the question of right in issue in the cause’ ” is a final judgment, and “works well enough in a simple lawsuit in which a single plaintiff sues a single defendant on a single claim,” does not function easily in our modern system of pleading, in which liberal joinder of parties, cross-claims, and counterclaims may be disposed of at various stages of litigation. Planning Bd. of Howard County v. Mortimer, 310 Md. 639, 644-45 , 530 A.2d 1237, 1240 (1987), quoting Nally v. Long, 56 Md. 567, 571 (1881).

Although we have held that an order or other form of decision that adjudicates less than the entire claim, or adjudicates the rights and liabilities of fewer than all parties to the action, is not a final judgment, utilization of Rule 2-602(b), 11 regarding certification by a trial court of a final judgment, has occupied much of our efforts in recent years. The Rule allows a party to appeal from a judgment not disposing of an entire action, and one that is not otherwise a final judgment, if a court expressly determines in a written order that there is no ²⁴⁵ just reason for delay and directs the entry of a final judgment as to one or more but fewer than all of the claims or parties. We have noted, however, that while Rule 2—602(b) affords a judge limited discretion to enter final judgment when fewer than all parties or claims have been adjudicated, it does not create some kind of “mystic ‘never-never land’ ” where a defendant can be both in and not in a case. Silbersack, 402 Md. at 687, 938 A.2d at 863 .

In Smith, 386 Md. at 12 , 871 A.2d at 545 , we emphasized that Rule 2-602(b) is reserved for the “infrequent harsh case,” and we will not hesitate to countermand the entry of judgment under the Rule and dismiss an appeal upon a finding that the trial court did not articulate a sufficient reason why there was no just reason for delay of an appeal. Id. at 24-25 , 871 A.2d at 552 , quoting Diener Enters. v. Miller, 266 Md. 551, 555-56 , 295 A.2d 470, 473 (1972). Smith was a complex case involving seven minor plaintiffs from four families (the Smiths, the Brantleys, the Hamiltons, and the Shorters) who jointly filed a fifteen-count complaint against twenty-one defendant companies for various products liability-related claims in the Circuit Court