Q C Corp. v. Maryland Port Administration

ADKINS, Judge. This case presents, among other things, questions about covenants of quiet enjoyment, constructive eviction, inverse condemnation, and sovereign immunity. In due course we shall discuss some of the facts in considerable detail. Initially, we sketch an outline of them to place the case in procedural perspective.

In 1979, Cosmin Corporation (Cosmin) leased land on Hawkins Point from appellee and cross-appellant Maryland Port Administration (MPA), a State agency. 1 The lease terminated a prior lease between the same parties. The 1979 document provided a term of five years with two five-year renewal terms at Cosmin’s option. In 1981 the lease was amended to substitute appellant, Q C Corporation (Q C), as lessee. When Q C, a processor of ferrous sulfate, took possession of the leased premises, MPA (through an independent contractor) was operating a chrome waste landfill at some distance to the south of the leased premises.

Later in, 1981 MPA began to develop plans to operate new chrome waste landfills immediately adjacent to the Q C plant on the north and south. By agreement with MPA, ¹⁸⁵ Maryland Environmental Services subsequently commenced the new landfill operation. According to Q C, this operation caused debris and dust, containing carcinogenic chrome waste, to come upon its property. These emissions contaminated, or might have contaminated, its product and were hazardous to its employees.

Q C advised MPA that because of these problems it would not exercise its first renewal option. On July 21, 1983, it sued MPA and appellees and cross-appellants Department of Transportation (DOT) and the State of Maryland in the Circuit Court for Baltimore City alleging, inter alia, breach of its covenant of quiet enjoyment, constructive eviction, and constructive or inverse condemnation. Later, it left the property. MPA, DOT, and the State responded with a plea of sovereign immunity, which was rejected.

The case went to trial. At the conclusion of Q C’s case, the trial judge granted judgment for the defendants on the quiet enjoyment and constructive eviction counts. The inverse condemnation count went to the jury which could not agree. The judge thereupon granted the defendants’ motion for judgment n.o.v. on that count.

Issues In its appeal Q C asserts that the trial judge erred in 1. granting the defense motions for judgment on a. the quiet enjoyment count and b. the constructive eviction count; 2. granting the defense motion for judgment n.o.v. on the inverse condemnation count; 3. granting a motion in limine excluding certain evidence; and 4. denying its motion to amend the complaint. In a cross-appeal, MPA contends that the trial judge erred in denying the sovereign immunity plea. We shall review each of these issues, although not in the order we have listed them. Because it is a threshold issue, we turn ¹⁸⁶ first to the contention of MPA that Q C’s suit was barred by sovereign immunity.

Sovereign Immunity An account of the history of contract sovereign immunity in Maryland may be found in Note, “Abrogation of Sovereign Immunity in Contract Cases in Maryland,” 6 U. of Balt.L.Rev. 337, 344-347 (1977). We need not recount that history now. MPA argues that the statutory waiver of that immunity initially enacted in 1976 applies only to procurement contracts. Q C’s lease is obviously not a procurement contract.

Hence, it avers, it is immune from this suit. To resolve this issue, we must review the somewhat tortured legislative history of the immunity waiver first enacted as Ch. 450, Acts of 1976 and originally codified as Art. 41, § 10A, Annotated Code of Maryland (1978 Repl.Vol.). In its pristine form this statute read: (a) Unless otherwise specifically provided by the laws of Maryland, the State of Maryland, and every officer, department, agency, board, commission, or other unit of State government may not raise the defence of sovereign immunity in the courts of this State in an action in contract based upon a written contract executed on behalf of the State, or its department, agency, board, commission, or unit by an official or employee acting within the scope of his authority. (b) In any such action, the State, or its officer, department, agency, board, commission, or other unit of government is not liable for punitive damages.

(c) A claim is barred unless the claimant files suit within one year from the date on which the claim arose or within one year after completion of the contract giving rise to the claim, whichever is later. (d) In order to provide for the implementation of this section, the Governor annually shall provide in the State budget adequate funds for the satisfaction of any final judgment, after the exhaustion of any right of appeal, which has been rendered against the State, or any officer, ¹⁸⁷ department, agency, board, commission, or other unit of government in an action in contract as provided in this section. Section 6 of Ch. 450 makes the Act applicable to any action based on a contract entered into on or after July 1, 1976. The contract between Cosmin and MPA (in which Q C was later substituted for Cosmin) was in writing and was executed after July 1, 1976.

A lease is a species of contract. Anne Arundel County v. Bowen, 258 Md. 713, 719 , 267 A.2d 168 (1970). Therefore, had this statute remained on the books without change, there could be no question that MPA could not have asserted, with any likelihood of success, the defense of sovereign immunity when Q C sued on the lease. This is apparent from the language of the statute, the purpose of which was to waive the defense of sovereign immunity on all written contracts executed on and after the critical date.

As the preamble to Ch. 450 recited: ... The Governor’s Commission to Study Sovereign Immunity believes that there exists a moral obligation on the part of any contracting party, including the State or its political subdivisions, to fulfill the obligations of a contract; and ... The Governor’s Commission to Study Sovereign Immunity has concluded that the doctrine is no longer appropriate to actions on certain contracts, and that the effects of this doctrine should be limited by legislative action____ [2] ¹⁸⁸ The difficulty is that this statute did not remain on the books without change. After 1979, when the lease was executed, several things occurred.

It is these legislative actions upon which MPA relies in arguing that its plea of sovereign immunity should have been sustained. In 1977, pursuant to Resolution 28 of that year, the President of the Maryland Senate and the Speaker of the House of Delegates appointed a Purchasing and Procurement Policies Task Force. The Task Force’s work came to initial fruition in 1980. Chapter 775 of the Acts of that year, titled “State Procurement of Supplies, Services, and Construction” and “generally relating to State procurement law,” added to the Code a new Art. 21, “Procurement.” It became generally effective July 1, 1981.

Section 8 of the Act transferred to the new article all of Art. 41, § 10A, relating to waiver of sovereign immunity in contract cases. Except for minor changes in style, and for redesignation of its former subsections (a) through (d) as sections 7-101 through 7-104 of Art. 21, the language of the immunity statute was absolutely unchanged. But Ch. 775 also contained a definitions subtitle. Section l-101(a) of new Art. 21 provided that: “In this article, the following words have the meanings indicated unless: (1) the context clearly requires a different meaning____” And § l-101(f) defined “contract” as “every agreement entered into by a State agency for the procurement of supplies, services, construction, or any other item____” MPA asserts that this had the effect of withdrawing the State’s waiver of immunity as to non-procurement contracts prior to the institution of this suit.

There is no doubt that Ch. 775 took effect before July 21, 1983, when this suit was filed. There is no doubt that the Cosmin/Q C lease was not a procurement contract as that term is defined in Art. 21, § 1-101. Nor is there any doubt that facially, at least, the word “contract,” as used in the waiver of immunity statute ¹⁸⁹ in Art. 21, is subject to the definitions contained in subtitle 1 of that article. MPA further buttresses its argument by pointing to Ch. 284, Acts of 1984, which adopted the State Government Article.

Sections 12-202 through 12-204 of that article restate the provisions of §§ 7-101 through 7-104 of former Art. 21 which, as we have seen, re-enacted the language of former Art. 41, § 10A. Section 12-201 of the State Government Article purports to limit §§ 12-202 through 12-204 “only to a contract ... as defined in Article 21, § 1-101 of the Code____” The last referenced section, of course, contains the definition of “contract” that limits the word to procurement contracts. 3 We, however, are unpersuaded by these arguments. What we must search out here is legislative intent. Maryland Automobile Insurance Fund v. Sun Cab Co., Inc., 305 Md. 807 , 506 A.2d 641 (1986).

When we do so, we are not necessarily bound by a literal reading of the statute. In State v. Petrushansky, 183 Md. 67 , 36 A.2d 533 (1944), for example, the Court of Appeals was “faced with a literal reading of a statute that would produce an absurd result.” Cohen v. Goldstein, 58 Md.App. 699, 715 , 474 A.2d 229 (1984). The Court declined to read the statute in that fashion: “To assume that the Legislature intended such a result ... without declaring it in very definite words would be to reach a conclusion which is repugnant to common sense, and which would attribute to the legislative mind something which there is no reason to suppose it contemplated.” Petrushansky, 183 Md. at 72 , 36 A.2d 533 . “Real intent must prevail over literal intent.” Id. at 71 , 36 A.2d 533 . As we explained in Cohen, 58 Md.App. at 715-16 , 474 A.2d 229 : ¹⁹⁰ This is not a novel doctrine.

It is but one emanation of the general principle that ‘[statutes are to be construed reasonably and with reference to the purpose to be accomplished. Results that are unreasonable, illogical, or inconsistent with common sense should be avoided.’ Cider Barrel Mobile Homes v. Eader, 287 Md. 571, 583 , 414 A.2d 1246 (1980).... We turn, then, to consideration of the purpose of the enactment of the 1976 waiver of sovereign immunity. What purpose did the General Assembly seek to accomplish by that measure?

The problem facing the General Assembly in 1976 was the Court of Appeals’ adamant refusal to abrogate the doctrine of sovereign immunity, it being the Court’s position that such a change in fundamental State policy should be effectuated by the legislature, not the judiciary. Austin v. Baltimore, 286 Md. 51 , 405 A.2d 255 (1979). As the Report of the Governor’s Commission on Sovereign Immunity shows, the legislature had made several attempts to waive contract immunity prior to 1976. That goal was achieved in that year.

The Commission Report makes pellucid that the Commission intended the 1976 bill to achieve a broad waiver of immunity, and that same objective was embraced by the General Assembly. See note 2, supra, and accompanying text, and see former Art. 41, § 10A. There is simply no suggestion in Ch. 450, Acts of 1976, in the Commission Report, or in other available legislative history, that the waiver was intended to be limited to procurement contracts. Is there evidence that the legislative mind had changed by 1980, when new Art. 21 was enacted?

The answer must be in the negative. That enactment was preceded by the Purchasing and Procurement Task Force Report (1978). Close scrutiny of that document produces not the slightest hint that the Task Force perceived problems that demonstrated any need to limit immunity waiver to procurement contracts. Indeed, the only explicit reference to former Art. 41, § 10A contained in the Task Force Report is found ¹⁹¹ in the report of a Subcommittee on Current Procurement Practices.

The Subcommittee staff reviewed 383 “procurement” laws, 78 of which were recommended for transfer to proposed Art. 21. One of these was Art. 41, § 10A. Subcommittee Report at 8. Neither the Subcommittee Report nor the Task Force Report reveals any reason for this recommendation, or any recognition that the transfer (because of the definition of “contract” contained in proposed Art. 21) might substantially reduce the scope of the then-existing waiver of immunity in all written contract cases.

The conclusion to which this history persuades us is that the legislature did not intend its transfer of former Art. 41, § 10A to new Art. 21 to modify the waiver of immunity it had adopted in 1976. It seems likely that the General Assembly was unaware that this transfer might be read as subjecting the waiver law to the contract definition that appeared as Art. 21, § l-101(f). Whatever result might be produced by a literal reading of the relevant Art. 21 provisions, there are no “very definite words” to convince us that we should “attribute to the legislative mind something which there is no reason to suppose it contemplated.” Moreover, as Q C suggests, to agree with MPA’s reading of former Art. 21 would raise serious constitutional questions. The subject of every law enacted by the General Assembly must be “described in its title____” Md. Const., Art. III, § 29.

Failure to comply with this mandate may render all or part of an act invalid. State’s Attorney v. Triplett, 255 Md. 270, 281-285 , 257 A.2d 748 (1969). Nowhere does the title of Ch. 775, Acts of 1980, even hint that the Act in any respect dilutes the then-existing waiver of sovereign immunity. Since a statute should be given a constitutional construction when that is possible, Berlin v. Aluisi, 57 Md.App. 390 , 470 A.2d 388 (1984), our view that the 1980 legislation did not affect the 1976 immunity waiver is reinforced.

The 1984 Act that MPA thinks supports its notion of legislative intent does not do so. Chapter 284 of that year ¹⁹² was a code revision bill. It is apparent that the drafters of that act undertook a literal reading of the pertinent Art. 21 provisions as they then stood, and translated that literal reading into what in 1984 became §§ 12-201 through 12-204 of the State Government Article. As our previous discussion makes clear, those Art. 21 provisions did not narrow the 1976 waiver of sovereign immunity.

Their metamorphosis through code revision did not change that situation. Changes effected through the process of formal bulk code revision ordinarily do not produce substantive modifications of law. 4 Dillsworth v. State, 66 Md.App. 263, 269 , 503 A.2d 734 (1986). We hold, therefore, that the post-1976 legislative actions we have discussed were not intended to narrow the waiver of sovereign immunity in contract cases as established by Ch. 450, Acts of 1976: Our holding is fully confirmed by additional legislative action that occurred during the 1986 session of the General Assembly. On February 7, 1986, House Bill 1684 was introduced. 5 The sponsor was Delegate Owens, who had sponsored the bill that became Ch. 450, Acts of 1976.

Delegate Owens also had sponsored earlier immunity waiver bills, and was a member of the Governor’s Commission to Study Sovereign Immunity. The preamble to the bill recites: WHEREAS, Chapter 450 of the Acts of 1976 (the “Sovereign Immunity Act”) which was codified in Article ¹⁹³ 41, § 10A of the ... Code, prohibited this State and every officer, department, agency, board, commission, or other unit of State government, unless otherwise specifically provided by the laws of Maryland, from raising the defense of sovereign immunity in the courts of this State in an action in contract based upon any written contract executed on behalf of this State, or any of its ... units ...; and WHEREAS Section 8 of Chapter 775 of the Acts of 1980 (the “Procurement Article”) merely transferred, with certain stylistic changes only, the Sovereign Immunity Act from Article 41, § 10A, to the new Article 21 ..., and in doing so, may have narrowed inadvertently the scope of the Sovereign Immunity Act so as to prohibit the defense only in cases involving contracts which are subject to the Procurement Act; and WHEREAS, the Office of the Attorney General after reviewing the matter, concluded that the General Assembly had not intended to narrow the scope of the sovereign immunity defense prohibition____ [6] The preamble then sets forth the 1984 legislation we have described and concludes: “There consequently is a need to ¹⁹⁴ clarify the intent of the General Assembly and the scope of the Sovereign Immunity Act____” The bill proceeds to do so by repealing § 12-201 of the State Government Article (the section that purports to apply waiver of immunity only to procurement contracts) and to re-enact §§ 12-202 through 12-204 of that article (renumbered as §§ 12-201 through 12-203) in essentially the same form of the original waiver of immunity enacted in 1976. House Bill 1684 is now Ch. 265, Acts of 1986, effective July 1, 1986.

It may sometimes be that “[t]he motives that prompt the various members of a legislature to embark upon a particular course of action may be varied and conflicting.” Cohen, supra, 58 Md.App. at 719 , 474 A.2d 229 (Bloom, J., dissenting). But we think that Ch. 265 makes transpicuous the unchanged legislative intent as to the statute involved in this case. That intent was and is to give full sfcope to the immunity waiver as it was adopted ten years ago. Consequently, the trial judge did not err in rejecting cross-appellants’ plea of sovereign immunity.

Covenant of Quiet Enjoyment/Constructive Eviction We now address the merits of the issues raised by Q C in its appeal. The first two of these relate to MPA’s alleged breach of the covenant of quiet enjoyment in Q C’s lease and to Q C’s claim that MPA constructively evicted it. Both of these contentions were rejected by the trial judge when he granted MPA’s motion for judgment. Md. Rule 2-519.

Because both of them arise in the same procedural context and are based essentially on the same facts, we consider them together. With respect to the procedural context, we recall that MPA made the motions for judgment at the close of Q C’s case in this jury trial. Under those circumstances, the court was required to “consider all evidence and inferences in the light most favorable to the party [Q C] against whom the motion is made.” Rule 2-519(b). This standard means ¹⁹⁵ that “if there is any evidence, however slight, legally sufficient to prove the charge, [the motion must be denied because] the weight and credibility of that evidence is for the jury.” University Nursing Home, Inc. v. R.B. Brown & Associates, Inc., 67 Md.App. 48, 54, 506 A.2d 268 (1986) [emphasis in original].

What was the evidence, considered in the light most favorable to Q C? Q C was engaged in processing ferrous sulfate, “an environmentally sensitive compound used in municipal water supplies, animal feed and fertilizer.” In 1981, Q C was substituted as tenant in Cosmin’s lease of a 2.12 tract of land at Hawkins Point, in Baltimore City. Cosmin had also been engaged in processing ferrous sulfate, and the lease limited use of the demised premises to that of a chemical processing plant. Q C took over the Cosmin plant and improved it to the tune of $100,000, an action that seemed desirable because of the long-term nature of the lease (an original term of five years with two five-year renewal options).

When Q C occupied the premises, its landlord, MPA, was operating, through an independent contractor, a landfill for chrome ore waste received from Allied Chemical Company. This landfill was to the south of Q C’s property; the activity there was at considerable distance from Q C’s plant and took place at or below ground level; there was no indication that the landfill would be extended. Later, chrome ore waste was declared to be a hazardous substance. MPA notified Allied that it would accept no more chrome ore waste.

Allied thereupon sued MPA. The suit was settled. Part of the settlement included an agreement that MPA would lease property at Hawkins Point to Maryland Environmental Services (MES) which would landfill the waste there. The MPA-MES lease included land immediately adjacent to the Q C site on both the north and south, and that land was to be used only for a hazardous waste landfill.

MPA then agreed with Allied to dispose of the waste in the new landfill. ¹⁹⁶ In November 1981, MPA approached Q C to inquire about the availability of the latter’s site for inclusion in the proposed landfill. It was suggested that Q C give MPA a figure for sale of the leasehold improvements or for the possible relocation of Q C to another site. 7 It was then that Q C learned of the new landfill plans. During 1982 further plans for the new landfill were revealed. Originally, these contemplated filling the property adjacent to Q C with chrome ore waste up to the Q C property line and to a considerable height above ground level.

In February 1983 MPA actually leased the new landfill area south of Q C to MES and disposal of chrome ore waste there commenced shortly thereafter. The landfill operation moved from south to north (i.e., towards Q C). By the early summer of 1983, the entrance to the landfill was “right next to the Q C site” and vehicles hauling waste to the landfill used the same road that provided access to Q C. These vehicles, such as “[d]ump trucks carrying hazardous waste,” sometimes leaked leachate or otherwise dropped hazardous waste material on the roadway. In wet weather, this mud was tracked onto the Q C property.

When the weather was dry, this material would become dusty and blow onto the Q C property. In addition, material in the landfill itself was sometimes left uncovered for up to a week. One witness testified: The chrome was exposed. The wind would pick it up and blow it on Q C’s property.

The wind seemed like it was always blowing [from the] south, right to Q C’s property, right across the landfill. Another described dust from contaminated areas of the landfill blowing towards the Q C property. Dust was seen to “migrate over the Q C area many times.” A manager of the landfill testified that it was impossible to control the contamination. On one occasion a huge cloud of lime and ¹⁹⁷ chrome ore tailings, 40 to 60 feet high, was seen to blow over the Q C property.

There was evidence that the chrome ore waste deposited in the landfill contained hexavalent chrome, a known carcinogen. There was evidence that hexavalent chrome in excess of one microgram per cubic meter of air exceeded safe limits, that less than “a cook’s pinch” of that material deposited in the landfill would contain levels of hexavalent chrome in excess of one microgram per cubic meter, and that if the waste became airborne and was blown onto Q C’s property there would be a hazard to the safety of its employees and the integrity of its product. There was evidence from which a jury could find that, on at least one occasion, an air monitoring test showed two micrograms of hexavalent chrome per cubic meter of air inside Q C’s plant. Q C’s president explained that if the company’s customers became aware of the possible contamination of its product, they would no longer purchase it.

A Q C employee spoke of his concern for his own health, and his need to wear a respirator when working outside the plant. Q C’s efforts to persuade MPA to assist it in reallocating its plant were unavailing. On June 13, 1983, it notified MPA that it would be unable to renew the lease because, in its view, the landfill rendered the premises untenable. Just over a month later, it filed this suit.

It cut back its operations, but remained on the property until April 30, 1984, approximately the end of the original term of the lease. It then vacated the premises, removing from the site what equipment it could salvage. We recognize that the facts we have recited were in many respects disputed, and that there is evidence in the record casting doubt on them, or raising questions as to the credibility of witnesses, their expertise, or the weight to be given their testimony. But the test we must apply is whether, considering the testimony and inferences from it most favorably to Q C, there was enough to go to the jury.

We hold there was. Resolving factual disputes, determining credibility, and weighing evidence are functions for the ¹⁹⁸ jury, not for the court on a motion for judgment at the end of the plaintiffs case in a jury trial. We explain. Although Q C’s lease did not contain an express covenant of quiet enjoyment, it nevertheless was the beneficiary of one. “[I]n a lease, unless the lease provides otherwise, there is an implied covenant by the lessor that the lessee shall quietly enjoy the land.” Real Property Art. § 2-115.

Such a covenant “insulates the tenant against acts or omissions on the part of the landlord, or anyone claiming under him, which interfere with the tenant’s right to the use and enjoyment of the premises for the contemplated purposes.” 3 G. Thompson, Thompson on Real Property, § 1130 at p. 456 (1980 Repl.Vol.). Put otherwise, the covenant is breached if the landlord’s acts or omissions deprive the tenant of “‘the essence of what the landlord is to provide____’” Stevan v. Brown, 54 Md.App. 235, 248 , 458 A.2d 466 , cert. denied, 297 Md. 110 (1983) (quoting Chas. E. Burt, Inc. v. Seven Grand Corp., 340 Mass. 124 , 163 N.E.2d 4, 6 (1959)). Here, the acts were performed by a party (MES) claiming under the landlord if not by MPA itself.

The fact that the detrimental activities occurred on premises adjacent to those leased by Q C is immaterial because “there is an implied obligation on the part of the lessor not to derogate from his grant by so using his adjoining property as substantially to interfere with the enjoyment of the premises he has leased, and if he does use adjoining property in such a way as substantially to interfere with the use and enjoyment of the demised premises, he may be held to have breached his covenant of quiet enjoyment____” 49 AmJur.2d, “Landlord and Tenant,” § 339. MPA cites Parklawn, Inc. v. Nee, 243 Md. 249 , 220 A.2d 563 (1966) and The Macke Co. v. Housing Management Co., 38 Md.App. 425 , 381 A.2d 313 (1978) as supporting the trial judge’s holding. They do not. Parklawn involved a suit for damages (nuisance) brought by a property owner against a landlord and others.

One issue involved a landlord’s liability to a third party for a nuisance created by his tenant. Macke concerned a landlord’s liability to a tenant in ¹⁹⁹ tort with respect to maintenance of common areas. Neither case dealt with breach of a covenant of quiet enjoyment. Nor was the trial judge correct in concluding that breach of that covenant requires a showing that “the landlord ... must take acts, which make it factually impossible for the lessee to use his property as it was intended to be used____” Substantial deprivation of enjoyment for the intended use (here a chemical processing plant) is enough.

See Stevan v. Brown, 54 Md.App. at 237 , 458 A.2d 466 (charges of poor janitorial service, lack of heat and hot water, “ ‘near manic’ ” elevator service, accumulation of bird droppings, etc., sufficient to prevent entry of summary judgment for landlord). Enough evidence was present here to permit, although not to compel, a finding of breach of the covenant of quiet enjoyment. The question should have gone to the jury. So far as constructive eviction is concerned, that occurs “when the acts of a landlord cause serious or substantial interference with the tenant’s enjoyment of the property which results in the tenant vacating the premises.” Stevan, 54 Md.App. at 240 , 458 A.2d 466 .

The facts we have already discussed are sufficient to present a jury question as to whether MPA’s acts were of that nature. In addition, however, those “acts must be done by the landlord with the intent and effect of depriving the tenant of the latter’s use and enjoyment.” Id. MPA contends that proof of the requisite intent is lacking. We