Wm. T. Burnett Holding LLC v. Berg Bros. Co.

Wilner, J. BACKGROUND Appellants, Wm. T. Burnett and Ellicott Dredges, LLC (hereafter referred to collectively as Burnett/Ellicott), and appellee Berg Brothers Company (Berg) are neighbors in the Carroll Camden Urban Renewal Area of South Baltimore. Berg owns two properties, one at 1500 Bayard Street, which it uses as a scrap metal processing yard, and one at 1434-1438 Wicomico Street, an intersecting street, on which it operates a materials recovery facility. Both properties are in an M-2-3 Industrial zone.

A scrap metal yard is not a permitted use in an M-2-3 zone, but the yard on Bayard Street has been allowed to continue as a lawfully existing non-conforming use. Burnett/Ellicott are adjoining and across-the-street neighbors of Berg's scrap yard and recycling operations. Their facilities are a mixed use of corporate offices, conference and meeting rooms, and manufacturing and warehouse facilities. Their businesses, they claim, attract a lot of customer visits, many of whom "react negatively to Berg's unsightly operations." That negative reaction, they say, has been harmful to them.

A particular sore spot was the ten-foot-high metal fence that enclosed Berg's properties. The fence consisted of large steel plates that were bolted together and topped with highway guard rails. Burnett/Ellicott complained to Berg a number of times, to no avail. The genesis of what is before us was several violation notices issued to Berg by the City Department of Housing and Community Development (DHCD) over a 14-month period, from December 2011 to March 2013.

On December 20, 2011, DHCD issued Violation Notices Nos. 79414A-1 and 79414A-2, both concerning the fencing. No. 79414A-1 charged that the fencing at 1434-1438 Wicomico Street was erected without a permit and at a height higher than permitted by the City Building and Fire Code. No. 79414A-2 alleged that the fencing at 1500 Bayard Street also was erected without a permit. Both of those notices directed Berg to remove all work done without a proper permit and to obtain all required permits within 30 days.

On March 1, 2013, DHCD issued Violation Notice No. 936053A-1, alleging land use without a proper occupancy certificate or use permit at 1500 Bayard Street. Berg was ordered to discontinue the unlawful use or obtain the proper certificates or permits within 30 days. 1 Berg appealed all three notices to the Baltimore City Board of Municipal and Zoning Appeals (BMZA). On July 31, 2012, in response to Notice Nos. 79414A-1 and 79414A-2, Berg requested a variance for a fence ten feet high and 550 feet in length for the Wicomico Street property and ten feet high and 600 feet in length for the Bayard Street property. On March 14, 2013, Berg objected to Notice No. 93605A-1.

Burnett/Ellicott filed an opposition to all three appeals. With respect to the Bayard Street property, it acknowledged that a scrap metal operation became a lawful non-conforming use in 1972 but argued that status terminated shortly thereafter when the property ceased being used as a scrap metal yard and was used instead as a parking lot for some period of time. It also asked that the fencing around both properties be removed and replaced with "attractive screening that completely shields from view the junkyard-like operations." In a supplement to its opposition, Burnett/Ellicott argued that the operation on Wicomico Street also was illegal, noting that the 2009 permit for that operation was based on the operation being conducted within an enclosed building and not as an open junk or scrap storage yard. The appeals remained dormant until October 2013.

During the summer of that year, negotiations involving Berg, Burnett/Ellicott, and DHCD commenced, with a focus on replacing the existing fencing with a more aesthetic wall. Those negotiations eventually bore fruit in the form of an agreement between Berg and DHCD signed on October 15, 2013. Burnett/Ellicott was not a named party to the agreement and did not sign it. The Agreement recited that its purpose was to resolve all outstanding violation notices and appeals pending before BMZA regarding uses and structures located at 1500 Bayard Street and 1434-38 Wicomico Street and, to that end, stated that "the parties to this appeal," which it identified as Berg as the appellant and DHCD as the appellee, "agree to the following facts and terms." The rest of the Agreement was in two parts-a recitation of the procedural history, including the violation notices, the appeals by Berg, and the opposition filed by Burnett/Ellicott-and the remedial terms to which the two parties had agreed.

The relevant terms were that: (1) Berg would construct a masonry wall ten feet high and 420 feet in length at 1500 Bayard Street, as depicted on an attached Exhibit B, using the materials described in another attached exhibit, the purpose of which was to screen the contents and activity at both the Bayard Street scrap yard and the Wicomico Street processing yard; 2 (2) Berg would maintain and operate all structures at both locations in sound condition, in good repair, and in compliance with applicable City health, zoning, fire, and related codes; (3) During non-operational hours, the stock piles of materials would be maintained so as not to be visible from the sidewalks across the street from the properties; (4) All construction of the wall and the gates as depicted on the attached exhibit would be completed by March 31, 2014; (5) Berg would obtain all permits necessary for the construction of the wall and gates, and DHCD would support any zoning variances or minor privilege applications necessary to complete the project; (6) DHCD agreed that the use at 1500 Bayard Street was and has been a legally existing non-conforming scrap metal processing yard and that the last approved use on Wicomico Street is as a materials recovery facility approved by BMZA in 2008; (7) The Agreement would not limit the ability of DHCD to secure compliance with other applicable codes and ordinances by any other legal, equitable, or administrative means and not "limit in any way the legal, equitable or administrative rights" of Burnett/Ellicott; (8) If Berg failed to "materially comply" with the terms of the Agreement, DHCD would issue a Notice to that effect and give Berg ten days to cure the non-compliance; and (9) If Berg failed to comply with the Notice, "the non-conforming use at 1500 Bayard as a scrap metal processing yard shall be forever terminated," subject to Berg's right to appeal the notice of final termination. On the same day that the Agreement was signed, it was filed with BMZA and, at a public hearing before that Board, Burnett/Ellicott formally withdrew its oppositions to the Berg appeals. On October 21, 2013, the Board adopted a Resolution granting the appeals and incorporating the terms of the Agreement as part of the Resolution. Berg commenced preparations to construct the wall but ran into a number of problems, one of which required that it obtain a minor privilege permit from the City.

A timely application was made for the permit on February 5, 2014 but there was a delay in processing the application, for which the City accepted responsibility. The permit was not actually issued until March 20. Accordingly, the City agreed to extend the time for completion by six weeks, until May 10, 2014. No objection to that extension was made by Burnett/Ellicott.

On March 25, Berg applied for a building permit for construction of the wall. During the application process, however, sewer drains, of which Berg previously was unaware, were discovered that blocked the anticipated location of footers for the wall, requiring revisions to the permit. A final building permit was issued on May 1, and Berg promptly commenced construction. DHCD inspected the site on May 13 and, though verifying progress consistent with the permit, concluded that construction of the wall was not materially complete.

DHCD therefore issued a Notice of Default and Order to cure the non-compliance by May 23, 2014. Burnett/Ellicott did not wait until May 23 to act. On May 16, it filed a complaint against Berg in the Circuit Court for Baltimore City accusing Berg of maintaining a public and private nuisance. DHCD, having inspected the site, concluded that satisfactory progress was being made.

On May 27, Burnett/Ellicott amended its complaint (1) to add DHCD as a defendant, and (2) to seek a declaratory judgment that the non-conforming use at 1500 Bayard Street had been forever terminated by reason of Berg's failure to complete construction of the wall by May 23, 2014. Berg responded with a request to BMZA to extend the time for completion. BMZA denied the request on the ground that it was not a party to the agreement and had no authority to modify it. Eventually, however, and over Burnett/Ellicott's strenuous objection, DHCD, through a Modified Consent Agreement with Berg, did extend the time for completion to July 18, 2014.

That agreement recited that the DHCD inspection on May 26 showed that the wall was more than fifty percent complete, that DHCD considered the material progress to have cured the non-compliance, and that "[i]n light of the material progress, DHCD agreed to allow Berg to complete construction of the wall in accordance with the issued building permit and agreed that Berg's non-conforming use had not ceased due to non-compliance with the Consent Agreement." The Modified Agreement noted that on July 14, 2014, "DHCD issued final building approval of the newly constructed wall pursuant to the plans and permit issued by DHCD." Accordingly, the Consent Agreement was modified to require completion of the wall by July 18, 2014. Intent on putting Berg out of business notwithstanding that the wall it had wanted all along had been completed, Burnett/Ellicott filed a Second Amended Complaint to allege that "any attempt by Berg and [DHCD] to amend or modify the deadline or cure provisions of the October 15 Agreement after May 24, 2014, without the agreement of Plaintiffs would be impermissible, invalid or voidable for lack of consideration and otherwise as well as under equitable principles of promissory estoppel and detrimental reliance." Burnett/Ellicott based its ability to enforce the October 15, 2013 Agreement on the fact that it had participated in the negotiations leading to that Agreement and, as part of the Agreement, had withdrawn its objections to Berg's then-pending appeals. After motions to dismiss and for summary judgment were denied, the case was tried over a two-week period in July 2016. On September 26, 2016, the court entered its findings that Burnett/Ellicott had failed to prove either a private or public nuisance and that it lacked standing to seek the declaratory relief it requested.

With respect to the latter conclusion, the court held: "[The function of DHCD] is to enforce the zoning laws of Baltimore City to the benefit of the entirety of the citizenry of the city. The [DHCD] would not have contemplated ceding to the Plaintiffs (or for that matter, any other complaining constituent) the agency's ability to enforce the zoning laws of the City of Baltimore as under such a precedent anarchy would/could ensue. Under such circumstances, those disgruntled with the [DHCD]'s determinations could climb over its back and seek their own relief. Clearly, that makes no sense from a policy and/or practice standpoint.

That the Agreement mentions that the Plaintiffs had agreed to drop their opposition to Berg's appeal then pending in front of BMZA, is evidence not of the parties' intention to consider the Plaintiffs as third party beneficiaries to the Agreement, but is instead of [ sic ]evidence of the Plaintiffs' satisfaction with the proposed resolution of this continuing conflict. To be clear, [DHCD] and Berg were the actual parties to the appeal, and they alone had the ability to continue with the appellate process before BMZA or not." In this appeal, Burnett/Ellicott has abandoned its claims of public and private nuisance and complains only about the court's ruling in its declaratory judgment action. It argues that it had the requisite legal interests for standing based on (1) its status as an intended third-party beneficiary of the October 15, 2013 Consent Agreement, and (2) its detrimental reliance on that Agreement. We disagree and shall affirm the judgment of the Circuit Court.

THIRD-PARTY BENEFICIARY It was in Mackubin v. Curtiss-Wright Corp. , 190 Md. 52 , 57 A.2d 318 (1948) that the Court of Appeals first addressed whether a non-party to a contract should be allowed to enforce the contract on the premise that he (or she or it) was the intended beneficiary of the contract. The Court noted that the common law initially did not allow such an extended benefit-the right to enforce a promise for which no consideration was given-but that there had been a gradual relaxation of that rule and that courts had come to recognize the right of a third-party beneficiary to sue on a contract "made expressly for the benefit of either a donee beneficiary or creditor beneficiary." Id. at 56 , 57 A.2d 318 (Emphasis added). A person is a donee beneficiary, the Court said, "where it appears that the purpose of the promisee in obtaining the promise of the performance thereof is to make a gift to the beneficiary or to confer upon him a right against the promisor to some performance neither due nor asserted to be due from the promisee to the beneficiary." Id. at 56-57 , 57 A.2d 318 . A third person could be a creditor beneficiary "where no purpose to make a gift appears and performance of the promise will satisfy an actual or supposed or asserted duty of the promisee to the beneficiary...." Sixty-one years later, in Lovell Land v. SHA , 408 Md. 242 , 969 A.2d 284 (2009), the Court brought the law governing third-party beneficiaries up to date, explaining in more detail the principles that govern whether and under what circumstances a non-party to a contract may be permitted to enforce the contract as a third-party beneficiary.

The issue in Lovell was whether a former owner of a parcel of land was entitled to enforce a reverter clause in a deed between the State Highway Administration and Howard County to which the former owner was not a party, and the answer was "no." The critical distinction, the Court concluded, was not between donee and creditor beneficiaries, but between "intended" and "incidental" beneficiaries. Confirming what the Court had held in Mackubin , the Court repeated that, in order to recover as an intended beneficiary, "it is essential that the beneficiary shall be the real promisee; i.e. , that the promise shall be made to him in fact, though not in form" and that "[i]t is not enough that the contract may operate to his benefit. It must clearly appear that the parties intend to recognize him as the primary party in interest and as privy to the promise." (Emphasis in Lovell ). The Lovell Land Court added that "[a]n incidental beneficiary acquires by virtue of the promise no right against the promisor or the promise." That language was repeated and confirmed more recently in 120 W. Fayette v. Baltimore , 426 Md. 14 , 36, 43 A.3d 355 (2012) ; see also Yaffe v. Scarlett Place , 205 Md.App. 429 , 442-43, 45 A.3d 844 (2012).

In determining whether that standard is met, the court looks to "the intention of the parties to recognize a person or class as a primary party in interest as expressed in the language of the instrument and consideration of the surrounding circumstances as reflecting upon the parties' intention." CR-RSC Tower v. RSC Tower , 429 Md. 387 , 458, 56 A.3d 170 (2012). The focus of the standard is on the intent of "the parties" to the Agreement-in this case DHDC and Berg-and that intent clearly must be to recognize Burnett/Ellicott as "the primary party in interest"-an interest at least equal if not paramount to that of DHCD and Berg. Applying that standard, we look first to the language of the October 15 Agreement. The intent of the Agreement, as recited in the first paragraph, was to resolve outstanding violation notices and appeals therefrom.

Burnett/Ellicott certainly had an interest in the disposition of those violation notices, but we would be hard-pressed to conclude that its interest in such a disposition was paramount to that of DHCD or Berg, who were the only persons directly affected by them. With respect to the pending appeals, in light of its oppositions