Opinion ID: 2319221
Heading Depth: 1
Heading Rank: 4

Heading: Termination of the Purchase Agreement and Litigation

Text: On February 1, 2008, Hovnanian's president sent a letter to ATC, asserting that ATC had failed to fulfill conditions precedent. The unfulfilled conditions include items contained in the following sections of the Agreement: Section 3(c), (d) and its subsections, (g)(h), Section 4 and Section 14(c) and (d). On March 3, 2008, ATC responded in a letter asserting that the condition had been complied with, as the Amended Declaration provided for annual assessments through the use of Supplemental Agreements. The letter also asserted that Hovnanian had agreed to deal with the CAM fees in a Supplemental Agreement, a draft of which ATC included with the letter. Hovnanian disagreed, and faxed a letter to ATC the next day declaring that the Purchase Agreement was terminated for a failure to fulfill the conditions precedent. ATC filed a complaint in the Circuit Court for Anne Arundel County, [14] seeking a declaratory judgment that Hovnanian had breached the contract, and other injunctive relief. [15] Hovnanian answered, claiming that its obligations were relieved by ATC's failure to comply with the condition precedent. Both parties filed motions for summary judgment on the issue of whether ATC had complied with the condition precedent regarding Section 14(d) and the CAM maintenance fees. The Circuit Court issued an order on February 24, 2008, granting ATC's motion for summary judgment on that issue. [16] In its opinion, it held that Section 10.2.4 of the Declaration strictly complied with Section 14(d) of the Purchase Agreement: ... In the context of this transaction, the only reasonable reading of § 14(d) is that ATC was required to establish a mechanism for the funding of the office and retail CAM charges, rather than specifying the amount of the assessments in the Declaration. Since parcels would ultimately be sold to a diverse selection of office and retail users ranging from large single users such as Target, to individual boutique stores, logic dictates that the assessments against individual Parcel owners would require a level of customization to reflect the nature and extent of each Parcel's ultimate use. Since it may be unrealistic to predict CAM costs into the future, due to changing the maintenance needs and expenses, it is logical that a condominium declaration establish a formula or methodology by which CAM charges can be determined in perpetuity, rather than establish a fixed amount.    The court agrees with ATC that the Agreement does not require the Declaration to assess a particular dollar amount against the office and retail portions of the Development.... [and] the court finds that the requirement for assessing the office and retail portions of the Development was met by § 10.2.4 of the [Declaration.] In an alternative holding, the Court concluded that Hovnanian waived the CAM funding condition through its actions: [Hovnanian's] waiver went beyond mere silence. In fact, while [Hovnanian], through its counsel, raised issues regarding other portions of the Declaration which are not the basis of any claim of default, it did not complain of those provisions which it now alleges entitled it to terminate the Purchase Agreement. After reviewing drafts of the Declaration which contained the supposedly offending language, [Hovnanian], through its counsel, acknowledged the applicable provisions and their impact, and never objected to these provisions. [Hovnanian] treated the Agreement as valid [from its recording on January 22, 2007] until February 1, 2008, when it became clear that its repeated requests for modification of the Purchase Agreement, or for a further extension to closing, would not be attainable. After the parties agreed to dismiss the remaining claims, the Circuit Court entered a final judgment on March 12, 2009. Hovnanian filed a timely notice of appeal to the Court of Special Appeals. Before that Court, Hovnanian criticized the Circuit Court's decision as ignoring the non-waiver clause in the contract. In an unreported opinion, the intermediate appellate court aligned with the Circuit Court, holding that: ... Hovnanian impliedly agreed to the mechanism by only raising objections not here relevant. It was clear for well over a year before February 1, 2008, that ATC could not strictly comply with section 14d, as Hovnanian now interprets 14d. While later actions by Hovnanian might be equivocal if taken out of context, in context they are unequivocal and support waiver and estoppel. Hovnanian's conduct supports the conclusion that it waived the non-waiver clause in the Agreement as well as the substantive conditions in Section 14d. The Court of Special Appeals, determining that Hovnanian had waived the condition, did not reach the question of whether the Declaration strictly complied with the conditions of the Purchase Agreement. Hovnanian then sought certiorari from this Court.