Opinion ID: 2555748
Heading Depth: 1
Heading Rank: 3

Heading: Owners of the Three Parcels as of the Execution of the 1992 Declaration

Text: To illustrate the location of the Restricted Development Area delineated in the 1992 Declaration, we insert here Figure Two, which reflects the RDA in cross-hatching and is based on an exhibit in evidence below, modified slightly for clarity purposes. On 22 July 1994, after the 1992 Declaration was executed (on 14 July 1992) and recorded (sometime between 14 and 22 July 1994), the 1984 litigation was dismissed with prejudice. At some point prior to 1998, Burlington Coat Factory (BCF) began investigating whether the largely vacant Ward store on Parcel One would be a suitable site in which to open one of its retail clothing stores. Robert Grapski (Grapski), BCF's Senior Vice President of Real Estate, explained that the covenant in the 1992 Declaration prohibiting residential development on Parcel Two was attractive to BCF as a potential tenant of the Ward store, opining that residential mixed with retail [in close proximity] . . . is not a healthy mix. Further, Grapski explained that the covenant against construction activities on Parcel Two during the Thanksgiving-Christmas holiday season was desirable to BCF, as BCF does sixty-to-seventy percent of its business in the holiday shopping season, and to be under construction during that time of the year is suicidal. Ultimately, on 23 October 1998, Ward assigned to BCF its interest as tenant under the 1976 Lease and, thereafter, BCF began operating a retail store in the building on Parcel One, while continuing the subleases of parts of the building to Toys R' Us and a Ford automobile dealership. The BCF operation on Parcel One became one if its best stores in Maryland, placing in the top one-third based on net operating income. In the Fall of 2003, Petitioner became interested in acquiring Parcels One and Two. After conducting a due diligence review, outside counsel for Petitioner determined that the 1992 Declaration was not binding on the owner of Parcel Two, but, as explained more fully infra, believed the covenants applied only to third-party developers of Parcel Two. [9] As a result, Petitioner, in December 2003, purchased Parcels One and Two. Soon thereafter, Petitioner entered into a development agreement with Avalon Bay Communities, Inc. (Avalon Bay) to erect on Parcel Two a 394-unit apartment complex, retail stores, and a six-story parking garage. Discussions between Grapski and Avalon Bay's agent, who solicited BCF's consent to Avalon Bay's development plan, proved fruitless. Avalon Bay withdrew as a developer of Parcel Two. [10] Petitioner engaged another developer for Parcel Two, JPI Enterprises, Inc. (JPI). Under their agreement, JPI would purchase and develop Parcel Two, and Petitioner would remain the owner of Parcel One. Petitioner's counsel wrote to Grapski, explaining that JPI's proposed development of Parcel Two included a 300-unit apartment complex, retail stores, and a parking garage. Petitioner's counsel expressed the view that, although Petitioner sought to get feedback from Burlington on the plans, and obtain Burlington's full cooperation during the construction of the project, [w]hether Burlington's consent is necessary is an open question legally. . . . After additional correspondence and meetings between counsel and representatives of Petitioner, BCF, and JPI, [11] , [12] on 30 April 2007, counsel for BCF wrote to Petitioner to advise of its refusal to consent to the JPI project, explaining that the construction would be in violation of numerous provisions of the [1992] Covenants and would substantially interfere with [BCF]'s operations at the site. On 7 June 2007, Petitioner filed a seven-count Complaint for Declaratory Relief against BCF in the Circuit Court for Montgomery County, asking that the Circuit Court declare: A. That the . . . 1992 Document is unenforceable; B. That the . . . 1992 Document failed to create an easement or covenant regarding Parcel [Two]; C. That . . . [BCF] unreasonably withheld its consent and that the 1976 [Lease] permits construction of the J[PI] Development; D. That . . . [BCF] has waived its right to approve or disapprove the J[PI] Development; E. In the alternative, that . . . [Petitioner] is entitled to develop Parcel [Two] without regard to the easements and covenants Purcell and Eretz . . . attempted to create in the 1992 D[eclaration] because the easements and covenants have outlived their usefulness; F. In the alternative, that . . . [Petitioner] is entitled to develop Parcel [Two] without regard to the easements and covenants Purcell and Eretz . . . attempted to create in the 1992 D[eclaration] because the easements and covenants are extinguished through merger of interests; G. In the alternative, [that Petitioner] is entitled to develop Parcel [Two] without regard to any easements and covenants created by Purcell and Eretz because [BCF] has an adequate remedy at law; H. That the Court award [Petitioner] its costs and other relief in this action; I. That the Court award further and supplementary relief as may be necessary or proper; and J. That the Court award such other relief as the Court deems just and proper. BCF filed an answer and counterclaim, asking the Circuit Court to declare that BCF did not withhold unreasonably its consent, and, pursuant to a fee-shifting provision in the 1976 Lease, to require Petitioner to pay its expenses and attorney's fees, assuming that BCF would be the successful party in the litigation. On 21 January 2008, Petitioner moved for summary judgment, arguing generally that the 1992 Declaration is unenforceable and/or void for mutual mistake and lack of consideration. BCF opposed Petitioner's motion and filed a cross-motion for summary judgment, arguing generally that the 1992 Declaration is valid and enforceable, and that it prohibits the proposed JPI development on Parcel Two. Following a hearing, the Circuit Court, by order and memorandum opinion, on 4 June 2008, ruled that: (1) the issue of whether there was adequate consideration for the 1992 Declaration was withdrawn by Petitioner and thus moot; (2) the 1992 Declaration did not create an interest that violates the Rule Against Perpetuities or an unreasonable restraint on alienation of property; (3) the covenants contained in the 1992 Declaration run with the land; (4) the 1992 Declaration was not based upon a mutual mistake of fact; and (5) Petitioner did not breach the 1976 Lease merely by advancing JPI's proposal to develop Parcel Two. The Circuit Court, however, denied the parties' competing motions for summary judgment regarding the following issues, deferring their resolution for a trial: (a) [Whether] the 1992 Declaration of Easements and Covenants [was ambiguous]. (b) The validity . . . of the 1992 covenants because Eretz . . . could not create easements for restrictions on its own land. (c) Whether . . . there has been a [subsequent] change in circumstances in the neighborhood which would render the 1992 covenants invalid. (d) Whether the 1992 covenants are . . . subject to specific performance. (e) Whether the 1992 covenants apply to. . . the owner of Parcel No. 2.[ [13] ] (f) Whether the 1992 covenants are invalid because they only confirm rights in the 1981 Declaration that were allegedly invalid. (g) Whether or not [BCF] . . . withheld [unreasonably] consent to the landlord's proposed future improvements under Section 16.2 of the lease. At trial, Petitioner injected another issue, namely, whether the 1992 Declaration is invalid because it was not signed by the owners of Parcels [One], [Two] and [Three] as required by the 1981 Declaration. Resolution of this flagship issue is at the core of the present case. On 27 May 2009, the Circuit Court, in a thirty-three page memorandum opinion, rejected Petitioner's claim that the 1992 Declaration's restrictions on `Developer' are not applicable to the Owner of Parcel [Two], explaining rather that: The express language and structure of the 1992 Declaration make it clear that the restrictions apply not only to the construction of Future Improvements by Purcell pursuant to a ground lease, but also to any Future Improvements constructed by anyone on Parcel [Two] after the expiration of the ground lease. Next, regarding the missing-signatories argument, the Circuit Court held that the 1992 Declaration was valid and enforceable notwithstanding the fact that the owners of Parcel Three were not signatories to it, relying on the California Supreme Court case of Hotle v. Miller, 51 Cal.2d 541, 334 P.2d 849 (1959), and explaining that, because [t]he rights of the Parcel [Three] owner were not affected by the 1992 Declaration, under Maryland law, the only signatures needed were those of the owners of Parcels [One] and [Two]. Petitioner appealed timely to the Court of Special Appeals. The Court of Special Appeals, in an unreported opinion, discussed: (1) the validity of the 1992 Declaration; (2) assuming the validity of the 1992 Declaration, the application of the 1992 Declaration to Petitioner as the owner of Parcel Two; and (3) whether BCF's withholding of consent to development of Parcel Two was unreasonable. In agreeing with the Circuit Court regarding the missing-signatories argument, the panel of the intermediate appellate court explained: It is not uncommon in multi-party contracts covering a variety of matters for the parties to have common interests in some matters but not others. Matter A may be of interest to only two of the parties, although all may have an interest in matter B. If the only two parties with an interest in Matter A later wish to modify their agreement as to that matter and their proposed modification would not adversely affect any other party, we see no reason why they should not be permitted to make that modification.[ [14] ] Regarding the issue of whether the 1992 Declaration applied to Petitioner as the owner of Parcel Two, or applied merely to third-party developers of Parcel Two, our appellate brethren explained: We see nothing in th[e 1992 Declaration]. . . limiting those restrictions and burdens to development carried on by third-party developers or in any way exempting the owner of Parcel [Two] from them. Indeed, ¶ 2 specifies the contrary by defining developer as [t]he entity undertaking any such Future Improvements  (emphasis added), which would necessarily include any entity undertaking the improvements, whether the owner of Parcel [Two] or some other entity. Finally, regarding the issue of whether BCF's withholding of consent to development of Parcel Two was unreasonable, the Court of Special Appeals opined: [F]rom the very beginning, the tenants on Parcel [One] objected to any development on Parcel [Two] that would substantially injure their ability to conduct their businessby interfering with the visibility of the store from Route 355 and with ingress and egress from that road to and from the parking area, and by substantially limiting the parking area necessary to attract customers. Montgomery Ward made that clear in 1983 and [BCF] made it clear when presented with the various plans. The plain, simple fact is that [Petitioner] had insisted, presumably for its own economic reasons, on utilizing nearly all of the area of Parcel [Two] for a mixed-use office, retail, and residential development and that all of the plans for that kind of development not only violate the requirement that development be restricted to the area specified in the 1992 Declaration but also would do the very thing that the [BCF] ha[s] consistently and legitimately expressed concern about and opposed. There is substantial evidence in the record supporting the Circuit Court's conclusion that [BCF] acted reasonably and in good faith. 600 North Frederick Road, LLC, filed timely a Petition for Writ of Certiorari, which we granted, 600 N. Frederick Road, LLC v. Burlington Coat Factory of MD, LLC, 416 Md. 272, 6 A.3d 904 (2010), to consider: 1. Whether a recorded written instrument requiring the signatures of a defined set of property owners to cancel or modify it can be modified by fewer than all based on an allegation that extrinsic evidence shows that the non-signing property owners are not adversely affected by the modification? 2. Whether potentially perpetual restrictions on the use of land may be imposed under the rule of reasonably strict construction without applying the traditional rule of contract interpretation that every provision in a written instrument must be given meaning, if possible? 3. Under the rule of reasonably strict construction, may a court imply restrictions on the use and development of land or must such restrictions be clearly stated in a document applicable to the property owner? For the reasons that follow, although we agree with the holding and much of the reasoning of the opinion of the Court of Special Appeals, we must vacate its judgment and remand the case to that court with directions to remand the case to the Circuit Court for Montgomery County for further proceedings not inconsistent with this opinion.