Opinion ID: 2555748
Heading Depth: 2
Heading Rank: 3

Heading: Assuming the 1992 Declaration is Valid, To Whom Does It Apply?

Text: Petitioner argues that, should we find that the 1992 Declaration is valid and enforceable, we should conclude nonetheless that the onerous restrictions of the 1992 [Declaration] never were intended to be applied to the owner [of Parcel Two] and that it applies merely to third-party developers. Petitioner contends generally: The courts below found that the 1992 [Declaration]'s restrictions applied with full force to the Owner. To reach that result, the courts below ignored and failed to apply long-standing principles developed by this Court to construe restrictions such as those imposed by the 1992 [Declaration]. First, the lower courts did not consider the contract's character, purpose, and the facts and circumstances of the parties at the time of execution.[ [22] ] Second, the courts did not follow substantial precedent from this Court that such restrictions on the use of land are not favored. Third, the courts below did not resolve any doubts regarding the restrictions in favor of the use of land. And, finally, the courts failed to apply basic principles of contract construction when they adopted a contract interpretation that made provisions of the contract surplusage without any purpose. (Internal citations and quotations omitted.) BCF replies: The Landlord's interpretation on its face is convoluted and contrary to the plain and unambiguous language of the 1992 [Declaration]. The restrictions in §§ 2, 5 and 6 apply to any Future Improvements regardless of the person or entity that constructs them. Sections 2(c) and 6(a) flatly state that no development may proceed outside the RDA and no development may occur anywhere on Parcel [Two] without the consent of the Parcel [One] Tenants. Further, the Landlord's interpretation ignores the fact that other restrictions in § § 2 and 6 apply to any Developer which term is expressly defined to include any entity that undertakes to construct any Future Improvements on Parcel [Two] at any time.
In City of Bowie v. MIE Properties, Inc., 398 Md. 657, 679-80, 922 A.2d 509, 522-23 (2007), we reiterated the manner in which restrictive [land] covenants are read and interpreted generally by Maryland courts: In construing covenants, it is a cardinal principle . . . that the court should be governed by the intention of the parties as it appears or is implied from the instrument itself. The language of the instrument is properly considered in connection with the object in view of the parties and the circumstances and conditions affecting the parties and the property.. . . This principle is consistent with the general law of contracts. If the meaning of the instrument is not clear from its terms, the circumstances surrounding the execution of the instrument should be considered in arriving at the intention of the parties, and the apparent meaning and object of their stipulations should be gathered from all possible sources. If an ambiguity is present, and if that ambiguity is not clearly resolved by resort to extrinsic evidence, the general rule in favor of the unrestricted use of property will prevail and the ambiguity in a restriction will be resolved against the party seeking its enforcement. The rule of strict construction should not be employed, however, to defeat a restrictive covenant that is clear on its face, or is clear when considered in light of the surrounding circumstances. (Quoting Belleview Constr. Co. v. Rugby Hall Cmty. Ass'n, 321 Md. 152, 157-58, 582 A.2d 493, 495-96 (1990) (internal citations, quotations, and modifications omitted)). Thus, as we see it, we are faced (potentially) with a three-step inquiry. First, we ask whether the meaning of the instrument is . . . clear from its terms. MIE, 398 Md. at 679, 922 A.2d at 522 (quoting Belleview, 321 Md. at 157, 582 A.2d at 495). If not, then, second, we look to the circumstances surrounding the execution of the instrument . . . [,] and apparent meaning and object of their stipulations should be gathered from all possible sources in ascertaining the parties' intent. MIE, 398 Md. at 679, 922 A.2d at 522 (quoting Belleview, 321 Md. at 157, 582 A.2d at 495). Third, and finally, if that ambiguity is not clearly resolved by resort to extrinsic evidence, the general rule in favor of the unrestricted use of property will prevail and the ambiguity in a restriction will be resolved against the party seeking its enforcement. MIE, 398 Md. at 679, 922 A.2d at 522 (quoting Belleview, 321 Md. at 158, 582 A.2d at 495). In the present case, we need not travel beyond the first level of inquiry because we find that the meaning of the 1992 Declaration is abundantly clear. Paragraph 1 of the 1992 Declaration gives Declarantidentified in Recital 1 and 2 as the owner of certain development rights with respect to `Parcel [Two]' . . ., which were created and reserved . . . under that [1981 Declaration] (then Purcell/Danac)the option, until 1 January 2001, to enter into a ground lease with the owner of Parcel Two at $1,000.00 monthly. Further, Paragraph 2 of the 1992 Declaration provides that [t]he following provisions shall apply to and govern the construction of any Future Improvements on Parcel [Two]. . . . (Emphasis added.) Paragraph 1(c) defines Future Improvements as [a]ny improvements constructed in the future on Parcel [Two], whether or not the same shall be constructed pursuant to such ground lease. . . . The restrictions on any such Future Improvements i.e., building only in the newly-created RDA, etc. were not limited to the Declarant or any third-party developer. We count at least five instances in the 1992 Declaration in which clarification is given that such restrictions apply  whether or not the [ Future Improvements ] shall be undertaken pursuant to the ground lease. . . . See, e.g., Paragraph 1(c) (Any improvements constructed in the future on Parcel [Two], whether or not the same shall be constructed pursuant to such ground lease, shall hereinafter be referred to as the `Future Improvements.'); Paragraph 2 (The following provisions shall apply to and govern the construction of any Future Improvements on Parcel [Two], whether or not the same shall be undertaken pursuant to the ground lease. . . .); Paragraph 5 (No construction of any Future Improvements on Parcel [Two], whether or not the same shall be undertaken pursuant to the ground lease described . . . above, shall be permitted, unless. . . .); Paragraph 6 ([T]he following restrictions shall apply to all construction and development activities undertaken on Parcel [Two] in connection with the construction of any Future Improvements, whether or not the same shall be undertaken pursuant to the ground lease. . . .). If the foregoing was not clear enough, Paragraph 8 reiterates: [N]otwithstanding anything in this Restated Declaration to the contrary, the parties hereto acknowledge that each and every right, obligation, restriction and limitation set forth in this Restated Declaration shall pertain to, and shall be fully applicable to, any future development activity on Parcel [Two] . . . whether undertaken pursuant to the exercise by Declarant of its option to enter into such a ground lease or otherwise. . . . Notwithstanding the abundance of language suggesting that the 1992 Declaration's restrictions apply to anyone pursuing Future Improvements on Parcel Two (and not merely a third-party developer), Petitioner arguesin what the Court of Special Appeals deemed a somewhat vague and confusing mannerthat by virtue . . . of the 1992 [Declaration], the restrictions imposed on development only apply to development of Parcel Two by the `Developer,' and that, accordingly, to rule that the 1992 [Declaration] applied to the Owner of Parcel [Two] . . . the lower courts were required to find that the term `Developer' includes the Owner of Parcel Two. As that argument goes, if Developer and Owner of Parcel Two are one in the same, then there would be no reason to include both Paragraphs 6(d) and 7, which, aside from the former pertaining to Developer and the latter pertaining to Owner of Parcel [Two], both provide that that party will not change any approaches, entrances or exits on Parcel [Two] without the prior written consent of each Parcel [One] Tenant, which consent shall not be unreasonably withheld. This argument lacks merit. Paragraph 6 states merely that if a Developer ( i.e., the party undertaking the Future Improvements) should undertake to construct Future Improvements, the Developer may not change entrances or exits on Parcel Two without the consent of the tenants of Parcel One. Paragraph 7 provides that the Ownerwho may or may not be the Developermay not change the entrances or exits on Parcel Two without the consent of the tenants of Parcel One. Thus, Petitioner is wrong when it says that the only difference in the two provisions is that Paragraph 6 applies to `Developer' and Paragraph 7 applies to the `Owner of Parcel [Two].' The difference is when those provisions apply; Paragraph 6 applies to the Developer in the event it undertakes Future Improvements; Paragraph 7 applies to the Owner of Parcel Two regardless of whether it undertakes Future Improvements. Because the 1992 Declaration is clear facially that its development restrictions apply equally to the owner of Parcel Two, as it does to third-party developers, we think it unnecessary to consider the circumstances surrounding the execution of the instrument. MIE, 398 Md. at 679, 922 A.2d at 522 (quoting Belleview, 321 Md. at 157, 582 A.2d at 495). Were we to go down that path, however, we would think it important to note that the 1984 litigation commenced after Ward refused consent to Danac's proposed development of Parcel Two with an office complex, complaining that Danac's plan would destroy the line of sight to Ward's entrance. Thus, in challenging Danac's rights to develop Parcel Two under the 1981 Declaration, Ward was seeking to protect the Parcel One tenants' line of sight to the retail store's entrance from Route 355. It is illogical to conclude that the 1992 Declaration, the culmination of approximately eight years of litigation over the potential development of Parcel Two, would be intended to protect the Parcel One tenant's line of sight from developments undertaken by third-party developers, but not by the owner of Parcel Two. In summary, we hold that, barring an adequate and persuasive showing of prejudice to the owners of Parcel Three (a determination that may be made on remand), the 1992 Declaration is a valid and enforceable modification of the 1981 Declaration. Therefore, we hold also that the restrictions in the 1992 Declaration apply with equal force to Petitioner as they do to third-party developers of Parcel Two. JUDGMENT OF THE COURT OF SPECIAL APPEALS VACATED. CASE REMANDED TO THAT COURT WITH DIRECTIONS TO VACATE THE JUDGMENT OF THE CIRCUIT COURT FOR MONTGOMERY COUNTY AND REMAND TO THAT COURT FOR FURTHER PROCEEDINGS NOT INCONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY PETITIONER.