Court Opinion

ID: 1024944
Source: CourtListenerOpinion
Date Created: 2013-07-05 06:41:46.356276+00
Date Added: 2024-06-11T12:27:35.898181
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 07-1011

RICHARD C. LITMAN, Trustee, under a Land
Trust Agreement date September 21, 1995,

                                              Plaintiff - Appellant,

           and

LITMAN LAW OFFICES, LTD.,

                                                           Plaintiff,

           versus

TOLL BROS., INC.,

                                               Defendant - Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. T. S. Ellis, III, Senior
District Judge. (1:06-cv-00476-TSE)

Argued:   December 6, 2007                 Decided:   February 5, 2008

Before MICHAEL and KING, Circuit Judges, and Catherine C. BLAKE,
United States District Judge for the District of Maryland, sitting
by designation.

Affirmed by unpublished per curiam opinion.
ARGUED: William Francis Krebs, BEAN, KINNEY & KORMAN, P.C.,
Arlington, Virginia, for Appellant. Alexander Young Thomas, REED
SMITH, L.L.P., Falls Church, Virginia, for Appellee.    ON BRIEF:
James R. Schroll, Thomas W. Repczynski, Christopher A. Glaser,
BEAN, KINNEY & KORMAN, P.C., Arlington, Virginia, for Appellant.

Unpublished opinions are not binding precedent in this circuit.

                                2
PER CURIAM:

     Richard Litman, as trustee for Litman Law Offices, Ltd.

(“Litman”), appeals the district court’s grant of summary judgment

to Toll Brothers, Inc. (“Toll”), in this dispute between Litman and

Toll stemming from an agreement for the sale of redevelopment

property   in   Arlington   County,    Virginia.     For    the    reasons

articulated below, we affirm.

                                 I.

     The essential facts are undisputed, and the most relevant are

set forth here.   On May 12, 2005, Litman and Toll entered into an

agreement (the “Agreement”) for the sale of land owned by the
                            1
Litman Law Offices, Ltd.        J.A.    18-33.     The   subject   of   the

Agreement was a one-acre parcel, with commercial office building,

in Arlington, Virginia - specifically, within the Columbia Pike

Special Revitalization District.       Under the Agreement, Litman was

to turn over a vacant building, which Toll would demolish. Because

Toll intended to redevelop the property with mixed residential and

commercial units, the closing was expressly conditioned upon Toll’s

obtaining the appropriate governmental permits.

     The Agreement sets out the sale of the Columbia Pike property

from Litman to Toll, at a price of $90 per saleable square foot.

The number of saleable square feet is to be determined by the

“total square footage contained within all condominium units on the

     1
      An Amendment to the Agreement was executed on June 16, 2005.
J.A. 65-71.
                                   3
Property as shown on and defined in the recorded Condominium

Documents.”   J.A. 19.   The Agreement set a minimum purchase price,

however, of $13 million.

     The document outlines a series of payments to be made by Toll:

within ten days of the Agreement, a $300,000 deposit, to be held in

escrow until after the due diligence period; and a second deposit
of $1 million, half of which would be released by the end of the

due diligence period and half of which would be withheld until the

approval of Toll’s zoning application. The closing date was set as

ninety days after the provision of a written notice of closing; the

Agreement specifies, however, that Toll could not provide such

notice later than February 15, 2006.        Accordingly, the latest

possible date anticipated for closing was May 16, 2006.      Litman

could, however, elect to extend the closing date to July 31st by

giving Toll written notice within 45 days of receiving Toll’s

closing notice.    Section 20 of the Agreement states that “TIME IS

OF THE ESSENCE AS TO ALL PROVISIONS OF THIS CONTRACT.”    J.A. 30.

     Should Toll fail to perform any of its obligations under the

contract, the $1.3 million deposit could be retained by Litman as

the “sole and exclusive remedy for such breach as liquidated

damages,” provided that Litman had given Toll written notice of the

breach.    J.A. 23.   Toll’s default also would result in a transfer

to Litman of Toll’s interests in the zoning application, all

architectural and other studies, and all building drawings and

permits.

                                   4
     Section 16A of the Agreement expressly conditions Toll’s

obligation to complete closing upon, in relevant part: “(iii) the

receipt by Buyer of final, unappealable Special Exception for the

Property.”     J.A. 28.   Section 15G defines the Special Exception:

     Following the end of the Due Diligence Period, Buyer, at
     Buyer’s sole cost and expense, may seek a special
     exception for the Property and/or any other government or
     other authorizations Buyer deems necessary, in its sole
     discretion, to develop the Property for use as
     residential and commercial condominium(s) (collectively,
     the “Special Exception”).

J.A. 27 (emphasis added).2            That section further provides that

Litman     would   cooperate   with    Toll’s   attempts   to   obtain   final

approval of the Special Exception.          Should the conditions listed

in Section 16A not be satisfied, Section 16C of the Agreement as

amended lists Toll’s options as the following:

         If on or before the date Closing [sic] all contingencies
         and conditions specified herein are not or cannot be
         satisfied, then Buyer shall have the option of (i)
         completing Closing hereunder if it so chooses, or (ii)
         canceling this Agreement if the Special Exception is
         denied and the date for filing an appeal has expired, in
         which case this Agreement shall become null and void and
         the Deposit shall be returned to Buyer, provided that
         any Released Deposit shall be returned to Buyer when and
         as provided in the Note, the provisions of which are
         incorporated herein by reference, or (iii) in the event
         the unsatisfied condition is outside of Buyer’s control,
         extending Closing until such condition is satisfied.

J.A. 28, 68.

         From the summer of 2005 until November of that year, Toll

pursued the Special Exception through an Arlington County zoning

process known as the Form Based Code (“FBC”).          Within the Columbia

     2
     This provision was later amended but Toll retained discretion.
J.A. 67.
                                        5
Pike Special Revitalization District, properties may be developed

through     either   of   two   processes:    the    FBC    process   or   the

traditional Site Plan Approval Procedure, which is governed by the

Arlington County Department of Community Planning, Housing and

Development     Administrative     Regulation       4.1    (generally,     “4.1

process”).    The FBC was developed as a streamlined alternative to
the 4.1 process; its goal is “to codify the community’s vision for

development and redevelopment in the Columbia Pike corridor of the

County.”    J.A. 135.     The FBC “addresses primarily the form of the

building, rather than just its usage.”               J.A. 135.         Once a

development is determined to meet the strictures of the FBC,

approval comes quickly; a submission may be processed in anywhere

from 45-60 days.

     By contrast, the 4.1 application is more cumbersome: it

requires that the applicant produce a series of studies and

analyses,    including,    inter alia ,   a   certified     survey    plat,   a

Transportation Demand Management Plan, and a Tree Preservation

Plan.     An administrative review period of 120 to 150 days is

required from the date the Arlington County Board (“the Board”)

accepts an application to the date the Board will consider the

application.     Applications which include rezoning or vacation

requests that would necessitate changes to the elements of the

General Land Use Plan require a minimum of 150 to 180 days.

     Prior to executing the contract, Toll had hired George Dove,

a   local    architect,    to   perform   initial     assessments     of   the

development prospects for the Litman site; it had also hired

                                     6
Catherine Puskar, a local land use attorney.                      In late spring or

early summer of 2005, Dove, who had experience working on FBC

projects, undertook informal meetings with Arlington County staff,

including the County’s Deputy Zoning Administrator and Columbia

Pike Initiative Coordinator, Richard Tucker, with respect to the

Toll   site.       At   those     meetings,      Tucker     “did    not   object”   to
conceptual plans regarding the Litman site, which were consistent

with other Dove-designed projects that had been approved under the

FBC.    J.A. 135.           These plans included occupiable residential

space in the building’s dormers.                J.A. 591.

       A series of changes in the acceptability of those plans

occurred throughout the fall.                   The first change involved the

building’s mezzanine level; Tucker informed Dove that because a

mezzanine was part of the first floor, it must meet the use

regulations for that floor - specifically, that the mezzanine must

be retail, and not residential, in nature.                     According to Dove,

Toll    “changed      the    project       accordingly      and    eliminated      [the

mezzanine].”       J.A. 572.

       The   second     change,     more    pertinent     to   the   instant    case,

developed     in   stages     and   dealt       with   occupiable     space   in    the

building’s dormers.         At some point, the interpretation of the FBC

regarding dormers changed; originally, occupiable space - in the

form of a dormer - was considered appropriate “in order to

encourage varying roof lines.”                   J.A. 586.         Tucker described

dormers as “additional occupiable space that’s available for the

developer to build.”         J.A. 588.       This interpretation clashed with

                                            7
the FBC’s six-floor limit on developments.              To comply with the

six-floor limit, developers could have individual units that were

two stories, with one floor within the unit being a dormer.                  The

dormer floor could have occupiable residential space, so long as

it was connected to the sixth-story unit and did not have its own

central stairway, hallway or elevator access.                Dove referred to
these as “dormer duplexes” and presented the county with an

amended development plan; Tucker noted that the new plan “was, as

far as staff was concerned, acceptable.”             J.A. 593.

     Arlington      citizens   did   not   respond    well   to    the   “dormer

duplex” idea; in Tucker’s words, they “felt like six stories

should   be   six   stories,   and    we   shouldn’t    have      or   encourage

development beyond that.” J.A. 587.           The Board formed a working

group of citizens and developers to work through the dormer and

other issues; Litman was a member of the group.                Throughout the

summer and fall, Tucker and his team formulated a staff report,

ultimately recommending that “dormer” be redefined to exclude all

non-ornamental uses.       Tucker states that “by the October time

frame, [Toll] was aware that no occupiable space above the 6th

floor would be allowable.”       J.A. 593.     Catherine Puskar disputes

this; she claimed that because the Board eventually deferred

several other changes that it was examining at the same time as

the dormer issue, it was not until the official action was taken

at the November 15th board meeting that Toll realized it had lost

the dormer issue.

                                      8
     Puskar,   Tucker     and    Dove       were   unanimous,     however,    in

describing the Board’s position on the dormer issue as fluid, or

evolving, throughout the fall of 2005.             After the November 15th

board meeting, it would not have been possible for Toll to submit

an   FBC   application;    the    county       simply     would    not    accept

applications that were not in conformity with the code.                  At that
point, Puskar advised Toll that it should begin to pursue a

Special Exception through the 4.1 process.              On December 1, Toll

set a January 2006 submission deadline for its 4.1 application.

     On January 16, 2006, Toll submitted a preliminary Major Site

Plan Amendment to the department of planning.                     Although the

application was not complete, it was deemed “in the best shape, by

far, of any site plan application” that the county employee who

received it had ever      checked in.         J.A. 806.     Litman wrote the

Zoning Administrator to consent to the filing of the application,

J.A. 807, and told Toll’s Vice President that he thought Toll was

“very smart” to pursue the 4.1 process, J.A. 871.                 In practice,

developers often submitted several rounds of submissions before an

application was deemed complete by the county; the county notified

Toll of several missing elements of the application, including a

Traffic Impact Analysis.        Toll requested the traffic analysis in

January and received a completion estimate from the company of

four to six weeks; the field analysis was performed in February.

Toll’s application, which it submitted on March 17th, was deemed

complete and accepted by the county on April 24, 2006.

                                        9
         The following day, when it was clear that Toll could not

obtain the Special Exception in time for the May 12 closing date,

Litman sued in the Circuit Court for Arlington County Virginia,

seeking a declaratory judgment that the failure to obtain a

Special Exception within the time frame was within Toll’s control.3

The case was removed to the Eastern District of Virginia under

diversity jurisdiction, and after discovery the parties filed

cross-motions for summary judgment. The district court issued not

one but two decisions in the case; after a hearing on October 27,

2006, Judge Ellis denied Litman’s motion for summary judgment and

granted summary judgment in favor of Toll, carefully explaining

that the material facts were undisputed, that Toll had no control

over the county’s decision to change the FBC, and that the

question was whether Toll had acted unreasonably or in bad faith

in exercising its discretion under the Agreement, which the judge

found that it had not.      J.A. 239-53.   Judge Ellis nonetheless

invited Litman to file a motion for reconsideration; after another

hearing, the motion to reconsider was denied on similar grounds.

J.A. 323-41.     The court’s final order granting Toll’s motion for

summary judgment was entered December 1, 2006, J.A. 350; Litman

noted a timely appeal. J.A. 351.

     3
      Toll nevertheless gave notice on May 15, 2006, that it sought
to extend the closing date under Section 16C(iii). J.A. 479-81.
It had previously notified Litman, in February 2006, that it was
“highly likely” that Toll would need to exercise its right to
extend the closing, and that Toll would “coordinate with [Litman]
as [it had] more information on the timing of the process for the
Special Exception.” J.A. 72.
                                 10
     The county held hearings on Toll’s 4.1 application in July

and a meeting in August; the application ultimately was denied on

October 24, 2006.     Litman appealed the denial to the Arlington

County Circuit Court.

                                II.
     The standard of review of a grant of summary judgment is de

novo.   M & M Medical Supplies & Serv., Inc. v. Pleasant Valley

Hospital, Inc., 981 F.2d 160, 163 (4th Cir. 1992) (en banc).   All

facts and inferences must be viewed in the light most favorable to

the non-moving party.   Bank of Montreal v. Signet Bank, 193 F.3d
818, 826 (4th Cir. 1999).

                               III.

     Under Virginia law, “where a contract is complete on its

face, is plain and unambiguous in its terms, the court is not at

liberty to search for its meaning beyond the instrument itself.”

Harris v. Woodrum, 350 S.E.2d 667, 669 (Va. App. 1986) (quoting

Berry v. Klinger, 300 S.E.2d 792, 796 (Va. 1983)).     Courts must

be “justly prudent and careful in inferring covenants or promises,

lest they make the contract speak where it was intended to be

silent, or make it speak contrary to what, as may be gathered from

the whole terms and tenor of the contract, was the intention of

the parties.”   So. Ry. Co. v. Franklin & Pittsylvania R.R. Co., 32

S.E. 485, 486 (Va. 1899).   However, “what is necessarily implied

is as much a part of the instrument as if plainly expressed, and

                                11
will be enforced as such.”         Pellegrin v. Pellegrin , 525 S.E.2d

611, 614 (Va. App. 2000) (quoting Va. Ry. & Power Co. v. Richmond,

106 S.E. 529, 539 (1921).

     As   the   district   court    noted,    the   Agreement   implicitly

requires Toll, before taking advantage of Section 16C(iii), to

file an application for a special exception.            J.A. 246-47.   In

Southern Railway, the Virginia Supreme Court determined that the

road lease at issue included the implied condition that the road

be maintained and operated during the entirety of the lease.            32

S.E. at 486.    In so concluding, it observed that the other clauses

of the contract demanded such a construction; there would be no

“annual expenses of running the road, and of keeping it and the

equipment in repair, nor receipts to pay them, unless the road was

operated.”   Id. at 487.   Moreover, the lease imposed an obligation

to furnish rolling stock and equipment for the use and enjoyment

of the road, “and to use it was to operate the road.”           Id.

     Similarly, the language of the Agreement contemplates that,

should Toll wish to rely upon nonpossession of a Special Exception

as a condition of delaying closing, it must have applied for a

Special Exception.      The language of 16A(iii) establishes the

“receipt by Buyer of final, unappealable Special Exception for the

Property” as a condition of closing.         J.A. 28.   Clearly, in order

for Toll to receive a zoning exception from the Arlington county

government, it must have applied for one.           Indeed, the Agreement

contemplates that Toll may make just such an application - Section

15G as amended refers to seeking “(ii) a special exception for the

                                    12
Property and/or (iii) any other government or other authorizations

Buyer deems necessary, in its sole discretion, to develop the

Property.”   J.A. 67.      The immediately succeeding section, 15H,

notes that “Buyer shall pursue the Approvals and permits necessary

for the satisfaction of the conditions to Closing at its sole cost

and expense.”      J.A. 27.
     Nowhere in the Agreement, however, is there a condition -

explicit or implicit - establishing a time frame within which Toll

would have to have filed an application for a Special Exception.

Nor is it apparent from the text that the parties intended to

impose such a time frame on Toll.          Indeed, the “sole discretion”

language that appears in both the original and amended versions

of Section 15G seems to contradict any rigidity that Litman now

seeks to impose on Toll.        J.A. 27, 67.

     On appeal, Litman argues that the “time is of the essence”

clause meant that Toll was required to file its application by a

certain date. Litman proposes that although Toll may have had the

“sole discretion” as to “what it submitted and which governmental

approvals it could seek and accept,” the time-essence provision

“limit[ed]   the    when   of   any   such    submissions   or   requests.”

(Appellant’s Reply at 20.)        We disagree.      It is not reasonable

that a contract which purports to give Toll “sole discretion” to

act with regard to the seeking of a zoning exception would at the

same time impose external deadlines upon the company, essentially

requiring it to begin the 4.1 process even before it was clear the

FBC application could not succeed.           As the district court noted,

                                      13
“the contract says nothing about how or when Toll Brothers applies

for that [] authorization.”             J.A. 248;   see also J.A. 331-32.

Moreover,     were   Toll   to   have    been   successful   in    seeking     an

exception under the FBC process, the 120 - 150 day deadlines to

which Litman refers would have been irrelevant.

         We must next determine what standard applies to Toll’s

exercise of discretion under the Agreement.            Toll’s discretion is

not unlimited; “a party may not exercise contractual discretion

in bad faith, even when such discretion is vested solely in that

party.”     Virginia Vermiculite, Ltd. v. W.R. Grace & Co., 156 F.3d
535, 542 (4th Cir. 1998) (citing Steven J. Burton & Eric G.

Anderson, Contractual Good Faith 46-47 (1995) (“Thus, contractual

discretion is presumptively bridled by the law of contracts-by the

covenant of good faith implied in every contract.”)) Accordingly,

the determination becomes whether Toll acted reasonably, or in
                                                                       4
good faith, in deciding to pursue a 4.1 application,                       and in

filing the application when it did.             We conclude that it did.

     Litman has attempted to portray the FBC’s position with

regard to the dormer issue as being increasingly negative; it

claims that Toll should have known in the summer of 2005 that the

County     would   not   approve   its    design.    Whether      or   not   this

     4
      In discussing the standard of discretion to be applied to
Toll’s actions, the district court referred, alternately, to
“unreasonable[ness],” “bad faith” and “[abuse of] discretion.”
J.A. 249.   We agree with the district court that “there is a
certain implicit discretion on the part of Toll Brothers to when
and how it applies [for the Special Exception],” J.A. 249, and
Toll’s behavior was acceptable regardless of which phrasing of the
standard is applied.
                                         14
characterization is accurate, what is certain is that Dove’s

initial dormer plans were greeted warmly by Tucker in late

spring/early summer of 2005; that the citizen group’s feelings

about the dormer issue became stronger throughout the summer and

fall; and that despite the best efforts of Litman, among others,

the county disallowed occupiable dormer space under the FBC on

November 15, 2005.        As the district court pointed out, “Litman

concedes that the decision to pursue the special exception through

the process at that time made sense.”         J.A. 251.   Right up until

the official change to the FBC, Litman and the working group

continued to discuss whether there was any way to meet the

community’s demands while providing Toll the project density it

needed. Indeed, as late as December 2005 - after the FBC had been

amended - Litman and Toll encouraged the county to consider a

“loft” level as an acceptable replacement for dormer space.

Emails from Litman to Puskar, Dove, and executives at Toll suggest

that the county took the suggestion seriously, J.A. 1168-72,

though it did not ultimately approve such a change.

     Given the state of flux surrounding the dormer issue, Toll

cannot be said to have acted in bad faith in pursuing a special

exception   under   the    FBC   process   until   November   2005.5   The

     5
      It should also be noted that it was not unreasonable for Toll
to pursue a Special Exception via the FBC, instead of preparing a
4.1 application from the outset; Puskar points out that a “Special
Exception sought for the Property through a 4.1 Site Plan Amendment
application at the outset would have stood no chance at all, as the
FBC itself . . . was designed as the vehicle for redevelopment of
the Columbia Pike Corridor.” J.A. 844.
                                     15
district court referred to the series of events leading up to

November thusly: “for a long time [obtaining approval under the

FBC] was possible.     Then in November it became impossible, and

then [Toll] had to put together a new application.”              J.A. 331.

The November 15th decision was the first official word from the

county that Toll’s proposed design would be unacceptable, and it
was   after   that   date   that   Toll   began   to   prepare    its   4.1

application. The emails referenced above reveal that Toll pursued

its application even given Litman’s suggestion that lofts might

be an acceptable way to achieve the projected density.

      Eight weeks expired between the county’s official revision of

the FBC and Toll’s initial 4.1 submission; Dove states, and Litman

does not dispute, that this was a very short period of time in

which to prepare such an application.             According to William

Holmes, a Vice President of Toll, Richard Litman told him that he

thought Toll was “very smart” to file a 4.1 Site Plan Amendment,

because it would force the county to work with Toll on approval

of the initial plans.       J.A. 871.

      Litman also argues that Toll’s failure to obtain a traffic

impact analysis far enough in advance of the spring submission

deadlines is sufficient to raise a question of Toll’s bad faith.

It remains true, however, that under the 4.1 regulation, a traffic

impact analysis was not due until the final submission of the

application. Of course, had Toll been able to obtain an exception

under the shorter FBC process, a January 2006 request would have

provided ample time for the traffic analysis to be conducted.

                                    16
Although it may have been more prudent for Toll to have requested

the traffic analysis when it first decided to pursue the 4.1

application, the fact that it did not do so is not evidence of bad

faith.

      Finally,       Litman        claims     that    Toll     knew    that   any    4.1

application         that    contained       either    residential       mezzanines    or

dormers would be denied by the county, and that Toll continued to

seek an exception under 4.1 solely to obtain this denial.                           Under

the       amended    Section       16C(ii),        this    would   trigger    Litman’s

obligation to return Toll’s deposit.6                     The implication appears to

be that the contract obligated Toll to proceed to closing, even

at the cost of scaling back the initial profitability of the

project.       This argument is undercut by the very terms of the

Agreement, which identified decisions concerning the Special

Exception      as    being      within      Toll’s    “sole    discretion”    in    both

Sections 15G, J.A. 67, and 16B, J.A. 28.                           Moreover, as the

district court observed, “Litman appealed . . . the Zoning Board’s

decision to deny Toll Brothers’ application, alleging that the

board      acted     in    an   unreasonable,         arbitrary,       capricious    and

discriminatory            manner    when     it    denied     Toll’s    complete     and

acceptable application.”              J.A. 336.

      The district court concluded that no reasonable jury could

find that Toll acted unreasonably or in bad faith.                       J.A. 333.     In

so concluding, it noted that the parties had filed cross-motions

      6
      Indeed, Litman’s interest in retaining Toll’s deposit appears
to be a major reason for this litigation.
                                              17
for summary judgment and that the facts were largely undisputed.

J.A. 332.   We agree that there are no undisputed material facts,

and the mere fact that it may have been possible for Toll to act

more expeditiously is not sufficient to substantiate Litman’s

claims that Toll breached the Agreement.

                              IV.

     For the foregoing reasons, the decision of the district court

granting summary judgment to Toll is affirmed.

                                                         AFFIRMED

                                18