Only parties to contract can invoke fees provision

Where a real estate contract was expected to close in 2008 but did not close until 2017, a suit brought by an entity entitled to receive certain expenses at closing was timely as it was filed within three years of the closing. However, because the attorneys’ fees provision applied only to parties to the real estate contract, the nonparty was not entitled to recover its fees.

Background

Years ago, U.S. Home Corporation entered land purchase and development contracts with others not party to this suit. Under one contract governed by Maryland law, U.S. Home was to reimburse Parkway 1046 LLC for certain expenses when the land purchase was finalized, which was expected to happen around 2008. But the matter became ensnared in litigation, and the purchase did not take place until 2017.

Once the purchase was finalized, Parkway sought the reimbursement required by the contract. U.S. Home did not pay, and Parkway then filed this action. U.S. Home argued that Parkway’s lawsuit is untimely under Maryland’s three-year statute of limitations. The district court held that Parkway’s cause of action did not accrue until 2017, and thus this lawsuit—filed that same year—was timely.

Next, the district court concluded that though the breach occurred in April 2017, “given the particular circumstances of this case,” the court would award prejudgment interest to Parkway beginning May 27, 2008. The court reasoned that, in light of the Maryland district court’s finding that U.S. Home should have settled with the sellers on that date, Parkway also should have received payment at that time.

Finally, the district court awarded attorneys’ fees to Parkway based on a provision in the development contract allotting attorneys’ fees to the prevailing party in “any litigation aris[ing] between the parties regarding th[e] Contract.”

Timeliness

U.S. Home’s principal argument is that Parkway’s claim accrued in 2008 or 2009, and therefore its lawsuit was untimely. The plain language of the contract supports the district court’s finding that there was no breach—and thus Parkway’s claim did not accrue—until 2017.

U.S. Home raises a litany of arguments to resist this conclusion, but to no avail.

Each argument boils down to one central theme: that Parkway’s cause of action accrued when U.S. Home should have proceeded to settlement, and thus Parkway’s claim is untimely. None of U.S. Home’s arguments account for the fatal flaw in this logic—that the plain language of the contract provides that there could be no breach as to Parkway until the “consummation of the purchase and sale,” which occurred in 2017.

Interest

U.S. Home next challenges the district court’s award of prejudgment interest to Parkway accruing from May 27, 2008. The court concludes that Maryland law requires that Parkway receive prejudgment interest, but only from April 21, 2017.

Prejudgment interest accrues from the date where “the obligation to pay and the amount due” were both “certain.” Here, the contract did not create any obligation for U.S. Home to pay Parkway the reimbursement until the time of settlement. However, as of the date of settlement, the reimbursement was a specific amount that was definitively owed.

Parkway is entitled to prejudgment interest as of right—but only from the date the reimbursement came due, that is, the date of settlement in 2017. This court therefore vacates the district court’s order and remand with directions to order prejudgment interest as of right accruing from April 21, 2017.

Attorneys’ fees

Finally, U.S. Home contends that the district court erred when it awarded attorneys’ fees to Parkway. Considering the plain language of the development contract, this court agrees.

The development contract provides that “[i]n the event that any litigation arises between the parties regarding this Contract, the substantially prevailing party shall be entitled to recover its reasonable attorneys fees . . . from the other party.” Significant textual evidence supports interpreting “party” to mean a signatory to the development contract and not to include others like Parkway. And where attorneys’ fees were to be permitted for a nonparty, the contract so specified. Accordingly, this court reverses the district court’s order awarding attorneys’ fees to Parkway.

Affirmed in part, reversed in part, vacated in part and remanded with instructions.

Parkway 1046 LLC v. U.S. Home Corporation, Appeal No. 18-1556, June 3, 2020. 4th Cir. (Wynn), from EDNC at Norfolk (Morgan). David Marroso, Jeffrey Gurrola, John B. Sprangers, Adam M. Carroll and Carl A. Eason for Appellant, Robert W. McFarland, E. Rebecca Gantt and Ashley P. Peterson for Appellee. VLW 020-2-144. 22 pp.