Virginia Lawyers Weekly//June 3, 2022
Virginia Lawyers Weekly//June 3, 2022//
Where a reasonable person would conclude a consultant was entitled to compensation after he fully performed under the parties’ contract, the court did not err in awarding damages using unjust enrichment principles.
In connection with two undeveloped parcels of land in Frederick, Maryland, the owner and developer, Day Development Company LC, entered into a consulting services agreement with Byron Martz for each parcel. Under the agreements, Martz agreed, as to one parcel, to obtain City of Frederick approvals to allow the developer to construct multi-story residential condominium units and, as to the other parcel, to perform unspecified services.
Each agreement provided for how the compensation amount for Martz’s services was to be calculated in the event that (1) the developer were to sell the parcel or (2) the developer were to elect to build on the parcel and obtain permits for doing so. After Martz obtained the necessary approvals and otherwise performed the services he was hired to do, the developer refused payment because it had neither sold the parcels nor elected to build on them, which, it claimed, were conditions precedent to payment.
The district court found that Day Development had breached the agreements in refusing payment. It filled the gap for the calculation of the amount of compensation by applying principles of unjust enrichment and awarded Martz $1,941,250.
Day Development contends first that the district court erred in failing to recognize that contractual conditions precedent to Martz’s compensation had never been satisfied. The court disagrees. A reasonably prudent person would read the provisions to mean that Martz was to be compensated for his “obtaining the Approvals for the Proposed Use,” and that there were no other conditions precedent for earning compensation. The paragraphs of the agreements addressing the sale or development of the parcels were included solely to distinguish between two methods for calculating the amount of Martz’s compensation.
Day Development contends that “it was never possible” for Day Development to develop the commercial parcel before Jan. 1, 2015, when payment became due to Martz. The district court ruled that the impossibility doctrine did not apply because the plain language of the agreements “obligated the development company to pay Martz no later than January 1, 2015, irrespective of the progress of any infrastructure on the Parcels.” The court agrees.
The impossibility doctrine identified by Day Development might appropriately be advanced by a person charged with the development of the commercial parcel. But Martz’s obligation was to obtain “approvals,” not to develop the property, and Day Development’s obligation to pay Martz arose when the approvals were obtained.
Day Development contends next that the district court erred in awarding Martz restitution under principles of unjust enrichment, because the relationship between the parties was fully and unambiguously governed by existing contracts. Day Development is correct in noting that when a contract exists, awarding restitution for unjust enrichment is, as a general rule, barred.
But the Maryland courts also provide several exceptions, one of which allows restitution for unjust enrichment “when the express contract does not fully address a subject matter.” The two agreements failed to address how Martz was to be compensated if Day Development neither sold the parcels nor developed them but simply continued to hold them, and denying any payment because there was this gap in the agreements would unjustly enrich Day Development, which received the benefit of Martz’s services.
Finally, Day Development challenges the amount of the district court’s award, claiming that it was untethered to any facts and simply constituted “a combination of contract damages and pure conjecture unsupported by any evidence.” The court concludes that the district court did not abuse its broad discretion in determining the measure of gain in the value of the parcels attributable to Martz’s services, and therefore rejects Day Development’s challenges to the court’s computations.
Quattlebaum, J., dissenting:
The agreements are circular. They indicate Martz is due compensation once he obtained the approvals, which he did. They provide that he shall be compensated on either the date the property is sold, the date the property is developed or Jan. 1, 2015. But the only two methods to calculate Martz’s compensation in the agreements are based on either the sale or the development of the property. In my view, it is not unreasonable to interpret the agreements to mean Martz was not to be paid until the property was either sold or developed.
Thus, we have two reasonable interpretations of the agreements. Under Maryland law, that means the agreements are ambiguous. Accordingly, I would vacate the order granting Martz summary judgment and remand to the district court to take evidence, including extrinsic evidence, to determine the parties’ intent and to resolve the ambiguity in accordance with Maryland law.
Martz v. Day Development Company LC, Case Nos. 19-2186, 19-2241, May 24, 2022. 4th Cir. (Niemeyer), from DMD at Baltimore (Blake). Bruce Lawrence Marcus for Appellants/Cross-Appellees. Leslie A. Powell for Appellee/Cross-Appellant. VLW 022-2-130. 21 pp.