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Martz v. Day Development Company, L.C.

United States District Court, D. Maryland

September 25, 2019

BYRON W. MARTZ
v.
DAY DEVELOPMENT COMPANY, L.C., et al.

          MEMORANDUM

          Catherine C. Blake United States District Judge.

         Pending before the court is defendants Day Development Company, L.C. ("DDC") and Southlawn Lane Properties, L.L.C.'s ("Southlawn") (collectively, "the development company")[1]renewed motion for judgment as a matter of law (ECF No. 85) and plaintiff Byron W. Martz's cross-motion for judgment (ECF No. 86). Martz's Amended Complaint contains four counts: (I) Breach of Contract (Domiciliary Care Parcel); (II) Breach of Contract (Commercial Parcel); (III) Declaratory Judgment; arid-(IV) Unjust Enrichment. (Am. Compl. ¶¶ 82-121, ECF No. 27). The court previously granted summary judgment on liability in Martz's favor as to Counts I and II. (ECF Nos. 53, 54). A four-day bench trial has been held. For the reasons outlined below, the court will deny the "development company's, motion for judgment as a matter of law and will enter judgment in Martz's favor as to Count IV of the Amended Complaint.

         FINDINGS OF FACT AND CONCLUSIONS OF LAW[2]

         This dispute arises out of a series of contractual agreements between Martz and the development company regarding real property located in Frederick County, Maryland. Based on evidence adduced at the bench trial held on October 5, 2018, January 3, 2019, and January 4, 2019, [3] the court makes the following findings of fact and conclusions of law.

         A. 1996 Purchase Agreement

         On March 21, 1996, Bernard E. Burkett, III, Earl E. Burkett, and Martz (collectively the "Sellers") entered into a purchase agreement ("1996 Purchase Agreement") with Horizon Development and Interest Company, L.L.C. ("Horizon") for the sale of real property located in Frederick County, Maryland.[4] (J.E. 3). In the 1996 Purchase Agreement, Horizon agreed to pay the Sellers a minimum purchase price of $ 2, 725, 000.00, , plus "fifty percent (50%) of the finished lot value of. any portions of the Property which are designated as Commercial, Office or other development designation than Residential (the "Commercial Property")." (Id ¶ 2.1).[5] In 1999, Horizon assigned its rights under the 1996 Purchase Agreement to Valley Ranch Associates, L.L.C. ("Valley Ranch"), (J.E. 9-A); in 2000, Valley Ranch assigned these rights to DDC. (J.E. 9-B).

         B. 2003 Consulting Services Agreement

         In 2003, DDC and Martz entered into a Consulting Services Agreement (the "2003 CSA"). regarding a portion of the property known as the Domiciliary Care Parcel. (J.E. 13). DDC had previously..obtained, approval from the City of Frederick to develop a 189-unit domiciliary, care facility on -the Parcel but sought to amend: its approved development plan. Under-the 2003.CS A, Martz agreed to "assume primary responsibility" for applying to the City of Frederick for an amendment "so that the permitted use for the Domiciliary Care Parcel shall be a multistory residential condominium project." (Id at 2(b)). Martz and DDC agreed to "share equally all costs incurred by Martz in having such application prepared, submitted and pursued with the City of Frederick." (Id).

         The 2003 CSA outlined two methods for calculating Martz's compensation. If Martz obtained the amendment from the City of Frederick, but DDC decided to sell the Domiciliary Care Parcel "for use as a condominium project to a third party, " DDC agreed to pay Martz 50 percent of its net profit on the sale. (Id. at 4(a)).[6] If Martz obtained the amendment and DDC decided to build the condominium units, DDC agreed to pay Martz 50 percent of the net' appraised value of the Domiciliary Care Parcel. (Id. at 4(b)).[7] The 2003 CSA also specified that Martz would be paid upon the happening of one of three events, whichever was earlier: (1) "A sale of the Domiciliary Care Parcel, or a portion thereof; (2) "Obtaining by DDC or other builder, in the event of assignment, a building permit for the construction of any units on the Domiciliary Care Parcel..."; or (3) "January 1, 2015." (Id. at 4(c)(i)-(iii)). Pursuant to the 2003 CSA, DDC's obligation to pay Martz "shall survive any sale of the Domiciliary Care Parcel, and any termination of this Agreement, and shall be binding upon any transferee, assignee or successor in interest of DDC to the Domiciliary Care Parcel." (Id. at 4(c))., C. 2005 ACSA

         In 2005, DDC and Martz executed an amendment to the 2003 CSA (the "2005 ACSA"), which expanded the scope of Martz's consulting services. (J.E. 17). The 2005 ACSA stated that Martz would provide consulting services regarding development of the "Commercial Parcel, " another portion of the land originally sold pursuant to the 1996 Purchase Agreement. Like the 2003 CSA, the 2005 ACSA set forth two potential methods for determining Martz's compensation. First, if DDC decided to sell the Commercial Parcel, "DDC shall pay Martz fifty percent (50%) of the finished lot value of the Commercial Parcel . . . [and] the net proceeds of sale shall be divided equally between DDC and Martz."[8] (Id. at 6(b)). Second, if DDC decided to build on the Commercial Parcel, Martz was entitled to "to fifty percent (50%) of the Net Appraised Value of the Commercial Parcel."[9] (Id.) Once again, DDC agreed to pay Martz upon the happening of one of three events, whichever was earlier: (1) "A sale of the Commercial Parcel, or portion thereof; (2) "Obtaining by DDC or other builder, in the event of an assignment, a building permit for the construction of any commercial units on the commercial lots or parcels of the Commercial Parcel . . ."; or (3) January 1, 2015. Id. at 6(c)(i)-(iii)). The 2005 ACSA provided that DDC's obligation to pay Martz "shall survive any sale of the Commercial Parcel, and any termination of this Agreement, and shall be binding upon any transferee, assignee or successor in interest of DDC to the Commercial Parcel." (Id.).

         D. Transfer of Domiciliary Care and Commercial Parcels to Southlawn

         On November 30, 2005, DDC granted the Domiciliary Care Parcel and the Commercial Parcel to Southlawn for "no monetary consideration." (J.E. 33). DDC and Southlawn did not formally record this transfer until 2012. (Id).

         E. The Development Company Does Not Sell or Build on Parcels Prior to January 1, 2015

         The parties do not dispute that as of January 1, 2015, neither the Domiciliary Care Parcel nor the Commercial Parcel had been sold to a third party, and the development company had not begun construction on the Parcels. At trial, the development company contended that they could not sell or develop either Parcel because of poor market conditions. Martz presented significant ' evidence, in the form of witness testimony, that established by a preponderance of the evidence that the Parcels could have been profitably sold or developed. In any event, the contracts did not provide for a later payment date than January 1, 2015, even if market conditions were poor.

         1. Testimony of Walter C. Martz[10]

         The plaintiffs brother, Walter C. Martz ("Walter"), testified at trial regarding his knowledge of development on the land surrounding the Domiciliary Care and Commercial Parcels. (Trial Tr. Oct. 5, 2018, at 47:2-18, 48:2-13). Walter testified that the southern portion of the Burkett farm, which was part of the property originally sold pursuant to the 1996 Purchase Agreement, "has all been developed ... by Mr. Day[11] and other builders." (Id. at 47:2-8). Walter also testified about the development of property adjacent or .near to the Parcels.[12] (Id. at 47:15-48:13).

         2. Testimony of Byron Winebrenner Martz

         Martz testified that he obtained the approvals as specified by the 2003 CS A and that it was his understanding that if the development company did not build or sell the Domiciliary Care Parcel by January 1, 2015, "[i]t would be appraised as finished lots, permits pulled, and I would be paid." (Id. at 66:21-67:1). Martz also testified that in November 2014, he called Mr. Day to inquire about the status of his compensation. (Id. at 70:7-12). According to Martz, Mr. Day responded, "I'm not going to pay you, and I'm just going to take the property from you." (Id.)[13]

         3. Testimony of Terrence W. McPherson

         Both Martz and the development company called McPherson, an expert in the field of real estate appraisal, to testify at trial McPherson testified that the development company hired him[14]to assess the value of the Domiciliary Care and Commercial Parcels.[15] (Trial Tr. Oct. 5, 2018, . at 117:22-118:3). The development company first approached McPherson in 2012 to conduct an appraisal "for internal decision-making regarding the development of the property." (Id. at 118:1-7). McPherson finalized his appraisal in 2013. (Id. at 120:15-18). McPherson's appraisal of each Parcel was based on the hypothetical conditions that the roads in each Parcel were complete and the proposed uses for each Parcel were approved. (Trial Tr, Oct. 5, 2018, at 132:22-133:4; Trial Tr. Jan. 4, 2019, at 60:5-22). McPherson determined that the highest and best use of the Domiciliary Care Parcel was for development as two-over-two residential condominiums and that there was adequate demand for these condominiums. (Trial Tr. Oct. 5, 2018, at 130:10-21). McPherson also noted that at the time of the 2013 appraisal, the development company was taking no efforts to sell the Domiciliary Care Parcel. (Trial Tr. Jan. 4, 2019, at 112:1-4). McPherson concluded that the fair market value of the Domiciliary Care Parcel was $4, 200, 000.00.[16] (Id at 132:22-133:9, 133:14-134:12). McPherson also determined that there was some demand for the Commercial Parcel, (id. at 130:3-5), and valued it at $1, 100, 000, 000, subject to the completion of the roads.[17] (Id at 134:24-135:4).

         4. Testimony of William J. Holtzinger

         Holtzinger, an expert in civil engineering and land development in Frederick City, Maryland, testified that 132 two-over-two condominium units could be constructed on the Domiciliary Care Parcel (Trial Tr. Oct. 5, 2018, at 149:15-20, 159:11-14). Holtzinger testified that the Domiciliary Care Parcel was approved for multifamily use, which can include any housing type that falls within the category of "multifamily" as defined by the City of Frederick. (Id at 156:19-23). Holtzinger also testified ...


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