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Council of Unit Owners of 100 Harborview Drive Condominium v. Clark

United States District Court, D. Maryland

October 2, 2019

PAUL C. CLARK, SR., et al., Cross-Appellees.


          Stephanie A. Gallagher United States District Judge

         This appeal results from the reorganization of the Council of Unit Owners of The 100 Harborview Drive Condominium (“Appellant” or “Reorganized Debtor”) in Chapter 11 bankruptcy proceedings before the United States Bankruptcy Court for the District of Maryland (“Bankruptcy Court”).[1] Reorganized Debtor appeals the Preliminary Damages Order, ECF 6-35, and Final Damages Order of the Bankruptcy Court, ECF 6-49. Judge Michelle Harner (“Judge Harner”) of the Bankruptcy Court awarded certain damages to Paul C. Clark, Sr., Rebecca Delorme, and Paul C. Clark, Jr. (“Appellees” or “Creditors”) for their claims during the Chapter 11 reorganization process. I have reviewed Appellant's brief, ECF 17, Appellees' brief, ECF 19, and Appellant's reply, ECF 21. No. hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons set forth below, the Bankruptcy Court's decision is AFFIRMED.

         I.Factual Background

         This appeal “is the latest-filed action in a quintet of cases, and numerous administrative actions relating to a series of disputes between [Appellees], who purchased a penthouse condominium in the Harborview Towers, and [Appellant], who manage[s] or managed Harborview.” See Clark v. 100 Harborview Drive Council of Unit Owners, 2016 WL 1159198 (D. Md. Mar. 23, 2016). A detailed factual background is found in this Court's Memorandum Opinion dismissing the Creditors' appeal as equitably moot, and is incorporated by reference herein. See Memorandum Opinion, ECF 22. This particular case stems from claims filed by Appellees, as part of Appellant's Chapter 11 reorganization, for damages to their condominium (“Unit PH4A”) caused primarily by water leakage. The Bankruptcy Court conducted a trial in February, 2018, during which it observed fact and expert witnesses over the course of four days. ECF 6-35 at 6. For instance, Appellees' structural engineer (Otto Guedelhoefer), and Appellant's building engineer (Christopher Coleman) each testified about leakage in Unit PH4A. See Id. at 7. Additionally, Loren Reese provided expert testimony about the rental market at the Inner Harbor, which Appellees leveraged in support of their loss of use claim. Id. at 28. Following the trial, the Bankruptcy Court issued its Preliminary Order on April 10, 2018. See Preliminary Order Regarding Creditors' Damages Claim, ECF 6-35.

         In its final damages award, the Court awarded Appellees $731, 000 in “set damages” and $19, 552 in “ongoing damages, ” on October 16, 2018, for a total aggregate amount of $750, 552. Final Order Regarding Creditors' Damages Claim, ECF 6-49 at 12-13. This aggregate amount included $6, 000 per month in “loss of use” damages, and $299, 000 for repair of the unit. ECF 6- 35 at 27. Loss of use damages were awarded for 72 months, i.e., February 23, 2012 until February 23, 2018, for a total of $432, 000.[2] Id. at 26.

         Relevant to this appeal, the Court limited the loss of use damages to this timeframe, because Appellees were precluded from seeking damages for conduct that took place prior to February 23, 2012. Id. at 11. February 23, 2012 was the appropriate starting date, because the Baltimore City Circuit Court (“City Court”) had entered summary judgment in favor of Appellant in a related case on that date.[3] See Memorandum Opinion, ECF 5-43 at 16. Because of the City Court's decision, the Bankruptcy Court found that Appellees' claims predating February 23, 2012, were precluded under the doctrine of res judicata. ECF 6-35 at 4 (“[T]he Creditors' breach of fiduciary duty and breach of contract claims, and any related damages, based on facts, allegations, or conduct arising on or prior to February 23, 2012, are barred under the doctrine of res judicata”). Importantly, however, the Bankruptcy Court found “that the Creditors adequately identified leaks and damage to Unit PH4A occurring after February 23, 2012.” Id. at 12 (emphasis added). Appellant filed its notice of cross-appeal on November 12, 2018. ECF 1-14.

         II. Cross-Appeal

         A. Legal Standard

         This court has jurisdiction to hear appeals from final orders of the bankruptcy court. 28 U.S.C. § 158. On appeal from the bankruptcy court, the district court acts as an appellate court, and reviews the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. In re Johnson, 960 F.2d 396, 399 (4th Cir. 1992). A bankruptcy court's calculation of damages is a finding of fact, and therefore is reviewable only for clear error, but to the extent those calculations were influenced by legal error, review is de novo. See Marinucci v. SG Homes Assocs., 472 B.R. 299, 311-12 (D. Md. 2012) (quoting Universal Furniture Int'l, Inc. v. Collezione Europe USA, 618 F.3d 417, 427 (4th Cir. 2010)).

         B. Loss of Use Damages after February 23, 2012

         The Bankruptcy Court determined that Appellees identified leaks and damage to Unit PH4A that occurred after February 23, 2012. ECF 6-35 at 12. On appeal, Appellant contends that “[n]o evidence was presented by Creditors to show what, if any, damage to the Unit existed as of February 23, 2012.” ECF 17 at 19. However, the record provides ample support for the Bankruptcy Court's conclusion that damage occurred after that date.

         At trial, both Appellant and Appellees presented evidence indicating that damage to the unit continued after February 23, 2012. First, several witnesses testified explicitly about persisting leaks. Mr. Guedelhoefer - Appellees' structural engineer - testified that leaks continued, and worsened, after February 23, 2012. ECF 6-35 at 7 (“Mr. Guedelhoefer provided extensive testimony concerning the leaks that existed during his various visits since 2013, including leaks that remained as of the date of the trial.”). Furthermore, Dr. Clark and Mr. Coleman - Appellant's own expert witness - each testified about leakage that continued, even as of the trial in February, 2018. Id. at 8, id. at 7 n.9 (“The Debtor's expert witness, Mr. Coleman, generally agreed with Mr. Guedelhoefer's description of leaks existing as of the date of the trial.”). In issuing its damages ruling, the Bankruptcy Court assessed the credibility of these individuals. Id. at 12 (“The Court finds the testimony of Dr. Clark, Mr. Guedelhoefer, and [another witness] concerning the increase in water leaks and related damages from 2012-2017, which was not directly disputed by the Debtor's evidence, persuasive.”).

         In addition to considering the witness testimony, the Court relied on other evidence presented by Appellant. Specifically, Appellant provided a letter (dated February 23, 2012) stating that repairs to leaks in Unit PH4A were completed during the first two weeks of February, 2012. Id. (explaining that the letter stated Appellant was “satisfied” that the unit's roof had been repaired). The Court concluded that, since major repairs were completed in early February, any leaks identified during the trial must have related to conduct occurring after February 23, 2012. See Id. Accordingly, “[b]ased on a review of all the testimony and evidence admitted during trial, the Court [found] that the Creditors established conditions within Unit PH4A that relate to the Debtor's conduct and breach of contract after February 23, 2012.” Id.

         The Bankruptcy Court fully acknowledged that the Creditors' conduct, e.g., leaving wet and contaminated materials in the unit, also contributed to the overall damage. ECF 6-35 at 22- 23. Thus, Judge Harner made significant reductions to the amounts of Appellees' damages claims. Id. at 32 (“[A]ny damages proximately caused by the Debtor's breach are subject to adjustment based on the Creditors' failure to mitigate damages”). To reach its conclusion, the Court analyzed evidence, and made credibility determinations about several witnesses. Credibility assessments merit significant deference when the bankruptcy court has presided over a trial. See In re Dornier Aviation, 453 F.3d 225, 235 (4th Cir. 2006) (“Deference to the bankruptcy court's findings is particularly appropriate when, as here, the bankruptcy court presided over a bench trial in which witnesses testified and the court made credibility determinations.”). Appellant has not met its burden to show that any of the Bankruptcy Court's factual findings are clearly erroneous. See United States v. Wooden, 693 F.3d 440, 451 (4th Cir. 2012) (“A court reviewing for clear error . . . must ask whether, on the entire evidence, it is left with the definite and firm conviction that a mistake has been committed.”). Indeed, Appellant does not challenge any of the Bankruptcy Court's specific factual findings concerning Mr. Guedelhoefer, Mr. Coleman, or the letter dated February 23, 2012. See ECF ...

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