CDC-LCGH, LLC v. Mayor and City Council

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 08-1332

CDC-LCGH, LLC,

Plaintiff - Appellant,

v.

MAYOR AND CITY COUNCIL OF BALTIMORE,

Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District
Judge. (1:06-cv-02235-WDQ)

Argued: January 29, 2009 Decided: February 26, 2009

Before GREGORY and DUNCAN, Circuit Judges, and Arthur L.
ALARCÓN, Senior Circuit Judge of the United States Court of
Appeals for the Ninth Circuit, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Paul Reinherz Wolfson, WILMER, CUTLER, PICKERING, HALE &
DORR, L.L.P., Washington, D.C., for Appellant. David Eugene
Ralph, Mark Houston Grimes, BALTIMORE CITY DEPARTMENT OF LAW,
Baltimore, Maryland, for Appellee. ON BRIEF: Andrew H. Baida,
Caroline L. Hecker, ROSENBERG│MARTIN│GREENBERG, L.L.P.,
Baltimore, Maryland; Andrew D. Freeman, BROWN, GOLDSTEIN & LEVY,
L.L.P., Baltimore, Maryland, for Appellant. George A. Nilson,
City Solicitor, Justin S. Conroy, Assistant Solicitor, BALTIMORE
CITY DEPARTMENT OF LAW, Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

Appellant, CDC-LCGH, LLC (“CDC”), sued the Mayor and City

Council of Baltimore, Maryland (“City”), for breach of contract

and other claims arising out of the expiration of a lease

agreement on an historic City-owned building. CDC had hoped to

extend the lease and renovate the building for use as its

headquarters. However, CDC failed to obtain zoning approval for

the proposed use of the property, and such approval was an

express condition precedent to extension of the lease. The

district court granted summary judgment to the City, and CDC

appealed. For the reasons discussed below, we affirm.

I.

CDC is a Delaware limited liability company whose principal

place of business is Delaware. CDC is engaged in the business

of renovating, restoring, and preserving historic properties.

In 2001, CDC became interested in the Gatehouse, an eight-

sided Gothic revival stone and tile-roof structure built in the

1880s and located in Baltimore’s Lake Clifton Park. At the

time, the building was dilapidated as a result of years of

disuse. CDC began negotiations with the City to acquire and

rehabilitate the Gatehouse for its use as CDC’s headquarters.

The City preferred a long-term lease to an outright sale.

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 On August 21, 2002, CDC and the City executed a written

lease. 1 It provided for an “Initial Term” of three years “for

the Lessee [CDC] to perform all necessary requirements for the

review, design and structural ‘Study’ of the Leased Premises.”

JA at 62. 2 If CDC obtained certain required approvals, including

“approval from the Board of Municipal and Zoning Appeals,” and

satisfied certain other conditions, including demonstrating

adequate financing, the lease would extend for an additional

forty-seven-year term. Id. If CDC failed to meet the various

conditions, the lease would terminate.

The lease provided that, during the Initial Term, the

property “shall be used solely for the review, design and

structural ‘Study’ of the leased premises.” JA at 61.

Thereafter, if the lease were extended, the property “shall be

used as office space by Lessee.” JA at 62. The lease further

provided that, upon termination,

all alterations, additions or improvements made by
either of the parties hereto upon the premises . . .
shall be the property of the Lessor, and shall remain
upon and be surrendered with the premises at the

1
The lease was executed by Center Development Corporation, a
Maryland corporation, and then assigned to CDC.
2
Citations to “JA” are to the Joint Appendix submitted by
the parties.

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 termination of this Lease, without molestation or
injury.

JA at 75.

CDC made improvements to the property during the Initial

Term. In November 2003, for example, CDC applied for and

received building permits to restore the Gatehouse. CDC

installed approximately 650 feet of water and sewer lines and

performed structural repairs. CDC asserts that it discussed

this work with the City before, during, and after the time the

improvements were made.

In 2004, CDC began to seek zoning approval from the Board

of Municipal and Zoning Appeals (“Zoning Board”). Although the

lease called for the property to be used “as office space by

Lessee,” CDC sought approval to use it as a “multi-purpose

center.” It did so because the Zoning Board informed it that

this was the only permissible use under the applicable

regulations. Nevertheless, the Zoning Board ultimately denied

the application, however, because CDC’s description of the

project did not include the kinds of governmental or community

activities required to qualify as a multi-purpose center as

contemplated by the regulations. CDC did not seek judicial

review of this decision in Maryland state courts.

On August 29, 2005, the City informed CDC that it believed

the lease had terminated upon the expiration of the Initial Term

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due to CDC’s failures to demonstrate adequate funding and to

obtain Zoning Board approval.

In August 2006, CDC brought an action against the City

alleging, inter alia, breach of contract, unjust enrichment, and

promissory estoppel. 3 The district court granted summary

judgment to the City on all claims, and this appeal followed.

II.

We review a district court’s grant of summary judgment de

novo, taking all facts and permissible inferences in the light

most favorable to the appellant. Castillo v. Emergency Med.

Assoc., P.A., 372 F.3d 643, 646 (4th Cir. 2004). As a federal

court sitting in diversity, we apply the substantive law of

Maryland, the state in which the action arose. Id. We address

CDC’s arguments in turn.

A.

CDC claims the City breached its contract by terminating

the lease at the end of the Initial Term. The district court

held there was no breach because the lease expired by its own

3
CDC also alleged fraud in the inducement, fraud by
concealment, and negligent misrepresentation, but those claims
have not been pursued on appeal.

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terms when CDC failed to secure Zoning Board approval by the end

of the Initial Term. We agree.

The lease expressly provided, as a condition precedent to

its extension, that “Lessee must acquire approval from the Board

of Municipal and Zoning Appeals.” CDC does not dispute that it

sought, but failed to acquire, approval by the Zoning Board to

use the property as private office space. CDC contended below

that its failure to obtain the approval of the Zoning Board was

excused because of impossibility of performance. It argued,

somewhat circularly, that because the proposed use for the

Gatehouse was incompatible with applicable zoning, CDC ought to

be “excused” from a lease provision that conditioned extension

of the lease on CDC’s obtaining the approval of the Zoning

Board.

CDC’s theory on appeal has evolved significantly. It now

argues that the lease never required it to obtain the Zoning

Board’s approval of the proposed use of the property. CDC

contends that the district court erred in “rewriting” the lease

by construing the phrase “approval of the Board of Municipal and

Zoning Appeals” as meaning Zoning Board approval “of the use” of

the property. See Appellant’s Br. at 15-16. CDC argues it was

error for the district court to interpret the lease “in a manner

that renders it impossible to perform.” Id. at 16. Instead,

CDC urges us to read the lease as requiring “[Zoning Board]

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approval only to the extent such approval was necessary and

within the [Zoning Board]’s authority to provide.” Id. at 12.

CDC suggests that “approval” in this context means approval for

such matters as parking, signage, bulk dimensions, and lot

coverage, but not for “use.”

CDC’s contract-interpretation theory was not advanced

below, 4 and we generally do not consider new arguments raised for

the first time on appeal. Muth v. United States, 1 F.3d 246,

250 (4th Cir. 1993). “Exceptions to this general rule are made

only in very limited circumstances, such as where refusal to

consider the newly-raised issue would be plain error or would

result in a fundamental miscarriage of justice.” Id. Such is

clearly not the case here.

In any event, CDC’s newly minted contention is without

merit. “Maryland courts have long adhered to the principle of

the objective interpretation of contracts.” Wells v. Chevy

Chase Bank, F.S.B., 363 Md. 232, 250-51 (2001). Under this

approach, “where the language employed in a contract is

4
Although CDC argued below that its failure to acquire
Zoning Board approval was excused because of impossibility of
performance, that is a different argument from the one advanced
here. CDC’s initial argument was that a failure to obtain the
Zoning Board’s approval of the proposed use of the building,
even if it were required, was nevertheless excused. CDC’s
present assertion is that the lease should be interpreted as
having never included such a condition.

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unambiguous, a court shall give effect to its plain meaning and

there is no need for further construction by the court.” Id.

That is, “[t]he words employed in the contract are to be given

their ordinary and usual meaning, in light of the context within

which they are employed.” Id. at 251. And, although Maryland

“courts will prefer a construction which will make the contract

effective rather than one which will make it illusory or

unenforceable,” that canon of construction applies only when a

provision is ambiguous. Cadem v. Nanna, 243 Md. 536, 544 (1966)

(“Inasmuch as the provision is clear and unambiguous[,] resort

to the rules of construction . . . need not be had.”).

There is no ambiguity here. The text of the lease

provided, as a condition precedent to its extension beyond the

Initial Term, that the “Lessee must acquire approval from the

Board of Municipal and Zoning Appeals.” The most natural

reading of this provision is that it requires Zoning Board

approval of the object of the lease: renovation of the Gatehouse

by CDC for use as office space. While the language might be

read as also requiring Zoning Board approval for things like

signage and parking, it would make little sense to interpret the

text of the provision as referring to such collateral matters

while not referring as well to the proposed use of the property.

CDC offers no support for such a novel construction.

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 Further, the fact remains that CDC did seek approval of the

Zoning Board for the proposed use and was unable to acquire it.

Given the text of the lease and the undisputed fact that the

Zoning Board denied CDC’s application, the only reasonable

interpretation is that CDC failed to satisfy the express

condition that the “Lessee acquire the approval of the Board of

Municipal and Zoning Appeals.” Because a condition precedent to

extension of the lease was not satisfied, the lease expired by

its own terms at the end of the three-year Initial Term. 5

B.

CDC also appeals the district court’s grant of summary

judgment to the City on CDC’s claims of unjust enrichment and

promissory estoppel. In this regard, CDC argues that the City

was unjustly enriched by the value of improvements CDC made to

the Gatehouse property before the lease terminated and that CDC

relied to its detriment on “promises” by the City regarding the

5
In further support of its argument that the lease should be
construed as not requiring Zoning Board approval of the
building’s proposed use, CDC also contends (1) that the City’s
Department of Recreation and Parks, and not the Zoning Board,
had authority to approve of the property’s use, and (2) that
interpretation of the lease is subject to the rule that
contracts be construed against the party that prepared them.
Because we find no ambiguity in the text of the lease regarding
the Zoning Board’s authority, we need not reach these points.

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permissibility of use of the Gatehouse as offices and CDC’s

satisfaction of certain lease-extension conditions.

These claims are alternatives to the breach-of-contract

claim because in Maryland, as elsewhere, “[t]he general rule is

that no quasi-contractual claim can arise when a contract exists

between the parties concerning the same subject matter on which

the quasi-contractual claim rests.” County Comm’rs v. J. Roland

Dashiell & Sons, Inc., 358 Md. 83, 96 (2000); see also Ver

Brycke v. Ver Brycke, 379 Md. 669, 693 n.9 (2004) (“We observe

that the Ver Bryckes’ unjust enrichment and promissory estoppel

claims, which are quasi-contract claims, would have been

untenable had they argued that a contract had existed between

them.”).

CDC generally acknowledges that, if the lease was valid,

its quasi-contractual claims fail. 6 Thus, CDC argues that the

lease was invalid to the extent it required Zoning Board

approval of the proposed use of the property. See Konig v.

Mayor and City Council of Baltimore, 128 Md. 465, 465 (1916)

6
CDC’s only argument to the contrary is that the unjust
enrichment claim survives because a “Cancellation Clause” in the
lease provided for reimbursements by the City of certain costs
if the City terminated the lease early. That provision does not
apply here because, as discussed, the City did not terminate the
lease early.

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(allowing a claim in quasi-contract where an express contract

was held invalid).

CDC fails, however, to demonstrate that the lease here is

invalid. At best, CDC argues the Zoning Board’s approval was

impossible to obtain, either because the use required by the

lease was incompatible with applicable zoning or because the

Zoning Board did not actually have the authority to approve of

the use of the property. 7 Although impossibility may excuse a

failure to perform a particular contractual obligation in some

circumstances, see, e.g., Acme Moving and Storage Corp. v.

Bower, 269 Md. 478, 483 (1973), CDC has failed to cite any

Maryland authority for the proposition that mere impossibility

of a condition precedent can invalidate a contract ab initio.

Even assuming, arguendo, that it could, CDC’s case for

impossibility falls short. Impossibility provides an excuse

only when the risk of impossibility was not assumed by the

promisor and was not foreseeable at the time of contracting.

7
Although CDC asserts in this litigation that the Zoning
Board lacked authority to approve of the use of the property
because that authority resided in the Department of Recreation
and Parks, CDC nevertheless did seek the Zoning Board’s approval
of its proposed use of the property, and the Zoning Board
rendered a decision on the merits. The record indicates that
CDC did not challenge the jurisdiction or authority of the
Zoning Board to render its decision, nor did it appeal the
decision in Maryland state courts, as it could have. See Md.
Code. Art. 66B, § 2.09.

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Acme, 269 Md. at 483. This makes sense: contracting parties

regularly manage uncertainties by allocating the risks between

them, and courts should avoid upsetting bargained-for

expectations. Here, the language and structure of the lease

readily inform the conclusion that CDC assumed the risk that

Zoning Board approval might not be obtainable. The lease

provided for two separate terms. The Initial Term of three

years was “for the Lessee to perform all necessary requirements

for the review, design and structural ‘Study’ of the Leased

Premises.” Thereafter, if (and only if) CDC were able to meet

all of several express conditions would the lease extend for an

additional forty-seven year term. The lease term was bifurcated

to account for the possibility that one or more of the

conditions could not be satisfied. The responsibility to

satisfy each and every condition was assigned to CDC. The risk

of failure to obtain Zoning Board approval could scarcely have

been more clearly allocated to CDC.

Therefore, because CDC assumed the risk that Zoning Board

approval might not be obtainable, it is unable to claim that the

impossibility of obtaining that approval rendered the lease

invalid. Moreover, because the lease is valid, it precludes

CDC’s quasi-contractual claims for unjust enrichment and

promissory estoppel. County Comm’rs, 358 Md. at 96.

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 III.

For the foregoing reasons, the judgment of the district

court is

AFFIRMED.

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