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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND Stephen L. MOWBRAY, Plaintiff vs. * Rajai ZUMOT, et al. Defendants * ****** MEMORANDUM Plaintiff Stephen L. Mowbray ("Mowbray") filed this action against Rajai Zumot ("Zumot"), Mohammed El-Rashed ("El-Rashed"), Rainbow Holdings LLC ("Rainbow") and Salt LLC ("Salt") (collectively, "Defendants") in the Circuit Court for Baltimore City on May 12, 2006. Mowbray seeks damages from all four Defendants for breach of contract in connection with the sale of a vacant apartment building. He also alleges negligent misrepresentation on the part of Zumot and El-Rashed. The case was timely removed to this Court on grounds of diversity of citizenship. Now pending are the parties' cross-motions for summary judgment. The Court held a hearing on the motions on November 26, 20071 and is now prepared to issue its ruling. For the following reasons, Mowbray's motion is DENIED. The Defendants' motion is GRANTED IN PART and DENIED IN PART. * * Civil No. L-06-1606

On December 4, 2007, Mowbray filed an unsolicited "Post-Hearing Brief" (Docket No. 25), to which the Defendants responded on December 10, 2007 (Docket No. 26). Neither of these filings was requested or authorized, and both are hereby stricken.

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I.

Background

On December 31, 2002, Mowbray entered into an agreement with Park Avenue LLC to purchase a Baltimore City apartment building known as the Brexton (hereinafter "Land Purchase Agreement"). Zumot signed the agreement in his capacity as a member of Park Avenue LLC. The Land Purchase Agreement called for settlement to occur on or before May 1, 2003. Section 8 of the agreement states that "[a]t the settlement[,] Seller shall deliver to Purchaser... exterior masonry, windows, new roof and scaffolding paid for by Seller."2 By the time the agreement was executed, a contractor retained by Zumot had already completed work on the Brexton's roof. Zumot Dep. 58-59. Work on the windows, however, had yet to begin, and would be delayed well into 2003. Because of these delays, the parties agreed on April 29, 2003 to extend the settlement date to July 31. On August 1, with the work still unfinished, settlement was postponed indefinitely until repairs to the windows were complete. On August 19, 2003, Mowbray sent Zumot an email complaining about the quality of the work on the windows. In response to Mowbray's concerns, Zumot orally assured him the problem "was going to be taken care of." Zumot Dep., 276-277. According to Mowbray, Zumot informed him in early November that "he had completed the work of replacing the roof and windows[.]" Affidavit of Stephen L. Mowbray, 1. Settlement finally occurred on November 10, 2003. On that date, the parties executed three documents which fundamentally altered the nature of the transaction. First, Mowbray

A handwritten addendum further provides: "Notwithstanding anything to the contrary, the Purchaser is acquiring this property with the exterior complete to the satisfaction of the Historical Society of Baltimore, Maryland (excluding front door and entrance), including new roof, brickwork, chimney, and windows. Interior conveyed as-is." -2-

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executed an "Agreement of Sale" with Rainbow, Salt, and El-Rashed, the collective owners of Park Avenue LLC. Unlike the 2002 Land Purchase Agreement, which transferred ownership of the Brexton directly from Park Avenue LLC to Mowbray, the Agreement of Sale structured the acquisition as a purchase of 100% of the membership interests in Park Avenue LLC. Zumot signed the agreement in his capacity as "Executive Officer" and "Member" of Rainbow and Salt, respectively, but was not a party to the contract in his individual capacity. Although the Agreement of Sale converts the acquisition from a sale of real property into a transfer of membership interests, it nonetheless incorporates the terms of the Land Purchase Agreement.3 Accordingly, the provisions in the Agreement of Sale addressing risk of loss, conditions precedent to closing, and representations and warranties all continue to treat the transaction as one involving real property. In Paragraph 11(a)(xviii), the Sellers represent that all "[w]ork on the [Brexton] done during [Park Avenue LLC's] ownership through the date of Closing has been completed in accordance with all applicable laws[,] and all sums due and payable under the Contracts have been paid in full."4 The second document executed at settlement was an "Assignment of Membership Interests" agreement. The agreement lists Rainbow, Salt, and El-Rashed as "Seller," and Brexton LLC and Park & Tyson LLC as "Purchaser." Mowbray was the sole member of each of

To that end, Paragraph 24 of the Agreement of Sale provides that "[e]xcept to the extent modified by this Agreement, the terms and provisions of the Land Purchase Agreement shall remain in full force and effect." In addition, Paragraph 11(c) provides that "Each Seller ... agrees to indemnify, defend and hold harmless Purchaser, and ... after Closing, the Company[,] from and against all claims... damages, costs and expenses ... which relate to matters ... arising ... on or before the Closing but not after the Closing, which are based upon any breach of the Seller's representations, warranties, or covenants set forth herein." -34

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the latter two companies. Pursuant to the agreement, 100% of the membership interests in Park Avenue LLC was transferred from Rainbow, Salt, and El-Rashed to Brexton and Park & Tyson. The third and final settlement document was a "Guaranty Agreement" between Zumot (as "Guarantor") and Mowbray and Park Avenue LLC. In Section 1 of the Agreement, Zumot guarantees payment of "any and all sums due and owing to the Purchaser [] and[,] after Closing, the Company[,] under Section 11(c) of the Membership Interest Purchase Agreement."5 Section 1 further provides that the "Purchaser, and after Closing, the Company[,] shall have the same right to pursue any claims against [Zumot] that it would have against any [S]eller." Pursuant to Section 10 of the Agreement, however, Zumot's liability is limited to $250,000. Mowbray visited the Brexton at least twice prior to settlement. Mowbray Dep., 51-53; 78-80. During these visits, he was able to enter the building and climb to the top of the stairs, and both he and his construction associate - an individual named Douglas Stansbury - were able to inspect the roof and windows. On one of these occasions, Mowbray and Stansbury met with two members of the Maryland Historical Trust, who informed them that the work on the roof and windows complied with historical society requirements. Id., 54-55. In early 2004, Mowbray observed water leaking from the Brexton's roof and windows. He also saw that pigeons had entered the building through gaps in the roof. Mowbray informed Zumot of these developments and was referred to the subcontractor who performed the work on the roof. After consulting with the subcontractor on Mowbray's behalf, Stansbury concluded that he was unqualified for the job and that the work on the roof had been performed

Because the "Assignment of Membership Interests Agreement" does not contain a Section 11(c), the parties agree that the Guaranty Agreement is here referring to the Agreement of Sale. See FN 5, supra. -4-

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incompetently. On November 4, 2005, Mowbray sent a letter to Zumot alleging that "the sellers of Park Avenue LLC" had failed "to deliver the [Brexton] with properly installed replacement windows and a new roof and gutter system, as required by the sales agreements." As compensation for these deficiencies, Mowbray demanded $250,000 pursuant to Zumot's obligations under the Guaranty Agreement. When Zumot failed to respond, Mowbray filed this lawsuit. Mowbray's complaint contains seven counts. In Counts I-III, he alleges that Zumot, ElRashed, and Rainbow and Salt, respectively, breached the Agreement of Sale by failing to repair the Brexton's roof and windows in accordance with the Land Purchase Agreement. Counts IV and V allege negligent misrepresentation by Zumot and El-Rashed, respectively, in connection with the Agreement of Sale's warranty that all work performed on the Brexton was completed prior to settlement. Mowbray further contends that Zumot is liable for negligent misrepresentation in connection with his oral assurances that the repairs to the Brexton would be "taken care of." Finally, Counts VI and VII allege that Zumot is liable for breach of contract and negligent misrepresentation pursuant to the terms of the Guaranty Agreement. At the close of discovery, both Mowbray and the Defendants filed motions for summary judgment. The motions are now ripe for decision. II. Standard of Review

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56 (c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); see also

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Felty v. Graves-Humphreys Co., 818 F.3d 1126, 1128 (4th Cir. 1987) (recognizing that trial judges have an "affirmative obligation" to prevent factually unsupported claims and defenses from proceeding to trial). A material fact is one that may affect the outcome of the suit. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether there is a genuine issue of material fact, the Court views the facts, and all reasonable inferences to be drawn from them, in the light most favorable to the non-moving party. See, e.g., Pulliam Inv. Co v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir. 1987). If, as in this case, both parties file motions for summary judgment, the Court applies the same standard of review. McCready v. Standard Ins. Co., 417 F. Supp.2d 684, 695 (D.Md. 2006), citing Taft Broad Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991). When ruling on cross-motions for summary judgment, the Court must consider each motion "separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Vorhaar, 316 F.3d 516, 523 (4th Cir. 2003). III. Discussion

A. Mowbray's Motion for Summary Judgment: Mowbray has moved for summary judgment on both his breach of contract and negligent misrepresentation claims. We take up each of his arguments below. i. Breach of Contract According to Mowbray, the undisputed facts establish that the Defendants breached the Agreement of Sale by failing to make the repairs specified in the 2002 Land Purchase Agreement. By way of review, the Land Purchase Agreement required Park Avenue LLC, as the entity transferring the Brexton to Mowbray, to deliver a new roof and windows at settlement.

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This obligation was carried forward to El-Rashed, Rainbow and Salt (as "Seller") pursuant to the Agreement of Sale, which incorporates the Land Purchase Agreement and represents that all work on the Brexton performed during Park Avenue's ownership "has been completed in accordance with all applicable laws[.]." Def.'s Exhibit 5,

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