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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 2287 September Term, 2005

PRISON HEALTH SERVICES, INC. v. BALTIMORE COUNTY, MARYLAND

Salmon, Kenney, Eyler, Deborah S., JJ. Opinion by Eyler, Deborah S., J.

Filed: December 6, 2006

Baltimore County ("the County"), the appellee, brought an action for declaratory and injunctive relief against Prison Health Services ("PHS"), the appellant, seeking a determination that the County had timely exercised an option to renew a contract between the parties. On summary judgment, the Circuit Court for Baltimore

County interpreted the operative contract language and declared that the County indeed had exercised its option to renew in a timely manner. PHS challenges that ruling on appeal, presenting one question for review, which we have rephrased: Did the circuit court err in ruling that, on the undisputed material facts, the County timely exercised its option to renew its contract with PHS, as a matter of law?[1] For the following reasons, we shall reverse the circuit court's judgment and remand the case to that court for further proceedings.

FACTS AND PROCEEDINGS
On July 1, 2000, the County and PHS entered into a five-year contract for PHS to provide health care services to inmates at two County jails ("the Contract"). follows:
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The Contract defines its "Term" as

The question as posed by PHS is:

"The Contract between PHS and the County was for a fixed five-year term, which the County had the option to renew for up to three additional two-year terms. The County failed to exercise the first of its options until after the Contract expired. Was the County's attempted postexpiration exercise of its option effective?"

3.1 This Agreement shall be effective on the later of July 1, 2000 or the date on which it has been fully executed by Baltimore County and shall continue through 06/30/2005 (hereinafter defined as the "Initial Term"), at which time the County may exercise its option to renew set forth in Paragraph 3.2 below, unless sooner terminated pursuant to Paragraphs 5 and 7 hereof. (Bold in original.) The renewal provision states:

3.2 This Agreement may be renewed for up to three (3) additional two-year terms on the same terms and conditions set forth herein. Unless set forth in a written amendment, the compensation and manner of payment set forth in Paragraph 2 shall remain as is including the maximum amount of compensation available hereunder. In the event any renewal changes the terms and conditions set forth herein, the approval of the Baltimore County Council may be required. (Bold in original.) In addition, the Contract states, at section

22, that "[t]ime is of the essence with respect to performance of the terms and conditions of this Agreement." On July 1, 2005, counsel for PHS faxed a letter to the administrator for the Baltimore County Bureau of Corrections, stating, in relevant part: The County failed to exercise its option to renew the Contract by June 30, 2005 and, therefore, the County's option to renew the Contract has lapsed. For the reasons set forth below, the Contract is complete and PHS has no legal obligation to continue performance. The letter went on to say that PHS would continue to provide services to the inmates in affected facilities through July 31, 2005, "as a professional courtesy and to protect the County and its inmates from a lapse in health-care services."

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Later that same day, the County, also by counsel, faxed to PHS a document entitled "Services Term Contract Amendment," which states in part: AMEND TO EXERCISE THE FIRST OF THREE TWO-YEAR RENEWAL OPTIONS, FROM 07/01/05 TO 06/30/07. The amendment also increased the unit prices for certain Contract line items. Also that same day, the County responded to PHS's letter, stating: [P]lease be advised that Baltimore County disagrees completely with the assertions in your letter and, in particular, that the current Contract between PHS and the County has expired and that PHS has no legal obligation to continue performance. On the contrary, the Contract between PHS and the County continues to be in full force and effect under the terms and conditions of the Contract dated July 1, 2000, including without limitation, the services outlined in that Agreement to be performed by PHS. Two weeks later, in the Circuit Court for Baltimore County, the County filed an action for declaratory and injunctive relief against PHS. PHS filed a timely counterclaim and a motion to PHS argued that the language of

dismiss or for summary judgment.

the Contract clearly required the County to exercise its renewal option, if at all, no later than June 30, 2005. The County opposed PHS's motion and filed its own motion for summary judgment. It argued that the language of the Contract

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clearly allowed the County to exercise its renewal option in some reasonable time before or immediately after June 30, 2005.2 The motions came on for a hearing before the circuit court on November 14, 2005. After counsel made their arguments, the court

ruled from the bench, granting summary judgment in favor of the County. The court reasoned that the phrase "through 6/30/05 [. .

.], at which time" means within a reasonable time "after 6/30/05," i.e., "thereafter." It concluded that, because July 1, 2005, was

a reasonable time after June 30, 2005, being the very next day, the County had timely exercised its renewal option.3 After the circuit court entered a written order, PHS noted a timely appeal to this Court.4

The County also argued, alternatively, that it had exercised the renewal option by its conduct prior to June 30, 2005, when it and PHS were engaged in negotiations over compensation and staffing levels for the Contract term beginning July 1, 2005. Staffing levels had become an issue because, during the Initial Term, the County had enlarged one of its jails. Compensation increases in accordance with the Consumer Price Index were permitted, but not required, under the Contract. The court did not address the County's alternative argument, that it had exercised the renewal option by its conduct, prior to June 30, 2005. The court's order stated only that summary judgment was granted in favor of the County. It did not declare in writing the rights of the parties, as a declaratory judgment order should. Allstate Ins. Co. v. State Farm Mut. Auto Ins. Co., 363 Md. 106, 117 n.1 (2001); Harford Mutual Ins. Co. v. Woodfin, 344 Md. 399, 414-15 (1997). Because, on the record, the circuit court judge explained the reason for his summary judgment ruling and declared the rights of the parties, and his oral ruling was transcribed, we have been able, on review, to see in writing a declaration of the (continued...) 4
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DISCUSSION
The sole issue properly before us for decision is whether the County timely exercised its option to renew the Contract when it faxed a written renewal amendment to PHS on July 1, 2005. As

already quoted, the Contract states that its Initial Term would continue "through 06/30/05 [...], at which time the County may exercise its option to renew." PHS maintains that this language is unambiguous and means that the County could exercise its renewal option up through and including June 30, 2005, but no later. PHS

makes the fall-back argument that, if the pertinent Contract language is ambiguous, it should be construed against the County, as the drafter of the Contract. The County agrees that the pertinent Contract language is unambiguous, but, not surprisingly, argues that it does not mean what PHS claims it means. The County maintains, as it did below,

that the language in question allowed it to exercise its renewal option within a reasonable "interval of time near or after" June 30, 2005, which included July 1.5

(...continued) parties' rights. Upon remand, the circuit court should amend the summary judgment order of November 22, 2005, by attaching the transcript of the court's ruling to it. Alternatively, the County argues that, in fact, it exercised the renewal option before the end of the Initial Term, by its conduct during the Initial Term. 5
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We review a circuit court's decision to grant a motion for summary judgment de novo. Tyma v. Montgomery County, 369 Md. 497,

504 (2002); Clarence W. Gosnell, Inc. v. Hensley, 156 Md. App. 224, 230 (2004). Summary judgment should only be granted when there is

no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Miller v. Bay City Prop. Md. Rule 2-501 (e); Whether there is If we

Owners Ass'n, Inc., 393 Md. 620, 631 (2006).

Bradley v. Fisher, 113 Md. App. 603, 610 (1997).

a genuine dispute of material fact is a question of law.

determine that there is not a genuine dispute of material fact, we then decide, also as a matter of law, whether the ruling was legally correct. Beatty v. Trailmaster Products, Inc., 330 Md.

726, 737 (1993); Clarence W. Gosnell, supra, 156 Md. App. at 231. We already have recited the facts material to the question whether the County's July 1, 2005 written amendment was a timely exercise of its renewal option. These facts are undisputed. The

sole issue on summary judgment review, then, is whether, under the language of the Contract, July 1, 2005 was a day too late for the County to exercise its renewal option, as a matter of law. Maryland follows the objective law of contracts. NationsBank, N.A., 365 Md. 166, 178 (2001). Taylor v.

As the Court of

Appeals explained in Gen. Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261 (1985): A court construing an agreement under this [objective] test must first determine from the language of the 6

agreement itself what a reasonable person in the position of the parties would have meant at the time it was effectuated. In addition, when the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant. Consequently, the clear and unambiguous language of an agreement will not give away to what the parties thought that the agreement meant or intended it to mean. Whether contract language is ambiguous also is a question of law, which we review de novo. 393 Md. 55, 79 (2006). United Servs. Auto Ass'n v. Riley,

"A written contract is ambiguous if, when

read by a reasonably prudent person, it is susceptible of more than one meaning." Calomiris v. Woods, 353 Md. 425, 436 (1999). When

contract language is ambiguous, its meaning becomes a question of fact and extrinsic evidence may be considered to determine the intent of the parties. Beale v. Am. Nat'l Lawyers Ins. Reciprocal, 379 Md. 643, 658 (2004) (citing Bushey v. N. Assurance Co. of Am., 362 Md. 626, 632 (2001)). An "option" is a type of unilateral contract. See Foard v.

Snider, 205 Md. 435, 446 (1954); Coleman v. Applegarth, 68 Md. 21, 27 (1887). It is a "continuing offer to [enter into a contract]

during the duration [of the option] which on being exercised by the optionee becomes a binding and enforceable contract." Straley v.

Osborne, 262 Md. 514, 521 (1971) (quoting Diggs v. Siomporas, 248 Md. 677, 681 (1968)). An option only is properly exercised if the

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exercise is "unconditional and in exact accord with the terms of the option." Foard, supra, 205 Md. at 446. In an option contract,

time is of the essence, even if the contract does not expressly say so. Green Manor Corp. v. Tomares, 266 Md. 472, 473 (1972);

Maryland City Realty v. Vogts, 238 Md. 290, 304 (1965); Foard, supra, 205 Md. at 446. The reason an option must be exercised

precisely as its terms require, and that time always is of the essence in an option contract, is that, by exercising the option, its holder is accepting the continuing offer, through performance. 1 Richard A. Lord, Williston on Contracts,

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