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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 2775 September Term, 2010

PETER N. YAFFE, ET AL.

v.

SCARLETT PLACE RESIDENTIAL CONDOMINIUM, INC., ET AL.

*Eyler, James R., Wright, Raker, Irma S. (Retired, specially assigned), JJ. Opinion by Eyler, James R., J. Filed: June 5, 2012 *Eyler, James R., participated in the hearing and conference of this case while an active member of this Court; he participated in the adoption of this opinion as a retired, specially assigned member of this Court.

On May 5, 2009, Peter N. Yaffe, individually and as successor in interest to and assignee of Budreaux & Sammy, LLC ("Budreaux") and Columbus Piazza, LLC ("Columbus Piazza") (collectively referred to as "appellants"), filed the instant action in the Circuit Court for Baltimore City against Scarlett Place Residential Condominium, Inc. ("Scarlett Place"), Karl A. Knutsen, and Knutsen Engineering Group, LLC ("KEG") (collectively referred to as "appellees"). Appellants sought damages, specific performance, and injunctive relief stemming from alleged reoccurring water leaks and moisture infiltration in several condominiums owned by appellants located at Scarlett Place in Baltimore City. The circuit court conducted a bench trial and, at the conclusion of appellants' case, granted appellees' motions for judgment. This timely appeal followed. For the reasons set forth below, we shall affirm.1 Factual and Procedural Background Budreaux was formed in 2002 by Mr. Yaffe and his father, with Mr. Yaffe possessing a 99 percent ownership interest in the company. He acquired the remaining 1 percent interest in 2007. In 2003 and 2004, Budreaux purchased Scarlett Place Condominium units 612 and 613. According to Mr. Yaffe, he intended to combine units 612 and 613 and live in them. In 2009, Budreaux assigned all of its rights in units 612 and 613 to Mr. Yaffe. Mr. Yaffe is also the sole member of Columbus Piazza, which

Judge Shirley M. Watts did not participate in the Court's decision to designate this opinion for publication in the Maryland Appellate Reports pursuant to Maryland Rule 8605.1.
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purchased unit 1011 in 2007. In 2004 and 2005, there was considerable water infiltration into the Scarlett Place units, including appellants' units. In 2005, Budreaux filed suit against Scarlett Place in circuit court. In October 2006, the parties entered into a settlement agreement in which Scarlett Place agreed to pay damages and to make permanent repairs. Scarlett Place also agreed that it would deliver to Budreaux, prior to February 1, 2007, a certification from a registered professional engineer that the water leak and moisture penetration repairs had been completed or, if not, pay $6,000 per month until delivered. Scarlett Place had been experiencing water infiltration problems with respect to many units for many years. As a result, on January 18, 2006, Scarlett Place entered into a contract with KEG pursuant to which KEG agreed to make repairs to the terrace decks and walls of the entire building ("the AIA contract"). Shortly after the October 2006 settlement agreement, KEG agreed to investigate leaks, including in units 612 and 613, and to create a design to prevent water infiltrations in those units. With respect to the October 2006 settlement, Scarlett Place did not deliver a timely certification. Scarlett Place delivered a certification dated March 30, 2007, but Mr. Yaffe did not accept it. According to Mr. Yaffe, leaks continued. In April 2007, Budreaux filed a second suit in circuit court against Scarlett Place. On June 29, 2007, the parties entered into a second settlement agreement. Scarlett Place paid Budreaux money, agreed to install terrace doors, and delivered a certification dated June 28, 2007, as described in the October 2006 settlement agreement.
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In the fall of 2007, Columbus Piazza purchased unit 1011. In late 2007 and thereafter, Mr. Yaffe complained about leaks in all three units. In February 2008, Budreaux and Columbus Piazza filed a third suit in circuit court against Scarlett Place. Throughout this period of time, appellants were performing some renovation work on their units but also took the position that they could not move forward until after the leaks were stopped. On July 21, 2008, the parties entered into a third settlement agreement. Scarlett Place agreed to pay money and conduct more repairs. Scarlett Place also delivered a certification dated July 21, 2008, as described in the October 2006 settlement agreement. More leaks and repair work followed. By January 2009, Scarlett Place took the position that repairs had been completed. In May 2009, appellants filed this suit against Scarlett Place and the Knutsen entities. The fifth amended complaint is the operative complaint. Most counts of the complaint are relevant to this appeal. In count 1, appellants requested the court to grant specific performance of the July 2008 settlement agreement by Scarlett Place. In count 6, Mr. Yaffe alleged that he was a third party beneficiary of the repair agreement between Scarlett Place and KEG entered into after the first settlement agreement in October 2006, and that KEG breached that contract. Appellants sought compensatory damages. In count 9, appellants sought a permanent injunction against Scarlett Place, requiring it, inter alia, to repair all leakage and other water problems.
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In the remaining relevant counts of the complaint, appellants collectively and separately alleged a variety of claims against Scarlett Place and the Knutsen entities, such as negligence, breach of contract, negligent misrepresentation, and trespass. Appellants sought compensatory damages. Eventually, the parties went to trial. Following the conclusion of appellants' case, appellees filed motions for judgment. After hearing argument on the motion, the circuit court granted the motions in an oral opinion. With respect to count 1, the court found that specific performance was not warranted because appellants had not established the absence of an adequate remedy at law. With respect to count 6, the court found that the appellees did not intend for appellants to be third party beneficiaries of the AIA contract and any subsequent contract for repairs specific to units 612 and 613. With respect to count 9, the court found that the elements for injunctive relief had not been satisfied. As to the seven remaining relevant counts, the court found that appellants did not adequately prove damages. The court found that appellants did not prove damages based on diminution in value of units 612 and 613 because the evidence did not support the valuation of the Plaintiff's real estate expert, Jennifer Stick. Thus, the court did not find the expert's testimony credible. The court noted that all parties agreed that the property damage was repairable. The court found appellants had not proved the cost of restoring
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the property to a non-damaged condition. The court concluded that the measure of damages based on the claim for loss of use was the reasonable rental value of comparable property, and appellants failed to present such evidence. In addition, the court found that appellants had not shown a loss of use for units 612 and 613 because appellants were not precluded from using the units due to water infiltration. The court also found that appellants had failed to prove breach of the 2007 settlement agreement; failed to prove any reliance on or misrepresentation by KEG related to the June 29, 2007 settlement agreement; and found that appellants had released appellees from any claims predating the June 29, 2007 settlement agreement.2 Thus, the court granted appellees' motion for judgment. We shall include additional facts when we discuss the issues. Questions Presented As phrased by appellants, the following questions are presented for our review: 1. Was Mr. Yaffe a third-party beneficiary of Mr. Knutsen's agreement with Scarlett Place to repair the water leaks and moisture penetration problems in Mr. Yaffe's condominium units which Mr. Knutsen certified several times had been corrected? 2. Are Plaintiffs entitled to damages measured by the mortgage interest, real property taxes, insurance, and other carrying costs of their property which they have been unable to use as a result of Defendants' failure to correct the water leaks, moisture penetration, and mold affecting their condominium units?

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The court made other findings not relevant to the issues raised on appeal.
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3. Did the Circuit Court err as a matter of law in holding that Plaintiffs cannot obtain specific performance relief because they have also sought damages? 4. Did the Circuit Court abuse its discretion in entering judgment on Plaintiffs' claim seeking injunctive relief requiring Scarlett Place to correct the moisture penetration and mold contamination in their condominium units caused by water leaking from the limited common elements over which Scarlett Place has exclusive control? Standards of Review Maryland Rule 2-519(b) provides that, "[w]hen a defendant moves for judgment at the close of the evidence offered by the plaintiff in an action tried by the court, the court may proceed, as the trier of fact, to determine the facts and to render judgment against the plaintiff or may decline to render judgment until the close of all the evidence." In such a case, we review the circuit court's grant of a motion for judgment in accordance with Maryland Rule 8-131(c): When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. "The clearly erroneous standard does not apply to the circuit court's legal conclusions, however, to which we accord no deference and which we review to determine whether they are legally correct." Cattail Assocs., Inc. v. Sass, 170 Md. App. 474, 486 (2006) (citation omitted). In several areas in their brief, appellants argue that if there was any supporting
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evidence presented in the record, the trial court should not have granted the motion for judgment at the end of the plaintiff's case on the grounds that there was "no evidence" supporting the claim. Maryland Rule 2-519(b) clearly indicates that when the court is a fact finder it may assess the credibility of witnesses and the weight of the evidence and make a determination. In context, it is clear that is what the court did, and its use of the expression "no evidence" meant no persuasive evidence. We review the circuit court's denial of equitable relief, such as a permanent injunction or specific performance of a contract, for an abuse of discretion. Kemp v. Kemp, 287 Md. 165, 176 (1980); State Comm'n on Human Rels. v. Talbot County Det. Ctr., 370 Md. 115, 127 (2002). Additionally, for the purposes of this case, it is important to note that although an appellate court will not ordinarily consider an issue that was not previously raised in the trial court, an appellate court can affirm when "the record in a case adequately demonstrates that the decision of the trial court was correct, although on a ground not relied upon by the trial court and perhaps not even raised by the parties." Robeson v. State, 285 Md. 498, 502 (1979) (citations omitted). In other words, we can affirm when the trial court's decision was right for the wrong reasons. "Considerations of judicial economy justify the policy of upholding a trial court decision which was correct although on a different ground than relied upon." Id.

Discussion
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The evidence supported the following determination by the circuit court. Mr. Yaffe was not a third party beneficiary of any contract between Scarlett Place and the Knutsen entities. Although loss of use damages of residential property can consist of items other than or in addition to the reasonable rental value of comparable property, here, there was no evidence of market value and no evidence of other types of costs caused by the alleged wrongdoing. Finally, the court did not abuse its discretion in denying the equitable remedies of specific performance or a permanent injunction. We shall discuss each of these issues in turn. 1. Third Party Beneficiary First, appellants contend that the court erred in finding that the Knutsen entities and Scarlett Place did not intend to provide third party beneficiary status to Mr. Yaffe in their agreement to correct water infiltration issues in units 612 and 613. Appellants argue that Mr. Yaffe was an intended beneficiary of KEG's design and repair agreement with Scarlett Place that was entered into "after the October 2006 Settlement Agreement was reached."3 Appellants argue that the original AIA contract between the Knusten entities

Relying on express provisions in the AIA contract, appellees argue that the AIA contract controlled all repair work done by KEG, and it did not confer third party beneficiary status. Appellants do not rely on the AIA contract and argue that the controlling contract is one subsequent to the AIA contract. In order to recover damages, however, appellants would have to be able to point to a contract under which they have third party beneficiary status. In the June 29, 2007 settlement agreement, appellants released Scarlett Place and various other entities, including its agents, contractors, and all entities "which may have any liability, or be alleged to have any liability for, by or through" Scarlett Place, from all clams through the date of the agreement. Due to the release of liability found by the trial court, the underlying contract would have to be a
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and Scarlett Place is irrelevant in determining the intent of the parties because the services rendered for units 612 and 613 were in addition to and separate from the work Mr. Knutsen performed for the entire building. The Knutsen entities respond by stating that the AIA contract expressly precluded third party beneficiary status and also stated that any additional work or agreements between the parties "shall not modify the rights, responsibilities or obligations" of KEG as described in that agreement. The Knutsen entities also point out that at trial, Mr. Knutsen testified that all services performed by KEG at Scarlett Place were performed under the AIA contract, including the work for units 612 and 613. He also testified that the parties had no intent to benefit Mr. Yaffe through their agreement. In Mackubin v. Curtiss-Wright Corp., the Court of Appeals explained that a third party beneficiary cannot enforce a contract merely because "the contract may operate to his benefit." 190 Md. 52, 58 (1948). In that case, the third party is referred to as an "incidental" beneficiary. Instead, "[i]t must clearly appear that the parties intend to recognize him as the primary party in interest and as privy to the promise." Id. The primary method of determining the intention of the parties to a contract is to look at the language in the contract. Volcjak v. Washington County Hosp. Ass'n., 124 Md. App. 481, 509 (1999). When determining third party beneficiary status, "the controlling issue is whether the contract's terms, in light of the surrounding circumstances, reveal an intent

repair agreement between Scarlett Place and KEG that was created after the second settlement agreement on June 29, 2007.
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to make the promise to the third party in fact if not in form." College of Notre Dame of Maryland, Inc. v. Morabito Consultants, Inc., 132 Md. App. 158, 179 (2000). In granting appellees' motion for judgment below, the circuit court stated that: Accordingly, under the law, there must be an intent to create third party beneficiary status. It is not enough that a contract may operate to the benefit of a third party. It must be clear that the contracting parties intended to recognize Mr. Yaffe as a primary party in interest and a privy to their promise. In this case, the AIA contract specifically rejects that possibility by its terms. To the extent that the Plaintiff may contend that the AIA contract alone does not govern and that there were other repair contracts or agreements over time between Scarlett Place and Knutsen, there has been no showing that Mr. Yaffe was intended to be a third party beneficiary of any agreement between Scarlett Place and Knutsen. Mr. Knutsen took on additional responsibilities during his relationship with Scarlett Place and acknowledged those. His testimony and the Court repeats, that he was working for Scarlett Place and began completely unaware even of the settlement agreement between Scarlett Place and Yaffe. There has simply been no evidence presented that either Mr. Knutsen or Scarlett Place intended and had a meeting of the minds that Mr. Yaffe would be a third party beneficiary in interest to any contractual relationship between the parties. There is ample evidence to sustain the circuit court's finding that Mr. Yaffe was not an intended third party beneficiary of any agreement between the Knutsen entities and Scarlett Place to correct the water infiltration issues in units 612 and 613. The court found that there were no implied in fact contracts between appellants and KEG. Thus, the original AIA contract controls. First, Section 9.7 of the AIA contract explicitly states that the parties did not intend to confer any rights to any third parties: "[n]othing

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contained in this Agreement shall create a contractual relationship with or a cause of action in favor of a third party against either the Owner or Architect." Second, in Article 3, the AIA contract also outlines the possibility of "Additional Services" between the parties. Specifically, Section 3.2.1 states that "[i]f more extensive representation at the site than is described in Section 2.6.5 is required, the Architect shall provide one or more Project Representatives to assist in carrying out such additional on-site responsibilities." Section 3.23 further provides that "[t]hrough the presence at the site of such Project Representatives, the Architect shall endeavor to provide further protection for the Owner against defects and deficiencies in the Work, but the furnishing of such project representation shall not modify the rights, responsibilities or obligations of the Architect as described elsewhere in this Agreement." This language strongly indicates that the parties did not intend to confer standing upon any third-party, whether for the services rendered under the AIA contract or for "additional services" rendered under Article 3 and subsequent agreements. Additionally, appellants failed to present sufficient evidence that, assuming a subsequent unwritten repair contract, the parties intended to create a third party beneficiary under that document. Mr. Knutsen specifically testified that he never entered into any agreements with Scarlett Place with the intention of benefitting any third party, including Mr. Yaffe or Budreaux. Mr. Knutsen testified that any additional services rendered by him to Scarlett Place were covered under Article 3 of the AIA contract. He also noted that when he agreed to undertake the additional work relating to units 612 and
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613, he communicated to Scarlett Place that he was proceeding with that work as additional services under the AIA contract. He claimed that he never entered into any other separate written agreement for the work performed on units 612 and 613. In light of this significant evidence, the trial court did not err in finding that Mr. Yaffe was not a third party beneficiary of any agreement between the Knutsen entities and Scarlett Place. 2. Loss of Use Damages Appellants also contend that the court erred in granting appellees' motion for judgment because appellants "failed to demonstrate damages sufficient to warrant recovery under any of the theories or causes of actions." Specifically, Appellants argue that they should have been able to claim carrying costs, such as mortgage interest, real property taxes, condominium fees, and special assessments, as damages resulting from appellees' conduct. In granting appellees' motion for judgment, the circuit court held that loss of use damages are limited to the "reasonable rental value of comparable property," citing Subsection D of Maryland Civil Pattern Jury Instruction 10:21. The court reasoned that a Plaintiff's actual expenses, such as carrying costs, without further proof, are not an adequate measure of loss of use damages. Additionally, the court made a factual finding that, as to units 612 and 613, Mr. Yaffe was not "precluded from using or residing at the units due to water infiltration" and, therefore, was not entitled to any loss of use damages for those units. Appellants claim that carrying costs are recoverable compensatory damages under Maryland law as either "diminution in value" or "loss of use" damages, relying primarily
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on Reichs Ford Rd. Joint Venture v. State Rds. Comm'n, 388 Md. 500 (2005), and 7-Eleven, Inc. v. Dep't of Envtl. Quality, 42 Va. App. 65 (2003). Appellants note that "loss of use" damages are not necessarily limited to the property's rental value but can include carrying charges when one is unable to use the property for which the fees are charged. Appellants also note that there was sufficient evidence of water infiltration for units 612 and 613 for their claims to survive a motion for judgment. Appellees respond that appellants are unable to now claim that the carrying costs should be considered "diminution in value" damages because throughout the trial these costs were only presented as "loss of use damages" and because appellants "sought distinct and different damages for diminution in value from Scarlett Place at trial." Appellees contend that comparable rental value is the proper measure of loss of use damages and that Reichs Ford and 7-Eleven, Inc. are distinguishable from this case. Appellees also note that it was within the circuit court's power to make a factual finding regarding the actual loss of use in units 612 and 613, and the circuit court did not err. In a tort action for damages based on repairable property,4 damages are measured by (1) the diminution in value of the land or the cost of repair and (2) the value of the lost use of the property. Superior Construction Co. v. Elmo, 204 Md. 1, 9 (1954) (quoting

Here, both parties appear to agree, and the circuit court acknowledged, that the damages are repairable.
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Restatement (First) of Torts

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