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4th Circuit upholds $1.9M award to consultant in Md. contract dispute

A divided federal appeals court last week rejected a Frederick developer’s argument that it owed no money to the consultant who helped it win the city’s approval for condominium and commercial development because the buildings were never built and the property was never sold.

In its published 2-1 decision, the 4th U.S. Circuit Court of Appeals upheld a judge’s ruling that Day Development Co. would be unjustly enriched if Byron Martz were not compensated for the services he rendered under the two contracts.

Senior U.S. District Judge Catherine C. Blake had set the compensation owed to Martz at $1.9 million.

On appeal, Day Development argued that the contracts expressly called for Martz to be paid only if the developer built after receiving the approval or sold the two parcels.

Day Development said the contracts set forth a specific formula for how Martz was to be compensated if the land were developed or sold:  The developer was to pay Martz 50% of the net appraised value of the parcels if construction occurred and 50% of the net profit if the six- and four-acre parcels were sold.

The contract was silent, however, on Martz’s compensation if Day simply retained the land. That silence regarding compensation indicated that payment would not be owed if the land was neither built upon nor sold, Day Development argued.

But the 4th Circuit said contractual silence on the amount of compensation does not excuse Day Development from paying Martz for fulfilling his part of the contracts.

The 4th Circuit cited language from the contracts stating that “in the event Martz obtains the approvals for the proposed use, compensation as set forth below shall be due and payable” by Jan. 1, 2015.

“We conclude that a reasonably prudent person would read these provisions to give them one meaning as relevant to the issues here – that Martz was to be compensated for his ‘obtaining the approvals for the proposed use,’ and that there were no other conditions precedent for earning compensation,” Judge Paul V. Niemeyer wrote for the majority. “Thus, when Jan. 1, 2015, arrived and the property had neither been sold nor developed, Martz was entitled to compensation as he had obtained ‘the approvals for the proposed use’ as referenced in the agreements.”

The 4th Circuit also upheld the validity of Blake’s calculation of “unjust enrichment” damages as being within the judge’s discretion. The appeals court noted that the $1.9 million award was 50% of the appraised value of Day Development’s parcels following the city’s approval of the land for multiresidential and commercial development.

Niemeyer was joined in the opinion by Judge Albert Diaz.

Day Development’s attorney, Bruce L. Marcus, said only that he and his client are “examining our options.” Marcus is with MarcusBonsib LLC in Greenbelt.

Martz’s attorney, Leslie A. Powell, praised Blake and the 4th Circuit for recognizing that Martz was entitled to be paid for fulfilling his obligation under the contract.

“The plaintiff did what he was supposed to do,” said Powell, of Powell LLC in Frederick. “It is totally appropriate for the court to apply the doctrine of unjust enrichment.”

In dissent, Judge A. Marvin Quattlebaum Jr. called the contracts unclear regarding whether Martz was owed money if Day Development simply retained the land. Due to that lack of clarity, the 4th Circuit should have sent the case back to the district court for a determination of what the parties intended, Quattlebaum stated.

The specified “methods of compensation … require the property to either be sold or developed,” Quattlebaum wrote.

“So, while one might reasonably conclude that the parties forgot to include or failed to consider a provision that described how Martz would be paid if a third event happened – he obtained the approvals but Day Development neither sold nor developed the property – another fair reading was that the omission was intentional,” Quattlebaum added. “Thus, we have two reasonable interpretations of the agreements.”

Martz sued Day Development in Frederick County Circuit Court in September 2015, alleging the developer breached the two consulting services agreements by not paying the consultant by Jan. 1, 2015, after having secured development approvals from the city.

Day Development had the case moved to U.S. District Court in Baltimore based on the amount in controversy exceeding $75,000 and the diversity of state citizenship between the Rockville-based developer and Martz, a Floridian.

The 4th Circuit did not state why it chose to issue its decision — based solely on Maryland contract law — as “published” and, thus, citable as precedent in federal courts in Maryland, the Carolinas, West Virginia and Virginia.

The 4th Circuit rendered its ruling in Byron W. Martz v. Day Development Co. et al., Nos. 19-2186 and 19-2241.