Axe Prop. & Mgmt. v. Merriman

311 A.3d 376

261 Md.App. 1

AXE PROPERTIES & MANAGEMENT, LLC

v.Leonard MERRIMAN, IV

No. 1627 Sept. Term, 2022

Appellate Court of Maryland.

March 1, 2024

Circuit Court for Prince George’s County, Case No. CAL17-03910, Judy L. Woodall, Judge

Argued by Imoh E. Akpan, Goldberg Segalla, LLP, Baltimore, MD (Michael P. Hsur, Business Law Associates, LLC, Rockville, MD), on brief, for Appellant

Argued by Eugene W. Policastri, Selzer Gurvitch Rabin Wertheimer & Polott, P.C., Rockville, MD, on brief, for Appellee

Argued before: Berger, Leahy, Alexander Wright, Jr. (Senior Judge, Specially Assigned), JJ.

Leahy, J.

The issues presented in this appeal concenter on whether a jury may award damages for breach of contract, unjust enrichment, and negligent misrepresentation on the same claims arising out of the November 2015 sale of a single-family home in Capitol Heights, Maryland, to Leonard Merriman, IV ("Merriman") by AXE Properties, LLC ("AXE").

On remand for a new trial ordered in Merriman v. AXE Props. & Mgmt., LLC, No. 848, Sept. Term 2018, slip op. at 1-2, 2020 WL 4341783 (filed July 28, 2020) (Merriman I), a Prince George’s County jury determined that AXE failed to disclose latent defects that existed in the home prior to the sale. The jury awarded Merriman $70,000 for breach of contract; $200,000 for unjust enrichment; and $130,000 for negligent misrepresentation. AXE filed two motions for judgment notwithstanding the verdict ("JNOV"), which were denied.

AXE presents two issues for our review. First, AXE complains, as it did before the trial court, that a plaintiff may not simultaneously recover under claims for breach of contract and unjust enrichment, even if the fraud or bad faith exception of County Commissioners of Caroline County v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 747 A.2d 600 (2000) (hereinafter "Dashiell"), is applicable. Issue one, therefore, is whether the circuit court erred by sustaining the jury’s unjust enrichment award under the fraud or bad faith exception adopted in Dashiell, where Merriman also recovered damages for breach under an express contract defining the rights and remedies of the parties.¹ We hold that although a plaintiff may allege causes of action for breach of contract and unjust enrichment concurrently when there is evidence of fraud or bad faith, Dashiell, 358 Md. at 100, 747 A.2d 600, a plaintiff may not recover under both for any claim covered by the contract.

Axe frames the second issue in its brief as: "Did the Circuit Court err by sustaining the jury’s $200,000 compensatory damage award, when [Merriman] only presented evidence of [$132,925]² in damages?" AXE asserts that, under Beall v. Holloway-Johnson, 446 Md. 48, 70-71, 130 A.3d 406 (2016), Merriman’s claims for breach of contract and negligent misrepresentation are not eligible for separate compensatory damage awards; therefore, because the combined $200,000 award ($70,000 for breach of contract, and $130,000 for negligent misrepresentation) exceeds the evidence of damages that was presented at trial, we should exercise our authority under Maryland Rule 8-604(a)(4) to modify the judgment and reduce the award to $132,925. We hold that AXE failed to preserve any argument that, under Beall, the jury’s remaining $200,000 combined compensatory award ($70,000 for breach of contract and $130,000 for negligent misrepresentation) represents an impermissible double recovery; therefore, we will not disturb that award.

BACKGROUND

Underlying Dispute

The basic facts of the case, as we previously summarized in our unreported opinion, are as follows:

AXE Properties & Management, solely owned by Weichin "Eric" Wang, is a limited liability corporation in the business of buying improved real estate, foreclosed or otherwise, renovating and reselling them. In the parlance of the day, AXE is a "property flipper." In late July 2015, AXE purchased the "[d]istressed" property, 4925 Gunther Street, in a foreclosure sale from the foreclosing bank and renovated it for resale. Merriman, a first-time homebuyer in Maryland, purchased the renovated property from AXE in November 2015. In the contract documents, Wang, as the principal of AXE, executed a disclaimer and conveyed the property "as is." Shortly before moving into the home in February 2016, Merriman and his wife, Jeanine Young Merriman, noticed several instances of water intrusion into the basement which, Merriman aver[red], was, or should have been, apparent to AXE, but had not been disclosed prior to the sale. That condition continued even after they had moved into the home.

In the months that followed, Merriman and his wife experienced several additional problems with the house, including faulty electrical wiring and a roof leak that appeared to be related to the removal of a load-bearing wall. To assess the full extent of the defects, Merriman retained architect Kevin J. Driscoll, A.I.A., who, in September 2016, performed a code compliance inspection of the property. Driscoll’s report noted 20 various defects through- out the interior and exterior of the property, including code compliance failures. Thus Merriman assert[ed], there were latent defects of which AXE ought to have known that required disclosure.

Merriman I, slip op. at 1-2 (footnotes omitted, second and third alterations added).

Thus aggrieved, in February 2017 Merriman filed a complaint in the Circuit Court for Prince George’s County. The complaint charged that undisclosed latent defects existed in the property he purchased from AXE and Merriman asserted claims for breach of contract, fraudulent inducement/deceit, fraud/concealment, negligent misrepresentation, unfair or deceptive trade practices in violation of the Maryland Consumer Protection Act, rescission, and unjust enrichment.

A jury trial commenced on May 7, 2018. The case never reached the jury, however, because the court granted AXE’s motion for judgment on all counts at the conclusion of Merriman’s case-in-chief. Merriman I, slip op. at 3. In its motion for judgment, AXE argued that the alleged defects were "visible and apparent" and, thus, that any defects were not latent³ defects. Id., slip op. at 5. The court agreed with AXE and, in its oral ruling on the motion, found, among other things, that there was "nothing hidden" and that "[t]he things that were wrong with [the house] appeared to be visible[.]" Id., slip op. at 6-7.

On appeal, Merriman argued that the trial court erred in granting AXE’s motion for judgment, and we conducted a de novo review of the evidence presented at trial to determine whether, "in the light most favorable" to Merriman, there was "any evidence, no matter how slight, legally sufficient to generate a jury question" on the complaint’s central allegation that the water seepage constituted a latent defect that was known, or should have been known, to AXE and its agents at the time they renovated the house. Id., slip op. at 4, 9-10 (quotations omitted). After summarizing the testimony of each of, the four witnesses that Merriman called in his case-in-chief, we found "from an essentially uncontested record that there were defects present" and that it was possible that "certain" of those defects, including the "presence of water seepage into the basement … were made to be latent by the efforts of the renovating contractors, thereby imputing knowledge to AXE." Id., slip op. at 10-13. Accordingly, we held that "[w]hether the evidence … was sufficient to charge AXE with knowledge of latent defects in violation of laws requiring disclosure or in violation of the parties’ contract of sale [was] a question of fact to be decided by a trier of fact." Id., slip op. at 13 (citation omitted). To effectuate that holding, we vacated the judgment of the circuit court and remanded the matter for a new trial. Id., slip op. at 13.

In July 2021 Merriman filed an amended complaint that made new and more specific factual allegations⁴ and asserted an in- creased estimated cost to repair the property and place it in the condition that, in Merriman’s view, it should have been in at the time of sale.⁵ The amended complaint also added a claim for "pierc[ing] the corporate veil" and a claim for "attorneys’ fees per contract – [Maryland] Rule 2–705[,]" but the court granted AXE’s motion to strike these new claims. (Emphasis removed).

Trial Summary

The parties convened to pick a jury on October 27, 2021, and trial commenced on October 28. During his case-in-chief, Merriman called five witnesses and played portions of the recorded deposition of the listing agent, Charles Nucciarone.⁶ Because, in this appeal, AXE does not contest liability—but merely Merriman’s ability to recover the awarded damages—our summary of the factual record is focused on the evidence pertinent to the damages issues presented.

Merriman testified that in October 2015 he entered into a contract to purchase the home from AXE for $255,000. The parties closed on the home in November, and Merriman moved into the home in February 2016. Merriman quickly began to experience problems, however, before moving in. For example, Merriman installed a washing machine in the home’s basement, but when the dolly carrying the machine rolled over the basement’s carpet, water began to "bubble[ ]" up. To remedy that issue, Merriman installed a new sump pump and purchased a wet vac to remove the water. After Merriman moved into the home, "within a week" it rained, and Merriman discovered "more water infiltration" in the basement. Thereafter, he continued to discover water seeping into the basement approximately once every six weeks. Merriman enlisted the help of various professionals to attempt to diagnose and remedy the home’s issues. These professionals discovered additional problems, including defects in the wiring, water that pooled on a portion of the roof, and an exterior facing window that was concealed behind drywall and not visible from the outside.

On cross-examination, Merriman acknowledged that he had...