Relating to Real Estate

In a well-publicized case, the Court of Special Appeals recently held that The Johns Hopkins University is not prohibited by the terms of the deed that conveyed a farm in Montgomery County to it from developing that property in the way that it wants, even though the prior owners wanted the development to be much less intense than Hopkins is planning. Newell v. Johns Hopkins University, -- Md. App. --, 79 A.3d 1009 (2013).

The plaintiffs in the case were members of the family of Elizabeth Banks, who owned and lived on a 138-acre farm. Ms. Banks’s family had owned the farm for more than 100 years. Ms. Banks was outspoken in her dislike for the way that nearby properties were being developed.

In the 1980’s Montgomery County imposed assessments on the farm because of the widening of roads adjacent to it, and Ms. Banks could not afford to pay those charges. Therefore, she began discussions with Hopkins about transferring the property to it. In 1988, Ms. Banks and Hopkins entered into a contract of sale, which was later amended and restated, for the sale and gift of the farm. Under the agreement, Hopkins paid $8 million to Ms. Banks and her siblings, Hopkins built a house on the property for Ms. Banks to live in for the rest of her life, and Hopkins assumed the obligation to pay $1.6 million to the County for its assessments. Because Hopkins had placed a value of $15 million on the property, Ms. Banks and her siblings were able to take a significant tax benefit from the conveyance.

Of most significance to the case, the contract of sale imposed restrictions on Hopkins’s use of a 98- acre portion of the farm. For a period of time, Hopkins was permitted to use that land “. . . for agricultural, academic, research and development, delivery of health and medical care and services, or related purposes only . . . .” The deed to Hopkins contained this same restriction.

In another portion of the contract Ms. Banks acknowledged that the proposed use of the property by Hopkins would require a change in the zoning classification of the property, and she agreed to cooperate with the zoning change. That zoning plan was approved in 1990. In June 2010 the Montgomery County Planning Department approved a new master plan (the Great Seneca Plan), which would enable Hopkins to develop the property in a more intensive way than Ms. Banks had anticipated. On November 10, 2011, after Hopkins sought zoning approval to permit the higher density development than the Seneca Plan permitted, Ms. Banks’s family filed a declaratory judgment action in the Circuit Court for Montgomery County.

Although the Circuit Court did not grant Hopkins’s motion to dismiss, after discovery and a hearing the Circuit Court did grant summary judgment to Hopkins. The family appealed to the Court of Special Appeals.

The Court of Special Appeals found that the quoted language three paragraphs above is the only non-public limitation on Hopkins’s development of the property and that this language is not ambiguous – i.e., it is not susceptible of more than one meaning. When language in a contract or a restrictive covenant is unambiguous, the courts are to give effect to that language and not look beyond the document to ascertain the intent of the parties who drafted it. In this case, the language contains no limit on the scale, density, height, or other aspect of the development of the property by Hopkins, or on Hopkins’s ability to lease portions of the property. Therefore, none of these conditions was subject to the contract or deed limitation.

The plaintiffs argued that the new Hopkins plan would produce a campus that was quite a bit different from the one anticipated by Ms. Banks, but the Court of Special Appeals stated that “a campus with more or taller buildings is no less a campus. . . . Put another way, the Belward Campus is still a campus, whatever the size or density of the buildings, so long as Hopkins has devoted the space to the agreed purposes.”

The Court of Special Appeals recognized how upset the plaintiffs were by the possibility that the property would be developed in a way that was very different from what Ms. Banks had envisioned. However, the court noted that “our task is to examine the agreement the parties did sign, not the agreement that one or the other now wishes they had negotiated instead.” Therefore, the Court of Special Appeals affirmed the order of the Circuit Court to enable Hopkins to develop the property in the more intensive manner.

PRACTICE NOTE: Newell v. Hopkins points out the need for documents to contain all of the provisions that are of import to the parties. In many instances the parties will not be able to rely on oral statements or on other writings, so it is very important that documents be drafted in a comprehensive way. Maryland’s appellate courts have stated that they will not revise a document because it is a bad deal for one of the parties or because a court’s objective reading does not conform to the expectations of one of the parties. The courts are interested in ensuring certainty in contracting, and the way in which a party may protect itself is to be sure that its documents are drafted clearly, carefully, and completely.

For questions about this, please contact Ed Levin at (410) 576-1900.