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United States District Court denies Defendant’s Motion to Dismiss Plaintiff’s Breach of Contract Claims because of ambiguity in the operative contract

Key Tidewater Ventures LLC v. PNC Bank, N.A.
No. 14-2170 (D. Md. Oct. 15, 2014)

by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (

Available at:

In Key Tidewater Ventures LLC v. PNC Bank, N.A., the United States District Court for the District of Maryland denied a defendant/bank’s motion to dismiss breach of contract claims filed by plaintiffs who were loaned money, where the operative contract between the parties was unclear as to whether plaintiffs were required to pay a fee for repaying the loan before the maturity date. Writing for the Court, Judge James K. Bredar held that ambiguity in the effect of the parties’ contractual agreement generated an issue of material fact, such that dismissal would be improper. The Court also held that ambiguity in the parties’ contractual agreement allowed the plaintiffs to maintain claims for unjust enrichment, even though there was no contention that the parties’ written agreement was a valid contract.

Key Tidewater Ventures LLC, Tidewater Yacht Service Center, Inc., Tidewater Holdings LLC, Robert P. Brandon, and Jacqueline S. Brandon (collectively, “Plaintiffs”) obtained three (3) loans from Mercantile Bank in 2005. Plaintiffs’ loans were consolidated into a single promissory note (the “Consolidated Note”) for $7,050,000.00. Importantly, the Consolidated Note contained a clause (the “Prepayment Clause”) that imposed a fee if Plaintiffs prepaid before the Consolidated Note’s maturity date. PNC Bank (“Defendant”) became the successor to Mercantile Bank, and was the holder of the Consolidated Note when Plaintiffs defaulted in 2011. Rather than accelerate loan repayment, Plaintiff and Defendant entered in an agreement (the “Forbearance Agreement”) that set new maturity dates for the Consolidated Note. The Forbearance Agreement provided that Defendant had an obligation to forbear from “exercising and enforcing any rights, remedies, or recourse” associated Plaintiffs’ default, and acknowledged that the Forbearance Agreement did not alter the Consolidated Note unless expressly stated. Plaintiffs ultimately prepaid the Consolidated Note, and Defendant charged Plaintiffs a fee under the Prepayment Clause. Plaintiffs filed suit, alleging claims of breach of contract and unjust enrichment against Defendant. Defendant moved to dismiss Plaintiffs’ claims.

Applying Maryland law, the Court denied Defendant’s Motion to Dismiss. The Court noted that the construction of an ambiguous contract provision is a factual determination that precludes dismissal. The Court found that the Consolidated Note and Forbearance Agreement did not clearly entitle Defendant to the prepayment fee imposed upon Plaintiffs. Rather, the Court determined that the Prepayment Clause was susceptible to multiple interpretations given the terms of the Forbearance Agreement. The Court held that, under the objective interpretation principle, the Forbearance Agreement could be reasonably interpreted to have modified or altogether eliminated the Prepayment Clause. Having held that the Prepayment Clause was ambiguous, the Court stated that extrinsic evidence would be necessary to interpret the parties’ duties and obligations. As to the unjust enrichment claim, the Court acknowledged that claims of quasi-contract cannot be maintained when an express contract defined the rights and remedies between the parties. The Court determined, however, that Plaintiffs could maintain their unjust enrichment claim because no express contract provision unambiguously addressed the rights and remedies between the parties under the Prepayment Clause. Until the issue of whether the Prepayment Clause is still operative given the terms of the Forbearance Agreement, the Court held that Plaintiffs adequately pled unjust enrichment as alternative grounds for relief.