Phelps v. Herro

137 A.2d 159, 215 Md. 223

• Court: Court of Appeals of Maryland
• Decided: September 1, 1965
• Docket: [No. 65, September Term, 1957.]
• Status: Published

Opinions

Prescott, J.,

delivered the opinion of the Court.

This appeal questions the validity of an order passed on April 3, 1957, that directed, “the Plaintiffs’ (appellees’) motion for a Summary Judgment be granted,” and a judgment entered on April 8, 1957, in favor of the appellees against the appellants for the sum of $34,135.82; both in the Circuit Court for Anne Arundel County.

On October 21, 1955, the appellees and appellants entered into a written agreement whereby the appellees agreed to sell, and the appellants agreed to buy, fractional interests of the appellees in and to certain real property and corporate stock for the sum of $37,500. The agreement further provided that appellants should pay the purchase price as follows:

“1. Five Thousand Dollars ($5,000.00) in cash on or before January 1, 1956.

“2. A promissory note in the amount of Thirty-two Thousand Five Hundred Dollars ($32,500.00) calling for principal payments in the amount of Five Thousand Dollars ($5,000.00) plus interest at the rate of four per cent (4%) per annum on the first of each succeeding January and the entire balance to become due and payable January 1, 1961. However, Phelps and Sandsbury (appellants), may extend the maturity date until January 1, 1963, by giving notice of intention to so extend in writing to Herro (appellee) on or before July 1, 1960.”

The appellants paid the first $5,000 as provided in the agreement. They and the appellees remained rather closely associated in several intricate and complicated business transactions until some time in September of 1956. At that time, the appellees transferred unto the appellants their fractional interests in the real estate and corporate stock named in the contract. Soon thereafter, negotiations were conducted by the parties, which had as their objective the sale to the appellants of all of the interests of the appellees in all business enterprises where there were mutual interests, or a purchase by the appellees of the appellants’ interests therein. A meeting was held and attended by all of the parties on October 11, 1956, at the office of the appellees’ counsel. At this meeting, the appellants contend the appellees made an oral proposal that was subsequently accepted unconditionally by the appellants in writing, thereby making a binding contract. While the appellants fully acknowledge the existence of the contract involved in the case at bar, this alleged contract, as set forth by them, materially changed their obligations thereunder. The appellees contend the appellants did not accept the proposal as made by them, and claim the purported acceptance contained a number of terms either in addition to or at variance with the oral offer made by them; consequently the purported acceptance was no more than a counter-proposal, which was not acceptable 'to them.

The appellees instituted an action at law against the appellants on December 7, 1956. The declaration consisted of five common counts in assumpsit and one special count on the written contract. At the same time, the appellees filed a motion for a summary judgment to which was attached a photostatic copy of the written contract. This motion was supported by an affidavit in proper form. This affidavit, after stating some of the facts related above, alleges the appellees: “transferred and conveyed to the defendants their said interest in and to said real and personal property and performed all other matters and things required of them under said agreement; that the defendants paid the plaintiffs five thousand dollars ($5,000.00) but have failed and refused to execute and deliver to the plaintiffs a promissory note in accordance with the said agreement although plaintiffs have so requested”and demanded; that defendants have, through their attorney and agent, notified the plaintiffs, through their attorney and agent, that they will not pay the balance of the purchase price to the plaintiffs in the amount of thirty-two-thousand five hundred dollars ($32,500) ; that there is now therefore justly due and owing the plaintiffs by the defendants, over and above all credits the sum of thirty-two thousand five hundred dollars ($32,500) together with interest from-January 1, 1956.” The appellants filed what they termed an “Answer in Opposition to Plaintiffs’ Motion for Summary Judgment.” As the affidavit attached to this “answer” was clearly defective in not being made on personal knowledge (Maryland Rule 610 b), it cannot be considered here. The appellees filed a supplemental affidavit before the hearing on the motion for summary judgment stating that they had received no payment from the appellants since the filing of the suit. A hearing was held on the motion on March 29, 1957. On April 3, 1957, a docket entry was made that reads: “Ordered that the Plaintiffs’ motion for Summary Judgment be granted,” and on April 8, 1957, judgment was entered against the appellants in favor of the appellees for $34,135.82. From these, the appellants have appealed.

The judgments herein were entered under the authority of Maryland Rule 610. Section a 1 of this rule provides: “In-an action, a party asserting a claim, * * * may at any time-make a motion for a summary judgment in his favor as to all) or any part of the claim on the ground that there is no genuine dispute as to any material fact and that he is entitled to-judgment as a matter of law.” As the appellants’ affidavit was defective, there was no genuine dispute concerning the facts, so we must determine whether the appellees were “entitled to judgment as a matter of law.”

It will be noted suit was filed December 7, 1956, and the next instalment of $5,000 was not due under the contract until January 1, 1957. It is well settled and familiar law that a cause of action must be ripe at the commencement of the suit and the non-existence of a cause of action at that time is fatal to the right to recover; therefore it would be superfluous to cite authorities in support of the proposition.

The appellees’ theory of the case is that at the time of the hearing on the motion for a summary judgment, their allegations that the appellants had failed and refused, although requested and demanded, to execute and deliver a promissory note, and that the appellants had notified the appellees they would not pay the balance of the purchase price showed such a definite and specific repudiation of the contract that it entitled them to sue immediately for the entire sum due by the appellants under the contract. The appellants, on the other hand, claim the suit was prematurely brought; that originally the contract was a bilateral one that became unilateral as soon as the appellees performed all of the matters and things required of them under the agreement (the fact that appellees had so performed being admitted in appellees’ affidavit) ; that under the agreement of the parties, the appellants had not agreed to give a negotiable promissory note, or a note that was to be' secured in any manner, but simply a promissory note payable to the appellees and signed by the appellants; that the consideration named was higher than the appellants would have agreed upon, unless the appellees had agreed to take an unsecured note payable over a long period of time; that when the contract became unilateral, the only obligation thereunder was that the appellants were required to pay several sums of money in instalments, which obligation, assuming a failure to give a note and a statement by their attorney that appellants would not pay the note, would not be accelerated so as to make-the entire sum named in the contract, or any part thereof, due on December 7, 1956, when suit was instituted.

One of the leading cases on the question of the anticipatory breach of a contract is Hochster v. De la Tour, 2 El. and Bl. 678. There, the plaintiff in April, 1852, had agreed to serve the defendant, and the defendant had undertaken to employ the plaintiff, as courier, for three months from June 1, 1852, on certain terms. On May 11, 1852, the defendant wrote the plaintiff that he had changed his mind, and declined to avail himself of plaintiff’s services. On May 22, 1852, the plaintiff brought an action at law for breach of the contract. It was held that there could be a breach before the time fixed for performance; that a positive and absolute refusal to carry out the contract prior to the date of actual default amounted to such a breach. Since the decision in this case, there have been numerous and varied rulings on the many and complex angles that have arisen in applying, or not applying, the doctrine of anticipatory breach of a contract, and it is entirely possible the law relating thereto is not, at the present, well settled in all of its aspects. Annotation, 105 A. L. R. 460, 462.

However, with reference to unilateral contracts, or bilateral contracts that have become unilateral by full performance on one side, for the payment of money in the future, without surety or other conditions involved, (the situation in this case when suit was instituted), the text writers and decisions are in general accord that the doctrine of anticipatory breach has no application. 5 Williston, Contracts, sec. 1328; 4 Corbin, Contracts, sec. 963; Annotation, 105 A. L. R. 460, 465; Restatement, Contracts, sec. 318, comment e. In Roehm v. Horst, 178 U. S. 1, a leading case, the Supreme Court, on elaborate consideration by Chief Justice Fuller, recognized the principle. In Greenway v. Gaither, Taney, Circuit Court Decisions, 227, 231, the facts were quite analogous to those in the case at bar. The plaintiff agreed to sell, and the defendant to buy, a house and lot for a sum of money to be paid in 18, 24, 30 and 36 months. The defendant repudiated the contract, and suit was instituted before the first instalment of the purchase-money was due. Chief Justice Taney decided the case had been prematurely brought. In ruling on an application to seal a bill of exceptions, he stated: “It has never been supposed that notice to the holder of a bond, or a promissory note, or bill of exchange, that the party would not (from any cause) comply with the contract, would give to the holder an immediate cause of action, upon which he might sue before the time of payment arrived.” A similar ruling was made in General American Tank Car Corp. v. Goree (C. C. A. 4th), 296 F. 32, 36, wherein the court stated flatly: “No right of action arises from the repudiation before maturity of a unilateral contract, nor for repudiation of an independent promise in a bilateral contract. An action cannot be sustained on a promissory note before maturity on the ground that the maker had declared his intention not to pay it. A tenant’s repudiation of his lease does not give his landlord an immediate right of action for future rent.” In a case decided by this Court, Appleman v. Michael, 43 Md. 269, the plaintiff agreed to sell, and the defendant to purchase, certain goods; payment therefor was to be made by the defendant by executing his note in the amount of the purchase price, payable in ninety days. The defendant refused to execute the note or to pay for the goods. Suit was instituted more than three years after the defendant’s refusal to execute the note, but less than three years from the maturity of the note, which the defendant was alleged to have agreed to execute. The Statute of Limitations was pleaded. This Court held that this was not a sale upon condition that a note be given where no title would have .passed unless the note were given; that it was a case where the sale and delivery of the goods were absolute, and where the title to them passed immediately, but they were to be paid for at a subsequent time; that the credit was not dependent upon the execution of the note, so that it could be terminated or treated at an end by the vendor upon the neglect or refusal of the purchaser to give the note; that the note would have given no additional security to the vendor and there was no stipulation in the contract for such security; that it was simply a case of a sale of goods upon an absolute credit of ninety days, and the Court was “clearly of (the) opinion (that) no action for their value could, under any circumstances, have been sustained if brought before the expiration of that time.” In other words, the Court held that if the action had been brought after the neglect or refusal to give the note, but before its maturity date, the cause of action would not then have accrued and the suit would have been prematurely brought.¹

We think the proper rule is that the doctrine of anticipatory breach of a contract has no application to money contracts, pure and simple, where one party has fully performed his undertaking, and all that remains for the opposite party to do is to pay a certain sum of money at a certain time or times, and, under the circumstances of this case, this is as far as we need to rule, although some of the cases cited hold that the doctrine of anticipatory breach has no application whatsoever in unilateral contracts, or bilateral contracts that have become unilateral by full performance on one side.

The appellees cited to us the case of Precision Development Co. v. Fast Bearing Co., 183 Md. 399, 37 A. 2d 905. We fail to see that it applies to the facts of the present controversy. There, the defendant purchased certain articles, consisting entirely of personal property, from the plaintiff. The purchase price was to be paid by a payment of $10,000 within 30 days and the balance, according to the defendant, in five annual instalments on the first day of December of each calendar year. The defendant agreed to execute and deliver its promissory note or notes for the balance of the purchase price secured by chattel mortgage on the goods sold. However, the defendant failed to pay the $10,000 within the prescribed time, did not have the property insured, and declined to execute the notes or chattel mortgage. It accepted delivery of all the articles and disposed of portions thereof. It was held that these facts furnished ample evidence upon which the jury could find that the contract had been breached, and, if so found by the jury, warranted a recovery of the full purchase price. Cf. Better v. Williams, 203 Md. 613, 102 A. 2d 750. In the case at bar, there was no agreement to secure the notes in any manner whatsoever, but the agreement of the appellants was a bald promise to pay money at a future date.

The appellees relied heavily upon the cases of Hanna v. Mills (1839), 21 Wend. (N. Y.) 90, 34 Am. Dec. 216, Bowman v. Branson (1892), 19 S. W. 634 (Mo.), Bayne v. Morris (1863), 68 U. S. 97, and Bennett v. Dodgson (1955), 284 P. 2d 990 (Mont.).

The Hanna and Bowman cases are greatly weakened, if not overruled entirely, by subsequent rulings in New York and Missouri in so far as they can be said to have permitted recoveries for anticipatory breaches of contracts for the recovery of money only. (The Hanna case called for a note to be indorsed by a person satisfactory to the plaintiffs, which was tantamount to the giving of security.) Nichols v. Scranton Steel Co. (N. Y.), 33 N. E. 561, 566; Kelly v. Security Mut. Life Ins. Co. (N. Y.), 78 N. E. 584; Sulyok v. Penzintezeti Kozpont Budapest, 111 N. Y. S. 2d 75, and cases therein cited. Modified on other grounds, 107 N. E. 2d 604; Leon v. Barnsdall Zinc Co. (Mo.), 274 S. W. 699, 703. In Bayne v. Morris, the defendant was not only obligated to pay money, but to furnish a bond with penalty and surety; and in Bennett v. Dodgson the defendant agreed to give a “bankable” note. A different rule applies when an agreement calls for the giving of a note with security from one that simply requires the giving of a note.

The appellees argued further that a promise to give a negotiable note stands on the same footing as a promise to furnish security. We find it unnecessary to decide this question; because we think the promise to give a note in this case contemplated a non-negotiable one. The contract does not explicitly call for a negotiable instrument; it was to be paid over a rather extended period of time; the appellants had the option of extending the maturity date until- January 1, 1963, by merely giving notice to one of the appellees; and the declaration filed by the appellees does not declare on a promise to give a negotiable instrument. Considering these facts and all of the circumstances surrounding the execution of the contract, we conclude that the note promised by the appellants to appellees was a non-negotiable one.

From what we have said above, we conclude this case was prematurely brought, so the judgments must be reversed.

This ruling renders it unnecessary to pass upon the other questions raised by the appellants and the appellees.

We have not overlooked the fact that suit possibly could have been entered on December 7, 1956, if the suit were regarded as an action for a breach of the contract by the appellants in refusing to give the note within a reasonable time, as distinguished from an action for the value of the interests sold. Appleman v. Michael, supra, 43 Md. at page 281. If it had been treated as such, the appellees would have been limited to nominal damages, or such as they could have proved resulted from the failure to give the note, alone; but they were not entitled to recover the instalments named in the contract, which were not then due.

Judgments reversed without prejudice to the appellees’ right to institute further proceedings to enforce whatever rights they may have under the contract, appellees to pay the costs.

1 . For other cases holding that the doctrine of anticipatory breach of contract either has no application to unilateral contracts, or that it has no application to unilateral contracts for the pure and simple payment of money, see City of Hampton, Virginia v. United States (C. A. 4th), 218 F. 2d 401; Moore v. Security Trust and L. Ins. Co. (C. C. A. 8th), 168 F. 496; Brimmer v. Union Oil Co. (C. C. A. 10th), 81 F. 2d 437; Sagamore Corp. v. Willcutt (Conn.), 180 A. 464; Manufacturers’ Furniture Co. v. Cantrell (Ark.), 290 S. W. 353, 354; Huffman v. Martin (Ky.), 10 S. W. 2d 636, 638; Sheketoff v. Prevedine (Conn.), 51 A. 2d 922, 924; Parks v. Maryland Casualty Co. (D. C., W. D. (Mo.), 59 F. 2d 736. Cf. Fidelity and D. Co. v. Brown (Ky.), 20 S. W. 2d 284; Better v. Williams, 203 Md. 613, 617, 102 A. 2d 750; Weiss v. Sheet Metal Fabricators, 206 Md. 195, 203, 110 A. 2d 671.