The Glendale Corp. v. Crawford

114 A.2d 33, 207 Md. 148

• Court: Court of Appeals of Maryland
• Decided: October 1, 1983
• Docket: [No. 83, October Term, 1954.]
• Status: Published

Opinions

Brune, C. J.,

delivered the opinion of the Court.

The appellant, The Glendale Corporation (“Glendale”), brought suit in the Circuit Court for Baltimore County for specific performance of two contracts for the purchase of adjoining lots in a new residential development on the outskirts of Baltimore City. The defendants-appellees, the Crawfords, filed an answer which also served as a cross-bill for rescission of the contracts and for the refund of their deposit on the purchase price on the lots. The decree of the trial court dismissed the bill and granted the relief prayed by the appellees, with interest and costs. The appeal is from that decree.

The first contract was executed on May 4, 1953, and the second two days later. The second contract was entered into because the first lot was found not to be large enough for the type of house which the Crawfords contemplated building. The balance of the purchase price of the two lots was payable on September 13, 1953. Just before the settlement was due Mr. Crawford wrote to Glendale’s agent stating the houses being built at Glendale were not of the type which they believed would be constructed and that “If we build the house for which we have plans, we feel that we would be ‘overbuilding’ the development, and it would be an unwise investment.” For these reasons they requested a refund of their deposit.

When Glendale brought this suit the Crawfords asserted in their answer that they had been induced to execute the contracts by false, misleading and untrue statements to the effect that: (1) the lots were “to remain and stay in their natural state of beauty and contour;” (2) only homes of certain sizes, types and price ranges were to be built in the development; and (3) homes were to be built individually and not commercially; and (4) all homes built would have to be approved by Glendale as complying with the foregoing requirements.

The principal controversy at the trial related to the grading of an adjacent lot, which had been cut down to such an extent that the roof of the house built thereon was approximately level with the Crawfords’ lots, and a virtual cliff had been created by the grading excavation.

There was testimony by the Crawfords in support of their allegations relating to the representations which they claimed had been made to them by Glendale’s agent, Mr. C. Preston Scheffenaeker, Jr.; and there was a conflict between their testimony and Mr. Scheffenacker’s on several points, particularly with regard to the cost of houses to be constructed in the development and on the question as to whether houses were to be built exclusively by home owners or might be constructed by builders for resale (referred to in the testimony as “speculative building”).

On the matter of grading and elevation, it appears that there are streets along two sides of the Crawfords’ lots, and the appellant states that these had been graded before the Crawfords signed the contracts here in suit. The Crawfords’ testimony shows that they wanted a high lot. The grading of the adjoining lot was done by the owner, not by Glendale, but it was done under plans submitted to and approved by Glendale’s architect. Such approval was required — as well as the approval of house plans — under the restriction placed upon the Glendale development.

These restrictions are said by Mr. Schenffenacker to cover nine pages, and they had been duly recorded. The Crawfords did not examine them, but did discuss them with Mr. Scheffenaeker. In response to a question as to whether he had made any representations to the Crawfords about grading Mr. Scheffenaeker replied that he became “more or less standardized” in his statements and that he would say, if asked to cut lots down or to remove trees, that “Glendale sells the lots as is and we will not grade lots that have been sold.” He further testified with regard to the requirements for approval of grading plans by Glendale’s architect, and that, on the subject of the cost of homes, he would state that “the price is not taken into consideration; you can build a $40,000 home which is not acceptable” and the architect’s approval must be obtained.

The Chanecllor’s opinion is concerned with the matter of grading and states: “It is impossible for the Court to believe that any sensible person would have purchased the property if he had been apprised of the grading plans that the complainant corporation contemplated making. The lots at the present time may be likened to a small mesa with precipitous cliffs approximately twenty feet in height on three sides. It would be an extremely expensive operation to grade this land and bring it in line with the neighboring property and the streets. The testimony is to the effect that the defendants desired a high lot but they could not have contemplated any such fantastic elevation as has been left after the grading of the surrounding property by the complainant. * * * I do not believe it to be necessary to go into any legal aspects of the case as the thing speaks for itself. It would be grossly inequitable to compel the defendant to take the lots as they are now. A home erected on the present location would be a virtual cliff dwelling and be almost as inaccessible. It would be incredibly foolish to even consider building as it now is.”

Each of the contracts contained the following provision : “This contract contains the final and entire agreement between the parties hereto, and neither they nor their agents shall be bound by any terms, conditions or representations not herein written.”

The evidence shows that in the latter part of September, 1953, the Crawfords decided to buy another lot in an entirely different development and that they have since constructed a house on the new lot. The appellant suggests strongly that their refusal to complete the purchase of the Glendale lots was due to a change of heart about the bargain which they had made.

The chief question on this appeal is whether or not the contract should be specifically enforced.

The general rule with regard to specific performance of contracts for the sale of land has been stated many times. Specific performance is not a matter of absolute right in the party but of sound discretion in the court. This discretion is not, however, arbitrary; and where the contract is, in its nature and circumstances, unobjectionable — or, as it is sometimes stated, fair, reasonable and certain in all its terms — it is as much a matter of course for a court of equity to decree specific performance of it as it is for a court of law to award damages for its breach. See, among other cases which might be cited, Smoot v. Rea, 19 Md. 398; Brewer v. Herbert, 30 Md. 301; Popplein v. Foley, 61 Md. 381; Rogers v. Dorrance, 140 Md. 419, 117 A. 564; Camden Sewer Co. v. Salisbury, 162 Md. 454, 160 A. 4; Soehnlein v. Pumphrey, 183 Md. 334, 37 A. 2d 843; Taussig v. Van Deusen, 183 Md. 436, 37 A. 2d 915.

The fairness or hardship of a contract is to be judged as of the time when it was made and no subsequent change which may make it less beneficial to one of the parties is material unless the change is in some way the fault of the party seeking its specific execution. Cochran v. Pascault, 54 Md. 1 (citing Smoot v. Rea and Brewer v. Herbert, supra); Lucas v. Long, 125 Md. 420, 94 A. 12.

In this case the appellant seeks to avoid the application of that exception by urging that the Chancellor’s opinion indicates that he proceeded upon the erroneous belief that Glendale itself had done the grading to which the Crawfords object. This, however, does not dispose •of the point. It seems clear that Glendale had retained some control over grading through the requirement that any grading plans had to be approved by its architect; and because of this control Glendale cannot escape all responsibility for the change in grade made by a purchaser with its general consent and with the specific consent of its architect.

The Chancellor also stressed the hardship to which theCrawfords would be subjected if specific performance were decreed, because of the expense to which they would be put in grading their lots so as to bring them into conformity with the neighboring property and streets. Insofar as the streets and access thereto are concerned we find some difficulty in following his opinion, because the general grade of the street seems to have been established before the Crawfords signed the contracts and no reason appears why they should have expected to go to and from their lots over the land of their neighbors. However that may be, the Chancellor’s opinion, based upon his inspection of the site, gives the strong impression that the grading of the adjoining lot put the finishing touch to the elevated (if not splendid) isolation of the Crawford lots and thereby made extensive and expensive grading down of those lots a virtual necessity.

The appellant stresses the fact that no objection on the score of grading was made by , the Crawfords prior to the settlement date under their contracts. On the other hand, the evidence suggests that the grading of the adjoining lot had not taken place up to that time. If that is so, it is difficult to see why they should now be bound by a failure to raise the objection then, if their silence might operate as an estoppel or waiver (which we do not decide) ; nor do we find it necessary to decide whether the Crawfords would have lost all right to object to the grading and to seek rescission if they had paid the balance of the purchase price on the due date and the grading had been done thereafter.

There was direct testimony before the Chancellor of a representation that the general contour of the land was not to be disturbed, and the Chancellor’s opinion makes it clear, we think, that the change in grade of the neighboring lot is material to the contracts which the Crawfords signed. See Pomeroy, Equity Juris., 5th Ed., Sec. 898. In Sec. 891 of the same work, the author points out that where statements of fact which are essentially connected with the subject of the transaction (and are not mere expressions of opinion, hope or expectation, or mere general commendations), “and especially where they are concerning matters which, from their nature or situation, may be assumed to be within the knowledge or under the power of the party making the representation, the party to whom it is made has a right to rely on them, he is justified in relying on them, and in the absence of any knowledge of his own, or of any facts which should arouse suspicion and cast doubt upon the truth of the statements, he is not bound to make inquiries and examination for himself.” This rule has been applied in many cases in other jurisdictions, even though the truth could have been ascertained by an examination of the public records. Pomeroy, op. cit., Sec. 896 (a). No Maryland case is cited on the point.

In Kappelman v. Bowie, 201 Md. 86, 93 A. 2d 266, the owners of a piece of property who had first acquired the leasehold interest in it and had later redeemed the ground rent decided to sell the property. They authorized a real estate agent to sell it for $9,500, subject to a $90 ground rent to be created. They later entered into a contract through that agent to sell it in fee for $7,500. At the time of the execution of the contract they testified that they asked him, “What about the ground rent?” and that he replied, “That will be taken care of.” The purchaser sought specific performance and it was denied on the ground of mistake on the part of the sellers and inadequacy of price, though the Court stated that such mere inadequacy, standing alone, would not be a sufficient ground for denying specific performance.

Here the representation as to grading under which the Crawfords acted seems to have produced a mistake comparable to that in the Kappelman case. Parol evidence is admissible to show a mistake, as the Kappelman case indicates. See also Pomeroy, Equity Juris., 5th Ed., Secs. 860, 862, and Gordon v. Gross, 141 Md. 490, 119 A. 267; Diffenderffer v. Knoche, 118 Md. 189, 84 A. 416; Somerville v. Coppage, 101 Md. 519, 61 A. 318; and we think a mistake induced by misrepresentation is no more immune from attack than is a mistake induced by one’s own agent, as in the Kappelman case.

The appellant cites Schnader v. Brooks, 150 Md. 52, 132 A. 381, and Gontrum v. City of Baltimore, 182 Md. 370, 35 A. 2d 128, in support of the proposition that the representation relied on by the Crawfords is a representation of some future or contingent event and not of an existing fact. We do not agree that this rule is applicable to this case. Although the representation relates to the future preservation of the grade, we think that it may also be properly construed as a representation that Glendale, which undoubtedly could have made provisions in its restrictions to preserve the general contours of the land, had done so.

To defeat a suit for specific performance, it is not necessary to show that a material misrepresentation was made with knowledge of its untruth or with any fraudulent intent. (As is stated by Pomeroy, Equity Juris., 5th Ed., Sec. 889,) “It is sufficient to defeat a specific performance that the statement is actually untrue so as to mislead the party to whom it is addressed”, (and that) “With respect to its effect upon the specific performance of a contract, a party making a statement as true, however honestly, for the purpose of influencing the conduct of the other party is bound to know that it is true, and must stand or fall by his representation.” This view is supported by Ginther v. Townsend, 114 Md. 122, 78 A. 908, which is one of the cases cited by Pomeroy. See also, Restatement, Contracts, Sec. 367 (a) ; Warren Manufacturing Co. v. Baltimore, 119 Md. 188, 86 A. 502.

What we have said with regard to representations as to maintenance of the existing contours is largely applicable to the representations which the Crawfords assert were made as to the cost of houses to be built in Glendale, and it seems unnecessary to go into this matter extensively. It may be noted that the size of the house which the Crawfords proposed to build — and probably its cost, too — must have been known to Glendale’s sales agent from the fact that two days after signing a contract to purchase one lot the Crawfords contracted to buy an adjoining lot, because the first one alone was not big enough for the house which they planned.

Hardship is an element which a court of equity may consider in deciding whether or not to enforce a contract specifically, and specific performance may be refused if it would be burdensome to the defendant and of little benefit to the plaintiff. Restatement, Contracts, Sec. 367 (b). Pomeroy, Equity Juris., 5th Ed., Sec. 1405 (a); Powichrowski v. Sicinski, 139 Md. 376, 114 A. 899; Linthicum v. Washington, B. & A. Elec. R. Co., 124 Md. 263, 92 A. 917; Smith v. Meyers, 130 Md. 64, 99 A. 938; Abell v. Safe Deposit & Trust Co., 192 Md. 438, 64 A. 2d 722. In view of the evidence indicating that the land has appreciated in value, it seems that Glendale, whose business is described by its vice-president as buying and selling land and disposing of its wares would have little difficulty in effecting a resale, notwithstanding the grading, but the property would be useless to the Crawfords.

On the matter of specific performance we think that the evidence both of misrepresentation and of relative hardship and benefit was sufficient to support the Chancellor’s dismissal of the original bill.

On the matter of rescission and the refund of the $500 deposit made by the Crawfords, which constitutes the second question in the case, we also think that, although a stronger case is requisite to establish a right to rescind than to defend against specific performance (Pomeroy, Equity Juris., 5th Ed., Sec. 1405 (a) ; Black, Rescission of Contracts, 2d Ed., Sec. 12; Hollis v. Hayes, 1 Md. Ch. 479), the evidence is also sufficient to sustain the Chancellor’s decree. The appellees have abandoned the charges of fraud which they set up in their answer, but material misrepresentations, even though innocently made, may be sufficient to warrant rescission. Williston, Contracts, Rev. Ed., Sec. 1500; Restatement, Contracts, Sec. 476 (1); Pomeroy, op. cit., Sec. 888. Cf. McKeever v. Washington Heights Realty Co., 183 Md. 216, 37 A. 2d 305. Also, the appellant’s reservation of some control over the grading of adjacent lots and its assent to the change which has contributed to the re-suiting physical situation which strongly impressed the Chancellor when he viewed the premises, tend to support his conclusion.

We conclude that the decree dismissing the appellant’s bill for specific performance and ordering the refund of the deposit paid by the appellees should be affirmed.

Decree affirmed, with costs.