Ace Development Co. v. Harrison

Grason, J., delivered the opinion of the Court. This case presents for review an order of the chancellor (dated February 27, 1950) overruling the demurrer filed by the defendants jointly and severally to. the whole bill of complaint filed against them, and to. each and every paragraph thereof, and to each and.every prayer for relief prayed therein. The bill of complaint consumes twenty pages of the appellants’ appendix, and cannot be set out in full in this opinion. The material facts alleged therein may be stated in narrative form as follows: The Ace Development Company, Inc., is a Maryland corporation, and was engaged in developing real estate on East Coldspring Lane, in Baltimore City; it sells lots in the developmént and erects thereon houses for purchasers of said lots; ³⁶¹ Newton C. Sibley and John Kablis are officers and directors of this corporation and are in actual personal charge of sales and construction; it entered into four separate and distinct contracts with the plaintiffs, all of which contracts are exactly alike, except for the names of the parties, the dates thereof, and some differences in price.

We quote the contract entered into by the corporation with Edward J. Fink (single) as an example of the contracts involved in this case. “This Agreement of Sale, made this Second day of May nineteen hundred and Forty-six between Ace Development Company, Inc., Seller, and Edward J. Fink (Single) Buyer. “Witness that the said Seller does hereby bargain and sell unto the said Buyer, and the latter does hereby purchase from the former the following described property, situate and lying in Baltimore City, State of Maryland, and being subject to an annual Ground Rent of $90.00 and further described as a two story brick house to be erected in accordance to plans and specifications as approved by the Veterans Administration and known as No. 819 East Cold Spring Lane, at and for the price of Fifty two hundred and fifty Dollars ($5,250.00) of which Two hundred Dollars ($200.00) have been paid prior to the signing hereof, and the balance to be paid as fo] lows: Cash upon completion and the purchase mortgage money is to be secured through the G. I. Loan plan. “And upon payment as above provided of the unpaid purchase money, a deed for the property shall be executed at the Buyer’s expense by the Seller, which shall convey the property by a good and merchantable title to the Buyer, free of liens and encumbrances except as specified herein and except: Use and occupancy restrictions of public record which are generally applicable to properties in the immediate neighborhood or the subdivision in which the property is located, and publicly recorded easements for public utilities above ground and any other easements which may be observed by an inspection of the property. ³⁶² “Ground rent, rent, water rent, taxes and other public charges against the premises shall be apportioned as of date of settlement, at which time possession shall be given; and the said parties hereto hereby bind themselves, their heirs, executors and administrators, for the faithful performance of this agreement. “It is also understood and agreed that the Seller shall immediately have all of the insurance policies on the property so endorsed as to protect all parties hereto, as their interests may appear, and continue said insurance in force during the life of this Contract. ' “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; time being of the ■ essence of this Agreement. Cost of all documentary stamps required by law shall be divided equally between the parties hereto. “Seller hereby agrees to pay commission on this sale, in accordance with the Standard Schedule of Commissions of the Real Estate Board of Baltimore, to “Witness in duplicate the hands and seals of the parties hereto the day and year first above written. “/s/ Ace Development Co., Inc. (Seal) By N. C. Sibley, V. Pres. Seller’s Signature “/s/ Edward J. Fink (Seal) Buyer’s Signature “/s/ H. I. Skaggs, Jr. As to both” The negotiations for'sales of the respective lots and building of a house thereon were conducted by Sibley and Kablis; these houses were financed under the G. I. Bill of Rights, and in order to procure materials for the erection of the same Federal priorities had to be obtained; application for such priorities was not made by:the Ace Development Company, but was made by the Ace Construction Company, Inc.; the latter company was and is a defunct corporation and did not exist at ³⁶³ the time of the application for priorities, but was . .a corporation of which Sibley and Eablis were previously officials.; that in the application for priorities it was represented that the houses would be constructed in accordance with certain plans and specifications submitted, and that veterans of military service during World War II would be given priority, as provided by Priorities Regulations 33; applications for building permits, to the Bureau of Buildings of Baltimore City for the construction of these houses, are duplicates of the plans filed with the Federal Housing Administration, and were made in the name of the Richwood Development Company, which was at that time a defunct corporation, and Sibley and Kablis were interested in the same before it legally expired on October 24, 1923; the plans of these houses filed with the application for a permit from the Bureau of Buildings of Baltimore City showed on their face that they were made by Edward C. Brown, designer for Ace Construction Company, Inc.; each of the complainants is a veteran of the military service of World War II, and was in desperate need of housing for himself and family; each complainant “purchased one of the homes constructed by the Respondents, and pursuant to the Servicemen’s Readjustment Act of 1944, 38 U. S. C. A. § 693 et seq., secured a mortgage loan in order to pay the balance of his respective contract price at the time of settlement, and is obligated to maintain his payments under such mortgage to his respective mortgagees”; the American National Building and Loan Association was financing, or partly financing, the construction of said houses and one H. I. Skaggs, Jr., who was an employee of said association, told the plaintiff Milton L. Harrison that his house would be constructed “under the same plans and specifications and exactly similar to the houses on the north side of said East Cold Spring Lane”, and that said Skaggs was at the time an authorized agent of the respondent, the' Ace Development Company, Inc.; and that said houses on the north side of East Cold spring Lane had been inspected by the ³⁶⁴ plaintiffs at that time; and that the complainants relied upon the representations of the officials and agents of the corporate defendant, viz., that the houses were to be built and would be completed in accordance with the aforementioned plans and specifications filed with the Federal Housing Administration, and in a similar manner to that in which the said houses on the north side of Cold spring Lane had been constructed; that the respondent did not perform its obligation under said contract, and unlawfully violated the terms of said contract in that the respective houses on said lots were not built in accordance with said plans and specifications and were not built exactly similar to the houses on the north side of said block of Cold spring Lane, and were constructed in a wilfully improper, negligent and unlawful manner, in violation of the building code of Baltimore City in the following particulars: (then follows two pages in the appellants’ appendix devoted to specifying the way and manner in which the defendant has violated the contract). Such allegations are made on behalf of each and every one of the plaintiffs, with the exception of some variation.

With reference to these allegations it is sufficient to say, assuming them to be true, as we must do in ruling on the demurrer, that they show that these houses were weakly constructed, wanting in reasonable material and workmanship, and, in fact, that they were wretchedly constructed. The bill further alleged that Sibley and Kablis dominated the corporate defendant, and that they, in fact, constituted the corporate defendant; that complainants relied upon the representations made by the agents of the defendant corporation, and have fully complied with said contracts, and entered into possession of the houses; that all of the defects in said houses were not patent at the time they took possession, but some defects subsequently developed; that they called upon the defendants to make such repairs in said houses as would make them conform to the contracts under which they were built; that they promised to do so, which they never did, and in making such promise to repair they were ³⁶⁵ guilty of fraud; that the individual defendants are financially responsible, but that the corporate defendant, which they aver is operated solely by the individual defendants, is financially irresponsible. In the settlement for one of these properties $500 was held in escrow by the aforesaid building association pending the completion of certain work on this house, to make the house conform to the contract. It is averred in the bill that the deeds for the various properties involved in this case were executed, not by the corporate defendant, but by one or the other of the individual defendants.

The bill prayed: 1. For specific performance of the several contracts; 2. or for monetary damages in lieu of specific performance; 3. for the award of monetary damages for the loss and inconvenience caused by the failure to carry out said contracts; 4. for the award of monetary damages for the loss and inconvenience caused by reliance upon the fraudulent misrepresentations