Applestein v. Royal Realty Corp.

Marbury, J., delivered the opinion of the Court. This is a second appeal. The first will be found reported as Applestein v. Royal Realty Corporation, 180 Md. 274 , 23 A. 2d 684 . The bill of the appellee for specific performance of a contract to purchase from it certain real estate in the city of Baltimore was demurred to on the ground that the contract was vague, indefinite and uncertain.

The demurrer was overruled below and the defendant appealed. We reversed the lower, court, and remanded the'case with leave to the appellee to amend its bill of complaint. Amendment was made below in pursuance of this permission. The appellant again demurred, his demurrer was again overruled, and he is now here appealing from this decision.

The question before us is whether the amendments made are sufficient to cure the defects we found in the contract. The contract provided for a “purchase money mortgage of Eight Thousand Dollars ($8,000) for a period of five years, to bear interest at 4% per annum. Said mortgage to be amortized 10% annually to be paid monthly or quarterly.” We found (1) that the contract did not state the form or terms of the mortgage and (2) that such terms as were stated were inconsistent because ¹⁷³ the mortgage is to be paid in five years and also is to be amortized at the rate of 10 per cent, annually, which rate of amortization, if continued until thereby the debt is extinguished, will require ten years to accomplish such result. The appellee in Paragraph 5 of its amended bill of complaint alleges that the appellant has been engaged for a number of years in buying and selling real estate in Baltimore City and in giving and receiving mortgages thereon, and knows the universal custom prevailing in that city of incorporating in all mortgages on real estate certain covenants.

It further alleges that it has never been the practice or custom in Baltimore to include in a contract of sale these covenants, and it is an implied condition of all contracts that mortgages shall be executed in accordance with the prevailing custom. Where a usage or custom exists in respect to a transaction and each party knows of the usage or it is generally known by persons under similar circumstances, that usage is binding upon the parties to such a transaction. Restatement of Law, Contracts, Chap. 9, Sec. 247. In an early case, this court, speaking through Judge Alvey, said: “The principle upon which usage or custom is applied to the interpretation of contracts, is very familiar, and of constant occurrence.

It may be resorted to in the absence of express stipulations, or where the meaning of the parties is uncertain or doubtful upon the language used, or where the usage of the trade or business to which the contract refers, or with reference to which it was made, may afford explanation and supply deficiencies in the instrument.” Appleman v. Fisher, 34 Md. 540 ; Himmel v. Levenstein, 132 Md. 317 , 103 A. 848 . The true test is that there must be in the contract something doubtful which can be explained by a usage or custom. If the contract is plain, evidence cannot be received to contradict it. If the contract is made with reference to a usage and therefore omits the special particulars which are supplied by that usage, those particu ¹⁷⁴ lars can be supplied by proof of the usage.

Travelers’ Insurance Co. v. Hermann, 154 Md. 171 , 140 A. 64 . It is competent for the appellee to offer proof of a trade custom, and if it can establish such custom by proof, this would answer the first objection we found to the enforcement of the contract. By Paragraph 6 of the amended bill of complaint, the appellee alleges that any uncertainty as to the method of amortization provided in the contract arises out of a latent ambiguity and that the phrasing of the contract is in conformity with the well-established meaning of the word in the framing of similar contracts. That what it means is that the vendee would pay on account of the mortgage debt 10 per cent, during the first four years, and presumably the balance at the end of the five years.

The word “amortize” was originally used to describe the passing of land into the dead hands of the church, from which it could not be extracted. It gradually came to apply to the extinguishment of a debt by providing a sinking fund which would gradually kill the obligation. The later dictionaries apply the word to the partial as well as the complete extinguishment of a debt, and some of them give as one of its meanings “reduce.” It is with this last meaning that the appellee claims the word is used in the contract. If