Archway Motors, Inc. v. Herman

Wilner, J., delivered the opinion of the Court. The question before us is whether the Circuit Court of Baltimore City erred in refusing to grant specific performance and ancillary monetary relief upon finding a breach of a contract for the sale of real estate. We think it did. The appellant, Archway Motors, Inc., owned two parcels of real estate in Baltimore City that it wished to sell.

One parcel appears to be unimproved; the other is improved by 92 brick garages. We are concerned with the second, or improved, parcel. Archway employed A. J. Billig & Co., auctioneers, to sell the two parcels at public auction. Billig advertised the sale in The Daily Record on March 4, 1975, which was the same day as the auction.

The advertisement generally described the property, gave notice of the time and place of the sale, and stated: “TERMS OF SALE: A cash deposit or certified check for $500.00 on each parcel at time of sale. Balance to be paid in cash in 30 days. All adjustments as of date of sale. Cost of all documentary stamps and transfer taxes to be paid by purchaser.

Time is of the essence.” The auction was conducted on the premises in accordance with the notice. Appellee, Walter Herman, who happens to ⁶⁷⁶ be the real estate, business, and finance editor of the Baltimore News American, attended the auction and was the successful bidder for the improved parcel. To evidence his purchase, he signed the following contract: “I, Walter F. Herman, have this day purchased at Public Auction for the price of $675 the Fee Simple Garage Properties situated in rear of 3500 W. Franklin Street, and 500 block Edgewood St. — in rear of 3500 block Edmondson Ave., more fully described in the Daily Record advertisement of March 4,1975, from Archway Motors, Inc., Owners, of which a deposit of Five Hundred ($500.00) Dollars has been paid. Balance of purchase money to be paid IN CASH within 30 days.

Time is of the essence. All rents, taxes, and expenses to be adjusted to date of sale. Subject to any and all agreements, restrictions, covenants and easements of record affecting the same, if any. All documentary stamps to be borne by purchaser.

All transfer taxes to be paid by purchaser. The Daily Record Advertisement of March 4, 1975 is hereby incorporated herein.” On March 26, 1975, Archway’s president, Alan Abramson, wrote to appellee at his home address reminding him of the contract, and stating: “Under the terms of the contract the balance of the purchase price is to be paid and final settlement is to occur within 30 days; this, of course, means by April 4,1975. Time is of the essence.” On either April 3 or April 4, appellee called Mr. Abramson and, according to Abramson, acknowledged receipt of the March 26 letter and said that he was ready to settle for the property. Abramson suggested that appellee have an attorney handle the settlement.

Appellee said that thajt would not be necessary, and instead asked Abramson to have the deed prepared and sent to him. Within ten days, Abramson executed and acknowledged a deed for the ⁶⁷⁷ property, which, along with a settlement sheet showing a balance due Archway of $284.78, he mailed to appellee at his home address. Abramson and his secretary testified that these documents were duly deposited in the U. S. mail, properly addressed, on April 14, 1975. Appellee denied ever receiving them.

Nothing further occurred until six months later. On August 14,1975, Archway received a formal notice from the City Department of Housing and Community Development that the condition of the subject property violated various sections of the City Building Code, and that these violations would have to be corrected either by razing or rehabilitating the garages. This was the first notice Archway had of any violations. It responded to the notice by letter dated August 18, in which it informed the Department that the property had been sold to appellee.

After apparently checking the Land Records and finding that the deed to appellee had not been recorded, the Department, on September 8, 1975, warned Archway that unless the violations were corrected, legal action and possible penalties would ensue. This was no idle threat; for, on December 4, 1975, Archway was summoned into the District Court and tried for the violations. The court entered probation before judgment pending a determination of ownership of the property, conditioned upon Archway placing the garages in a condition satisfactory to the Department, short of actual razing or rehabilitation. To comply with this condition, Archway claims to have expended $2,507.96 for materials and labor, the labor being supplied by some of Archway’s regular employees.

It also was required to pay the 1976-77 real estate taxes on the property, amounting to $513.13. On January 16,1976, Archway filed a Bill of Complaint, in which it asked for an order requiring appellee to record the deed and for a judgment for $25,000 damages. In the alternative, the Bill asked that, if the original deed were lost or destroyed, the court order appellee to accept and record a new deed, to be effective April 15,1975, and for “such other ⁶⁷⁸ and further relief as the nature of this cause may require.” For the next two months, efforts were made to serve appellee at both his home and his place of business, without success. Summonses were issued on January 16, February 2, February 23, and March 16, all of which were returned “non est.” Finally, on March 23, appellee was served at his home by a private process server.

He failed to respond to the summons; and on May 6, 1976, a Decree Pro Confesso was entered against him, notice of which was sent to him at his home by the Clerk of the Court. On May 19, 1976, appellee sent a letter to the Clerk on News American stationery in which he stated that he had never been served with any papers, didn’t know how a decree could be entered, and that “if this is the way the Baltimore City courts handle things of this sort, then it bears investigation.” He signed the letter as “Business Editor”. The Clerk responded to appellee’s letter, advising him of the Return of the Private Process Server and inviting him to view the file during normal court hours. At this point, appellee retained counsel, who, on September 27, 1976, moved to set aside the Decree Pro Confesso.

His motion was granted, and on October 13, 1976, ten months after the Bill of Complaint was filed, appellee filed an Answer to it. The case was tried December 2,1976. In his Answer, and at trial, appellee asserted that he had never received the deed from Archway, and that the contract was void because of a misrepresentation as to the potential use of the property. The chancellor rejected the first defense, correctly, we think, on the basis that whether or not appellee received the deed was irrelevant.

He had entered into the contract; and, as buyer, it was his obligation to proceed with settlement. As to the claim of misrepresentation, appellee testified that, in an attempt to induce him to bid on the property, Mr. Billig had told him that (1) there were no “violations” on the property, and (2) he could rent out “the center sections” to ⁶⁷⁹ contractors for $200 per month. Mr. Billig denied making any such representations. He testified: “We said the properties were sold as is, where is and how is.

We guaranteed the title to be free and clear and merchantable.” With respect to the question of “violations”, the fact is that, at the time of the auction, there had been no violation notices issued; and thus, even if such a representation had been made, it would have been true. Moreover, in testifying about his alleged conversation with Mr. Billig, appellee stated that he had told Billig, “I don’t believe with the condition here there are no violations; it’s a little strange.” On the question of whether the garages could be rented commercially, appellee stated that “several months later” he checked with the Zoning Board and discovered that the garages could only be used for residential purposes. This was not persuasive to the chancellor, however, for, in ruling on the issue of misrepresentation, he stated: “I can’t believe he was misled or induced, as he characterized it. ... I think what he did was decide after he made it [the contract] that it was a bad deal, and notwithstanding that he wasn’t going to go ahead and invest any more money into what he considered a bad deal.

Perhaps he acted hastily, perhaps not. That is not before me. The point is he is certainly more than an initiated [sic, uninitiated?] buyer that normally attends these sales. He can stand on a par with all the professional real estate agents as far as I’m concerned.

I am not persuaded one way or another that he was misled, induced or ill-advised or there was any misrepresentation to him.” Thus, in effect, the chancellor found the contract to be valid and binding on appellee, and his breach of it to be legally inexcusable. The evidence clearly supports those findings. ⁶⁸⁰ The chancellor then stated: “The question in my mind is really what relief to afford here. I don’t believe that Mr. Abramson should be in a position of being continually subject to Housing Court violations. Perhaps that’s why his counsel is strenuously urging the Court to decree specific performance of the contract of sale.

On the other hand, I don’t know whether decreeing specific performance in the case of Mr. Herman would, in fact, accomplish the desired result. It is not a matter of simply appointing a trustee, and I don’t feel that a decree of specific performance, if in fact it is going to be ignored, would accomplish much. I wouldn’t want to have to face the prospect of holding a contempt hearing on Mr. Herman. I don’t enjoy that sort of thing.” From this and other colloquy between the chancellor and counsel for appellant, it is evident that the chancellor assumed that appellee would simply ignore a court decree of specific performance; and that, as a result, either the decree would be a “nullity”, or that the court would be put to the distasteful task of enforcing it through contempt proceedings.

On that basis, the chancellor denied the request for specific performance. With respect to damages, he rejected Archway’s request to be compensated for the $2,507 expended to that point to satisfy the Department of Housing and Community Development, and refused to consider any future cost that would be required to correct the violations. Instead, on April 25, 1977, nearly five months after the hearing, the chancellor issued an Order that $1,045.18 (including the $500 deposit) be paid by appellee as damages for his breach. The Order contains no breakdown or explanation of how this amount was calculated.

In this appeal, Archway contends that it was entitled to specific performance, and that the chancellor abused his discretion in refusing to grant it. Additionally, Archway claims that it is entitled to ancillary compensation for losses ⁶⁸¹ caused by appellee’s delay in performance, measured from April 4, 1975, to the date of actual performance, including reimbursement for all sums expended by Archway to comply with the order of the District Court. I. Specific Performance Specific performance is considered an extraordinary equitable remedy which may be granted, in the discretion of the chancellor, where more traditional remedies, such as damages, are either unavailable or inadequate. This extraordinary remedy has been particularly recognized as appropriate where the contract is for the sale of land because of the presumed uniqueness of land itself, no parcel being exactly like another.

Although it has most frequently been granted at the behest of the buyer to compel the seller to convey the land, the criteria justifying its use have also been found operative where the seller is its seeker. Thus, the Restatement of Contracts § 360 (1932), states: “Damages are regarded as an inadequate remedy for the breach of a promise (a) to transfer any interest in specific land, or (b) to buy and pay for such an interest, so long as the transfer has not yet been made; and specific performance will be decreed, subject to the rules stated in § § 359-380.” The rules in § § 359-380 are not applicable to this case, and thus the statement stands as expressive of the law. In Comment c. to § 360, the authors discuss the inadequacy of damages as a seller’s remedy, as follows: “Before conveyance has been made by the vendor his remedy in damages is not an adequate one. He can not get judgment for the full price, because he still has the land.

His damages are usually measured by the contract price less the value of the land retained; but the land is a commodity that has ⁶⁸² no established market value, and the vendor may not be able to prove what his real harm will be. Even if he can make this proof, the land may not be immediately convertible into money, and he is deprived of the power to make new investments. Prior to getting a judgment, the existence of the contract, even though broken by the vendee, operates as a clog on salability, so that it may not bq possible to find a purchaser at any fair price. In addition, the fact that specific performance is available