Banner v. Elm

Smith, J., delivered the opinion of the Court. Appellant (Banner) entered into a contract with appellee (Elm) for purchase of a lot in Montgomery County containing approximately 60,000 square feet for the sum of $18,000.00, computed at the rate of $.30 per square foot. Banner was employed as a real estate salesman by a broker in the area. On his own behalf he was engaged in a project of assembling land from individually owned parcels, securing the proper zoning, and developing the land.

Banner induced Nathan Levy, a salesman employed by the same broker, to approach Elm relative to purchase of the Elm land. Elm said Levy asked if he were interested in selling, Elm told him that he was, Levy offered $.30 a square foot and Elm accepted. A contract was ultimately signed. The contract provided for rezoning.

This was accomplished, taking approximately 18 months. Settlement was set. ⁶⁹⁶ Apparently Elm was not represented by counsel until he was served with papers in a suit brought against Elm, Banner and others. This suit apparently was misinterpreted by all concerned, leading to the belief at that time that there could not be a conveyance. Elm told his attorney to notify Banner that he could not settle for this reason.

Banner did not get the message and appeared at settlement. Elm testified that had it not been for the suit he would have been willing to settle. He subsequently refused to settle and this led to this proceeding for specific performance. The realtor was to receive a 10% commission.

Levy had an agreement with his fellow salesman, Banner, by which Levy would pay to Banner a portion of his share of the commissions. This case was tried in the Circuit Court for Montgomery County simultaneously with two other cases in which Banner sought specific performance. In one case the sales price was $1.00 per square foot and in the other, $.75 per square foot. Levy was not the salesman on the other two cases.

The same broker was involved, however. Elm contended and the trial court concluded that in each case the property owners did not know of Banner’s connection with the broker and did not know there was to be a sharing of commissions between Banner and Levy and the other salesman. In the two cases in which specific performance was granted it was granted on the condition that, in addition to the consideration provided in the contract, Banner was to also pay to the sellers an amount equal to the sales commission required to be paid by the sellers under the contract. The chancellor declined to grant specific performance against Elm on the combination of circumstances involved in what the court regarded as an inadequate purchase price, non-disclosure of the broker-purchaser’s role, and the 10% commission compared to 6% in the other cases.

Chief Judge Brune said for this Court in The Glendale Corp. v. Crawford, 207 Md. 148 , 114 A. 2d 33 (1955): “The general rule with regard to specific performance of contracts for the sale of land has been stated ⁶⁹⁷ 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.” (citing cases). Id. at 154 .

The contract here is certain in all its terms. There is no question about the amount of the consideration agreed upon nor as to the property involved. Banner relies on the inadequacy of the purchase price. Our present Chief Judge Hammond said for this Court in Brooks v. Towson Realty, Inc., 223 Md. 61 , 162 A. 2d 431 (1960) : “Restatement, Contracts, Sec. 367, comment b says: ‘Mere pecuniary inadequacy of consideration will not generally make the terms of a contract seem too unfair for enforcement unless the degree of inadequacy is extreme.’ The Maryland cases have said that mere inadequacy of consideration is not enough to cause refusal of specific performance.

But, generally, the reference has been to factual situations where competent parties had agreed upon a price which was low, or which later events indicated was low, and in such instances bad bargains or a low price have been held not to be enough to deny specific enforcement. Cases are collected in a note in 65 A.L.R. 9 . Cases showing that the majority rule is that mere inadequacy of consideration, without unfairness or overreaching in the procuring of the contract will not justify a denial of specific performance are collected beginning at page 86. The cases establishing the minority rule that inadequacy of consideration may be a sufficient ground for refusal to compel specific performance although the inadequacy would not be enough to entitle the defendant to a decree for rescission begin at page 89.

In ⁶⁹⁸ many jurisdictions in which it is held that mere inadequacy of consideration alone will not preclude the specific enforcement of a contract, the courts hold that if the inadequacy is so gross that it shocks the conscience of the court, it is satisfactory evidence of an unconscionable and unreasonable contract and the