Cattail Associates, Inc. v. Sass

KENNEY, Judge. Appellant, Cattail Associates, Inc., appeals the decision of the Circuit Court for Anne Arundel County granting the motion for judgment of appellees Leonard Sass, Jr. and Beverly Sass (“the Sasses”), Sandra DeVor, and Theresa Sass. Cattail presents one question for our review: Whether the Circuit Court erred in determining that specific performance of the contract was barred by the Rule Against [Perpetuities] [.] [1] For the following reasons, we shall reverse the circuit court’s judgment. ⁴⁸¹ FACTUAL AND PROCEDURAL HISTORY In February 1995, Cattail entered into a contract with the Sasses, their daughter Sandra Stout, 2 Leonard Sass, Sr., 3 and Theresa Sass, Leonard Sass, Jr.’s, sister, for the purchase of two parcels of real property located in Anne Arundel County (“the Contract”). The Contract provided for a purchase price of $20,000.

An addendum to the Contract included the following provisions: 1. PROPERTY — The Property to be sold and transferred to the Buyer is all of that improved and unimproved real property within the above described two parcels as marked on the attached map, Attachment # 1, together with all the Seller’s rights and appurtenances thereto.... 5. SUBDIVISION PROCESS — The Purchaser intends to subdivide the property into a number of single family ⁴⁸² residential building lots. The Seller hereby grants unto the Purchaser permission to subdivide the Property and further agrees to cooperate with and to support the Purchaser’s subdivision efforts including for example signing of plans, plats, applications, covenants, and easements, all at no cost to the seller.

The Purchaser will also apply for the site grading permit to cover the construction of the Public Works and Public Utilities improvements; the Seller shall also cooperate and join in this application as well, again at no cost to the Seller. The Settlement of this contract is specifically contingent on the successful completion of the subdivision which shall be evidenced by the obtaining of all the necessary approvals from Anne Arundel County (and any other State and/or Federal Government agency) that are required as discussed in this Paragraph 5. In the event the subdivision does not proceed to conclusion, and settlement fails to take place, then the Purchaser shall provide the Seller upon request, at no cost to Seller, all engineering data, tests, studies, and plats either previously provided to Purchaser or prepared by Purchaser or prepared on behalf of Purchaser with respect to the Property. 6. SETTLEMENT CONTINGENCY — Settlement on this contract is expressly contingent on the prior, or concurrent, settlement of the adjoining property owned by Claire Davison and covered under a separate Contract for Sale of Lots or Acreage dated March 10, 1994.

Further, both of the two parcels of the Property under this contract must settle at the same time. 7. SETTLEMENT — Settlement on this contract shall be consummated within Forty-five (45) days after the subdivision is complete, as described in Paragraph 5 above. 10. PURCHASERS RESPONSIBILITY — The Purchaser shall be solely responsible to pursue the accomplishment of the intended residential subdivision and the obtaining of the requisite approvals in a professional, diligent, and timely manner.... ⁴⁸³ 12. UNFORESEEN EVENTS — If at any time during this contract, an unforeseen event or change should occur ..., which is not the fault of the Purchaser, which the Purchaser determines would make the continuation of the subdivision financially infeasible, then the Purchaser may in writing declare this contract to be null and void and the contract shall be terminated, and all deposits returned within 10 days, and neither party having any further obligation to the other.... 20.

TERMINATION — The parties to this contract intend that it will be binding and legally valid upon them. In order to preclude any application of the Rule Against Perpetuities which would otherwise invalidate and nullify this contract, the parties agree that this contract shall expire, unless otherwise previously terminated, on the last day of the time period legally permitted by the Rule Against Perpetuities in the State of Maryland, in which case all deposits shall be promptly returned to the Buyer. 21. SELLER’S WARRANTIES — The persons, both jointly and individually, entering into this contract represent and warrant as follows, unless otherwise specifically indicated in this contract: (1) That they are the only owners of the Property and that they have the unrestricted right to enter into this contract, (2) That there are no letters of intent or understanding, contracts of sale, leases, or other similar documents pertaining to the Property, other than this agreement, (3) That there are no civil or criminal suits, claims, actions, condemnation, liens, or actions pending in any court pertaining to or otherwise affecting this Property, nor does the Seller have any knowledge of any proposed action or claim. ⁴⁸⁴ According to Cattail, it made various efforts to pursue its subdivision plan over the ensuing years. In a letter dated July 18, 2000, counsel for Cattail informed the parties that Cattail intended to settle “within the next thirty (30) to forty-five (45) days.” The letter also stated that Cattail had determined that Faye Sass, the wife of Leonard Sass, Sr., owned an interest in one of the lots.

Because she was not a party to the Contract, Cattail stated that “it will be necessary to obtain her consent in joinder to the Contract.” In a letter dated January 2, 2001, and addressed to all the parties to the Contract, counsel for Cattail again stated that Faye Sass, who was not a party to the Contract, owned an interest in the property. The letter stated that counsel had enclosed “an appropriate form” by which she could become a party to the Contract, and requested that the parties “have the document signed and witnessed and returned to our office.” James Muzik, a Cattail principal, testified at trial that the company was “getting very close” to completing its subdivision plan in 2002. He stated: “We wanted to make sure that this property wasn’t a thorn in our side. So we decided to settle on that first and get it out of the way.” To that end, Cattail informed the Sasses and DeVor in a letter dated December 19, 2002, that it wished to move forward with settlement.

The letter stated in its entirety: I represent Cattail Associates, Inc., with regard to the above referenced contract. At this time, my client has decided to waive all contingencies set forth in the contract that have not been previously satisfied and proceed to settlement. To that end, the date for settlement is hereby set as Friday, January 3, 2003, at 10:00 a.m. at my office in Annapolis. If you are unavailable on this date and at that time, please let me know at once; otherwise, my client will be present as noted and ready to fulfill its obligations under the contract and proceed with settlement.

You will receive no further notice of the settlement date. Failure to attend settlement will be seen as a breach of your obligations under the contract and my client [will] have no ⁴⁸⁵ choice but to take the appropriate action to enforce its rights. The letter was sent by certified mail, and the three addressees accepted delivery on December 26, 2002. Cattail’s counsel sent a similar letter to Theresa Sass.

In a response by telephone, and later by letter, she informed Cattail that she had sold her interest in one of the parcels to the Sasses on October 24, 2002. She stated that the Sasses had agreed to “undertake any and all obligations pursuant to the Contract of Sale, dated February 1995, between the parties and Cattail Associates, Inc.” She was of the opinion that she was no longer “involved in this dispute.” Muzik testified at trial that he appeared at counsel’s office on December 26, 2002, but neither the Sasses, DeVor, or Theresa Sass attended the scheduled settlement. He also stated that Cattail had not received a response to its letter from the Sasses and DeVor prior to that date. On March 26, 2003, Cattail brought suit in the Circuit Court for Anne Arundel County against the Sasses, DeVor, and Theresa Sass.

In its complaint, Cattail sought specific performance of the Contract. It also brought a breach of contract claim against the Sasses and DeVor, and a negligent misrepresentation claim against Theresa Sass. The case went to trial on April 22, 2005. At the close of Cattail’s case, the Sasses, DeVor, and Theresa Sass moved for judgment.

They asserted that the Contract was unenforceable for want of a necessary party, and based on the doctrine of laches. Alternatively, they argued that, if the Contract was enforceable on its face, they could not have settled because the contingencies had not been satisfied. In addition, Theresa Sass argued that she had made only a special warranty, that she had validly assigned her interest in the property, and that Cattail had waived its claims against her. The defendants also contended that the Contract was unenforceable because it violated the rule against perpetuities.

The court agreed. It found that, because the Contract provided for settlement only after certain conditions in the control of ⁴⁸⁶ a third party are satisfied, the Contract violates the rule against perpetuities. The court granted the motion for judgment, “denying] the specific performance and all of the other relief sought.” On April 29, 2005, Cattail moved for a new trial, or, in the alternative, to alter or amend judgment. The court denied the motion on May 24, 2005.

Cattail noted this appeal on June 15, 2005. STANDARD OF REVIEW Pursuant to Maryland Rule 2 — 519(a), “[a] party may move for judgment on any or all of the issues in any action at the close of the evidence offered by an opposing party.” Maryland Rule 2-519(b) provides that, “[w]hen a defendant moves for judgment at the close of the evidence offered by the plaintiff in an action tried by the court, the court may proceed, as the trier of fact, to determine the facts and to render judgment against the plaintiff or may decline to render judgment until the close of all the evidence.” In such a case, we review the circuit court’s judgment in accordance with Maryland Rule 8-131 (c): When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. See also Boyd v. Bowen, 145 Md.App. 635, 650 , 806 A.2d 314 (2002) (stating that “we review the trial court’s decision to grant a defendant’s motion for judgment at the close of the plaintiffs case in a court trial under Md. Rule 8-131(c)”).

The clearly erroneous standard does not apply to the circuit court’s legal conclusions, however, to which we accord no deference and which we review to determine whether they are legally correct. Cannon v. Cannon, 156 Md.App. 387, 403-404 , 846 A.2d 1127 (2004), aff'd, 384 Md. 537 , 865 A.2d 563 (2005). “When reviewing a trial court’s construction or inter ⁴⁸⁷ pretation of a written contract, we do so as a matter of law.” Nationwide Ins. Cos. v. Rhodes, 127 Md.App. 231, 235 , 732 A.2d 388 (1999). DISCUSSION I. Validity of the Contract We begin with the argument by the Sasses and DeVor that the Contract is invalid because Faye Sass is not a party to it.

In a footnote in their brief they argue: “Even though the failure of Faye’s consent is necessary only with respect to the sale of Lot 22, because the Contract deals in. all respects with the sale of both Lots 22 and 23 as a unit ... the defect with regard to Lot 22 is fatal to the contract as a whole.” It appears that Lot 22 was owned by Leonard Sass, Sr., and Faye Sass, as tenants by the entirety, in a joint tenancy with Theresa Sass. Although Leonard Sass, Sr., signed the Contract in 1995, apparently with the intention of conveying his and Faye’s interest to Cattail, Faye was not a party to the Contract. In the case of a tenancy by the entirety, either an absolute divorce or “some form of joint action by the husband and wife is necessary in order to achieve a severance.” Bruce v. Dyer, 309 Md. 421, 428 , 524 A.2d 777 (1987). In the absence of an absolute divorce or some joint aet of severance, upon the death of a spouse, the surviving spouse takes the whole through right of survivor-ship.

Id.; State v. Friedman, 283 Md. 701, 705 , 393 A.2d 1356 (1978). Therefore, the signature of Leonard Sass, Sr., on the contract did not transfer his and Faye’s interest in the property. When Leonard Sass, Sr., died in 1997, Faye Sass become the sole owner of their interest in Lot 22. “ ‘A joint tenant may convey his interest by deed, and the result is a severance of the joint tenancy and the creation of a tenancy in common between the grantee and the surviving joint tenant or tenants.’ ” Alexander v. Boyer, 253 Md. 511, 519 , 253 A.2d 359 (1969) (quoting Eder v. Rothamel, 202 Md. 189 , 95 A.2d 860 (1953) (citing 2 Herbert T. Tiffany & ⁴⁸⁸ Basil Jones, Tiffany Real Property, § 425 (3rd ed.); and 2 American Law of Property § 6.2)). Moreover, “a mere contract by one joint tenant to sell his share, or to settle it, will effect a severance.” 2 Herbert T. Tiffany & Basil Jones, Tiffany Real Property § 425 (3d ed.

Supp.2005) (footnotes omitted). Thus, when Theresa Sass contracted to convey her interest in the property, the joint tenancy was severed, and a tenancy in common with Leonard Sass, Sr. and Faye Sass was created, and after Leonard’s death, with Faye Sass alone. Cattail states that Faye Sass’s absence as a party to the Contract “does not matter in this case,” because it is merely “asking the Court to order the Appellees to specifically perform the contract as to the portion they can convey, and not any interest that was not contracted for.” We are not persuaded that the absence of Faye Sass as a party to the Contract “is fatal to the contract as a whole.” Section 1 of the addendum states: “The Property to be sold and transferred to the Buyer is all of that improved and unimproved real property within the above described two parcels ... together with all the Seller’s rights and appurtenances thereto.” Accordingly, with respect to Lot 22, Cattail would hold an undivided share as a tenant in common with Faye Sass. We proceed, then, to Cattail’s contention that the circuit court erred in finding that the Contract was void for violation of the rule against perpetuities.

II

Rule Against Perpetuities “As a formulation of the Rule Against Perpetuities, our cases have adopted Professor Gray’s statement that ‘[n]o interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.’” 4 Dorado Ltd. P’Ship v. Broadneck Dev. ⁴⁸⁹ Corp., 317 Md. 148, 152 , 562 A.2d 757 (1989) (quoting Fitzpatrick v. Mer.-Safe, Etc. Co., 220 Md. 534, 541 , 155 A.2d 702 (1959)). The rule “ ‘is not a rule that invalidates interests which last too long, but interests which vest too remotely.’ ” Arundel Corp. v. Marie, 383 Md. 489, 495 , 860 A.2d 886 (2004) (quoting Fitzpatrick, 220 Md. at 541 , 155 A.2d 702 ). By voiding future interests that might vest too remotely, the rule against perpetuities facilitates the alienability of property, helps prevent uncertain title, and encourages owners to make effective use of their property.

Historically, the Rule was usually applied to grants or devises made by deed or by will. In recent years, however, [the Court of Appeals] ha[s] extended the Rule to include equitable rights in real property created by contract and enforceable by specific performance. Arundel Corp., 383 Md. at 495 , 860 A.2d 886 (citations omitted). The Court of Appeals has held that, “if a contract creates an equitable right in real property, enforceable by specific performance, the contract is subject to the Rule.” Dorado, 317 Md. at 152 , 562 A.2d 757 .

The Court reasoned: [W]hen the purpose of a contract is to transfer legal title in land, then legal title must vest within the period of the Rule Against Perpetuities. Otherwise, there would be the distinct possibility that a contract would render title uncertain. After the signing of the contract, the seller retains legal title until the deed is properly executed and delivered. Until that point, the seller’s interest is fettered by the possibility that it will be required to relinquish title to the purchaser.

Between the signing and execution of the contract, the owner of legal title would be reluctant to make the most effective use of the property.... ... For a land sales contract to be valid under the Rule, therefore, legal title must vest in the purchaser within a life in being plus 21 years. Id. at 153-54 , 562 A.2d 757 . To determine whether a conveyance violates the rule against perpetuities, we first construe the language of the ⁴⁹⁰ contract apart from any consideration of the rule.

Arundel Corp., 383 Md. at 496 , 860 A.2d 886 . Then we apply the rule to the conveyance to determine whether it could vest too remotely. Id. The Contract places two major contingencies on the ultimate transfer of legal title.

Section 5 of the addendum states that “[t]he Settlement of this contract is specifically contingent on the successful completion of the subdivision which shall be evidenced by the obtaining of all the necessary approvals from Anne Arundel County (and any other State and/or Federal Government agency).” Section 6 provides that “[sjettlement on this contract is expressly contingent on the prior, or concurrent, settlement of the adjoining property owned by Claire Davison and covered under a separate contract for Sale.” Thus, under these provisions, settlement will not occur until Cattail receives the necessary government approvals for its subdivision plan, and the sale of an adjacent parcel is settled. The rule against perpetuities requires that the interest to be conveyed “ ‘must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.’ ” Dorado, 317 Md. at 152 , 562 A.2d 757 (quoting Fitzpatrick, 220 Md. at 541 , 155 A.2d 702 ) (emphasis added). “The Rule is applied to determine whether the interest could vest beyond the permissible period, based on the possibility of events, not actual events.” Arundel Corp., 383 Md. at 496 , 860 A.2d 886 . “A future interest is invalid unless it is absolutely certain that it must vest within the period of perpetuities. Probability of vesting, however great, is not sufficient.” W. Barton Leach, Perpetuities in a Nutshell, 51 Harv. L.Rev. 638, 642 (1937).

See also Tiffany, supra, at § 395. In Dorado , Broadneck Development Corp. agreed to sell 112 lots to Dorado L.P. Settlement was contingent on Broad-neck’s obtaining “sewer allocations” from the county. Dorado, 317 Md. at 150 , 562 A.2d 757 . When, due to a government moratorium on sewer allocations, the sale had not been com ⁴⁹¹ pleted, Dorado brought a declaratory judgment action.

Id. at 151 , 562 A.2d 757 . The Court of Appeals stated that it was “immaterial” that Dorado had obtained equitable title by execution of the contract. Id. at 156 , 562 A.2d 757 . “If legal title might not vest within a life in being and 21 years, then the contract is invalid under the Rule Against Perpetuities.” Id. The Court therefore concluded that the contract was unenforceable because it violated the rule: Settlement is contingent upon a county sewer allocation.

It is uncertain when, if ever, Broadneck will obtain the sewer allocation. It is conceivable that it could occur after a life in being plus 21 years.... In this case, Broadneck has fulfilled its obligation under the contract. It has applied for a sewer allocation.

Settlement is dependent, not on performance by Broadneck, but on the action of a third party, Anne Arundel County. Whether Anne Arundel County might grant a sewer allocation for the lots within the perpetuities period is unknown. Id. at 156, 158-59 , 562 A.2d 757 . Cattail directs us to a line of our cases in which a conveyance that would otherwise have violated the rule against perpetuities was found to include an express or implied time limitation, saving the conveyance from running afoul of the rule.

In Stewart v. Tuli, 82 Md.App. 726 , 573 A.2d 109 (1990), settlement on a sales contract was contingent on the seller’s obtaining clear title because there was some question with regard to the enforceability of a prior sales contract. We distinguished Dorado by determining that the contract contained a reasonable time limitation. In Hays v. Coe, 88 Md.App. 491, 504 , 595 A.2d 484 (1991), vacated by 328 Md. 350 , 614 A.2d 576 (1992), we addressed a land sales contract provision extending the contract “ ‘until a good and marketable title can be transferred.’ ” We determined that, “even without an express contractual directive ⁴⁹² that action to clear title ‘must be taken promptly,’ we believe that the Stewart rationale is applicable, and the addendum here does not violate the rule against perpetuities.” Id. at 505, 595 A.2d 484 . In vacating our decision, 5 the Court of Appeals stated, without explanation: “The Court of Special Appeals construed the [trial court’s] reference to a cloud on title as a ruling that the Rule Against Perpetuities had been violated.

It correctly rejected that as a viable holding.” Hays, 328 Md. at 362 , 614 A.2d 576 . Brown v. Parran, 120 Md.App. 653, 656 , 708 A.2d 12 (1998), involved a sales contract that was contingent on “percolation tests” and “permits approvals.” Despite the fact that these contingencies were in the control of Calvert County, we held that they did not cause the conveyance to violate the rule against perpetuities. We distinguished Dorado on the basis that, in that case, there was a moratorium on sewer allocations, and instead relied on our holding in Stewart. Id. at 661, 663, 708 A.2d 12 .

In Kobrine, L.L.C. v. Metzger, 151 Md.App. 260 , 824 A.2d 1031 (2003), vacated by 380 Md. 620 , 846 A.2d 403 (2004), we addressed a covenant by a developer to convey certain real property to the landowners in a subdivision, for use as a common area, once all the lots were sold. Relying on our reasoning in Brown , we determined that the rule against perpetuities would not be violated. We also stated that, “[e]ven if the Rule Against Perpetuities might otherwise apply to the agreement to convey contained in the Declaration in this case, we