Fran Realty, Inc. v. Thomas

Menchine, J., delivered the opinion of the Court. Fran Realty, Inc., Phyllis Realty, Inc. and Harriett Realty, Inc., associated together under the trade name “Ridge Realty Company,” hereinafter called “developers,” were the owners and developers of a tract of land known as “Southgate,” in Anne Arundel County, Maryland. In early 1972 developers entered into separate contracts for the sale of two separate specific lots within that recorded subdivision. One such contract was with Edward Thomas and Angela Thomas (Thomases); the second was with William Sipple and Geraldine Sipple (Sipples).

The ³⁶⁴ Thomases and the Sipples sometimes collectively will be referred to herein as “home buyers.” In each instance developers agreed for a stated sum to construct a dwelling upon the respective lots for the Thomases and the Sipples. 1 The contracts provided that the dwellings were “to be built in accordance with plans and specifications on file with Anne Arundel County and in the offices of Crown Realty Development, and similar to sample house, the Crown Jamaican — “Type A,” located at 7947 Elvaton Road, Glen Burnie.” Settlement dates in September, 1972 were set in the contracts, but time was not of the essence and extensions without a fixed time limitation had been agreed upon among the parties. In July, 1973, however, developers declined to go forward with construction and tendered the return of the down payments made by appellees. Developers’ basis for declining to go forward was that “* * * the sub-surface conditions of the lot[s] render it impossible to construct any dwelling in accordance with the plans and specifications agreed upon. There is a silty sand base above a hard clay sub-stratum and, between the two levels, a vast pool of water, creating a water table only slightly below the surface of the lot[s] involved.

We did not know about such conditions at the time of the * * * contracts] * * *.” Home buyers rejected the tender and filed separate bills for specific performance of their contracts. The actions were consolidated and tried together. The chancellor denied specific performance because he found that it was “* * * likely that a decree of specific performance would require such extended supervision and continuing resolution of disputes as to outweigh the benefits to be gained.” The chancellor decided to award monetary damages to the home buyers as alternative relief. A decree was passed entering judgment in favor of the Thomases for $11,350.00 and in favor of the Sipples for $10,600.00. ³⁶⁵ Developers and home buyers have appealed.

Developers seek reversal and dismissal of the bills of complaint. Home buyers seek reversal as to damages only. Developers’ Appeal Developers thus state the questions presented by their appeal: 1. Did the chancellor have any right to decree specific performance or to award monetary damages?

(Equity Jurisdiction) 2. Were they relieved of going on with the contracts? (Rescission or Breach) 3. What is the date of breach, if any, for computation of damages?

(Date of Breach) 1. Equity Jurisdiction Developers argue that there was no equitable jurisdiction because: (a) a building contract will not be specifically enforced; (b) when the court denied specific performance, general equity jurisdiction was otherwise lacking; and (c) the home buyers were not ready, willing, able and eager to perform. (a) Enforcement of a building contract The general rule and an exception are thus stated in Pomeroy’s Specific Performance of Contracts, (3d Ed. 1926) § 23, at 61, et seq “The general rule is now well settled that, on account of the great difficulty and often impossibility attending a judicial superintendence and execution of the performance, contracts for the erection or repair of buildings, the construction of works, and the conduct of operations requiring time, special knowledge, skill, and personal oversight, will not be specifically enforced. Notwithstanding this general rule and the cogent reason which supports it, there are certain excep ³⁶⁶ tions; and contracts for building or for the construction of works, and the like, falling within them, may be specifically enforced. 1.

It has been said that if an agreement for erecting a building is in its nature defined, there is no difficulty in entertaining a suit for its specific performance. But a contract to build a house of a certain value merely, does not come within this description of an agreement sufficiently defined, and will not be enforced. 2. Whether or not the opinion of Ld. Rosslyn is to be regarded as a correct statement of the law, it is settled by the recent English decisions, that where the defendant has contracted to construct some work which is defined on his own land, and where the plaintiff has a material interest in the execution thereof, which is not susceptible of adequate compensation in damages, a specific performance of the undertaking will be compelled.” It is quite plain that Maryland recognizes the general rule and the cited exception.

Ward v. Newbold, 115 Md. 689, 696 , 81 A. 793, 795-96 (1911); Brummel v. Realty Co., 146 Md. 56, 64 , 125 A. 905, 908 (1924); Edison Realty Co. v. Bauernschub, 191 Md. 451, 457 , 62 A. 2d 354, 356-57 (1948), and Laurel Realty Co. v. Himelfarb, 191 Md. 462, 467 , 62 A. 2d 263, 265 (1948). The growth and the extent of the rule and the exception were discussed in Edison Realty Co. v. Bauernschub, supra, where it was said at 457-58 [356-57]: “In England there was confusion for many years as to how far courts of equity ought to entertain suits for specific performance of a covenant to build or rebuild a house of a specified form and size on particular land. In City of London v. Nash, 3 Atk. 512, 515, Lord Hardwicke recognized the power of the court in this respect, but said that the court should not specifically enforce a covenant to make repairs to a house. The ground of his opinion in that ³⁶⁷ case, which was between a landlord and tenant, was that on the covenant to repair the tenant might have a remedy at law.

In some of the later decisions, however, it was held that no covenant to build or rebuild ought to be enforced specifically in equity. It was considered that there could be adequate compensation in damages in a court of law, and a court of equity ought not to undertake to construct a building any more than to make repairs. Lucas v. Comerford, 3 Bro. Ch. 167; Errington v. Aynesly, 2 Bro.

Ch. 343. But the English courts finally adopted the rule that they would decree specific performance where the defendant has entered into a contract to construct on his own land work which is clearly defined, and the complainant has a material interest in its performance, and failure to perform is not susceptible of adequate compensation in damages. 2 Story, Equity Jurisprudence, 14th Ed., secs. 1006-1008. The Court went on to say at 458 [357]: “So, we hold in this State that where complainants have purchased land improved by an unfinished house and the vendor has installed an insufficient heating apparatus, or has failed to do certain work which he agreed to do, the court of equity has power to decree specific performance, where the work which has not been performed is clearly defined * * In Daniel v. Kensington Homes, Inc., 232 Md. 1 , 192 A. 2d 114 (1963), the Court of Appeals discussed the above cited cases in explicating the rule and the exception, saying at 7 [118]: “Both Brummel v. Clifton Realty Co., Inc., 146 Md. 56 , 125 A. 905 , and Edison Realty Co. v. Bauernschub, 191 Md. 451 , 62 A. 2d 354 , * * * hold that specific performance of a construction contract ³⁶⁸ to complete a house may be decreed, in the discretion of the court, if the work to be done is clearly defined. See also Laurel Realty Co. v. Himelfarb, 191 Md. 462 , 62 A. 2d 263 .

The general rule of equity against specific performance of a contract to build or repair is not absolute and without exception. See Ward v. Newbold, 115 Md. 689, 696 , 81 A. 793 , where, however, specific performance was denied because of the indefiniteness of the contract.” In City Stores Company v. Ammerman, 266 F. Supp. 766 (U.S.D.C. for D.C. 1967), affd. 394 F. 2d 950 (1968), it was said at 776-77: “Some jurisdictions in the United States have opposed granting specific performance of contracts for construction of buildings and other contracts requiring extensive supervision of the court, but the better view, and the one which increasingly is being followed in this country, is that such contracts should be specifically enforced unless the difficulties of supervision outweigh the importance of specific performance to the plaintiff. 5 Willis-ton on Contracts § 1423 (Rev.Ed.1937). This is particularly true where the construction is to be done on land controlled by the defendant, because in that circumstance the plaintiff cannot employ another contractor to do the construction for him at defendant’s expense. In the case at bar, the fact that more than mere construction of a building is involved reinforces the need for specific enforcement of the defendants’ duty to perform their entire contractual obligation to the plaintiff.” In the subject case title to the land upon which the two houses were to be built was held by the developers.

Early on, the Court of Appeals adopted the observation of Story that: “Where, indeed, a contract respecting real property is in its nature and circumstances unobjectionable, it is as much a ³⁶⁹ matter of course for Courts of Equity to decree a specific performance of it, as it is for the Court of Law to give damages for a breach of it.” Smoot v. Rea, 19 Md. 398 (1863). Application of these principles to the subject contracts persuades us that appellees' bills for specific performance were appropriate actions by them to seek such discretionary equitable relief. In Charles Co. Broadcasting Co. v. Meares, 270 Md. 321 , 311 A. 2d 27 (1963), it was said at 324 [30]: “The granting of specific performance rests within the sound discretion of the trial court, Horst v. Kraft, 247 Md. 455, 459 , 231 A. 2d 674, 676 (1967); Restatement of Contracts § 359 (1) (1932). If a contract is fair, reasonable and certain, specific performance may be granted almost as a matter of course, Excel Co. v. Freeman, 252 Md. 242, 246 , 250 A. 2d 103, 106 (1969).

This is true even if the contract is contingent, if the contingency can be met, Scheffres v. Columbia Realty Co., 244 Md. 270, 284 , 223 A. 2d 619, 626 (1966); * * '*” In the subject case the land was titled in the developers. The home buyers had a material interest in seeking to obtain the home of their choice at the place of their choice. The nature of the performance to be required of the developers was clearly defined — well within the certainty required by the decided cases. See: e.g., Laurel v. Himelfarb, supra; Cohen v. Baltimore County, 229 Md. 519 , 185 A. 2d 185 (1962); Edison Realty Co. v. Bauernschub, supra; Kandalis v. Paul Pet Construction Co., 210 Md. 319 , 123 A. 2d 345 (1956).

An adequate basis for equitable jurisdiction was shown. (b) Damages in lieu of specific performance We regard the case of Charles Co. Broadcasting Co. v. Meares, supra, to be dispositive of the question. In Meares it was said at 325 [30-31]: “It has long been established that if the remedy of specific performance is possible when the vendee brings suit, but while the action is pending, a vendor disables himself from, performing his ³⁷⁰ contract, damages may be awarded in lieu of specific performance, Busey v. McCurley, 61 Md. 436, 448 (1884); Powell v. Young, 45 Md. 494, 498 (1877); Green v. Drummond, 31 Md. 71, 84 (1869); Rider v. Gray, 10 Md. 282, 300 (1856); 1 Pomeroy, Equity Jurisprudence § 237f, at 443 (5th ed. 1941); Miller, Equity Procedure § 672 (1897); Pomeroy, Specific Performance of Contracts § 294, at 372 (2d ed. 1897). See Kappelman v. Bowie, 201 Md. 86, 90 , 93 A. 2d 266, 268 (1952) (‘equity may refuse ... to . . . enforce a hard bargain'). “If a complainant files a bill for specific performance at a time when he knows specific performance is impossible, and the sole remaining prayer for relief is for damages, his bill will be dismissed, Davis v. Winter, 168 Md. 613, 618-19 , 178 A. 604, 605-06 (1935).

Although specific performance cannot be decreed once performance has become impossible, Powichrowski v. Sicinski, 139 Md. 376, 383 , 114 A. 899, 901-02 (1921), damages may be awarded in the same equitable proceeding, Restatement of