Hill v. Benevicz

Bruñe, C. J., delivered the opinion of the Court. The plaintiffs-appellants, Willie Hill and Margaret Hill, his wife, brought this suit at law to recover a $1,000 down payment made by them as purchasers under a contract to purchase a property known as 1503 Fllwood Avenue in Baltimore. The defendants-appellees are Frank Benevicz and Rita Benevicz, his wife, as sellers of the property, their agent Addison Realty Company to which the plaintiffs’ down payment was made, and Carl A. Robinson, an officer of the corporate defendant. The case was tried before the trial court, without a jury, and resulted in a judgment for the defendants, from which the plaintiff appeals.

The sales contract was dated December 30, 1957. It provided, among other things: (a) that the property was subject to an annual ground rent of $90 [which capitalized at 6% ⁸¹ would amount to $1,500] ; (b) that the sale price was to be $10,500, of which $1,000 had been paid; (c) that an additional down payment of $200 was to be made at or before the time of settlement; (d) that the remaining $9,300 was “to be financed by a Federal Housing Administration (F.H.A.) guaranteed mortgage in [the] same amount,” the salient terms of which were stated; (e) that “the lending institution,” which was neither named nor identified, should “have to 90 days to arrange settlement, from the date hereof.” The contract also contained an integration clause and a provision stating “time being of the essence of this Agreement.” Since F.H.A. mortgage financing was contemplated and since there had been no F.H.A. appraisal prior to the time of execution of the contract of sale, the following provisions, intended to comply with § 1715 q of Title 12, U. S. C. A., and F.H.A. regulations issued thereunder and by virtue of § 1715 b of the same Title, were included in the contract: “It is expressly agreed that notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposit or otherwise unless the seller has delivered to the purchaser a written statement issued by the Federal Housing Commissioner setting forth the appraised value of the property for mortgage insurance purposes of not less than $12,000 in fee simple which statement the seller hereby agrees to deliver to the purchaser promptly after such appraised value etc. is made available to the seller. “The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the appraised valuation made by the Federal Housing Commissioner.” These provisions are almost verbatim in the terms prescribed by the relevant F.H.A. form (sometimes referred to below ⁸² as “the F.H.A. appraisal clause”) and the first sentence quoted is virtually identical with provisions involved in Griffith v. Scheungrab, 219 Md. 27, 30 , 146 A. 2d 864 . In that case failure to furnish an F.H.A. certificate of appraisal to the purchaser was held to bar the seller from specific performance of the contract of sale of realty where F.H.A. financing was to be obtained. The appellants rely heavily on that case, but there, unlike the present case, no F.H.A. appraisal was obtained at all.

(Indeed, it appeared impossible in the locality and at the times involved to obtain F.H.A. mortgage financing on the terms stated in the original contract, which would have prevented specific performance at the suit of the seller even under the original contract, apart from the amendment requiring the furnishing of an F.H.A. appraisal. See Note 1, 219 Md., p. 33.) Here there was an F.H.A. appraisal, and an F.H.A. insured mortgage on the terms specified in the contract of sale was obtainable within the time fixed for settlement. The principal question here is whether or not the purchasers were discharged from any obligation to go through with the purchase because of failure of the sellers to furnish them with a copy of the F.H.A. certificate of appraisal promptly after the certificate became available to them. We shall attempt to summarize the relevant facts, many of which are not in serious, if any, dispute.

The contract of December 30, 1957, was executed by both of the Hills and both of the Beneviczes to replace a prior contract for the sale of the same property executed in August, 1957, which had expired or was about to expire. The earlier contract had also contemplated F.H.A. mortgage financing, which apparently had not been procurable prior to the expiration of that contract. It appears that F.H.A. commitments to insure mortgages are issued only to mortgagees approved by the F.H.A. and are not issued directly to persons such as the buyers or sellers of the property in the circumstances here involved. An application for a mortgage commitment is submitted to the F.H.A. by an approved mortgagee and, in a case such as this, it must be accompanied by a copy of the contract of sale and by a ⁸³ supplement executed by or on behalf of the proposed mortgagors giving a good deal of information, including credit information.

An appraisal fee must be paid, and an appraisal is then made of the property in question by or on behalf of the E.H.A. Assuming that the E.H.A. is willing to issue mortgage insurance in connection with the proposed sale, it issues a commitment to that effect to the approved mortgagee and also forwards with the commitment a certificate of appraisal. The form of certificate used in this case 1 includes certain instructions, the statement of the E.H.A. appraised value of the property, and a “Mortgagor’s Certification” to be executed by the purchaser (mortgagor) at the time of settlement. The original and a duplicate copy of this certificate were to be delivered to the purchaser-mortgagor and the duplicate copy was to be signed by him at the foot of the “Mortgagor’s Certification” and was to be delivered by the mortgagee to the F.H.A., in a case such as this, with the closing instruments. There were three different forms of certification and the appropriate one was to be checked.

Here the appropriate one was that reciting that “The EHA Statement of Appraisal value was not received by me prior to my signing the contract to purchase, but the contract to purchase contained the following language: * * Here follow provisions substantially identical with those inserted in the Hill-Benevicz agreement to comply with F.H.A. requirements, which we have already quoted. On January 16, 1958, Mr. Hill accompanied Mr. Robinson to the office of James W. Rouse Co., Inc. (Rouse) for the purpose of obtaining E.H.A. insurance of the proposed mortgage, and executed, on behalf of himself and his wife, the required supplement to the mortgagee’s application for a commitment. (No question is raised as to his authority so to act on behalf of his wife.) Hill did not have the money to cover the appraisal fee of $25.00, but Robinson put it up apparently shortly after he and Hill visited Rouse. Rouse processed ⁸⁴ the application in accordance with its usual procedure.

It promptly obtained a credit report on Hill and submitted the application to the F.H.A. on February 5, 1958. A commitment, accompanied by an appraisal certificate showing a valuation of the property in fee simple at $12,000 (the minimum amount stated in the contract of sale) was issued to Rouse on February 27 and was received by Rouse the next day. Rouse at once gave the sellers’ real estate agent, Robinson (or his company), notice of the F.H.A. approval of the proposed transaction. Rouse’s usual practice appears to be to submit applications to the F.H.A. for mortgage insurance in its own name, but to place the mortgage, when a commitment for insurance has been obtained, with one or another of the lending institutions for which it acts as mortgage correspondent, and which are themselves F.H.A. approved mortgagees.

Rouse then takes the mortgage in its own name, assigns it to the lending institution and services the mortgage under a contract between Rouse and the lender, pursuant to which Rouse receives compensation. Rouse thus performs several functions in the transaction. It acts partly in its own interest, partly as agent for the lending institution and partly for the benefit of the prospective mortgagor and partly also for the benefit of the would-be seller, for without the mortgage financing the sale probably would not produce the cash consideration which he is seeking. All of these functions are well known in the business, and there is no question of an agent secretly serving his own interest or the interest of one principal to the detriment of another.

There is, however, some room for question as to the extent or evén the existence of Rouse’s agency for some of the parties. In this case Rouse obtained a commitment from one of its insurance company correspondents on March 18, 1958, to make the proposed mortgage loan. When notice of this fact was given to the sellers or their agent or to the purchasers is not clear; but on March 27th, Rouse sent a notice to the Hills that settlement would take place on April 1st. This was countermanded by another notice sent on March 28th, which ⁸⁵ moved it up to Monday, March 31st, 1958, presumably because of the ninety day time limitation in the contract.

The Beneviczes’ attorney also wrote the Hills a letter on March 29th notifying them of the settlement, which was delivered by a messenger to Mrs. Hill, who says she did not read it, but turned it over to her lawyer. On March 31st the Hills did not appear for the settlement. Robinson then took a copy of the F.H.A. appraisal certificate to the office of Mr. Mund, counsel for the Hills, and, as the trial judge expressly found, then delivered it to Mr. Mund. Robinson then went to the home of the Hills, rapped on the door, but received no answer, and pushed a copy of the appraisal certificate under the door.

There is no dispute that the first actual delivery of a copy of the F.H.A. certificate of appraisal by the sellers or anyone acting on their behalf was that made by Mr. Robinson to Mr. Mund, the purchasers’ attorney, on March 31st. The appeb lants’ contention that this was not a compliance with the terms of the contract because it was not a personal delivery made by the sellers to the purchasers is quite unsustainable. Bob Holding Corp. v. Normal Realty Corp., 223 Md. 260 , 164 A. 2d 457 . We think that this delivery by the sellers’ agent to the purchasers’ agent and attorney was sufficient.

We therefore need not determine the sufficiency of the subsequent delivery of a copy by Robinson at the purchasers’ home by shoving it under the door when he could get no response to his rapping. It seems, however, from the cloudy testimony of Mrs. Hill that this copy was received by the Hills on the day of its delivery at their home. It is clear that the purchasers were informed of the time and place of the intended settlement (11:00 A.M., Monday, March 31, 1958, at Rouse’s office), and that they refused to attend. It is obvious that if they had attended, the appraisal certificate would have been delivered to them then and there since the appraisal was in the possession of Rouse and a signed copy of the mortgagors’ certificate appended thereto was an essential part of the F.H.A. mortgage insurance transaction.

It is, we think, clear from the purchasers’ testimony, as well as from that on behalf of the sellers, that the pur ⁸⁶ chasers were seeking to avoid fulfillment of the contract. Indeed, Mr. Hill admitted that when they received the first notice of the time appointed for settlement (which was subsequently advanced by one day) they consulted counsel to find out if they could get out of the sale. (Mrs. Hill’s testimony on this point seems to us evasive.) They stayed away from the settlement and they refused to admit Robinson when he called at their residence the day before. The Hills patently were not complying with their implied obligation of cooperation in carrying out the contract.

Such non-cooperation would clearly excuse the sellers from the obligation to deliver a copy at the time of settlement (which is a somewhat different question from that of their contractual obligation to deliver a copy promptly after it was made available to them). See Griffith v. Scheungrab, supra; Alois v. Waldman, 219 Md. 369, 375 , 149 A. 2d 406 ;