Jacobs v. Atlantco Ltd. Partnership No. 1

³³⁶ Powers, J., delivered the opinion of the Court. We shall commence by listing and describing the cast of major characters involved in this case, which grew out of the purchase and sale of two blocks of land, located in the northern part of Ocean City, Worcester County, Maryland. They are: 1. Stanley R. Jacobs, a lawyer and real estate developer and investor.

Jacobs is the principal appellant. 2. Atlanco Limited Partnership Number One. The name appears throughout the record in several minor variations. We shall refer to it as Atlanco.

On 10 August 1972, and-for some months before and after that date, this entity owned the land involved in this case, Blocks 52 and 82, on Plat No. 2, Fenwick, Maryland. Atlanco and its general partners are appellees. 3. Ronald C. Pulliam, a real estate broker, and a general partner in Atlanco. 4. Herman E. Perdue, a lawyer, and a general partner in Atlanco. 5.

WTR Company, a partnership, and itself a general partner in Atlanco. Robert W. Todd is the only visible partner of WTR Company. In a written contract of sale dated 10 August 1972, Atlanco, acting through Pulliam as a general partner, agreed to sell, and Jacobs agreed to buy, Blocks 52 and 82 for the sum of $550,000.00. A deposit of $10,000.00 was paid.

The balance was to be paid at settlement, which was to be on 15 January 1973. Other provisions of the contract significant to this case were: if the buyer failed to settle prior to midnight on 15 January 1973, “this contract shall be considered null and void”; title was to be good and merchantable (but there was no provision to extend the time for settlement to clear a title defect); and time was of the essence of the agreement. Jacobs was acting throughout for a partnership known as Bojac Investment Company, in which Jacobs and F. Ripley Bowman were the partners. On 6 January 1973 Jacobs contracted to sell Block 82 to one Josh D. Richardson, for ³³⁷ $300,000.00, to be settled on 15 January.

Richardson promptly engaged Dale R. Cathell, an attorney in Ocean City, to examine title and prepare the papers necessary for settlement. At about the same time or within a day or two, Jacobs engaged Cathell to perform the same service for the overall transaction. Settlement was scheduled for the morning of 15 January 1973, at Cathell’s office in Ocean City. Jacobs and Richardson appeared, with the necessary funds in the form of cash, certified check, and an acceptable loan commitment.

Pulliam and Todd were'present. Perdue was in Salisbury, available by telephone. Cathell advised Jacobs that his examination of title had revealed a decree of the Circuit Court for Worcester County recognizing the right of one Raymond W. Clifford to occupy a portion of the property under some sort of leasehold interest. The decree, entered on 12 June 1972, indicated that Clifford had occupied a portion of Block 52, and had a construction trailer or office trailer on the property.

The decree appeared to resolve a dispute between Clifford and Todd, who was also making some use of a part of Block 52. Apparently Atlanco and its partners had been named in that suit, because the decree dismissed the case as to Atlanco and each partner therein. The title attorney said that in his opinion the decree constituted a cloud on the title, and advised that settlement should not be held until the question was resolved. Shortly before the settlement day, Cathell had called Donald C. Davis, a law associate of Perdue’s, who was representing Atlanco, and discussed the Clifford decree with him.

Davis felt that the decree did not affect the title to the property. Later in the day (some or all of the persons involved were in and out of Cathell’s office from time to time during the day) Pulliam informed Cathell that the partnership and Perdue insisted that settlement be made that day. Perdue was adamant that the Clifford decree was not a cloud on Atlanco’s title. It seems that everyone in the community knew that Clifford had left the area — ³³⁸ absconded”, they called it — months before, and was reputed to be in Florida.

Perdue, through a law partner who was an issuing agent for Title Guarantee Company, prepared and offered to issue a binder for an owner’s title insurance policy on the property, with no exceptions. Jacobs consulted by telephone with two title insurance company offices, and concluded that a policy might not protect him against a defect of which he had actual knowledge. Jacobs declined to settle, and notified the Atlanco partners that settlement should be deferred until the defect was cleared. At the request of Jacobs, Cathell prepared and filed a specific performance suit that afternoon.

Clifford was located in Florida. The next day Mrs. Richardson, traveling down and back by airplane, obtained a release signed by Clifford and his wife. Cathell notified all concerned that settlement was rescheduled for the morning of 18 January 1973. 1 Everybody was present but Perdue. Reached by telephone, Perdue refused to sign the deed.

He said the contract was breached when it was not settled on the 15th. He pointed out also that he was not obligated to sign the deed, because he had not signed the contract of sale, as required by Atlanco’s partnership agreement, which was a matter of public record. After one of several telephone conversations with Perdue, Cathell informed Jacobs that Perdue would sign the deed if Jacobs paid an additional $50,000.00. Jacobs then had a series of telephone conversations — four or five — ^with Perdue.

The net result of their discussions was that Perdue reduced his demand to $25,000.00, and Jacobs agreed to pay it, in the form of a one year note to Atlanco, secured by a mortgage on the property. The note and mortgage were drawn, and signed by Jacobs. He arranged for the dismissal of the specific performance suit he had filed when the first settlement fell through. ³³⁹ Perdue came to Cathell’s office later that day, and signed the deed. Settlement was concluded.

All appeared well, but the appearance was deceiving. Some four months later, in June 1973, Jacobs filed a bill of complaint in the Circuit Court for Worcester County against Atlanco, its general partners, and the broker who prepared the contract of sale. As later amended, the bill alleged the execution of the contract of sale between the parties, and the refusal of Perdue to settle, unless Jacobs gave a secured note for an additional $25,000.00. It further alleged that the note was given, but that there was a total lack of consideration for it, in that Perdue was already bound by the contract to execute the deed.

The complaint prayed that the court declare the note and the mortgage securing it to be null and void, or in the alternative, enter judgment against the defendants for the amount of the note and interest. There were demurrers, motions, and various other proceedings over the next two and one half years. The note was paid, and the mortgage released. A motion by the defendants for summary judgment was heard on 21 January 1976 before Judge Edward O. Thomas.

On 30 January 1976 the motion was denied, and the case was tried on the merits. At the conclusion of the trial Judge Thomas rendered an oral opinion in favor of the defendants. When a judgment was thereafter entered for the defendants, the plaintiffs took this appeal. As we see it, the facts of this case present a textbook illustration of the law of accord and satisfaction, and raise only one real issue.

The position taken by Atlanco, largely through Herman Perdue, on the question of whether the contract became null and void for failure to settle on 15 January, and on the question of whether Perdue was legally bound to execute the deed, with disagreement by Jacobs on both questions, raised the disputes upon which an accord was reached. If Atlanco gave consideration for the accord, it became binding on both sides when Jacobs provided the satisfaction — the secured note for $25,000.00. The issue, then, is whether the position of Atlanco on ³⁴⁰ either or both of those questions was taken in the honest belief that it was an arguable position, and in good faith, or whether it was a pretext, not honestly believed, but raised for the purpose of exerting economic duress. If the former, Atlanco’s agreement to yield on both questions was consideration for the accord.

If the latter, Atlanco gave no valid consideration, and the accord was a nullity. The authorities are generally in agreement in discussing the law of accord and satisfaction. In 1 Am. Jur. 2d Accord and Satisfaction § 1 (1962 & Supp. 1976), it is said: “* * * an accord and satisfaction may more properly be said to be a method of discharging a contract, or settling a cause of action arising either from a contract or a tort, by substituting for such contract or cause of action an agreement for the satisfaction thereof and the execution of such substituted agreement.” * * * “With respect to the terms separately, an accord is an agreement by one party to give or perform and by the other/party to accept, in settlement or satisfaction of an existing or matured claim, something other than that which is claimed to be due, and the satisfaction is the execution or performance of the agreement, or the actual giving and taking of some agreed thing.

The accord is the agreement and the satisfaction is the execution or performance of such agreement. When an accord is followed by a satisfaction, it is a bar to the assertion of the original claim, but until so followed, it has no effect.” A clear capsule definition is found in 1 C.J.S., Accord and Satisfaction, § 1 (1936 & Supp. 1976), which says: “Accord and satisfaction is a method of discharging a contract or cause of action, whereby the parties agree to give and accept something in ³⁴¹ settlement of the claim or demand of the one against the other, and perform such agreement, the ‘accord’ being the agreement, and the ‘satisfaction’ its execution or performance.” The same work, in discussing consideration, says, 1 C.J.S. supra, § 4: “The consideration need not be adequate, nor will the courts inquire into its reasonableness, as distinguished from its existence, and its amount or value does not affect the validity of the transaction; even though it is insignificant, or merely technical, the accord and satisfaction will nevertheless be sustained, provided, of course, the consideration is of some value, however slight, in the eyes of the law, for purported consideration of no value will not support the agreement. So even a slight modification, in accordance with these principles, of the status of the parties, resulting from the terms of the new agreement, is sufficient consideration. “Thus consideration for an accord and satisfaction exists where something substantial which the debtor was not bound by law to do is done by him, or where he abstains, at the request of the creditor, from doing something which he has a right to do; it may consist in the performance of an act, or even the giving of a promise.” We are not concerned here, and the Chancellor properly made it clear that he was not deciding whether Atlanco’s contentions were right or wrong. The significance of Atlanco’s forbearance to stand on its position, as consideration for the accord reached, is shown in 1 A. Corbin, Contracts, § 140 (1963 & Supp. 1971), where it is said: “Claims made by one person against another are frequently disputed and may be invalid.

The ³⁴² claimant may not have the right or the defense that he thinks he has. Of course, if his claim is valid and correct, his forbearance to press it is sufficient consideration for a return promise; this has been discussed in the preceding sections. But forbearance to press a claim, or a promise of such forbearance, may be a sufficient consideration even though the claim is wholly ill-founded. It may be ill-founded because the facts are not what he supposes them to be, or because the existing facts do not have the legal operation that he supposes them to have.

In either case, his forbearance may be a sufficient consideration, although under certain circumstances it is not. The fact that the claim is ill-founded is not in itself