Jeffrey Sneider-Maryland, Inc. v. LaVay

Powers, J., delivered the opinion of the Court. This case arose from transactions relating to purchase and sale of a group of nine residential building lots in Montgomery County, adjacent to Heathwood Court, between River Road and Bradley Boulevard. It is apparent that the difficulty between the parties is attributable to a so-called sewer moratorium imposed in the Cabin John drainage basin, in which the property lies. Appellant here is Jeffrey Sneider-Maryland, Inc., which we shall refer to as “Sneider”.

Appellee is Gerard M. LaVay. A background review of their contractual relationships to the property is desirable. On 31 July 1967 LaVay entered into a contract to purchase the lots from one Robert G. Ellis, who signed on behalf of a corporation to be formed. Because of unrealized contingencies in the contract, and because he forewent an option to cancel it, LaVay in 1973 still held the right to buy the lots under his 1967 contract.

By an Assignment of Contract dated 7 April 1973, LaVay assigned his rights to Sneider. We quote two provisions of the Assignment, which are pertinent to the issues in this case. Paragraph 3 provided: “The Assignee hereby agrees to pay the Assignor as a total consideration for the assignment herein, the sum of One Hundred Eighty Thousand Dollars ($180,000.00). Said sum shall be payable $90,000.00 cash upon the execution of this Assignment and $90,000.00 cash fifteen days prior to the time of settlement under the contract attached hereto as ²³¹ Exhibit “A” as hereinafter set forth in paragraph numbered 6.

Time is of the essence for payment under this paragraph. In the event payment is not made as provided herein, this Assignment shall be null and void and the sum paid in the amount of $90,000.00 shall be forfeited as fixed and liquidated damages and the parties shall be relieved of all further liability to each other and further, Assignor shall have the right to settle under the contract as if this Assignment had not been made.” Paragraph 10 provided: “The Assignor warrants and represents that sanitary sewer and water facilities are or will at settlement be at a property line of the subject property, and that the said property is sewerable and that the sewer is or will at settlement be available for connection, and in size sufficient to service the subject property for the purpose for which the Assignee intends to put the same; namely, the erection of nine (9) single family homes. In the event the water and sewer facilities are not as set forth in this paragraph, all sums paid by Assignee to Assignor shall be refunded to Assignee and the parties shall be relieved of all further liability to each other. In the event Assignee settles on the contract with “seller”, all liability of Assignor under this Assignment shall thereafter be null and void, it being conclusively presumed that Assignee has investigated the availability of water and sewer prior to settlement and satisfied itself that these items are as represented by Assignor.

All tap fees have been paid by Assignor in the amount of $6,390.00, which sum shall be repaid by the Assignee to the Assignor at the time of settlement. If Assignee elects to make any permit applications prior to settlement, Assignor will cooperate and join in where required by Assignee.” ²³² LaVay promised more with respect to sewer and water than his seller had promised him. The 1967 contract, made a part of the 1973 Assignment, contained this promise: “Seller further agrees that it will cause to be installed underground power lines, sewer and water lines and connections thereto so as to make sewer and water available at either the front or rear lot line of each lot sold by this agreement.” It appears to be undisputed that at the time of the Assignment on 7 April 1973 sanitary sewer and water facilities were in fact “at a property line of the subject property”, that future hookups had been authorized by the Washington Suburban Sanitary Commission, and tap fees paid; and that all of these facts were known to the parties. Time for settlement under the 1967 contract was fixed as 30 days after acceptance by Montgomery County of a street which the seller had undertaken to construct.

Before this event took place, and pursuant to orders of the Secretary of Health and Mental Hygiene dated 16 August 1973, the Washington Suburban Sanitary Commission, by a resolution adopted on 19 September 1973, imposed a prohibition against any hookup to a sanitary sewerage line in the Cabin John drainage basin unless the structure to be hooked up was under construction on 13 September 1973 under a County building permit issued on or before 16 August 1973. The undisputed effect of this prohibition was that sewer was not available to service the property. On 23 October 1973 Sneider filed in the Circuit Court for Montgomery County, in equity, a bill of complaint for declaratory judgment, rescission, injunction, impression of constructive trust, and other relief. Later, with leave of court, the complaint was amended.

Named as defendants were LaVay, and others who then held title to the property, subject to the 1967 contract. Time for settlement under the 1967 contract was triggered by Montgomery County’s acceptance, on 18 December 1973, of the street provided for in the contract. LaVay settled. The pending case was dismissed ²³³ as to the other defendants.

On 6 and 7 August 1974 trial was held before Judge David L. Cahoon. As we see it the critical issue tried and decided in the court below was whether LaVay’s warranty of 7 April 1973 that “the sewer is or will at settlement be available for connection” was breached. On 7 August 1974 the chancellor rendered an oral opinion, and on 27 August 1974 signed a decree which declared the rights of the parties as follows: “1. The Plaintiff has not established a right to the rescission of the sales contract dated July 31, 1967 attached to the Amended Bill of Complaint as Exhibit A. “2.

The Plaintiff has not established a right to the rescission of the assignment of contract dated April 7, 1973, attached to the Amended Bill of Complaint as Exhibit B. “3. The Plaintiff was not, as a consequence of the Order adopted September 19, 1973, attached to the Amended Bill of Complaint as Exhibit C, relieved without forfeiture of paying the Defendant fifteen (15) days prior to the settlement date called for in Exhibit A, the additional $90,000.00 installment called for in that contract, nor was the Plaintiff relieved thereby of its obligation to settle with the record owners of the subject property. “4. The Plaintiff has not established a right to an injunction prohibiting the Defendant from settling with the record owners of the subject property on the contract attached to the Amended Bill of Complaint as Exhibit A. “5. The Plaintiff has not established a right to have a constructive trust impressed upon the subject property. “6.

The Plaintiff has not established its right to the entry of a judgment in its favor against the Defendant. ²³⁴ “7. The proper interpretation of the warranty contained in paragraph 10 of the Assignment of Contract attached to the Bill of Complaint as Exhibit B, which warranty reads as follows: ‘The Assignor warrants and represents that sanitary sewer and water facilities are, or will at settlement be at a property line of the subject property, and that the said property is sewerable and that the sewer is or will at settlement be available for connection, and in size sufficient to service the subject property for the purpose for which the Assignee intends to put the same; namely, the erection of nine (9) single family homes’ was fully performed by the Defendant because the sewer and water facilities were at the property lines of the lots which are the subject of this action and were available for connection at the time ot the execution of the Assignment of Contract dated April 7,1973. “8. The Defendant is entitled to retain as liquidated damages pursuant to Paragraph 4 of the Assignment of Contract attached to the Bill of Complaint as Exhibit B, the $90,000.00 which was paid to him by the Plaintiff.” The important phrase in the Assignment, “that the sewer is or will at settlement be available for connection” was, to be sure, expressed in the disjunctive, by use of the word “or”. Sneider contends that it was the intent of the parties that sewer be available for connection at the time of settlement, and that the warranty should be read as if the conjunctive “and” had been used.

LaVay contends that the meaning of the disjunctive phrase is clear, and there is no ambiguity which requires judicial construction. The chancellor agreed with LaVay’s contention. In his oral opinion, after noting that the contract contemplated an ultimate settlement upon the final completion of the subdivision — construction of all the facilities and their being in place, he said: “With those purposes, which are manifest in the ²³⁵ contract, we look to Paragraph 10 of the * * * assignment agreement containing the warranty provision. Then the significance of the phrases questioned becomes apparent and acute.

If it was the intention of the assignor and the assignee that the warranty be a matter that necessarily subsisted at the time of settlement, there is no necessity for the expression in the present tense, because then it would be of no consequence necessarily to warrant that sewer and water facilities are at the present time available. There is no necessity for the phrase. The warranty could merely express itself as in the future — that at time of settlement the property would be sewerable and be available at the time of settlement.” “My conclusion is that the intention of the parties was, by this phrase, that there is a warranty as to a current circumstance or, in the alternative, that it will prevail at a certain time. If it is available at this point, the assignee may exercise his elections and secure the availability.

This is an option which apparently he bargained for, if you read the whole document. The contrary would be to consider the matter superfluous. I cannot assume a document involving matters of this magnitude, forfeitures, the express excuse of liability in the given circumstances, that they were not careful in the choice of their words. “If they intended that it was to be a present warranty and a continuation of the circumstances as a condition precedent, an obligation under the contract, it seems to me from a reading of all of the documents that they would have included the word ‘and.’ This is not a matter which I am at liberty to conclude is inadvertence, because it is repeated twice. It is in the same paragraph, and very clearly in the disjunctive.

For this reason I have concluded ²³⁶ that the contract, or warranty, is with respect to the availability of sewer and water facilities either at the time of the assignment or at the time of settlement on the property.” The Court of Appeals stated in Walton v. Hospital Association, 178 Md. 446 , 13 A. 2d 627 (1940), at 450: “The words of a guaranty should receive a fair and reasonable interpretation to effectuate the intention of the parties, and the circumstances accompanying the transaction may be considered in seeking the intention of the parties. The court should give the instrument that construction which will best accord with the intention, as manifested by the language in the light of all the surrounding circumstances, without stretching the words beyond their import in favor of the creditor or restricting them in aid of the guarantor.” (Citations omitted)