Kimm v. Andrews

Barnes, J., delivered the opinion of the Court. This appeal involves two written contracts for the sale of the same 53 acres of land and the improvements thereon in Gambrills, Anne Arundel County (the subject property), signed by the owners, J. Maurice Dicus, Jr. and his wife, Doris E. Dicus. The first contract was signed on December 10, 1970, with the appellants, Lloyd C. Kimm and his wife, Diana C. Kimm, as purchasers. The second contract was dated April 5, 1971 (but agreed upon and signed on April 4, 1971), with the appellee, Michael W. Andrews, as purchaser.

The Circuit Court for Anne Arundel County (Wray, J.) granted specific performance of the Andrews contract by its decree of September 22, 1972, in which it also declared null ⁶⁰³ and void the deed from the Dicuses to the Kimms for the subject property and the purchase money mortgage from the Kimms to the Dicuses, both dated May 4, 1971, and recorded May 6, 1971. The principal issues in the case involve the validity of the first contract at the time the second contract was signed, the status of Mr. Andrews as a bona fide purchaser, and the determination of whether the Dicuses and the Kimms waived the provision in the first contract that time was of the essence and, if so, whether such a waiver was effective against Mr. Andrews. The metes and bounds description of the subject property appearing in the deed of May 4, 1971, indicates that it is an irregularly shaped tract with eight corners. The improvements on the land consist of the home of the Dicuses and four other houses.

The first contract of December 10, 1970, was prepared by Ira J. Wagonheim, a member of the Bar, who acted as the attorney for the Dicuses in that transaction. It recited, inter alia, that the subject property “has a road frontage on Gambrills Road of eight hundred (800) feet, more or less" and that the selling price was $80,000 of which $500 had been paid prior to the signing of the contract and the balance to be paid as follows: an additional $29,500 to be paid at the time of settlement and the $50,000 balance to be financed by a purchase money mortgage, under terms and conditions set forth in the contract. The contract then provides: LCK JMD DED DCK “It is expressly understood and agreed that this contract shall be subject to the following terms and conditions, and upon failure of any of said terms and conditions, this contract shall become null and void, and all deposit monies shall be promptly returned: 1. Sellers will take back a purchase money mortgage for Fifty Thousand Dollars ($50,000.00), payable in twenty-five (25) years, said mortgage bearing interest at the six (6%) rate of seven per cent (%%) per annum, computed on the unpaid principal balance, ⁶⁰⁴ with the right of prepayment without penalty after the end of the tenth year; monthly installments to include principal and interest, with Buyers paying annual real estate taxes and other public charges assessed against the property.

Buyers are also to insure the premises for not less than Fifty Thousand Dollars ($50,000.00) for benefit of sellers. 2. All houses situate on said premises are being sold ‘as is’. 3. Sale includes: Kitchen stoves in all houses, one (1) refrigerator, one (1) Ward’s freezer, space heaters and heating equipment in all houses. 4. Prior to settlement, Sellers will show Buyers location of boundary stakes, septic system and water pipes. 5.

Settlement shall take place not later than March 31,1971. 6. The hereinafter stated offer to sell said premises shall be revoked if not accepted by Buyers not later than December 18,1970.” Later in the contract is the provision “time being of the essence of this Agreement.” The sellers also agreed to pay Charles H. Steffey, Inc., in cooperation with Earl Patterson Realty, a brokerage commission of 6% of the total sale price. The Kimms are Koreans. They have been in the United States for a number of years.

In this transaction, they were represented by Mrs. Virginia Lewis, a real estate agent employed by Charles H. Steffey, Inc. Mrs. Lewis had previously sold the Kimms three other properties in a period of four years prior to December 10, 1970. Mrs. Lewis prepared the first draft of the proposed contract of sale between the Kimms and the Dicuses and presented that draft to Earl Patterson, the listing broker, who was cooperating with Steffey. Mr. Patterson indicated that he ⁶⁰⁵ was not satisfied with the wording of the proposed contract and wished to have an attorney prepare the contract. Mr. Patterson later stated that Mr. Wagonheim (who has offices in the same building as Mr. Patterson) prepared the draft of the contract which, with certain amendments, was signed by the parties.

The signatures of the Kimms wrere witnessed by Mrs. Lewis; Mr. Wagonheim witnessed the signatures of the Dicuses. After the contract of December 10, 1970, was signed, Mrs. Lewis arranged for an appointment with the Dicuses to meet at the subject property on January 10, 1971, in order that Mr. Dicus could show the Kimms the boundary stakes, as well as the location of the septic system and the water pipes. When the parties met at the subject property on January 10, the ground was largely covered with snow as a result of a snowfall a few days before. Mr. Dicus was too ill to walk the boundaries, particularly in the snow.

Mrs. Dicus apparently did not know the location of the boundaries, having never bothered to learn their location. Mrs. Lewis testified that Mr. Kimm appeared to be upset or angry about the condition of the pipes in the Dicuses’ house. What was said between the Kimms, however, was said in Korean. Mrs. Kimm testified that her husband was upset only because he had taken a day off from work and was displeased about the inability of the Dicuses to show him the boundaries of the subject property. 1 Mrs. Lewis testified that, thereafter, on behalf of the Kimms, she made repeated telephone calls to the office of Earl Patterson in an effort to make new arrangements for the Dicuses to show the Kimms the boundary lines, but without success.

The boundary lines were never shown to the Kimms until shortly before the Dicuses executed a deed for the subject property to them on May 4, 1971. Mrs. Kimm wanted the Dicuses to consent to certain amendments of the December 10 contract and she and Mrs. ⁶⁰⁶ Lewis met in Mr. Wagonheim’s office on January 30, 1971. Mrs. Lewis thought the meeting took place on February 6, 1971, but the precise date of the meeting is immaterial. Mrs. Kimm at this meeting indicated that she wanted the December 10 contract amended in three particulars, i.e., (1) a reduction in the rate of interest on the purchase money mortgage; (2) a reduction in the required amount of fire insurance; and, (3) a one-month deferment from payment of the $29,500 due at settlement.

The Dicuses rejected all of these proposed amendments. At the January 30 (February 6), 1971, meeting in Mr. Wagonheim’s office, Mr. Wagonheim suggested that Mrs. Kimm might wish to invest her money in the Delaware farm the Dicuses were buying, but Mrs. Kimm stated: “oh no, I want the [subject] property.” Mrs. Kimm acquiesced in the rejection by the Dicuses of the proposed amendments and began to prepare for settlement by ordering a title search for the subject property in the middle of February, 1971, from the Central Maryland Title Company, Inc., with which William A. Hackney, an attorney, is affiliated. On March 1, 1971, Mrs. Lewis and Mr. Patterson met in the office of Mr. Hackney, who, as already indicated, is affiliated with the Central Maryland Title Company, Inc., which was employed by the Kimms to search the title of the subject property. Mr. Hackney’s office is in the Steffey Building across the hall from the office of Mrs. Lewis.

It was at this meeting that March 30, 1971, was selected as the date for settlement. Although no written notice of the settlement date was sent to the Kimms either by Patterson, Hackney, or Wagonheim, Mrs. Lewis testified that she told Mrs. Kimm of the proposed settlement date and that Mrs. Kimm agreed to the date, provided the boundary lines were shown to the Kimms prior to that date. An arrangement had been made for the Kimms to meet the Dicuses at the subject property on March 24, 1971, so that the boundaries, septic system, and water pipes could be shown to the Kimms. On March 24, however, Mr. Patterson telephoned the office of Mrs. Lewis and left a message that ⁶⁰⁷ Mr. Dicus was in the hospital with pneumonia.

This message was passed on to the Kimms. Mr. Wagonheim testified that on March 27, 1971, Mr. Hackney telephoned him, stating that the Kimms wanted the boundaries shown to them prior to settlement. The boundaries, however, were not shown to the Kimms and, on March 29, 1971, Mr. Hackney left a message at Mr. Wagonheim’s office to the effect that the Kimms were not coming to the settlement. Mrs. Lewis and the Kimms apparently believed that the settlement would not take place on March 30 in view of the information given them that Mr. Dicus was in the hospital with a serious illness.

Unknown to them, however, Mr. Wagonheim had obtained the signatures of Mr. and Mrs. Dicus on a deed for the subject property and also on a letter authorizing Mr. Wagonheim to make the affidavit in regard to consideration on the proposed purchase money mortgage. The signatures on these documents were obtained by Mr. Patterson at Mr. Wagonheim’s request. Mr. Wagonheim advised Mrs. Dicus not to attend the settlement because, he said, it could “be very ugly at a settlement.” On March 30, 1971, Mr. Wagonheim and Mr. Patterson appeared at Mr. Hackney’s office, expecting the Kimms to settle at that time. Mr. Dicus was still in the hospital and Mrs. Dicus, taking the Wagonheim advice, did not appear at the settlement.

The Kimms also did not appear at the settlement. Mrs. Lewis did not appear until she was notified that Mr. Wagonheim and Mr. Patterson were present and were expecting settlement to take place. Mrs. Lewis then tried to telephone the Kimms from Mr. Hackney’s office, but was unable to reach them. During the evening of March 30, Mrs. Lewis told Mrs. Kimm what had previously happened.

On March 31, 1971, Mrs. Kimm told Mrs. Lewis that the parties should still settle for the subject property, but that $1,000 should be held in escrow until Mr. Dicus was able to walk the boundaries of the property. Under this proposal, Mr. Dicus would have three months to walk the boundary lines and settlement could take place on Monday, April 5, 1971. This proposal was communicated to Mr. Wagonheim ⁶⁰⁸ by Mrs. Lewis on March 31. Mr. Wagonheim recalled that the proposal was communicated to him on April 1, but he was not sure of the date.

In any event, the same day the proposal was made to him, Mr. Wagonheim relayed it to the Dicuses by telephone. Mr. Wagonheim, as agent for the Dicuses, made a counterproposal that only $500 be withheld from the settlement and held in escrow; that Mr. Dicus obtain the approval of his physician before trying to walk the boundaries; that the Dicuses be permitted to occupy the subject nroperty free of rent for 30 days; and. that an extension on the settlement for the Delaware property being purchased by the Dicuses be obtained. After Mr. Wagonheim told Mrs. Lewis of this proposal for settlement, she communicated it to the Kimms the same day; and they accepted it on either April 2 or 3,1971. On Friday, April 2, or Monday, April 5, Mrs. Kimm consulted R. Tilghman Brice, III, an attorney practicing in Annapolis, in regard to having the terms of the extension reduced to writing; Unknown to the Kimms, however, on or about April 3, Mr. Wagonheim learned from Richard Nelson, a realtor, that Michael W. Andrews, the appellee, was interested in acquiring the subject property.

On April 3, Nelson, Patterson, and Wagonheim met in Wagonheim’s office. At this meeting, Wagonheim expressed the opinion that the contract with the Kimms had lapsed by its own terms; but he did not tell either Nelson or Patterson that he, as agent for the Dicuses, had negotiated an extension for the time of settlement with the Kimms. The following day, Sunday, April 4, Nelson took Andrews, for the first time, to the subject property to inspect it. Later, the same day, Andrews signed a contract with the Dicuses for the purchase of the subject property, although this contract was dated April 5, 1971.

Prior to signing the contract, Andrews knew there had been a prior contract for the sale of the subject property and he learned through his agent, Nelson, of Wagonheim’s opinion that the prior contract was null and void inasmuch as the purchasers had not attended settlement within the time limit in the prior contract. ⁶⁰⁹ On Monday, April 5, Mr. Wagonheim notified Mrs. Lewis that "Mrs. Kimm is out.” The Kimms, thereafter, on or about April 13, 1971, retained the services of Jerome F. Connell, Sr., an attorney, to represent them. Mr. Connell wrote the Dicuses on behalf of the Kimms, threatening a suit against them for specific performance of the contract of December 10, 1970. At the time of that letter, the Dicuses terminated the services of Mr. Wagonheim. On April 9,10 or 12, 1971, Mr. Andrews learned from his agent, Nelson, that the Kimms intended to enforce their rights under the prior contract of December 10, 1970.

The Kimms recorded their contract among the land records of Anne Arundel County on April 16,1971. On April 28, 1971, Mr. Andrews appeared at the office of the Central Maryland Title Company, Inc., for settlement under his contract of April 5 (4), 1971. By this time, however, the Dicuses had retained John Demyan, Jr., an attorney, to represent them. Mr. Demyan, representing the Dicuses, refused to proceed to settlement with Mr. Andrews, stating that the Dicuses were going to settle on the Kimm contract instead.

Mr. Andrews, after settlement with him had been refused, consulted counsel and upon counsel’s advice recorded his contract, dated April 5, 1971, among the land records of Anne Arundel County on April 28, 1971. On May 4, 1971, the Dicuses, after showing the Kimms the boundary lines of the subject property, executed a deed for the property in accordance with the terms of the December 10, 1970, contract. Both the deed and the purchase money mortgage provided for in the Kimm contract (also dated May 4) were recorded on May 6, 1971, among the land records of Anne Arundel County. The Kimms have been in possession of the subject property since May 4, 1971.

Mr. Andrews filed his bill of complaint against the Kimms and the Dicuses on May 13, 1971, in the Circuit Court for Anne Arundel County, praying that specific performance of his contract dated April 5, 1971, be granted against the Kimms as successors in interest of the Dicuses; that the right, title, and interest of the Kimms in the subject property be impressed with a trust in favor of Andrews; that ⁶¹⁰ the Kimms be enjoined from transferring or encumbering the subject property pendente lite; that a receiver be appointed to take charge of the property, collect the rents, and account to the court; that the purchase money mortgage of May 4, 1971, be declared void and cancelled; that the Kimms surrender possession of the subject property to Andrews; that the court enter a monetary decree for $75,000 damages against the Dicuses; and that Andrews have other relief. The Kimms and Dicuses duly answered the bill of complaint on June 17, 1971. After the taking of substantial testimony, the submission of memoranda by counsel for the respective parties, and the hearing of argument, the chancellor granted the motion of Andrews to strike all evidence with respect to the continuing negotiations between the Kimms and the Dicuses after March 31, 1971, upon the theory that they were within the purview of the Statute of Frauds and that Andrews could avail himself of the protection of that statute. Later, on September 1, 1972, the chancellor filed a written opinion which, after reciting many of the facts already given, stated: “The parties agree that a contract with a ‘time of the essence’ clause must ordinarily be performed by the date set, or it is no longer viable, Triton Realty Company v. Frieman, 210 Md. 252 (1956).

But the defendants say the contract is still ‘enforceable,’ citing Shoreham v. Randolph Hills, 248 Md. 267 (1967), because the Dicuses had not performed by showing the boundary stakes, etc., and continued to negotiate with the Kimms. Shoreham speaks a different doctrine to the Court. The Court of Appeals cites with approval Professor Corbin at page 274: ‘An oral agreement fixing a new date would not be enforceable as a contract; but it may nevertheless prevent the vendor from defending on the ground that payment was not made on time.’ This seems to say that the Dicuses would be under a disability to raise the defense of the Statute of Frauds if the Kimms sued them for specific ⁶¹¹ performance. The defendants do not show how that disability attaches to Andrews, who contracted knowing only that there had been a prior contract, and that Wagonheim thought it ‘dead’.

But without their disability, Andrews can rely on the Statute of Frauds, Vancloostere v. Logan, 36 N.E. 946 (Ill. 1894), Gohlke v. Davis, 279 S.W. (2d) 369 (Tex. Civ. App. 1955), O’Banion v. Paradiso, 393 P.

(2d) 682 (Cal. 1964) with respect to any evidence of any agreement for an extension of time for settlement of the Kimm contract, or with respect to any of the Dicuses’ conduct, not known to him. “The Plaintiff is entitled to specific performance. Counsel may submit a proposed Decree.” The decree, dated and filed on September 22, 1972, provides that Andrews is entitled to specific performance of his contract of April 4, 1971 (dated April 5, 1971); that the deed and mortgage of May 4, 1971, are null and void; that a trustee is appointed to act for the Dicuses to execute any necessary papers to effect settlement under the Andrews contract; and that the Kimms are to pay the costs. From this decree, a timely appeal was perfected to this Court. Three questions are presented to us for decision: (1) Was the first contract, dated December 10, 1970, for the sale of the subject property a valid and binding agreement on April 4, 1971, when the second contract (dated April 5, 1971) was entered into for the sale of the same property?

(2) Did the evidence indicate that Andrews was not entitled to protection as a bona fide purchaser for value without notice of the prior equity of the Kimms? (3) Did the Dicuses and the Kimms waive the provision in the contract of December 10, 1970, that time was of the essence and was such a waiver effective against Andrew’s, the subsequent purchaser? We have concluded that all three questions should be ansv/ered in the affirmative and that the decree of September 22,1972, must be reversed. ⁶¹² (1) We are of the opinion that the contract of December 10, 1970, for the sale of the subject property was a valid and binding agreement on April 4, 1971, when the second contract (dated April 5, 1971) was entered into for the sale of the same property. As the chancellor observed, the parties do not dispute that ordinarily a contract for the sale of land containing a clause that “time is of the essence” must be performed by the date fixed in the contract or the contract is no longer viable.

This general rule is, however, subject to the limitation that such a contract may nevertheless be specifically enforced if the failure to perform within the designated time results from the act or fault of the party against whom specific performance is demanded. We think our predecessors put it well in Budacz v. Fradkin, 146 Md. 400, 407 , 126 A. 220, 222-23 (1924), Judge W. Mitchell Digges stating for the Court: “[W]here the terms of a contract expressly provide that it shall be completely performed and consummated by a certain date named therein, courts of equity are bound to give full force and effect to the terms thereof, unless the failure to perform by the time designated is caused by the act or default of the party against whom specific performance is asked to be decreed, whether he be vendor or vendee.” The Court cited with approval the decision of the Supreme Court of the United States in Cheney v. Libby, 134 U. S. 68 , 10 S. Ct. 498 , 33 L. Ed. 818 (1890) in which Mr. Justice Harlan, for the Supreme Court, stated: “The parties in this case, in words too distinct to leave room for construction, not only specify the time when each condition is to be performed, but declare that ‘time and punctuality are material and essential ingredients’ in the contract; and that it must be ‘strictly and literally’ executed. However harsh or exacting its terms may be, as. to the ⁶¹³ appellee, they do not contravene public policy; and, therefore, a refusal of the court to give effect to them, according to the real intention of the parties, is to make a contract for them which they have not chosen to make for themselves. * * * But there are other principles, founded in justice, that must control the decision of the present case. Even where time is made material, by express stipulation, the failure of one of the parties to perform a condition within the particular time limited, will not in every case defeat his right to specific performance, if the condition be subsequently performed, without unreasonable delay, and no circumstances have intervened that would render it unjust or inequitable to give such relief.

The discretion which a court of equity has to grant or refuse specific performance, and which is always exercised with reference to the circumstances of the particular case before it * * * may, and of necessity must often be controlled by the conduct of the party who bases his refusal to perform the contract upon the failure of the other party to strictly comply with its conditions.” 134 U. S. at 77-78 , 10 S. Ct. at 501-02 , 33 L. Ed. at 823 . It is clear to us from the evidence that, although settlement did not take place by March 31, 1971, as required by Condition No. 5, the Dicuses did not show the Kimms the “location of boundary stakes, septic system and water pipes” as required by Condition No. 4 “prior to settlement” which was originally scheduled for March 30, 1971. The parties were at the subject property for the purpose of locating the aforementioned items on January 10, 1971; but Mr. Dicus was too ill, especially with the snow-covered ground, to show the boundaries, and Mrs. Dicus did not know where the boundaries were, never having made an attempt to locate them. As previously mentioned, after this meeting, Mrs. Lewis on behalf of the Kimms made numerous telephone calls to Mr. Patterson, the agent and realtor of the Dicuses, ⁶¹⁴ to arrange for another appointment at the site of the subject property.

These efforts were unavailing. Mrs. Kimm testified, without contradiction, to an appointment at the site for March 24, 1971. This, however, was cancelled because Mr. Dicus was hospitalized on that day. On March 27, 1971, Mr. Hackney, whose title company had been employed by the Kimms to search the title to the subject property, warned Mr. Wagonheim, then attorney for the Dicuses, that the Kimms “wanted to have the boundaries walked off” prior to settlement.

The testimony indicates that the Kimms were ready, willing, and even eager to settle for the subject property; but they insisted that the obligation of the Dicuses to show the location of the boundaries, septic tanks and water pipes at the subject property be performed. They had arranged for the title examination. They had made arrangements to withdraw the necessary funds from their bank to complete the settlement. The Kimms, who did not tender the purchase price to the Dicuses on or before March 31, 1971, could, under the circumstances, nevertheless be entitled to specific performance of the contract where this failure to perform the condition precedent was caused by the conduct of the Dicuses.

In Shoreham Developers, Inc. v. Randolph Hills, Inc., 248 Md. 267, 275 , 235 A. 2d 735, 741 (1967), we considered this principle and cited with approval Professor Corbin in 2 Corbin on Contracts § 310, at 112 (1950), as follows: “ ‘Where “time was of the essence”—that is, where performance by the plaintiff within a specified time was a condition precedent to the defendant’s duty to perform his part—if the plaintiff has been caused to delay his performance beyond the specified time by the request or agreement or other conduct of the defendant, the plaintiff can enforce the contract in spite of his delay. This assumes that the non-performance of the condition was not caused by the plaintiff’s own inability to perform, and that but for the defendant’s request, agreement, or other conduct, the plaintiff would have performed the condition. If the defendant ⁶¹⁵ later repudiates or otherwise breaks the contract, he cannot use the plaintiffs failure to perform on time as a defense.’ (Citing Walter v. Victor G. Bloede Co., 94 Md. 80 , 50 A. 433 (1901).)” It is clear to us that Conditions Nos. 4 and 5 in the contract of December 10, 1970, are mutually dependent and, by their terms, must be read together. Condition No. 4 provides that “Prior to settlement, Sellers will show Buyers location of boundary stakes, septic system and water pipes” and Condition No. 5 provides “Settlement shall take place not later than March 31, 1971.” (Emphasis supplied.) In K & G Construction Co. v. Harris, 223 Md. 305, 312 , 164 A. 2d 451, 454-55 (1960) Judge Prescott, for the Court, in discussing the law in regard to promises and counter-promises, stated: “Promises and counter-promises made by the respective parties to a contract have certain relations to one another, which determine many of the rights and liabilities of the parties.

Broadly speaking, they are (1) independent of each other, or (2) mutually dependent, one upon the other. They are