Manor Real Estate Co. v. Jos. M. Zamoiski Co.

McWilliams, J., delivered the opinion of the Court. Appellant (Manor) agreed to sell appellee (Zamoiski) a 6 acre site in its industrial park in Prince George’s County for $135,000. The contract called for Manor to convey to Zamoiski ¹²² a fee simple title “clear of all liens and encumbrances.” Zamoiski contends that the unpaid benefit charge ($10,130.76) of the Washington Suburban Sanitary Commission (WSSC) for sewer and water facilities is such an encumbrance. In the circumstances we must agree with Zamoiski.

Negotiations between Manor, a subsidiary of the Pennsylvania Railroad, and Zamoiski began some time prior to October 1964 and continued for more than a year. The first draft of the contract of sale was prepared by Manor. The next draft was prepared by Zamoiski’s attorney. Then Manor submitted another draft which was followed by still another Zamoiski draft.

There were also many minor revisions agreed upon before the execution of the final draft on 2 November 1965. The parties concede that the final contract was the result of “hard negotiations.” The portions of the long and elaborate contract which have become our special concern are as follows: “4. At the closing, Grantor shall * * * execute and deliver to Grantee a deed * * * which shall convey * * * a good and marketable title, with covenants of special warranty, clear of all liens and encumbrances, * * * » * * * “[6.] b. Closing of this transaction shall take place at Grantee’s Title Insurer’s office on a mutually agreeable date on or before December 31, 1965.

The Grantor shall pay for federal documentary stamps and the Grantee shall pay for state and county stamps and transfer taxes on the deed; real property taxes for the year of transfer shall be apportioned. Upon failure of Grantee to close within the time limit fixed above, Grantor may elect to rescind this contract and retain the sums paid on account of the purchase price and Grantee shall thereafter have no lien against or interest in the premises, it being understood and agreed that in such event Grantor shall not seek specific performance.” * * =t= “9. In the event * * * it should develop that Grant- ¹²³ or’s title to said premises for any reason is not good and marketable, clear of all liens and encumbrances, * * * and Grantee shall not be agreeable to accepting title of such lesser quality as the Grantor is willing to give, then the sum paid on account will be refunded to Grantee, who hereby agrees to accept same, whereupon this writing shall be cancelled and neither party hereto shall have any claim against the other by reason hereof. “10. All understandings and agreements heretofore had between the parties hereto are merged into this contract, which alone fully and completely expresses their agreement, and the same is entered into after full investigation, neither party relying on any statement or representation, not embodied in this contract, made by the other.” (Emphases added.) At or about the time set for the closing, 7 March 1966, Zamoiski, for the first time, it says, learned of the charge levied by the WSSC.

Upon Manor’s refusal to permit Zamoiski to deduct from the purchase price the unpaid balance due on the charge the closing was adjourned. On 16 June 1966 the parties executed an amendment to the contract of sale, the relevant parts of which we have set forth below: “Grantor and Grantee are unable to agree which of the parties hereto is obligated to pay and discharge current and future front foot benefit assessments [charge] of * * * [WSSC] for water, drainage and sanitary sewer facilities constructed in Ardwick Road and Adams Avenue. “2. For the purposes of such closing, the front foot benefit assessment of * * * [WSSC] for the current fiscal period will be apportioned between the parties as of the date of closing. “3. After the date of closing, the Grantee shall have the right to assert a single claim and/or suit in an amount which shall not exceed * * * $10,130.76, plus interest, to resolve the dispute between the parties over payment of current and future front foot benefit assess ¹²⁴ ments of * * * [WSSC] for presently constructed water and sewer facilities, which right shall not merge with but shall survive the delivery of the deed from Grantor to Grantee at closing. “4.

Any final adjudication by a court of competent jurisdiction from which adjudication the time for appeal shall have expired, shall be conclusive and binding on the parties hereto with respect to the liability of the Grantor and Grantee for the payment of said * *' * $10,130.76, plus' interest, which is the entire amount in controversy, notwithstanding the fact that only paid and/or then current assessments of * * * [WSSC] may be the subject matter of said suit and adjudication, since it is the intention of the parties to avoid a multiplicity of suits in this matter. “6. This agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns.” (Emphasis added.) The closing took place on 24 June 1966. On 19 July 1966, Zamoiski filed suit. The trial judge, Carter, J., on 13 October 1967, holding that “the removal of all charges for the existing utility benefits involved here is the obligation of * * * [Man- or],” entered a judgment in favor of Zamoiski against Manor for $10,163.76, with interest from 16 June 1966 (the date of the amendment).

Manor insists that its obligation to deliver a title “clear of all liens” applies only to existing liens and not to “future potential liens.” It argues that because the WSSC benefit charge, like county taxes, is collected annually, and, “for purposes of collection * * * [is] treated as County Taxes,” 1 it does not ¹²⁵ become a lien until the year in which it is collectible. In support of its argument Manor relies upon the statute. (Quoted in n.l.) Judge Carter, however, observed, in his opinion, that treating the charges as taxes to expedite their collection does not make them taxes, any more than a mule does not become a horse just because it “may be ridden like a horse.” Manor further declares that “if the future charges are encumbrances, it is only because they are first liens,” which seems to us to be another way of saying that unless an encumbrance is also a lien it cannot be an encumbrance. But there are many encumbrances, such as easements, that are not liens.

As Judge Carter put it “a lien is always an encumbrance, but an encumbrance need not necessarily be a lien.” For a discussion of the significance of the words “lien,” “lienor,” “encumbrance” and “encumbrancer”, in a context different from the case at bar, see Automobile Acceptance Corp. v. Universal C. I. T. Credit Corp., 216 Md. 344 , 139 A. 2d 683 (1958). We discussed, at some length, the nature of the benefit charges levied by WSSC in Morris v. Ehlers, 211 Md. 23 , 124 A. 2d 776 (1956), where the principal question presented is somewhat akin to the one now under consideration. There the buyer contended the benefit charges constituted liens against the property for the full 40 year period. While we chose not to resolve that issue, the language of Chief Judge Brune, who spoke for the Court, is interesting: “As one ground of defense the appellees rely upon the fact that the amount of the asserted assessment could not have been paid off by them in a lump sum at the time of their transfer of the property.

They also rely, perhaps more heavily, upon testimony that a custom exists in Montgomery County under which only annual current instalments of front foot benefit ¹²⁶ charges made by the Commission are adjusted to the date of transfer and under which no allowance is made for the unpaid portion of the original assessment. “Each of the assessments here involved is stated to be payable over a period of forty years. The purpose of this is to conform more or less with the period for which bonds issued to finance the improvements are to run. The earliest of the charges here involved ran for forty years from January 1, 1948, the second from January 1, 1949, and the third from January 1, 1951. “The testimony of an official of the Commission showed that the appellees could not have paid off the balance of these assessments at the time of the settlement. They could have done so within one year after the original determination or the date of actual imposition of each of the several amounts chargeable against this property (there being some doubt as to which), but on either basis the time had passed.

The privilege of prepayment of the unpaid balance is allowed as to certain other classifications of property after the first year, but there is no such provision with regard to 'Small Acreage’ property. A reclassification of this particular tract to one of these other classifications would make it possible to pay off the entire amount, but that seems immaterial for present purposes. Cf. District Title Co. v. United States, 169 F. 2d 308, 83 App. D. C. 335. “If the aggregate benefit charges made by the Commission against the appellees’ thirty-two acre tract constituted assessments, we are unable to see how the fact (if it be one) that, after the first year, they could ■not be paid off by way of anticipation of future instalments made them any the less assessments.

It is true that under the practice of the Commission shown by the testimony, the sellers could not have paid these assessments at the time of transfer. There was nothing, however, to prevent their complying with the other alternative, which was to make an allowance for them. ¹²⁷ “The facts that no assessment of the 26.546 acres purchased by the appellant was ever made in his name and that he himself never paid any front foot benefit charges based thereon seem to us wholly immaterial insofar as the existence of an assessment against the land is concerned. “Whether these charges constituted liens against the property for the full amount thereof from the dates when they became final under the statute, or whether they constituted liens only as and when annual charges were entered by the Commission’s agents on the books of the County Treasurer, is a question which we are not called upon to decide in this case.” Id. at 27-28. (Emphasis added.) In the case at bar, it should be noted, the “benefit charge may be extinguished or redeemed, at any time, upon payment” 2 of a determinable amount which, the parties here have agreed, was, at the time, $10,130.76. The decision in Morris v. Ehlers, supra, was based entirely on the language of the contract, the pertinent paragraph of which was as follows: “ ‘9.

Taxes, general and special, are to be adjusted according to the certificate of taxes issued by the Treasurer of the County, except that assessments for improvements completed prior to the date hereof, whether assessments therefore [ííc] has been levied or not, shall be paid by the Sellers or allowance made therefore [sic] at the time of transfer.’ ” Id. at 25 . (Emphasis added.) Chief Judge Brune’s comment in this regard is also interesting: “Our view with regard to the interpretation of the contract is reinforced by one other document which is included in the record. That is the proposed contract of March 15, 1954, which the appellant signed, ¹²⁸ but .which the appellees declined to accept. That proposed contract was on a printed form, from which we may infer that it is in rather general use.

One paragraph contains a sentence which is virtually identical with the first sentence of Paragraph 9 of the executed contract. The proposed form contains a succeeding sentence which reads as follows: ‘If the property is serviced by the Washington Suburban Sanitary Commission, annual benefit charges of said Commission are to be adjusted to the date of transfer and assumed thereafter by purchaser.’ There is no corresponding provision in the executed contract. The learned trial judge took its absence as an indication of fraud or of something very close to it. So far, however, as the record discloses, the appellees did not set up fraud as a defense, and they went through with the contract with full knowledge of the plaintiff’s contention and counsel for the respective parties