Rinaudo v. Bloom

Bruñe, C. J., delivered the opinion of the Court. This is an appeal from a judgment for $25,000 and costs rendered in the Circuit Court for Worcester County in favor of Arthur Bloom and his wife Julia May Bloom, appellees, and against Frank J. Rinaudo and his wife Lillian C. Rinaudo, appellants. The suit was brought, following the exercise by the appellees of a right to cancel a contract for the sale of a motor court or “motel”, to recover “all deposit monies” alleged to have been theretofore paid by them as purchasers to the appellants, as sellers, under the contract of sale. The appellants were the owners of certain real estate in Worcester County, located on the south side of U. S. Route 50, approximately one mile west of Ocean City, Maryland, known as “Green Gables Motor Court,” which was improved by twenty-one motel units, a coffee shop and a few other buildings.

In the spring of 1953, the appellees entered into negotiations with an agent of the appellants, Glenn Steele, a real estate salesman employed by David M. Nichols & Co., regarding the purchase of the appellants’ property. On Friday, March 13, 1953, at their home in Baltimore County, the appellees signed a form of contract for the sale of “Green Gables,” which had been prepared by Steele. This form of contract stated the price as $85,000, recited that $10,000 had been “paid prior to the signing hereof,” and provided for the payment of the balance as follows: $10,000 at the time of settlement (which was to be within 30 days from the date of the agreement) and the remainder in semi-annual payments of $5,000 each over a period of 6years, with interest at not more than 6%. At this time, the appellees delivered to Steele a treasurer’s check issued by a trust company in Baltimore for $10,000, representing the deposit stated in the contract, payable to the order of David M. Nichols & Co. The appellants were not present on this occasion, and the contract had not been signed ⁴ by them.

On Sunday, March 15th, the Blooms visited Mr., and Mrs. Rinaudo at “Green Gables,” but the contract was not signed by the appellants at that time. On Monday, March 16, 1953, the next day, the parties met again in the kitchen of the Rinaudo living quarters at the “Green Gables Motor Court.” When the Blooms arrived, sometime between 1:00 and 2:30 P.M., Mr. Steele and Mr. and Mrs. Rinaudo already were present. The appellees, Mr. and Mrs. Bloom, were permitted to testify, over objection, that, before Mr. and Mrs. Rinaudo would sign the contract, and while all the parties were gathered around the kitchen table, the sum of $15,000 in cash was paid by Mr. Bloom to Mr. Rinaudo, who then counted the money and handed it to Mrs. Rinaudo. Mrs. Rinaudo then, according to the testimony of Mr. and Mrs. Bloom, admitted over appellants’ objections, said to Mr. Steele, “Let’s make it legal,” or “Pass it under the table to make it look legal,” and Mrs. Rinaudo then passed the money under the table to Mr. Steele, who passed it back to her.

Mrs. Rinaudo then, according to this testimony, gave the money back to her husband, who got up from the table, walked toward the safe, and put the money in the safe. No receipt for the money was given to the Blooms. The testimony of Mr. and Mrs. Bloom regarding the payment of the $15,000 was denied by Mr. and Mrs. Rinaudo and by Mr. Steele. The contract or form of contract which had been signed by the Blooms on March 13th was signed without change (except probably the insertion of the 16th as the date) by the Rinaudos at the meeting on March 16th.

According to the appellees it was signed immediately after the $15,000 cash payment had been made and the money had been put in the sellers’ safe. After the contract had been signed, the Blooms and Mr. Steele visited a lawyer in Snow Hill to ask him to represent the Blooms in the settlement. On that day, after conference with the Blooms and a telephone conversation with Mr. Rinaudo, he addressed a letter to the ⁵ Blooms and to the Rinaudos setting forth an agreement which undertook to extend slightly the time for payment of the balance of the purchase price. There is no controversy over this agreement.

The contract contained a provision that all deposit money was to be held by David M. Nichols & Co. until the time of settlement and a further provision that “In the event that all present existing licenses are not obtainable by the Buyers, then this Contract shall become null and void and all deposit monies returned to the Buyers.” In April, 1953, the buyers found that they would not be able to secure the transfer of the beer license held by the Rinaudos. Thereupon, through their Baltimore attorney, Mr. Sidney B. Needle, they notified the appellants that they declared the contract null and void and demanded the return of all monies paid in the transaction in the total amount of $25,000. The appellants denied that $15,000 in cash had been paid and admitted only the payment of the $10,000 still held by David M. Nichols & Co. The testimony of Sidney B. Needle was admitted, over objection, that the appellants’ real estate agent, Steele, admitted the payment of the $15,000 in cash by the Blooms to the Rinaudos at a conference in Mr. Needle’s office. This testimony was contradicted by Mr. Steele and by another representative of David M. Nichols & Co., who had been present at the conference.

Also over objection, the testimony of Mrs. Eleanor Stagg, a Worcester County real estate broker, was admitted to the effect that at sometime during the spring of 1954, she heard a discussion between the Blooms and the Rinaudos in regard to the $15,000 allegedly paid to the Rinaudos and heard Mr. Rinaudo tell the Blooms that they could not give them all of the money back. This testimony was contradicted by Mr. Rinaudo. The first and principal question presented is whether or not parol evidence should have been admitted to show that the appellees paid $15,000 to the Rinaudos before the execution of the written contract which stated the sale price as $85,000, not $100,000. It is quite evident ⁶ .that the jury believed the testimony offered on behalf of the appellees.

The question is, of course, not one of the credibility of this evidence, but whether its introduction was permissible in the face of the parol evidence rule. As has often been pointed out, the very term “parol evidence rule” is really a misnomer because it is not a rule of evidence at all but is a rule of substantive law. Restatement of Contracts, Sec. 237; Williston on Contracts, Rev. Ed., Vol. 3, Sec. 631; Corbin on Contracts, Sec. 573; Wigmore on Evidence, 3d Ed., Sec. 2400. As Professor Wigmore states: “It does not exclude certain data because they are for one reason or another untrustworthy or undesirable means of evidencing some fact to be proved. * * * What the rule does is to declare that certain kinds of fact are legally ineffective in the substantive law; and this of course (like any other ruling of substantive law) results in forbidding the fact to be proved at all.” Therefore, if the parol evidence rule is applicable, no evidence of any kind can be introduced to change the writing.

At this point a rather close examination of the pleadings and of some of the crucial testimony seems advisable, even at the cost of repetition. The declaration is in three counts. The first and second are, respectively, the common counts for money lent and for money had and received. In response to a demand for the particulars of these counts the plaintiffs stated “the particulars * * * are the same as the claim set forth in the third count of the plaintiff’s declaration.” The third count sets up a contract by which the plaintiffs agreed to purchase and the defendants agreed to sell Green Gables Motor Court “at and for the sum of one hundred thousand dollars ($100,000).” It then alleges (among other things) that in accordance with the demands of the defendants the plaintiffs “paid as down payment on said property, an aggregate sum of twenty-five thousand dollars ($25,000.00),” of which $15,000 was paid in cash and $10,000 by check, that an agreement of sale was subsequently executed by the parties on ⁷ March 16th, 1953, and that “for reasons unknown to the plaintiffs, * * * the defendants elected by said agreement to give credit to the plaintiffs for the fifteen thous- and dollars ($15,000) down payment in cash * * * by setting forth the purchase price as eighty-five thousand dollars ($85,000.00).” The declaration also sets forth the clause of the contract with regard to the refund of “all deposit monies” if all existing licenses are not obtainable by the buyers, and alleges that such licenses were not so obtainable, that the contract thereby became null and void, and that the plaintiffs demanded the refund of $25,000, which was refused by the defendants.

A photostatic copy of the contract dated March 16th, 1953, was filed with and made a part of the declaration. A careful examination of the transcript shows that no evidence was admitted at the trial which stated in direct terms that the true consideration for the motor court was $100,000, instead of $85,000. The trial court excluded evidence as to conversations on March 15th and sustained a number of objections to questions relating to conversations leading up to the alleged payment of $15,000 and the signing of the contract by the defendants immediately thereafter. The first point at which testimony was admitted to show a payment in excess of $10,000 was in response to' this question put to Mr. Bloom: “What payment have you made on the principal pursuant to this contract dated March J.6, 1953?” His answer was “25,000.00.” The defendants’ objection and motion to strike this testimony were overruled.

Thereafter, over further and repeated objections and motions to strike, testimony by or on behalf of the appellees was admitted to show the payment of $25,000 at or before the signing of the contract by the sellers. A practical effect of the admission of this testimony was, we think, to show that the contract price was $100,000, since it seems not to have been challenged that the sum of $75,000 remained unpaid after the delivery of the $10,000 check and the execution of the contract, and the conference with counsel in Snow Hill and his letter based thereon confirm ⁸ this balance. The. appellees have not and do not contend that their. $15,000 cash payment should be credited against an $85,000 purchase price; they have consistently adhered to the position that it was a' part payment against a $100,000 purchase price. The admission .of the testimony relating to the $15,000 cash payment thus presents, in our view, a question of- the applicability of the parol evidence rule to the stated total consideration as well as to the amount acknowledged to have been received at or prior to the signing of the contract. ■ -That rule has been repeatedly recognized and applied in this State, and it is also well settled that where the Statute of Frauds requires a contract to be in writing, the whole contract must be in writing.

No extensive citation of authorities in support of these rules would seem useful. See, among many cases which might be cited: Bladen v. Wells, 30 Md. 577 ; Boyce v. Wilson, 32 Md. 122 ; Merritt v. Peninsular Construction Co., 91 Md. 453 , 46 A. 1013 ; Freeman v. Stanbern Construction Co., 205 Md. 71 , 106 A. 2d 50 ; Lazear v. National Union Bank, 52 Md. 78 ; Markoff v. Kreiner, 180 Md. 150 , 23 A. 2d 19 ; Coster v. Arrow Bldg. & Loan Ass’n, 184 Md. 342 , 41 A. 2d 83 ; Trotter v. Lewis, 185 Md. 528 , 45 A. 2d 329 ; Kiser v. Eberly, 200 Md. 242 , 88 A. 2d 570 . The appellants rely very heavily upon the above rulés. Among the difficulties pertaining to the parol evidence rule are the rather numerous exceptions to it or situations in which it is held inapplicable.

Without attempting an elaborate analysis or citation of cases we may mention some types of cases to which the parol evidence rule is not applied. For example, the consideration stated in a deed may usually be contradicted and the true consideration may be shown by parol. Koogle v. Cline, 110 Md. 587 , 73 A. 672 . The same rule was held applicable to the assignment of policies of life insurance in a case in which the law of Maryland was considered controlling.

Union Central Life Ins. Co. v. Deutser, 13 F. Supp. 313 (D. C., Md.), affirmed sub. nom. Deutser v. Marlboro Shirt Co., 81 F. 2d 139 (C. C. A., 4th). Parol evidence ⁹ is admissible to show that what appears on its face to be a full and complete contract was not intended to be a contract at all.

Southern Street Rwy Adv. Co. v. Metropole Shoe Co., 91 Md. 61 , 46 A. 513 ; Birely & Sons v. Dodson, 107 Md. 229 , 68 A. 488 . Parol evidence may be introduced where the written instrument is attacked for fraud. Hirons v. Hubbell, 149 Md. 593 , 132 A. 645 .

It may also be adduced in some instances, as where misrepresentations are alleged, to stay the hand of equity in the specific enforcement of contracts. WiUiston, Contracts, Rev. Ed. Vol. 3, Sec. 631. It does not prevent proof of a collateral agreement. It is also usually held that a mere receipt or recital of a fact is subject to explanation or contraction by parol, but it is also said that a recital which is contractual in nature is not open to parol attack.

See 20 Am. Jur., Evidence, Secs. 1112, 1115. The parol evidence rule thus can hardly be considered as an all-inclusive and automatic or self-operating rule of law. Its practical application presents many problems.

In the instant case the first question with regard to the applicability of the rule is this: Were all agreements and understandings of the parties as to consideration and the amount paid at or before the signing of the agreement integrated by the written agreement? We are met at once by the integration clause of the agreement which states in part that “This Contract contains the final and entire Agreement between the parties.” As Professor Corbin points out in an article on the Parol Evidence Rule, in 53 Yale Law Journal 603, at page 621, even such a clause itself may embody a recital of fact which may be untrue. Doubtless, however, such a clause strengthens, and it may go beyond, the presumption of integration upon which the parol evidence rule proceeds; but it is not invariably conclusive and its coverage is a matter of interpretation. In Markoff v. Kreiner, supra, and Kikas v. Baltimore County, 200 Md. 360 , 89 A. 625 , a three-fold test of what constitutes a “collateral” agreement is stated. ' Under ¹⁰ this test it is necessary (1) that the agreement be independent, separate and distinct from the original agreement, (2) that it be consistent with the provisions of that contract and (3) that it be such an agreement as the parties could not reasonably be expected to embody in the main contract and would naturally make a separate agreement.

The first and third of these requirements tend to shade into each other. It is evident that the parol agreement alleged in the instant case might run afoul of the tests in the Markoff and Kikas cases. The trial court did not pursue the course recommended by Professor McCormick in his work on Evidence (p. 441) of hearing testimony out of the presence of the jury on the alleged oral agreement, including the evidence of substantiating circumstances, comparing the oral agreement with the written agreement and then, depending upon whether or not he finds that the agreement was such as might normally be made by parties situated as were the parties to the contract, either admitting the testimony or excluding it from consideration by the jury. For similar views see also Wigmore on Evidence, 3rd Ed., Sec. 2430, Corbin, Parol Evidence Rule, 53 Yale Law Journal 603, at 628-633.

See also Restatement, Contracts, Sec. 240. We think that the solution above suggested affords a practical means of applying the tests of the Markoff and