Schlee v. Bryant

Finan, J., delivered the opinion of the Court. This is an appeal by vendors from a decree granting specific performance of a real estate sales contract. This Court affirms the decree for specific performance. The contract, dated September 2, 1963, was drawn on a standard sales contract form, in prevalent use in Maryland, by seller’s broker, Hans W. Nestler.

It provided for a total purchase price of $42,000 of which $32,000 was to be secured by a deed of trust, and a deposit by Bryant, the purchaser, of a $2,000 check to be held by the “Nestler Realty Co.” In addition, the purchaser was given the option to make percolation tests within the first two weeks, and if the results were not satisfactory, purchaser could terminate the agreement and have his deposit returned. Paragraph 9 of the printed form reads: “Within 90 days from the date of acceptance hereof by the owner, or as soon thereafter as a report on the title can be secured if promptly ordered, the seller and purchaser are required and agree to make full settlement in accordance with the terms hereof. If the purchaser shall fail so to do, the deposit herein provided for may be forfeited at the option of the seller, in which event the purchaser shall be relieved from further liability hereunder, or without forfeiting the said deposit the seller may avail himself of any legal or equitable rights which he may have under this contract. In the event of the forfeiture of the deposit the seller shall allow the agent one-half thereof as a compensation for his services to him.” (Emphasis supplied.) However, the parties substituted “shall” for the underscored “may” and deleted the other emphasized words, so that the effect was to impose a forfeiture of the deposit on the purchaser in the event of a default, while the vendor waived all further legal and equitable remedies.

The contract was signed by Bryant as “Purchaser,” Schlee as “Seller” and Mrs. Schlee as “Wife of Seller.” ⁶⁹² The $2,000 check was turned over to Nestler, who rather than depositing it, held the check itself until the settlement date. From the record, it appears that Bryant had sufficient funds in his checking account to cover the draft representing the deposit on September 2, when he executed the agreement, and on December 4, the actual date of settlement. However on December 2, which the appellants claim was the last day for settlement under the contract, the bank statement indicated an overdraft of $339.28. When satisfactory percolation tests were completed within the two-week option period, Bryant orally informed Nestler, whom he believed to be agent of the Schlees, that he was willing to proceed to settlement and that Nestler should order a title search and arrange for settlement.

Nestler apparently failed to inform the Schlees that Bryant had so agreed, or that settlement had been set for December 4. On Sunday, December 1, Mr. Schlee received a call from Nestler informing him of the settlement on the following Wednesday. However, Schlee expressed his reluctance to talk business as appears from the record: Then he [Nestler] said: “Well, how about going to settlement on Wednesday, December 4th, in the afternoon ?” I said: “No, absolutely. I have something else that day.” “Well, how about 11:00 o’clock in the morning ?” I said, “I’ll see.” I did not agree to go to settlement on December 4th, I did not infer it, I did not hint it.

And I shut him off at that point. Q. Why, Mr. Schlee? You say you shut him off at that point. A. Because we had gotten into a matter of business on Sunday, and it was getting to be a horse trading deal.

Although the 90-day period would have expired December 2, the evidence shows that the surveyor was unable to complete his survey until that date, and that it was not received by Nestler until that day or the next day, Tuesday, December 3. On ⁶⁹³ Wednesday, Mr. and Mrs. Bryant and Nestler appeared at the place of settlement, the requisite note and deed of trust were executed, and the purchaser tendered a certified check for the cash balance due as per the settlement sheet. The Schlees did not attend the settlement. Appellee and Nestler then sent registered letters demanding that Mr. and Mrs. Schlee perform the contract, but the appellants, through their attorney, purported to declare a forfeiture of the deposit, and demanded the deposit from the broker, Nestler.

This case presents the following questions which the Court will answer seriatim: (1) Was the contract which the appellee seeks to have specifically enforced in essence an option agreement, which after being exercised by the appellee ripened into an executory contract for the purchase of land ? (2) Was the verbal acceptance of the option, communicated by the appellee to the real estate broker, binding on the appellants ? (3) Assuming the answer to questions (1) and (2) to be in the affirmative, was the appellee’s tender of performance made within a reasonable time ? (4) Was the $2,000 check, which was presented by the appellee to the broker at the time of the execution of the contract, valid consideration, there having been adequate funds in the appellee’s checking account both at the time of execution and the date of settlement, but for which funds were not in appellee’s account on the date that appellants contend should have been the date of settlement?

(5) Was appellant Hazel S. Schlee, wife of appellant Herbert J. Schlee, bound as one of the sellers, she having signed the agreement as “Wife of Seller” rather than as “Seller,” title to the property being held by the Schlees as tenants by the entireties ? We believe that as in Messina v. Moeller, 214 Md. 110 , 133 A. 2d 75 (1957), the present instrument constituted in essence an option to purchase. i In Messina this Court was called upon to construe a similar instrument. It provided for a cash down payment and terms of ⁶⁹⁴ financing, and also for settlement within 35 days, or as soon thereafter as a report on the title could be obtained. It was further agreed that settlement need not be made until the lots were approved for septic tank installation by the County Board of Health.

If approval was not forthcoming, the deposit was to be returned to the purchaser and the contract was to be of no effect. The contract also contained substantially the same printed default clause as appears in the contract in the instant case, and similar words were deleted by the parties, so that in both contracts, if the buyer failed to settle in time, he forfeited his deposit but the vendor retained no further rights against him. Speaking for the Court, Judge Hammond (now Chief Judge) stated: “Clearly, such a contract is an option given for a valuable consideration and is binding and effective according to its terms.” Id. at 113 , 133 A. 2d at 76 . We believe that, as in Messina , the present instrument constituted an option to purchase.

The Maryland law is clear that after an option has been exercised by the optionee’s proper manifestation of acceptance, it no longer exists, but is replaced by an executory bilateral contract. Simpers v. Clark, 239 Md. 395, 401 , 211 A. 2d 753, 756 (1965); Trotter v. Lewis, 185 Md. 528, 534 , 45 A. 2d 329 (1946). ii The next question to be answered is whether the appellee properly exercised the option so as to create a specifically enforceable executory contract. Appellants argue that the mere manifestation of assent was not enough, that the agreement required a cash payment at settlement and the execution of a deed of trust for the balance, all within ninety days, and anything less could not constitute acceptance. The appellee’s theory, with which the lower court concurred, is that the mere communication from Bryant to Nestler, representing the sellers, had the effect of exercising the option.

In Foard v. Snider, 205 Md. 435, 446 , 109 A. 2d 101 (1954), Judge Hammond for the Court discussed this very point. “Each such agreement must be scrutinized to see what it requires to be done within the specified time, either ⁶⁹⁵ expressly or by necessary implication. Does it require completed performance, that is, actual payment, or does it require tender of the agreed price? Generally, there is contemplated only a notice of acceptance of, and a readiness and willingness to perform, the irrevocable offer which is an option. Whatever the option requires must be done. * * *.

When an optionee duly signifies his purpose to accept an option for the purchase of real estate, and tenders the amount of the purchase price if required, he is entitled to specific performance of the contract. * * *. If there is required only notice of acceptance of the irrevocable