Schmidt v. Millhauser

Collins, J., delivered the opinion of the Court. This is an appeal from a judgment rendered on the second count of a declaration filed by the plaintiffs, appellees, against the defendants, appellants. The plaintiffs, David Millhauser, Herbert Millhauser and David L. Perlman, pursuant to a Stock Sale and Purchase Agreement, (Purchase Agreement), dated May 19, 1954, purchased all of the stock of the Oaklyn Apartment Corporation, (the corporation), from Henry J. Schmidt, Rita E. Schmidt, Lillian S. McCurdy and Robert McCurdy, defendants. The principal asset of the corporation was a large apartment house building located at 903 Druid Lake Drive in Baltimore.

Subsequently that corporation was dissolved, ⁵⁸⁸ and its assets assigned to Lake Drive Apartments Corporation, plaintiff, of which the individual plaintiffs are the sole stockholders. The first count of the declaration was based on the indemnity and guaranty agreement which was executed subsequent to the Purchase Agreement and which primarily guaranteed the payment of all debts owed by the corporation. The second count of the declaration alleges that the defendants, their agents and employees represented unto the plaintiffs that the apartment house building was in good condition “and that a new roof had been recently installed on said building”, which representations were also specially set forth in the advertisement of said building for sale by the agents of the defendants, Service Realty Co., Inc., (Service Realty). Upon the consummation of the aforesaid agreement and the purchase of the stock it was found that the roof of the apartment house building was in such a state of disrepair as to require that it be completely replaced.

The said roof had not been recently installed as represented by the defendants and, in fact, said roof was between 25 and 30 years old. As a consequence thereof it was necessary that the roof be replaced by the plaintiffs at an estimated cost of $2,460.00. Although the defendants were well aware of the condition of said roof at the time of the sale of the stock to the plaintiffs, and were well aware that said roof was between 25 and 30 years old, they nevertheless represented to the plaintiffs that the apartment house building and its roof were in good condition and permitted their agent, Service Realty, to wrongfully advertise that the property was in good condition and a new roof had been recently installed. The plaintiffs relied upon this representation and advertisement in purchasing the stock of the corporation from the defendants.

The case was submitted to a jury which brought in a verdict in favor of the plaintiffs on the first count for the sum of $5,000.00 and on the second count for the sum of $2,845.00. The defendants have abandoned the appeal on the first count and the appeal here is on the judgment awarded on the second count. They contend that the trial court committed error in refusing their motion for a directed verdict at the end ⁵⁸⁹ of the plaintiffs’ case. However, the appellants withdrew their motion when they offered evidence after the denial of that motion.

Rules of Practice and Procedure, Part Three, III, Trials, Rule 4, in effect when this case was tried, provides that in any proceeding tried by a jury, any party may move, at the close of the evidence offered by an opponent, or at the dose of all evidence, for a directed verdict in his favor on any or all of the issues. A party who moves for a directed verdict at the close of the evidence offered by an opponent may offer evidence in the event that the motion is not granted without having reserved the right to do so, and to the same extent as if the motion had not been made, but in so doing he withdraws the motion. Smith v. Carr, 189 Md. 338 , 56 A. 2d 151 ; Weil v. Free State Oil Co. of Maryland, 200 Md. 62, 66 , 87 A. 2d 826 . However, the motion was renewed at the end of the whole case.

We will therefore consider all the evidence offered. Service Realty, a real estate agency employed by the appellants, distributed to various real estate offices, including that of Russell T. Baker & Company, with whom one of the plaintiffs, David I. Perlman, was associated, a brochure, offered in evidence, advertising the Lake Drive apartments for sale. That brochure contained the statement “a new roof was also installed recently, as well as all new carpets in the halls. This property is in good condition.” Mr. Perlman then got in touch with Service Realty and was approached by Mr. David M. Klein of that company.

Mr. Perlman testified that Mr. Klein said at the outset that there was only one way the property could be sold, and he referred him to the brochure which stated that the assets of the corporation were being sold, and that was the only way the sale could be handled. Mr. Perlman knew that the Millhausers were interested in making an investment and he approached them with the brochure. During the course of the negotiations each of the appellees visited the apartment house at least once. On one occasion, a Sunday in March, 1954, when all of the plaintiffs were present, Mr. Klein, the President of Service Realty, mentioned the oil burner, the furnace and the roof and said that everything had been done ⁵⁹⁰ to put the building in condition and they would have nothing to worry about.

There would be no need to spend money on the building. All of the plaintiffs relied on the brochure and also on Mr. Klein’s representation with regard to the condition of the roof. On one occasion Mr. Perlman climbed up. a stairway and took a look at the roof. He did not examine it minutely.

It was a slag roof covered with finely crushed stone and it looked all right to him. He was not a roofing man and there was nothing to make him suspicious that it was not a good roof. They relied on Mr. Klein’s representation in the brochure and orally with regard to the condition of the roof. Mr. Robert Wilkins, who had been engaged in the roofing business for 22 years and who was engaged to examine the roof and replace it after the plaintiffs took possession of the building, and after they had discovered that the roof leaked, testified that the felt on the roof was so old it had worn down to the concrete.

There were originally five layers of felt on the roof. The weather and sun had burned it badly. It could not be patched. Anyone who knew about roofing would know as soon as he looked at it that it was bad.

People who were not experts would not observe that. He estimated that the roof, before he replaced it, was from 20 to 30 years old. Mr. David M. Klein testified that the brochure hereinbefore referred to was prepared under his direction. When asked whether he remembered putting in the part quoted above, he stated that the girl in the office must have taken it down as it was given to him by the people who sold the property to Mr. Schmidt in 1947.

When Mr. Schmidt bought the property, seven or eight years before the sale in the instant case, he went up on the roof and a Mr. Ettings, a representative of the Property Management Corporation, told him that a new roof had recently been put on. He did not tell the plaintiffs that there would be no cost except operating expenses, and no cost because of a new roof, and he never told them that a new roof had been put on. There was no way for him to tell whether there was anything wrong with the roof. Nothing was represented to the plaintiffs except in ⁵⁹¹ the brochure which was sent out.

It was possibly a month and a half or two months after the plaintiffs originally inspected the building before a contract was signed. He thought that a reprint was made of the brochure which was made in 1947 when Mr. Schmidt bought the property. Mr. Ettings, when the property was sold to Mr. Schmidt in 1947, told him, Mr. Klein, that a new roof had been put on the property. When Mr. Ettings told him that a new roof had been put on in 1947 he did not know whether that statement was true or not.

Mr. Herbert B. Millhauser, one of the plaintiffs, testified that he bought one-third of the stock in the corporation. He was with his brother and Mr. Perlman on the Sunday morning that Mr. Perlman had mentioned, and Mr. Klein told them about the condition of the apartment house. He said it was in perfect condition and they had just put in a new oil burning system