Sergeant Co. v. Pickett

Orth, J., delivered the opinion of the Court. This appeal stems from an action for breach of contract brought in the Circuit Court for Charles County by Ronald W. Pickett against The Sergeant Company and Fidelity ¹⁸⁸ Federal Savings & Loan Association, formerly Waitlorf Federal Savings & Loan Association (Sergeant). sjPhe background of the case was set out in Sergeant Co. v. Pickett, 283 Md. 284 , 388 A. 2d 543 (1978). In his declaration, Pickett, a builder of residential dwellings, alleged that on payment of a valid - consideration, Sergeant, acting on its own behalf and as agent for Fidelity, had procured for him a commitment for a permanent mortgage loan which he had accepted. Pickett further alleged that despite this binding obligation, Fidelity and Sergeant had breached the agreement by utilizing the funds earmarked for the Pickett account to make a loan to another borrower.

As a consequence, Pickett allegedly incurred various items of damage, consisting primarily of profits lost from expected house sales. Sergeant responded with a counterclaim, seeking payment for the unpaid portion of the monies which it claimed to be owed for obtaining the loan commitment. The counterclaim alleged that Sergeant had fully performed its bargain by obtaining the commitment, thus entitling it to fees and commissions upon Pickett’s acceptance of the loan. Ultimately a jury awarded Pickett a judgment of $53,450 against appellees and also found in his favor on the counterclaim.

At the conclusion of the trial, appellants submitted an assortment of jury prayers to the court, among them their requested instruction No. 10: “Where one party to a contract commits a breach of contract, the other party is required by the ‘avoidable consequences’ rule of damages to make all reasonable efforts to minimize the loss he sustains as a result of the breach, and he can charge the party in default with such damages only as, with reasonable endeavors and expense and ¹⁸⁹ without risk of additional substantial loss or injury, he could not prevent. M & R Contractors & Builders, Inc. v. Michael, 1958 138 A. 2d 350 , 215 Md. 340 .” This was not read by the trial court during the course of its ensuing charge to the jury, nor was the principle of law adverted to in the prayer otherwise included in its instructions. Without reaching the contention that the trial court had erred in failing to grant the disputed prayer, the Court of Special Appeals held that the point had not been properly preserved for appellate review under sections d and e of Rule 554, “because appellants [had] not distinctly statefd] the grounds of their objection, designating the particular portion of the instructions given, or omitted, or objected to before the jury retired.” [Id at 285-287.] The Court of Special Appeals affirmed the judgment of the trial court. Sergeant Co. v. Pickett, No. 452, September Term, 1977, decided 27 December 1977, unreported.

We granted Sergeant’s petition for the issuance of a writ of certiorari. We did not agree with the intermediate appellate court and reversed its judgment. We believed, for the reasons stated in the opinion, that there had been “[a]t a minimum ... substantial compliance with Rule 554 d and e,” which “was therefore sufficient to preserve the issue for appellate review.” Sergeant Co. v. Pickett, 283 Md. at 290 . We concluded our opinion by stating: Because our grant of certiorari in this case was limited to the question whether failure to give the requested instruction was properly preserved for appellate review, and since the substantive issue arising from the trial court’s refusal was fully presented to the Court of Special Appeals, we shall remand the case to that court for appropriate resolution.

Id. ¹⁹⁰ On remand, in an unreported opinion filed 8 November 1978, the Court of Special Appeals once more affirmed the judgment of the trial court. It still declined to resolve the substantive issue, observing that “[although our inclination not to address the merits of the complaint has not changed, our reason therefor has.” It thought that an “ ‘appropriate resolution’ of the revitalized issue” was properly to be attained under Maryland Rule 1031 c 5 which requires that the brief of the appellant contain “[ajrgument in support of the position of the appellant.” It believed that Sergeant’s brief did not contain the argument called for by the Rule and, accordingly, it held that the issue had been waived. Sergeant sought review of this judgment by way of certiorari, and we granted its petition. We again reverse.

The Court of Special Appeals set the case down for reargument on remand. When counsel for the parties were informed by the clerk of the court of the date the appeal was to be reheard, they were told: Counsel will be permitted to use briefs hereinbefore filed in the original cause for this presentation. The issue in this matter will be relegated to questions 2 and 3 in the appellants’ brief. Pickett’s counsel sought clarification from the court; he did not believe that the matter was “presently in a proper posture in the Court of Special Appeals”: As the Court of Appeals pointed out in its Opinion, the only question raised on certiorari was the adequacy of an exception to the trial judge’s refusal to grant a requested instruction concerning mitigation of damages.

Then, as I read the concluding paragraph of the Court of Appeals’ Opinion, the matter has been sent back to the Court of Special Appeals to decide, even though the instruction was not given, whether the failure to give the instruction caused any damage to the appellant which would justify a remand to the trial court. ¹⁹¹ He expressed his fears: This case has gone on for quite some time now and I’m concerned that if the Court of Special Appeals doesn’t do exactly what the Court of Appeals says it should do, we’re going to wind up back in the Court of Appeals. The Court of Special Appeals confessed that the problem as to what the Court of Appeals expected it to decide on remand had been caused by the Court of Special Appeals “having advised the Clerk’s Office to limit reargument to ‘questions 2 and 3 as they appear in the brief of appellant.’ ” It informed all counsel that “[t]he correct instruction should have been to limit argument to question 3 as it appears in the brief of the appellants.... The other issues have all been decided by our adoption of the trial court’s opinion.” The second question presented by Sergeant in its brief was: “Is there legally sufficient evidence to sustain the award of damages?” The third question was: “Did the court err in its instructions to the jury with respect to the law of damages?” Sergeant dealt with these two questions together. It argued that the evidence did not “measure up to the doctrine of reasonable forseeability” as set out in our decisions.

It then asserted: A primary reason for the unforseeable character of Pickett’s alleged damages is that the losses could easily have been avoided. As noted above, the nonavailability of the special forward money did not prevent Pickett from proceeding with his plans. Instead, Pickett chose to make his profit through legal action against Sergeant Company and Fidelity Federal. The failure to mitigate damages bars recovery by Pickett.

Sergeant then quoted what we said in M & R Builders v. Michael, 215 Md. 340 , 138 A. 2d 350 (1958), was the ordinary rule with respect to minimization of damages, namely that “damages are not recoverable if the consequences (of a breach are avoidable. In other words, a ¹⁹² plaintiff] is not entitled to a judgment for damages for a loss that he could have avoided by a reasonable effort without risk of additional loss or injury. 215 Md. 340, 354-355 .” 1 Sergeant noted: “This doctrine applies with full force to the instant case. See Furstenburg v. Fawsett, 61 Md. 184 (1884).” Sergeant summed up its argument on both questions 2 and 3 thus: For all of the reasons stated above, there is legally insufficient evidence to support this jury award of damages and the Court erred in its failure to instruct the jury that it could not award any damages for lost profits. Additionally, the Court erred in its failure to instruct the jury that Pickett had a duty to mitigate damages.

These instructions were requested, refused, and exception was taken. The Court of Special Appeals deemed that the last two sentences comprised the “entire reference to the instructional error argument.” It dismissed the prior discussion regarding mitigation of damages as “directed at bolstering [Sergeant’s] contention that the case should never have been submitted to a jury,” and as not helping the court “to decide whether the trial judge was justified in denying [Sergeant’s] requested instruction on mitigation when it was submitted.” We do not agree with that narrow view. In the circumstances, we see no such violation of Rule 1031 c 5 as would justify a conclusion that the substantive issue had been waived and should not be considered. Our assertion, whether right or wrong, that the issue had been fully presented to the Court of Special Appeals, stood as the law of the case and called for resolution of the issue on the merits.

The setting of the case for reargument, the specific authorization by the Court of Special Appeals to use the briefs previously filed in the court in the original case, the-concern of Pickett’s counsel regarding the posture of the case on remand and the clarification by the ¹⁹³ court sent to all counsel, not only gave no indication that the court thought there was a violation of Rule 1031 c 5, but, on the contrary, led to the reasonable assumption, shared, as was made apparent in oral argument before us, by counsel for all parties, that the issue would be resolved on the merits. There was, of course, no opportunity for the parties to brief and argue the point on which the appeal was decided. The Court of Special Appeals was wrong in the first instance in failing to address the issue on the ground that it had not been preserved below. Because it did not proceed according to the tenor and directions of our mandate, it was also wrong on remand in failing to address the issue on the merits.

Maryland Rule 876 d. In the usual course of events, we would remand the case a second time to the Court of Special Appeals and again direct that it determine the substantive issue as it should have done when the appeal was before it in the first instance. But, considering the circumstances and the tortuous history of what began as a simple appeal, fundamental fairness to the litigants and the interest of judicial administration and economy dictate that the matter be resolved without further ado. The issue for decision is whether the trial court erred in refusing to grant the prayer concerning mitigation of damages.

We shall decide it now. The court may instruct the jury upon the law, either by granting requested instructions or by giving instructions of its own on particular issues or on the action as a whole, or by several or all of these methods, but need not grant any requested instruction if the matter is fairly covered by instructions actually given. Maryland Rule 554 a and b. The court told the jury with respect to damages: If you find for the plaintiff, it would be necessary that you determine what damages he would be entitled to recover for a breach of the contract, and the Court tells you that the damages which a party to a contract is entitled to, because of a breach, are those which were reasonably forseeable and within the contemplation of the parties at the time they made the contract. ¹⁹⁴ Damages is limited to such damages as arise out of the contract on which the action is founded, and a recovery cannot be for damages for losses resulting out of collateral contracts or transactions affected by the breach of the contract or transaction affected by the contract, although they may have been entered into on the date of the original contract.

Those that are recoverable must be actual damages which the party has convinced you that he suffered. They cannot be speculative, remote or uncertain. The requested prayer was not fairly covered by instructions actually given. We said in Schaefer v. Publix Parking, 226 Md. 150 , 172 A. 2d 508 (1961): There can be little doubt that all parties to a law suit are entitled to have the jury properly instructed upon their theories of the case....

But this statement presupposes that evidence has been adduced to support the theory of any particular party. The trial courts, in presenting their instructions to the juries, are not required to give the juries merely abstract statements of the law that have no relation to the facts of the case being tried. [Id. at 152-153.] That is: “A litigant is entitled to have his theory of the case presented to the jury, but only if that theory of the case is a correct exposition of the law and there is testimony in the case which supports it.” Levine v. Rendler, 272 Md. 1, 13 , 320 A. 2d 258 (1974); Fowler v. Benton, 245 Md. 540, 548-549 , 226 A. 2d 556 , cert. denied, 389 U. S. 851 (1967); Dorough v. Lockman, 224 Md. 168, 171 , 167 A. 2d 129 (1961). Thus, the general rule regarding instructions to the jury has two aspects: (1) the instruction must correctly state the law, and (2) that law must be applicable in light of the evidence before the jury. In the case before us, the first aspect was satisfied.

It is not disputed that the mitigation instruction requested by ¹⁹⁵ Sergeant was a correct exposition of the law. In its 18 November 1978 opinion, the Court of Special Appeals observed: “In the abstract, [Sergeant’s] statement of the law that the non-breaching party has a duty to mitigate, cannot be fairly faulted.” We must determine, therefore, whether the second aspect was satisfied. 2 Here, the written prayer was filed by Sergeant at the close of the evidence, Rule 554 a, and the determination must be made on the basis of what evidence was before the jury at that time. We recount the evidence adduced at trial, borrowing freely from the opinion of the Court of Special Appeals of 27 December 1977. The Sergeant Company (the Company), was a wholly owned subsidiary of Waldorf.

Pickett had planned to construct some sixty houses in a development in Charles County to be known as “Cliffton on the Potomac”. By an “Agreement of Special Agency” it was provided that the Company would have the exclusive authority to obtain a permanent mortgage loan commitment not to exceed $2,400,000 for the use of prospective purchasers of the homes Pickett was to build. The agreement contemplated that “special forward” 3 money would be obtained by the Company’s best efforts, within the commitment limits, if such funds became available. The Company was to be compensated for its services by payment of $12,000 cash at the time the commitment was obtained and execution of three notes totaling $12,719.95 in periodic deferred payments.

A general commitment was obtained from Waldorf on January 16, 1975. On January 24, 1975, about a week after the original agreement was executed and the commitment arranged, although the Company had not received the fee pursuant to the agreement, it advised Pickett that Waldorf had obtained some “special forward” money at 7% percent, but that Pickett could only obtain $485,000 worth. In order to obtain ¹⁹⁶ the money Waldorf would need one percent “up front”. Pickett thereupon mailed a check to the Company for $4,850 to be forwarded to Waldorf.

According to Pickett the original fee to the Company as provided by the agreement had not been paid because there was trouble in getting building permits from the county. Pickett explained this to the Company in response to its inquiry about its fee, and, about 20 March 1975, after negotiations, the Company agreed to await its fee either until Pickett obtained a “construction loan with a take-out,” 4 or until the time of settlement of the houses to be constructed, whichever first occurred. As a “sign of good faith,” the Company demanded and received $2,000 for the concession, but, according to Pickett, suggested that he “call it for processing the first 20 applications down there at $100.00 a piece but it was like a kicker really of $2,000.00.” Nothing of consequence occurred then until late in July when Pickett’s permit problem was finally resolved by the grant of 50 permits by the county with more permits to follow. At that time, according to Pickett, a separate agreement in the nature of a novation of the original agreement between him and the Company occurred.

He explained that he called C. Douglas Sergeant, Jr., President of the Company, and told him that the matter of the building permits had been resolved. Pickett and Mr. Sergeant met on 18 August and talked about the whole situation. Pickett explained that it would be more reasonable for him to build about 30 houses rather than 60: I had builders who now wanted lots and they were willing to buy the lots and pay cash for them. I was in a cash flow bind, because of the delay for the