Shoreham Developers, Inc. v. Randolph Hills, Inc.

Finan, J., delivered the opinion of the Court. On June 22, 1962, Randolph Hills, Inc., by its president, Morris Perlmutter, entered into a contract with Shoreham Developers, Inc. On the same day Perlmutter Bros., Inc. also entered into a contract with Shoreham Developers, Inc. Under one of the instruments, known as the sales contract, Randolph Hills agreed to sell to Shoreham Developers a tract of land containing 32.61 acres for a total purchase price of $351,000 of which $10,000 was to be deposited with attorneys for the seller. Of particular importance to the present dispute is paragraph 5 : “On or before ninety'(90) days from the date hereof or as soon thereafter as a report of title can be obtained if promptly ordered, the Purchaser and Seller ²⁶⁹ agree and shall be required to make settlement of this contract. It is understood that the time of settlement is of the essence.

Settlement is to be made at the office of the Purchaser’s choosing, and deposit with said firm of the deed and such other papers or cash payment as may be required by the terms hereof shall be considered good and sufficient performance of the terms. If the Purchaser shall fail or refuse to make settlement in accordance with the provisions of this contract, his deposit may be forfeited as liquidated damages or, without such forfeiture, the Seller may at its option pursue such other legal and equitable remedies for the enforcement hereof as it deems proper.” The second contract, described as the finishing contract, embodied the terms and conditions relative to the seller processing the land involved in the sales contract into finished lots. Some of the requirements in this contract were conditions precedent to settlement. It should be understood from the beginning that Perlmutter (the testimony as to this was undisputed) requested that the original contract be separated into two agreements so as to afford Randolph Hills certain tax benefits.

Theodore Lerner, vice-president of Shoreham Developers, agreed that Perlmutter could prepare the contract in any manner he wished, so long as it was one overall agreement and reflected all the terms and conditions agreed upon. Immediately following the execution of the agreements and pursuant to their terms, the purchaser, Shoreham Developers, filed applications with the Veterans Administration and the Federal Housing Administration for approval of the homes they intended to build. In addition it entered into other preliminary agreements, such as ordering a title report, retaining engineering firms and obtaining a standby commitment for construction financing from the Prudential Insurance Company, making a $9,000 deposit for this latter commitment. In the meantime, Randolph Hills, pursuant to its obligation under the finishing contract, received the approval of the Maryland-National Capital Park and Planning Commission for ninety ²⁷⁰ of the lots covered by the sales contract.

However, as September 20, 1962, which was the ninetieth day after the execution of the agreements, drew near, it became increasingly obvious that Randolph Hills would be unable to settle. It had agreed under the finishing contract to sign certain engineering agreements relating to sewerage and water rights of way with the Washington Suburban Sanitary Commission (WSSC) “prior to settlement,” but by September Randolph Hills was unable to obtain WSSC approval. As the settlement date approached, Perlmutter informed Lerner of the difficulty it was having obtaining the WSSC commitments and suggested an extension of the time for settlement. Lerner verbally agreed to wait until Perlmutter had performed all of the preliminary conditions, and on September 18, 1962, Shoreham Developers sent a letter to Randolph Hills confirming the mutually agreed to modification.

The last sentence of this letter read: “Should the aforegoing be agreeable, please sign a copy of this letter and return same to us.” Although the record discloses that Randolph Hills never signed and returned ■a copy of the written modification, it is devoid of any indication that Randolph Hills expressly or impliedly objected to the modification as it appeared in the September 18 letter. The parties discussed going to settlement on numerous occasions between September 20, 1962 and the early part of 1963, however Perlmutter and his company remained unsuccessful in their attempt to obtain WSSC approval. Early in 1963, Perlmutter made a new proposal to Lerner; Randolph Hills would apply with the county for a zoning reclassification which would permit construction of apartment units on the same land which was the subject of the sales contract and the finishing contract. Both parties would then enter into a joint venture to develop the apartments together.

Lerner agreed on behalf of Shoreham Developers but only on the condition that the parties revert to the original agreement of June 22, 1962 if the new arrangement •did not go through as planned. The final chapter to this wayward venture began with the •county approval of the rezoning application on August 4, 1964. Lerner contacted Perlmutter and requested that he prepare the .final documents, but Perlmutter informed him that he was un ²⁷¹ der no obligation to Lerner with respect to the apartments. Lerner was quite upset at this new twist, but after protesting, inquired as to whether the parties could fall back on the original deal, since there was obviously no agreement regarding the apartments.

To this, Perlmutter replied that the original agreement had been “cancelled.” At this final meeting between the parties Perlmutter offered Lerner $50,000 to forget about the whole thing, which offer Lerner rejected. Shoreham Developers, Inc., and Lerner filed a bill of complaint for specific performance on August 12, 1964. On May 17, 1965, attorney for Randolph Hills sent notice to Lerner that the seller was declaring the original contract null and void and was retaining the $10,000 deposit as liquidated damages. The appellants then filed their amended bill on July 13, 1965.

In this pleading, they alleged that at all times after June 22, 1962 they had been ready, willing and able to go to settlement. The case proceeded to trial and at the close of appellants-petitioners’ case, the court granted appellee-respondent’s motion to dismiss under Rule 535. From this dismissal, Shoreham Developers, Inc. and Lerner appealed. We reverse the decision of the lower court.

At the outset, it must be noted that the court below treated both instruments of June 22, 1962 as forming only one contract involving the sale of finished lots. We agree with this construction. Paragraph 10 of the sales contract reads: “The principals to this contract mutually agree * * *; that this contract contains the final and entire Agreement between the parties hereto and they shall not be bound by any terms, statements or representations not contained herein.” Notwithstanding the above integration clause, this Court does not find a situation requiring the application of the parol evidence rule to exclude reading the instruments together. It is quite apparent that the parties did not intend the sales contract standing by itself to be a final and complete integration of the agreed upon terms.

See Markoff v. Kreiner, 180 Md. 150 , 23 A. 2d 19 (1941). As this Court noted in Rinaudo v. Bloom, 209 Md. 1, 9 , 120 A. 2d 184, 189 (1956), and more recently ²⁷² in Whitney, Exec. v. Halibut, Inc., 235 Md. 517, 528 , 202 A. 2d 629, 634 (1964), even the sentence “This contract contains the final and entire Agreement between the parties,” may embody a recital of facts which may be untrue. Such an integration clause is not invariably conclusive, and its coverage is a matter of interpretation. See also Brooks v. Towson Realty, Inc., 223 Md. 61 , 162 A. 2d 431 (1960), where the Court treated two-separate but contemporaneous contracts for the sale of contiguous parcels of land as comprising only one overall contract for the sale of both parcels.

It is interesting to note that in Towson, as in the instant case, one of the reasons for separating the agreement into two contracts was to enable one of the parties to derive a tax advantage through such procedure. The lower court, viewing the agreements as one contract involving the sale of finished lots, stated: “The Court finds at this stage of the case that the plaintiff has failed to make out a case in his favor of specific performance. In other words, he must himself, as a prerequisite, comply with all the requirements which he has agreed to comply with. Namely, it is up to him to make a date for settlement, to appear at the settlement, to deposit the money and then if the defendant fails to convey the property, if he fails to comply with all the prerequisites that he has agreed to then he would be in default and the specific performance would lie. “The Court is not passing upon whether or not laches exist but the Court is passing upon the question of whether or not the plaintiff has complied with the terms of the contract in that he has not made a date for settlement, he has not put the defendant in default.” The lower court was also of the opinion that, although the parties may have waived the time limit for settlement originally set by the terms of the contract, time continued to be of the essence of the contract and therefore it was incumbent upon Shoreham Developers thereafter to set a definite time for settlement which it failed to do.

It appeared to the Chancellor that ²⁷³ “the parties were just dragging their feet, so to speak, in connection with this entire contract.” In disagreeing with the lower court we are persuaded by the fact that the record reveals uncontradicted evidence that the appellants were ready, willing and able to perform on September 20, 1962, the date originally set for settlement within the' purview of the contract terms. Furthermore, it is clear from the record that it was the appellee’s failure to perform the conditions precedent, in the nature of securing the rights-of-way for water and sewer service in compliance with the requirements of the WSSC, and the rights-of-way for sanitary sewers and storm sewers, as provided by paragraphs 8 and 10 of the finishing contract, which made it impossible to settle, not only on September 20, 1962, but for many weeks thereafter. The untenability of the appellee’s position is emphasized by the fact that the rights-of-way or easements for water and sewers were-never obtained by the appellee. On September 18, 1962, Shoreliam Developers after learning from Randolph Hills that it was encountering difficulty in obtaining approval from WSSC, wrote Randolph Hills as follows : “Please let this letter serve to confirm our understanding that settlement on our contract dated