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

Digges, J., delivered the opinion of the Court. Randolph Hills, Inc. (RHI), appellee, must be a firm believer in the old adage, “If at first you don’t succeed, try, try again.” For, despite having already suffered two defeats before this Court in closely allied litigation, it continues to wage war. Unfortunately, we must, once again remand the case for still another legal skirmish. The appeal here represents the third visit to the Court of Appeals for this dispute 1 which started on June 22, 1962, ²⁹³ when RHI, by its president, Morris Perlmutter, entered into a contract with Shoreham Developers, Inc., appellant.

On the same day, Perlmutter Bros., Inc. also entered into an agreement with Shoreham. The stock of both RHI and Perlmutter Bros., Inc. is owned by the Perlmutter family. 2 Under the terms of the RHI-Shoreham contract, appellant agreed to purchase a 32.61 acre parcel of land in Montgomery County for $351,000. By the latter contract Shoreham agreed to pay Perlmutter Bros., Inc. $162,000 to develop the raw acreage into 108 finished lots, with the understanding that the $162,000 would be reduced by $4,750 for each lot less than 108. 3 As is chronicled in our prior decisions related to this controversy, RHI experienced considerable delays in performing its contract and, after failing in an effort to persuade Shoreham to abandon the project, finally refused to settle under the sales agreement. This refusal prompted Shoreham’s first action — a suit for specific performance.

But, the trial court dismissed the bill of complaint at the close of the complainant’s case. In Shoreham v. Randolph Hills, 248 Md. 267 , 235 A. 2d 735 (1967), we concluded that a prima facie case had been established and, therefore, reversed the order of dismissal and remanded the case for further proceedings. Following remand, a decree was entered against RHI in May 1968 directing it to specifically perform the sales agreement. In February 1969 appellee complied by conveying the 32.61 acre parcel to Shoreham.

At settlement, pursuant to their agreement, appellant gave RHI a down ²⁹⁴ payment of $50,000 and, to evidence the balance of the purchase price, executed and delivered a deferred purchase money note secured by a first deed of trust. Additionally, as security for the payment of the $162,000 contract price that would be owed when the raw acreage was converted into finished lots, Shoreham executed and delivered a note in that amount secured by a second deed of trust on the property. But, the difficulties between RHI and Shoreham were far from over. In September 1969, when the work contemplated by the “finishing contract” had not been begun, Shoreham, and its president, Theodore N. Lerner, instituted a new equity action in the Circuit Court for Montgomery County.

The bill of complaint in that suit, after being amended, contained seven “counts.” 4 As summarized by Judge Singley for the Court in Randolph Hills v. Shoreham, 266 Md. 182, 185-86 , 292 A. 2d 662 (1972): “The first Count sought a cancellation of the $162,000.00 note given by Shoreham to Perlmutter at the closing and of the deed of trust securing the note. Count II sought a cancellation of the deed of trust securing the $162,000.00 note on the theory that it constituted a cloud on title. Count III asked a reformation of the $162,000.00 note and of a note for $301,000.00 given RHI to the end that interest would not commence to run on either until 21 months after Perlmutter commenced to develop the 32.61 acre parcel as contemplated by the finishing contract. Count IV claimed damages for the breach of the Perlmutter contract.

Count V sought the imposition of a constructive trust on $16,752.30 which RHI had received for a right of way for a sewer across part of the 32.61 acre tract subsequent to the 1962 contract but prior to the 1969 closing. Count VI sought to have Shoreham exonerated from any liability on a $30,000.00 road construction contract on which RHI allegedly obligated ²⁹⁵ Shoreham, without its knowledge or consent. Count VII sought to impose a constructive trust on $43,700.00, being part of an award of $50,000.00 as consequential or severance damages attributed to the tract of land not taken in condemnation, of which the 32.61 acres was a part, received by RHI after the execution of the contract but prior to closing. Only Counts I, II, V and VII (the latter having been added by a later amendment) survived RHI’s demurrer.

Summary judgment was entered for Shoreham on Counts I and II, because Perlmutter’s refusal to perform the finishing contract was not disputed, but was denied on Counts V and VII. RHI’s motion for summary judgment on all four Counts was denied. The order granting Shoreham’s motion for summary judgment directed that the case go to trial on Counts V and VII. At trial on Counts V and VII, Shoreham offered no testimony, and the chancellor limited the evidence to be offered by RHI to the question of expenses incurred in connection with the payment received for the right of way and the recovery of severance damages, which RHI found it impossible to prove.

As a consequence, a decree was entered, which provided in part for the payment by RHI to Shoreham of the $16,752.30 claimed in Count V and the $43,700.00 claimed in Count VII, with interest in each case, and costs.” RHI appealed from the entry of that decree but to no avail as this Court affirmed it. All of this, however, is only important as background; what is really relevant to the present dispute is what happened to the claim for damages for breach of contract contained in Count IV after that count failed to survive RHI’s demurrer. By Count IV of its bill of complaint, Shoreham sought to obtain $250,000 in damages, claiming that this amount represented the additional sum appellant will now be forced ²⁹⁶ to expend in order to obtain the same work it contracted in 1962 with RHI to perform for $162,000. Appellee demurred to this count claiming in pertinent part that: “Count IV is further defective in that this is an action for a breach of contract for which there is an adequate remedy at law, this being a suit for money damages.

Defendants would be greatly prejudiced if this action were allowed to remain in equity as said Defendants would then be denied a right to jury trial.” The demurrer to Count IV was sustained, the chancellor said, because “It is persuasively argued by and on behalf of [RHI] in this case that [it] would be entitled to a jury trial on the matter of entitlement or not of the complainants to the relief prayed.” Additionally, the chancellor commented that the count “was not stated to be in the alternative, and yet, of course, it is entirely at variance with the other counts contained in the bill of complaint.” Appellant was not granted leave to amend Count IV of the bill but was permitted to amend another count, which it apparently did not do, and later special permission was allowed to add a count stating an additional claim not relevant here. After its claim for damages under Count IV was eliminated from the equity case, appellant filed this suit on the law side of the court claiming damages for breach of the contract. RHI eventually responded to this law suit with a general issue plea and also filed a counter-claim on the theory that Shoreham had breached the contract. In its initial plea, RHI did not challenge the propriety of Shoreham’s maintaining parallel equity and law cases to secure complete relief.

RHI, however, did file a motion to stay the law action pending final determination of the equity case, alleging that: “1. The fundamental legal issues that are present in this law case are the same as those involved in the equity case [then pending]. The disputes arise out of and concern the identical contractual documents and their purported breach. 2. In the equity case those essential legal issues ²⁹⁷ have already been tentatively decided by Judge Shure in his Order and Opinion [by granting summary judgment on Counts I and II and when all counts are finally decided], it is a certainty that an appeal will be taken from the final determination.

A stay of these legal proceedings, while allowing the equity case to proceed, would afford to all parties a swift, non-prejudicial, and equitable manner of testing those legal issues upon which both actions are dependent. (Emphasis added.) 3. The Court, by restraining plaintiffs from prosecuting and maintaining two separate actions on the same cause, would relieve your defendant from the ‘double vexation’ of defending itself in two courts at the same time. Furthermore, it would avoid a potential ‘clashing of jurisdiction’ which would result from a jury finding a verdict one way and a chancellor another.” Over Shoreham’s objection, the law action was stayed until the equity case was concluded.

When the final equity decree was filed, as promised, RHI appealed. However, contrary to its representation that it would test the “essential legal issues” common to the two cases, RHI voluntarily dismissed its appeal as to Counts I and II, which involved the issue of breach of contract, and only attacked the propriety of the court’s rulings on the remaining two counts, which sought the imposition of a constructive trust on certain funds which were allegedly wrongfully retained by appellee. By this action on the part of RHI, no test of the “legal issues upon which both actions are dependent” was conducted in that appeal. And, once again reneging on its statement that the stay would permit a “swift, nonprejudicial and equitable manner of testing the legal issues” the appellee instead attempts to prohibit such a determination by asserting that the termination of the prior equity suit now bars the present law suit.

This issue was raised by RHI almost two years after it filed its initial plea in the law case and was sprung on the ²⁹⁸ appellant on the same day that this Court decided the appeal in the equity case. On that day, appellee filed a plea “Puis Darrein Continuance” under Maryland Rule 342 c 1 (e), asserting that the final determination of the equity suit was a defense on the merits arising after this suit was brought and barred the further maintenance of the law case. Then, for the first time, RHI suggested that this suit was no longer maintainable since, by the equity case, Shoreham had “irrevocably elected the remedy of rescission of the contract” and had obtained restitution by the return of its consideration — i.e. the cancellation of the note and second deed of trust. Additionally, RHI argued that since Shoreham could have sought damages in the equity suit and did not, the final decree there is now res judicata in this law action and the issue of damages cannot here be relitigated.

The trial judge agreed; and, citing A. B. Veirs, Inc. v. Whalen, 256 Md. 162 , 259 A. 2d 516 (1969), ruled that this suit was barred by the doctrine of res judicata since the claim for damages might have been presented in the equity suit and, as it was not, it could not be presented in this law case. The judge further found that, as damages and restitution are alternative remedies and since “the value of [RHI’s] performance had been set by the parties at $162,000 and a promissory note secured by deed of trust had been given,” when Shoreham “elected to seek restitution and cancellation of the consideration, the promissory note and deed of trust,” rather than claiming damages, it opted to have its consideration restored and “cannot now be heard to claim for additional damages as well.” Therefore, judgment was rendered in favor of RHI for costs. This appeal followed. As we disagree with the trial court’s treatment of both the election of remedies and res judicata issues, we will reverse its judgment and remand the case for trial.

In reaching his conclusion concerning the application of the doctrine of election of remedies, the trial judge reasoned that the value of RHI’s contemplated performance was set by the parties at $162,000, an amount evidenced by the note and secured by the second deed of trust, and, by seeking to have the note and deed voided, cancelled, released, and ²⁹⁹ returned rather than claiming damages, Shoreham had elected to seek restitution rather than the alternative remedy of damages. The law pertaining to the doctrine of election of remedies is quite technical. To compel a litigant to select among his remedies frequently is onerous. This makes the doctrine a severe one and a court should not strain to employ it or seek to extend lightly its applicability.

Rather, it “should only be applied to actions taken by the same litigant which are necessarily inconsistent.” Petillo v. Stein, 184 Md. 644, 652 , 42 A. 2d 675 (1945). The function of this doctrine is to estop a plaintiff “from ignoring the judgment rendered, changing his position and adopting the remedy he had repudiated and repudiating the one he had adopted. He is not at liberty ‘to again vex the same defendant with another suit in a different form of action for the identical demand.’ ” Travelers v. Nationwide, 244 Md. 401, 416 , 224 A. 2d 285 (1966); Bolton Mines Co. v. Stokes, 82 Md. 50, 59 , 33 A. 491 (1895). See generally 25 Am.

Jur. 2d, Election of Remedies, §§ 1-7 (1966); 28 C.J.S., Election of Remedies, §§ 1-3 (1941). Therefore, if one claim or remedy is pursued to judgment an inconsistent claim is thereafter barred. There is no doubt that the remedies of restitution and damages are alternative, only one of which will be given as relief for a breach of contract. And, if one of these is pursued to judgment the other is barred.

Restatement of Contracts, § 384 (1) (1932); 5A Corbin on Contracts, § 1223 (1964); Williston on Contracts, §§ 1454, 1455 (1970). This is so because the two are at least theoretically inconsistent. And, “If the plaintiff is given judgment for his money back or for the restoration of the status quo in another form, he will not also be awarded the value of the performance that was promised him.” Restatement of Contracts, Explanatory Notes § 384 (1),