Shriver v. Druid Realty Co.

Digges, J., ■ delivered the opinion of the Court. The appeal in this case is taken from an order of the Circuit Court of Baltimore City overruling the demurrer filed by the appellant, as defendant, to the appellee’s bill of complaint. The grounds of the demurrer are want of equity and laches. The prayers of the bill are for an accounting and an injunction.

The bill alleges, in effect, that Joseph Berman was in 1916 the owner of substantially all of the capital stock of a corporation called the Lyon Realty Company, which corporation was seised of a lot of ground in Baltimore City upon which it had erected a large apartment house known as the Riviera; that Berman had practically all his money invested in the capital of this corporation, and that ³⁸⁷ the investment appeared in 1916 to he possibly ruinous and certainly unprofitable; that Berman was advised and convinced that the only way that increasing pecuniary loss and ruin could be avoided was to increase the size of the Biviera by building adjacent apartments of the same general character and putting the whole under one management, thereby reducing overhead charges to such an extent as to convert an unprofitable and perhaps ruinous investment into one which would yield a substantial profit. Acting upon this conviction, and in order to be in a position to carry out his plan, Berman caused, the incorporation of the Druid Bealty Company of Baltimore, the plaintiff below (appellee here), which corporation is practically owned by Berman, he being the owner of all of its capital stock with the exception of ten shares belonging to his son and one share to his son-in-law. After having organized the appellee corporation, the first requirement in Berman’s plan necessitated the expenditure of a large sum of money, and having practically none of his own, this required the borrowing of the necessary money on such terms as he could negotiate. With this end in view, he approached the defendant, who represented himself to be, and in fact was, in control of the money desired, this money belonging either to himself or to- those for whom he had authority to act.

The bill also alleges that the defendant knew the imperative need of the appellee obtaining the loan of the necessary funds to enlarge the then existing apartment house, or to build additional ones. The bill alleges that the defendant, when approached by the plaintiff, through Mr. Berman, agreed to furnish the plaintiff $246,600 of the money of which he had control as agent or trustee, at five per cent., and $8,400 of his own money at six per cent. The conditions upon which the loan was to be made were that the five per cent, money was to be secured by a first mortgage running (with some amortization) for twenty years, and that' the six per cent, money was to be secured by a second mortgage running for the same time; that the plaintiff should pay the defendant personally, in addition to the principal ³⁸⁸ and interest on the money borrowed from him, the snm of $90,297.96 in instalments covering twenty years, this sum to be also secured by a second mortgage, without interest. There is a further 'allegation that the plaintiff, being impelled thereto by what it deemed were the necessities of its case, agreed to the terms dictated as above by the defendant, and that the money was lent and secured as above stated; that during the eight years elapsed between the lending of the money in the latter part of the year 1916 and the filing of the bill, the plaintiff has paid the defendant an amount of money equal to all the defendant personally loaned it, all interest thereon at the rate of six per cent, per annum, broker’s commission at two' and one-half per cent, upon the whole amount of money lent both by the defendant himself and' those for whom he was the agent or trustee, and in addition thereto the sum of $16,464.00; but notwithstanding all these payments, the defendant is insisting upon the terms exacted by him when the money was lent, and under these terms the plaintiff is required to pay a further additional sum of $73,440.46 to be paid in instalments during the next twelve years.

The plaintiff also alleges in its bill that the terms of this contract are harsh and oppressive, and that notwithstanding the passage of the Act of 1916, ch. 374, forbidding a corporation to set up> the defense of usury, are so manifestly unfair, unreasonable and oppressive that a court of equity will relieve it from said contract upon its paying to the said defendant such an amount as may be found justly and equitably due. The plaintiff then asks for an accounting, and proffers itself ready to bring into court any sum that may be found due, but avers that the above allegations show that the defendant is already largely overpaid. The substance of these allegations is that Berman was practically the sole owner of the Lyon Realty Co. and all of his money was invested in that company’s stock, the whole of its assets being represented by an unprofitable apartment house'-known as the Riviera; that finding the operation of the Riviera unprofitable, Berman conceived the idea that if ³⁸⁹ he had more apartment houses, thereby lessening the overhead charges, he would be able to convert a losing venture into a profitable one. With that end in view, he organized the Druid Realty Company (appellee here), and sought the defendant as one who would be in a' position to secure a loan for him of the necessary funds to acquire the ground and erect additional apartment houses; the defendant agreed to secure the necessary money, estimated to be $255,000, and did secure the major portion of this sum from friends or relatives, at the same time investing $19,600 under his control as trustee, and $8,400 of his individual money; the sum of $246,600' being secured by first mortgages on the property purchased and built upon, the mortgages to run for twenty years at five per cent., with amortization during this period, and the $8,400 furnished by the defendant individually with interest at six per cent., together with compensation for securing the loan amounting to $90,291.96, to be paid in instalments over a period of twenty years, without interest, secured by second mortgages on the same property purchased and built upon.

The bill in this case was filed more than eight years after the consummation of the agreement by the execution of the mortgages, and after the sum of $35,339.50 had been paid to the defendant in pa'rtial payments made at six months’ periods in accordance with the terms contained in the mortgages. The contention of the appellee is that it was a necessitous borrower; that the defendant was acquainted with the plaintiff’s necessities a'nd able to procure for it the money needed; that by reason of these conditions the defendant exacted a harsh and oppressive contract from the plaintiff, from the results of which a court of equity should grant relief. There is no claim of actual fraud, misrepresentation, mistake, undue influence, fiduciary relation, or other common ground of equity jurisdiction, but the claim of the plaintiff is based upon the allegation that it was a borrower whose financial necessities were taken advantage of by the defendant in compelling a'n extortionate and oppressive contract. ³⁹⁰ The rule universally recognized is that parties of sound mind and under no legal disabilities, not occupying fiduciary relations, are left free to make such contracts as to them seem wise, and neither courts of law nor equity will interfere to reform or rescind such contracts, when there is no fraud, misrepresentation, mistake, undue influence, or fiduciary relation shown to exist. The case presents a claim for the reformation or cancellation of a contract entered into after time for calm deliberation on the part of one entirely competent to contract, upon the ground of alleged inadequacy of consideration, plus the alleged financial need of the plaintiff at the time when the agreement was made.

It is stated in Brantly on Contracts, sec. 29, and also in 1 Williston on Contracts, sec. 115, that “If the courts should pass upon the question of the adequacy of the consideration for the promise, it is obvious that they would be engaged in fixing prices and making bargains for the parties, a proceeding which would violate the fundamental principle, that there should be the utmost liberty in the making of contracts. Men are not wards of the courts, nor are they under legislative tutelage. They are presumed to be capable of malting their own bargains. On the other hand, if an illusory consideration were sufficient to support a promise, then the rule requiring the existence of a consideration would have no force.

Therefore the law requires it to be real, i. e., something of value. There may be a qualitative but not a quantitative analysis of consideration. A stipulation in consideration of one dollar is just as effectual and valuable as a larger sum stipulated for and paid. When a thing is to be done by the plaintiff, be it ever so small, this is a sufficient consideration to support a promise to pay for it.

The contracting parties must determine for themselves the value and benefit of the consideration as of the other constituents of their contract.” In the case of Taylor v. Turley, 33 Md. 500 , being a suit on a note for $9,000 given in 1863, during the Civil War, and the money for which the note was given being paid to the ³⁹¹ borrower in Confederate money, when subsequently a suit was brought by the payee against the maker of the note, the note providing that the repayment should be made in current bankable funds, it being admitted that the maker was competent to contract and that the note was given voluntarily, it was argued that there was such a wide difference between (lie value of the money received in 1863 and the money which was demanded in repayment, that it constituted such an inadequacy of consideration as would relieve pro tanto the maker of the note. In passing upon this situation this Court held: “But it is urged that, however the parties may have made their contract, that there is such inadequacy between the consideration and the amount to be paid, occasioned by the subsequent events, that it would be unjust to hold the,maker bound. Assuming- the contract to be subsisting, is there any force in this objection? It was perfectly competent for the parties to have made the note payable in whatever currency they pleased, not prohibited by law. * * * Whether he made a good or bad bargain, or received a full equivalent for what he promised to pay, cannot affect the legal character of his obligation.

Parties contracting must determine for themselves the value and benefit of the consideration, as of the other constituents of their contract. It is not the province of the courts to interfere with the natural rights of parties to contract, and to exercise their own will and judgment upon the subject; and they have the power to estimate the value of the consideration and the benefits to be derived from their contracts, where there is no incompetency to contract, no fraud or surprise, and no rule of law is violated. While there must be some consideration, otherwise the contract is nudum pactum, it is sufficient if it be slight, or may be valuable to the party promising. Even in equity, where contracts may be reformed, although a consideration is necessary, when the agreement is not under seal, inadequacy of consideration is no ground for impeaching a contract — folly, weakness or want of judgment will not necessarily defeat a contract.

Chitty on Contracts, 30, 31; ³⁹² Stewart v. State, 2 H. & G. 114 . It is certainly not the duty of courts to shape the contracts of parties, but to enforce such as the parties make. The contract must be construed by the natural and fair import of its terms, without reference to the hardship that it may visit on the parties. If persons voluntarily express themselves in writing, they are bound by the language employed, interpreted by all the evidence admissible for that purpose.

Brown v. Waters, 2 Md. Ch. 201 ; Wagner v. White, 4 H. & J. 566 ; Barney v. Smith, 7 H. & J. 345 ; Abbott v. Gatch, 13 Md. 314 .” In the case of McShane v. Halzehurst, 50 Md. 107 , which was a bill in equity for the cancellation of a contract for the exchange of property in Howard County for Baltimore City property, the ground for revocation of the contract was fraud and misrepresentation, and also difference in the value of the property exchanged, creating an inadequacy of consideration. The Court, in dealing with the proposition of inadequacy of consideration, says: “We do not enter into any inquiry as to the relative value of the properties which formed the subject of exchange. There is a good, deal of testimony on this subject, much of it conflicting. This is a question with which we have nothing to do.

The appellee cannot be relieved from his contract merely because he may have made a bad bargain.” In Drury v. Briscoe, 42 Md. 154 , it was said: “It is an established principle that any consideration, however small, will be sufficient, as a court of equity is willing to lay hold of any just ground to support an agreement. Hannan v. Towers, 3 H. & J. 147 .” In Gluck v. Baltimore, 81 Md. 315 , in dealing with the question of applying legal rules which in particular cases may result in hardship', the Court said: “As said by Rolfe, B., in Winterbottom v. Wright, 10 M. & W. 115: ‘Hard cases, it has been frequently observed, are apt to introduce bad law.’ And in Abbott v. Gatch, 13 Md. 314 , and in Taylor u. Turley, 33 Md. 500 , this Court declined to permit considerations of great hardship to influence the rigid enforcement of ³⁹³ established legal principles. Obviously, a principle, if sound, ought to be applied wherever it logically leads, without reference to ulterior results.

That it may in consequence operate in some instances with apparent or even with real harshness and severity does not indicate that it is inherently erroneous. Tts consequences in special cases can never impeach its accuracy.” In 13 C. J. 365, the principle is stated: “So long as it is something of real value in the eye of the law, whether or not the consideration is adequate to the promise, is generally immaterial in the absence of fraud. The slightest consideration is sufficient to support the most onerous obligation; the inadequacy, as had been well said, is for the parties to consider at the time of making the agreement, and not for the court when it isi sought to be enforced. It is competent for the parties to make whatever contracts they may please, so long as there is, no fraud or deception or infringement of law.

Hence the fact that the bargain is a hard one will not deprive it of validity”; and at page 366: “In Equity — Mere inadequacy of consideration, unless it is SO' gross as to shock the conscience and amount, in itself, to conclusive evidence of fraud, is not of itself a ground on which a court of equity will refuse to decree specific performance of a contract or reoind it for fraud or undue influence” citing in support of that statement Feigley v. Feigley, 7 Md. 537 . This latter was a ease of a bill in equity on behalf of the wife to set aside a conveyance1, made by the husband to his sister, of all his interest in his father’s estate, on the ground of fraud on her rights to alimony in divorce proceedings, and upon the further ground of inadequacy of consideration moving from the sister to her brother, the 'complainant’s husband. This Court, after finding that there was no direct evidence in the record as to the fraudulent participation of the sister in the transaction, other than the mere inadequacy of consideration contained in the deed, held that the conveyance of the husband’s interest, shown to be worth $800, in consideration of $200 paid him by the sister, “is not such a ³⁹⁴ glaring inadequacy as,