St. Luke's House, Inc. v. DiGiulian

O’Donnell, J., delivered the opinion of the Court. The appellant, St. Luke’s House, Inc. (St. Luke’s), aggrieved at the entry of a judgment in the amount of $1,850 in favor of the appellee, Rita E. DiGiulian (on her counter-claim), for breach of a written lease, following a nonjury trial in the Circuit Court for Montgomery County (John J. Mitchell, J.), urges us to reverse. In January 1971 Mrs. DiGiulian purchased the property known as 3910 East-West Highway located in Section 4 of the Town of Chevy Chase, intending to use it as a residence for herself and her family. After the completion of extensive remodeling and restoration the idea of occupying it as a residence was abandoned and a “For Rent By Owner” sign was posted on the property.

Mrs. Audrey M. Henrickson, 1 a licensed realtor with the Routh Robbins Real Estate Company induced Mrs. DiGiulian to give her a listing on the property, stating that she had a South American diplomat as a prospective tenant. When that tenancy did not materialize, Mrs. Henrickson, a member of the Board of Directors of St. Luke’s and, together with the president of the Board, a member of its Site Procurement Committee, succeeded in having a lease executed between St. Luke’s and Mrs. DiGiulian. St. Luke’s, a private, nonprofit organization, operating “halfway houses” designed to provide a ³¹⁹ transitional step for those recuperating from mental illnesses who had been released from institutional care and were being returned to community life, had been searching for a home like the DiGiulian premises for use as such a “halfway house.” The lease, on a standard form of the Routh Robbins Real Estate Company, was in pertinent parts prepared by Mrs. Henrickson in collaboration with Frank H. Dearden, Jr., president of St. Luke’s Board and also a professor at the University of Maryland School of Social Work and Community Planning. The lease, for a two-year term, effective July 1, 1971, was for a total rental of $19,200 “payable in monthly installments of $800.” Standard printed clauses therein provided that it “contains the entire agreement between the parties hereto and shall not be changed or modified in any manner except by an instrument in writing executed by the parties hereto”; and that the tenant “will not use and will not permit the property or any part thereof to be used for any . . . unlawful purpose.” Provision was also made in the lease for the payment of a commission of $400 to Mrs. Henrickson.

Paragraph 3 of the lease, as modified by an addendum, provided as follows: “Tenant will use said property as a residence for five (5) persons and for no other purpose or additional number of persons whatever, subject to modifications noted in Addendum Clause #1. Addendum #1 — It is understood and agreed that Tenant intends to apply for and to obtain a permit and/or variance and license to operate a boarding house from the proper Montgomery County or Chevy Chase authorities which would allow Tenant to have up to nine residents and two employees living on the premises. Should the Tenant be unable to secure the necessary permits by April 1, 1972, then Tenant may give Landlord thirty (30) days’ notice of intent to vacate. If such notice is not forthcoming by July 1, 1972, then this provision will be deemed waived.. ..” ³²⁰ Another addendum provided that the tenant in each quarter would deposit with an escrow agent a sum equal to one-quarter’s rent ($2,400) for disbursement to the landlord. 2 Two restrictions on the use of the property were the catalysts which gave rise to the litigation; one, the Montgomery County zoning ordinance which restricted occupancy in a single family dwelling, in an R-60 zone, to not more than five unrelated adults, but subject under the zoning ordinance to “a special exception”; 3 the other, a restriction contained in a covenant running with the land under a deed dated 1910 from the Chevy Chase Land Company of Montgomery County, Maryland, to which Mrs. DiGiulian’s property — and the other lots in Section 4 — was subject, and which provided that “all houses upon the premises hereby conveyed shall be built and used for residence purposes exclusively . . . and that no trade, business, manufacture or sales, or nuisance of any kind, shall be carried on or permitted upon said premises.” The restrictions in the deed further provided that any house erected upon the land “shall be designed for the occupancy of a single family” and that any violation of such covenants and agreements might be enjoined by the Chevy Chase Land Company, including those who derive title from said company.

Prior to August 16, 1971 it appears that there had been extensive newspaper publicity concerning the nature of the occupancy of the premises by St. Luke’s; there had been several meetings between the Board of Directors of St. Luke’s and the “Council” of Section 4 of Chevy Chase, as well as a “citizens’ meeting,” as a result of all of which the neighbors, residents in Section 4, had given notice of their intention to seek injunctive relief against the operation of the “halfway house.” Although furniture had been moved into the premises in early July, it had not yet become occupied when, on August 16th, the Board authorized its ³²¹ attorney to file the necessary petition for special exemption under the zoning law, as contemplated in Addendum #1. Before the petition could be filed the Circuit Court for Montgomery County (Shure, J.), following a bill of complaint filed by 13 neighbors and the Town Council of Chevy Chase, on August 17th, pursuant to Maryland Rule BB72, issued an ex parte injunction restraining both the appellant and appellee “from operating a Halfway House on the leased premises known as 3910 East-West Highway.” Counsel for the Board upon ascertaining that the restrictive covenant appeared to be identical to that applied by this Court in Chevy Chase Village v. Jaggers, 261 Md. 309 , 275 A. 2d 167 (1971), wrote an opinion for the Board in which he concluded that the filing of a petition for special exception, even if allowed, would not grant relief from the restriction in the deed and that St. Luke’s could not successfully defend its postition against the restriction. He advised St. Luke’s “to immediately seek another location,” to remove all equipment from the premises and to treat the lease as null and void. Although St. Luke’s filed an answer in the injunction proceedings in which it disclaimed knowledge of the existence of the “covenants” in the deed, and contended, inter alia, that its use of the premises would constitute a use under the zoning ordinance by a “family,” it did not otherwise contest the injunction granted, but vacated the premises.

When the injunction proceedings came on for hearing on September 24, 1971, the complainants’ motion for dismissal on the grounds of mootness was granted since St. Luke’s had discontinued the use of the premises and they had been re-leased. When St. Luke’s abandoned the building Mrs. Henrickson still acting as the agent for Mrs. DiGiulian, secured another tenant for a lease commencing September 15, 1971 and ending April 30, 1972, at a monthly rental of $500. St. Luke’s sued Mrs. DiGiulian when she refused to refund $1,600 of the deposited rent; under her counter-claim she was awarded damages computed at $800 per month for the period July 1 to September 15, 1971 ($2,000), plus $300 per ³²² month from September 15, 1971 to April 15, 1972, and $150 for the period April 15 to April 30, 1972 (totalling $4,250), less credit for the $2,400 deposit. In urging a reversal St. Luke’s contends (a) that the trial court erroneously excluded parol evidence which, if admitted, would have established “mutual mistake” as to the restrictive covenant; (b) that the restrictive covenant, running with the land, created a “frustration of use” and/or an “impossibility of performance” which granted the lessee the right to rescind the lease and (c) that the lease was breached by the appellee since she leased the premises for a purpose not allowed by the restrictive covenant and she failed in her duty, upon the institution of the injunction proceedings, to defend the tenant’s “implied warranty of quiet enjoyment.” 4 At the trial counsel for St. Luke’s, upon direct examination of Dearden, asked: “What was the purpose of that lease to be in terms of St. Luke’s House?” Appellee’s objection, on the ground that “the lease will speak for itself,” was sustained, counsel conceding, however, “[tjheir understanding or attempts to negotiate will be something else.” Notwithstanding the sustaining of the objection to that question, Dearden did testify, without objection, that there had been extensive discussions with Mrs. DiGiulian concerning the purpose for which her house would be used, that she was informed that it was to be “used as a halfway house for people recovering from mental illness,” and that she did not indicate any constraint upon such use other than under the zoning laws.

Mrs. Henrickson similarly testified, without objection, that she had explained to the appellee the purpose for which the house was needed. Although an objection was sustained to a question addressed to her as to whether she was given any indication “that the purpose which you had discussed with Mrs. DiGiulian could not come to pass as a result of any restriction,” she testified, without objection, that ³²³ Mrs. DiGiulian had not indicated to her any “restriction” other than zoning upon the use of the property. The attorney who was commissioned to prepare the petition for special exception and who prepared the opinion for the Board testified that he was “reasonably certain” that he was a member of St. Luke’s Board at this time, and although he was familiar with the restrictions in Section 4 of Chevy Chase, he was apparently not consulted when the lease was executed. Also without objection, Mrs. DiGiulian testified that when both Mrs. Henrickson and Dearden explained to her that they wanted to use her property as a “halfway house” she told Mrs. Henrickson, whom she did not know, at that time, to have been a member of St. Luke’s Board, that the property could only be used as a residence and that “if she had anything else [contemplated] that she must check thoroughly with the ‘state’ [zoning], as well as [under] ‘Section 4’ [Chevy Chase] . . . and that is written on my deed,” to which Mrs. Henrickson replied: “Don’t worry about it because she [Mrs. Henrickson] had been renting and selling within this area for a long time.” The appellee further, without objection, testified that when Dearden explained the purpose for which the house would be used she replied: “Remember, this is only, could be used as far as I am concerned, it is always used as a residence, but if you check with the state and with Section 4 and you get the permission, only if you get the permission, but don’t ever say that I gave you this home as anything but a residence.” She also testified that in her dialogue with Dearden he represented to her that St. Luke’s had “other uses for the property, other than as a halfway house.” There was additional testimony from Mrs. DiGiulian that she “would have no parts of anything, but as a ‘residence’ ” and that although she was aware of a restriction in her deed she did not check it because Mrs. Henrickson “was working for me” and was being paid for representing her in renting her property.

Although it is true that “ ‘while parol evidence is not admissible to alter or vary a written instrument expressing ³²⁴ an agreement, it may be admitted to show that, because of a mutual mistake of the parties, their minds never met as to its subject-matter, and that consequently there never was an agreement. Where that fact is clearly shown, it is generally but not uniformly held that the instrument may be cancelled.’ ” Smith v. Bounds Package Corp., 206 Md. 74, 79 , 110 A. 2d 71, 73 (1954), quoting from Gross v. Stone, 173 Md. 653, 665 , 197 A. 137, 142 (1938). See also 4500 Suitland Rd. Corp. v. Ciccarello, 269 Md. 444, 451-52 , 306 A. 2d 512, 516 (1973).

In view of the length and breadth of the parol evidence received without objection from Mrs. Henrickson, Dearden and Mrs. DiGiulian, the principals in the negotiations of the lease, it is clear to us that the trial judge did not exclude parol evidence which might have established “mutual mistake.” Although it is true that objections were sustained in two instances to questions addressed to the appellant’s witnesses, it is patent that such objections were sustained as to the form of the questions propounded rather than to an exclusion of parcl evidence. In any event, assuming arguendo that there may have been error in sustaining the objections in those two instances, such error must be considered harmless since the witnesses were otherwise permitted to give the same testimony, under questions in different form, and did, in fact, testify to each aspect of the pre-execution negotiations between the parties. See Riley v. Naylor, 179 Md. 1 , 16 A. 2d 857 (1940); Snyder & Blankfard, Co. v. Farmers ’ Bank of Tifton, 178 Md. 601 , 16 A. 2d 837 (1940); Berg v. Plitt, 178 Md. 155 , 12 A. 2d 609 , reargument denied, 13 A. 2d 364 (1940). In rejecting the contention that St. Luke’s had no knowledge of the covenant and that thus there had been no “meeting of the minds,” the trial court found that the negotiations leading up to the lease were conducted by Mrs. Henrickson who had assumed “a dual role, that of rental agent for Mrs. DiGiulian and that of [a] representative of St. Luke’s,” and that even though it was her testimony “that she considered herself to be representing St. Luke’s and not Mrs. DiGiulian at the time St. Luke’s entered the negotiations, this belief was never actually communicated to Mrs. DiGiulian.” The trial court further found that “[i]n either ³²⁵ capacity, Mrs. Goss [Henrickson] should have been aware of any covenants running with the land and certainly as a representative of St. Luke’s should have known those facts, unless she believed them not to be an impediment to the prospective use of the property.” The trial court also pointed out that both the lease and the addenda, prepared by Mrs. Henrickson and Dearden, were “in terms most favorable to St. Luke’s.” We cannot say that these conclusions by the trial court, which had the opportunity to pass upon the credibility and the weight to be given the evidence, were clearly erroneous.

Finding that the holdings in Chevy Chase Village v. Jaggers, supra, 5 were not dispositive of the issue of an “impossibility of performance” on the part of St. Luke’s and were, on the facts, distinguishable, since Jaggers involved the use of a residence for a purely business purpose, the trial court concluded that St. Luke’s before terminating the lease had a “minimal obligation” to contest in court the issuance of the injunction. Pointing out that the questions of law involved in the injunction were different than those then before the trial court and that it would be “senseless to speculate as to the ultimate