String v. Steven Development Corp.

Levine, J., delivered the opinion of the Court. Having convinced himself that his new home would not be completed on schedule, appellant (String) declared the contract providing for its purchase “null and void.” Subsequently, he brought this action against appellee (Steven) in the Circuit Court for Montgomery County, seeking the return of his deposit and the reimbursement of a loan commitment fee paid to a savings and loan association. At the conclusion of the trial, presided over by Judge Cahoon sitting without a jury, a judgment for costs was entered in favor of Steven. This appeal followed.

On April 15, 1971, String executed a contract for the ⁵⁷¹ purchase of a house that was to be built by Steven in its Bedfordshire subdivision of Montgomery County. String agreed to pay $45,751, of which $41,176 was to be furnished by a first trust to be placed by him with Standard Savings & Loan Association. The contract, which was accepted by Steven on April 20,1971, also provided: “Within ISO days from date of acceptance hereof by the Seller . . . the Seller and Purchaser are required and agree to make full settlement in accordance with the terms hereof. If the Purchaser shall fail to make full settlement, the deposit herein provided for may be forfeited at the option of the Seller, in which event the Purchaser shall be relieved from further liability hereunder ... .” (emphasis added).

Beginning in May, String made frequent visits to the building site to inspect the progress of construction. Observing no evidence of activity, he checked with the county authorities, and also examined the land records at the court house. From these inquiries he learned, on June 18, that neither a building permit had been issued nor a construction loan recorded. Armed with this information, he directed his attorney to write a letter requesting the return of his deposit.

On June 21, his attorney wrote to Steven as follows: “According to the contract, the seller is to complete improvements on the lot and make settlement before August 28, 1971, which is obviously impossible because to date, there is not even a building permit issued. “ . . . [T]he Strings obtained a mortgage loan commitment from Standard Savings and Loan Association, which commitment expires August 20, 1971, and has already cost the Strings $427.00, which the lender refuses to return. “Since it is impossible for your principal to comply with its contract to deliver the premises on ⁵⁷² or before August 28, 1971, we demand refund of the $1,000.00 deposit and declare the contract of August 28, 1971, [sic] breached and null o,nd void.” (emphasis added). Steven’s attorney replied on July 16,1971: “Contrary to your letter, we understand that a building permit has been issued on the premises and a foundation installed. Steven hopes to have the residence complete by the anticipated date even though there have been unforeseen delays encountered. In the event that it is not complete in time we understand Standard Savings will extend their loan commitment accordingly. “We also understand that the purchasers have simply had a change of heart, which is not sufficient cause for cancellation of their contract.

If this is in fact the case, Steven will consider forfeiture of the deposit as its sole remedy under .. . the contract and treat your letter as an anticipatory breach thereof... .” On August 18, Steven’s attorney again wrote: “Having received no reply to my letter of July 16, 1971, in response to yours reference the above, Steven Development Corporation has elected to treat your letter, particularly the last paragraph thereof, as an anticipatory breach of the contract between the parties. “Accordingly, Steven hereby declares your clients’ deposit forfeited under paragraph six (6) of said contract and thereby, in consideration of such forfeiture, relieves your clients from further liability thereunder.” It appears to be conceded that construction of the house did commence on or about July 2, the date on which the building permit was issued. Photographs taken by String at three stages during August were admitted into evidence. At ⁵⁷³ the beginning of the month, there existed a frame structure “under roof” and no garage. A picture taken on August 28 reflects substantial, if not dramatic, progress.

For example, the house appears to have been completely “bricked up” and the garage completed. After Steven refused to return the deposit and reimburse the loan commitment fee, the scene shifted to the circuit court. There, the evidence disclosed that following execution of the contract, which specified that the house was to be built in accordance with attached plans, String had sought a number of changes in design, including some which were structural. The only witness to testify at the trial, other than String, was George Young (Young), an officer of Steven; he was called by the plaintiff.

He testified, without contradiction, that even as late as May 11, String was still “asking for changes in his home.” Young said that these changes, which he characterized as major, delayed the commencement of construction by at least one month and, thereby, Steven’s ability to complete the house in the specified period of time. There was also testimony by Young that after receiving the letter of June 21 declaring the contract “null and void,” Steven relaxed its schedule for completing the house; and, anticipating that a substituted purchaser might not desire the changes initiated by String, diverted its immediate efforts to other houses under construction. But for the changes, according to Young, the house could have been “just about” completed by the end of August. He said that even with the delay attributable to the design changes, if there had been no “breach” by String, the house would have been completed within a reasonable time following expiration of the 130 days designated in the contract.

Indeed, he testified that the house could have been built in a total of 90 days which, even with the changes and the July starting date, would have meant a delay of only one month beyond the 130 days. As evidence of Steven’s ability to do so, Young pointed to other projects in which it had completed houses within 90 days, in some cases even under unfavorable weather conditions. ⁵⁷⁴ In his trial testimony, String revealed for the first time that the 130-day period specified in the contract: “was very important in that it made the contract termination date or completion date within fifteen days of the time school was starting. That gave me a reasonable time to get a family in and settled, after they had been settled and having to move from California. I turned down or ceased negotiations with the other builders before this.

They did not promise me occupancy by the time school started. That was the important factor in my purchase of a house.” He also testified that when, in his “judgment or determination,” the house would not be ready by the designated date, he rented a house in Vienna, Virginia. Precisely when he actually entered into that arrangement is not disclosed by the record. Judging from the remaining evidence, it could have been any time after June 18, when he instructed counsel to write the letter declaring a breach by Steven.

At the conclusion of the evidence, Judge Cahoon rendered judgment in favor of Steven. In so doing, he held that since time was not of the essence, Steven “had a reasonable period in which to complete the construction”; and he found, as a fact, that it could have done so. Accordingly, he concluded that String had failed to establish an anticipatory breach, under the circumstances of this case, by relying merely on the belated commencement of construction. In effect, he held that it was String, himself, who had committed the breach in adopting the stance reflected by the letter of June 21.

On appeal String contends, as he did below, that the action of the builder in beginning construction “less than two months before the delivery date,” constituted an anticipatory breach of the contract. Therefore, he says, his action in declaring the contract null and void was justified. Steven, of course, levels the same charge of anticipatory breach at String. From these cross-contentions, as it were, ⁵⁷⁵ emerges the principal issue to be decided on this appeal: Whether String breached the contract by taking the position announced in his attorney’s letter of June 21; or whether Steven did so by delaying construction to the point of rendering impossible a timely performance on its part.

As we view the case, however, we are confronted with a threshold question that is pivotal to the main issue: Whether time was of the essence; and, if not, whether the trial judge was correct in determining that Steven, if afforded a reasonable time after August 28 in which to complete the house, could have done so. A conclusion that time was of the essence would be virtually dispositive in light of the uncontradicted evidence that even without the relaxed effort following the June 21 letter, the house would not have been completed until a month after August 28. Thus, given a holding that time was of the essence, String’s judgment of June 21 that the house would not be completed on August 28 — and that Steven had thereby committed an anticipatory breach — might conceivably have been invulnerable to attack. The remaining question posed by String is whether the trial judge erred in ruling that the testimony of Young, called as an adverse witness by String, “is chargeable to him.” (1) Long ago, in Scarlett v. Stein, 40 Md. 512, 525-26 (1874), our predecessors enunciated the general principle that: “Parties may, no doubt, make time an essential part of a contract, and in such cases, the failure by one of the parties to perform his part of the obligation within the time prescribed, discharges the other from all liability under the contract.

Whether time is to be considered as of the essence of the contract, must, of course, depend upon the intention of the parties. When this intention is expressed in clear and unambiguous terms, the contract must speak for itself, and the liability of ⁵⁷⁶ the parties must be determined by the plain and obvious meaning of the language used. If, however, this intention is not expressed in clear and direct terms, courts may look to the acts and conduct of the parties, in order to find out the meaning which they themselves have put upon the contract.” (emphasis added). That rule has been consistently followed by this Court, St. Paul at Chase v. Mfrs.

Life Insur., 262 Md. 192, 222-23 , 278 A. 2d 12 (1971), cert. denied, 404 U. S. 857 , 92 S. Ct. 104 , 30 L. Ed. 2d 98 ; Vincenti v. Kammer, 189 Md. 523, 529 , 56 A. 2d 688 (1948); Diamond v. Shriver, 114 Md. 643 , 80 A. 217 (1911). In Scarlett , a contract for the sale of land contained the language, “balance of purchase money to be paid within thirty days from date.” Those words were not viewed as an expression of intent that time was to be of the essence. Nor, as disclosed by the evidence there, was such an intention established by the “acts and conduct” of the parties subsequent to its execution. While tacitly conceding that the words used in the contract here are not alone sufficient to establish that time is of the essence, String