Westpark, Inc. v. Seaton Land Co.

Sybert, J., delivered the opinion of the Court. In this appeal we are called upon to determine which of tw’o development corporations has the paramount right to purchase certain land in Baltimore City from the owners, Joseph P. Cook and Herman F. Cook, Jr., and their wives, appellees. The appellant, Westpark, Inc., claims on the basis of its exercise of a right of first refusal contained in an agreement executed by the Cooks in 1954, while Seaton Rand Company, one of the appellees, claims under a contract of sale ⁴⁴⁰ signed by the Cooks in 1958. The Circuit Court of Baltimore City decreed specific enforcement of the Seaton contract and dismissed Westpark’s cross bill seeking similar relief, or, in the alternative, money damages.

Westpark appealed. The Cooks owned several parcels of land on Cooks Lane, near Edmondson Avenue, in the western section of the city. Joseph Cook and his wife live at 703 Cooks Lane, a lot 120 feet square, which they own. Herman Cook and his wife own and live at 713 Cooks Lane, containing one acre.

Joseph and Herman are brothers. Their maiden aunt, Belle Cook, owned and lived on 5.2 acres, known as 709 Cooks Lane, located between the brothers’ lots. Those three properties are the subject of these proceedings. In addition, Joseph and Herman, in 1954, owned 12.04 acres of undeveloped land on Cooks Lane north of and adjoining the other properties.

The involved factual situation leading to the present litigation originated with an agreement on April 8, 1954, between the Cooks and George J. Miller, Jr., Builder, Inc., concerned primarily with the 12.04 acre tract. This tract had been in the hands of a real estate broker for sale for some time, without success. Its topography was difficult and rocky, with an open stream at the bottom of a deep ravine, making the feasibility of development problematical. George J. Miller, Jr., án officer of the corporation bearing his name, became interested in the tract and discussed it a number of times with the Cook brothers.

Realizing that a considerable expenditure of money and effort would be necessary to determine whether development was practicable, the parties worked out an option agreement under which the Miller company was to have 90 days in which to purchase the 12.04 acres at a price ranging from $37,000 to $40,000, depending upon the number of houses that could be built thereon. In consideration of the option, the Miller company agreed to pay the costs of a topographical survey and an engineering study, with the condition that if the option was not exercised, the results of the survey and study would be delivered to the Cooks upon reimbursement to the Miller company for the cost of the survey alone, not to exceed $600. ⁴⁴¹ Miller was also interested in Belle Cook’s adjoining 5.2 acres. This land was closer to Edmondson Avenue, a main traffic artery, was free of topographical difficulties, and would be relatively inexpensive to develop. However, Miss Cook, then 76 years of age, desired to end her days there, so it could not be developed as long as she lived on it.

On the other hand, Miller foresaw the possibility that his company would develop the more difficult and expensive 12.04 acres, but that some late comer might take over the 5.2 acre tract, whose value would be enhanced and development facilitated by his company’s improvement of the 12.04 acres. During negotiations for the option on the brothers’ 12.04 acres, Miller requested an option on Belle Cook’s 5.2 acres. In discussion between the Cook brothers, their attorney, and Miller, it was pointed out that an option at a fixed price would be unfair if the value of the land should increase, as seemed likely. Finally, the parties agreed to include in the option agreement relating to the 12.04 acres, a right of first refusal as to the 5.2 acres, under which the Miller company would for five years have the right to meet any price and terms acceptable to the Cooks should they decide to sell the property.

The right of refusal provision became paragraph 10 of the April 8, 1954 agreement and read as follows: “10. The parties hereto hereby now agree that the Buyer shall have the ‘right of refusal’ with respect to the following described property, to wit: — All other land presently owned by the signatories hereto between Cooks Dane and the west side of Hunting Ridge and Edmondson Avenue, exclusive of the residence of Joseph P. Cook and Herman F. Cook, this ‘right of refusal’ herewith given the Buyer shall be construed to mean that if the owners of the aforedescribed property shall at any time within five (5) years from the date of this Option Agreement decide to sell the property hereinabove described in this paragraph, they shall, before selling it to any other party or person, give the Buyer herein written notice of their intention to so sell the property and ⁴⁴² of the price for which they intend to sell it, and the terms thereof, the Buyer herein shall have seven (7) days from the receipt of such written notice to accept such offer.” The effect of the description of land in paragraph 10 was to include only Belle Cook’s 5.2 acres, since Joseph’s and Herman’s residence lots were excluded. She executed the agreement, along with the other parties, above a notation stating that she “signed this Agreement to indicate her intention to be bound by the ‘right of refusal’ set forth in paragraph 10 hereof since she is presently the owner of the land described in said paragraph”. Belle Cook had raised the Cook brothers after their mother’s death in their early childhood, and the record shows that she did not hesitate to execute the agreement in order to facilitate the possible sale by her nephews of their 12.04 acres.

It proved impossible to complete the topographical survey and engineering study on the 12.04 acres within the 90 day limit provided in the option, and consequently the parties executed an agreement extending the option for an additional 30 days. Belle Cook signed the instrument, which contained a notation that she did so to indicate her intention to be bound by the extension and by the right of refusal set forth in paragraph 10 of the original option. George J. Miller, Jr., Builder, Inc., assigned the option agreement on August 4, 1954, to the appellant, Westpark, Inc., of which Miller is vice-president. On the next day the Cooks and Westpark entered into a supplemental agreement substituting Westpark for the Miller company as a party to the original option agreement.

Belle Cook also executed this agreement, with a notation similar to that mentioned in the preceding paragraph. Westpark exercised the option on the Cook brothers’ 12.04 acres by paying a purchase price of $40,000 and receiving a deed. From 1954 to 1957 Westpark built 15 detached, 52 semi-detached, and 15 group houses on this tract. It paid half the cost of streets and the whole cost of sanitary sewers draining the area, and dedicated them to Baltimore City, as ⁴⁴³ required by city regulations.

There was testimony to the effect that the improvements and utilities installed on the 12.04 acre development by Westpark increased the value of Belle Cook’s 5.2 acre tract and made it easier to develop. Miller testified that “* * * at the time we made the agreement [of April 8, 1954] we wouldn’t have taken the 12-acre tract without the * * * right of refusal on the 5-acre tract and I can state that quite emphatically.” In 1956 Belle Cook conveyed the 5.2 acres to Joseph and Herman Cook as a gift. She died in 1957, and somewhat later the Cooks listed the tract with a realtor for approximately one year, with no results. Miller testified that the reason for this listing was to ascertain the market value of the property and to sell to Westpark if it met the price offered, and, if not, to sell to the offeror.

In 1957, St. William’s Church, part of whose property is directly across Cooks Lane from the 5.2 acres, became interested in acquiring the property and was informed by the Cooks of Westpark’s right of refusal. In late 1957 and early 1958 Miller surveyed and staked the 5.2 acres and laid out a street with a view to development. Later in 1958 Miller and Herman Cook discussed a joint venture for the construction of apartments, Miller to contribute the building and Cook the land. Joseph Cook was not interested in this proposal, and Herman did not see his ■way clear to purchase his brother’s interest in the land, but discussions between Miller and Herman continued on into September.

On September 11, 1958, the Cooks listed the 5.2 acres for sale with Russell T. Baker and Company, a corporate realtor, through Richard M. Larrick, a Baker company salesman, who was a friend of the Cooks. Miller was in the home of Herman Cook on the evening of September 11, discussing the apartment venture, when Larrick arrived to obtain the listing. Miller testified he remained only a few minutes thereafter and said nothing to Larrick concerning Westpark’s right of refusal, but stated that Herman Cook told him he would disclose Westpark’s interest, and that he relied on it, as on past occasions. Both Cook brothers and Larrick testified that ⁴⁴⁴ on that same evening the Cooks told Larrick of Westpark’s right of refusal and the details thereof.

Larrick discussed the right of refusal with his sales manager, and on the request of the latter the Cooks had their attorney send a copy of the 1954 option agreement to the Baker company. Larrick advertised the 5.2 acres for sale and received a call from Robert Meyerhoff, president of appellee, Seaton. Larrick showed the property to Meyerhoff, and later to his assistant, Trivas, and Larrick and Herman Cook testified that shortly thereafter an offer of $40,000 was received from Sea-ton on the 5.2 acres, although Meyerhoff stated that to his recollection no offer was made on that tract alone. Mr. and Mrs. Herman Cook then decided to sell their home also, and Seaton made an offer on both properties.

Thereupon Mr. and Mrs. Joseph Cook likewise determined to sell their home, and Larrick was asked to try to sell all three properties. No listing agreement was ever signed, except the original one for the 5.2 acres. An offer of $80,000 was made by Seaton for the three properties by tendering a standard printed form of contract of sale, prepared by Seaton’s counsel, into which he had inserted the following clause: “It is agreed that if Vendee shall default in paying the balance of the purchase money in accordance with the terms of this agreement, Vendors shall retain all money theretofore paid hereunder as liquidated damages for the breach of contract, and ghall not have any right of action against Vendee arising out of this agreement either at law or in equity.” The price of $80,000 was not acceptable to the Cooks. Both brothers testified that they wanted $50,000 for the 5.2 acres, that Herman wanted $20,000 for his home and Joseph wanted $18,000 for his.

Larrick was informed that they would not take less than $88,000 for the three properties, and he so advised ■ Meyerhoff, who thereupon stated that Seaton would pay that figure. Larrick struck out the price of $80,000 in the contract pre ⁴⁴⁵ pared by Seaton’s counsel, inserted $88,000 instead, made other necessary changes, and took the contract to the home of Herman Cook late on the night of Tuesday, October 28, 1958, for signature and initialing of the changes. Herman testified that Larrick assured him that “everything was all right,” but that he said to Larrick, “you know this may not be good for me to do this because Mr. Miller [Westpark] has the right of refusal”, and that Larrick replied, “I know that”. Larrick had Joseph Cook and his wife sign the contract on the next day.

Joseph testified that before he signed he told Larrick “Don’t forget to notify Miller,” and asked, “Is everything all right now before I sign it?” and that Larrick replied, “Yes, everything is all right.” Joseph then added, “Because you know George [Miller] has to be notified,” and he was “pretty sure” that Larrick said “Everything is taken care of.” The contract of sale was dated October 28, 1958. As soon as the Joseph Cooks executed it on the 29th, Larrick had it signed by Seaton’s officers and left an executed copy with that company, after receiving the $2,000 deposit required therein. It is conceded that up to this point Seaton had no knowledge of Westpark’s right of refusal under its option agreement of April 8, 1954. In his testimony, Larrick admitted that on the evening when he obtained the listing of the 5.2 acres, the Cooks told him of Westpark’s right of refusal; that the Baker organization, on request of its sales manager, had obtained a copy of the 1954 option agreement and kept it in its file on the Cook property; that he was in touch with the sales manager in every step of the Cook transaction; that he and the Cooks had discussed the right of refusal several times; that the Cooks impressed on him that they were obligated to notify West-park as to any proposed sale; that he knew that under the option agreement Westpark had seven days to meet the price offered by anyone else; that he had acted “too hasty” in delivering the executed contract of sale to Seaton; that the reason had been that he wanted to make a sale, and that he thought the disclosure of Westpark’s right of refusal would ⁴⁴⁶ have caused difficulty in making a sale.

He asserted that the Cooks gave him no instructions as to how to handle the transaction when they signed the contract, and that after an earlier statement by Herman Cook that he didn’t think Miller (West-park) was in a position to take up the option, “* * * I just went on the assumption that he was not interested in the property.” The record shows that after the contract of sale was delivered to Seaton, Larrick discussed the situation with his sales manager, who contacted the Baker organization’s counsel. On advice of the latter, the sales manager called Seaton on October 30 and notified it of Westparlc’s right of refusal. Meyerhof! consulted Seaton’s counsel, who checked the land records, found that the right of refusal had not been recorded, and advised that the Seaton contract should be acknowledged and recorded promptly. Larrick took Trivas, who was also a notary public, to the Herman Cook home, where the four Cooks acknowledged the instrument.

The Cooks were not informed of the real reason for the visit, Larrick merely telling them that Seaton was a stickler for detail and just wanted to make sure that the signatures on the contract were theirs. The Seaton contract was filed for recording among the land records on the morning of October 31. Larrick also told Herman Cook that he had better inform Miller of the Seaton contract. Cook did so on the night of October 29.

He said that Miller seemed to be interested, and asked for a copy of the Seaton instrument. Miller testified that on that evening Cook gave him the breakdown of the sale price—$50,000 for the 5.2 acres and $20,000 and $18,000 for the two residences. On the next day Larrick informed the Cooks that the notice to Miller must be in writing, and a letter, dated October 30, 1958, and postmarked on October 31, was mailed to Miller and was received by him on November 1. It read as follows: “We have a contract dated October 28, 1958 for 703, 709, and 713 Cook’s Lane for “Eighty-eight Thousand ($88,000.00) ...Dollars of which Two Thousand ($2,000.00) ....Dollars ⁴⁴⁷ have been paid prior to the signing hereof and -the balance to be paid as follows: Five Thousand dollars ($5,000.00) in cash sixty days after the date hereof, and the remaining balance, that is, Eighty-one thousand dollars (81,000.00) in cash, at settlement, which shall take place ninety days after the date hereof, provided that Vendee shall have the right to settle at any time prior to said ninety days upon paying in cash the entire balance of said purchase price.” At the trial, counsel for the Cooks informed the chancellor that the purpose of the letter was to give Westpark an opportunity to exercise its right of refusal under its option agreement.

Miller received a copy of the Seaton contract on November 3, and two days later delivered to Joseph Cook, and mailed to Herman Cook, a letter whereby Westpark informed the Cooks of its exercise of its right of refusal as to the 5.2 acres. The letter also stated that, since the Cooks’ letter of October 30 had offered all three properties to West-park for $88,000, “We also hereby accept your offer to sell so much of the said property, as is not subject to our ‘right of refusal’, that is, the residences of Joseph P. Cook and Herman F. Cook * * With the letter, Westpark forwarded to the Cooks a contract containing price and terms identical with the price and terms of the Seaton contract, including the special clause relating to remedies upon default by the purchaser. Miller testified that his purpose was to duplicate exactly the Seaton contract. A check for deposit of $2,000 was enclosed with the letter.

At the trial, Miller testified that Westpark is ready, able and willing to purchase the 5.2 acres at $50,000, the valuation placed by the Cooks upon that tract separately, or to purchase all three properties at $88,000. In their answers to the bill of Seaton and the cross-bill of Westpark, in their testimony, and in their brief here, the Cooks take no position in the controversy between Seaton and Westpark as to which is entitled to the property in question, but “stand ready, willing and able to convey said property as the Court directs.” Asserting that they had been placed in their present position by the action of the Baker ⁴⁴⁸ company, through its agent, Larrick, the Cooks impleaded the Baker company as a defendant so that it could be held responsible for any damages which might be assessed against the Cooks. In the situation thus presented, the learned chancellor entered a decree denying Westpark’s claim for equitable relief or damages, and specifically enforcing a conveyance of the three Cook properties to Seaton.