Wlodarek v. Thrift

Parke, J., delivered the opinion of the Court. In this action the original declaration had Philip Wlodarek, Eleanor Durkie and Adam F. Durkie, her husband, and the Realty and Mortgage Company, á body corporate, united as parties plaintiff, with James F. Thrift and David G. McIntosh, individually, and as law-years associated as partners under the firm name of McIntosh & Thrift, as the defendants. As a result of a demurrer the declaration was amended so that Philip Wlodarek became the sole plaintiff; and the defendants pleaded the general issues of non assumpsit and nil debet, and issues were joined thereon and the action went to trial with a jury. At the conclusion of the testimony, prayers were offered by both sides, but the court acted upon but two prayers.

These prayers directed a verdict in favor of the defendants, and the jury gave its verdict accordingly. A judgment in favor of the defendants was duly rendered, and the plaintiff has appealed. The ruling of the trial court on the two demurrer prayers is made the subject of the thirteenth bill of exceptions, and the other twelve exceptions are to the action of the court on the testimony. ⁴⁵⁷ One of the prayers granted was a general demurrer to the legal sufficiency of the evidence to entitle the plaintiff to recover, and the other granted prayer denied the action on the theory that the plaintiff as a mere stockholder in a corporation had no right of action for damages sustained by the corporation in its real estate. The withdrawal of the case from the jury requires a careful examination of all the testimony in order to ascertain whether the determination of the court should be sustained.

Since by the granting of the demurrer prayers the issues of fact were not submitted to the jury, all the testimony in support of the right of action must be accepted as true. It was upon this assumption that the trial court acted, no matter what might be the conflict of testimony and the court’s view of its weight of credibility. Without setting it forth in detail, there is on this record legally sufficient testimony tending to show these facts. James F. Thrift and David G. McIntosh are attorneys who compose the law firm of McIntosh & Thrift.

In the course of their practice they make examinations and abstracts of titles for their clients, for reward. The defendant Thrift informed the plaintiff that the firm guaranteed its title work. For a fee of forty dollars the defendants entered into a contract with the plaintiff to examine the title to two blocks of lots of land in Anne Arundel County for the purpose of informing the plaintiff whether the apparent owners of the lots could convey a good and merchantable title. The examination was made in the first part of 1925, and the plaintiff was advised by the defendants that the examination of title by them established that the purporting owners of the lots held them in fee simple by a good and merchantable title.

In reliance upon said examination and report, the plaintiff bought and paid for the lots, which were known as Nos. 20-25 in one block and 13-15 in the second, on the plat of “Bay Head,” but had the title to them conveyed to Eleanora Durkie and Adam F. Durkie, her hus ⁴⁵⁸ band, so that, while the record title in fee simple was vested in said grantees, the title was held by the grantees for the sole use and benefit of the plaintiff. The deed for Lots Nos. 20-25 was executed on February 19th, 1925, and the plaintiff took possession of the lots, and on August 29th, 1928, in execution of their agreement, the grantees of the legal title to the lots Nos. 20-25, along with another distinct block embracing Lots Nos. 18-15, at the request of the plaintiff, conveyed them in fee to the Realty and Mortgage Company, a body corporate of the State of Maryland, upon a similar agreement to hold the legal title to the lots for the use and benefit of the plaintiff. The two successive grantees of the legal title to the lots gave no consideration whatsoever, and, under the agreement with the plaintiff, were the successive grantees of the bare legal title. The plaintiff paid the fee of the defendants for the examination of the title, the purchase price of $2760 for Lots Nos. 20-25 to their original vendor, and the taxes assessed against the said lots, until October 14th, 1933, when one Sarah Stinchcomb asserted that she was the owner in fee simple of said lots.

The plaintiff forthwith made the adverse pretensions known to the defendants, who affirmed that the title to the lots was in fee simple and good and merchantable. Some time in the summer of 1933, the plaintiff had a prospective purchaser for Lots 20 to 25, inclusive, who had the title examined by his attorney. The examiner reported that the nominees of the plaintiff had acquired no title to the lots, and the sale was lost. The plaintiff had an interview with the attorney who had examined the title for the prospective buyer, and, with the information received, called upon the defendants and saw Thrift.

It was insisted by the defendants that the title was good and merchantable, but finally Thrift and the plaintiff agreed to call upon the attorney whose examination had discovered the defect. At the interview, the two attorneys talked apart and, after they separated, the plaintiff was told by Thrift that the title was bad. ⁴⁵⁹ The plaintiff then demanded to be compensated for the loss, and Thrift claimed the right for time to make the title good, but did nothing promptly to that end. However, as a result of the plaintiff’s importunity to act, Thrift instituted a suit in equity against Sally Stinchcomb in the name of the Realty and Mortgage Company, to quiet the title then of record in the company as heretofore stated. The plaintiff testified that the defendant Thrift asserted that he could get the title straightened out through court, but that his “firm was perfectly responsible to me for the title and whatever I had in it, but I must have patience until it goes through court, and after all means are exhausted through court when then is the time that that McIntosh & Thrift were going to pay me my money.

I hadn’t a thing under the sun to worry about. He said, it 'was a responsible, reliable firm, and they guaranteed me the title, and they were ready and willing to make good if they couldn’t get it cleared up through court.” The costs and expenses of the litigation were to be borne by the defendants, but they repudiated the obligation, and the plaintiff paid these charges. The Realty and Mortgage Company, Incorporated, was organized in the month of March, 1926, and the defendants were the attorneys in its formation. No stock was ever issued, and no one ever contributed or invested any capital except the plaintiff.

The plaintiff had the five lots conveyed to it in order to give it assets, in the event the plaintiff wanted to secure a loan for the company, but the corporation never functioned, as the defendants did not fulfill their promise to put money into the enterprise. All the money and property were supplied by the plaintiff and, although the formalities of incorporation, the adoption of by-laws, the procurement of a seal, and the minutes of the first meeting, were provided or directed by the defendants, the corporate existence was nominal, and all its assets furnished by the plaintiff, who solely carried on, conducted and controlled whatever was done in its corporate name and behalf. He paid the franchise tax until 1935, when he stopped. ⁴⁶⁰ In addition to the assertion in 1933 of counsel for the prospective buyer, a Doctor Hess, that the title to the five lots was defective, a Miss. Sally Stinchcomb claimed title to the lots, and in 1933 put up a fence in accordance with her pretensions, which embraced Lots Nos. 20 to 25, inclusive.

After the building of this fence, but in the same year, the defendants brought the heretofore mentioned suit in equity against the claimant, Sally Stinchcomb, in the name of the Realty and Mortgage Company, Incorporated, to quiet the title in the latter. The decree was obtained on April 23rd, 1936, but the defendant appealed, and this court reversed the decree and dismissed the bill of complaint, as is reported in the appeal of Sarah Stinchcomb v. Realty Mortgage Company, Inc., 171 Md. 317 . On being informed of this adverse result, the plaintiff renewed his demand for indemnification, but was urged to be patient, as a motior for re-argument had been made. The motion was no! granted, and the plaintiff was advised by Thrift that title to the five lots had been lost.

After the plaintiff made his discovery in respect of the title, it is in evidence that Thrift interviewed David Fyffe, the grantor of lots Nos. 20 to 25 to the Durkies, and told Fyffe that he had no title, and, on Fyffe’s inquiry of Thrift if the latter had not searched the title, Thrift’s response was that he had relied upon Fyffe’s word as to the title. The transactions were practically all had with the defendant Thrift, who acted for the partnership. It was he who, for the partnership, entered into the original contract and later conducted or directed all the subsequent transactions. The papers in relation to the incorporation of the Realty and Mortgage Company were, however, prepared by McIntosh, and he later participated in some of the conferences which grew out of the relation of client and counsel.

Whatever may be the liability of McIntosh is the liability of the law partnership, which here bound both by the acts of either in respect of the employment in question. ⁴⁶¹ The testimony on the part of the defendants was in flat contradiction of that offered to sustain the plaintiff’s case. Their testimony was in categorical denial of their employment either to examine the title to Lots Nos. 20-25 or to express an opinion of its being good and merchantable. It is their testimony that the plaintiff had previously had the title to these six lots examined, and that all they were employed to do, and all they did, was to draw the deed for these lots. If their testimony be accepted, there is no liability of the partnership on account of the defect in title.

On the other hand, if the testimony on the part of the plaintiff be taken as true, (1) the defendants entered into a contract for a reward with the plaintiff to examine the title to Lots Nos. 20-25 for the purpose of informing the plaintiff whether the title was a good and merchantable one; and (2) the defendants breached that contract by not making any examination of title and, notwithstanding such failure to examine, by advising the plaintiff that the title in question was good and merchantable, whereby (3) the plaintiff sustained material loss and injury as a direct consequence of such breach and because the title was not good and merchantable. The issues of fact raised by the irreconcilable conflict of testimony on the respective parts of the plaintiff and of the defendants are not for the resolution of the court but for a finding of fact by the jury. Whatever may be the conviction of the trial court or of this tribunal as to what were established as facts by the conflicting testimony, the issues of fact are and must remain inviolably the function of the jury. It is, therefore, error for the court to have withdrawn the resolution of this contradictory testimony from the jury, unless all the testimony in the causé tending to support the plaintiff’s case, when assumed to be true to its utmost credible extent, is nevertheless legally insufficient to entitle the plaintiff to recover.

For every breach of a contract, there is a right of recovery of at least nominal damages. The action and pleadings are in contract, and, if the plaintiff’s testimony ⁴⁶² of the terms of the contract be true, the failure of the defendants to examine the title, as the plaintiff’s testimony tends to show was agreed for reward, is a breach of contract for which an action ex contractu lies. The question of the measure of damages then becomes important, and, that is the material problem on this appeal (a). Upon the assumption of what the testimony tends to prove in support of the plaintiff’s case as the facts found by the jury, the recovery of substantial damages depends upon the concurrent existence of these primary conditions: (first) that the title was not good and marketable; (second) that the defect making it so was one which, by the exercise of reasonable and ordinary care and diligence upon the part of the defendants, might have been discovered, and, so discovered, was of such a nature that no reasonable doubt may be entertained by an attorney possessed of that reasonable degree of knowledge and skill which is requisite and necessary under the circumstances, that the title was by such defect rendered not good and marketable (b) ; and (third) that the plaintiff suffered other than nominal damages (c) as the proximate result of the breach of contract by the defendants.

(a) Williston on Contracts (Rev. Ed., secs. 1339a, 1340; Sutherland on Damages (4th Ed.), secs. 9-11; Brent v. Davis, 9 Md. 217, 228, 229 . (b) 2 Mechem on Agency (2nd Ed.), sec. 2202; National Savings Bank v. Ward, 100 U. S. 195 , 25 L. Ed. 621 ; Warvelle on Abstracts and Examination of Titles (4th Ed.), sec. 619, pp. 654-656; Caltrider v. Weant, 147 Md. 338, 339-341 , 128 A. 72 ; Watson v. Calvert Bldg. & Loan Assn., 91 Md. 25, 33 , 45 A. 879 ; Cochrane v. Little, 71 Md. 323 , 18 A. 698 ; Brewster v. Frazier, 32 Md. 302 . (c) 2 Mechem on Agency (2nd Ed.), sec. 1291; Horner v. Beasley, 105 Md. 193, 198 , 65 A. 820 ; Ahrens v. Ijams, 158 Md. 412, 423 , 148 A. 816 . I. There is testimony tending to show that the plaintiff eihployed the defendants to examine and pass upon the title to certain lots in Anne Arundel County which ⁴⁶³ one Thomas J. Fyffe claimed to own in fee simple, and which the plaintiff was under contract to buy, if the title were good and marketable.

The land and equity records of Anne Arundel County disclose that Fyffe had neither a good nor marketable title to these lots, as had been adjudicated at the time he took his deeds to the land involved in the present controversy. The facts are that Masonetta M. Waring, wife of Everett Waring, and Frank M. Stinchcomb and Sarah A. Stinchcomb, were the owners of adjoining tracts of land which fronted on the Chesapeake Bay and were anciently divided by the waters of Little Magothy River or Creek as it ran and emptied into the Chesapeake Bay. In the course of time the original outlet of the river gradually became filled by alluvium, so that the river sought and found a new outlet and left, by accretion and change in the westernly course of the river to its new outlet, a bar or strip of land between the location of the river’s present bed to its south and the water of the Chesapeake Bay to its north. The length of this strip of land from the former outlet of the river, on the east, to land’s end at the new