Bachmann v. Glazer & Glazer, Inc.

• Decision Date: 01 September 1988
• Docket Number: No. 105,105
• Citation: 316 Md. 405,559 A.2d 365
• Parties: Albert J. BACHMANN, Jr. et ux. v. GLAZER & GLAZER, INC. ,
• Court: Maryland Court of Appeals

Page 405

316 Md. 405

559 A.2d 365

Albert J. BACHMANN, Jr. et ux. v. GLAZER & GLAZER, INC.

No. 105, Sept. Term, 1988.

Court of Appeals of Maryland.

June 19, 1989.

Alan Hilliard Legum (Legum & Henley, P.A., both on brief), Annapolis, for appellant.

Mitchell Stevan (Weinberger, Weinstock, Sagner, Stevan & Harris, P.A., both on brief), Baltimore, for appellee.

Argued before ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ., and MARVIN H. SMITH, Associate Judge of the Court of Appeals of Maryland (retired), Specially Assigned.

MARVIN H. SMITH, Judge, Specially Assigned.

We shall here hold that a guarantor of rent is not released from his obligation when a third party pays that debt pursuant to an agreement with a creditor of the tenant that the third party shall have an assignment of the creditor's claim.

Appellants, Albert J. Bachmann, Jr., and Evelyn Bachmann, his wife (the guarantors), were the guarantors of a commercial lease between A.J.B. Clothiers, Inc. (the tenant) and The Village of Cross Keys, Incorporated (the landlord). The lease was assigned to appellee Glazer & Glazer, Inc. (Glazer).

I

This appeal is one from a grant of summary judgment. Under Maryland Rule 2-501 summary judgment is to be rendered forthwith "if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law." The function of a summary judgment is not to try the case or to attempt to resolve factual issues, but to determine whether there is a dispute as to a material fact sufficient to provide an issue to be tried. See Coffey v. Derby Steel Co., 291 Md. 241, 247, 434 A.2d 564 (1981); Berkey v. Delia, 287 Md. 302, 304, 413 A.2d 170 (1980) (and cases cited therein); Washington Homes v. Inter. Land Dev., 281 Md. 712, 716, 382 A.2d 555 (1978). On review, therefore, we are concerned with whether there was a dispute as to any material fact and, if not, whether the movant was entitled to judgment as a matter of law.

We set forth the facts which we glean from the pleadings, affidavits, and exhibits.

On June 14, 1985, the tenant leased commercial space in Harundale Shopping Center from the landlord. The tenant operated a men's clothing store known as "Gentleman's Quarters." The lease agreement prohibited assignment without the written consent of the landlord. Under an agreement executed the same day as the lease agreement the guarantors guaranteed the rental payments. By the terms of that agreement they could not be released from their obligations as guarantors even if the landlord released the tenant from its obligations. The guaranty agreement also provided that the guaranty would extend to any assignee of the tenant's interest in the lease.

On September 6, 1985, the tenant entered into a promotional sales agreement with Glazer whereby Glazer agreed to supply merchandise on consignment and to act as a sales consultant. Among the remedies reserved to Glazer in the promotional sales agreement, in the event of default by the tenant, is the power of attorney granted to Glazer to assign the lease to Glazer. The guarantors also guaranteed the promotional sales agreement, including "all sums due Glazer & Glazer, Inc. ... whether arising out of this agreement or out of any other agreement in writing which Glazer & Glazer, Inc., may make with [the tenant]."

The tenant defaulted on the promotional sales agreement. On December 9, 1987, Glazer exercised the power of attorney to assign itself the lease. At the time of the assignment the tenant owed three months rent amounting to $15,686.99. ¹ By letter dated December 9, 1987, the attorney for Glazer transmitted the assignment of lease to counsel for the landlord seeking the landlord's consent. The letter stated that Glazer agreed to pay the tenant's back rent and that in return for this it was agreed that the landlord would "assign to Glazer & Glazer, Inc. ... Landlord's claim against [the tenant] and its guarantors for the said past due rent of $15,686.99." ² In a second letter, also dated December 9, 1987, Glazer's attorney acknowledged that the assignment of the lease would operate for a temporary period of 30 days and that in the intervening 30-day period "the Landlord [would] prepare a lease agreement on its usual form for assignment which, when executed, [would] operate for the remaining term of the lease." The landlord consented to the assignment.

Pursuant to the December 9, 1987, agreement, on December 31, 1987, Glazer paid the landlord the back rent owed by the tenant. On February 9, 1988, Glazer brought suit against the guarantors in the Circuit Court for Anne Arundel County. The trial court granted summary judgment in favor of Glazer for the sum of $12,941.77 and costs. The guarantors appealed to the Court of Special Appeals. We issued a writ of certiorari prior to a determination in that court in order that we might consider the important public question here presented.

II

The guarantors contend that their obligation as guarantors of the tenant's rental payments was discharged when Glazer paid the back rent and that the trial court thus erred in granting summary judgment in favor of Glazer.

We believe this case involves the doctrine of subrogation. Although Glazer did not specifically invoke the doctrine of subrogation, the pleadings contain all of the elements necessary for application of this equitable remedy. On at least two previous occasions this Court has applied the doctrine of subrogation even though the plaintiff did not argue this theory of recovery.

In Schnader, Inc. v. Cole Build. Co., 236 Md. 17, 202 A.2d 326 (1964), a developer (Schnader) purchased 38 lots from another developer (Cole) who had failed to fulfill a public works agreement on other lots not purchased by Schnader. Schnader was the assignee of the public works agreement between the county and Cole. The county would not allow Schnader to pave the streets on his property until the streets on Cole's property were paved. Schnader was forced to pay the cost of the uncompleted portion of the public works agreement on Cole's lots in order to save his $500,000 investment. The trial court ruled that Schnader had paid the money to the county as a "volunteer." Schnader had advanced several theories of recovery at trial, none of which was the doctrine of subrogation. Nevertheless, this Court held that Schnader was entitled to recover under that doctrine because his pleadings satisfied the requisite elements. 236 Md. at 24-25, 202 A.2d 326. That case was one involving legal subrogation. The essential elements are: (1) the existence of a debt or obligation for which a party, other than the subrogee, is primarily liable, which (2) the subrogee, who is neither a volunteer nor an intermeddler, pays or discharges in order to protect his own rights or interests. Id. at 23, 202 A.2d 326.

Maryland Title v. Kosisky, 245 Md. 13, 225 A.2d 47 (1966), is another case involving legal subrogation. The plaintiff did not raise the issue of subrogation but this Court, citing Schnader, held that the application of the doctrine was appropriate if the pleadings alleged the necessary elements and these elements were supported by the facts. 245 Md. at 19, 225 A.2d 47. Mr. and Mrs. Kosisky sold a house and deposited the proceeds in escrow with the settlement agent, Sapero, pending settlement on their new house. The money was held under an irrevocable trust for the vendor of the new home. Maryland Title was advised of the escrow account. The money in the escrow account was not received on the day of settlement and Maryland Title paid the vendor from its own funds. When it was unable to collect from Sapero, Maryland Title sued the Kosiskys. This Court determined that the title company would have had a right of subrogation against the Kosiskys but for the fact that the right of subrogation can be lost by agreement. Id. at 21, 225 A.2d 47. Maryland Title knew the money was to come from Sapero and acquiesced in looking to Sapero for payment by making a notation to this effect on the settlement sheet.

We are here presented with another situation where a plaintiff has not specifically invoked the doctrine of subrogation, but, as in Schnader and Maryland Title, all of the elements of this doctrine have been pleaded and proved. Glazer is thus entitled to recover under the doctrine of subrogation.

The Supreme Court of the United States has observed that subrogation is one of the oldest of the equitable doctrines evolved by the courts. Under the doctrine of subrogation "one who has been compelled to pay a debt which ought to have been paid by another is entitled to exercise all the remedies which the creditor possessed against that other." Amer. Surety Co. v. Bethlehem Bank, 314 U.S. 314, 317, 62 S.Ct. 226, 228, 86 L.Ed. 241 (1941) (citing H. Sheldon, The Law of Subrogation § 11 (2d ed. 1893).

Subrogation is founded upon the equitable powers of the court. It is intended to provide relief against loss and damage to a meritorious creditor who has paid the debt of another. Milholland v. Tiffany, 64 Md. 455, 460, 2 A. 831 (1886). The doctrine is a legal fiction whereby an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person. Harford Bank v. Hopper's Estate, 169 Md. 314, 324, 181 A. 751 (1935) (citing Aetna Life Ins. Co. v. Middleport, 124 U.S. 534, 8 S.Ct. 625, 31 L.Ed. 537 (1888)). This third person succeeds to the rights of the creditor in relation to the debt. Finance Co. of Am. v. U.S.F. & G. Co., 277 Md. 177, 182, 353 A.2d 249 (1976) (and cases cited therein); Schnader, 236 Md. at 22, 202 A.2d 326. The rationale underlying the doctrine of subrogation is to prevent the party primarily liable on the debt from being unjustly enriched when someone pays his debt. Security Ins....