Dreisonstok v. Dworman Bldg. Corp.

• Citation: 284 A.2d 400,264 Md. 50
• Decision Date: 17 December 1971
• Docket Number: No. 82,82
• Parties: Lewis DREISONSTOK, Executor u/w of Louise S. Dreisonstok and John Davis, Successor Trustee u/w of Mollie Shepard v. DWORMAN BUILDING CORPORATION.
• Court: Court of Appeals of Maryland

Page 50

264 Md. 50

284 A.2d 400

Lewis DREISONSTOK, Executor u/w of Louise S. Dreisonstok and John Davis, Successor Trustee u/w of Mollie Shepard v. DWORMAN BUILDING CORPORATION.

No. 82.

Court of Appeals of Maryland.

Dec. 17, 1971.

Warren K. Kaplan, Washington, D. C. (Melrod, Redman & Gartlan, Washington, D. C. and Hyman Shapiro, Bethesda, on the brief), for appellants.

Warren Browning, Bethesda, for appellee.

Argued before HAMMOND, C. J., and BARNES, McWILLIAMS, SINGLEY, SMITH and DIGGES, JJ.

SINGLEY, Judge.

Mrs. Louise S. Dreisonstok, individually, and as trustee under the Will of Mollie Shepard, on 26 June 1970 brought an action in ejectment in the Circuit Court for Montgomery County against Dworman Building Corporation (the Dworman Corporation) and others, claiming that the defendants had wrongfully retained possession of a parcel of improved land known as 5430 Wisconsin Avenue, Chevy Chase, Maryland. ¹ There was evidence that this property consists of four lots, having a total frontage of 200 feet on Wisconsin Avenue, with a depth of 116 feet, improved by a one story brick building containing 2,508 square feet, occupied by Farnsworth Reed, Ltd., a clothing firm, which was a monthly subtenant of one of the defendants.

After a three day trial, the court submitted the case to the jury as to the only remaining defendant, the Dworman Corporation, under an instruction that Mrs. Dreisonstok, as a matter of law, had failed properly to terminate the lease in accordance with its terms. ² The jury was permitted to decide, however, whether the Dworman Corporation had committed a breach of a lease covenant entitling Mrs. Dreisonstok to re-enter, which would result in a recovery of possession of the premises.

The jury returned a verdict for Mrs. Dreisonstok on the issue of ejectment and for damages in the amount of rents tendered, but not accepted by her.

After receiving the jury's verdict the court considered a plea puis darrein continuance, made by the Dworman Corporation on equitable grounds, and concluding that the jury verdict would effect the forfeiture of a leasehold which an expert witness had testified was worth some $561,000 for a failure to make timely payment of taxes of $11,667.69, entered judgment for the Dworman Corporation in the ejectment case. The court, in granting equitable relief, then entered an order requiring the Dworman Corporation to pay arrearages of rent, to pay the costs in the ejectment case, and to create and to maintain a security deposit from which rents, taxes and other charges due for more than 30 days could be paid in the future.

Both Mrs. Dreisonstok and the Dworman Corporation appealed from this order. We can only assume that the Dworman Corporation has abandoned its appeal, since it filed a brief as appellee, but not as cross-appellant, Maryland Rules 804 b., 831 c., 831 g., although it did challenge the jury verdict in the brief which it filed as appellee. We regard this challenge, even had it been properly presented, as groundless, since reliance on Code (1957, 1969 Repl.Vol.) Art. 75, § 27 is misplaced in a case where a right of re-entry upon default is conferred by a written lease, Streeter v. Middlemas, 240 Md. 169, 174, 213 A.2d 471 (1965).

An understanding of the controversy requires a somewhat tedious litany of facts. By a lease dated 28 December 1956, Mrs. Mollie Shepard, Mrs. Dreisonstok's mother, had leased to Roger Euster the Wisconsin Avenue property for a term of 20 years with renewal options at a rent which at the time of trial was $1,000 monthly, subject to adjustment at five year intervals to reflect changes in the consumer price index. The lease contemplated that commercial zoning would be obtained; that existing improvements demolished, and that a commercial building costing at least $40,000 would be built by the tenant. The lease contained the provisions customarily found in what has come to be called a 'net-net' lease. The tenant covenanted, in part, that he would maintain adequate hazard and public liability insurance at his own expense written to protect the tenant as well as the landlord; that he would promptly comply with and carry out, at his own expense, all 'governmental orders' imposed upon or required of the landlord or tenant in connection with the premises, and that he would pay the rent and all taxes as they became due and payable. In 1963, Mrs. Shepard died. Under her Will, an undivided half interest in the Wisconsin Avenue property passed to Mrs. Dreisonstok individually, and the other half to Mrs. Dreisonstok as trustee under the Will.

In November, 1965, Euster assigned his leasehold interest to trustees under a deed of trust to secure a borrowing which he had made from a savings and loan association. In 1967, there was a default in Euster's payments under the obligation secured by the deed of trust, and in December, 1967, the trustees, acting under their power of sale, sold Euster's leasehold interest for $91,000 to Peoples National Bank of Maryland. After protracted negotiations in early 1968, Peoples National Bank sold the Wisconsin Avenue leasehold to Dworman Development Company in April for $125,000.

Dworman Development Corporation is an affiliate of Dworman Building Corporation, and both appear to be parts of a sizeable corporate structure involved in real estate development. Lester J. Dworman is the president and controlling stockholder of both corporations, as well as of the others which comprise the Dworman interests. Mr. Dworman testified that in accordance with his companies' policy the Wisconsin Avenue leasehold was transferred in May, 1969, to Dworman Building Corporation, because substantial improvements were in contemplation at that time.

Mrs. Dreisonstok's attorney, H. Max Ammerman, who acted as her agent, testified that on various occasions in 1968 and early 1969 he had had conversations with Dworman. At the time of Dworman's only visit to his office, Ammerman had informed Dworman of the chronic failure of Euster, the prior tenant, to comply with the covenants of the lease. In particular, Ammerman disclosed Euster's failure to pay the rent and taxes on time, and expressed the hope that Dworman would be more reliable. Ammerman stated that Dworman '* * * indicated he was as more substantial person; that he * * * had a lot more experience with this sort of thing * * *.' Although Dworman testified that he did not remember this conversation, there is a hint of a knowledge of Euster's breaches in Dworman's precautions at the time of settlement. Apprehensive that he was buying 'a pig in a poke,' Dworman sought, but did not get, an estoppel letter from Mrs. Dreisonstok, stating that there was no default in the performance of the covenants of the lease.

Despite Dworman's assurances, the bill for 1968 taxes due 30 September 1968, remained unpaid for more than six months. During the interim, Ammerman testified that he had had several conversations with Dworman and with his office manager, Mr. Sapanakis, requesting that the taxes be paid. In one such conversation, when he was apprised of the fact by Ammerman that the taxes had not, as yet, been paid, Dworman replied, 'Of course not * * * what's the rush?'

On 21 March 1969, Ammerman sent a letter to Dworman, notifying Dworman that he was still receiving delinquent tax bills, and warning him that if the bills were not 'taken care of within the next 48 hours, (he) would be compelled to institute such proceedings as (he) deem(ed) necessary to protect the interest(s) of (his) client without delay or further notice to (Dworman).' Despite this warning, the 1968 taxes were not paid until mid-April, 1969.

The bill for 1969 taxes, due 30 September 1969, was forwarded to Dworman on 9 September. With the taxes again overdue, on 21 January 1970 Ammerman sent Dworman a letter, which Dworman denies having received, enclosing a copy of the tax bills to which penalties had now been added and notifying Dworman that if the bills were not paid within 10 days, 'appropriate action will be taken without further delay or notice to you.'

During February, 1970, Ammerman testified that he had had several conversations with Dworman's office personnel, only because he had found it impossible to reach Dworman after the telephone conversations regarding the 1968 tax bill, informing them of the critical situation with respect to the taxes. During one of these conversations, Sapanakis promised to 'send the money down,' nevertheless, 'It didn't come.'

Mrs. Dreisonstok continued to receive delinquent tax bills; and on May 14th, 21st, and 28th the property was advertised for sale for non-payment of taxes with the sale scheduled for 8 June 1970. On 2 June 1970, Mrs. Dreisonstok paid the taxes and accrued penalties in the amount of $11,667.68. By letter of 18 June 1970, Mrs. Dreisonstok advised the Dworman Corporation that its lease had been terminated. ³ The ejectment suit was filed by Mrs. Dreisonstok on 26 June in the Circuit Court for Montgomery County; that same day, Mrs. Dreisonstok was presented with checks totalling $11,741.48 ($11,667.68 for taxes and penalties with 8% interest) by Carl G. Rosinski Company, which was acting as agent for the Dworman Corporation. Pursuant to leave granted by the court on 30 June 1971, these checks were endorsed over to the clerk of the court and deposited in its registry.

The colloquy which follows, an excerpt from the deposition of Dworman which was read into the trial record, establishes that it was Dworman's policy not to pay taxes on time:

'Q * * * Can you tell us why it was that the 1968 taxes were not paid until seven months after they were due and after delinquent notices had been sent to you?

'A (Dworman) Because that's how we usually pay our taxes.

'Q You customarily pay taxes several months after they are due?

'A (Dworman) Of course. Don't you?'

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