George L. Schnader, Jr., Inc. v. Cole Bldg. Co.

• Decision Date: 15 July 1964
• Docket Number: No. 418,418
• Citation: 202 A.2d 326,236 Md. 17
• Parties: GEORGE L. SCHNADER, JR., INC. v. COLE BUILDING CO., Inc.
• Court: Maryland Court of Appeals

Page 17

236 Md. 17

202 A.2d 326

GEORGE L. SCHNADER, JR., INC. v. COLE BUILDING CO., Inc.

No. 418.

Court of Appeals of Maryland.

July 15, 1964.

Samuel F. Kenney and Richard R. Beauchemin, Baltimore (Thomas F. Dempsey, Baltimore, on the brief), for appellant.

Richard C. Murray, Towson (LeRoy E. Gerding, Baltimore, on the brief), for appellee.

Before BRUNE, C. J., and HENDERSON, HAMMOND, PRESCOTT, HORNEY, MARBURY and SYBERT, JJ.

HORNEY, Judge.

Although numerous questions are raised on this appeal, the principal one is whether the purchaser and present owner of an undeveloped portion of a platted subdivision or development of land in Baltimore County is entitled to recover from the seller and former owner of the whole subdivision, by way of subrogation or otherwise, a portion of what the present owner was compelled to pay for public improvements as an assignee of the public works agreement between the former owner and Baltimore County. George L. Schnader, Jr., Inc. (Schnader) is the appellant and Cole Building Company, Inc. (Cole) is the appellee.

Cole, as the former owner of the subdivision known as 'Laureldale,' entered into a public works agreement with the County on January 9, 1956, and by the terms thereof agreed, among other things 'to assume the full cost of street paving, curbs and gutters' for the standard pavement width of a street in a cottage type of development. It thereafter developed a substantial portion of Laureldale and partially performed its obligations under the public works agreement. Aside from the lots subsequently sold to Schnader, Cole had sold some of the Laureldale lots to others both before and after homes had been built on them by Cole.

After a part of the paving had been laid, Cole, on October 28, 1958, conveyed to the County, for public highway purposes, all its right, title and interest, first, in and to the bed of Evergreen Drive (running from Jerald Drive to a point opposite the division line between Lots No. 61 and 62); second, in and to the bed of a street designated as Ivy Place on the plat but now known as Holly Place; third, in and to the bed of Jerald Drive; and fourth, in and to the bed of Laurel Drive (running from Jerald Drive to a point opposite the division line between Lots No. 96 and 97).

Subsequently, Cole and Schnader entered into an agreement on September 17, 1959, wherein Cole agreed to sell Schnader thirty-eight of the numbered lots in Laureldale, as well as the beds of such streets as were outlined in red on a plat made a part of the contract of sale, ¹ including John Drive and Ivy Place and the dead-end part of the latter between the side lines of Lots No. 12 and 13, and also agreed to assign to Schnader all its right, title and interest in the public works agreement.

In compliance with the contract of sale, Cole, on December 30, 1959, conveyed to Schnader Lots Nos. 3 to 18 inclusive, 40 to 43 inclusive, 46 to 50 inclusive, 54 to 61 inclusive, and 73 to 77 inclusive, together with all right, title, interest and estate of Cole in and to the beds of any streets not theretofore conveyed to the County, but no reference was made therein to the public works agreement.

Prior thereto, however, also in compliance with the contract of sale, Cole, on December 1, 1959, had assigned to Schnader (by an assignment executed by and between Cole, Schnader and the County) all its (Cole's) right, title and interest in that portion of the public works agreement affecting the same thirty-eight lots as were designated by number in the deed. As to such lots, Schnader accepted 'all obligations' under the public works agreement 'as now being assigned.'

Thereafter, during the spring of 1960, Schnader began constructing homes on the lots it had purchased and requested the county department of public works to put the public works agreement in operation as to such lots. The department, however, refused to do so unless such of the unassigned portion of the agreement as had not been finished was completed at the same time. Both Schnader and the department requested Cole to deposit funds to cover the cost of completing the remainder of the unassigned portion of the agreement, but it refused to do so, and continued to refuse, despite repeated demands made by Schnader for compliance.

As of that time, Schnader had more than $500,000 invested in its thirty-eight lots and the homes it had constructed thereon and, in order to save its investment, it entered into a supplementary agreement with the County on April 28, 1961, whereby it guaranteed payment of the entire uncompleted portion of the public works agreement between Cole and the County.

On May 18, 1962, Schnader conveyed to Baltimore County, for public highway purposes, all its right, title and interest in and to the beds of Ivy Place, Evergreen Drive, John Drive and Laurel Drive.

On the basis of all the documentary evidence, particularly the original public works agreement between Cole and the County and the assignment of the portion thereof relating to the lots sold by Cole to Schnader, it is apparent that Schnader was obligated to pay the cost of paving (as well as curbing and guttering) such portions of the unpaved streets as were applicable to its thirty-eight lots, but no more, and that Cole was liable for the remainder. It is not negated that the portion of the public works agreement for which Cole remained responsible was completed at a total cost of $8,283.60 and that Schnader paid therefor. Schnader, claiming reimbursement, sued Cole for that sum plus interest. The case was tried on April 10 and 11, 1963, and resulted in the entry of a judgment for costs on November 13, 1963, in favor of Cole against Schnader. This appeal followed.

The trial judge, despite his having stated in the course of his written opinion that there was a 'fair inference that the parties never intended that Schnader should pay all of the [remainder of the] amount due under the public works agreement, but only that portion which was applicable to the lots conveyed to [it]' and that the assignment of a portion of the agreement confirmed that fact, concluded nevertheless that Schnader had voluntarily paid the County and that it, in the absence of a separate agreement between itself and Cole, was not entitled to recover from the latter that portion of the cost of completing the public works agreement which Schnader advanced for Cole, and entered a verdict in favor of Cole for costs.

Although Schnader advanced several theories as to why it was entitled to recover, its claim for reimbursement is primarily based on the doctrine of subrogation or substitution. The principle of subrogation is an equity doctrine, Schaeffer v. Sterling 176 Md. 553, 6 A.2d 254 (1939), but in many jurisdictions it is recognized and enforced at law as well as in equity. See Hartford Acc. & Indem. Co. v. First Nat. Bank & Trust Co. of Tulsa, 287 F.2d 69 (10th Cir.1961); Sullivan v. Naiman, 130 N.J.L. 278, 32 A.2d 589 (1943); Offer v. Superior Court, 194 Cal. 114, 228 P. 11 (1924); Black v. Chicago Great Western R. Co., 187 Iowa 904, 174 N.W. 774 (1919); De Brauwere v. De Brauwere, 69 Misc. 472, 126 N.Y.S. 221 (1910). See also 50 Am.Jur., Subrogation § 142; 83 C.J.S. Subrogation § 64. This Court has not heretofore specifically stated that the doctrine of subrogation is cognizable at law as well as in equity, but several previous decisions have recognized the right in cases at law. See, for example, Packham v. German Fire Ins. Co., 91 Md. 515, 46 A. 1066, 50 L.R.A. 828 (1900); Maryland Trust Co. v. Poffenberger, 156 Md. 200, 144 A. 249, 62 A.L.R. 546 (1929); Noma Electric Corp. v. Fidelity & Deposit Co., 201 Md. 407, 94 A.2d 277, 35 A.L.R.2d 1117 (1953). Cf. Orem v. Wrightson, 51 Md. 34 (1879), where the right of subrogation was allowed in the Orphans' Court. Further, Maryland Rule 243a (based on a former statute) expressly recognizes the right of a subrogee to seek a judgment at law, the only requirement being that 'the action shall be brought in the name of the real party or parties in interest including those claiming by subrogation.' When, therefore, an action at law is consistent (as this one is) with Rule 243, the right of subrogation should be recognized. See Mullen, The Equitable Doctrine of Subrogation, 3...