Henry's Drive-In, Inc. v. Pappas

• Decision Date: 09 February 1972
• Docket Number: No. 206,DRIVE-I,INC,206
• Citation: 287 A.2d 35,264 Md. 422
• Parties: HENRY'Sv. Kalliope PAPPAS et al.
• Court: Maryland Court of Appeals

Page 422

264 Md. 422

287 A.2d 35

HENRY'S DRIVE-IN, INC. v. Kalliope PAPPAS et al.

No. 206.

Court of Appeals of Maryland.

Feb. 9, 1972.

Frank H. Weller, Jr., Baltimore (Ober, Grimes & Shriver, Baltimore, on the brief), for appellant.

Robert E. Sharkey, Baltimore (Evan A. Chriss and Gordon, Feinblatt & Rothman, Baltimore, on the brief), for appellees.

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

SINGLEY, Judge.

Henry's Drive-In, Inc. (Illinois Henry's) has appealed from a summary judgment for $3,999.84 entered against it in the Superior Court of Baltimore City, contending that the lower court misapplied the applicable statute of limitations. Because we think Illinois Henry's is at least partially right, we shall modify the judgment.

Seeds of the controversy were sown in 1959 when Mrs. Kalliope Pappas, her husband and other members of her husband's family, to whom we shall refer collectively as 'the Lessor,' the owners of a drive-in restaurant site on Old Annapolis Road in Glen Burnie, Maryland, leased the land and the improvements to be erected to Henry's Drive-Ins of Maryland, Inc., (Maryland Henry's), apparently a franchisee of Illinois Henry's. The lease, which was for a term of 12 years from the date of the completion of the restaurant which the Lessor proposed to build on the leased land, called for a monthly rental of $650.00. It also provided that Maryland Henry's would post a security deposit of $7,800.00 which would be applied by the Lessor in satisfaction of the last year's rent, interest at the rate of 3% to be paid by the Lessor to Maryland Henry's during the lease term. Maryland Henry's also agreed to pay all real estate taxes in excess of $135.00 per year, as additional rent.

The latter covenant, which is at issue here, provided:

'Lessor will pay all real estate taxes and assessments levied or assessed against the demised premises during the term hereof. If, during any lease year of the term hereof, real estate taxes payable during such lease year shall exceed One Hundred Thirty-five Dollars ($135.00) Lessee agrees to pay to the Lessor, as additional rental, upon presentation of receipted tax bills therefor the amount of such excess. The Lessee shall have the right to contest any levy of such taxes in its behalf or in behalf of the Lessor in accordance with the provision of the laws relating to such contests. It being the intention of this Paragraph that the Lessee shall pay for all taxes for improvements on the demissed premises and on the land over the amount now paid by Lessor.'

Virtually contemporaneously with the signing of the lease, Illinois Henry's executing a guaranty agreement, under which it guaranteed the payment of rent and the performance of the other lease covenants. In 1967, apparently in connection with the Lessor's making certain improvements which Maryland Henry's desired, and for which Maryland Henry's had agreed to pay additional rent, Illinois Henry's reaffirmed in writing its undertaking to guarantee the payment of the original rent of $7,800.00 per year and the performance of the covenants of the lease.

Illinois Henry's argues that a comparison of the language of its first guaranty:

'* * * hereby guarantees the payment of the Rents and the performance of all other covenants and agreements by the Lessee in the within Lease contained * * *.'

with that of the second,

'* * * does hereby reassert and reaffirm that it will continue to guarantee the payment of the rent ($7,800.00, per year) and the performance of the covenants called for in the lease * * *.'

leads unerringly to the conclusion that the scope of the first guaranty was narrowed by the second, which limited the guarantor's liability to the basic rent reserved and did not extend to the reimbursement for excess taxes, as additional rent.

We remain unpersuaded. If one reads on, it becomes apparent that Illinois Henry's was only endeavoring to limit its liability to the base rent of $7,800.00, for the second guaranty continues,

'* * * although the Lessee has agreed to pay additional rental for the improvement, and that the guarantor hereby covenants that the original Guaranty attached to the aforementioned Lease shall remain in full force and effect.'

Its guaranty of the performance of the lease covenants remained unchanged. We cannot say that this language modified, much less negated, the guaranty that the covenant to pay excess taxes would be performed.

Commencing in 1963, real estate taxes on the leased premises exceeded $135.00 in each year, by the following amounts:

                1963                       $440.50
                1964                        512.75
                1965 (to 30 June) 1     193.50
                1965-66                     576.36
                1966-67                     576.36
                1967-68                     590.93
                1968-69                     767.00
                                         ---------
                                         $3,657.40
                

For some unexplained reason, no statement of the amount due was sent to Maryland Henry's until sometime after 1 November 1968. Payment was not made, and by the time suit was brought on 30 June 1970, excess taxes for 1969-70 in the amount of $810.44 had been paid by the Lessor, increasing the amount claimed to $4,467.84.

Suit for this amount was brought by the Lessor against Maryland Henry's, as lessee, and Illinois Henry's as guarantor, and was accompanied by a motion for summary judgment. Both defendants pleaded the general issue and specially pleaded limitations, and both filed affidavits in opposition to the motion for summary judgment, denying that proper demand had been made within the period of limitations, and claiming a recoupment (which they characterized as a set-off) by reason of the Lessor's failure to make payments of 3% interest amounting to $234.00 annually on the security deposit of $7,800.00 as required by the lease.

The trial court concluded that the demand required by the lease had been made for the first time on 26 June 1970, four days before suit was brought, for the payment of excess taxes in the amount of $4,467.84, and that limitations ran from the date when payment was demanded, but that the recoupment claimed for interest on the security deposit was barred by limitations, except for the three year period immediately preceding the assertion of the claim. This allowance was limited to two years' interest, amounting to $468.00, because the court determined that the security deposit would be used in the last year of the lease term to satisfy the rent obligation.

We do not see it quite that way. The applicable statute of limitations, Maryland Code (1957, 1968 Repl.Vol.) Art. 57, § 1 provides, in part:

'All actions * * * brought to recover rent in arrear, reserved under any form of lease, * * * shall be commenced, sued or issued within three years from the time the cause of action accrued; * * *.'

When did the Lessor's cause of action accrue? The answer is found in the lease provision,

'* * * Lessee agrees to pay to the Lessor, as additional rental, upon presentation of receipted tax bills therefor, the amount of such excess.' (Emphasis supplied)

It is palpably clear that the earliest date when the Lessor could have demanded payment was the first day on which he could have exhibited a receipted tax bill. Because the presentation of a receipted bill was a necessary element of a valid demand, it would seem, ordinarily, that it would be payment of taxes by the Lessor which would start the running of the statute. It is certainly true, as the Lessor contends, that the general rule is that when performance is conditioned on demand, limitations do not commence to run until a demand is made, for it is only then that a cause of action accrues, Rhind v. Hyndman, 54 Md. 527, 530-531 (1880); Fells Point Sav. Inst. of Baltimore v. Weedon, 18 Md. 320, 326 (1862). There are instances, however, where the general rule should not be laid on with a heavy hand, since the primary consideration underlying a statute of limitations is one of fairness to the defendant, Feldman v....