Loma Linda University v. District-Realty Title Ins. Corp., 23353.

• Decision Date: 12 February 1971
• Docket Number: No. 23353.,23353.
• Citation: 443 F.2d 773
• Parties: LOMA LINDA UNIVERSITY v. DISTRICT-REALTY TITLE INSURANCE CORPORATION et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

443 F.2d 773 (1971)

LOMA LINDA UNIVERSITY v. DISTRICT-REALTY TITLE INSURANCE CORPORATION et al., Appellants.

No. 23353.

United States Court of Appeals, District of Columbia Circuit.

Argued May 21, 1970.

Decided February 12, 1971.

Mr. Thomas Penfield Jackson, Washington, D. C., for appellants. Mr. Austin P. Frum, Washington, D. C., was on the brief for appellants.

Mr. Harold T. Grier, Washington, D. C., for appellee.

Before McGOWAN and MacKINNON, Circuit Judges, and DAVIES^*, U. S. District Judge for the District of North Dakota.

MacKINNON, Circuit Judge:

This appeal is from a judgment awarding a $15,000 deposit plus interest to a contract vendor (appellee) who had agreed to sell a certain plot of land free of all covenants, conditions or restrictions. At issue is the validity of the cancellation of the contract to purchase the land by the contract purchaser (appellant).

Under date of March 29, 1966, appellant Capitol Land Corporation (Capitol) entered into a written contract to purchase a plot of land comprising approximately 370 acres in Montgomery County, Maryland, from appellee, Loma Linda University (Loma Linda). In conformance with the terms of the agreement, Capitol placed a deposit of $15,000 with appellant District-Realty Title Insurance Corporation (District-Realty) to be applied as part payment of the purchase of the 370 acres. The purchase price for the property was set at $740,000, based on a price of $2,000 per acre, and was to be adjusted upward or downward as a survey showed more or less than 370 acres. The settlement date of the contract is an important element in this case and was to be determined by the terms of the contract. In this respect, as the trial court pointed out, paragraph 8 of the contract provided:

Time is of the essence of this Contract and within 90 days from the date of acceptance hereof by the Seller, or within — sic days after all contingencies have been eliminated or as soon thereafter as a report on the title can be secured if promptly ordered, and an appointment can be made with the Title Company for settlement, the Seller and Purchaser are required and agree to make full settlement in accordance with the terms hereof. If the Purchaser shall fail to do so, the deposit herein provided shall be forfeited as the sole remedy of the Seller and the Purchaser shall thereby be relieved from further liability hereunder.

Thus, the settlement date was not fixed precisely, but could have been either of several dates depending on circumstances, i.e., (1) within 90 days from the date of acceptance of the contract by the seller or (2) if contingencies (title or other) arose, then within an unspecified number of days after all contingencies had been eliminated or as soon thereafter as a report on the title could be secured if promptly ordered and settlement date fixed with the Title Company.

The settlement date was originally set for July 5, 1966 but because of the discovery of certain restrictive easements it was extended. The details of these extensions are discussed hereafter in considerable detail.

The clause of the contract which causes the principal dispute here provides:

6. The property is sold free of encumbrance except as aforesaid; title is to be good of record and in fact and merchantable; the property covered by this contract shall be subject to no covenants, conditions or restrictions, recorded or unrecorded as could in the sole discretion of Purchaser in any way whatsoever affect or interfere with the economic development and/or use of the same at maximum density under applicable zoning and building regulations except customary rights of way for utilities and utilities installations; otherwise the deposit is to be returned and the sale declared off at the option of the Purchaser. * * *

After the contract was executed, District-Realty prepared a title report. This report, dated May 17, 1966, disclosed the existence of two easements 50 feet wide for long distance natural gas pipelines across the property.¹ One pipeline easement ran across the entire property at its approximate center and the other across the entire property near the western end of the plot. These easements cut up the tract into three segments. Herbert G. Kaufman, the president and sole stockholder of Capitol (the contract purchaser), undertook to obtain more specific information about the pipeline easements and to that end hired an engineering firm to make a survey of the property. The initial survey showed the approximate location of the easements²; thereafter Kaufman was granted an indefinite extension of the settlement date so he could make additional studies of the location and of the effect of the easements upon the proposed development of the property as a residential subdivision. By the following October, an accurate survey of the easements had been prepared which Kaufman turned over to another engineering firm to determine a possible layout for the property and to calculate how many lots could be platted out of the plot. This study was completed in October and it concluded that improvements could not be built over the right of way of the pipelines and that manholes allowing access to the pipelines would have to be put into any street built over the right of way,³ with the result that 6.88 acres of land would be lost for purposes of development.

After receiving the results of this study, the three men who had previously agreed to back Kaufman financially on the land transaction withdrew their support.⁴ At about the same time, a "tight" money market developed, and as a result of these two developments Kaufman found himself faced with financing difficulties. At about this time Kaufman also informed Kelly Litteral, Loma Linda's attorney, that he was concerned about the effects of the easements on the development of the land.

There is a conflict in the testimony as to what transpired next. Litteral testified that he and Kaufman orally agreed to go to settlement with the understanding that Loma Linda would convey 6.88 acres of land within the easement area without consideration. Kaufman testified that he was surprised by Litteral's testimony to that effect and that he did not recall making any such agreement. In any event, District-Realty sent letters on December 20, 1966 to Litteral and Capitol informing them that settlement would be made on December 29th in District-Realty's offices.

On the 29th at 7:46 A.M., Capitol cancelled the contract with the following telegram to Loma Linda University:

We hereby cancel our contract of March 29th 1966 in accord with paragraph 6 as pipelines interfere with economic use accord to our engineer letter to follow

Capitol Land Corp.

Loma Linda replied the same day with a telegram to Capitol insisting on settlement as scheduled, and itself proceeded to complete its part of the settlement on the 29th by tendering to District-Realty a deed to the property along with an adjustment represented in the settlement sheet to the effect that no charge (at $2,000 per acre) was being made for the 6.88 acres of land within the easement area.

Loma Linda, through Litteral, continued to press for settlement for the next few weeks and there was testimony that on January 9, 1967 the parties apparently again agreed to go to settlement. However, no settlement date was ever set nor was any settlement made and Litteral thereafter demanded that District-Realty pay over the $15,000 deposit to Loma Linda. District-Realty refused and finally on June 16, 1967, Loma Linda filed its complaint in the instant case seeking the $15,000 deposit as liquidated damages for Capitol's alleged breach of contract.

The case came to trial in May of 1969. The trial court without a jury concluded that Kaufman and his financial backers "were able and willing to invest in the subject property * * * were ready to go to settlement on the * * * originally scheduled date of July 5, 1966 and would have done so but for the discovery of the existence of the pipeline easements"; that Kaufman's financial backers completely lost interest in the transaction upon receipt of the October, 1966, engineering study which showed the effects of the easements upon the development of the land, and at about this time a "tight" money market developed; that in early December, Kaufman relayed his concern to Litteral about the land lost to development due to the easements and that Litteral obtained the consent of Loma Linda to convey this land (6.88 acres) without charge; that the parties then agreed that they "would try to get" settlement on December 12th or 19th; however, these dates were unavailable to District-Realty so the parties agreed on December 29th as the closing date; that Capitol telegraphed its cancellation of the contract on the 29th and Loma Linda completed and proffered its part of the settlement on that date; that on or about the 9th of January, 1967, Kaufman advised Litteral that he had arranged his financing and would go to settlement but that no subsequent settlement date was fixed and Kaufman did not go to settlement; and that Litteral thereafter on behalf of Loma Linda demanded the $15,000 deposit from District-Realty. The trial court then ultimately concluded that:

There is no evidence that Kaufman informed any representative of plaintiff of his financial condition prior to January, 1967. Nor did Kaufman inform plaintiff prior to the morning of settlement that he was cancelling the contract in accordance with paragraph 6 thereof because the pipelines interfered with the economic use of the land. On the contrary, his failure to raise any point concerning the economic development of the entire tract of land, but only change as to the area involving the pipeline easements and his joining in fixing a settlement date after Litteral had obtained consent of Loma Linda to convey the 6.88 acres without payment therefor, together with his representations to Kelly Litteral during January, 1967, indicate and

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