Southland Corporation v. Shulman

• Decision Date: 01 July 1971
• Docket Number: Civ. A. No. 70-931.
• Parties: The SOUTHLAND CORPORATION v. Isidore SHULMAN.
• Court: U.S. District Court — District of Maryland

331 F. Supp. 1024

The SOUTHLAND CORPORATION v. Isidore SHULMAN.

Civ. A. No. 70-931.

United States District Court, D. Maryland.

July 1, 1971.

M. Peter Moser and Lawrence F. Rodowsky, Baltimore, Md., for plaintiff and counter-claim defendant.

S. Herbert Harris, Baltimore, Md., and Joel Savits, Bethesda, Md., for defendant and counter-claimant.

NORTHROP, Chief Judge.

This case was tried on its merits before this court on May 5, 1971. The parties are in agreement as to the facts, but are in disagreement as to the applicable law. The facts, as set forth in the plaintiff's and defendant's "Agreed Statement of Facts" and as stated at trial, are as follows: By an agreement dated December 29, 1961, Edward M. and Evelyn F. Perkins, husband and wife, leased to the Andrews Motel Real Estate Company, a Maryland corporation, the following described property:

Parcel lettered "K" in the subdivision known as "Plat No. 3, Andrews Manor, Section 2" as per Plat thereof recorded among the plat records of Prince George's County, Maryland in Plat Book WWW 35 at folio 3, containing 8.5510 acres, more or less.

This lease agreement was for a term of twenty (20) years, to end on December 31, 1982. This lease was duly recorded on June 21, 1962, in Liber 2695, folio 166 of the plat records of Prince George's County, Maryland. By an undated agreement effective January 1, 1964, twenty-seven separate individuals and fiduciaries of whom the defendant was a party formed a joint venture known as Andrews Motel Joint Venture, hereinafter referred to as "Joint Venture." The principal asset of the Joint Venture was to be Parcel "K." By a lease dated January 6, 1965, and recorded on July 29, 1966, in Liber 3364, folio 29 of the land records of Prince George's County, the Joint Venture subleased a portion of the original leased property to the plaintiff. This property that was the subject of the sub-lease will be known hereafter as the "store premises." At the time of the lease of the store premises, the defendant, Isidore Shulman, was a general partner with a 2½% interest in the Joint Venture. By the terms of the sub-lease, under Article 4 thereof, the lessor partnership agreed to construct on the store premises in accordance with certain plans and specifications a 7-Eleven Store and to sub-lease the premises to the plaintiff for a term of 25 years at a rental fee of $550 per month or 1½% of annual sales, whichever was greater. By Article 7, paragraphs (1) and (2) of the sub-lease agreement, the defendant together with his co-partners, covenanted and agreed with the plaintiff as follows:

"(1) That Landlord has good and marketable title to the demised premises in fee simple absolute and that the same is subject to no leases, tenancies, agreements, encumbrances, liens or defects in title affecting the demised premises or the rights granted Tenant in this lease;

* * * * *

"(2) That the Tenant upon paying the rent and performing the covenants and agreements of this lease shall quietly have, hold and enjoy the demised premises and all rights granted Tenant in this lease during the term hereof."

This sub-lease agreement by contract dated July 28, 1966, and recorded on July 29, 1966, in Liber 3384, folio 36 of the land records of Prince George's County was assigned by Andrews Motel Joint Venture to the Andrews Motel Real Estate Company. By a letter dated July 28, 1966, and recorded in Liber 3384, folio 39 of the land records of Prince George's County, Andrews Motel Real Estate Company exercised an option provision in its original lease agreement with Edward M. and Evelyn Perkins to extend the initial 20-year term of said lease for an additional term of twenty-one (21) years, to terminate December 31, 2004.

The construction of the 7-Eleven Store for plaintiff was let by Andrews Motel Real Estate Company, as owner, under a general contract to Don-bar Construction Corporation as general contractor. The construction of the 7-Eleven Store was included as part of a general construction contract which primarily involved the construction of a 50-unit addition to the Inter-State Inn Motel, also located on Parcel K. Don-bar Construction Corporation by a contract dated July 14, 1965, subcontracted the mechanical work under the general contract to Rural Plumbing & Heating, Inc. of Raleigh, North Carolina. The 7-Eleven Store was subsequently constructed and accepted by the plaintiff by a letter dated July 7, 1966. It was agreed in the acceptance letter that the 25-year sub-lease between the plaintiff and Andrews Motel Joint Venture had commenced on July 1, 1966.

On February 13, 1967, Rural Plumbing & Heating, Inc. filed a Bill of Complaint in the Circuit Court for Prince George's County, to foreclose its mechanic's lien claim against Parcel K, including the store premises. The mechanic's lien claim was in the amount of $44,043.26. The Bill of Complaint joined as parties defendant, Andrews Motel Real Estate Company, Andrews Motel Joint Venture, Edward M. Perkins and Evelyn F. Perkins, and The Southland Corporation. On April 3, 1967, Rural Plumbing & Heating dismissed the Bill of Complaint as to the defendants Edward M. and Evelyn F. Perkins.

Southland was subsequently served with a copy of the Bill of Complaint and filed its answer thereto on March 31, 1967. Trial of the mechanic's lien was conducted before the Circuit Court for Prince George's County on April 15, 1968, where an oral judgment in the amount of $44,018.26 was entered. A provision was made in the order for the appointment of a Trustee to sell the property if the judgment amount was not paid on or before the 15th day of May, 1968. Southland Corporation did not appeal this order of the Circuit Court.

By a letter dated April 17, 1968, counsel for plaintiff, Mr. Rodowsky, advised the attorneys then representing the members of the Joint Venture that if the Southland operation at the store premises was disrupted as a result of the mechanic's lien foreclosure, Southland would hold the members of the Joint Venture personally liable on the covenants of title and quiet enjoyment that were provided for in the sub-lease agreement.

By an Order of the Circuit Court for Prince George's County dated June 14, 1968, a Trustee was appointed to sell all of the right, title and interest of Andrews Motel Real Estate Company and the Southland Corporation in Parcel K. On the 26th day of February, 1969, the Trustee, at public sale, sold all right, title and interest of Andrews Motel Real Estate Company and of the Southland Corporation in Parcel K to the defendant for $77,000. This sale was ratified by the Circuit Court on April 10, 1969. The sale was made subject to all covenants, agreements, restrictions, limitations and easements of record. By a deed dated May 9, 1969, Joe M. Kyle, Trustee, conveyed by Trustee's Deed the interest of Andrews Motel Real Estate Company and Southland Corporation in and to Parcel K to the defendant. The deed was recorded among the land records of Prince George's County on May 20, 1969, in Liber 3719, folio 278.

The defendant by a letter dated June 26, 1970, notified plaintiff of his intent to repossess the store premises and have plaintiff vacate by midnight, July 31, 1970. He asserted that plaintiff currently occupied the premises only as a tenant from month to month and not by a fixed term lease. By a letter dated August 4, 1970, defendant advised plaintiff that it was unlawfully on the premises and that an action for ejectment would be commenced. Plaintiff thereby brought this suit in this court based on 28 U.S.C. § 1332 seeking (1) a preliminary injunction, under Federal Rule 65, to restrain defendant from instituting or prosecuting any ejectment proceedings against the plaintiff pending the outcome of final litigation; (2) a permanent injunction restraining the defendant, his privies and assigns, for the duration of the sub-lease agreement from interfering with the quiet enjoyment and possession by the plaintiff of all of the covenants and obligations under the sub-lease agreement; and (3) a declaration that plaintiff holds as a sub-tenant under and by virtue of the sub-lease agreement and that all of the terms, conditions and provisions of said lease are applicable to the plaintiff's sub-tenancy. The defendant has counter-claimed seeking the ejectment of the plaintiff from the store premises involved in this proceeding. This cause initially came before this court on August 27, 1970, when this court granted plaintiff's motion for a preliminary injunction. This court is now called upon to determine the merits involved in this proceeding.

Defendant contends that the plaintiff has no right to relief since (1) they are precluded from litigating this claim by the doctrine of res judicata; (2) the leasehold interest of the plaintiff was extinguished by the judicial foreclosure sale; and (3) the doctrine of estoppel by deed is not applicable in this case. Plaintiff contends that the doctrine of estoppel by deed should be applied and that based upon this doctrine, relief should be granted.

Res Judicata—Defendant's assertion that the doctrine of res judicata precludes plaintiff from recovery is founded on the mechanic's lien foreclosure proceeding in the Prince George's County Circuit Court. Defendant's argument is as follows: Since plaintiff was a party before that court in which all of its and Andrews Motel Real Estate Company's right, title and interest as to parcel "K" was sold to Dr. Shulman, they are now estopped from bringing in a subsequent proceeding a cause of action based upon their sub-lease agreement with the Joint Venture.

The doctrine of res judicata specifies that a judgment rendered by a court of competent jurisdiction on the merits is a bar to any future action between the same parties or their privies, on the same cause of action, in the same or another court as long as the judgment remains unreversed and not in any way vacated or annulled. DeMaio v. Lumbermens...