# Appendix — St. Paul At Chase Corp. v. Manufacturers Life Insurance

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1971
- **Citation:** 404 U.S. 857

## Text

* Tt Se ae ORE

In THE | ‘haem
Supreme Court of the United States :

Octoser TERM, 1971

ST. PAUL AT CHASE CORPORATION,
A MARYLAND CORPORATION,

- Petitioner,
Vv.

MANUFACTURERS LIFE INSURAN CE COMPANY OF |

TORONTO, A CANADIAN CORPORATION,
Respondent.

®,
APPENDIX TO |
PETITION FOR A WRIT. OF CERTIORARI TO THE
| * COURT OF APPEALS OF MARYLAND

W. HaMILTon WHITEFORD,
Sun Life Building, .
Baltimore, Maryland 21201,
-: Counsel for Petitioner.
Of Counsel :
. David FREISHTAT

‘Tower Building, .
Baltimore, Maryland.

_ The Daily Record Co., Baltimore, Md. 21203

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Comments | OF APPENDIX

“Opinion and Judgment below filed May 17, 1971 . ie :

Motion for Rehearing filed May 25, 1971 Re esr os ;

Supplemental Motion for — ‘Bled June 14,
1971 . ;

banal to Stay of Mandate filed Ju une 214, 1971

- Orders of Court Below on above Motions | : ve ‘a aes

el
~_

.- -
In The’
at Court of Appeals of Maryland

— No. 400 ied
September Term, 1970 _

St. Paul at Chase Corporation, et al.
-— |

The estates Life Insurance Company et al.

_ Hammond, C. J. ia. McWilliams, Finan, ry
Smith, and ee. JJ.

,

Opinion by Smith, J.
Filed May 17, 1971 |
The trial judge in this case . (Proctor, J.) prefaced his

findings of fact (the delivery of which consumed a full. -

-..court day and which took up over 50 | Pages of the record
_ extract) with the comment:

_. “In the past,.I have looked upon St. Paul as a great

Christian apostle. However; from here on I’m very
much afraid that to me it will mean a high-rise apart-
ment building at the corner of St. Paul at Chase.”

The apartment house was the dream of appellant Charles

W. Williams. ‘As his literature put it, he conceived of it as.

a “prestige. address” intended for “Gracious In-Town Liv- . _

ing.” Appellant St. Paul at Chasé Corporation was formed

for the purpose of erecting and operating the building.

‘This litigation was produced when Manufacturers. Life |
Insurance Co. of Tannen, Canada, cancelled.a commitment

2a

it had made for siniinies apes of the apartment |
building.

The situation

been stopped by a combination of those two factors.
It’s obvious to’me from his testimony that he did not
-interpret satisfactory as complete one hundred percent,
down to the last nut and bolt. It necessarily follows,
that, if it’s not absolute, final, complete without any-
‘thing of any kind no matter how minute remaining
to be done, it: is a question of degree. And degree
brings us inevitably to the question of substantial
compliance. ;

“Substantial [Performance], in-17 Am. Jur. 2d (Con-
tracts), page 818, section 375, is described as folldws: : j
‘Although there is some early authority in support of
the rule that a party must strictly or literally perform

‘the stipulations on his part before the other party is
obligated to perform, unless the promises are inde-
pendent, the modern authoritiés support a more liberal
rule. Thus, it’is said that the law looks to the spirit

‘ of a contract and not the letter of it, and that the
' question therefore is not whether a party has literally

complied with it, but whether he has substantially .

done so. This has long been the rule in equity. Ac-.
cordingly, the courts now state that substantial, and
not exact, performance accompanied by good faith is

34a

all the law requires in the case of any contract to
entitle a party to recover on it.’’ And then skipping to
the next page, ‘While the doctrine of substantial per-
formance is applied most frequently in building and
constrution contracts, it is not so limited and may be
‘applied in the case of any kind of contractual obliga-
tion to perform.’ Now in the first quotation it is stated
that ‘performance accompanied by good faith is all the
law requires’, and I don’t think that anyone can say
that St. Paul and Williams did not operate in good:
faith. They did everything possible to. push for the
completion of the project by the 7th of March, 1966.

“There is also a note in 76-A.L.R. 2d 815 et seq.,
which admittedly is related only to construction con-—
tracts, but where cases are cited from almost every
state in the Union. All the leading authorities follow.
this rule of substantial compliance — Illinois, Massa-
chusetts, Michigan, ‘New Jersey, New York, Penn-
sylvania.

“In Maryland, it has been applied. At the time of
the decision on the Motion for Summary Judgment,
I referred to the case of First National Realty Corp.
v. Warren Ehret Co., Inc., 247 Md. 652, 656. There are
several portions of that ‘opinion to which I wish to
refer. It’s just as good law today as it was when we

had the Motion for Summary Judgment. In that case
_ there was a-requirement that the work be approved
by the architect, like we have here. The Court had
this to say: ‘If we were concerned with only the ques-
tion of substantial performance, this case could be
put to rest with the decisions of this Court * * *’ citing’
several cases including Evergreen Amusement Corp.
v. Milstead, 206 Md. 610, 621, opinion by Judge Ham-
mond, which is to the same effect. Then’ it goes on to
say, ‘However, this case -presents the further ques-
tion of the effect to be given the express wording of
the contract set forth in paragraph numbered “Twenty-
fifth” which specifically provides | that the “opinion”
of the contractor will control in deciding whether the

35a

- subcontractor (Warren-Ehret) prosecuted the work |
‘. with promptness and diligence or failed in the per-

formance of any of the oa. contained in the
contract.

- ‘There? area ‘isiliaed of Maryland cases which have -
dealt with the question of the performance of.a con-
tract to the satisfaction of one of the parties, * * *.’
That, in substance; is what we have here. The Court
then proceeded to cite a-number of authorities in and
out of the State, including textbooks, and went on to
say, in quoting from 13 Am. Jur. 2d (Building & Con-
struction Contracts), section 30. page 32, where the
architect or the owner or somebody..has the final ‘say,
‘Nevertheless, even under the latter view, the owner’s
claim of dissatisfaction must be made in good faith,
and this is ordinarily a question of fact for the jury.’
The Court went on to say (page 660), ‘* * * whether
the objective criteria (i.e., reasonable-man rule) or
subjective criteria (i:e., the individual personal satis-

. faction of the owner) must be met, the Courts, with

very few exceptions, have asked the question whether
the action on the part of the owner was capricious or
arbitrary, and if such action was present it vitiated
the quality of the reasonableness of the owner’s action
in the objective criteria gases and his good :faith in
the subjective criteria sales:

“Referring (page 661) to a Pennsylvania decision,
Hood v. Meininger, 377 Pa. 342, 347, the Court said,
‘* * * where the Court in rejecting the “reasonable
man” test and adopting the subjective criteria test,
found in favor of the owner and against the contractor
stating: “* * * (1) that the dissatisfaction.must be
genuine and not prompted by caprice or bad ‘faith,
and (2) that if the work is not sufficiently completed
for a reasonable determination whether it was or
would be satisfactory, then the —— is =
mature”. >’ :

“Interestingly simile. what brought the problem i in
First National v. Warren-Ehret to a head was a tor-

_rential downpour of four to, five inches which in-
undated parts of the building and, as the trial judge
said, snapped the patient of the contractor and trig-

gered the dismissal of the roofer, and triggered the’
termination of the contract. I have no doubt that, in

ty

' - the 22nd and 23rd floors from leakage, Manufacturers:
_ would not have had the gall or the nerve to cancel
the contract 5 it did. — .

- “Now looking at contracts in general, the bw appli-

cable to contracts and what happened i in this case, was
Manufacturers justified in canceling its commitment? -

~“It had agreed with Chemical Bank and New York

_ |. Trust Company that ‘At any time on or before Sep- —
tember 7, 1965 (or the last day to which the commit-

ment may be extended,:if any extension thereof. has

been made as provided herein), if the conditions of the
Commitment have been fulfilled, you agree te pur-
chase and we agree to sell the Note for $4,800,000.’ St.

) Paul was the beneficiary of that contract; Now what
is are the facts and circumstances surrounding the can-
_ cellation? In the first place, I am persuaded from all

of the evidence that the only stated reason for the
cancellation, before the fact, was that the building

was not-complete. I am persuaded, as Lamon de-
scribed Williams’ reference to the cause of the leaks,

viz., a snowstorm — that it was an afterthought to say

that the certificates had not been furnished. Although »

- it is not necessary to hold this, there is some law that.

if one states a reason ‘for cancellation of 4 ‘contract,
they’re stuck with it. They can’t later on try to drag

in some other reason or excuse. That’s the case that

Mr. Freishtat referred to in-his argument yesterday,

. Brush-Swan. Electric Light Co. of New England v.
Brush Electric Co., 41 Fed., 163, at pages 168-169. In
determining the answer to this question, it is necessary

that the Court bear in mind, that basically, the law
frowns on forfeitures. of any kind. That’s what. the
‘effect = this cancellation was — all that had been

« +8

the present case, if there had not been the damage to. -

37a

expended « on that building at the date of cancellation
was lost, so far as St. Paul was concerned. The evi-

-.dence discloses, based upon my ‘findings of fact. that

although Weaver had not told Manufacturers about,
Williams’ poor credit experience in Virginia, had not\
told Manufacturers. that Williams had no money of
his own -to invest in this proiect, had merely told
Manufacturers that the project had to be one hundred
percent financed, I have found that Weaver was Manu-

chargeable to\Manufacturers. We then have the Feb-
ruary 28, 1966, visit to Baltimore by Lamon, when he

learned that Williams. might be on thin ice, that he
was unhappy with his contractor, that he was con-

sideririg-suit against the contractor, that he was threat-

ening not to pay intereSt if there were a roll over,

until he ironed out his problems with Mullan. These
were ‘all matters which*I can understand worried

Lamon tremendously, but- matters which he had no .

legal right to consider,. none at all. He had no right

to speculate, even though it ‘was a reasonably good

speculation, as to what would happen in the event
there was a roll over. Many things might have hap-
pened which could have bailed out Williams after a

~ roll over, which would have enabled him to preserve

the status quo. But, in any event, whether they would
or would not have happened, Lamon had no legal right
to anticipate that they would. He had an obligation —
to live up to his contract, if the other party had lived
up to its. I am persuaded beyond any doubt that the
reason for the cancellation of this contract was, first,

‘a calculation risk taken by Manfacturers that if it

didn’t accept the roll over, and if the construction
mortgage were foreclosed, and if Manufacturers were
sued, that it could weather the storm, either by avoid-

‘ing liability completely, or if subjected to liability,

by minimizing damages. They took that calculated |
risk, and they’re stuck with the result. It is my judg-

ment, — a so hold, that first, this building \ was sub-

, —_,

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- facturers’ agent, and as such all that information was ~ \

te

38a

stantially completed, and that was all that was re-
quired so far as the contract was concerned; second,
that Manufacturers had more than adequate protec-
tion by escrow of funds sufficient to complete ‘the
building, at which point the necessary certificates
would have been forthcoming. So that, so far as the
roll ‘over was concerned, Manufacturers had every
legal and practical protection it needed, or could have
- arranged for such legal and practical protection and
_/wes obligated to accept the roll over; that in not
accepting the roll over, it breached its obligations
under the loan commitment and under the Buy-Sell:
Agreement of which St. Paul was the beneficiary.

“Now, thus endeth this lesson. We now have to
recess for as miuch time as counsel want to —
for trial of the question of damages.”

.

PREJUDGMENT INTEREST

The trial judge allowed prejudgment interest on the de-
ficiency decree from the date of entry of that decree down -
to the date of his judgment. After quoting extensively
from the opinion of Judge Sobeloff (a former Chief Judge |
of this Court), in Robert C. Herd and Company, Inc. v.
Krawill Machinery Corp., 256 F. - 946 (4th Cir. 1958),
. he said:

. “It is my judgment that the exercise of judicial dis-
cretion requires the award of Bree apngeredhs anger
of the deficiency decree from te of the entry of

. that decree down fo the daté of this judgment. I have

_ considered whether or not interest should be awarded
on any other phases of this case, and have determined

that to allow interest on the other judgments nisi
would constitute an abuse of judicial discretion.”

St. Paul and Williams take issue with this, quoting
further from Herd, asking the Court to take judicial cog-
nizance of the fact that “delay is the best defense”, stating
that St. Paul “was left impoverished and destitute and faced
with huge obligations, on all of which interest was and is

39a = —— =

- accruing, while the Defendants ‘were using the monies
wrongfully withheld from. St. Paul to their advantage,
during a period of spiraling interest rates”, and suggesting:
that the trial judge abused his discretionary powers.

In \Atlantic States v. Drummond & Co.,.251 Md. 77, 246
A. 2d 251 (1968), Judge McWilliams said for the Court:

“Ordinarily~the matter of interest is left to the dis--

cretion of the jury or the court sitting without a jury.
In Affiliated Distillers Brands Corp. v. R.W.L. Wine -
' & Liquor Co., 213 Md. 509, 516, 132 A. 2d 582 (1957),
we said:

‘However, this general rule is subject: to certain
exceptions that are as well established as the rule
itself? Among-the exceptions are cases on bonds,
or on contracts, to. pay money on a day certain, .
and cases where the money has been used. If the
contractual obligation be unilateral and is to pay
a liquidated stim of money at a certain time, in-
terest is almost universally allowed from the time
when its payment was due. [Citing cases.]’ .

To the same effect see Mullan Contracting Co. v, In-
ternational Business Machs. Corp., 220 Md. 248, 151
A. 2d 906 (1959).” Id, at 85..

In City Pass. Ry. v. Sewell, 37 Md. 443 (1873), our prede-
cessors said:

“It ‘must be conceded that interest is Fi an in-
separable and invariable incident of claims for money,
or unliquidated accounts.: ‘It is recoverable as of right,

upon contracts in writing to pay money upon a day~* .

certain; as upon bilis of exchange and promiissory
notes, or on contracts. for the payment of interest,
or where the money tlaimed has been actually used,
and upon bonds, etc., but in other cases, it is a question
entirely for the jury to be decided according to the .

equities of the transaction.’ Newson v. Douglass, 7 .
H: & J. 417; Karthaus v. Owings, 2G. & J. 430.” aca

‘at —_ (emphasis in original).

*

. &

40a

See also A. & A. Masonry v. Polinger, 259 ) Ma. 199, 203-204,

269 A. 2d 566 (1970), which quoted both of the above cases.
. As Brantly on Contracts (2d ed. rev. 1922) puts it?

“Interest is recoverable as of right upon all. con-:
tracts to pay money upon a day certain, as upon bills of . .
exchange, or where goods sold and delivered are to be °

‘paid for at a given time. In other cases the. allowance

. of interest. is —— the discretion of the jury. a

at 460.

“A contract ) to loan ee can not te equated with a

i _ contract to pay money ‘on a day certain. The trial judge

was the trier of fact. His statement ‘relattve to judicial
discretion was entirely in accord with the Maryland author-
ities. | ;

‘Punrnive Dascaces

The trial judge allowed punitive damages on both the
rst and: second counts of the declaration. As previously
- indicated, the first count was a pure contract claim, while
- the second count alleged negligence by Weaver Bros. in
' the performance of its contract with. St. Paul. Judge
Proctor in his award recognized the general ‘rule that in
a contract action punitive or éxemplary damages are not
-recoverable, citing 22 Am. J ur. 2d Damages § 245 (1965)
and 5 Corbin on Contracts § "1077 (1964). A comment to

- the same effect is to be found in Restatement of Contracts —

§ 342 (1932). The award on the first count was made on
the strength of Brown v. Coates, 102 App. D.C. 300, 253
F. 2d 36, 67 A.L.R. 2d 943 (1958). No Maryland authority
_ was cited to = the allowance of punitive damages in
this type ‘of case..

The Maryland rule relative to punitive damages was
most recently summarized for the Court by Chief J udge

- Hammond in Damazo-v; Wahby, 259 Md. 627, 270 A: 2d 814 a

(1970), where he said:

+ Puntiive damages were claimed on all of the tort.counts of the

declaration, but on none of the contract counts including the first:

count.

‘é “

&

4la

“The Maryland ‘rule is that mialice in the serise of
deliberate and improper violation of a known right,
that..is, absence of legal justification, will support an
action and permit recovery of compensatory damages
for deprivation of known contractual rights but that
actual malice must’ be shown to support punitive
damages. Knickerbocker Co. v. Gardiner Co., 107 Md.
556; Stannard v. McCool, 198 Md. ‘609; Heinze _v.
Murphy, 180 Md. 423: There is no’ evidence here to
show more than that Damazo wanted to ‘benefit him-
‘self by receiving the gross purchase price without
diminution for commissions and the various purchasers
wanted to pay a lesser purchase price that the. avoid-

ance of the earned commissions would permit.” Id. at
638-639.

In Damazo a broker claimed commissions on the sale of .
_ apartment properties and damages for tortious interference .
with and conspiracy by the séllers and buyers to deprive
him of contract rights. The trial court found the broker
was the procuring cause of the sale, that the two parties
tried to bypass the broker, and awarded the commissions.
earned, nominal compensatory damages, and punitive dam-
ages. This Court affirmed on liability but. reversed relative
to punitive damages. © .

The classic case in Maryland on punitive damages in-
volving tortious interference with a contract is Knicker--
-bocker Co. v. Gardiner Co.,.107 Md. 556, 69 A. 405 (1908).
There a dairy company had a contract with an ice company ~
by which the ice company was to supply the dairy company
with ice during a-certain season at a designated price. The
ice company procured large quantities of ice from Knicker-
bocker, a company manufacturing ice. ’ Knickerbocker, °
knowing of the existence of the. contract between the
dairy company and the other ice company and intending .
to obtain a benefit for itself, notified the other ice company
that if it sold ice to the dairy company Knickerbocker would
refuse to supply any ice to it: Consequently,. the ice—
company. broke its contract with ‘the dairy company and
that company was compélled to purchase ice ‘from Knicker-
bocker at a price — than that stipulated for in its con-

-

42a°

tract with its original supplier. Punitive damages were

. claimed. Chief Judge Boyd said for our predecessors:

“But the difficulty is that there is no evidence of malice
in this case, unless it be such as some of the cases
speak of — that the intention to benefit the defendant,
or to injure the plaintiff, is to be treated as evidence
_of malice. But we have found no case in which exem- -
plary damages were allowed for malice implied from
such facts. The facts stated in the first prayer are in
. our judgment sufficient to entitle the plaintiff to re-
cover, but we do not think they authorize recoyery of ©
exemplary damages, and there was not sufficient evi-
dence outside of those facts to authorize the submis-
sion of this prayer.. We do not mean to say there may
not be such damages in cases of this character, for if,
. for example, there was evidence tending to show that
the defendant had caused the contract to be broken
for the sole purpose, and with the deliberate intention
of wrongfully injuring the plaintiff, exemplary dam-
ages might be recovered, but when the object was
- merely to benefit itself, although the plaintiff would be
thereby injured, there would be no more reason for -
_ allowing such damages than there would be in a suit
by one party to a contract against the other for breach
of it.” Id. at 569-570. —

. Cf. Rinaldi v. Tdna, 252 Md. 544, 250 A. 2d 533 (1968), as

commented upon in Damazo, 259 Md. at 639.

It is true, as St. Paul urges, that there has been dis-
‘cussion in the Maryland cases of wanton conduct as per-
mitting the recovery of punitive damages. These cases in-
clude Moore v. Schultz, 31 Md. 418 (1869); Sloan v. Ed-

‘wards, 61 Md. 89 (1883); Philadelphia, W. & B. R.R. v.

Hoeflich, 62 Md. 300 (1884): Baltimore Transit Co. v. Faulk-
ner, 179 Md. 598, 20 A. 2d 845 (1941); Heinze v. Murphy,
180 Md. 423, 24 A. 2d 917 (1942); Dennis v. Baltimore Tran-
sit Co., 189 Md. 610, 56-A. 2d 813 (1948); and Vancherie
v. Siperly, 243 Md. 366, 221 A. 2d 356 (1966). -Comfort is ©

derived from such comments as that of Judge Delaplaine

43a

| for the Court in itdineve Transit Co. v. Faulkner, where ~

at page 602 “wanton” was defined as: “Characterized by
extreme recklessness and utter disregard for the rights of

others.” None of these cases arose from contract actions. .

We interpret the language of those cases which speak of

wanton conduct or wantonness as being a basis for award-
ing punitive damages as referring to such conduct as would
' carry an implication of malice or as conduct from which

one would draw a necessary inference of malice; conduct_

from which one might determine the existence of actual

malice. There is no evidenee of malice in this case. The ©
sum total: of the conduct of Weaver Bros. in this case is .
but little different from the conduct in Knickerbocker ,
where Chief Judge Boyd said, “[WJhen the object was |
merely to benefit itself, although the. plaintiff would be -

thereby injured, there would be no more reason for allow-
ing such damages than there’ would be in a suit by one

party to a contract against the other for breach of it.” ©
' Accordingly, upon the basis of the prior Maryland holdings, .
we conclude that the conduct of Weaver Bros. was not such ©

as to warrant ae damages. |

DaMAGES ones MANUFACTURERS — Loss or B ING

St. Paul upon the strength of its conception of Hadley
v. Baxendale, 9 Exch. 341, 5 Eng. Rul: Cas. 502 (1854),

contends most strongly that it is entitled to recover $7,920,- :

‘000 for its loss of the property and $2,465,000 for its loss ©

of the business, the latter figure being the difference be-
tween its valuation of $7,265,000 for the business and the

mortgage of $4,800,000: It says that at the ‘time of the’

contracting | Manufacturers. had valued the building and —

- land at $7,920,000 and valued the use of the building on an

incomé basis of $7,265, 000. It is correct in. those statements. _

The Hadley v. Baxendale rule is succinctly summarized
in Brantly on Contracts (2d - rev. 1922) in the piowing

language: .
“The ‘uaa which a plaintiff : is entitled to re-

cover for a breach of contract ‘should be such as may

.

44a

’ fairly and reasonably be considered as either arising
naturally, ‘i.e., according to the usual course of things,
from such breach. of contract itself, or such as may
reasonably be supposed to have been in the contem-
plation of both parties at the time they made the
contract as the probable result of a breach of it.’” Id.
at 457.

‘“* *

“When a contract tas been made ‘tte special cir-
cumstarices and these were communicated to thé de-
fendant then, in case of a breach, the plaintiff is en-
‘titled to recover as damages the amount of the injury
which would ordinarily follow from a breach. But
whether such special damages may reasonably be sup-
posed to have been in the contemplation of both parties
depends upon how much of the real situation was so
disclosed. ;

_ “The special circumatances which may render a
breach more than ordinarily injurious to the one party
must be known by the other party,whom it is sought
to charge with ‘the loss, at the time the contract was
made and not afterwards.” Id. at 459. .-

: This was ‘a contract to lend money. Restatement of

_ Contracts § 343 (1932) states upon thi. subject:

_ “Damages for breach of a contract to lend money.
are measured by the cost of obtaining the use of money
during the agreed period of credit, less interest at.the
rate provided in the contract, plus compensation for
other unavoidable harm that the defendant had reason
to foresee when the contract was mete. er

5 Corbin on Contracts § 1078 (1964) siakia the abe

“The better rule and the one generally followed is
that for breach of a contract to lend money the. bor-
rower can get judgment for damages measured by

. his resulting injury so far as the defendant had reason
to foresee such iniury when the contract was made.
This is the rule applicable to contracts in general, and

»%

ie

45a: |

3 nay . er
a lenfler 9f money should be subject to it like other
contr s. Doubtless there are many cases in which
he has no reason to foresee that the borrower will be
unable to secure money elsewhere or that there will
be special injuries; but if he has such reason he must
‘make good the loss. There are many well considered
cases that have applied this rule.” Id. at 447-448.

11 Williston on Contracts § 1411 (3d Ed. Jaeger 1968)
states:

“It will frequently. happen that the bencolnrs is un-
- able to get money elsewhere, and, if the defendant had
notice of the purpose for which the money was desired,
he will be liable for damages caused by. the plaintiff’s
inability to carry out his purpose, if fe performance
" of the promise would have enable him to do so.” Id. |
at 614. :

“in -F. B. Collins Inv. Co. v. Sallas, 260 S.W. 261 (‘Tex.
Civ. App. 1924), the loss to which a landowner was entitled
- in a situation such as this‘was summarized: —

“It is the landowner’s interest in the land, repre-
sented by the value of his equity, that he would be
- entitled to as compensation. For legally the value of
the equity is his only ‘actual loss.’ The. value of the
‘ equity.is not measured, as-a matter of law, by the
‘amount of the purchase price paid in cash for the land —
. in.-the first instance.: The value of this equity must
. appear and be established at the time the title is lost. °
For the value of the equity at the time the title is lost —
may or may‘not be the same as at the time of the
original purchase by the landowner: The market value
of the land rises and decreases, ‘according to conditions .
and circumstances. If the market’ value of land goes ©
below the original purchase price paid, the value of the 3
equity would consequently be less and, on the other
hand, the value of the equity would be greater if the:
market value of the land should be greater than the
original purchase price paid. In either event the land-

owner could recover the value wes his equity, and no
more.” Id. at 265.

. See also Avalon Const. Corporation v. Kirch Holding Co.,
256 N.Y. 137, 175 N.E. 651 (1931).

It does not appear from this record that St. Paul was
able to go into the marketplace and obtain a loan else-
where in the time available to jt. The foreclosure sale by
Chemical took place on June 1. Fruitless efforts were made
by St. Paul to obtain funds elsewhere. As Judge Proctor
put it: ©

“(T]he next to the last paragraph [of the permanent
mortgage loan commitment] clearly contemplated an
antecedent construction mortgage loan and the execu-
tion of a Buy-Sell Agreement. This is standard pro-
cedure in a transaction such as this. In the first in-
stance the funds are obtained from the construction

' mortgage lender. The permanent mortgage lender
agrees to buy the promissory note, secured by the

- assignment of a Deed of Trust, from the construction
mortgage lender upon the completion of the project. ‘
It is contemplated that the borrower will use the
funds to build the proposed project — to pay” diréct
and indirect construction costs. In such a transac-
tion the parties, of course, anticipate that everything
will proceed according-to Hoyle — that there will be
no breach by either party. On the other hand, the

' would be permanent mortgage lender must contem-
plate that if, at the last minute, it cancels its com-
mitment such action would be disastrous to the bor-
rower; that in such event obtaining a new permanent
mortgage loan would be well-nigh impossible, for the.
reason that whatever brought about the cancellation
would in all likelihood prevent another: lender from
entering the fray; that one doesn’t find someone will-.
ing and able to lend $4,800,000 at a momient’s notice;
that, under such circumstances, foreclosure under the
construction mortgage would not only be a probabil- —
ity, it would be almost inevitable.” ;

47a

Accordingly, St. ‘Paul under the circumstances here was
entitled to more than nominal damages.

The trial judge here determined that at the time of the
loss St. Paul had no equity. in the property. In other words
he determined the value of the complete building. to be
not greater than the mortgage. There was ample evidence

‘to sustain this conclusion upon his part. Under Maryland.

Rule 886; this finding would not be disturbed by us if. this
were one of the issues specifically argued on appeal: The
position of St.-Paul ‘is that because a tentative value of
the building was assigned by Manufacturers in making its
loan that this becomes the criteria for determining dam-
ages.

St. Paul misunderstands the application of the ule. It
would have been the loss of the building which the parties
would have foresegn.at the time of entering into the con-
tract. It does not/ follow that the value of the building
and, therefore, the amount of.the loss is established by
the parties at that time. Judge Proctor was entirely cor-.
rect in determining that the loss was the equity, if any,
in the building. There was no equity. Therefore, he was
correct in allowing nothing for loss of the building.

St. Paul would also place a valuation on the business
and claim the loss of that. On the issue of lost profits,:
which was but another way of claiming the loss of the
value of the business, the trial judge said:

~“(1). Alleged Loss of Profits.

“In Lawson v. Price, 45 Ma. 123, 139, appellee brought
an action against appellant for obstructing the’ mill
_ race leading to his distillery. It was held that lost.
’ profits could be recovered as an element of damage
because they could be ascertained with reasonable
certainty. In doing so the Court cited, with are.
Sedgewick..on Damages, 89,. as follows:

‘It may now be assumed to be the general rule :

tv1at in actions of tort, where the amount of profits
__’ 4 which the injured party is deprived, as a legiti-

mate result’ of the trespass, can be shown with

48a
reasonable certainty, such profits constitute to
that extent a safe measure of damages. In these -
cases, the rule adopted with reference to certain
breaches of contract which makes the offending ~
party liable far the léss of profits, so far omly as
he. foresaw, or should: have foreseen that par- -
ticular consequence of his act, does not apply.
. He who commits a trespass must be held to con-
template all the damages which may legitimately
follow from his illegal act,-whether he might have
foreseen it'or not; and so far as it is plainly trace-
able, he should make compensation for it. To this
extent, the recovery of a sum equal to the profits
lost, while fairly within the principle of com-
pensation, is also within the limits which exclude
remote consequences, from the scale in Which
the wrong is weighed.’ |

“In Winslow Elevator Co. v. Hoffman, 107 Md. 621,
640-1, the owner of a building (recently constructed) «
had brought suit against’ the elevator contractor for;
among other things, loss of rents from the building
allegedly attributable to the defective elevator. The
Court held as follows:

*.* * In Wolcott v. Mount, 36 NIL, 269, the
Court said: “It must not be supposed that, under
- the principle of Hadley v. Baxendale, mere specu-
lative profits, such as might be conjectured to
have been the probable results of an adventure
which was defeated by the breach of the contract
sued. on, the gains from which are entirely con-
jectural, with respect to which no means exist of
_ ascertaining, even approximately,: the probable
. ‘results, ean, under any circumstances, be brought ~
within :the range of damages recoverable. The
' cardinal.principle in relation to the damages to
be compensated for on the breach of a contract,
that the plaintiff must establish the quantum of his
loss by evidence from which the jury will be able
to estimate the extent of his injury, will exclude

ae

49a

all such elements of injury as incapable of being
ascertained by the: usual rules of evidence to a
. reasonable certainty.”

‘When the claim of the plaintiffs for the recovery
of lost rent is considered in the light of these rules
it certainly must be denied. What rent they might
have received from the building was not only
dependent upon collateral engagements with per-
sons who might rent the rooms, but upon many .

. other considerations, such as location, desirability ~

of rooms, the amount of rent asked, light and
air, competition of other buildings, the number
of tenants, the ability of the: owners to keep the ©
rooms occupied, and the general character of the
management of ‘the building. There are so many
sie elements of uncertainty which enter into and af-
ws fect the question that any estimate of loss could
be little short of a guess. The special damages
sued for in this case-are so uncertain and incapa-
ble of reasonable ascertainment that they cannot
be. recovered.’

“ix Evergreen Amusement — v. Milstead, 206
-Md. 610; 618, the operator of a new drive-in movie |
theatre, in a suit by a contractor, counterclaimed for
alleged loss of profits attributable to the delay in the
work. The Court of Appeals‘ held that because the
venture was new profits were too uncertain to form
a basis for recovery, saying; -

‘* * * on the other hand, loss of profits from .a

_ business which has not -gone into operation may
not be recovered because they are merely specu-
Arehitect’s fees — usually approximately 3%
of base contract on a building of this size.

to

Engineering fees. :

Financing charges. | |
Interest on construction loan.
Settlement charges.

Off-site utility charges.

SN 8 PP &w

Building permits.
9. Leasing and advertising expenses.” .

It has been determined that St. Paul had no equity in > ae
the building and that, therefore, the value of the build- by.
ing could not be recovered. In that case it then follows. ~

LPIA ORSINI IEE SM A RE OO
Rewer yronteteom e

- 56a

that if St. Paul is to be placed “so far as possible, by
monetary award, in the position [it] would have been if ©
the contract had been properly performed”, it must be
permitted to recover those items which it has been obliged |
to pay out or for which it is liable that are connected with

the erection of the building and which would in the normal

course of circumstances have been paid -from the loan
from Manufacturers. The Manufacturers’ loan was to be

- approximately $1,300,000 more than the contractor’s con-

struction cost. Had there been no breach, St. Paul not
only would have had this fund from which to make, pay-
ment, but it anticipated having a business in being to gen-

erate revenue for repayment of the, loan which would _
have paid these items. ‘Thus, portions of the construction .

costs paid by St. Paul or for which it still remains liable

_are part and parcel of St. Paul’s loss directly chargeable

to the breach by Manufacturers.

-The trial judge correctly excluded the claim for: the
moving costs to be paid Dr. Merrill since that was-not a
part of construction. However, within the contemplation
of the parties under the Hadley v. Baxendale rule would
be the $24, 000 extension fee paid Manufacturers, the $9,600
fee paid Weaver Bros. on its loan of $480,000, the $3,500
attorney fee previously mentioned, the balance due the
architect said to be $108,000, the interest paid on the

- $480,000 mortgage, and: the balance due Mullan Contract- .

ing and Real Estate Management Co., Inc., under the con-
struction contract, said.to have amounted to $270,627.41.
Apparently, from the record this item is drawing interest
from April 2, 1968. It would appear proper to allow interest
from that date. In making computations. allowance must
be made: for the item of $175,167.40 discussed under the
second count which should ke..credited on the. Mullan
claim.

The original charge of Weaver Bros. was to be $48,000.00
for obtaining the permanent mortgage loan and $48,000.00
for obtaining the construction mortgage loan, a. total of
$96,000.00. When the contract with Weaver Bros. was re-
written in December of 1963 to eliminate the exclusive
agreement. with Weaver Bros. for obtention of the con- —
struction loan-so as to permit St. Paul to obtain the con-

Pal

57a ; .

struction loan through Merchants, Weaver Bros. required

that its compensation remain at $96,000.00, $48,000.00 which.

‘had already been paid and $48,000.00 to be paid later. St. .-

- Paul then agreed to pay, and did pay, Merchants $48,000.00 - /
for the construction-loan and was also obliged to pay .. *
Chemical a $24,000.00 fee, the same amount which Lamon

of Manufacturers advised Tinley of Weaver in August,

1963, it would require as a fee for making: a construction

2 , . a

such as . ', arising naturally . . or such as may
reasonably be supposed to. have been in the contem-"
plation-of both parties at the time they made the con-
tract as the probable result of the breach of it...” -

: “Damages; in the plural as used in the Hadley rule and

~ as used in the cases and texts! is distinguishable from the

singular of “damage.”

— Law Dictionary (4th Edition) defines “damages” :

“A pecuniary compensation or indemnity, which may |
be recovered jin the courts by any person who has

- suffered loss, detriment or injury, whether to his -

person, property, or rights, through the unlawful act
or omission or negligence of another.” (Citations
_ omitted) (emphasis supplied). ,

On the other hand, Black’s Law Dictionary (4th-Bdition)

’ defines~‘damage” (in singular form) as

“Loss, injury, or deterioration caused’ by the negli-
gence, design, or accident of one person to another
in respect of the latter’s person or property. Thé word
is to be distinguished from its plural —{‘damages’ —
which means a cepa in. money. for a loss or
damage.”

Since Hadley and all of the cases itis Hadley, and |
all of the text’s interpretation of Hadley, including Brantley ~

1 For example see 25.C.J.S. Damages, Section -24a:
“The damages which are within the contemplation of the
: parties are to be measured in terms of knowledge of the parties
at the time of making the contract. Ordinary damage because
of the-breach of a contract is assumed as a matter of law to be
within the contemplation of the parties. It is held that the
_ parties will be presumed to have contemplated that the party
injured by the breach of the contract would sustain such
damages as would>fairly and substantially, in ‘the usual course
of things, results from such breach, in the light of -all the facts
known or which should have been known to them; and the
damages recoverable. in and action for breach of contract are
for this reason sometime more remote than those recoverable for -
a tort” (emphasis eat (p. 667). . |

. . on Contracts, used the plural form of “damage” (damages)

in their explanation of the rule, “damages”, as used in
Hadley,.must mean the dollar value\ of the element con-
tracted for and dollar losses of the ‘parties contemplated
at the time of contracting in the event of a breach. These

- losses can only be measured in terms of the knowledge

of the parties at time of coritracting.
The dichotomization of “damages” under Hadley into

“elements” determined as of time of cont acting and |

“value” assigned to those elements on date of breach de-

feats the fundamental purpose. for the rule. ‘Hadley was .
* formulated so that both parties to a contract can, as of the
time of contracting, rather than at some subsequent, un-.

determined time, know what their exposures are under
the contract and to be able to safely rely upon the then
contemplated and agreed upon values in subsequent deal-
ings. The practical effect of the Court’s decision is to
measure damages in a breach of contract situation as of the

time of breach rather than as of the time of contracting

.which equates the contract rule with the rule in tort actions.
To hold that the building is an element of damage deter-
mined at time of contracting -without accepting the relied

upon value the parties simultaneously placed upon that °

“element” is really ‘theoretical, meaningless and has no

. practical application. After all, the dollars are what it is -

all about.:

_ To accept “elements” of damage and ignore the “values”

" assigned ta those elements in no way provides any security -

to the contracting parties. Such parties still have no. way
ef knowing what their exposure or ‘security under the

~ contract ultimately: will be. Th¢ “elements” are there but
under the Court’s ruling the “values” assigned to those -

elements await further determination under unforeseeable

. €conomic circumstances or other unforeseen conditions.

The best example is the instant case. St. Paul and Chemical

_totatly relied upon the value Manufacturers placed upon

the building: To. hold; as this Court has done, that one

in negotiating a construction loan or -in advancing addi-

a

can no longer rely upon the values assigned to a project ‘ ‘

62a

tional monies for a project, will create total chaos in the
‘volatile industry here- involved, saaeines from being grossly
unjust.

Under the Court’s ruling, ccinidsannts lenders and de-
velopers all over the country are placed in the position of
incurring the exposure that.a permanent lender. will cancel
its commitment and, through hired testimony, establish

-. that there was no then existing market for the particular «

project regardless of what the parties believed at time of
contracting and regardless of the degree of reliance the
. developer. and construction lender placed on the values
established for the project by the permanent lender. The
permanent lender can minimize or avoid its losses while
causing a developer to. lose his project and the fruits of his
bargain with the years of work going for naught and caus-
ing the construction. lender to foreclose and end up owning
. and operating a building against its wishes. |

Another tragic aspect of the present ruling is that the |

breaching party is placed in the unique position of déter-

mining the time the “value” will be assigned to the “ele=~

ment.” The potential for inequity and fraud is overwhelm-
ing. Permanent and construction lenders all over the
country, in times like today, when interest rates go up and

. down like a yoyo and money. is available today but not —

ton.orrow, desparately need a firm rule holding a perma--
nent lender to the values the parties contemplated; agreed °
and relied upon at the time of the contracting. Considera-.

‘tion of the totally meaningless “elements” that the parties
_ consider at contracting affords no practical protection to
anyone other than the breaching party. By design, a party
bent upon breaching a contract can scheme to breach at
a moment it knows that the immediate value of the “ele-
ment” is depressed regardless of.the reliance upon the

original values and the resulting injury to others.

The Court, at page 39, held:

) Fem. SON
“The position of St. Paul is that because a tentative
value of the building was assigned by Manufacturers

63a.

in making its loan that this becomes the criteria for
determining damages.” (emphasis supplied. )

Manufacturers Had not assigned a tentative? value on
St. Paul’s building. The value of St. Paul’s real estate and
the value of its project had been carefully determined by
anufacturers prior to giving their commitment. These cf
values had been accepted by St. Paul and had been relied
upon by St. Paul and by Chemical. An insurance. company
such as Manufacturers cannot make a mortgage commit- |
ment of 4.8 million dollars on a tentative value. Manufac-~
‘turers testified that in giving their commitment they were
restricted by Canadian regulations to lending 66% of the
value of the property. To hold that the values placed by
Manufacturers on St. Paul’s property and on its project
‘were merely tentative values, would be to hold that Manu-
- facturers’ commitment of 4.8 million dollars was merely
a tentative commitment, to be accepted or rejected at their
will when the building was complete. |

It was the Court’s belief that this value determined by
-Manufacturers was a “tentative” value that was pivotal in
the Court finding that’St. Paul had no equity in the build-
ing on the date of breach. Manufacturers loaned 66% of
this “tentative” value it placed on the building or 48
million dollars. This 4.8 million dollars was the direct re-
sult of Manufacturers’ “tentative” value and. was_sub-
tracted by the Court from the Court determined fair market
value of the building in determining that sia Paul had
ng equity.

St. Paul further maintains that this Court erred in adopt-
ing’ a “fair market value” as a basis for determining St.

_ 2 There is no evidence in this case to support this Court’s deter- °°
mination that the $7,265,000 was a “tentative” value. Certainly
neither Chemical nor St! Paul would: have agreed to rely upon a
tentative value as security for its loan. Nor would Manufacturers
have been willing to make a permanent Joan using the building
as security if it believed the value was merely. “tentative” and: would
not exceed the amount of its lien. Nor would Manufacturers have
agreed to waive.a higher interest rate in exchange for its 13.31%.
interest in the gross rents — on a “tentative” value:

64a

Paul’s equity. The value of the building on the day of
breach, then empty only because of the breach, ‘to a hypo-
‘ thetical buyer on a specific day, in no way represent its
true value within the contemplation of St. Paul and Manu-
facturers since it was always known that the building
‘would require about eighteen months before maximum
‘occupancy could be expected.

Further, the. fair market value assigned to the building
by the. defendants’ appraisers and accepted by the lower
court, ignores the intent of the parties formulated at time
of contracting relating to the specialized use to be made
of this “element.” If it is the loss of the bricks and
mortar only and not the value of its use that is contem-
plated by the parties at time of contracting, the value
ultimately assigned to the building should be determined
within the contemplated purposes of the parties for the
building. :The value the lower court assigned to the build-
ing was predicated upon a downgrading of the intended
use of the building totally contrary to the intent of -the
parties. Gordon Gilbert was the only expert that deter-
mined the fair, market value of the building on March 7,
1966 based upon the parties intended use. If fair market
value is relevant, it is Gilbert’s value of $7,245,339 that
should control.

The Court has determined that St. Paul’s equity on the
date of breach is all to which it is entitled. That being so,
the equity should be determined by using the “values”
_assigned to the “elements” by the parties at-contracting
based upon the uses then contemplated, pr the difference
between $7,265,000.00 and 4.8 million dollars, of the dif-
ference between Mr. Gilbert’s fair market value of $7,245,-
339 and 4.8 million dollars.

This Court, by. its decision, has effectively removed as
considerations in assessing damages against a wronging ~
party the uses and purposes the parties contemplated ‘and
relied upon in their contract. It is respectfully submitted ©
that this Court’s decision represents one giant step back-
wards in the development of the law which should be

65a

motivated to protect the innocent. Manufacturers chose
to breach knowing what the effect upon St. Paul would be.
But for the deficiency decree, which can be averted next
time and nominal damages, Manufacturers comes out. un-
scathed and St. Paul is obliterated. :

‘We urge the Court to consider the practical effects of
its decision. Cancellation of mortgage commitments by
permanent lenders are rampant over the country. There
is a significant national issue involved. This decision can
only add “fuel to the fire’ in encouraging permanent
lenders to refuse roll-overs each time there is a significant
change in the money market or to use a threat’ of refusal
to roll over as the means to force a developer to renegotiate
his loan on less favorable terms, as has become the custom.
Further, the Court’s decision results in the deprivation of
private property without just compensation in violation of -
the due ‘process requirement of the Fourteenth Amend-
ment of the Constitution of the United States.

The Court’s decision as it presently stands sanctions a
wrong without a remedy for there can be no benefit to
Charles W. Williams or St. Paul, from the present award.
We sincerely urge this Court to permit reargument on
this most important question.

B. Dr. Morrell and the $50,000.00

?

The Court held at page 48 of its opinion that St. Paul
can. recover “. . . portions of the construction costs paid
‘by St. Paul or for which it remains liable . . :” but dis-
allowed the $50,000.00 owed to Dr. Morrell because “: . .
that was not a part of construction . . .” (page 48). The
$50,000.00 was always understood to be a necessary part
of the project costs. In Plaintiff’s Exhibit 24, E. 967,
Jonhson’s letter to Tinley, Johnson stated:

“Attached is a list of the time. payments required in:
connection with the acquisition of the properties (1101- -
1115-St. Paul St. and 100 E. Chase St.) which you
requested by telephone today. This includes $675,- -

66a

000.00 for the land and $50,000.00 additional due one
of the present owners for disrupting his practice and
expenses of moving and reestablishing same.”

This Court; at page 8 of its opinion, considered the total
land costs:to be $725,000.00, where .it stated:

“August, 1962: Williams contracted the first of nine
purchase options on land on the north east corner of
St. Paul and Chase Streets. in Baltimore; total pur-
chase price was to be $725,000.00; the options were
to be exercised’ by June 15, 1963, with ‘payment ap-
—parently” to be made by September 1, 1963.”

Weaver’s. $480, 000.00 land loan was made so as to provide
funds for Williams to make partial payment on the option
to purchase the land. Weaver was repaid from the con-
struction loan. The construction loan was originally in-
tended by all parties to provide the funds for the acquisi-.
tion of the land. It is respectfully submitted that any dis-
tinction between construction costs and project costs is
‘academic. Williams could not purchase Dr. Morrell’s land’
without agreeing to the payment of this $50,000.00. It was
a necessary expense, known and accepted by all parties
_if the project was to proceed. It must be paid by St. Paul -
from any recovery it receives (assuming that any monies
are available after payment to judgment creditors), was
_ personally gauranteed by Williams and should be re-
coverable against Weaver and Manufacturers.

Respectfully submitted,
Davi. FREISHTAT,

_ Attornéy for St. Paul and
Charles W. Williams.

67a
In The |
Court of Appeals of Maryland |

No. 400
September Term, 1970 .

St. Paul at Chase Corporation, et al.
Manufacturers Life Insurance Company, et al. -

SUPPLEMENTAL MOTION FOR MODIFICATION OF
DECISION AND FOR REHEARING .

St. Paul at Chase Street Corporation and Charles W.
Williams, Appellants and Cross Appellees, by David Frie-
shtat, their attorney, move, pursuant to Maryland Rule 850,
for modification of the decision rendered by the Court of
Appeals on May 17, 1971 or for reargument of its appeal
and, in support thereof, respectfully shows: :

INTRODUCTION

1. The Appeal of this case was argued before this Court
on April 6, 1971. CONG:

2. On May 17, 1971 this Court rendered its decision in
favor of the Appellant and Cross-Appellees and against
Manufacturers Life Insurance. Company and Weaver
Brothers, reversing in part, affirming in part and remanding
for the entry of a judgment in conformity with it opinion. .—

' 3. On May 25, 1971, St. Paul filed a Motion for Modifica- -
tion and Rehearing raising points “A” and “B” as contained
therein which Motion was denied by this Court.

'4, Appellant seeks a modification or reargument upon
the following additional grounds. ;

68a

C. The Court. erred in. reversing ‘the trial Court’s
award of punitive damages of -$194,000.00 under Count II
of Plaintiffs’ Declaration based upon its belief that Count
II merely alleged negligence in the performance of a con-

tract and therefore malice must be shown before sych an.
award will lie.

D. The Court erred.in not finding the inference of
malice from Weaver Brothers uncontradicted actions justi-
fying exemplary damages.

E. The Court erred in ruling that St. Paul had suffered
no loss for the loss.of its building.

S = Court at page 32 of its opinion held:

. the first Count was a pure contract claim, while
Pa second Count alleged negligence by Weaver
Brothers in the pr of its contract with St.
Paul.” - ‘

This Court then held that aablien damages would not
lie under Count II because punitive damages can only be
awarded in a contract action where “actual malice” is
shown or where the Court can draw the necessary inference
of malice from the conduct of the offending party.

_ Count II is not-an action for the negligent performance
of a contract. Count II is an action in deceit. Following. -.
are various quotes from Count II establishing the true
nature of this Count.

E. 21-22 (par. 46)

“
.

. the false statements made by the Defendant
Weaver that Manufacturers had withdrawn their offer
of a construction loan . . . were made by Defendant
Weaver with the intent that the Plaintiffs rely on
these false statements and were gt ee 5

E. 26 (par.’55)

“The Plaintiffs further allege that Defendant Weaver |
having secured the Plaintiffs’ complete confidence,

69a

. knowing the position in which the Plaintiffs stood and
the heavy losses faced by the Plaintiffs; evidenced a
complete indifference to the Plaintiffs’ safety and wel-
fare, evidenced a complete absence of even slight care
or diligence, and further evidenced a thoughtless and
reckless disregard of the Plaintiffs’ interests.”

E. 26 (par. 56) . ae Se .
“As a result of Defendant Weaver’s deliberate, willful,
unjustifiable, unwarranted and wrongful acts and neg-
ligence, the start and hence completion of the Plain-
tiffs’ project was delayed by many months. The Plain--
tiffs allege that these deliberate, willful, unwarranted,
and wrongful acts and negligence on the part of
Weaver contributed to and set in motion those causes —
which caused the Plaintiffs their heavy losses and
damages including the loss of their entire project and
in- addition, were then left heavily indebted to Chemi-

- cal Bank and others. Vas,

E. 26 (par. 57)

“In addition, the Plaintiffs allege that when all of “ah
the actions of Defendant Weaver as set out above are
taken together, these actions show constructive fraud
on the part of Defendant Weaver. Accordingly, the
Plaintiffs allege that this fraud contributed to and set
in motion those causes which caused the Plaintiffs
their heavy losses and damages and that Defendant
Weaver is responsible for the Plaintiffs’ heavy dam-
ages and losses,” :

St. Paul has alleged in Count II-all of the essential ele-
ments constituting actionable fraud i.e., a false representa-
tion see E. 21; falsity of the representation was known to
the Defendant see E. 26; thatthe misrepresentation was
directed toward the Plaintiffs see E. 22; reliance by the .
Plaintiff on the misrepreséntation see E. 22; and damage
suffered as a result of the misrepresentation see E. 26.

The question of fraud is one of fact to be determined by

the jury or by the Court sitting as the trier of facts.. Walsh

/ he >

.
70a

v. Edwards, 1964, 197-A. 2d 494, 233 Md. 552; See also a
M. L.E. Fraud, Section 24 and cases cited in Note 31.

Following are the findings: of fact. and the statements |
contained in the opinion of thé trial Court dealing with
the conduct of Weaver which the Court felt. sufficient
justification for the imposition of exemplary damages. —

E. Page Reference

104
109

109.

110

110
118-119

121.
. 122
123

124

-Weaver’s breach of duty willful, material.

Weaver knowingly made a misstatement of fact
concerning Manufacturers construction loan offer.
This was a clear breach of duty.

At the very end it was all for Manufacturers —
nothing for St. Paul.

Series of acts prove Weaver did not act as it .

should toward St. Paul citing Gottschalk and
Grant episode and exacting of letters from New-
meyer - ‘and Cogswell.

If Weaver had spoken up, Manufacturers may
not have cancelled.

At the end everything was “toe Manufacturers, .
nothing for Plaintiffs.

Conscious and deliberate breach of duty should,

in an appropriate case, carry with it something
more than the obligation to pay actual damages.

_ Weaver’s actions were wanton, characterized by

extreme recklessness and utter disregard for the. »
rights of others — in this case St. Paul.

Weaver breached duty it owed to St. Paul by ;
negligent conduct; not merely a failure to dis-
close but knowing misstatenient.

Court has found Weaver owed a duty. of good
faith to Plaintiffs and Weaver breached this obli-

gation by knowingly _—s a misstatement of
facts. |

71a |
; - 2
E. Page Reference as

125 Court’s opinion is that if Tinley had communi-.

cated Plaintiffs acceptance of Manufacturers offer
of construction loan:to Manufacturers, Manufac-
turers would have issued letter of commitment
promptly and that settlement would have been
earlier than May 1, 1964 and’ that everything
would have been moved back at least two months.

126 - Had Weaver communicated St. Paul acceptance ,

it would have been altogether different ball game.

127. +Weavers conduct not only “wanton”, but also

_ may have involved an element of fraud citing
Parish v. Milk Producers Assoc., 250 Md. 24;
Levin v. Singer, 227 Md. 47. oly

Punitive damages can lie in an action for deceit par-
_ ticularly where the wrong involved some violation of duty
_ Springing from a relation of -trust and confidence ‘or in

‘the breach of duty where one is in a fiduciary capacity
as the trial Court found in the instant case or where fraud
is gross or where there is malice and willfulness. See
Fowler v. Bentcn, 1967, 226 A. 2d 996, 245 Md. 540. — 3

* Under the Fowler case, the trial Court, within its dis-.

- cretion, was justified in imposing punitive damages against
Weaver Brothers because of the trial Court’s finding that

the wrongs committed by Weaver Brothers in fact sprang -
_ from a relation of. trust and confidence and did in fact ©

involve a breach of fiduciary duty and did in fact consider
the actions of Weaver Brothers to be grossly fraudulent
to the point where the trial Court found that the gross,
reckless and wanton conduct of Tinley, the Executive

ne Vice-President of Weaver Brothers, justified the trial

Court, - as the trier of fact,:to infer from such conduct an
inference of malice and award punitive damages.

D. Count I was the contract Count. Count II alleyed
all of the essential elements of actionable fraud: How-

ever, arguendo, Weaver’s conduct was such as would com- _
pel an inference of malice regardless of- how this Court ~

characterizes Count II. *

z=

72a

The Court hes equated Weaver’s conduct in the instant
case with the conduct of the Defendant in the Knicker-
bocker v. Gardiner Co., 107 Md. 556 case which did ‘not
involve fraud. and held that the conduct of Tinley was °
“but little different from’ the conduct in Knickerbocker”
page.35 of the Court’s Opfijon. 3

As a factual proposition, we respectfully submit that
the Court erred in equating Tinley’s conduct to that of
the Defendant in the Knickerbocker case. Tinley’s wrong-
ful actions were far more prolific, more egregious and
foreseeably had a far more disastrous effect upon the
Plaintiff then did the acfions of the Defendant in the
Knickerbocker case. In Knickerbocker, the endant’s |
_actions were done with an intent to benefit itself though
knowing that his actions would: result in injury to the
Plaintiff but were not fraudulent and as of a scheming
nature as was Weayer’s conduct.

In St. Paul, Tinley, who was in a ‘ties capacity to
St. Paul, embarked upon a series of wrongful acts over an
extended period of time which, among others included
fraud by specific misrepresentation and fraud by omis-
sion. Tinley’s actions were done with the full knowledge
of the enormous:injury that would be inflicted on St. Paul.
The trial Court refused to find, as urged by St. Paul, that
Weaver’s actions through Tinley were motivated by a de-
sire to benefit itself rather than actions which were spe-
cifically intended to- injure St. Paul. St. Paul argued that
Tinley was scheming to take over the buildirig. .The trial
Court rejected this contention as has this Court by adopt-
ing the trial Court’s opinion. If. Tinley was not scheming |
to take over the building, then there was no justification
for any of the below described actions taken by: Tinley.
Without personal motivation for financial gain, Tinley’s
‘actions. can only be viewed as acts done with ‘a specific -
intent to injure St. Paul.1

: However, St. Paw maintains that the better rule for determining
whether or not exenrplary damages should be awarded is the rule
adopted by the trial Court through its reliance upon Brown v.
| Coates, 253 F. 2d 36. Phe scheming for personal gain by one in

== /This Court has relied ‘to almost an unprecedented de-
gree upon the comprehensive and painstaking factual
analysis of the Trial Court. Judge Proctor analyzed’ Tin-
} ley’s actions and repeatedly, in his Findings of Fact, Opin-
: ion on Liability and Opinion on Damages found that Tin-
ley acted in a grossly reckless and wanton manner ‘which
mounts up to fraud. . ;

ORF RMS ALD,
.

‘A listing of some of Tinley’s wrongful actions follow:

. 1. On October 10, 1963, Williams told Tinley he ac- —

cepted Manufacturers offer of a construction loan. Tinley
told Williams the offer had been. withdrawn when in fact
it was then available and remained available through
May 1, 1964 (E. 40). The loan was available even wien
Weaver coerced St.Paul to sign Defendant’s Exhibit 9,
E. 988, the letter agreement of December 6, 1963 where
_ St. Paul agreed to pay Tinley $96,000.00 even though Tin-
ley could not get the construction loan just to obtain
Weaver’s permission for Merchant’s Mortgage Company
_ to obtain the loan. This is in spite of Judge Proctor’s find-

nt GL EIAD us

Li eh hb Rai tiaias

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™ nm nee
Sah clita et Rods

a fiduciary capacity to the substantial detriment of another who .
3 is relying upon the breaching parties’ good faith, should be punish-
4 . able‘ by the imposition of exemplary damages. It is incongryous’
; ; to hold that the intent to benefit oneself creates a shield against
¢ punitive damages regardless of the degree of fraud, reckless and
' wanton conduct involved and regardless of the degree of injury
inflicted. Where conduct is gross, reckless, wanton and/or involves
* elements of fraud and such conduct substantially injures another,
: punitive damages should be imposed whether or not the tortious.
actions had its beginnings couched in the terms of a contract. We
respectfully submit that any distinction between gross, reckless find
wanton conduct stemming from’ the performance of a contract from
similar conduct occurring independent of a contract, does violence
S to the basic principles of justice Ea fair play. The effect upon the

Plaintiff in either case is the sdme.. Now Chief Justice Burger
recognized in Brown v. Coates mgny courts have refused to award
punitive damages in any contract action.: However, the Court held
that the better view permitted such damages where the breach of
contract. merges with and-assumes the character of a wilful tort,
caleulated, flagrant and in disregard of obligations of trust. 5
Corbin, Contracts, Sec. 367; McCormick, Damages, Sec. 290; 70
Harv. L. Rev. 517, 532. ° ) 4

"4a

ings that Tinley had given St. Paul assurances that it could

- obtain the construction toan (E. 54).

2.. After denying the existence of Manufacturers offer
. of a construction loan, Tinley attempted to interest Wil-
liams in selling his project to Gottschalk and Grant. Wil-
liams refused and terminated these discussions (E. 65-66).
Tinley. without any authority from Williams, attempted
‘to force a situation where Williams would be forced to
sell. Tinley contacted Mullen and told Mullen that Gotts-
chalk and Grant were taking over the building (E. 66).
He then called Newmeyer and. told Newmeyer that Wil-
liams was washed up and that Gottschalk and Grant were
taking over the project (E. 66). It must be remembered
‘that Tinley had the offer of a construction jloan in his
pocket all the time.

3. Tinley agreed to lend St. Paul $500,000.00 as a cush-
ion to insure completion if Mullen would obtain the con-
struction loan for 4.8 million dollars (E. 61). Mullen ob-
tained approval of Maryland National Bank if Weaver’s
- $500,000.00 was available (E. 64-65). On October ‘10, 1963,
Tinley denied having made the offer of $500,000.00 and
_ Mullen withdrew his application (E. 65). Both Williams

and Mullen confirmed Tinley’ s offer. ;

4. On March 17, 1964, Tinley told Williams he should
falsify his records so as to inflate the construction costs
_ for the project by giving Mullen St. Paul’s stock; that this
_ would facilitate Manufacturers approval of the plans and
specifications (E. 74-76). These happenings were confirmed
by Johnson. Tinley again repeated his unique suggestion
on April 8, 1964 (E. 76). See also E. 62 for additional con-
firmation of Tinley’s fraudulent suggestion to inflate the
costs of construction.

5. On March, 1966 Weaver hired on behalf of Manu-
facturers, a professional photographer to take pictures of
- only the unfinished work. Hé was accompanied by repre-
sentative of Weaver Brothers (E. 92).

6. On March 11, 1966, Weaver knowing that the build-
ing was fully — as the Court has found, indicated

75a

that the cancellation ‘was because the building was not
complete; there was nothing he. could do; he would not
even try; and Weaver asked for his additional ‘$48,000.00
(E.94). .

7. On March 29 and March 30, Weaver caused Cogswell
and Newmeyer to come to their offices in order to solicit
from them letters which would support Manufacturers
decision for cancellation. (Defendant’s Exhibit FF, De-
fendant’s Exhibit N). Both Cogswell and Newmeyer testi-
fied that they were asked a Specific question by Mrs.
Byrnes of Weaver Brothers as to whether or not the build-
ing was 100% complete. Mr. N ewmeyer testified that Mrs.
Byrnes said that:was not what she asked. She wanted
to know whether the building was 100% complete. To
this question, Newmeyer and Cogswell wrote their letters

‘which Manfuacturers so heavily relied upon at trial.

There are other wrongful actions committed by Weaver

which support St. Paul’s contention that this Court erred.

in reversing the trial Court’s finding that Weaver’s ac-
tions, under the atmosphere and circumstances developed
at the trial, demanded the imposition of sanctions. In
view of the heavy and justifiable. reliance this Court has
placed upon the trial Court’s Findings of Fact’‘it is respect-
fully submitted that the Trial Court’s belief that Weaver’s
actions required the imposition of sanctions should be

_ respected. .

E. Compensatory Damages

The Trial Court having listened to all of the testimony,
having reviewed all of the evidence, and having heard the .
arguments of Manufacturers, rejected Manufacturers’ con- _
tention that the contract between Manufacturers and St.
Paul was a contract to loan money. As stated by the Trial
Court at E. 131: +

“In the first place this was a great deal more than a
contract merely to make a loani, if in fact it was such
- -a contract at all.” |

76a ©

_ his Court at: page 37 of its Opinion overruled the Trial
Court on this point and held; “this was a contract té lend
' rhoney.” —

Whether the subject contract was one to lend money or
not is immaterial. It provided for duties and rights on
both sides with something to be done on each side. As
stated in 5 M.L.E. Contracts, Section 1:

“The law: recognizes, as a matter of classification, two
kinds of contracts, bilateral and unilateral. Every
bilateral contract includes both rights and duties on
each side, while both sides remain executory. A uni-

‘lateral contract, on ‘the other hand, is one in which
there is a promise on one side only, the consideration
on the other side being executed.”

As stated in 17 C.J .S. Contracts, Section 8:

“A ‘bilateral contract’ is one of reciprocal promises,
resulting. in something to be done or foreborne on
each side.”

“A ‘unilateral contract’ is one consisting of a promise
on one-side only: and)| executed consideration on the
y other side.” :

Under the above definitions, the subject contract was :

a bilateral executory contract with duties and obligations
on both St. Paul and Manufacturers. For a breach of its
contract, the damages assessed against Manufacturers must
be determined under the rules laid down for breach of

contracts in general. These rules stem from the celebrated 7

case of Hadley v. Baxendale, 1854, 9 Exch. 341, (Eng.).
The Hadley case has been adopted as part of the Law of
Maryland and has been universall} accepted.

This Court as well as St. Paul and Manufacturers, recog-
‘nized that the rules laid down by Baron Alderson in the
Hadley case should govern the subject case. Simply stated,
‘the Hadley rule is that in breach of contract actions the
damages which the injured party should receive are those
damages which* the parties contemplated at the time the
contract ‘was made, that would result from a breach of

ere

ALLA LE BNL SITY

lla

contract. The Court at page 39 of its Opinion, however, |
Tuled’ that St. Paul misunderstood the Hadley rule and
held that the loss of the building would have been in the
contemplation of the parties at the time the contract was
entered into, but not the values of the building as agreed
to by the parties and that the amount of the loss should
_be established at the time of the breach. :

In its “Motion for Modification of Decision and for Re-
hearing”, filed. May 25, 1971, which Motion was denied —
June 1, 1971, St. Paul had argued that under the Hadley -
rule, that which was in the contemplation of the parties .
at the time the contract was entered into could not be -
split into two elements; (1) the loss .of ‘the building ‘and,
(2) the value of the building. St: Paul will not impose
on the Court and attempt to reargue its position here, but —
will merely respectfully request the Court to reconsider |
its position as a part of this Supplementary Motion.

In this Motion St. Paul will: direct its arguments and

' request for a Rehearing to the following ruling of this

Court (also at page 39 of its Opinion). .
: ; & 2
“Judge Proctor was entirely correet: in, determining
that the loss was the equity, if any, in the building.
There was no equity. Therefore, he was correct in
allowing nothing for the loss of the building”.

In reaching this decision, the Court relied heavily on
the 1924 Texas case of Collins Insurance Co: v. Sallas, 260
S.W. 261. It is respectfully submitted that this case bears
no similarity to the case at bar. Firstly, the Collins case
was a unilateral contract to loan money. There was no.
duties to be performed by each of the parties. Secondly,
prior to negotiating a loan, Sallas had made a downpay-
ment of $1,000.00 on a piece of land priced at $20,000.00 on
which he desired to build a home. Sallas had not relied -
on the loan from Collins and had not started construction
of his home. When Collins reneged, Sallas was unable to
obtain another loan and his deposit was forfeit. Sallas’
only loss was his $1,000.00 deposit. This was all he sued
to recover. The Court found that this $1,000.00 was: the

dS.

78a

amount of Sallas’ equity, and awarded him the damages
., of $1,000.00 requested by him.

In the case at bar, St. Paul had not incurred any obtiga-
. tion and had made no payments on its. land or building
before Manufacturers’ offer was made. St. Paul relied on

Manufacturers’ contract, met all of the conditions im-—

posed by Manufacturers, borrowed $4,800,000.00 from
Chemical, and invested this amount together with sub-
stantial other sums in their project. The statement of the
Court in Collins cannot be held to govern the subject case
. or to modify the general Hadley rule. While the Court in
Collins did not cite Hadley, it recognized the Hadley rule
and held that what was in the contemplation of the parties

at the time they entered into their contract should govern ,

the damages to be awarded. The Collins case, therefore,

cannot be used to modify or in any manner change the.

Hadley rule. —

- During the trial of the subsinet case, Judge Proctor de-
_. termined that the value of St. Paul’s building as of the

* date of Manufacturers’ breach was $4,509,785.00. The Court
affirmed this finding. While St. Paul does not agree with
this value, or the speculative methods used by the Trial
Court in arriving at this figure,-nevertheless, under Judge
Proctor’s findings, this was the value of the building as of
the date of the breach. St. Paul, therefore, should have been

awarded at least this amount for the loss of their build- |
ing even’ though the parties at the time the contract was .

. entered into had. valued the building at $7,920,000.00. .

It is respectfully submitted that there was no’ justifica-
tion whatever for deducting the amount of the mortgage
from this value to determine St. Paul’s equity. In the first
place, equity has nothing to do with the damages St. Paul
. is entitled to recover. At-the time the contract was made,

neither of the parties contemplated that the bricks and >
‘mortar value of the building would pay off and redeem °

the mortgage. Bricks and mortar can pay off nothing. The
parties contemplated that the use of the building which
Manufacturers had valued at $7,265,000.00, would pay off
and. redeem the building. If equity has any part to pay

os )

79a

' in the damages in the subject case (which St. Paul denies),
the only: equity that could be used and the only equity
that was brought out by the testimony and evidence sub-
mitted at the trial of this case, would be St. Paul’s equity
in its use of the building, namely $7,265,000.00, less the
amount of the mortgage, or $2,465,000.00 which was the
-amount St. Paul had demanded as Special Damages. —

Neither the Trial Court nor this Court in awarding
‘damages considered St. Paul’s use of the building. Manu-
facturers’ ‘breach prevented St. Paul from using their
building as they intended to do for a downtown home for
' wealthy persons, and as was contemplated by the parties
at the time the contract was entered into. Manufacturers

cannot take advantage of the wrong committed by them
and say that St. Paul would not have been able to carry
and redeem the.mortgage from its use of the building.
Williams had testified that he had arranged ample funds
to carry the building through-the “lead period”, until it
would be self-supporting. This statement was uncontra-
dicted. While the Trial Court held that St. Paul’s prop-
erty was worth only $4,509,785.00,-‘at the date ,of the
breach, by the use of the Court’s own figures, as shown
by St. Paul in its brief at pages 97, 98, St. Paul would have
been able to meet its mortgage payments in full, with
- $52,283.89 remaining as a return to St. Paul. ee

.

Neither the Trial Court nor this Court in awarding dam-
ages considered the value of St. Paul’s use of its building.
As stated above, the only Valle for the use of the building
that was submitted in‘evidence was the value ‘that Manu-
- facturers had ‘placed on it of $7;265,000.00 from which
should be deducted the amount of the mortgage, leaving a .
' net value of $2,465,000.00.

For the-above reasons, St. Paul respectifully submits that
as damages, it should be awarded at the very least, the
value of the building as determinéd by the Trial Court,
namely, $4,509,785.00 plus the net value of the use of the
building as established by Manufacturers, namely $2,465,-
000.00. For this reason St. Paul has requested in this Sup-
plementary Motion the right to reargue these points. —

80a

“On page 47 of its Opinion, the Court stated:

“If St. Paul is to be placed ‘so far as possible, by mone-
tary award, in the position (it) would have been if the
contract had been properly: performed’, it must be per-
mitted to recover those items which it has been obliged
to pay out or for which it is liable,that are connected
with the erection of the building and which would
in the normal course of circumstances have been paid
. from the loan from Manufacturers”.

It is respectfully submitted that if St. Paul and Williams,
who is a Party Plaintiff, are to be “put back in the position
by monetary award, in the position (it) would have been
had the contract been properly performed”, St. Paul and
Williams must be awarded at the very least, the value of
the building, determined by the Court, namely, $4,509,785.00
plus the net value of its use, namely, $2,465,000.00, as es-
tablished by Manufacturers. Only in this way can St. Paul
and Williams be reimbursed for the enormous amount of
time, effort, and monies expended in developing the proj-
ect, putting it together, in supervising the construction of
the building, in advertising, in furnishing model apart-
ments, and in staffing the building, and having it open and
ready for occupancy. All of this, as well as the loss of the
building and loss of its use were lost as a result of Manu-
facturers’ callous, deliberate and wanton breach.

The amount of the monies awarded by this Court ‘will
not even pay off all corporate obligations with interest,
and will leave nothing for St. Paul and Williams. It is
further submitted that in equity St. Paul’s legal expenses
and fees must be paid before St. Paul’s creditors are paid ~
for, except for the time, effort, and expense-of St. Paul’s
attorneys, its creditors would have received nothing.

Respectfully submitted,

Davip FREISHTAT,
Attorney for. Appellants.

r

ees | 8la

In The
Court of Appeals of Maryland

( | | - Case No. 400
7 Fall Term, 1970 |

St. Paul at Chase Corporation, et al.
. v. .

Manufacturers Life Insurance Company
of Toronto, et al.

MOTION TO STAY ISSUANCE OF MANDATE PEND-
_ ING.REVIEW BY THE SUPREME COURT
. OF THE UNITED STATES

St. Paul at Chase Corporation and Charles W. Williams,
Appellants, by David Freishtat, their attorney, moves, pur-
suant to Maryland Rule 876b that the issuance of the man-
date herein be stayed pending application for review of the
judgment of this Court by the Supreme Court of the
United States. The grounds of the motion are as follows: -

1. Appellants intend to file a timely petition for cer--
tiorari in the Supreme Court of the United States.

2. The petition will present the following federal. and
constitutional questions, which, for the reasons set forth
‘after.each question, are sufficiently important and debat-
able as to raise a reasonable prospect that at least. four
members of the Supreme Court would vote to review the
case. fir at a

a. In view. of the acceptance in nearly all of the.
States of the United States of the Rule of Hadley v. Baxen-
dale, 1854, 9 Exch. 341 (Eng.), for measuring damages
arising out of a breach of contract, a decision of a State :
Court holding that the values determined by the contract-
ing parties at the time of contracting are merely “tenative

s 82a
ib ist values” and are not binding on a mortgagee, and that the
damages to which the injured. party is entitled are to be
determined under conditions existing on date of breach,
different from those values which formed the basis of the -
contract, will créate such chaos and uncertainty in the
Mortgage Financing Industry, that it presents an issue of

over-riding importance to the general public, and as such
constitutes a Federal question.

7
ee

This ruling would permit a permanent nsiiviasealies to » take
a second look at its commitment after a developer and con-
struction lender had spent huge sums in the development
‘and completion of a project and to cancel its commitment.
if it felt it was to its advantage fo do so. In time of eco-
nomic — and fluctuating interest rates, this ruling
would allowsthe permanent mortgagee to breach its con-
tract with impunity.

The Federal Government today is doing all in its power
_ to encourage building so as to stimulate the economy of
the country and provide needed housing for persons of low
incomes. Such developments can only be created by con-
struction loans against permanent mortgage ee
Only in reliance on-a permanent mortgage commitment
can developers and construction loan lenders advance the
huge sums needed for such developments. If under the
ruling of this court developers and construction loan lend-
ers realize they cannot rely on the face value of the com- .
mitment of a permanent. mortgage and the permanent
mortgagee may vary or cancel its commitment with im-
punity when work on the development has*betn completed,
no developer’ or construction loan lender can advance the
huge sums needed with any security. This ruling would
-have an exceedingly detrimental efféct on the national
economy. :

b. May a wrongdoer or a Court i an injured mets

_ to accépt a “fair market value” for his property where the
injured ‘party had no desire to sell his property and ‘does -

not this amount of taking of property without due process

of law in violation of Article Fourteen of the Constitution
of the — States? | x

oe

_to enable th

88a
During the trial of the subject case, the Trial Court
having ruled that Manufacturers had/ breached its contract
with St. Paul and was responsible to St. Paul for the loss

of its building, then disregarded the values of the building
and its use that had been. established by Manufacturers

. prior to the contract being ertered into and which values
formed the essence of the contract between St. Paul and

Manufacturers, and determined that the only damages St.
Paul was entitled to for the loss of. its Property was the
value of its equity in that property as of the date of the

_ breach. To determine. this equity, the Trial Cqurt estab-

lished a “fair market value” as of the date of the breach.
As this “fair market value” was less than the mortgage,
the Trial Court ruled that St. Paul had no equity in the

' property, had suffered no loss, and was not entitled to re- |

cover any damages for the loss of its building. This Court

_ affirmed the above rules.

_ It is submitted that in forcing St. Paul to accept this
arbitrarily established equity based on arbitrarily estab-
lished “fajrJnarket value” as a measure of its damages con-
stituted a taking of property without due process of law.

3. If the mandate issues and the judgment of this Court _
y Appellant will be’ irreparably injured. The
warded by the Court, not only are not sufficient

pellants to pay all of their-obligations that
were incurred in reliance on their contract with Manu-
facturers, but leaves nothing for the Appellants to repay

judgments

. them for the loss of their property, and nothing to pay them

for the time and monies invested in the project by them.
_ 4 The balance of equities favors the relief requested.
_ St. Paul and Williams spent three years in developing

_ the need for their specialized building, as covered in their
feasibilty report; in developing the plans and specifications

for this building and in acquiring the land necessary for

the project. Manufacturers fully approved the purpose for

which this building was developed, and the plans and spe-
cifications of it. St. Paul and Williams then spent another

three years in arranging the financing of the building, in.

_ B4a
supervising es construction of it, in advertising the proj-
ect, in furnishing model apartments, and in ‘staffing the
building and having it ready for occupancy. This repre-
sented a sizeable investment in terms of time, effort, and.
money. Having put their package together, St. Paul and
Williams then borrowed $4,800,000 from Chemical and in-
_vested this entire amount, plus other considerable monies in
the project. It was brought oufat the trial of this case by

the trier of facts that St. Paul’s investment in the —
amounted to approximately $5,100,000.

Manufacturers knew that St. Paul and Williams, in reli-
ance on the contract, had spent huge sums. Manufacturers
knew that St. Paul and Williams would be completely
wiped out should Manufacturers cancel their commitment.
This did not deter Manufacturers. As so succiently stated
by the Trial Court at p. E. 114:

_- “I am persuaded beyond any doubt that the reason for
the cancellation of this contract was, first, a calculated .
risk taken by Manufacturers that if it didn’t accept the
roll over, and if the construction mortgage. were fore-
closed, and if Manufacturers were sued, that it could
weather the storm, either by avoiding liability com-

> pletely, or if subjected to liability, by. minimizing dam-
ages. They took that calculated risk, and they’re stuck
with the result”.

St. Paul has asked for Direct Damages of $7, 920, 000. They
have asked for Special Damages of $2,465,000. The total of
these Compensatory Damages amounts to $10,385,000, a
very sizeable sum. Is it against equity for the Court to
award this amount of money to St. Paul when it has been
shown that St. Paul had invested only $5,100,000? In this
connection the Court has repeatedly held that parties enter
into a contract with the object of making a profit. Fhe
Court has also held that it is not for the Court to determine
that a contract was a good or bad bargain and the terms of |
it may not either be changed to favor either party. How-
ever, is it equitable to request an award of $10,385,000,
where — $5,100,000 had been invested i in the — In

TIT SOMA Gee aeh sey bork wnt avout aml
«

- me

spite of the legal rights of the injured party to recover the
full amount gontract for, let us look at the equity of such ,

a demand.

. $5,100,000.

As the judgment now stands, St. Paul will-have been . -
awarded a total of approximately $2,250,000 including. in- |
terest, which is not sufficient even to pay all of St. Paul’s
corporate obligations after providing for St. Paul’s legal ©
expenses. It is submitted that without these legal expenses,
St. Paul"would have recovered nothing for their créditors,
and therefore these legal expenses must be paid before the
creditors. As the judgment now stands, St. Paul recovers
nothing for itself and nothing to reimburse Williams for the

_ €normous amount of time, effort, and monies expended by

In demanding $10,385,000 from Manufacturers, St. Paul
was not requesting that’ Manufacturers guarantee the suc-
cess of their venture. St. Paul and Williams were merely
requesting that Manufacturers pay to them the values that,
formed the ‘basis of their contract with Manufacturers and

+

:

; 86a
. e ‘in ; :
that were lost as a result of Manufacturers’ breach. Manu-
_ facturers must be held liable for these values which they
themselves establisKed.

_ As aresult of Manufacturers’ breach, St. Paul was in wined

out and all of the time, monies, and efforts spent by Wil-
liams were also wiped out. Also as a result of Manufac-
turers’ breach, Manufacturers has had the use of the monies
wrongfully withheld by them for a period of over five
years, during a period when interest rates reached 10%
or more.

hd

The above clearly shows that the susiliaa in this case de-
- mand that St. Paul be awarded as damages the value of its

er building and the value of its use that was in the contempla-

tion of:all of the. parties at the’ time this contract was
entered into and which Manufacturers should have realized
St. Paul would’ lose should they (Manufacturers) breach: -
their contract. oe

Davin FREISHTAT,

Attorney for Appellants.

eo ie a June 2, 1971

David Freichtat, Esq...

Attorney at Law )

17th Floor, Tower’ Building a C\
Baltimore, oo fla ti‘ SK Cass, *

- Dear Mr. Freishtat:

The Court. has considered your motion, filed on May 26,
1971, for modification of decision and for rehearing in the
case of St. Paul at Chase Corporation, et al. v. The Manu-

facturers Life Insurance Company, et al., No. 400, Septem-
ber Term, 1970, and, for your information, said motion was
denied on June Ist. |

'.We. are, however, enclosing : a rewritten page 48 for
‘g substitution in- your sas of the opinion previously filed

ae ater %e
she on May 17, 1971, and you will note that the Court has made R
an addition thereon at line 13. atc aeaee
| Very truly yours,

| % J. Ltoyp Youna,
Clerk,

| ~ ORDER ;
Upon: consideration of the motion to: stay ‘issuance of

mandate pending review by the Supreme Court of the

‘United States in the above entitled ‘case, it is this 24th

day of June, 1971.

ORDERED by the Court: of Appeals of ‘Maryland. that the
mandate be, and it is hereby, stayed pending application
‘for review of the decision of this Court ‘to the Supreme .
Court of the United States, and until final decision by that
Court, unless otherwise ordered by this Court or by the
Supreme Court of the United States, provided such appli-_ .
cation for review be timely filed. ve |

/s/ Hatt Hammonn, é
Chief Judge.

June 25, 1971, -
David Freishtat, Esq. Lou
Attorney at Law .
1700 Tower Building

' Baltimore, Maryland 21202

Dear Mr. Freishtat:

The Court has considered your supplemental motion for
modification and for rehearing, filed June 14, 1971; in thé
case of St. Paul at Chase Corporation, et al. v. Manufac-
turers Life Insurance Company et al., No. 400, September
Term, 1970, and, for your information, said motion was
denied on June 24th. aig

~ A copy of Order of Court filed on June 24th in the
same appeal, which is self-explanatory, is énclosed.

88a

The motion for reargument -of Manufacturers Life In-
surance Company, filed on June 15th, was also denied on

-. June 24th.

The motion for reargument of Weaver Bros. Inc. of
Maryland, filed on June 16th, was denied June 24th.

Very truly yours,

J. Ltoyp Youn.
| Clerk.

“

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385605_1392%3A1. Public record. Not legal advice.