Fertitta v. Bay Shore Development Corp.

Citations: 291 A.2d 662; 266 Md. 59; 1972 Md. LEXIS 718Docket: [No. 374, September Term, 1971.]

Court: Court of Appeals of Maryland; June 13, 1972; Maryland; State Supreme Court

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In Fertitta v. Bay Shore Development Corporation, the Maryland Court of Appeals addressed a legal dispute stemming from a surveyor's error prior to World War II, which led to the construction of the Ocean Highway by the State Roads Commission (the Commission) in a location inconsistent with the original land deeds and plats. Rosemary Fertitta, the appellant, inherited land from her father, who had conveyed parts of Lots 1 and 2 of Block 87 to the Commission in 1940 and again in 1952 with a corrected description. Fertitta's father originally owned to the center of Philadelphia Avenue, but the Commission did not return the mistakenly conveyed land.

In earlier proceedings, the court determined that Fertitta possessed an equitable title but lacked legal title, preventing her from succeeding in an ejectment action against Bay Shore. The case was then remanded for transfer to equity, where the chancellor ruled against Fertitta except for a small sliver of land. The current case focuses on the bed of the east half of Philadelphia Avenue adjacent to Fertitta's lots. The court reversed the prior ruling regarding this area, thereby favoring Fertitta's claims to the land. Key figures in the case include Frank Fertitta, Rosemary Fertitta, and William B.S. Powell, whose land transactions are relevant to the dispute.

Bay Shore, an appellee, previously owned land on the west side of Philadelphia Avenue and received a quitclaim deed for a portion of the avenue's bed, including the disputed land, from the Commission. Skyline, another appellee and a Jenkins corporation, acquired the disputed land from Bay Shore. Cullen S. Jenkins, father of Charles Jenkins and father-in-law of John Rolfe, received land on the east side of Philadelphia Avenue and a part of the avenue's bed through deeds from M. Elizabeth Powell and Marion E. Mumford. Charles Jenkins succeeded his father as president of Bay Shore and Skyline. John Rolfe, married to Charles Jenkins' sister, also received a quitclaim deed for a portion of Philadelphia Avenue, which led to concerns regarding title problems and prompted a request for a quitclaim deed from the Commission.

In a prior opinion, the chancellor considered whether Bay Shore had sufficient notice regarding the Fertitta situation to disqualify it as a bona fide purchaser for value from the Commission. The chancellor found no evidence that Bay Shore had actual knowledge of any prior equities held by Fertitta or that its attorneys were aware of issues related to Block #87, indicating that speculation would be required to assume otherwise. A plat referenced in the opinion illustrates a sliver of land between the Coastal Highway and Philadelphia Avenue in Block 90, which Marion E. Mumford conveyed to Cullen S. Jenkins and his wife in 1957, detailing specific land descriptions and boundaries. Attorney William H. Scott testified that he prepared the deed from Mumford to Jenkins at Cullen Jenkins' request and confirmed that Jenkins had relevant plats during the transaction.

A plat was necessary to accurately describe the property in the deed, which included details about the Coastal Highway and Philadelphia Avenue. Scott, who had been familiar with the discrepancies between these roads for over a decade before the 1957 deed, mentioned that he had seen a plat that illustrated these lines, although he was uncertain if it covered Block 87. A letter from Scott to Owen J. Mumford requested the signing of a deed from Marion to Cullen S. Jenkins, detailing the transfer of portions of lots in Block 90 North and emphasizing the importance of verifying the property description. Scott confirmed that there was a requirement for the recordation of plats by the Commission, and the existing recorded plats from 1957 accurately depicted the Coastal Highway's lines. 

Simultaneously, a deed from M. Elizabeth Powell to Cullen Jenkins was executed, dated June 12, 1957, but referring to a private sale ratified earlier that year. The deed detailed the conveyance of all rights, title, and interest from the Powell estate in lands west of the Coastal Highway, specifying boundaries and including an attached plat for reference. The description began at the intersection of North 29th Street and the Coastal Highway, detailing a path to Lot No. 2 in Block 87 and then following various directional lines to include Blocks 88 and 89 along Philadelphia Avenue. The document did not clarify any prior agreements between the Powell estate and the Commission. Notably, the original right-of-way plat indicated that the Ocean Highway was intended to affect the front of each lot in Block 88. In 1959, Jenkins transferred several parcels, including those from Powell and Mumford, using similar descriptions.

In 1964, Bay Shore entered into a contract with Skyline to sell a tract of land, with the disputed area described similarly to the Powell deed. The contract was executed by Charles Jenkins, president of both corporations. The conveyance in 1965 began at 29th Street along the Ocean Highway, including the disputed area and portions of Lots 1 and 2 of Block 87, based on a 1965 survey. 

Mr. Marcus Williams examined land titles for Rolfe, who sought a mortgage to build a home on lots west of Coastal Highway but encountered title issues due to the old Sinepuxent Beach Plat. A meeting ensued between Williams, Jenkins, and Rolfe to clarify the title problems related to Philadelphia Avenue. Jenkins instructed Rolfe to collaborate with Williams to resolve these issues.

Jenkins recounted that Rolfe began construction, but was later informed by Williams of a title defect indicating that the State of Maryland owned part of the frontage. Williams assured Rolfe that the State Roads Commission would not impose exorbitant fees and would rectify the situation. This conversation in the fall of 1960 prompted Jenkins to seek clarification from Williams about the title issue.

The resolution involved simultaneous deeds from the State Roads Commission to both Rolfe and Bay Shore, facilitated by Williams, who had not previously represented Bay Shore. Deeds were submitted to the Commission, which were ultimately executed by the Attorney General, including a quitclaim deed to Bay Shore that conveyed portions of the bed of Philadelphia Avenue, specifically Parcel No. 2, between Blocks 87 and 88 and North 29th and North 30th Streets.

The Commission received a total payment of $472, allegedly made by Rolfe, for preparing deeds and completing a property transfer. This amount comprised $368 for the conveyance to Bay Shore and $104 for the conveyance to Rolfe. Rolfe contested the charge and requested an itemized breakdown, which the Commission was willing to provide, noting that less than half the time spent on the transfer was included in the total fee. Despite the payment and recording of the deeds, litigation ensued, with Fertitta arguing that Bay Shore could not be considered a bona fide purchaser for value due to the low payment compared to the fair market value of $18,500, as testified by two experts in a prior trial. However, the trial did not establish a definitive fair market value, with estimates ranging significantly. A notable part of the testimony involved Mr. Carl Wyant, Jr., who confirmed that the State Roads Commission's policy was to quitclaim property only to adjacent owners, stating they would not convey it to strangers or non-adjacent property owners. The deed submitted for the conveyance incorrectly described the property, failing to include parts of 30th Street, rendering it unsuitable for transfer.

John L. Sanford, a member of the Worcester County Bar, testified regarding corrective deeds related to the State Roads Commission. He stated that the error in the deeds was identified before the Collins lawsuit by Louis Merryman, who represented the Powell Estate, and was seeking certain deeds from various parties. Sanford noted that he had prepared some conveyances in the Bay Shore chain of title but did not represent Cullen Jenkins in the acquisition from the Powell Estate. He previously testified about litigation involving Lot 10 in Block 87, revealing inaccuracies in the State Roads plats.

Three attorneys, including Sanford, acknowledged their long-standing awareness of the mislocation of Ocean Highway and its resulting complications. The legal principles applicable to purchasers regarding notice of prior equities or unrecorded interests were articulated in Williams v. Skyline Dev. Corp., emphasizing that a purchaser is presumed to have made inquiries if aware of circumstances that suggest the need for investigation. Neglecting to investigate when prompted by known circumstances indicates bad faith. Notice to an attorney is also considered notice to the client, and a title examiner is charged with knowledge of the land records.

The chancellor's decision was based on a lack of evidence showing that Jenkins or Bay Shore had actual notice of the second Fertitta deed; however, it was noted that actual notice is not the only criterion. Jenkins possessed a plat showing the divergence of Ocean Highway from Philadelphia Avenue in Spring 1957 and purchased adjacent land from Mumford, including the bed of Philadelphia Avenue, based on a prior accurate deed from 1952. The actions taken by the Commission to correct its mistaken acquisition are not detailed in the testimony.

The Powell transaction occurred almost simultaneously with the acquisition from Mumford, highlighting that a sale ratified on May 20, 1957, was reported to the court roughly a month earlier. This private sale suggested it was a negotiated agreement, with a relevant letter from Scott to Mumford dated April 27, 1957, indicating the close timing of the two transactions. Jenkins acquired from the Powell estate all of Blocks 88 and 89 and a portion of Philadelphia Avenue between the Ocean Highway and Blocks 87 and 88, specifically from 29th Street to the Fertitta land. The deed description carefully delineated the property up to the center of Philadelphia Avenue. By June 1957, Jenkins had obtained all but a small section of Philadelphia Avenue's bed between 29th and 31st Streets adjacent to the Fertitta lots. 

Jenkins, familiar with Ocean City and real estate, was deemed to possess sufficient knowledge to prompt further inquiry regarding the property. Consequently, Bay Shore was found not to be a bona fide purchaser for value, meaning the quitclaim deed from the Commission did not grant it clear title but rather a title subject to outstanding equities. Previous rulings established that the second deed from Fertitta's father to the Commission conferred equitable title to Mr. Fertitta for the land improperly conveyed earlier. Therefore, Bay Shore's title and Skyline's are both subject to Fertitta's equitable claim, necessitating a conveyance to her.

Fertitta asserted that damages were clearly established through unrebutted testimony, requesting an order for damages to be determined on remand rather than making a direct conclusion. The decree was reversed regarding the title to the bed of Philadelphia Avenue, with costs assigned to the appellees, and the case remanded for further proceedings consistent with this opinion. Notably, Chief Judge Hammond participated in the case but did not adopt the opinion due to his retirement prior to its filing. The terms "Ocean Highway" and "Coastal Highway" are interchangeable, and the crossing point of the Ocean Highway over Philadelphia Avenue is noted to be slightly further south on Lot 3.