Adler v. Walker & Dunlop, Inc.

Horney, J., delivered the opinion of the Court. In this case, concerning the construction of a shopping center that was never undertaken and the making of a construction loan that was never consummated, the questions on appeal are (i) whether or not the finding of the lower court that the mortgage broker had not been paid its commission was erroneous and (ii) whether or not the individual property owners were ¹⁵⁶ personally liable for the brokerage commission and the title examination expenses sued for. 1 The owners of the property, Bettye S. Adler and Earl B. Missler, and the proposed transferee, Beltway Plaza Shopping Center, Inc., were the defendants below and are the appellants here. The mortgage broker, Walker & Dunlop, Inc., was the plaintiff below and is the appellee here. The individual appellants, who are the fee simple owners of a thirteen-acre tract of land in Anne Arundel County, planned to construct a shopping center thereon.

With this in mind, the property owners formed the corporation in which they (and their mother) were to be the only stockholders and to which they intended to transfer the land. Although franchise and personal property tax returns were filed for three years, the land was never transferred to the corporation. Nor were any shares of stock ever issued by it. And the corporation never had a bank account.

Leases were executed with prospective tenants during the formative years of the venture. Some were executed by the corporation. Some bore the name of the corporation over the signature of Earl B. Missler. But other leases were executed by the property owners only.

In 1960 and 1961, a vice president (H. Evan Smith) of the mortgage broker, a real estate broker (Lionell Olesker) engaged to obtain leases for the shopping center and one of the property owners (Earl B. Missler) had several discussions with-respect to financing the construction of the project. By a letter dated February 6, 1962, Missler authorized the broker to negotiate a loan for $670,000 and therein agreed to pay the broker “a loan placement fee in the amount of 1% of the loan applied for or accepted.” The authorization which was limited to a period of sixty days was later extended by agreement to April' 19, 1962. Within the extended time, the broker communicated with the Lincoln National Life Insurance Company and it agreed to loan the shopping center corporation $670,000 by its commitment let ¹⁵⁷ ter of April 19, 1962, addressed to the corporation, “c/o Walker & Dunlop, Inc.” When the broker informed Missler by letter on May 1, 1962, that his application for a loan had been approved, he accepted the commitment “without exception” on the same day. Among the stipulated terms and conditions, one specified that the “loan commission” should be one percent of the amount of the construction loan.

Prior thereto', on March 15, 1962, a check drawn on the Baltimore National Bank, payable to the order of “Walker & Dunlop” in the sum of $6700, was signed by Earl B. Missler. A notation thereon — “1% for comm, on shopping center” —- was written in ink in the lower left corner of the check. The check was deposited by the broker in its trustee account and, on May 2, 1962, the broker sent its check in the same amount to the prospective mortgagee in payment of the good-faith deposit or commitment fee (reduced from $13,400 to $6,700) requested by it in its commitment letter of April 19, 1962. About a month later the broker made application to the Title Guarantee Company for a title policy, as it was authorized to do under the terms of the original authorization given the broker by the property owners.

In due time a report that the title was insurable was received by the broker. Somtime thereafter, when it became evident that the property owners were confronted with increasing costs of construction and other problems, the broker wrote Missler a letter on May 28, 1963 advising the owners that the loan commitment would expire on June 1, 1963 and explaining that the insurance company would not guarantee a loan after that date because the construction of the project was uncertain. In the letter the owners were advised that should they make a “new proposal,” the broker would “try to salvage” whatever part it could of the commitment fee then held by the insurance company. At the same time, the broker reminded the owners that its commission (loan placement fee) was still unpaid and that it expected them to honor both the oral and written agreements as to the payment thereof.

In addition to the documentary evidence, there was testimony to the effect that Missler understood that the check for $6700 dated March 15, 1962 was for the good-faith deposit or com ¹⁵⁸ mitment fee the insurance company required; that he had full knowledge of the