Harris v. Arlen Properties, Inc.

Finan, J., delivered the opinion of the Court. This is an appeal in which the application of the Maryland “Long Arm” Statute 1 to nonresident individuals ¹⁸⁷ and foreign corporations is the pivotal question. We think that the principles of law laid down in Vitro Electronics v. Milgray Electronics, Inc., 255 Md. 498 , 258 A. 2d 749 (1969) and Novack v. Nat’l Hot Rod Ass’n, 247 Md. 350 , 231 A. 2d 22 (1967), are determinative of the question of jurisdiction. Leon H. Harris, the appellant and plaintiff below, was a licensed real estate broker of the State of Maryland.

He allegedly entered into a “co-op” sales arrangement with another real estate broker Harry A. Boswell, who was one of the defendants below, regarding the “Gudelsky Property,” located across the East-West Highway from the Prince George’s Shopping Center in Hyattsville, Maryland. Early in 1964, the plaintiff sent out letters to numerous mercantile establishments including Sears, J. C. Penney Co., Korvette, Marshal Field and the like, advising them of the availability of the “Gudelsky Property.” Shortly thereafter the plaintiff was contacted by the defendant Jay Stempel (Stempel), who represented himself as an employee and site location scout of the defendant Arlen Properties, Inc., (Arlen). Arlen is a developer of shopping center sites which acquires the land, constructs the center and then leases the premises to department store tenants and others. Stempel told the plaintiff that Arlen had about eighty shopping centers throughout the nation and “many, many corporations.” Arlen Properties, Inc. is a corporation organized under the laws of the State of New York, with its principal office at 60 E. 56th Steet, New York, New York.

Stempel and Arlen are among the appellees. Stempel is a resident of New York State. The plaintiff exhibited to Stempel numerous potential shopping center sites in Prince George’s County and Montgomery County, Maryland, and in nearby Virginia, viewing them by way of helicopter, airplane and automobile. In addition the plaintiff, at Stempel’s request, forwarded to him aerial photographs of locations, the “Dec ¹⁸⁸ laration of Restrictions” on the “Gudelsky Property,” and information on the “Penn Center Property,” the sale of which latter property gave rise to this suit for brokerage commissions.

All of the plaintiff’s contacts with Stempel and officers of Arlen were made either personally or by telephone; no letters passed between them. The plaintiff says he met with Stempel many times. The usual procedure was for Stempel to call the plaintiff and arrange to meet him the following day at an airport in the Washington area at about 9:00 A.M. and the plaintiff would take him on an inspection tour of the sites. When air transportation was used to inspect sites, Arlen paid the bill.

The plaintiff also marked for Stempel an “Esso” map of the Washington, D. C. metropolitan and suburban area, spotting desirable locations for shopping centers. In the process of showing Stempel potential sites, the plaintiff, in the early spring of 1966, showed him the “Penn Center Property,” comprising approximately 37 acres. He visited the property with Stempel on “possibly five or six occasions.” “Penn Center Property” was owned by James C. Dulin and wife, Samuel W. Barrow and wife, Harry A. Boswell and wife, and Henry J. Robb and wife, and the Pennsylvania Avenue Shopping Center, Inc., all party defendants. An employee of Boswell’s, one Kloetzli, supplied most of the information concerning the property to the plaintiff who in turn either gave or forwarded it to Stempel.

Kloetzli also advised the plaintiff, that in the event he proved successful in selling the property, the commission would be 7 %. The plaintiff on one occasion met the defendant-appellee Joseph Comras (Comras), vice president of Arlen and a nonresident of Maryland, and transported him from the airport to a prearranged meeting at Boswell’s Hyattsville office, at which time purchase of the “Gudelsky Property” was discussed. The plaintiff also discussed with Comras the purchase of the “Penn Center Property.” Still later the plaintiff, at Comras’ request, arranged a meeting for him with Boswell in Baltimore to discuss the “Gudelsky Property.” ¹⁸⁹ The plaintiff contends that sometime later he learned from Kloetzli, Boswell’s assistant, that Comras asserted that he had driven by the “Penn Center Property,” saw a sign on it and went to Boswell’s office to confer with him about it. It is the plaintiff’s contention that after he was instrumental in bringing Boswell and his associates together with Arlen and its representatives that at Arlen’s suggestion it was agreed that the sellers would deal directly with Arlen and by-pass the plaintiff.

The plaintiff states that on September 1, 1965, an agreement was reached for the sale of the “Penn Center Property” to Arlen, the general terms of which were worked out in the defendant Robb’s office in the District of Columbia. Among those in attendance were Comras, Arlen’s attorney Barry Traub, Esq., and Kloetzli. At this meeting Arlen supposedly assumed the responsibility for paying any brokerage commissions in the event a claim for commissions was made. Meanwhile the plaintiff continued his efforts to sell the “Gudelsky Property.” He states, however, that about this time Boswell stopped returning his telephone calls and he began “to feel that there was something wrong. . . that everything going on wasn’t above the table.” On November 5, 1965, unbeknownst to the plaintiff, Arlen executed a contract to purchase the “Penn Center Property.” The plaintiff learned of the sale in February of 1966.

Shortly after the November 5, 1965 contract, Arlen, through its engineering consultants, sought and obtained information from Boswell’s office pertinent to topography and drainage of the property. Contacts were also made by Arlen’s engineers with the Washington Suburban Sanitary Commission regarding drainage and with the telephone company regarding burying cable. In January, 1966, Arlen’s representatives filed site plans with the Prince George’s County Building Inspector’s Office, and on January 8, 1966, an application for a building permit ¹⁹⁰ was filed. Under the date of September 7, 1966, Arlen assigned all of its interest in the subject property to the defendant Delton Realty Corporation.

On March 10, 1966, deeds of conveyance of the “Penn Center Property” had been executed by the sellers to the defendant Delton Realty Corporation (Delton), a Delaware corporation, which instruments were recorded on September 15,1966. According to Arlen’s attorney, “The principals of both corporations are identical * * *,” i.e. Arlen and Delton. Delton’s principal business address is c/o A. Levien, 45-10 Court Square, Long Island City, New York, the same as that of Arthur N. Levien, one of the two partners of Arlen Operating Co., a partnership consisting of Arthur N. Levien and defendant-appellee Arthur G. Cohen.

This partnership is engaged in owning and developing real estate, and Arlen Properties, Inc., as the affidavit of plaintiff’s counsel states, is wholly owned by the partnership. Delton’s annual report to the State of Delaware for the year 1966 stated in part “no business transactions, no bank accounts opened, no assets or liabilities.” In May of 1968, the plaintiff filed his declaration against fourteen defendants comprising the sellers and purchasers of the “Penn Center Property” for $112,000 in commissions. 2 All nonresident defendants were served under the provisions of Maryland’s “Long Arm” Statute, Code (1969 Supp. Vol. 7) Art. 75, § 96, except Delton, which having qualified to do business in Maryland was served through its resident agent. Service was obtained on the nonresidents either by registered mail or by having the suit papers served on them by an out of state sheriff. The Dulins and the four appellees, Arlen, Stempel, Comras and Cohen, raised preliminary objections to the ¹⁹¹ service upon them on the ground that they were nonresidents of Maryland and that they were not engaged in such business in this State as would subject them to the jurisdiction of the courts of Maryland.

In September, 1968, the plaintiff filed an amended declaration extending his causes of action to include counts in express contract, implied contract, and quantum meruit against the owner-defendants; for relief against the appellees on the theory that he is a third party beneficiary to the contract between them and the owner-defendants; for recovery on the basis of a conspiracy between all of the defendants, including the appellees, to deprive him of his brokerage commission; and for damages against the appellees for wrongfully inducing the owner-defendants to breach their brokerage contract with plaintiff. Evidentiary hearings were held on October 30, 1968, and December 23, 1968, before Judge Powers. The matter was fully argued by counsel. On January 6, 1969, the Court entered an order denying the motion of the Dulins who were among the owner-defendants and granting the motion of the appellees who were among the buyer-defendants.

This ruling had the effect of dismissing the declaration against the appellees. It is from the judgment of the circuit court dismissing the declaration against the appellees that the plaintiff has filed this appeal. The other defendants named in the declaration are not involved in this appeal, the only appellees being Arlen Properties, Inc., Stempel, Comras and Cohen. The question before this Court is whether the four appellees were amenable to the jurisdiction in this State by virtue of the provisions of Art. 75, § 96, the “Long Arm” Statute of Maryland which provides: “§ 96.

Personal jurisdiction over person as to cause of action arising from business, etc., in State. “(a) A Court may exercise personal jurisdiction over a person, who acts directly or by an ¹⁹² agent, as to a cause of action arising from the person’s “(1) Transacting any business in this State; “(2) Contracting to supply services in this State; “(3) Causing tortious injury in this State by an act or omission in this State; “(4) Causing tortious injury in this State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in this State or derives substantial revenue from food or services used or consumed in this State: “(5) Having an interest in, using, or possessing real property in this State; or “(6) Contracting to insure or act as surety for, or on, any person, property, or risk, contract, obligation, or agreement located, executed or to be performed within this State at the time of contracting, unless the parties otherwise provided in writing. “ (b) When jurisdiction over a person is based solely upon this section, only a cause of action arising from acts enumerated in this section may be asserted against him. (1964, ch. 95, § 1; 1965, ch. 749; 1968, ch. 707.) ” The rationale of the lower court’s opinion with which we disagree, in part, is expressed in the following excerpts from its “Statement Of Grounds For Decision * * “In Novack v. The National Hot Rod Association, 247 Md. 350 (1967), the issue before the Court of Appeals was ‘. . .whether the National Hot Rod Association (Hot Rod), a non-profit California corporation which sponsors and regulates automobile drag races, had sufficient contacts with Maryland on a cause of action re ¹⁹³ lated to its corporate activities in the State . . .’ In Hot Rod, supra, the contacts with Maryland consisted of four inspections by Hot Rod’s agent of a track in Maryland for the purpose of determining whether the track was following the National Hot Rod Association rules required for sanctioning by the Association. The Court of Appeals held such contacts were sufficient. “In Hot Rod the four inspections were of the ‘nature and quality’ necessary to subject the Association to in personam jurisdiction because they were a necessary element of Hot Rod’s contract with the Maryland track. Without these inspections there could be no sanction.

However, in the instant case the inspections were not so directly related to the sales contract or the alleged tortious acts such that they would be of the ‘nature and quality’ required to be minimum contacts within the due process requirements.” The lower court elsewhere in its opinion reached the following conclusions: “As to Joseph Comras, it was established that he was a resident of the State of New York, not the State of Maryland and that he has never been in Maryland in connection with the subject property even though he, as Vice President of Arlen Properties, Inc., participated in negotiations about the subject property in the District of Columbia. With regard to Jay Stempel, it was established that he also was a resident of the State of New York, not Maryland, and that he also was employed by Arlen Properties, Inc., and in this capacity was in Maryland a number of times physically inspecting many properties including the subject property but never conducted any negotiations about the subject prop ¹⁹⁴ erty. It was also established that Arthur Cohen was a resident of the State of New York, not Maryland, and that he has never been in Maryland with regard to the subject property nor has he conducted any negotiations regarding the subject property. Finally, as to Arlen Properties, Inc., it was established that this defendant was not qualified to do business in Maryland; that it is a New York corporation and does not have an office in Maryland; that all negotiations and the signing of the contract took place in the District of Columbia; and that its contract of purchase has been assigned to another defendant in this action, Delton Realty Corp. which has title to the property. “The Court concluded, as a result of their lack of activity within the State of Maryland, that the defendants Comras and Cohen do not have sufficient contacts with Maryland out of which this cause of action arose; therefore, the due process requirement of International Shoe, supra, is not satisfied leaving this Court without in personam jurisdiction. “As to Stempel his only contacts with the State of Maryland are his trips to physically inspect properties within this State including the subject property.

The Court concluded that the mere inspection of the subject property was not of the ‘nature and quality’ such that it would subject him to the in personam jurisdiction of this Court. The Court further concluded that even if the activity of Stempel was such that it would be considered ‘transacting any business’ in Maryland, jurisdiction in this case would offend the due process requirement of International Shoe, supra. “The only contacts of Arlen Properties, Inc., with the State of Maryland are (1) the inspec ¹⁹⁵ tion of the subject property by its agent, Stempel, and (2) the fact that the subject matter of a contract entered into by it lies