Konover Property Trust, Inc. v. WHE Associates, Inc.

RAYMOND G. THIEME, JR., Judge, Ret’d, Specially Assigned. Appellee WHE Associates, Inc. (WHE) filed suit against appellant Konover Property Trust, Inc. (Konover), claiming that it was entitled to a finder’s fee of an amount between $2,000,000.00 and $4,000,000.00 for introducing Konover to Lazard Freres Real Estate Investors, LLC (Lazard), an investment firm, that ultimately invested $200,000,000.00 in Konover. At trial, the theories of recovery asserted by WHE were based in equity, as there never existed a written contract between the parties. The jury returned a verdict for damages in favor of WHE, and the Circuit Court for Baltimore City subsequently entered judgment for WHE in the amount of $2,756,550.00 against Konover.

Konover appeals from that decision and presents the following questions for our review: 1. Did the trial court err in entering summary judgment in favor of WHE, notwithstanding an erroneous entry of partial summary judgment in favor of WHE prior to trial, leaving only the issue of damages to be tried? 2. Did the trial court err in applying the substantive law of Maryland, because WHE’s claims are governed by the substantive law of New York, and, if not, by the substantive law of North Carolina? 3. Did the trial court err in entering judgment in favor of WHE instead of Konover, because WHE’s claim for a finder’s fee is barred as a matter of law based on New York’s applicable statute of frauds and broker licensing provisions? ⁴⁸⁰ 4.

Did the trial court err in entering judgment on WHE’s Count V (detrimental reliance/promissory estoppel) because it lacked any evidentiary support? 5. Did the trial court err in instructing the jury on the Maryland law of detrimental reliance/promissory estop-pel, and did so in a way that wrongly equated that claim with WHE’s dismissed implied contract claim? 6. Did the trial court err in entering judgment on WHE’s claim for pre-judgment interest because WHE waived such claim by failing to plead it as a component of its claimed damages in its complaint or otherwise? 7. Did the trial court err in denying Konover’s motion for judgment notwithstanding the verdict and motion for new trial, which raised the above enumerations of error?

We reverse the granting of summary judgment on detrimental reliance/promissory estoppel. The remaining judgments are affirmed. Facts and Proceedings Konover, a real estate investment trust engaged in the development, acquisition, leasing, management, and marketing of shopping centers, was attempting to raise equity capital. 1 A business relationship of some type existed between William H. Elliott, the President of WHE, and C. Cammack Morton, the Chief Executive Officer and President of Konover. Kon-over apparently was having difficulty raising the equity capital it sought, and therefore Elliott and Morton spoke about this issue on several occasions.

They met in North Carolina in September of 1997, at which time Lazard was pointed out as a potential source for capital. Elliott informed Morton that he knew principals at Lazard. He asked Morton for permission to contact Lazard on behalf of Konover. Morton expressly authorized Elliott to explore whether Lazard would be interested in investing in Konover. ⁴⁸¹ At trial, Morton testified that he understood Elliott’s role as that of a “finder and introducer.

To be finder, in fact.... Someone who introduces two people, who then take on the obligation of putting a deal together.” Elliott subsequently arranged for a three-way telephone conference between himself, Morton, and a Lazard representative, at which time the introduction was made. This introduction eventually led to an agreement between Konover and Lazard in which Lazard agreed to invest $200,000,000.00 in Konover. Although Elliott expected to be compensated for acting as the finder, Konover never compensated Elliott for such.

On several occasions Elliott requested that the fee agreement for his services as the finder be put in writing. Konover repeatedly insisted that this was unnecessary, and consistently reassured Elliott that he would be compensated. WHE eventually filed suit for recovery of a fee for Elliott’s services as the finder. WHE initially filed suit in the United District Court for the Central District of California, but that court dismissed the case, finding that Konover was not subject to personal jurisdiction in California.

WHE subsequently filed its suit in the Circuit Court for Baltimore City, alleging breach of contract, breach of implied contract, unjust enrichment, quantum meru-it, and detrimental reliance/promissory estoppel. Contemporaneously with the filing of its Complaint, WHE moved for partial summary judgment on the issue of liability. The circuit court granted WHE’s motion regarding its claims for unjust enrichment, quantum meruit, and detrimental 'reliance/promissory estoppel. Thereafter, Konover moved for summary judgment, arguing that WHE’s claims were barred by the statute of frauds of New York, and by real estate and securities licensing statutes of New York, North Carolina, and Maryland.

The circuit court denied Konover’s motion, and the case proceeded to jury trial. Before opening statements, WHE voluntarily dismissed its claims regarding breach of contract and breach of implied contract, so the only issue remaining at trial was damages on ⁴⁸² WHE’s equitable claims, as the issue of liability on those claims had already been decided pursuant to the prior partial summary judgment. During trial Konover urged the trial court to revisit the earlier summary judgment ruling concerning choice of substantive law. The trial court denied any reprise, and the jury was instructed on Maryland law relating to WHE’s equitable claims.

At the conclusion of trial, the jury awarded WHE damages in the following amounts: $1,275,000.00, plus $206,550.00 in prejudgment interest, on the unjust enrichment claim; $1,275,000.00, plus $206,550.00 in prejudgment interest, on the quantum meruit claim; and $2,550,000.00, plus $206,550.00 in prejudgment interest, on the detrimental reliance/promissory estoppel claim. The trial court entered judgment on the verdict in the total amount of $2,756,550.00. Konover moved for judgment notwithstanding the verdict and a new trial. Following oral arguments the trial court denied these motions.

This appeal followed. Discussion Konover appeals from the following judgments: entry of partial summary judgment in favor of WHE on the issue of liability; the denial of Konover’s motion for summary judgment; the amounts of the jury verdicts; and the trial court’s denial of its post-trial motions. Konover’s various grounds for appeal are in large part interwoven, essentially having as their schwerpunkt the issue of choice of law. We turn first to Konover’s contention that the trial court erred in granting partial summary judgment on the issue of liability under WHE’s claims for equitable relief. 2 We find that the trial court ruled correctly on the claims based on unjust enrichment and quantum meruit, but reverse its decision on the detrimental reliance/promissory estoppel claim. ⁴⁸³ Standard for Summary Judgment The trial court, in accordance with Maryland Rule 2-501(e), shall grant a motion for summary judgment if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.

In reviewing the grant of a summary judgment motion, we are concerned with whether a dispute of material fact exists. Jones v. Mid-Atlantic Funding Co., 362 Md. 661, 675 , 766 A.2d 617 (2001) (citations and internal quotation marks omitted). The standard for appellate review of a trial court’s grant of summary judgment is whether the trial judge was legally correct in his or her rulings. In granting a motion for summary judgment, the trial judge may not resolve factual disputes, but instead is limited to ruling on matters of law.

Okwa v. Harper, 360 Md. 161, 178 , 757 A.2d 118 (2000). Detrimental Reliance/Promissory Estoppel Konover contends that the trial court erred by granting summary judgment in favor of WHE on its detrimental reliance/promissory estoppel claim. 3 We agree. Moreover, we shall direct the circuit court instead to grant summary judgment on this issue in favor of Konover. In Pavel Enterprises, Inc. v. A.S. Johnson Co., Inc., 342 Md. 143, 166 , 674 A.2d 521 (1996), the Court of Appeals brightened the long shadows cast by this confusion and recognized that courts were using dissimilar paradigms in determining the applicability of this ⁴⁸⁴ theory of recovery.

It clearly set forth the law in Maryland pertaining to this cause of action, stating: To resolve these confusions we now clarify that Maryland courts are to apply the test of the Restatement (Second) of Contracts 90(1) (1979), which we have recast as a four-part test: 1. a clear and definite promise; 2. where the promisor has a reasonable expectation that the offer will induce action or forbearance on the part of the promisee; 3. which does induce actual and reasonable action or forbearance by the promisee; and 4. causes a detriment which can only be avoided by the enforcement of the promise. We find that the allegations by WHE did not sufficiently establish a clear and definite promise so as to permit recovery under this theory. At best, there was an implied understanding or an implied agreement. That is quite dissimilar from a clear and definite promise.

The evidence illustrates that Morton never made a promise to Elliott regarding any type of compensation for his service as a finder. Whether Morton gave Elliott express permission to contact Lazard on Konover’s behalf is of no moment in this analysis — the threshold question here is whether there was a clear and definite promise. In pertinent part, WHE sets forth the following facts in support of its contention that it is entitled to recovery under detrimental reliance/promissory estoppel: Elliott informed Morton that he knew principals in the real estate group at Lazard. Elliott expressly asked Morton for permission to contact Lazard on Konover’s behalf.

Morton expressly authorized Elliott to approach Lazard on Kon-over’s behalf to explore the possibility of Lazard investing in Konover.... Morton understood that Elliott and WHE would be acting as a finder. ⁴⁸⁵ WHE states, “[r]elying upon Morton’s express authorization, Elliott ... spoke by telephone to a contact at Lazard in October 1997, to introduce the idea of Lazard making an investment in Konover.” In response to this assertion, it is significant to point out that Elliott relied not on a promise of compensation from Morton, but rather on express authorization to contact Lazard on Konover’s behalf. WHE is contending that Elliott was acting in reliance upon something said by Morton. That becomes irrelevant, however, as the something being relied upon was not a promise of any sort, and certainly not a clear and definite promise.

Rather, it was simply permission or authorization, and not sufficient for a satisfaction of the first prong of the test. It is true that Morton eventually informed Elliott that he would be compensated for his services as finder, but Morton only made such promises after Elliott had already performed that service. WHE does not contend that Morton actually promised Elliott that he would be compensated for these actions before Elliott actually performed. Therefore, it cannot be said that Elliott relied on such promises or statements in performing his service as finder.

It was in a meeting between Morton and Elliott in September of 1997 that they discussed authorization for Elliott to approach Lazard. Elliott then arranged the introduction by telephone, which took place in October of 1997. The agreement eventually entered into between Konover and Lazard took place on February 24, 1998. It is important to bear in mind, before we flounder in a morass of detail, the chronology of these various stages of the developments in this case.

Any understanding that took place between Konover and WHE occurred, if at all, in September of 1997. Any services performed by Elliott as finder culminated in October of 1997, the time he made the telephone introduction between Konover and Lazard. Once this telephone conversation took place, Elliott’s role as finder essentially was complete. The agreement reached between Kon-over and Lazard occurred after Elliott had already performed his role as finder, and therefore is not to be considered in any analysis concerning detrimental reliance/promissory estoppel. ⁴⁸⁶ The latest time whereby any service performed by Elliott as finder could have occurred in reliance upon any action by Morton would have been by the time of the introduction.

With this time line as the polestar in our eye, we continue to assess the claims by WHE relating to this theory of recovery. WHE directs our attention to several discussions that occurred between Elliott and Morton in December of 1997 and continually during the next several months thereafter. WHE claims that during that time Morton assured Elliott that he would be pleased with WHE’S compensation in connection with the Lazard transaction. Referring to our time line, however, we observe that these discussions occurred after Elliott’s role as finder essentially had ended.

WHE points out that Elliott was still advising Konover at that time with respect to the details of the proposed transaction that would be taking place between Konover and Lazard. Such advice provided by Elliott at that time plays no role in our finding on this claim, however, as it is very clear that WHE is seeking compensation for Elliott’s services in the introduction between Konover and Lazard. Any advice provided by Elliott after that introduction is not pertinent in this determination. WHE finds it significant that Konover has consistently admitted its willingness to pay WHE a reasonable fee for Elliott’s services as finder.

Konover does not dispute this, and in fact made it clear to WHE on several occasions that it was willing to pay WHE a finder’s fee of $250,000.00. Once again, however, this has no bearing on whether Elliott relied on a clear and definite promise made by Morton. Konover’s willingness to pay a finder’s fee after Elliott had already acted as a finder is of no moment and does not demonstrate in any manner a promise made by Konover on which Elliott relied to his detriment. Elliott’s actions as finder had been carried out prior to any assurances by Konover as to payment of a finder’s fee.

WHE has failed to satisfy the first prong of the four-part test for recovery under detrimental reliance/promissory estop-pel as set forth by the Court of Appeals. Accordingly, silence is most melodious on the remaining three prongs of the test. ⁴⁸⁷ WHE has not demonstrated the applicability of detrimental reliance/promissory estoppel in these circumstances. Therefore, the trial court was incorrect in granting summary judgment in favor of WHE on this claim, and, in turn, we reverse that judgment. Litigation on this claim need not continue, however, as we direct the circuit court to grant summary judgment in favor of Konover on this issue.

Taking the evidence presented by WHE on this issue, together with all reasonable inferences that can be made in support thereof, we find that WHE has failed to demonstrate that it is entitled to go to trial on this claim. In sum, we reverse the granting of summary judgment by the trial court in favor of WHE on detrimental reliance/promissory estoppel, and we remand to the trial court to enter summary judgment in favor of Konover on this claim. We note that in light of this ruling we need not discuss Konover’s contentions regarding the proper method of computing damages under detrimental reliance/promissory estoppel and regarding the jury instructions given by the trial court on this count. Unjust Enrichment and Quantum Meruit Konover contends that the trial court prematurely granted WHE’s motion for summary judgment on its unjust enrichment claim.

It argues that it was not given ample opportunity to conduct discovery essential to a full and fair analysis of WHE’S claims. It also propounds this argument as to the granting of summary judgment on WHE’S quantum meruit claim. 4 Although we would generally discuss these claims separately, we discuss the unjust enrichment and quantum 'meruit claims together, given the arguments set forth by Konover. ⁴⁸⁸ We find no merit to this assertion by Konover for either unjust enrichment or quantum meruit. Based on our review of the record we find that there was no additional evidence or information of any type presented at any time during the relevant proceedings that would have precluded Konover from falling prey to a granting of summary judgment on these issues either at the time the summary judgment was granted or at any later time during the development of this case. Konover was unable to unearth evidence to oppose successfully this result on these claims not because it was too early at that time, but simply because it had no defense to the claims.

Konover maintains that the granting of summary judgment on these grounds was erroneous because subsequently discovered undisputed evidence established multiple legal bars to each of WHE’S claims. We note that these subsequently discovered bars to recovery claimed by Konover were the subject of its motion for summary judgment that was denied. As we stated earlier, Konover appeals that finding as well. Because Konover’s arguments are intertwined, we will address both the granting of WHE’S summary judgment and the denial of Konover’s summary judgment here.

We are unpersuaded by Konover’s contentions for several reasons. WHE’s summary judgment was granted on January 5, 2000. The judge who entered that judgment was not the judge who presided at trial. At trial, Konover urged the trial judge to revisit the earlier granting of summary judgment.

Konover claims that the trial judge felt himself constrained by the prior entry of partial summary judgment and refused to take up the issue anew. We disagree. Our review of the record indicates that the trial judge did not disturb the earlier granting of summary judgment not because he felt constrained by its ruling, but rather because he agreed with it. In any event, it is irrelevant at this point what reasoning the trial judge used to abide by the earlier granting of summary judgment.

We find that the initial motions judge was legally correct in his granting of summary judgment on the unjust enrichment and quantum meruit counts. ⁴⁸⁹ Konover has failed to demonstrate to this Court any basis for disturbing the granting of summary judgment on WHE’s claims of unjust enrichment and quantum meruit. As we have said, Konover’s contention is premised upon its insistence that summary judgment was granted too early in the proceedings. Konover must demonstrate that the outcome would have been different later in the game for us to conclude that the trial court, erred in granting summary judgment prematurely. This it has not done.

It