Lusby v. Shannon & Luchs Co.

Singley, J., delivered the opinion of the Court. There came a time when the appellants, Roger W. Lusby, Jr., Joseph G. Anastasi and Joseph F. Anastasi, a co-partnership trading as Trio Associates (Trio), determined to sell the Metropolitan National Bank Building in Silver Spring, Maryland. To that end, Trio authorized Alvin Peck, an employee of Shannon & Luchs Company (Shannon & Luchs), a real estate brokerage firm, to find a purchaser for the building. In due course, Peck found Dr. Jacob Hirsch and Harry Hirsch (the Hirsches), who by contract dated 20 December 1968 agreed to purchase the building for $1,000,000, of which $200,000 was to be paid in cash at time of settlement, on or before 20 January 1969.

The balance of the purchase price, also to be paid in cash, was to be derived from a 25 year 7%% loan of $1,855,000, which was referred to somewhat ambivalently in the contract and an addendum thereto. 1 The contract provided: “Purchaser is to [sic] (see attached addendum) a FIRST DEED OF TRUST secured on the premises of One Million Eight Hundred Fifty-five Thousand Dollars ($1,855,000.00) bearing interest at the rate of 7% per cent per annum, payable in 25 years.” The addendum is set forth in full: “The contract is subject to the placement of' a First Mortgage loan secured on the said premises and on the construction of an addition in accordance with the preliminary plans drawn by Eugene Delmar, AIA, dated April 19, 1968, in the face amount of $1,855,000.00 to net $1,750,-000.00 after taking any and all points and/or placement fees. “Loan shall bear interest of 7%% per annum on any remaining outstanding balance and ¹²³ shall be payable interest only for two years and then shall be retired in equal monthly payments to include interest and principal over a period of 25 years. “In addition to the total fees, $800,000.00 is requested to be disbursed on the existing building and land for the proposed addition. $950,-000.00 shall be disbursed during the construction period in accordance with the progress of the new addition. “No personal responsibility on permanent loan. Harry Hirsch Jacob H. Hirsch JGA [Joseph G. Anastasi] RWL [Roger W. Lusby, Jr.] JFA” [Joseph F. Anastasi] Trio itself had originally contemplated the construction of an addition to the building, but because of its lack of liquidity had been unsuccessful in obtaining a loan. Trio had employed James B. Keister as a “general consultant” to arrange financing. When Trio later decided to sell the property, it introduced Keister to the Hirsches as “a loan broker”, a man whom they “would have to deal through”.

Dr. Hirsch testified that it was the assurance that financing would be available on the terms described in the contract of sale which made the proposed purchase attractive. Three days after the contract was executed, the Hirsches gave Keister written authority to arrange for financing, but on the advice of their attorney, stipulated that they were to assume no personal liability for the loan and that “all other terms of commitment letter shall be satisfactory” to them. Keister testified that the imposition of the latter of these conditions prevented his arranging financing at the 71,4% rate, and that the most he could hope for was a loan at 7%%, which was unacceptable to the Hirsches. When the 30 day period for settlement expired with ¹²⁴ out settlement having been made, Trio, contending that the purchasers had breached the contract, sought a forfeiture of the $50,000 deposit under paragraphs 13 and 14 of the contract, which provided, in part: “(13) * * * If the purchaser shall fail to make full settlement, the deposit herein provided for may be forfeited at the option of the seller, in which event the purchaser shall be relieved from further liability hereunder, * * “(14) The entire deposit shall be held by Shannon & Luchs Co., Agent, until settlement hereunder is made or until the deposit is forfeited.

In the event of the forfeiture of the deposit, the Agent shall retain one-half thereof as a compensation for his services and shall pay to the seller the remaining one-half of the forfeited deposit.” Not until this demand was made did Trio learn that Peck had never deposited the check, and had, in fact, returned it to Dr. Hirsch sometime in late January, but prior to the 20 January settlement date. Trio then sued Shannon & Luchs in contract, claiming damages of $50,000, allegedly occasioned by the return of the deposit.