National Grange Mutual Insurance v. London

Powers, J., delivered the opinion of the Court. This case requires us to determine whether certain wrongful acts by a licensed real estate broker are covered by his bond. The surety contends that the acts did not require the individual doing them to hold a broker’s license, and that the coverage of the bond is no broader than the license requirements. In 1968 Warren S. Shaw was in the real estate business in Baltimore, operating personally and • through two corporations, Manning-Shaw Realty, Inc. and Eutaw Realty Corporation, in each of which he was a principal officer.

He was the holder of a real estate broker’s license, issued by the Real Estate Commission of Maryland. The Commission, ⁷⁵ after an unrelated complaint and a hearing, had ordered Shaw’s license revoked, but when he filed a proceeding in the Superior Court of Baltimore City to review the Commission’s order, the revocation had been stayed, upon Shaw’s posting of a $25,000.00 bond in addition to the regular bond of $5,000.00 then required of all licensed brokers. National Grange Mutual Insurance Company of Keene, New Hampshire was the corporate surety on both of Shaw’s bonds. We shall briefly summarize the significant facts which were shown in the evidence.

Dorothy P. London was engaged in the insurance business in Baltimore. A long time friend and sometime co-worker, Juanita McIntosh, told her that she knew that Shaw, a real estate broker, would be willing to pay a substantial bonus if Miss London would put up some money for 90 days in connection with certain pending real estate transactions. Although it was not disclosed to Miss London, the evidence showed that Shaw had serious financial problems, among which was a substantial debt he owed to Mrs. McIntosh. He had asked Mrs. McIntosh to try to find him some money.

It is clear that Mrs. McIntosh was acting for Shaw in soliciting Miss London for the transactions which followed. On 16 May 1968, Miss London drew two checks, each payable to Warren S. Shaw, each for the sum of $2,500.00. They were identical except that on one she typed the notation, “re: 4221 Fernhill Avenue” and on the other, “re: 3513 Springdale Avenue”. Mrs. McIntosh signed a receipt which read: “Received of Dorothy P. London, check made to Warren S. Shaw for twenty-five hundred dollars ($2500.) for contract on 3513 Springdale Ave., Baltimore, Md. This contract to be settled in 90 days with a guarantee of $250. profit.

Received of Dorothy P. London twenty-five hundred dollars for contract on 4221 Fernhill Ave., Baltimore, Md. This contract to be settled in 90 days, with a guarantee of $250.00. ⁷⁶ Contracts to be delivered by J. B. McIntosh by May 17,1968.” Within a day or so Mrs. McIntosh delivered to Miss London two land installment contracts, each of which covered the sale of the leasehold interest in a house and lot in Baltimore, subject to a ground rent. In one, dated 12 March 1966, Manning-Shaw Realty, Inc. had agreed to sell 4221 Fernhill Avenue to George E. Barnes and wife, and in the other, dated 16 September 1967, Eutaw Realty Corporation had agreed to sell 3513 Springdale Avenue to Henry Stephenson and wife. Each agreement specified a selling price and the terms of payment. Each also gave the seller the right to mortgage and to maintain a mortgage or mortgages on the property.

Neither showed what if any mortgages the seller had placed on the property. On each of the two contracts an endorsement was added transferring all of the right, title and interest of the seller to Dorothy P. London. Miss London testified that she did not understand the meaning of the contracts, except that upon settlement, within 90 days, she would be repaid her money plus the guaranteed profit. It was shown that subsequent mortgage foreclosures wiped out any equity that Shaw’s corporations may have had in the leaseholds, and Miss London received nothing.

There was also evidence that of the $5,000.00 put up by Miss London, Shaw paid Mrs. McIntosh $2,000.00 on account of his indebtedness to her, and the other $3,000.00 went into an account of one of the corporations. It was not traced further. Miss London filed suit for damages for deceit, naming as defendants Shaw, his two corporations, his surety, Mrs. McIntosh, the broker under whom she held a real estate salesman’s license, and each of their sureties. The trial of the case resulted in a jury verdict in her favor in the amount of $6,200.00 against Shaw, his two corporations, and his