Robert v. Construction General, Inc.

Moylan, J., delivered the opinion of the Court. The appellant, Joseph E. Robert, Sr., is a licensed real estate broker in Maryland, the District of Columbia and Virginia. In 1975, he was the president of the Robert Real Estate Exchange, Inc. (REX), which was licensed in the State of Maryland. The appellee, Construction General, Inc. (CGI) is a California corporation whose main office is in Montgomery County.

In 1974, CGI negotiated a $6,800,000 construction loan with Mellon Bank, N. A. of Pittsburgh, Pennsylvania, to build a condominium project in Arlington County, Virginia, known as The Carlyle. In return, CGI executed a promissory note in the amount of $6,800,000 plus interest in favor of Mellon Bank. The note was guaranteed by Bernard Lubcher, the president of CGI, and his wife and by Jack Y. Matthews, the secretary of CGI. The note was secured by a first lien deed of trust on The Carlyle in favor of Mellon Bank.

Despite the building being 80 percent complete as of the spring of 1975, CGI had little success in selling the individual condominium units in The Carlyle. Asa result, in June, 1975, Mr. Lubcher began discussing with Mr. Robert, who had been referred to him as an expert in selling distressed condominium properties, the selling of individual condominium units at The Carlyle. Facing cost overruns of approximately $1,000,000, on October 8, 1975, Mr. Lubcher on behalf of CGI entered into a written agreement with Mr. ⁸⁰ Robert on behalf of REX whereby REX was “granted the exclusive right to sell The Carlyle for a period of one (1) year commencing September 29, 1975 and ending September 30, 1976.” CGI agreed to pay REX a net commission of 3 percent of the sale price of the units, apart from any cooperating brokerage commission. REX agreed to staff The Carlyle with competent personnel six days a week, to coordinate walk-thrus, move-ins and upgrades with the developer’s agent or contractor, and to aid in the marketing, promoting and merchandising of the project.

The agreement provided that either party would have the right to cancel the agreement at any time during the term thereof upon 30 days written notice. During the next six weeks, REX submitted eleven contracts of sale on individual condominium units to CGI. Meanwhile, during 1975 it had become apparent to Mellon Bank that the condominium project was facing extreme difficulties. Unknown to CGI, the bank through its assistant vice president, John G. Roch, began negotiations with Stuart A. Bernstein, one of the ultimate purchasers, to take over the project.

Mellon Bank had previously financed one of Mr. Bernstein’s other condominium projects. By late summer, the discussions with Mr. Bernstein and with John J. Mason, the other purchaser, revolved around making The Carlyle a rental project. On November 17 and 18, 1975, Mr. Lubcher requested Mellon Bank to advance additional funds to cover the cost overruns. The bank, however, refused any additional funding and advised Mr. Lubcher it was considering its alternatives, including foreclosure or taking a deed in lieu of foreclosure.

On Friday, November 21, Mr. Lubcher told Mr. Robert that CGI had been unable to work out negotiations for an extension of the loan or an increase in the loan and that he had been advised by his attorneys to close the building down to put a squeeze on Mellon Bank to give them additional money. Mr. Robert persuaded Mr. Lubcher, nevertheless, to keep the building open over the weekend. On Monday, November 24, however, Mr. Lubcher told Mr. Robert to turn in the key to the project, which he did. ⁸¹ As of November 21, there had been no approvals of credit on any of the eleven contracts and, under the agreement, REX and Mr. Robert were not as yet entitled to any commissions. At their meeting on that day, Mr. Lubcher offered Mr. Robert $6,000 in settlement for his services.

Mr. Robert told Mr. Lubcher that the commissions on the contracts amounted to $16,846.50. He asked for $9,000. He testified at the trial, however, that this sum was only intended by him to cover his son’s services at The Carlyle and not to settle his claim for his commissions. Mr. Robert agreed to give back the deposits to each of the eleven prospective purchasers of condominiums and get releases from them.

This he subsequently did. When Mr. Lubcher several days later indicated to Mr. Robert that he would have to sign a release to obtain the $9,000 check, Mr. Robert refused to sign a release. He never received the check. On November 22, at the request of the Mellon Bank, Mr. Bernstein and Mr. Mason toured the building.

They had been to the building on a previous occasion when Mr. Robert’s son was present. This was the first time Mr. Robert, however, met the two gentlemen. He showed the men the building and answered their questions. The total visit lasted approximately 30 minutes.

Mr. Robert told Mr. Lubcher that the men seemed very interested in the building and asked him whether or not he was trying to work a deal with the men for the sale of the building. Mr. Lubcher told him no — that he did not even know the men. On November 26, CGI, Mellon Bank, Mr. and Mrs. Lubcher and Jack Matthews entered into an Agreement of Sale whereby CGI agreed to convey The Carlyle to the designee or nominee of Mellon Bank. In return, Mellon Bank agreed to release CGI and the guarantors from their liability on the promissory note.

Mellon Bank, on the same day, designated the Carlyle Limited Partnership as the grantee and a deed was prepared conveying the property to the Carlyle Limited Partnership. Mr. Lubcher testified that the negotiations for this transfer were all worked out between CGI and Mellon Bank on November 26. ⁸² Mellon Bank thereafter finalized its transactions with Stuart Bernstein and John Mason. On December 2, the deed conveying the property to the Carlyle Limited Partnership was recorded. On the same day, the Mellon Bank conveyed its interest in the Carlyle Limited Partnership to Mr. Bernstein and Mr. Mason by the execution of a power of attorney for service of process, a modification of deed of trust and a promissory note modification agreement.

Mr. Lubcher testified that as of November 24 he had no idea that the Mellon Bank had an assignee who was willing to buy the building. He, in fact, inquired of Mellon Bank on November 26 who the assignees were going to be. They told him they did not know — that they had several options open to them. He testified that he first learned that Mr. Bernstein and Mr. Mason were the assignees sometime in January, 1976.

Mr. Lubcher testified that he wrote to Mr. Robert on December 3,1975, asking him to come to his office to pick up the $9,000 check and sign the release. Mr. Robert never came to the office. Mr. Lubcher also attempted to reach Mr. Robert by telephone almost daily for two weeks with no success. Mr. Lubcher finally heard from Mr. Robert through his attorney in January, 1976, when the demands which resulted in this suit were made.

On June 4, 1976, Mr. Robert sued the appellees, CGI and its officers individually — Mr. Lubcher, Charles Walsh, and Mr. Matthews, the president, vice president, and secretary, respectively — for a broker’s commission on the sale of the entire project. The appellees demurred to the declaration, and the demurrer was sustained with leave to amend. Mr. Robert then filed suit individually and on behalf of REX against the appellees in an eleven-count declaration alleging breach of contract and fraudulent concealment of the sale of The Carlyle. The court sustained the appellees’ demurrer to Counts V through VIII and to Count XI without leave to amend.

A demurrer to Count IX was sustained with leave to amend. An amended declaration was then filed as to Count IX only, and a demurrer to that amended count was denied. ⁸³ The case proceeded to trial on Counts I, II, III, IV, IX, and X. At the close of the appellants’ case the court granted a directed verdict for the defendants/appellees as to Counts III and IX which charged, respectively, fraud and deceit against REX and Robert individually. At the close of all of the evidence, a directed verdict was granted in favor of CGI on the remaining counts. The appellants appeal from the sustaining of the demurrer to Count VIII and the granting of directed verdicts as to the remaining counts.

The appellants contend first of all that the contract of October 8, 1975, gave REX the exclusive right to sell The Carlyle and that as an exclusive right to sell agreement as opposed to an exclusive listing agreement, CGI was prevented from selling the property both personally and through another broker without incurring liability for a commission to REX, regardless of whether REX was the procuring cause of the sale. The appellants contend further that the deed in lieu of foreclosure was a sale entitling REX to a commission under an exclusive right to sell agreement. It is unnecessary to discuss whether the deed in lieu of foreclosure constituted a sale. We will assume for the sake of argument that the conveyance here was a sale, since we think the court was correct in ruling that the parties did not intend that CGI relinquish its implied right to sell the project. 12 Am.Jur.2d, Brokers, § 226, explains the distinction between an exclusive agency to sell and an exclusive right of sale: “With respect to the right of a broker to compensation on a sale negotiated by the employer without the aid of the broker, a distinction is frequently raised between an exclusive agency to sell and an exclusive right of sale.

It is held that where an exclusive agency is given the broker, the owner may still sell the property without liability to the broker unless the broker has procured a purchaser able and willing to buy prior to such time. The right of the owner of the property to sell is implied in such an agency. The only effect of such ⁸⁴ a contract is to prevent the owner from placing the property in the hands of another agent. On the other hand, where a broker is given an exclusive right to sell property, as distinguished from an exclusive agency, he is held entitled to the agreed commission, or at least damages, when a sale is made by the owner, and it is immaterial that he was not the procuring cause thereof, provided, however, that the employment contract is supported by consideration and is not a mere unilateral offer, and provided also, according to some cases, that the broker has produced a ready, able, and willing purchaser or can show damages.” For an owner of property to relinquish his right to sell his property, the brokerage contract must provide so in unequivocal terms or by necessary implication. 12 Am.Jur.2d, Brokers, § 227, states: “An absolute exclusion of an owner’s right to sell his property on his own efforts, without the aid of any broker, can be effected only by a contract so providing in unequivocal terms or by necessary implication.

Where any ambiguity exists, the courts favor an interpretation protecting the owner, especially where the contract was drafted by the broker himself. In determining whether a real-estate broker’s contract excludes the owner’s right to sell, the use of the words ‘exclusive agency’ or ‘exclusive sale’ is not conclusive, but, as in other cases involving judicial interpretation, all the circumstances must be considered. The fact that the broker’s contract of employment expressly provides that the broker has the exclusive right of sale has not in all cases been considered to negative the right of sale by the owner without liability to the broker. A contract granting a broker the ‘exclusive sale' of property or appointing him the exclusive agent is not sufficient to exclude an owner’s right of sale himself during the contract.” ⁸⁵ In interpreting the contract between REX and CGI, the lower court ruled, as a matter of law, that the parties did not intend that the contract cover a sale of the entire project and that, even if they did, the contract did not contemplate that CGI relinquish its implied right to sell the property: “[The contract] contemplated that REX was going to staff the Carlyle with personnel six days a week to sell condominiums; that they were to process the sales contracts which had to contemplate only condominiums; that they would coordinate walk-throughs, move-ins, upgrades with whomever was purchasing a condominium unit; and that they would provide their expertise to the developer and the ad agency in marketing, promoting, and merchandising of the project; and that the project referred to the condominium units and that the parties never contemplated prior to October the 8th, 1975, when they entered into this agreement that there would be a ‘sale’ of the entire project, the entire Carlyle in which Mr. Robert and his company would participate, much less a deed back in lieu of foreclosure.

The Court also holds, as a matter of law, that even if it were contemplated that this might be a sale of the entire unit, the Court holds, as a matter of law, that in the State of Maryland, despite the fact there are no reported cases in Maryland to this effect, the Court believes the better weight of authority is to the effect that a real estate owner always has the right to sell his own property directly himself unless there is a provision in the sales contract between himself and the broker, unless there is an expressed prohibition which says that even if the owner sells the property he nonetheless must respond to the broker for a commission.” We see no reason to disturb the court’s interpretation of the contract. The brokerage contract prepared by