St. Paul at Chase Corp. v. Manufacturers Life Insurance

Smith, J., delivered the opinion of the Court. The trial judge in this case (Proctor, J.) prefaced his findings of fact (the delivery of which consumed a full court day and which took up over 50 pages of the record extract) with the comment: “In the past, I have looked upon St. Paul as a great Christian apostle. However, from here on I’m very much afraid that to me it will mean a high-rise apartment building at the corner of St. Paul at Chase.” The apartment house was the dream of appellant Charles W. Williams. As his literature put it, he conceived of it as a “prestige address” intended for “Gracious In-town Living”.

Appellant St. Paul at Chase Corporation was formed for the purpose of erecting and operating the building. This litigation was produced when ¹⁹⁵ Manufacturers Life Insurance Co. of Toronto, Canada, cancelled a commitment it had made for permanent financing of the apartment building. The situation here can perhaps best be understood by reference to the cast of characters: St. Paul at Chase Corporation (St. Paul) — plaintiff below, and appellant and cross-appellee here; received judgment of $1,935,955.60 at trial below; this is the company which was developing the apartment project in question. Charles W. Williams (Williams) — president and principal stockholder of St. Paul.

W. Hamilton Whiteford (Whiteford) and Edward A. Johnston (Johnston) — attorneys for St. Paul. The Manufacturers Life Insurance Company (Manufacturers) — defendant below, and appellee and cross-appellant here; Canadian insurance company which was to provide a $4,800,000 permanent mortgage to St. Paul. Thomas R. Lamon (Lamon)—mortgage superintendent for Manufacturers. Donald W. Lambert (Lambert)—assistant mortgage superintendent for the United States for Manufacturers.

Weaver Bros., Inc. (Weaver Bros, or Weaver)—defendant below and appellee and cross-appellant here; retained by St. Paul to procure financing for the project. Sidney H. Tinley, Jr. (Tinley) — senior vice-president of Weaver Bros. E. Catherine Byrne Doehler (Miss Byrne) — another vice-president. The Mullan Contracting Company (Mullan Contracting)—general contractor for the project.

Charles A. Mullan (Mullan)—president of Mullan Contracting. ¹⁹⁶ Chemical Bank New York Trust Company (Chemical) —New York bank which eventually made $4,-800,000 construction loan (not the permanent mortgage) for the project; not a party to this suit, but party to federal suit now pending and awaiting outcome of this suit. Merchants Mortgage Company (Merchants) — another mortgage broker, which eventually procured the construction loan from Chemical. Ralph Lubow (Lubow) — loan officer of Merchants. Daniel A. Neumayer (Neumayer)—architect for the project.

Corbin C. Cogswell (Cogswell) of The Cogswell Construction Company—inspector for Weaver Bros, and Manufacturers. Merritt & Harris—inspector for Chemical. Williams and St. Paul sued Manufacturers and Weaver Bros. As Williams put it in his brief: “Upon Defendants’ Motion to Dismiss, Williams’ individual claims against Manufacturers and Weaver were dismissed.

However, as Williams is personally liable to Chemical for Chemical’s Deficiency Decree, until this entire matter is resolved, Williams is an interested party and as such is a Party Plaintiff, see Newark Trust Co. v. Talbot Bank, 217 Md. 141 (1958).” The exact breakdown of the judgments against Weaver Bros, and Manufacturers will be set forth later. St. Paul believes these judgments to be inadequate while Weaver Bros, and Manufacturers are convinced they had no liability. Therefore, they have all appealed. We shall affirm as to liability, eliminate punitive damages, and remand the case for entry of judgments which increase somewhat—but not to the extent desired by St. Paul — the compensatory damages.

Mullan Contracting and Real Estate Management Co., ¹⁹⁷ Inc., are use plaintiffs in the litigation and appear here as cross-appellees, being owed in excess of $300,000 by St. Paul. The six counts in the declaration were summarized by the trial judge as follows: “COUNT 1 OF THE DECLARATION “Although it is long and verbose, the gravamen of this count is that Weaver breached its contract of December 6, 1963, with the Plaintiff. * * * [(Probably the gist of this count is contained in paragraphs 40 and 41 of the declaration which stated: “40. The Plaintiffs allege that having accepted the above modifications of Weaver’s offer, they then waited for more than a reasonable time for Defendant Weaver to provide them with a construction loan, as Defendant Weaver had promised to do. The Plaintiffs allege that it was only after Defendant Weaver had attempted to secure their property for another client and only after Tinley, as Executive Vice-President of Defendant Weaver, had advised Plaintiffs’ counsel, that Defendant Weaver had spent entirely too much time, that the Plaintiffs with their entire project then in jeopardy, advised Defendant Weaver on December 6, 1963, that the Plaintiffs were placing their construction loan elsewhere.

The Plaintiffs allege that with their entire project then in jeopardy, under the time limitation set by Defendant Manufacturers in their Letter of Commitment of June 7, 1963, the Plaintiffs were required to do all in their power and regardless of the expense involved to obtain a construction loan from, another source in an attempt to avoid the heavy losses and damages with which they were faced. ¹⁹⁸ “41. The Plaintiffs allege that in spite of the modifications to Defendant Weaver’s original offer and contract agreed to by Plaintiffs in an effort to assist Defendant Weaver, Defendant Weaver did not secure a construction loan for the Plaintiffs by September 1, 1963, as they had promised and bargained to do, did not secure a construction loan for the Plaintiffs within a reasonable time thereafter, and in fact never did secure a construction loan for the Plaintiffs. The Plaintiffs allege that the failure of Defendant Weaver to secure a construction loan for the Plaintiffs as they had promised and bargained to do delayed the start and hence the completion of the Plaintiffs project by many months. The Plaintiffs allege that this failure on the part of Weaver to furnish the Plaintiffs a construction loan by September 1, 1963, and thereafter within a reasonable time, contributed to and set in motion those causes which caused the Plaintiffs their heavy losses and damage including the loss of their entire project.” It thus will be seen that the declaration itself did not refer to the December 6 agreement.

This agreement supplanted the earlier agreement.) ] * * * “COUNT 2 OF THE DECLARATION “This count sounds in tort and is based upon two alleged tortious actions by Weaver. “First, Plaintiff contends that Weaver failed to process the Plans and Specifications promptly, and thus committed a tort. I have already found for Defendant Weaver on this point. “Second, Plaintiff alleges negligent and deceitful conduct on the part of Weaver in failing to button up Manufacturers’ offer of a construe- ¹⁹⁹ tion mortgage loan, including Tinley’s advice to Williams, when he accepted such offer, that it had been withdrawn. * * * * * * “COUNT 3 OF THE DECLARATION “In this count Plaintiff contends that Manufacturers is responsible to it for breach of contract — Manufacturers’ offer of June 7, 1963, and Plaintiff’s acceptance of June 21, 1963. * * * * * * “COUNT 4 OF THE DECLARATION “This is an action against Manufacturers in tort. It is based upon three contentions: (1) Alleged failure of Manufacturers to exercise good faith and alleged negligence in the processing and approval of plans and specifications. I have already rendered a verdict in favor of Manufacturers on this count.

(2) Its alleged failure to exercise good faith in breaching the contract. (3) Alleged constructive fraud on its part in breaching the contract. “COUNT 5 OF THE DECLARATION “This is a contract action against Weaver to recover the $48,000 paid by Plaintiff to Weaver on May 11, 1964, as a finder’s fee for obtaining the permanent mortgage loan commitment from Manufacturers. * * * “COUNT 6 OF THE DECLARATION “This is a tort action against Weaver and Manufacturers. It merely combines the allegations of Counts 2 and 4, and alleges that Defendants were joint tortfeasors. * * *” St. Paul and Williams have summarized the request for damages and the actual award by the court as follows: “St. Paul requested the following in damages: ²⁰⁰ A. Direct Damages—loss of property $ 7,920,00( B. Special Damages—loss of business Value of Business $7,265,000 Less Amount of Mortgage 4,800,000 2,465,001 C. Consequential Damages— 1. Chemical Bank—Deficiency Decree—2/27/67 1,297,952 2.

Extension fee paid Manufacturers 9/7/65 24,000 3. Fee paid Weaver 9/18/63 on their loan of $480,000 9,600 4. Interest on Weaver’s loan of $480,000 from 9/18/63 to 1/1/65; paid 5/1/64 18,160 5. Merchants Mortgage Co. fees and legal expenses 85,500 6.

Dr. G. C. Merrill contract covering moving, interruption and dislocation of business, due over a 4 year period commencing with 4/1/66 50,000 1,485,21 11,870,21 D. Interest from 5/15/66 to 2/15/70 2,716,30 Total Compensatory Damages $14,586,51 “Under Count V, St. Paul claimed the return of the fee it paid to Weaver. “THE COURT AWARDED: Compensatory Punitn COUNT I (Plaintiffs v. Weaver—Contract) $ 5.00 $ 50,00 COUNT II (Plaintiffs v. Weaver—Tort) 185,167.40 100,00 COUNT III (Plaintiffs v. Mfgrs.—Contract) 1,552,783.20 —0- ■COUNT IV (Plaintiffs v. Mfgrs.—Tort) —0— —0- COUNT V (Plaintiffs v. Weaver—Contract) 48,000.00 —0- COUNT VI (Plaintiffs v. Mfgrs. & Weaver jointly) —0— —0- $1,785,955.60 $150,0C “No prejudgment interest was awarded except on the Chemical Deficiency Decree. The $1,552,783.20 above was awarded to cover the deficiency decree and included interest at 6%.” On appeal Williams and St. Paul raise four issues. The first three all deal with their dissatisfaction with the damages awarded. The fourth alleges error on the part of the trial court in denying a motion to amend by interlineation the damage clause of the declaration so as to materially increase the claim for compensatory damages ²⁰¹ to approximately $14,000,000.00.

We shall not be obliged to pass upon that point since the damages awarded are less than those claimed in the original declaration. They do not appeal the issue of the refusal of the trial court to enter judgment against Manufacturers under the fourth count of the declaration which was in tort, nor do they claim error on the part of the trial judge in not allowing punitive damages against Manufacturers. Weaver Bros, alleged error in finding it liable at all, in entering judgment for punitive damages against it and in the amount of the judgment for compensatory damages. Manufacturers contests the judgment as to liability and the amount of damages awarded.

We shall summarize as briefly as possible the essential facts, adding some additional summation of facts under the points discussed. Weaver Bros, is a mortgage broker. In Hill v. Benevicz, 224 Md. 79 , 167 A. 2d 104 (1961), Chief Judge Bruñe discussed the practice of mortgage brokers and mortgage correspondents, stating: “Rouse’s usual practice appears to be to submit applications to the F.H.A. for mortgage insurance in its own name, but to place the mortgage, when a commitment for insurance has been obtained, with one or another of the lending institutions for which it acts as mortgage correspondent, and which are themselves F.H.A. approved mortgagees. Rouse then takes the mortgage in its own name, assigns it to the lending institution and services the mortgage under a contract between Rouse and the lender, pursuant to which Rouse receives compensation.

Rouse thus performs several functions in the transaction. It acts partly in its own interest, partly as agent for the lending institution and partly for the benefit of the prospective mortgagor and partly also for the benefit of the would-be seller, for without the mortgage fi ²⁰² nancing the sale probably would not produce the cash consideration which he is seeking. All of these functions are well known in the business, and there is no question of an agent secretly serving his own interest or the interest of one principal to the detriment of another.” Id. at 84 . A chronology of major events is as follows: August, 1962: Williams contracted the first of nine purchase options on land on the northeast corner of St. Paul and Chase Streets in Baltimore; total purchase price was to be $725,000; the options were to be exercised by June 15, 1963, with payment apparently to be made by September 1,1963.

December, 1962: St. Paul was incorporated by Whiteford, with Williams as the sole stockholder. March, 1963: Tinley heard that Williams was contemplating erection of a high-rise apartment and directed one of his subordinates to contact Williams, which was done. March 25, 1963: Williams contacted Tinley about a possible $5,200,000 — $5,400,000 mortgage for the project. April 10, 1963: Whiteford told Tinley that Williams needed 100% financing because he had no working capital.

May 14, 1963: Tinley advised Williams and Whiteford that Manufacturers was interested in a $4,800,000 permanent mortgage for 25-26 years at 6%%. Weaver Bros, was to receive $48,000 for securing the permanent mortgage and another $48,000 for securing a $4,800,000 construction loan. St. Paul was also to pay Manufacturers a refundable “standby fee” of $48,000. Tinley said that Weaver Bros, would give a $200,000 second mortgage if Manufacturers’ $4,800,000 mort ²⁰³ gage was not enough.

Williams wanted to act as his own general contractor on the project (without bond), with bonded sub-contractors. May 29, 1963: Weaver Bros, made a written submission concerning the project to Manufacturers. The application was accompanied by Weaver’s valuation of the property in the amount of $7,920,000 for land and building and $7,265,000 on the basis of capitalization at 7!/2% of the estimated net income of $544,865 per year. These figures, as will later be seen, contribute materially to this controversy.

June 5, 1963: Financing and plans for the project were approved by Manufacturers. June 7, 1963: Commitment letter written by Manufacturers — it was for breach of this contract that the company was held liable at the trial below. In addition to interest on the loan, Manufacturers was to receive 13.31% of all gross rental income in excess of $721,044 (80% of the forecasted gross income). The offer was to be accepted by June 24,1963.

June 14, 1963: Manufacturers’ letter of commitment was discussed at a meeting, at which Tinley gave assurances that he would be able to secure the necessary construction loan by September 1, 1963. He also stated that the requirement of “satisfactory completion” of the building did not mean that the building had to be completed in every detail. Tinley made an offer of a $200,000 second mortgage for working capital purposes; the land options on the nine lots were exercised. June 21, 1963: St. Paul accepted Manufacturers’ offer and paid the $48,000 standby fee.

Late July or early August, 1963: Tinley telephoned Whiteford and told him Williams’ ²⁰⁴ poor credit standing (because of business losses in Virginia) and his insistence upon acting as his own general contractor without bond were making it difficult to obtain a construction loan. Early August, 1963: Tinley asked Lamon of Manufacturers if that company would be interested in financing the construction loan. August 10, 1963: Williams met with Merchants, which offered a $4,800,000 construction loan of 6% if they could have 2-3 weeks for approval of the plans. Williams “tabled” this offer because he needed the money prior to September 1, 1963, and did not think that he could afford this time.

August 12, 1963: On or about this date, Lamon telephoned Tinley. He said that Manufacturers would make a construction loan commitment as follows: interest at 6 % ; a separate $24,000 fee; approval by Manufacturers of the final plans and specifications; and a bonded general contractor. Tinley passed this information on to Williams, who indicated he was upset because it ruled him out as his own general contractor, since he could not get a bond. Late August, 1963: Tinley called Whiteford in Ocean City and told him that Weaver Bros, would procure a land mortgage loan for St. Paul in the amount of $480,000 so that the company could preserve its land options while ironing out the construction loan problems.

August 30, 1963: Letter from Weaver Bros, to St. Paul was delivered stating that Weaver Bros, was loaning $480,000 to St. Paul on land mortgage, that a $4,800,000 construction loan had been arranged, and that a $4,-800,000 permanent mortgage had been ar ²⁰⁵ ranged. (There was some indication that this letter was written solely for the benefit of the holders of the nine lots in order to get them to grant an extension on the date of payment.) Johnston (Whiteford’s partner) took this letter around, and obtained extensions from the landowners until September 18,1963. Williams delivered a set of plans for the project to Weaver Bros. Weaver Bros, apparently considered them to be only preliminary plans; Mullan testified that they were permanent plans and that they had been used to secure the necessary building permits from Baltimore City.

September 5, 1963: Williams had previously asked Mullan Contracting to become the general contractor. At a meeting on this date, there was some discussion relative to Mullan Contracting’s obtaining the construction loan from Maryland National Bank. Tinley again said that Weaver Bros, would advance $200,-000 on a second mortgage basis for working capital. At another meeting on this same date (or maybe at the same meeting mentioned above), Tinley allegedly said that Weaver Bros, would take a $500,000 second mortgage to assure completion of the building, if necessary.

September 18, 1963: Weaver Bros, made the $480,000 land loan to St. Paul. October 10, 1963: Mullan said that his application at Maryland National for $4,800,000 had been approved, subject to a $500,000 second mortgage from Weaver Bros, to be used for land fees and costs. Tinley denied that he had made an offer of a second mortgage, and an argument ensued. Williams said he would ac ²⁰⁶ cept Manufacturers’ offer for a construction loan and asked Tinley to place it.

Tinley said Manufacturers’ offer for the construction loan had been withdrawn. The trial court found that the offer had never been withdrawn and was still good as of this date, and that Williams’ statement to Tinley acted as an acceptance of Manufacturers’ offer. Shortly thereafter a meeting took place at which Tinley suggested that Williams sell his interest in St. Paul to make it easier to get the construction loan; Williams refused. November 25, 1963: Meeting where Tinley suggested sale to Messrs.

Gottschalk and Grant. Williams left in a huff. November 26, 1963: Tinley said he could still place the construction loan and asked for two more weeks; Williams gave him until December 6, 1963. On the same date, Williams called Lubow of Merchants and resubmitted his original proposal.

December 6, 1963: The original agreement between St. Paul and Weaver Bros, was “finally terminated”. They entered into a new contract. As the trial judge put it: “Tinley described Weaver’s obligations under this new Agreement as being, first, to make sure that the Buy-Sell Agreement between the construction and permanent mortgage lenders was signed by all of the parties at the construction mortgage loan settlement; and, second, if any problems arose, to assist in ironing them out. Under this new contract Plaintiff was obligated to pay Weaver $96,000 for its services — $48,000 in cash and $48,000 at a later date.

Weaver agreed that it would not assert ^ny claim against the fee of Merchants * * * for placing the construction mortgage loan.” ²⁰⁷ The trial judge found as a fact that Manufacturers’ offer to make a construction loan was still open at this time. December 6, 1963: St. Paul and Merchants entered into a contract under which the latter was to be paid $72,000 for obtaining a construction mortgage loan commitment for the project. A fee of $10,000 was to be paid to certain persons who had introduced Williams to Merchants. December 27, 1963: Commitment issued by Chemical.

March 9, 1964: Plans and specifications for the project were finally approved by Weaver Bros, on behalf of Manufacturers. April 8, 1964: Plans and specifications were finally approved by Manufacturers. April 27,1964: St. Paul executed a contract with Mullan Contracting, the use plaintiff, for construction of the building. May 1, 1964: Closing of Chemical’s construction mortgage loan was held in New York, at which all of the necessary documents were executed, including a promissory note in the amount of $4,800,000 and the “Buy-Sell” agreement between Manufacturers and Chemical.

August 19, 1965: The expiry date under Manufacturers’ permanent mortgage loan commitment was extended from September 7, 1965, to March 7, 1966, by letter from Manufacturers to Weaver Bros. Plaintiff paid Manufacturers $24,000 for such extension. March 4, 1966: At a meeting of its executive committee Manufacturers decided not to extend the commitment any further. Lamon was instructed to advise Chemical.

March 8, 1966: Manufacturers wrote Weaver Bros, cancelling the commitment. ²⁰⁸ April 13, 1966: Chemical filed foreclosure action. June 1, 1966: Foreclosure sale. There was only one bidder at the sale, and the property was knocked down to a representative of Chemical. February 23, 1967: Decree in personam was entered in the foreclosure proceedings against St. Paul in the amount of $1,297,952.39.

The commitment of Manufacturers provided in pertinent part: “It is understood that our funds will not be required until we receive a report from your inspector certifying that construction of the building has been satisfactorily completed, and the certificate of an architect, approved by our Company, certifying that construction has been completed in accordance with the plans and specifications which are to be submitted to us for approval. Engineering and architectural approval of the project is also required.” A “Buy-Sell” agreement was entered into between Chemical and Manufacturers. This appears to be the conventional practice in financing of this type. One paragraph of that agreement, which was in the form of a letter from Chemical to Manufacturers, stated: “1.

At any time on or before September 7, 1965 (or the last day to which the commitment may be extended, if any extension thereof has been made as provided herein), if the conditions of the Commitment have been fulfilled, you agree to purchase and we agree to sell the Note for $4,800,000.” Manufacturers accepted the agreement, Weaver assented to it, and St. Paul appended its consent to the agreement and agreed that it would “(i) take or cause to be taken ²⁰⁹ any action required of the Borrower in order to comply with the terms, covenants and conditions of this Agreement and the Commitment, (ii) accept a loan from [Chemical] under the Commitment and (iii) not accept from any other person or persons a loan secured by a deed of trust creating a first lien so long as the Commitment ha [d] not expired.” The trial judge said in his findings of fact relative to the June 14 meeting to discuss the Manufacturers’ commitment : “Williams’ testimony as to this meeting was that Tinley said that satisfactory completion meant the work had to be done in a workmanlike manner, and in accordance with the plans and specifications. Williams further testified that the degree of completion was discussed, and that Tinley said that an inspector would check the work monthly. Williams further testified that Whiteford had said that a construction loan had to be part of the package, and Tinley said we could rely on Weaver having a construction mortgage by September 1, 1963; that Whiteford said that the money had to be available by September 1, 1963. * * * The reason for the finding is that it is clear from the testimony of all the parties that at that point, Tinley was enthused about the project and its prospects, had obtained a permanent loan commitment from Manufacturers, and sincerely believed that with the permanent loan commit--1 ment on hand, he would have no difficulty in obtaining a construction mortgage loan commitment. Williams further testified that he asked if the word completed meant that everything had to be finished and Tinley replied that the building didn’t have to be completed in every detail.

I find that was the substance of what Tinley said, primarily because that’s the sub ²¹⁰ stance of the testimony Tinley gave here in Court. Tinley stated that Manufacturers’ proposal had to be accepted and the standby fee paid by June 24, otherwise the offer was void. Finally, Whiteford asked Tinley if there was any question about the items discussed at the meeting, saying that this was a serious step, and Tinley said no. Again, I am confident that that’s the gist of what took place, and so find. * * * “In his version of what transpired at this meeting, Tinley said that everyone was delighted with the information that the permanent loan commitment had been obtained, that Williams was interested to know whether there would be an architect coming from Canada, and that he advised Williams, from his own experience, that the answer was no; that, however, inspection by an architect would be necessary, unless an inspector was appointed to make monthly inspections.

Tinley said that Williams inquired what the term satisfactory completion meant, and he replied that the building had to be finished, that every apartment had to be ready for occupancy; that Williams further inquired about the term—satisfactory completion—and he said it was not absolutely necessary that the building be 100 per cent completed; that if some completely minor items remained to be done, roll over would take place. Tinley further testified there was a discussion about the last paragraph of the commitment letter, and that he said it meant what it said. He further testified that Williams inquired whether everyone always met the date set forth in the commitment letter, and he said it had been his experience, that if an owner-builder got to the point where an additional thirty days was necessary for completion, he would ask for an extension and ²¹¹ normally get it. Tinley further testified that there was a discussion about whose responsibility it was to get the certificates referred to in the third paragraph of the commitment letter, and that he told Williams that the burden would be upon him.

I find that that statement was made. It would be a logical statement for Mr. Tinley to make in response to that inquiry. “Asked about the engineering and architectural approval referred to in the third paragraph of the commitment letter, Tinley testified that he said it would have to be received before roll over; that whoever gave such approval was to send it to Manufacturers, who had the right of final approval. “Tinley admitted that, at that meeting, he made an offer of a $200,000 second mortgage for working capital purposes; that this is what Williams wanted. Tinley, on cross examination, testified that he did not remember White-ford saying St. Paul couldn’t make an application for a permanent loan without assurance of a construction loan; that, however, White-ford impressed on everyone it was very important to get a construction loan to pick up the land and go ahead with the project. Tinley stated that he told those in attendance that he would undertake to get a construction loan on a best efforts basis; that Whiteford gave Weaver authority to go ahead with the permanent loan application, without Weaver’s assurance of a construction mortgage.

However, as I have already stated, I find that there was assurance of a construction loan commitment.” The two top floors of the building, 22nd and 23rd, were damaged in 1966. On this subject the trial judge said in his finding of fact: “Next comes the question of the storm and ²¹² the alleged resulting damage. The weather reports, in my judgment, are inconclusive. I have examined them.

There was a bad blizzard. There was a time after the blizzard, a week or ten days later, where the daytime temperature did rise to a point where there would have been a thaw. The difficulty with proof of this phase of the case as far as Plaintiffs is concerned is that the time when the leak developed is not pinpointed. No witness testified that the leak was discovered on February 13 or 14, the day when quite a bit of thaw took place.

Neumayer testified, however, that the terraces had been tested for leaks. That tends to negate the idea of the damage being attributable to the storm. So that I find that Plaintiff has not met — for whatever significance it has in the case — its burden of proving that the damage to the 22nd and 23rd floor suites was due to ‘an act of God’.” This damage was a factor in the question of whether the building had been completed at the time of the March 7 deadline. At one point there was sincere belief on the part of Williams that Mullan would not be able at the pace at which he was going to complete the building by March 7.

On the question of completion of the building the trial judge said: “Finally, I find as a fact that the high-rise apartment building at the northeast corner of St. Paul and Chase, as of March 7, 1966 was substantially complete. The reasons for that finding are manifold. Mullan says it was substantially complete; Cogswell said it was substantially complete and Cogswell was Manufacturers’ and Weaver’s representative; Neumayer says it was suDstantially complete; the photographs taken by Tadder are only of the top two ²¹³ floors. You can bet your bottom dollar if there was substantial evidence of incompletion of the project on the remaining floors other than the first floor, there would have been photographs of that state of incompleteness.

He had been asked by Weaver, according to his own testimony, to take photographs showing what had not been completed. “Just as significant, in my judgment, is the inspection by Lambert. This was made under circumstances where Lambert knew that Manufacturers was cancelling the commitment letter. He read the handwriting on the wall. He knew that he had been asked to prepare an inspection report which, if called for, would justify (if possible) the position taken by Manufacturers.

I have reviewed his report carefully, and it is, to say the least, not objective. In the first place, in making the examination, he shows some lack of familiarity with the plans and specifications. Of 238 apartments in the building, as I compute it, he found 67 okay; there was nothing that he could find wrong, not even a scratch on the walls. In other words, there were at least 67 apartments which tenants could have occupied on March 7.

There were three that he said he couldn’t inspect. There were approximately 100 apartments in which the items which Lambert said needed correction, were obviously of the most minor nature — which could have been corrected in twenty-four hours — what I consider to be a punch list item. There were fifteen more apartments where his comment was — ‘Clean out hatch not plastered.’ As Charles Mullan pointed out, the purpose of the clean out hatch would be completely nullified if you plastered over it. Obvious nitpicking. “When I say minor items, I’m talking about ²¹⁴ this sort of thing: ‘Room 311, bath, vanity fixture hung below outlet, wire shows,’—only one item in that room.

So when I say minor, I mean petty. Where Lambert’s report showed more than one item to be corrected in a room or suite, I have not considered that as minor. But even in the rooms which had several items which allegedly required correction, they were items that could have been corrected before a tenant would want to move in. For example, in Room 1102, ‘Dining room electric light fixture not properly installed.

Bath, ceiling plaster finished splotchy.’ I don’t consider that minor, but obviously on the face of it, it is something that could be taken care of in one morning at most — probably fifteen minutes for the light fixture and an hour for the plaster job. The only part of the building that was not in this minor or comparatively minor category was some of the exterior work and some of the suites on the 22nd and 23rd floors. Here we’re dealing with an apartment house that has 238 apartments, ten of them on the top two floors. Ten out of 238, and even in those, the work was finished, according to the testimony before me, within a week after March 7,1966. “So that my finding, so far as the state of completion is concerned, is that the building was substantially completed.

Again, the determination of the legal effect of this finding must await tomorrow’s edition.” There were suggestions from time to time through the record that Tinley and Weaver Bros, did not want Manufacturers to know that the loan here was intended to cover the entire construction cost. There is some intimation that this was the reason that Tinley did not proceed with the closing of a construction loan with Manufacturers. ²¹⁵ LIABILITY At the conclusion of trial on the issue of liability and before presentation of evidence of damages the trial judge rendered an oral opinion which we adopt: “CONCLUSIONS OF LAW “We now come to the point in the case where I am required to make certain conclusions on the question of liability. As is true in most cases, these conclusions are in some instances exclusively legal, in others, they are combinations of fact and law. “There are several preliminary questions which must be considered before I get to the ultimate decisions which must be made. “I. Weaver — Agent for St. Paul and Manufacturers. “The question of agency has arisen in this case. I have found as a fact that Weaver acted as agent for both St. Paul and Manufacturers.

In Hogan v. Q. T. Corporation, 230 Md. 69, 75 , the Court of Appeals said that ‘the existence of a principal-agent relationship is ordinarily a question of fact. * * * And since such relationship may be implied from the words and conduct of the parties and the surrounding circumstances, the question was properly submitted to the jury, and its verdict should not have been set aside.’ So that such agency has been determined by me, sitting as a jury, as a matter of fact. “II. Weaver’s Responsibilities as Agent. “Next, is the question of the responsibilities of Weaver as broker-agent. In Hardy v. Davis, 223 Md. 229, 232 , the Court of Appeals had this to say on the subject of a real estate broker acting as agent for both parties: ‘During the term of the agency, a real estate broker can not act ²¹⁶ for both vendor and vendee in respect of the same transaction because of possible conflict between his interest and his duty in such case, and he must disclose to his principal all facts or information which may be relevant or material in influencing the judgment or action of the principal in the matter. Coppage v. Howard, 127 Md. 512, 523 ; Restatement (Second), Agency Sec. 381.’ Of course, Weaver did act as agent for both, and, in my judgment that dual agency was known both by Manufacturers and by St. Paul.

St. Paul had hired Weaver as its agent and broker, and yet it knew through the multitude of letters and phone and face to face negotiations that Weaver was also acting as agent for Manufacturers. Many of the communications were directed by Manufacturers to Weaver. As I recall it, none in writing were directed to St. Paul. So that the fact that Weaver was. acting as agent for both parties did not, in and of itself, constitute a breach in violation of the holding in Hardy v. Davis (supra).

Nevertheless, when one acts in such a dual capacity, one has an even greater responsibility to be sure that he walks a straight line and acts in a fair manner towards both principals, than if he were acting for only one party. “On the degree of care which an agent must exercise, 12 Am.Jur.2d, 847, Sec. 96, says that— ‘As a general rule, a broker who is not a mere middleman, but is employed by a principal to act as his agent in a transaction, is bound to exercise reasonable care and skill, or the care and skill ordinarily possessed and used by other persons employed in a similar undertaking. He must exert himself with reasonable diligence in his principal’s behalf, and is bound to obtain for the latter the most ²¹⁷ advantageous bargain possible under the circumstances of the particular situation. * * * ‘* * * A broker is not liable for a mere mistake in judgment which does not result from a failure to know or do that which a person of ordinary prudence under similar circumstances would know or do. * * *.’ ‘In the absence of special circumstances giving the principal a right to rely on the agent’s skill and care, the principal has been held to be barred from recovering for the agent’s negligence by his own contributory negligence.’ “In Nagel v. Todd, 185 Md. 512 , at page 516-517, the Court of Appeals had this to say on this subject: ‘In DeCrette v. Mohler, 147 Md. 108, 115 , this Court, speaking through Judge Walsh, said: “The principal duty of an agent is loyalty to the interest of his principal. The very nature of the relationship of principal and agent demands that the latter give to the former the fullest measure of service in all matters pertaining to the agency, and that he devote all his skill and ability to securing the greatest legitimate benefit and advantage for his principal. Experience has taught us that no man can serve two masters, and for this reason it has long been an established rule of law that an agent cannot recover from his principal in any transaction in which the agent’s interest was antagonistic to that of the principal, unless such interest was fully and fairly disclosed to the principal” citing Mechem on Agency, 2nd Ed., Sec. 1588 et seq.’ “The responsibilities and duties of an agent are discussed in some other Maryland cases.

In Maryland Credit Finance Corp. v. Hagerty, 216 Md. 83, 90, 92 , the Court of Appeals, after quot ²¹⁸ ing, as I have just done, from DeCrette , said: ‘Where the breach of duty by the employee was 'wilful and material, as we find it to have been in the case before us, the Courts have held consistently that the employee has forfeited at least compensation which has not already been earned. The rule was recognized, although found inapplicable on the facts, in Shipley v. Meadowbrook Club, 211 Md. 142, 148 . It was there said that: “We accept the general principle that an agent who is guilty of fraud upon his principal, particularly where there is a conflicting interest, concealment, or a wilful and deliberate breach of his contract, may be denied compensation for his services.” ’ There are a number of authorities cited at that point. “In Buffington v. Wentz, 228 Md. 33, 38 , the Court of Appeals said this: ‘* * * that the broker was under a duty to make full disclosure to his clients of all of the relevant facts which might influence the judgment or action of his principals.’ citing several Maryland cases, and Restatement, Agency, Second edition, Secs. 381, 389, 390; also 8 Am. Jur., (Brokers), Secs. 89, 91. “Again on this subject, Coppage v. Howard, 127 Md. 512, 523 , the Court said: ‘* * * A broker employed to sell real estate occupies a quasi fiduciary relation to his employer, and in his dealings with him is bound to act in good faith and to make disclosures of matters that are material and might affect the action of his employer in the premises.

This principal is fully recognized in this State.’ citing three earlier Maryland cases. “Finally on this subject, Virginia Dare Stores, Inc. v. Schuman, 175 Md. 287, 291-92 , the Court said: ‘It appears from the declaration hereto ²¹⁹ fore referred to that this action is founded upon negligence in misrepresentation. No Maryland case has been found directly upon the subject, but the weight of authority in other jurisdictions seems to be that such action is not necessarily confined to injuries arising from contractual relations; that the action lies for negligent words, recovery being permitted where one relies on statements of another, negligently volunteering an erroneous opinion, intending that it be acted upon, and knowing that loss or injury are likely to follow if it is acted upon.’ citing a number of authorities. “Referring to the argument of day before yesterday, Mr. Freishtat contended that Weaver had held itself out as having special skill in the subject of obtaining mortgage financing, such as is involved in this case, and that St. Paul and Williams had relied thereon to their loss. In response, Mr. Case contended that there was a failure of proof of special skill and reliance thereon, and also that there was a lack of expert testimony as to the standard of care required in such a case. In my judgment, this is not a case which requires the production of expert testimony.

However, it appears that in this case, and in other cases like it, it’s not so much a question of some higher degree of care, but of the degree of care one would expect of the particular person involved, whether he is a doctor, or a lawyer, or a real estate broker or specialist. “The case which Mr. Case referred to in argument is L. B. Laboratories, Inc. v. Mitchell, 235 Pac. (2d) 253 , 257, had this to say: ‘The courts have uniformly based recovery upon principles of negligence where there is failure to employ the knowledge, skill and judg ²²⁰ ment which is engaged to be rendered in professional employment, or other employment of a highly specialized nature. A member of the learned professions, and for that matter any one who undertakes employment because of his possession of exceptional skill, impliedly represents that he possesses and will employ the degree of learning and skill usually possessed by those in good standing practicing their specialities in the same locality. He impliedly agrees to use his best judgment but does not guarantee results.

Roberts v. Parker, 121 Cal. App. 264 ; 8 Pac. (2d) 908 . “In all those employments where peculiar skill is requisite, if one offers his services, he is understood as holding himself out to the public as possessing the degree of skill commonly possessed by others in the same employment, and if his pretentions are unfounded, he commits a species of fraud upon every man who employs him in reliance on his public profession. But no man, whether skilled or unskilled, undertakes that the task he assumes shall be performed successfully, and without fault or error; he undertakes for good faith and integrity, but not for infallibility, and he is liable to his employer for negligence, bad faith, or dishonesty, but not for , losses consequent upon mere errors of judgment.” (Cooley on Torts, (4th Ed.), Vol. 3, p. 335).’ “HI.

Commitment Letter—Time of Essence ? “Next, one other preliminary question is whether time was of the essence in this contract, the commitment letter of June 7, 1963. It is my judgment, and I so hold, that time was not of the essence of this contract. My reasons for that holding are several. First, the language itself negates the idea of time being of the essence.

The last paragraph says: ‘The commit ²²¹ ment may be canceled,’ not, as does the paragraph immediately preceding, that ‘This commitment shall become void if by June 24, 1963 we have not received written acceptance of the same, * * *.’ Clearly that paragraph was time was of the essence. If the refundable standby fee had not been paid and the offer contained in the letter had not been accepted by that date, that would have been the end of—the complete end of the matter. So that you have that very definite difference in language. Now the only thing in the last paragraph that would make time of the essence is that a date is mentioned.

However, when you compare the language of the two paragraphs it becomes obvious that, so far as the last paragraph is concerned, time was not considered of the essence. “Another reason is that the law is clear that one who draws a contract can expect to have that contract construed against him. '* * * this Court cannot disregard the rule of construction of contracts often restated by it, that where an ambiguity exists, a contract will be most strongly construed against the one who prepared it.’ Kelley Construction Co., Inc. v. Washington Suburban Sanitary Com., 247 Md. 241, 250 ; Hughes v. Pioneer, 230 Md. 36, 38 ; Ebert v. Millers Fire Ins. Co., 220 Md. 602, 611 ; Cadem v. Nanna, 243 Md. 536, 544 . This rule is particularly applicable to insurance contracts. Although this is not an insurance contract, it is a contract drawn by an insurance company; and there is a reasonable inference that they were familiar with that rule of law. “Another reason for my holding on this point is that Manufacturers knew that, if this commitment were accepted and if it were followed by a construction mortgage loan so that the ²²² project would go forward, St. Paul would expend large sums of money in reliance upon commitment, and also knew of the possibility, at least, that exactly what did occur, might occur. “Finally, the construction placed upon this contract by the actions of the parties.

When September 7, 1965, arrived, what did Manufacturers do? Did it say, stop, you have not met the date specified in the last paragraph? No, it not only did not say stop, it gave a six months extension — six months additional life to the agreement. So that it is clear not only that time was not of the essence, but that the parties did not consider it to be. “There are two Maryland cases which I have found that deal generally with this subject, and which throw some light upon it.

The first of these is Scarlett v. Stein, 40 Md. 512, 525-526 . There, the Court said: ‘Parties may, no doubt, make time an essential part of a contract, and in such cases, the failure by one of. the parties to perform his part of the obligation within the time prescribed, discharges the other from all liability under the contract. Whether time is to be considered as of the essence of the contract, must, of course, depend upon the intention of the parties. When this intention is expressed in clear and unambiguous terms, the contract must speak for itself, and the liability of the parties must be determined by the plain and obvious meaning of the language used.

If, however, this intention is not expressed in clear and direct terms, courts may look to the acts and conduct of the parties, in order to find out the meaning which they themselves have put upon the contract.’ And that is why I have emphasized the factual phase of this problem, because from such facts one can ascertain that the in ²²³ tention of the parties was that time was not of the essence. Also bearing on this subject is Kasten Constr. Co., Inc. v. Maple Ridge Constr. Co., Inc., 245 Md. 373, 377 .

There, the Court said: Tn a case involving specific performance, where the intention of the parties is always the controlling factor, the general rule is that time is not of the essence of the contract of sale and purchase of land unless a contrary purpose is discovered by its terms or is indicated by the circumstances and object of its execution and the conduct of the parties. * * * Ordinarily, however, time is held to be of the essence only when it is clear that the parties have expressly so stipulated or their intention is inferable from the circumstances of the transaction, the conduct of the parties or the purpose for which the sale was made.’, citing a long list of Maryland cases. “Now, as I said once before, we come to the nitty gritty. I have tried to sift from my recollection of the declaration, from all of the facts and from argument of counsel, what I consider to be the questions which I have to consider and decide. They are as follows, without comment, in the first instance: “First, the contention that Weaver and/or (I hate that expression but it applies here) Manufacturers alleged delay in approving the plans and specifications constituted negligence so far as Weaver and/or Manufacturers is concerned. Subsidiary to that question, even if one or both were negligent, was such negligence the proximate cause of any loss or damage sustained by St. Paul? “Second, the contention that Weaver was negligent in its failure to procure a commitment for a construction mortgage loan. ²²⁴ “Third, the contention that Weaver’s failure to button up Manufacturers’ offer of a construction mortgage loan commitment constituted either a breach of contract or negligence on the part of Weaver. “Fourth, whether by virtue of some act, or failure to act, Weaver has forfeited its right to retain the $48,000 fee paid it for obtaining the permanent mortgage loan commitment. “Fifth, whether Manufacturers’ cancellation of the permanent mortgage loan commitment constituted a breach of contract on its part. “First.

A great deal of the testimony before me and many of the exhibits are related to the question of delay, vel non, in the approval of the plans and specifications. * * * [E]ven if there were negligence it was not the proximate cause of any damage which has been sustained by St. Paul. “Second. It is contended that Weaver was negligent in its efforts to procure a commitment for a construction mortgage loan. At this point, I’m not going to consider the question of Manufacturers’ offer. * * * I cannot find from the evidence that St. Paul has met the burden of showing that Weaver was negligent in its failure to procure a commitment for a construction mortgage loan. And once again, I’m not referring to Manufacturers’ offer. “Third.

We come to the allegation that Weaver was negligent in its failure to button up Manufacturers’ offer of a construction mortgage loan commitment. If we bear in mind the authorities which I cited at the beginning of this opinion concerning the responsibility of an agent, particularly his responsibility to make full disclosure to the principal, what Weaver did in this case becomes of major significance. ²²⁵ This is not a case of mere failure to disclose. Weaver knowingly made a misstatement of fact. On October 10, 1963, Williams told Tinley that he accepted Manufacturers’ offer of a construction mortgage loan commitment and that Tinley should close it immediately.

Tinley’s response was that the offer was no longer open, that it had not been accepted promptly enough. And yet the evidence is clear beyond a doubt that the offer was still open on that date (and remained open, as a matter of fact, down to the very day that the Chemical construction mortgage loan was buttoned up) and that Weaver knew this. This was a clear breach of a duty which Weaver owed St. Paul, and I so hold. “Fourth. Is Weaver liable for return of the $48,000 fee which it was paid for obtaining the permanent mortgage loan commitment?

You will recall that in one or two of the authorities to which I referred in the beginning of the opinion, it was stated that for breach of duty an agent could lose a fee otherwise coming to him unless it had been earned. This poses a problem in this case because St. Paul agreed to pay Weaver $48,000 for obtaining a permanent mortgage loan commitment, and another $48,000 for obtaining a construction mortgage loan commitment. Weaver did obtain the