Storch v. Ricker

BISHOP, Judge. On November 4, 1982, the Circuit Court for Prince George’s County entered judgment in favor of plaintiff/appellee, Thomas B. Ricker, a licensed Maryland real estate broker, against Hannah Storch for breach of contract to pay brokerage commissions. It also entered judgment against her brother, Eleazer Hirmes, for tortious interference with that contract. Storch and Hirmes were held liable for $63,113.00 and $5,000.00, respectively, and have appealed.

Ricker has cross-appealed. 1 ⁶⁸⁷ I. This case involves contracts for the sale of land from its original owner, Mrs. Storch, to an intermediate purchaser, the Rozansky and Kay Construction Company, who later contracted to sell the land to the ultimate purchaser, the KRB Development Company. Ricker was the seller’s real estate broker in each contract. As Mrs. Storch’s broker, he procured Rozansky and Kay as a purchaser. Later, as Rozansky and Kay’s broker, he procured KRB as a purchaser.

The gravamen of Ricker’s claim is that Storch, with her brother’s assistance, sold land to (1) Rozansky and Kay and (2) directly to KRB, without paying him brokerage commissions to which he was entitled. A. After her husband died on February 3, 1972, Hannah Storch acquired his undeveloped commercial property in an area known as Lanham-Seabrook in Prince George’s County, Maryland. A tract of approximately 140 acres, zoned for family lots and townhouses, is referred to as the Storch property. Mrs. Storch retained an active role in her own business affairs, but authorized her brother, Eleazer Hirmes, to represent her in the disposition of the Storch property.

Hirmes had provided his sister with business advice in the past. On May 6, 1976, Mrs. Storch signed a real estate listing agreement for the Storch property with Thomas B. Ricker. As a result of Ricker’s efforts, Rozansky and Kay Construction Company entered into a residential land purchase agreement (First Contract) with Storch on August 2, 1976, in which it agreed to purchase the property for 2.2 million dollars. The contract provided for settlement on parcels of the property after certain contingencies, “. . . but in no event later than August 1, 1979, on which date, if Purchaser is not then in default, either party to this Agreement may declare same to have been terminated and the deposit shall be released and returned to Purchaser.” This contract provided that Storch would pay Ricker “a Brokerage of 7% of ⁶⁸⁸ the purchase price in cash at the time of each settlement as settlements take place in accordance with this Agreement.” The contract was assignable.

Shortly after entering into the First Contract, Rozansky and Kay requested that Ricker find a buyer to whom the company could resell the Storch Property. As a result of Ricker’s efforts Rozansky and Kay entered into a Second Contract on November 9, 1976, in which it agreed to sell the Storch Property to KRB Development, Inc., for 2.5 million dollars. This resale price was three hundred thousand dollars more than Rozansky and Kay had agreed to pay Storch for the property. The Second Contract excused Rozansky and Kay Construction Company’s performance if title to the Storch Property was withheld for any reason under the First Contract.

The Second Contract also provided that Rozansky and Kay would pay Ricker a six percent brokerage commission at each settlement. The resale of the land — known as “flipping — apparently displeased Storch and her brother, Hirmes, for at least two reasons. First, it gave Ricker an additional brokerage commission for obtaining a higher price than he obtained for Storch. Second, all settlements under the First Contract had to be completed by August 1, 1979, whereas the termination date of the Second Contract was December 31, 1980.

Storch continually claimed that the Rozansky and Kay Construction Company was violating the First Contract by delaying settlements until parcels of the Storch property could simultaneously be transferred to KRB. All five of the conveyances made before the termination date under the First Contract were directly from Storch to KRB, with Rozansky and Kay receiving the difference between the price it was paying to Storch and the price it was receiving from KRB, and with Ricker receiving commissions from both sellers, as if two separate sales were occurring. Ricker received a six percent commission from Rozansky and Kay, and a seven percent commission from Storch until the November 14, 1978, settlement at which Storch failed to pay Ricker his commission of $2,464.00. ⁶⁸⁹ After the November 14 settlement, Ricker’s dual commissions and the enhanced purchase price being paid to Rozansky and Kay exacerbated their already acrimonious relationship with Storch. On December 13,1978, Rozansky and Kay Construction Company filed suit against Storch and Hirmes in the Circuit Court for Prince George’s County, charging them with conspiring to oust Rozansky and Kay from its middleman position in order to sell the land directly to KRB Development Company.

In the event of an amicable settlement of the dispute under the two contracts, Rozansky and Kay could have benefited by recovering its $50,000 deposit and by possibly avoiding exposure to an additional $50,000 in liquidated damages and a possible loss of approximately $35,000 in escrow funds under the First Contract; it could also have avoided exposure to a possible multi-million dollar damage claim by KRB for its failure to settle under the terms of the Second Contract. On August 2, 1979, Storch notified Rozansky and Kay in writing that she was exercising her right to terminate the First Contract as of August 1, 1979. Settlement negotiations ensued involving Storch, Rozansky and Kay, and KRB. Although Ricker tried to insert himself into the settlement negotiations through George A. Brugger, (attorney for Rozansky and Kay and a member of the firm that also represented Ricker) Storch’s attorney refused to permit his involvement.

The negotiations led to a Third Contract of September 12, 1979, among the three parties. It provided that Storch would sell the rest of the property to KRB. The Third Contract also recited the existence of the First Contract and the Second Contract, and that the second depended for its performance upon the first. It further pointed out that Storch had “taken action to terminate the First Contract”; referred to the pending litigation regarding both contracts; and concluded in the recital the desires of the parties to settle all their differences and provide for the purchase of ⁶⁹⁰ the balance of the Storch Property.

In the Third Contract the parties agreed that the First Contract and the Second Contract “shall be null and void” provided that the parties performed under the Third Contract. The operative provision as to Rozansky and Kay provided: “3. R & K hereby relinquishes any rights it may have under the First Contract or the Second Contract, to any deposits or other monies relating thereto and, in general, releases Storch and KRB from any and all claims and demands whatsoever arising out of or relating to the First Contract and the Second Contract. The relationship of seller and purchaser, as respects the Property, shall be solely between Storch as seller and KRB as purchaser.

KRB hereby releases Storch and R & K, and Storch hereby releases R & K and KRB in the same manner and to the same extent as set forth above. It is agreed that Law No. 74,484 in the Circuit Court of Prince Georges County, Maryland, shall be forthwith dismissed with prejudice.” The Third Contract continues: “4. KRB agrees to buy from Storch, and Storch agrees to sell to KRB the Property for the price and on the terms and conditions hereinafter stated. In addition, Storch grants to KRB and KRB accepts from Storch the sole and exclusive option to purchase the school site, or so much thereof as is available, as hereinafter stated.” With reference to Ricker, Paragraph 10 of the Third Contract provides: “The parties acknowledge that Thomas B. Ricker, and corporations with which he is affiliated, may assert claims for commissions under the First Contract, the Second Contract, or otherwise.

It is acknowledged that KRB is not assuming the responsibility for such commissions, if due or found to be due. It is agreed that if suit be brought by Ricker or his affiliates against KRB then, to the extent such defense may be conducted without an irreconcilable conflict of interest, Storch shall request her ⁶⁹¹ counsel (if KRB shall desire to utilize Storch’s counsel) to defend KRB without charge to KRB.” The parties thus put an end to the First and Second Contracts, under which appellee, Ricker, was entitled to commissions. In place of these two contracts, they substituted the Third Contract, which Ricker had not brokered, and under which he was not entitled to commissions. B. Faced with a loss of expected commissions, Ricker filed a four-count declaration on November 8, 1979, in the Circuit Court for Prince George’s County against KRB Development, Inc., KRB Development Company, Rozansky and Kay Construction Company (all Maryland corporations), Hannah Storch and Eleazer Hirmes.

Michael T. Rose, President of KRB, testified that Rozansky and Kay had tied their settlements with Storch under the First Contract to their simultaneous settlements with KRB under the Second Contract. Rose pointed out that neither he nor KRB did anything to prevent Rozansky and Kay from settling with Storch under the First Contract, and that he had no conversations with Storch or Hirmes contemplating termination of the First Contract. On the contrary, Rose testified that he did not want the First Contract terminated, but rather wanted Rozansky and Kay to settle with Storch. The attorney for Rozansky and Kay wanted KRB to settle under the Second Contract before August 1979, but KRB refused to do so because it was not required to settle until December 31, 1980.

Rose explicitly denied that either he or his attorney was involved in any settlement discussion before August 1979. The attorney for Rozansky and Kay, George Brugger, testified that on June 27, 1979, he learned from KRB’s attorney that Hirmes, Hannah Storch’s brother, wanted Rozansky and Kay to buy the land on August 2; that Hirmes wanted to pay no further commissions to Ricker; and that if Rozansky and Kay did not ⁶⁹² purchase the balance of the property by August 2, KRB would deal with Storch directly. Since the circuit court attached great evidential weight to Storch’s letter of August 2, 1979, terminating her First Contract with Rozansky and Kay, we set it out in its entirety: Dear Mr. Kay: Your attention is directed to that certain Residential Land Purchase Agreement of August 2, 1976 between Mrs. Hannah Storch, a client of this firm, and your corporation. Among other provisions, Section 6.Q. of said Agreement clearly states that ‘[t]ime is of the essence regarding all terms and conditions of this Agreement.’ Additionally, the second paragraph of Section 3.A. of said Agreement, after setting forth the settlement schedule required of Purchaser, recites that no settlements may occur ‘later than August 1, 1979, on which date, if Purchaser is not then in default, either party to this Agreement may declare same to have been terminated and the Deposit shall be released and returned to Purchaser.’ Section 3.G. of the Agreement sets forth the amount of liquidated damages which are to be received by the Seller in the event of a Purchaser’s default.

Rozansky & Kay Construction Company has previously instituted litigation in the Circuit Court for Prince George’s County against Mrs. Hannah Storch and Mr. Eleazer Hirmes as Defendants; said litigation having been docketed as Law No. 74,484. One of the averments in said litigation is the claim that Mrs. Storch is in default by virtue of an alleged breach of said Agreement. Although this litigation is not at issue as of the date of this writing, your counsel has previously been advised by the undersigned that Mrs. Storch fully intends to assert as a defense, among such other defenses available to her, the fact that the Purchaser designated in said aforementioned ⁶⁹³ Residential Land Purchase Agreement has been in continuing default in the terms and conditions thereof since at least August 31, 1978. As a matter of fact, numerous prior communications have been issued by this office advising your counsel of the fact that in the opinion of the Seller, said Agreement has been and still is in default.

Undoubtedly, the Court will ultimately decide whether or not there was a default by the Purchaser. For this reason, I deem it irrelevant to reiterate your corporation’s default at this time. The Court will ultimately order either Mrs. Storch to release and return the deposit or your corporation will be obligated to pay the sum of $100,000 as liquidated damages. “In any event, however, you should be advised that by and pursuant to the provisions of the Residential Land Purchase Agreement, aforestated, Mrs. Hannah Storch, in the exercise of her rights thereunder, has declared said Contract to be terminated as of Midnight, August 1, 1979.” The court found that although there was a right to terminate the First Contract on August 1, 1979, the above letter did not terminate the contract but “says ‘we terminate’, and then in the next paragraph says, ‘no, we really don’t terminate.’ We are holding you to the contract. We want damages and we want what in effect is recision.” We do not agree with the trial court’s interpretation of the termination letter.

The second paragraph of Section 3 A of the First Contract gave the right to terminate the contract on August 1, 1979, to either party “if the Purchaser is not then in default” and further in that event the purchaser’s deposit would be'returned. That provision addressed itself to the failure, through no fault of either of the parties, of the contingencies set out in Section 4 of the contract. This is made clear when the foregoing language contained in Section 3 A is read in conjunction with the language in 4 E: “E. Remedies of Purchaser. If any condition in this Paragraph 4 is not satisfied, Purchaser shall have the right (to be exercised not later than the time scheduled for ⁶⁹⁴ settlement) either (i) notwithstanding such fact to proceed to settlement or (ii) to terminate this Agreement and recover the Deposit, whereupon all parties shall be released from any further liability or obligation hereunder. ...” Conversely 3 G. provides: “Purchaser’s Default.

If Purchaser shall, at any time, fail to proceed to a settlement as set forth herein, even though all of the contingencies stated in Para. 4 have been satisfied, Seller shall receive the sum of One Hundred Thousand Dollars ($100,000.00) as liquidated damages, upon payment of which, this Agreement shall terminate and the parties hereto released from any further liability or obligation to each other. Said $100,000.00 in liquidated damages to be paid as follows: the sum of Fifty Thousand Dollars ($50,000.00) then being held in escrow shall be released from escrow and paid to Seller, and furthermore, Purchaser shall pay an additional sum of Fifty Thousand Dollars ($50,000.00) directly to seller. . . . ” We conclude that the letter of August 2nd was an attempt on the part of Storch, through counsel, to cover the pertinent sections of the contract, i.e., Sections 3 A, 3 G and 4 E. In its opinion the court went on to find that termination “didn’t happen in this case because the parties . . . kept right on dealing.” While it is accurate that Storch and Rozansky and Kay did continue to deal after the August 2nd letter, that dealing culminated in the Third Contract which, in its effect, released Rozansky and Kay from its responsibility to Storch under the First Contract and from its responsibility to KRB under the Second Contract. The Third Contract ultimately resulted in a deal between Storch and KRB, the two parties between whom there had been no privity of contract. The “dealing” to which the court referred was the concluding stage of the negotiations that had begun some months before in efforts to settle the law suit between Rozansky and Kay and Storch under the First Contract, and ⁶⁹⁵ other serious problems between Rozansky and Kay and KRB under the Second Contract.

In addition to finding that the First Contract was not terminated on August 1, 1979, the court found that there were legitimate differences among the parties to the first two contracts; that the litigation was not a sham, the purpose of which was to prevent Ricker from collecting his commissions, but that ultimately the dealings of the parties were handled in such a way as to circumvent the paying of a commission to Ricker. The court found that the parties settled knowing that “Ricker had intervened and was claiming his commission;” that the meeting of August 9, 1979, which ultimately resulted in the Third Contract, was motivated by Ricker’s intervention and that the settlement thwarted Ricker’s “having his day in court.” The court thereafter concluded that the parties “acted in concert in an attempt to thwart Mr. Ricker and his organization from collecting their justly earned commissions. . . ”. The trial court found that the meeting among the parties held on August 9, 1979, at the Sheraton Hotel in Lanham was triggered by Ricker’s Motion to Intervene, which was mailed to counsel on August 7th and filed on August 8,1979. The court attached significance to its finding of fact that the parties settled knowing that Ricker “had intervened and was claiming his commission,” and that the subsequent dismissal of the court action prevented Ricker’s “having his day in court.” Finally, the court concluded that the “parties vendor purchasers” (sic) to the First and Second Contract “acted in concert in an attempt to thwart Mr. Ricker and his organization from collecting their justly earned commissions.” The court concluded that “there was a