Wilkens Square, LLLP v. W.C. Pinkard & Co.

DEBORAH S. EYLER, J. In the Circuit Court for Baltimore City, W.C. Pinkard & Co., Inc. (“Colliers Pinkard”), the appellee, sued Wilkens Square, LLLP, and Stone Associates, Inc. (together “Wilkens”), the appellants, for breach of contract, to recover an unpaid broker’s fee in connection with the sale of an office building by Wilkens to Charles McCann Investments (“CMC”). Wilkens counterclaimed against Colliers Pinkard on several legal theories. The case was tried to a jury, which found in favor of Colliers Pinkard on the breach of contract claim, awarding it $226,321.67 in damages, and found against Wilkens on its counterclaims. On appeal, Wilkens poses several questions for review, which we have consolidated and rephrased as follows: I. Did the trial court err by not ruling, as a matter of law, that Colliers Pinkard was in a dual agency with Wilkens and CMC during times relevant to this case?

II

Did the trial court err by not ruling, as a matter of law, that Colliers Pinkard’s relationship with CMC was a material fact that Colliers Pinkard had a duty to disclose to Wilkens at the outset of their business relationship? ²⁶⁰ III. Did the trial court err by not giving requested jury instructions and by giving the jury a special verdict sheet that was incorrect? 1 For the following reasons, we shall affirm the judgment entered on the jury’s verdict. FACTS AND PROCEEDINGS Because two of the issues presented raise, in effect, legal sufficiency questions, we shall summarize the facts adduced at trial in the light most favorable to Colliers Pinkard, as the prevailing party below. To the extent the third issue requires us to view any of the facts through a different lens, we shall do so in our discussion of that issue.

The business entities and their representatives were, at the relevant times, as follows. Colliers Pinkard is a commercial ²⁶¹ real estate broker in Baltimore City. Ordinarily, it represents sellers of commercial properties. The Colliers Pinkard principals primarily involved in the transactions at issue here were Philip Iglehart and Dennis Malone.

CMC is an investment company, based in Ireland, that in 2004 began looking to purchase commercial property in the Baltimore City/Washington, D.C. area. Its local representative and lawyer is Patrick Donnelly. Wilkens and its principal, Daniel Stone, were members of a limited partnership that owned 300 W. Pratt Street, an office building in Baltimore City (“the Pratt Street Property” or “the Property”). In early 2005, Colliers Pinkard and CMC entered into a Brokerage Agreement for Colliers Pinkard to represent CMC’s interests in the purchase of commercial property in the Baltimore City/Washington, D.C. area.

Under the Brokerage Agreement, CMC paid Colliers Pinkard a monthly fee (at first, $2,500, and later, $5,000) to identify potential investment properties in the $20 million dollar and above price range. According to the involved principals of Colliers Pinkard and CMC, the Brokerage Agreement applied only to potential investment properties for which Colliers Pinkard was not the listing agent. The Brokerage Agreement provided that, in addition to the monthly retainer, CMC would pay Colliers Pinkard a commission on any sale to CMC that resulted from Colliers Pinkard’s efforts. The agreement further provided that, for any given sale, if Colliers Pinkard were able to persuade the property seller to pay the commission in an amount equal to or greater than “the suggested CMC discounted fee,” Colliers Pinkard would “not seek remuneration from CMC.” In other words, if Colliers Pinkard could obtain its commission (or more) from the seller of commercial property to CMC, CMC would not be obligated to pay a commission to Colliers Pinkard.

By August 2005, the business relationship between Colliers Pinkard and CMC had not proven fruitful and the entities decided to bring it to an end. They agreed that the Brokerage Agreement would remain in effect until the end of 2005, ²⁶² during which time CMC would continue paying Colliers Pinkard the monthly fee; and then the Brokerage Agreement would expire. Indeed, that is what happened, and the Brokerage Agreement came to an end as of December 31, 2005. In the meantime, Wilkens, through Stone, decided to put the Pratt Street Property up for sale.

After a few months of marketing the Property on his own, without success, Stone approached Colliers Pinkard about serving as Wilkens’s broker in the sale of the Property. Colliers Pinkard agreed and, on November 18, 2005, the entities entered into a Listing Agreement for the sale of the Property. In early December 2005, representatives of CMC traveled to the United States to inspect potential commercial investment properties. On December 7, 2005, the CMC representatives met with Iglehart and Malone of Colliers Pinkard to view a number of properties in the Baltimore area.

The Pratt Street Property was not one of them. At one point during the visit, Colliers Pinkard representatives told the CMC representatives they might want to look at the Pratt Street Property, even though it was priced below their target value for potential investment properties. The CMC representatives then visited the Property, but not in the company of anyone from Colliers Pinkard. Thereafter, the CMC representatives informed the Colliers Pinkard representatives, by e-mail, that they would be interested in receiving additional information about the Property.

The Pratt Street Property was to be sold by means of a “controlled auction,” which is a common practice in commercial real estate sales. As Wilkens’s broker under the Listing Agreement, Colliers Pinkard made the arrangements for the auction. It prepared an Executive Summary for the Property, from which potential buyers would learn basic relevant information. That summary was publicly distributed on December 15, 2006.

If a potential buyer expressed interest in the Property, Colliers Pinkard would send it a confidentiality agreement to execute. It was Colliers Pinkard’s practice that, upon receipt of a signed confidentiality agreement from a ²⁶³ potential buyer, it would send the potential buyer an Offering Memorandum, which was a detailed disclosure about the Property. Because the CMC representatives had expressed interest in the Pratt Street Property, Colliers Pinkard added CMC to the list of potential buyers for the Property and sent it a copy of the Executive Summary. In early January 2006, after the Executive Summary had been mailed out to all potential buyers, Colliers Pinkard began contacting the various entities that had responded to the mailing to obtain signed confidentiality agreements before mailing the Offering Memorandum.

On January 18, 2006, CMC executed a confidentiality agreement, which Colliers Pinkard received. Soon thereafter, CMC was mailed the Offering Memorandum. CMC was one of 48 entities to receive the Offering Memorandum. The first round of bids on the Pratt Street Property took place on February 3, 2006.

CMC was one of five bidders, and its bid of $12.5 million was the second highest. On February 6, 2006, Malone of Colliers Pinkard met with Stone of Wilkens to discuss the bids that had come in from each potential buyer. At that meeting, in response to an inquiry, Malone told Stone about the Brokerage Agreement between Colliers Pinkard and CMC. Specifically, Malone explained that Colliers Pinkard had contracted with CMC to help it locate potential investment properties to purchase, and that the contract had expired as of the end of 2005.

Stone memorialized that conversation in a note to himself, in which he also wrote that Wilkens should proceed with the second round of bidding, “get [the] CMC final proposal,” and then inquire more about the business relationship between CMC and Colliers Pinkard. He further noted that if, at that time, he thought the prior contract between CMC and Colliers Pinkard posed a problem, he would have to decide whether to go forward with a sale to CMC or to go forward with a sale to another bidder; and if he thought there was no problem, he would “proceed.” ²⁶⁴ The second round of bidding was held on February 28, 2006. The bids were submitted on invitation by Wilkens, through Colliers Pinkard, as its broker. Invitations were extended only to three entities, one of which was CMC.

Stone’s decision to include CMC as one of the second round bidders was made after the February 6, 2006 meeting. As it turned out, one of the three invited bidders dropped out before the second bidding round, leaving only two entities (including CMC) to participate in that round. Both participants submitted increased bid amounts. CMC’s bid, for $13,175,000, was the high bid, by $725,000.

In late February 2006, after the second round bids were received, Stone instructed Colliers Pinkard that, from that point on, he would handle the negotiations with CMC on his own. On March 1, 2007, Stone met with representatives of CMC and tried to persuade them to increase their bid. They refused and the sales price remained $13,175,000. Stone informed representatives of CMC that, before a sales contract would be executed, he wanted to see a copy of the Brokerage Agreement between Colliers Pinkard and CMC.

He also asked CMC to pay Colliers Pinkard’s commission. CMC refused to pay the commission, on the ground that Colliers Pinkard had not acted and was not acting as its broker in the transaction in question (ie., the sale of the Pratt Street Property); to the contrary, Colliers Pinkard was acting as Wilkens’s broker in that transaction. CMC representatives confirmed for Stone that its Brokerage Agreement with Colliers Pinkard had expired on December 31, 2005. On April 27, 2006, CMC e-mailed Stone a copy of the expired Brokerage Agreement.

The final contract of sale for the Property by Wilkens to CMC was executed the next day. Stone had read the Brokerage Agreement before then. On May 24, 2006, in anticipation of the settlement on the sale of the Pratt Street Property, Colliers Pinkard sent Wilkens an invoice for $226,321.67, its commission as calculated under the terms of the Listing Agreement. Closing took ²⁶⁵ place on June 14, 2006. 2 Thereafter, Wilkens failed to pay Colliers Pinkard’s commission, notwithstanding demand.

On July 3, 2006, in the Circuit Court for Baltimore City, Colliers Pinkard filed a one-count breach of contract action against Wilkens, seeking payment of its commission. Wilkens filed a counterclaim for breach of contract and negligence. It later amended its counterclaim to add claims for intentional concealment of material facts and conspiracy by a fiduciary. The case was tried to a jury from October 24, 2007, to November 2, 2007.

It was submitted to the jury for decision by way of a special verdict sheet. The jurors returned their verdict, finding 1) that Colliers Pinkard proved by a preponderance of the evidence that Wilkens had breached the Listing Agreement by failing to pay the commission; 2) that Wilkens had not proved “by a preponderance of the evidence that Colliers Pinkard engaged in a dual agency by representing both [Wilkens and CMC in the sale of the Property]”; and 3) that Colliers Pinkard was entitled to $226,321.67 in damages for the breach of contract. The jurors returned verdicts against Wilkens on each of its counterclaims, determining that Colliers Pinkard did not breach its duties to Wilkens arising out of the Listing Agreement by failing to properly market the Property or to properly support its underwriting assumptions; that Colliers Pinkard did not breach a fiduciary duty to Wilkens; and that Colliers Pinkard did not enter into a conspiracy with CMC. The court entered judgment on the jury verdict.

Wilkens filed a timely motion for judgment notwithstanding the verdict or for new trial, which was denied. This appeal followed. We shall include additional facts as pertinent to our discussion of the issues. ²⁶⁶ DISCUSSION I. Wilkens’s Affirmative Defense of Dual Agency At trial, Wilkens did not contest Colliers Pinkard’s evidence on its claim for breach of the Listing Agreement. Rather, Wilkens raised the affirmative defense of dual agency.

It sought to prove that Colliers Pinkard acted as a real estate broker for it (Wilkens) and as a real estate consultant for CMC and therefore, under Maryland law, and also under a term peculiar to the Brokerage Agreement, Colliers Pinkard forfeited its contractual right to a broker’s fee under the Listing Agreement. At the close of all the evidence, Wilkens moved for judgment on that ground. The court denied the motion. Wilkens challenges that ruling on appeal.

It acknowledges that it bore the burden of proving dual agency. It argues that it not only met its burden, it adduced such powerful evidence as to compel a finding, as a matter of law, that Colliers Pinkard was in a dual agency relationship with it and with CMC from November 18, 2005, until December 31, 2005. For that reason, the court should have ruled that Colliers Pinkard forfeited its contractual right to a broker’s commission on the sale of the Pratt Street Property, and not submitted that issue to the jury for decision. In essence, Wilkens maintains that, on the evidence about dual agency and the reasonable inferences it supported, reasoning minds only could find that Colliers Pinkard occupied a prohibited dual agency role vis-avis the Pratt Street Property.

Colliers Pinkard counters that the court did not err by denying Wilkens’s motion for judgment and sending the issue of dual agency to the jury for decision; and, if anything, the evidence was legally insufficient to support a rational finding that there was a dual agency relationship in this case. 3 Col ²⁶⁷ liers Pinkard maintains that, to prove a dual agency that would trigger a forfeiture of its commission on the sale of the Pratt Street Property, Wilkens had to show that Colliers Pinkard was representing Wilkens and CMC in the same transaction (the sale of the Pratt Street Property) at the same time. It argues that, because the evidence before the jury would permit (if not require) a reasonable finding that it was not acting on behalf of Wilkens and CMC in the same transaction, the trial court would have erred by granting Wilkens’s motion for judgment at the end of the case. Colliers Pinkard also maintains, more generally, that prohibited dual agencies that result in the forfeiture of a broker’s commission do not arise merely because the broker at one time represented both parties in question, not in connection with the particular transaction, or represented both of the parties but at different times. We review a trial court’s decision to deny a motion for judgment at the conclusion of the evidence de novo.

Lowery v. Smithsburg Emergency Med. Serv., 173 Md.App. 662, 682-83 , 920 A.2d 546 (2007). As noted above, Wilkens bore the burden of proving its dual agency defense. See Wells Fargo Home Mortg., Inc. v. Neal, 398 Md. 705 , 730 n. 12, 922 A.2d 538 (2007) (“As with all affirmative defenses, [the defendant] bears the burden of proof.”).

Thus, on appeal, we must determine whether the evidence adduced at trial, viewed in a light most favorable to Colliers Pinkard as the prevailing party, was such as to compel a factual finding of dual agency, i.e., that reasonable jurors only could find that a dual agency existed. Cavacos v. Sarwar, 313 Md. 248, 258-59 , 545 A.2d 46 (1988); McQuay v. Schertle, 126 Md.App. 556, 569 , 730 A.2d 714 (1999). See also Md. Rule 2-519(b). If reasonable minds could find one way or the other, the trial court’s decision to deny Wilkens’s motion for judgment was not in error.

A real estate broker stands in a fiduciary relationship to his client. Silverman v. Kogok, 239 Md. 71, 76 , 210 A.2d 375 (1965) (citing Coppage v. Howard, 127 Md. 512, 521 , 96 A. 642 (1916), and Restatement (Second) Of Agency § 13)). See ²⁶⁸ also Yerkie v. Salisbury, 264 Md. 598, 608 , 287 A.2d 498 (1972) (observing that “when a seller employs a broker to sell his property he bargains for the disinterested skill, diligence and zeal of the broker for his own exclusive benefit”); Sellner v. Moore, 251 Md. 391, 398 , 247 A.2d 523 (1968). Absent the knowing consent of the parties to a real estate transaction, the broker’s fiduciary relationship with his client precludes a “dual agency,” that is, the same broker representing both sides in the transaction.

This is so because, ordinarily, the interests of the parties on the two sides of such a transaction are diametrically opposed. “The principle ... is that a broker cannot act for both a seller and purchaser without the full knowledge and consent of each, because their interests are in conflict. That is undeniably the law----” Blake v. Stump, 73 Md. 160, 172 , 20 A. 788 (1890), quoted in Slagle v. Russell, 114 Md. 418, 427 , 80 A. 164 (1911). See also Raisin v. Clark, 41 Md. 158, 160 (1874) (“[T]he law will not permit an agent of the vendor whilst that employment continues, to assume the essentially inconsistent and repugnant relation of agent for the purchaser.”); Schwartze v. Yearly, 31 Md. 270, 277-78 (1869) (“An agent, as a general rule, will not be permitted to act for both sides.”). In Silverman, supra, the Court commented upon the absolute conflict that exists when a broker represents both parties to the sale of real estate: A broker is a fiduciary.

Because the interests of prospective seller and buyer as to price are necessarily adverse, the law will not permit an agent of the vendor, while the employment continues, to assume “the essentially inconsistent and repugnant relation of agent for the purchaser.” A fortiori, the principle applies where the agent himself is the purchaser [unless the agreement allows it]. 239 Md. at 76 , 210 A.2d 375 (citations omitted). Thus, the positions of the opposing parties to a real estate sale are so inherently in conflict that, in the absence of consent, the broker’s fiduciary duty always will be violated. It was for this reason that by common law (and later in the case of residen ²⁶⁹ tial real estate sales, by statute), Maryland came to recognize the principle that a broker cannot profit from a transaction in which he represents opposing parties. 4 It is inevitable in that circumstance that the dual agency relationship will cause harm to one, if not both, parties; and a fiduciary who has harmed his principal must not benefit from doing so. Accordingly, a broker in a dual agency that is not consented to by both principals cannot recover a commission from either party to the transaction, as any commission paid would amount to a benefit conferred on a fiduciary who violated his duty in the transaction.

See, e.g., Holzman v. Fiola Blum, Inc., 125 Md.App. 602, 628 , 726 A.2d 818 (1999) (“[I]f a broker breaches his or her fiduciary duty, acts in bad faith, or in another opprobrious manner, he or she may forfeit the right to compensation.”) Because the inherent conflict that gives rise to this strict rule of forfeiture exists when there is one transaction in which the broker is representing opposing sides, it is not surprising that in all the Maryland cases on the topic, the broker in question was representing the parties on the opposite sides of a particular transaction (or was one of the parties on one side of the transaction while acting as broker for the other party). There are no Maryland dual agency cases that extend the commission forfeiture rule to situations in which a real estate broker has represented two parties at the same time in different transactions or has represented two parties to a transaction at different periods of time. 5 ²⁷¹ Moreover, the holding in Ricker v. Abrams, 263 Md. 509 , 283 A.2d 583 (1971), makes plain that proof of dual agency must consist of evidence that the broker represented the opposite sides to a transaction when the transaction took place. In that case, a broker sued the seller of a package goods store (personalty) for an unpaid commission. The broker had approached the seller to see if she wanted to sell her business, knowing that a client he had represented in the recent sale of a liquor store wanted to go back into that type of business.

The seller said she did and gave the broker information about the terms of the sale she was seeking. The broker then introduced his former client, the buyer, to the seller. The seller and the buyer negotiated on their own. They reached an agreement and closed on the sale of the business without the broker’s knowing.

When the broker found out about the sale, he sued both the seller and the buyer to recover commissions allegedly agreed to. The broker’s position was that he never acted for the buyer, only for the seller; but if he had acted for the buyer, it was with the seller’s consent. The case was tried to a jury. The buyer was granted a directed verdict (now a motion for judgment).

The jury returned a verdict in favor of the broker and against the seller, awarding the broker his commission. On appeal, the seller argued inter alia that the broker had acted as a dual agent and therefore had forfeited any commis ²⁷² sion he might have earned. In affirming the judgment for the broker, the Court of Appeals remarked that the directed verdict in favor of the buyer meant that the “dual agency point made by [the seller] on appeal falls of its own weight.” Id. at 515 , 283 A.2d 583 . Because as a matter of law the broker did not represent the buyer in the transaction at issue, i.e., the one in which the commission was being sought, there could not be a dual agency.

Either the broker had acted only for the seller, and was entitled to the commission, or he had not been acting for either the seller or the buyer, and was not entitled to any commission. It did not matter that the broker formerly had represented the buyer in the recent sale of another similar property. The evidence in the case at bar was undisputed that Colliers Pinkard did not represent CMC in the sale of the Pratt Street Property, on June 14, 2006, and indeed did not represent CMC in any capacity after December 31, 2005. The evidence also was undisputed that Colliers Pinkard in fact represented Wilkens in the sale of the Pratt Street Property, and in the auction process that led to the sale of the Property to CMC.

Under the holding in Ricker , and consistent with all of the Maryland dual agency cases, as a matter of law, Colliers Pinkard was not representing both sides to Pratt Street Property sale when the sale went forward or when the auction that resulted in the sale was held, and therefore was not in a dual agency respecting that transaction. When the auction and sale of the Pratt Street Property took place, Colliers Pinkard was representing one party to the transaction (Wilkens) and not the other (CMC). Under Ricker , there was not a dual agency when the sale took place, when the auction was held, or at any time after December 31, 2005, as a matter of law. The sole evidence at trial that showed that Colliers Pinkard had any business relationship with CMC at the same time it had a business relationship with Wilkens was that, from mid-November, 2005, until December 31, 2005, Colliers Pinkard had a contract (the Brokerage Agreement) with CMC to ²⁷³ render general real estate purchase consulting services and also had a contract (the Listing Agreement) with Wilkens to market the Pratt Street Property for sale.

The mere coexistence of the two contracts did not constitute a dual agency under Maryland law. As we have explained, the dual agency commission forfeiture rule, which is what Wilkens was seeking to have imposed, exists as a disincentive to brokers from engaging in conduct, such as opposite side representation, that, absent consent, plainly is a breach of their fiduciary duties. Here, there was no inherent conflict in Colliers Pinkard’s contracts with the two entities. It could properly perform its obligations under both contracts without necessarily breaching a fiduciary duty to one client or the other.

The only evidence adduced at trial that linked the Colliers Pinkard contracts with CMC and with Wilkens to the Pratt Street Property was that, in mid-December 2005, Colliers Pinkard recommended to CMC that its representatives view the Property, and that, later that same month, in response to CMC’s expressed interest in the Property, Colliers Pinkard, as broker for Wilkens, added CMC to the list of entities to receive the Executive Summary about the Property. Wilkens argues that, by recommending that CMC’s representatives view the Pratt Street Property, even though it was not valued in the $20 million dollar range, Colliers Pinkard was rendering real estate brokerage services to CMC, for a fee, respecting the purchase of the Pratt Street Property, at the same time it was representing Wilkens with respect to the sale of the same Property. Specifically, Wilkens asserts that Colliers Pinkard, by serving as a consultant to CMC with respect to the purchase of the Property, was providing “real estate brokerage services” to CMC as that term is defined by Maryland Code (2004 RepLVol., 2009 Supp.), section 17-101(Z) of the Business Occupations and Professions Article (“BOP”). 6 ²⁷⁴ This argument is flawed in several respects. To start, the representatives of Colliers Pinkard and CMC testified that the Brokerage Agreement did not apply to any transaction in which Colliers Pinkard was the listing agent.

This testimony was uncontroverted, and we must view it in a light most favorable to Colliers Pinkard. Accordingly, Colliers Pinkard’s recommendation that CMC look at the Pratt Street Property did not constitute “serving as a consult [for consideration]” pursuant to BOP section 17-101(7), because it did not fall within the purview of the Brokerage Agreement. Although Wilkens points to Malone’s testimony that Colliers Pinkard understood that the agreement with CMC “was meant to put all properties that we [Colliers Pinkard] were familiar with and thought were good purchases in front of them ... [w]hether we listed them or not,” in the latter portion of that statement, omitted by Wilkens, Malone continues, “Well, then when [the Pratt Street Property] comes along, this is slightly different because we have to represent the seller, so we can’t represent your [CMC’s] interest.” Thus, Malone’s testimony is consistent with the understanding of Colliers Pinkard and CMC that when CMC expressed an interest in a property for which Colliers Pinkard was the listing agent, the Brokerage Agreement did not apply and Colliers Pinkard would act exclusively on behalf of the seller. ²⁷⁵ Moreover, even if Colliers Pinkard’s recommendation that CMC look at the Pratt Street property was made pursuant to the Brokerage Agreement, that action was not sufficient to make Colliers Pinkard a dual agent. As we explained, the dual agency prohibition stems from the inherent conflict between the interests of buyer and seller, such that when the broker acts in accordance with his fiduciary duty to one party he invariably breaches his duty to other.

See, e.g., Silverman, supra, 239 Md.