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

¹⁷⁵ MURPHY, J. The ease at bar presents the question of whether the seller of real property is entitled to refuse to pay an agreed upon fee to the broker who represented the seller, on the ground that the broker was a “dual agent.” In the Circuit Court for Baltimore City, W.C. Pinkard & Co., Inc. (“Colliers Pinkard”), Respondent, filed a Complaint in which it asserted that Wilkens Square, LLLP and Stone and Associates, Inc., Petitioners, had breached their agreement to pay the “Advisory Fee” that Respondent earned while acting as Petitioners’ broker in the sale of Petitioners’ real property located at 300 West Pratt Street in Baltimore. Petitioners then filed a three count Counterclaim in which they asserted that, among other things, “[Respondent] materially breached the Listing Agreement by failing to disclose to [Petitioners] that it had previously entered into the Buyer’s Agency Agreement with [Charles McCann Investments (CMC), the purchaser] and was acting as a dual agent for both [the purchaser] and Wilkens Square.” At the conclusion of a jury trial, the jury awarded $226,321.67 in damages to Respondent, and rejected Petitioners’ counterclaim. In Wilkens Square, LLLP, et al. v. W.C. Pinkard & Co., Inc. t/a Colliers Pinkard, 189 Md.App. 256 , 984 A.2d 329 (2009), the judgments entered on those verdicts were affirmed by the Court of Special Appeals. Petitioners then filed a petition for writ of certiorari, in which they requested that this Court answer three questions: (1) Is it a “dual agency” where a broker provides “real estate brokerage services” as a paid consultant to a real estate investor seeking to purchase commercial real estate in a market and simultaneously represents the owner of a commercial real estate for sale in that market requiring disclosure to the seller?

(2) Does the principal who was kept ignorant of a dual agency bears the burden of proving the dual agency prejudiced it? (3) Does the fiduciary duty that a real estate broker owes to a principal include any obligation to disclose relationships ¹⁷⁶ with other principals it represents in separate but related matters? We granted the petition. 412 Md. 689 , 990 A.2d 1046 (2010). For the reasons that follow, we agree with the Court of Special Appeals that (1) “it is questionable whether there was any legally sufficient evidence of dual agency in this case; and if there was any at all, the jury [was entitled to decide] as a matter of fact that a dual agency did not exist,” and (2) “[t]here simply was no evidence of any other ‘material fact,’ i.e., a fact that reasonably would have had an impact one way or the other upon [Petitioners’] decision to sell the property to CMC, that [Respondent] had a duty to disclose, but did not.” 189 Md.App. at 281 , 984 A.2d at 344 .

We shall therefore affirm the judgment of that Court. Background The opinion of the Court of Special Appeals includes the following summary of material facts: Colliers Pinkard is a commercial real estate broker in Baltimore City____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 ¹⁷⁷ 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, 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 ¹⁷⁸ 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, 200[5]. 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 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. ¹⁷⁹ 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.” The second round of bidding was held on February 23, 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, 200[6], 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. ¹⁸⁰ 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 (i.e., 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 [April 28, 2006]. 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 place on June 14, 2006.

Thereafter, Wilkens failed to pay Colliers Pinkard’s commission, notwithstanding demand. 189 Md.App. at 260-65 , 984 A.2d at 332-34 . What the parties and the Court of Special Appeals refer to as the “Brokerage Agreement” between CMC and Respondent is an “Acquisition Consulting Proposal” that Respondent submitted to CMC, which was “Approved by” CMC on April 6, 2005. This agreement, which we shall also refer to as the Brokerage Agreement, was signed by Philip C. Iglehart and Dennis P. Malone on behalf of Respondent, and by Carl P. McCann on behalf of CMC. Before the Brokerage Agreement expired on December 31, 2005, there were three communications between Respondent and CMC that pertained to 300 West Pratt Street.

Mr. Iglehart testified that, on December 7, 2005, after taking CMC representatives through the World Trade Center, he and Mr. ¹⁸¹ Malone suggested that the CMC representatives “look at 201 North Charles Street[,] which we were going to be bringing to the market ..., and 300 West Pratt Street which we were, in fact, somewhat reluctant about because they had made it pretty clear for a long period of time that their minimum threshold from an efficiency point of view, spending all the time and the money to coming into the United States, that their minimum valuation for a property was more than $20 million.” In a December 13, 2005 e-mail to Respondent, CMC advised that it had “an active interest in pursuing Word Trade Center, Padonia Village, and 300 West Pratt Street.” On December 15, 2005, Respondent mailed to CMC a copy of the Executive Summary for 300 West Pratt Street. Every person who signed the Brokerage Agreement testified that it did not apply to properties for which Respondent was the listing agent. Mr. Iglehart testified as follows: Q: And what kinds of services were you providing CMC under this arrangement? A: The arrangement was very specifically stated that it would be two pronged effort.

And the two pronged effort would be that we would approach owners of real estate who had not put their property into the market and ask them whether or not they would be interested in selling their real estate. If they were interested in selling real estate, we would take the next step with that group. That’s the first prong. The second prong was to approach and introduce CMC to brokers other than Colliers Pinkard who were in the market, formally, representing an owner and selling a piece of real estate.

Q: During this period of time of 2004 and 2005, what, if any understanding existed with respect to the services that you would be rendering to CMC with respect to the property for which you, Colliers Pinkard, was the listing agent? A: It was very clear. First off, the industry is absolutely clear as to when you’ve got an exclusive agent—agency and you’re representing an owner, it’s the fiduciary responsibility. It’s the exclusive agency responsibility.

You’re an ¹⁸² advocate in every way, every sense of the word to that client. And it was made very clear to CMC multiple times over the relationship. Mr. Malone testified as follows: Q: And during 2004, and 2005, did you ever discuss with [CMC] properties on which Colliers Pinkard was the listing agent? A: Yes.

Q: When you were doing so, discussing with [CMC] properties on which Colliers Pinkard was the listing agent, were you acting as the agent of [CMC], the seller, or both? A: The seller Q: And did you express that to [CMC’s] representatives? A: Yes. Mr. Donnelly testified as follows: Q: At the time [the brokerage agreement] was executed, did you know that Colliers Pinkard was acting as the listing [agent] for various sellers of commercial real estate?

A: Yes. Q: And under this agreement, was Colliers Pinkard going to be acting as CMC’s agent, with respect to the property that Colliers Pinkard was also the listing agent. A: No, we were—we understood from the beginning that any property that Colliers had, that they were representing the seller. Q: Under this agreement, was Colliers Pinkard going to be acting as CMC’s agent' when it was also acting as agent for the seller, with respect to a particular piece of property?

A: We always understood that if Colliers was selling the property, they were not representing us. The jurors, who were entitled to believe all, part, or none of the above quoted testimony, returned their verdict on a “special verdict” sheet that contains the following questions and answers: ¹⁸³ 1. Do you find that Colliers Pinkard has proven by a preponderance of the evidence, that Wilkens Square and Stone & Associates breached their obligations under the Listing Agreement by failing to pay the commission due to Colliers Pinkard Please Answer Yes or No: YES 2. Do you find, that Wilkens Square and Stone & Associates have proven by a preponderance of the evidence that Colliers Pinkard engaged in a dual agency by representing both Wilkens Square & Associates and Charles McCann Investments with respect to the sale of 300 West Pratt Street?

Please Answer Yes or No: NO 3. If you answered “Yes” to Question 2, do you find that Colliers Pinkard has proven by preponderance of the evidence that Wilkens Square and Stone & Associates had full knowledge of this dual agency or other material information and that the waived any breach of contract resulting from Colliers Pinkard failure to disclose? Please Answer Yes or No: [blank] 4. If you answered “Yes” to Question 1 and either “No” to Question 2 or “Yes” to Question 3, what amount of damages, if any, do you award Colliers Pinkard? $226,321.67 5.

Do you find, that Wilkens Square and Stone & Associates have proven by a preponderance of the evidence that Colliers Pinkard breached its promises arising out of the listing agreement by failing to properly market 300 West Pratt Street or by failing to properly support its underwriting assumptions Please Answer Yes or No: NO If you answered “NO” please skip the question below and go directly to Question No. 7 6. If you answered “Yes” to Question 5, what amount of damages, if any, do you award Wilkens Square and Stone & Associates? ¹⁸⁴ Please state a dollar amount $ [blank] 7. Do you find by a preponderance of the evidence that Colliers Pinkard breached the fiduciary duties that it owed to Wilkens Square and Stone & Associates? Please Answer Yes or No: NO 8.

If your answer to question 7 was “yes”, what amount of damages, if any, do you award to Wilkens Square and Stone & Associates? Please state a dollar amount $ [blank] 9. Do you find by a preponderance of the evidence that Colliers Pinkard entered into a conspiracy with Charles McCann investments? Please Answer Yes or No: NO 10.

If your answer to question 9 was “yes”, what amount of damages, if any, did Wilkens Square and Stone & Associates suffer as a result of that conspiracy? Please state a dollar amount $ [blank] 11. Do you find by clear and convincing evidence that Colliers Pinkard breached the fiduciary duties that it owed to Wilkens Square and Stone &