Chesley v. Goldstein & Baron, Chartered, 773

Citation806 A.2d 296,145 Md. App. 605
Decision Date30 August 2002
Docket NumberNo. 773,773
CourtCourt of Special Appeals of Maryland

Cynthia E. Young (David G. Whitworth, Jr. and Whitworth, Smith & Trunnell, P.A., Crofton, on the brief), Annapolis, for appellant.

Leonard R. Goldstein, Rockville, for appellees.

Argued before DEBORAH S. EYLER, SHARER and RAYMOND G. THIEME, JR. (Ret'd, Specially Assigned), JJ. DEBORAH S. EYLER, Judge.

The Circuit Court for Prince George's County granted summary judgment to Leonard R. Goldstein, Esquire, and his law firm, Goldstein & Baron, Chartered ("G & B"), the appellees, on claims asserted against them by William F. Chesley, the appellant. On appeal, Chesley poses one question, which we have rephrased: Did the circuit court err in ruling that his claims were barred, as a matter of law, by claim or issue preclusion or by the law of the case doctrine?


This case has a long and convoluted history. In 1986, Dr. Ervin Rose decided to sell commercial property ("the Property") he owned in Seabrook, Prince George's County. He entered into a listing agreement with Coldwell Banker Residential Real Estate, Inc. ("Coldwell Banker"), and one of its agents, C. Michael Parrish, that would give Coldwell Banker a 10% brokerage fee if the Property were sold by March 18, 1987. Coldwell Banker and Parrish made efforts to market the Property, including distributing information about it. Chesley, a successful real estate agent and developer in the Seabrook area, was one of the people who received the marketing information.

The Property did not sell by March 18, 1987. Thereafter, Rose and Coldwell Banker allegedly entered into an agreement modifying the original listing agreement and extending its expiration date.

Before the new expiration date, and before the Property sold, Rose died. Rose's sister, Rosalind Marsh, was appointed personal representative of his estate ("the Estate"). She retained Goldstein and G & B to represent her in her role as personal representative.

Coldwell Banker and Marsh did not enter into a new listing agreement for the Property, and Marsh did not sign the listing agreement her brother had entered into with Coldwell Banker. Parrish continued marketing the Property for sale, however. His efforts resulted in two offers to purchase the Property, which were communicated to Marsh; she did not respond to them.

In the meantime, Chesley began negotiating with Goldstein, on behalf of Marsh and the Estate, to purchase the Property. When the negotiations culminated in an oral purchase agreement, Goldstein notified Parrish that Marsh had sold the Property. On April 11, 1988, Chesley and Marsh reduced their oral agreement to a written contract of sale.

The contract of sale was drafted by Chesley and his lawyer, except for an indemnification clause, which was drafted by Goldstein. In that clause, at paragraph 12 of the contract, the parties agreed that the Estate would not pay any real estate commission in connection with the sale, and payment of any such commission, if required, would be Chesley's sole responsibility. They further agreed that in any claim or action brought by an agent or broker to recover a commission, Chesley would hold harmless, defend, and indemnify the Estate, not only for any commission owed by also for all related costs, including attorney's fees incurred in defense.

The closing on the sale of the Property to Chesley took place on July 8, 1988. On September 1, 1988, in the Circuit Court for Prince George's County, Coldwell Banker sued the Estate on the listing agreement, claiming it was owed a 10% commission on the sale. Pursuant to the indemnification clause in the contract of sale, Chesley retained G & B to defend the Estate in the Coldwell Banker suit, and agreed to pay the firm's fees.

Coldwell Banker's case against the Estate went to trial. At the close of Coldwell Banker's case-in-chief, the court granted judgment in favor of the Estate. The evidence at trial included proof that the alleged modification agreement was a forgery.

Coldwell Banker took an appeal, and on October 1, 1992, in an unreported opinion, this Court reversed the judgment and remanded the case for a new trial. After remand, the case was settled. Thereafter, Chesley made some payments toward G & B's attorney's fees in the case, but then stopped paying and refused to pay the balance.

On August 4, 1995, in the Circuit Court for Prince George's County, G & B sued Chesley for the fees it claimed he owed for its defense of the Estate in the Coldwell Banker suit, under the indemnification clause of the contract of sale (the "original claim"). G & B did not demand a jury trial. Chesley was served with the complaint, and on November 2, 1995, filed an answer. He did not file a demand for a jury trial then, or within 15 days.

On December 5, 1995, Chesley filed a "Counterclaim And Third Party Claim," against G & B (as counterdefendant) and Goldstein (as third-party defendant). At the same time, he filed a demand for jury trial, as "Defendant, Counter Plaintiff, and Third Party Plaintiff." Chesley's counterclaim and third-party claim sounded in fraud, negligent misrepresentation, and legal malpractice.

Chesley's fraud claim was two-pronged. First, he alleged that, during the purchase negotiations, Goldstein told him the Estate would not agree to pay any commission or brokerage fee on the sale. In justifiable reliance on that representation, he agreed to include the indemnification clause, undertaking liability for any commission or fee and for the cost of defense in any case for recovery of a commission or fee. Chesley then learned, after the sale, that Goldstein had petitioned and ultimately had received in the Orphans' Court for Prince George's County a $100,000 commission on the sale. Chesley alleged that that award was a commission on the sale of the Property, and Goldstein's having sought it showed that his statement during the purchase negotiations was a fraudulent misrepresentation communicated to induce Chesley to agree to the indemnification clause.

Second, Chesley alleged that because Goldstein and G & B had represented him in the Coldwell Banker suit, from October of 1988, to the Spring of 1993, Goldstein owed him a fiduciary duty to make disclosures about the Property honestly and fully; and that, in violation of that duty, Goldstein had fraudulently concealed Coldwell Banker's involvement in bringing potential purchasers to the Property. Chesley further alleged that he had been induced to enter into the contract of sale, including the indemnification clause, in justifiable reliance on that allegedly fraudulent misrepresentation/omission.

In his fraud claim, Chesley sought compensatory damages of $150,000, and punitive damages of $1,500,000.

The factual allegations supporting Chesley's negligent misrepresentation claim were the same as those supporting his fraud claim, with one addition. Chesley alleged that it was a conflict of interest for Goldstein and G & B to represent him and the Estate; that they had had a duty to disclose the conflict, but failed to do so; and that while representing him they had been acting out of a primary allegiance to others, namely the Estate and Marsh. Chesley asserted that he had justifiably relied on Goldstein's and G & B's negligent representations and omissions and as a consequence had entered into the contract of sale, including the indemnification clause, without consulting independent counsel. He sought $150,000 in compensatory damages.

Finally, in his legal malpractice claim, Chesley alleged that Goldstein and G & B had breached their attorney-client relationship with him by 1) failing to disclose "the true nature of the facts and circumstances related to" Coldwell Banker's claim against the Estate; 2) failing to advise that because they were in a conflict of interest position, due to their representation of the Estate, he should engage independent legal counsel; and 3) failing to disclose that Goldstein had received a $100,000 "commission" (i.e., the orphans' court award) from the Estate for the sale of the Property, contrary to the purpose of the indemnity clause. He further alleged that Goldstein and G & B had charged attorney's fees "which were induced by the fraud and/or negligent misrepresentation by Leonard R. Goldstein to Mr. Chesley, and were otherwise not necessary, fair and reasonable." He claimed the same injury as in the first two counts, and sought $150,000 in compensatory damages.

Goldstein and G & B responded to the counterclaim and third-party claim with a joint motion to dismiss or for summary judgment, on the ground of limitations, which Chesley opposed. The court granted the joint motion. The court then held a pretrial conference and scheduled a trial date for the original claim. The Pre-Trial Conference Report is marked with a check next to "yes" for whether there was a jury demand.

After being postponed and rescheduled, trial commenced on December 7, 1998. That day, when it became apparent that the case was scheduled to be tried to the court, not by jury, Chesley's lawyer argued that even though summary judgment had been granted on the counterclaim and third-party claim, Chesley still was entitled to a jury trial on the original claim. The court disagreed and the case proceeded to a court trial.

Trial lasted three days. At the close of the evidence and after hearing argument, the court ruled in G & B's favor and awarded $57,767.81 in attorney's fees and interest. The court made detailed factual findings, which we quote in relevant part:

The testimony before me, and I find as a fact, is that [the indemnification clause in the April 11, 1988 contract of sale] was the subject of negotiations between Mr. Chesley and Mr. Goldstein on behalf of the estate. I find that the negotiations were arms length negotiations, and further that the estate

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