Atlantic Richfield Co. v. Sybert

• Citation: 295 Md. 347,456 A.2d 20
• Decision Date: 07 February 1983
• Docket Number: No. 31,31
• Parties: ATLANTIC RICHFIELD COMPANY v. Cornelius F. SYBERT, Jr. et al.
• Court: Maryland Court of Appeals

Page 347

295 Md. 347

456 A.2d 20

ATLANTIC RICHFIELD COMPANY v. Cornelius F. SYBERT, Jr. et al.

No. 31.

Court of Appeals of Maryland.

Feb. 7, 1983.

John F. Wilson, III Philadelphia, Pa., and by Charles M. Preston, Westminster, for appellant.

Thomas A. Garland, Ellicott City, Md., for appellee.

Argued before MURPHY, C.J., SMITH, COLE, DAVIDSON, RODOWSKY and COUCH, JJ.

DAVIDSON, Judge.

This case presents three questions. The first question concerns the circumstances under which a contract between an attorney and a client for the payment of compensation may be enforced by an attorney who simultaneously represents another client with adverse interests. The second question concerns the circumstances under which an attorney, who is not licensed as a real estate broker, may recover a commission on the sale of real estate, notwithstanding the prohibitions contained in Maryland Code (1957, 1979 Repl.Vol.), Art. 56, § 217(a) and § 228. The third question concerns the burden of proof applicable when a trial court determines the existence and terms of a contract allegedly made between an attorney and a client at a time when the attorney/client relationship existed.

The respondents, Cornelius F. Sybert, Jr. (Sybert) and Lewis S. Nippard (Nippard), are attorneys and partners in the law firm of Sybert, Sybert, and Nippard (law firm). In 1972, the petitioner, Atlantic Richfield Company (ARCO), a Pennsylvania corporation, otherwise represented by counsel, retained Sybert for the purpose of obtaining a special exception on property located in Howard County (Schultz property) to be used as a pipeline terminal facility. Sybert's main contact at ARCO was George Tracy (Tracy), who was then ARCO's Real Estate Manager, Special Projects. Tracy was then close to 65 years old and had been employed at ARCO for close to 25 years, during which time he had been actively engaged in the acquisition and sale of properties for ARCO.

Although neither Sybert, Nippard, nor any other member of the law firm was a licensed real estate broker, in September 1974, Citadel Corporation (Citadel), otherwise represented by counsel, retained Nippard for the purpose of locating a suitable property and obtaining the necessary zoning clearances for the construction of a petroleum storage facility. At that time, Sybert was still representing ARCO in the then ongoing proceedings to obtain a special exception on the Schultz property that was ultimately obtained in 1975. See Gowl v. Atlantic Richfield Co., 27 Md.App. 410, 341 A.2d 832 (1975).

In the fall of 1974, Tracy informed Sybert that ARCO was having second thoughts about developing the Schultz property. Sybert, aware of Citadel's interest in purchasing such a property, agreed with Nippard that he would contact Tracy to learn if ARCO would be interested in selling the Schultz property. Sybert informed Tracy that the law firm had another client who might purchase the Schultz property, and Tracy indicated that he was interested in pursuing the matter. Nippard then informed Roger Keohneke (Keohneke), a vice president of Citadel, that his law firm represented another client who might have a suitable piece of property for sale.

While the appeal of ARCO's requested special exception was still pending, Sybert and Nippard arranged for a meeting between Tracy and Keohneke to take place on 16 October 1974 at the law firm's offices. Before that meeting, Sybert and Nippard met with Tracy. At that time, Tracy indicated that in addition to the Schultz property, ARCO might be interested in selling two other properties, its Key Highway Terminal, located in Baltimore, and its Belvoir Terminal, located in Virginia. Additionally, Tracy, Sybert, and Nippard agreed that ARCO would compensate Sybert and Nippard in the event of a sale of its properties to the law firm's other client, Citadel.

Subsequently, there was a meeting between Sybert, Nippard, Tracy, and Keohneke. Keohneke expressed an interest in purchasing one of the three properties. At that time, Tracy and Keohneke were aware that ARCO and Citadel were each represented by members of the same law firm. However, no explanation of the implication or possible effect of such common representation was offered. Moreover, no explicit consent to such dual representation was given. Commissions were not discussed at the meeting.

On 29 October 1974, Tracy wrote to Sybert that ARCO would not sell the Schultz property but might sell the Key Highway or Belvoir terminals. Tracy indicated that if Citadel was interested in purchasing either property, it should contact the manager of ARCO's Commercial Properties Department. After Sybert gave this information to Nippard, Nippard called the manager, who sent him a brochure describing the two properties. Again, commissions were not discussed. On 24 January 1975, Nippard forwarded the brochure to Keohneke. Thereafter, neither Sybert nor Nippard had any contact with Citadel or ARCO concerning the sale of any of these properties. Rather, Alan O. Keiler, counsel for Citadel, communicated directly with the manager of ARCO's Commercial Properties Department, and they negotiated for the sale of the Belvoir Terminal.

On 30 May 1975, ARCO sold the Belvoir Terminal to Belvoir Terminal Corporation, an entity formed by the principals of Citadel, for $3,125,000. Upon learning of the sale, Sybert repeatedly demanded a commission from ARCO. The demands were rejected.

On 20 August 1976, Sybert and Nippard filed a declaration in the Circuit Court for Howard County alleging that ARCO owed them a commission on the sale of the Belvoir Terminal. On 4 November 1977, the case was removed to the Circuit Court for Carroll County.

On 20 February 1980, ARCO filed a motion to dismiss. That motion was premised in part on an allegation that, because Sybert and Nippard were not licensed as real estate brokers, they were prohibited from recovering a commission on the sale. On 21 February 1980, the trial court denied that motion.

At a bench trial, most of the relevant facts were undisputed. Tracy, Sybert, and Nippard each testified, in essence, that Tracy had agreed that ARCO would compensate Sybert and Nippard in the event of a sale of ARCO's properties to Citadel. The major area of disagreement centered upon the nature and amount of the compensation to be paid.

According to Tracy, he never agreed to pay Sybert or Nippard a commission for any possible sale of ARCO's properties. However, he failed to offer any affirmative evidence to show the nature and amount of the compensation that he had agreed to pay. Indeed, according to Tracy:

"My only recollection of any discussion of compensation was to the effect that, since Mr. Sybert was our attorney--was the company's attorney in another matter, and the matters were sort of interrelated--that, if anything came of it, that something would have to be worked out about how to be compensated." (Emphasis added.)

According to Sybert and Nippard, Tracy had agreed that ARCO would pay a "usual" or "normal" commission in the event that a sale of the Schultz property or any other property was arranged as a result of the meeting. According to one expert in the field of real estate, ten percent of the purchase price constituted a usual or normal commission. According to another such expert, there was no "usual" or "normal" commission for the sale of improved industrial property. However, there was a "fair and reasonable" commission that would be "six percent of the first $500,000 of the sale price and three percent of the balance."

On 1 April 1981, the trial court, in a written opinion in which the standard of proof applied was not articulated, determined that Tracy had real or apparent authority to bind ARCO to a contract to pay a commission to Sybert and Nippard; that Tracy agreed that ARCO would pay a usual commission in the event of a sale; that a usual commission was ten percent of the sale price; and that a valid contract had been created. Moreover, after determining that Tracy was informed of the law firm's dual role as attorneys for both ARCO and Citadel, the trial court determined that ARCO's agreement to pay Sybert and Nippard a commission was enforceable. On 6 April 1981, the trial court entered a final judgment in favor of Sybert and Nippard.

ARCO appealed to the Court of Special Appeals. Although the trial court had not articulated the standard of proof it had applied, the Court of Special Appeals concluded, among other things, that in the absence of an allegation of fraud or undue influence, proof by a preponderance of the evidence, rather than by clear and convincing evidence, was the appropriate standard to be applied in determining the existence of a contract allegedly made between an attorney and a client at a time when the attorney/client relationship existed. The Court of Special Appeals affirmed the judgment of the trial court. Atlantic Richfield Co. v. Sybert, 51 Md.App. 74, 441 A.2d 1079 (1982).

ARCO filed a petition for a writ of certiorari that we granted. We shall affirm the judgment of the Court of Special Appeals. However, as we shall later explain, the record in this case makes it unnecessary to determine the applicable standard of proof.

I

ARCO contends that its agreement to pay Sybert and Nippard compensation was null and void because of their alleged conflict of interests arising from their simultaneous representation of clients with adverse interests. It points out that Sybert and Nippard, members of the same law firm, simultaneously represented ARCO and Citadel, the seller and buyer, in a potential real estate transaction. It asserts that Sybert and Nippard failed to disclose fully "the potential pitfalls of their dual representation," and also "failed to obtain any informed consent to such dual representation." Because we do not agree with these assertions, we find that the compensation agreement was enforceable.

This Court has repeatedly recognized that ordinarily an attorney...