Damazo v. Wahby

• Decision Date: 17 November 1970
• Docket Number: No. 98,98
• Citation: 270 A.2d 814,259 Md. 627
• Parties: David S. DAMAZO et al. v. Nimer S. WAHBY et al.
• Court: Maryland Court of Appeals

Page 627

259 Md. 627

270 A.2d 814

David S. DAMAZO et al. v. Nimer S. WAHBY et al.

No. 98.

Court of Appeals of Maryland.

Nov. 17, 1970.

Joseph A. Lynott, Jr., Rockville, for David S. Damazo et al., part of appellants and by Andrew W. Starratt, Jr. (Barbee & Starratt, Rockvill, on the brief), for John L. and Irene Toth, other appellants.

Warren K. Kaplan, Washington, D. C. (David S. Goldberg, Rockville, on the brief), for Nimer S. Wahby, appellee.

James K. Foley, Silver Spring, for Fliegel Properties Management, Inc.

Argued before HAMMOND, C. J., and BARNES, FINAN, SINGLEY and DIGGES, JJ.

HAMMOND, Chief Judge.

An appellee, Wahby, was found to have been the procuring cause of the sale of a high rise apartment building (Edwards Way) situated in Montgomery County. The appellant Damazo was the controlling stockholder and president of Willowbrook Development Company, Inc. (Willowbrook), which held title to Edwards Way. Judge Shearin, sitting without a jury in the Circuit Court for Montgomery County, gave Wahby a judgment for $47,500 (5% of the sales price of $950,000) against Willowbrook and Damazo, and also gave Wahby two judgments against Damazo, John Toth, Irene Toth, his wife, and Robert L. Taylor (who were purchasers), one for tortiously interfering with Wahby's contract right to a commission, for compensatory damages in the sum of $1.00 and for punitive damages in the sum of $5,000 each, and the other for conspiring to deprive Wahby of his commission, in the sum of $1.00 compensatory damages.

Damazo was also the controlling stockholder and president of Vance Properties, Inc. (Vance), a corporation that held title to a garden apartment cluster (Riggs Road) that adjoined Edwards Way. Judge Shearin found the appellee Pinkas Fliegel to have been the procuring cause of the sale of Riggs Road to John and Irene Toth for the price of $770,000 and gave judgment for Fliegel in the sum of $38,500 against Damazo and Vance. Judge Shearin also gave Fliegel two judgments against Damazo, John Toth and Irene Toth, one for tortiously interfering with Fliegel's contract right to his commission in the sum of $1.00 compensatory damages and $5,000 punitive damages, and one for conspiring to deprive Fliegel of his commission in the sum of $1.00 compensatory damages.

Although the testimony was conflicting on many points, there was evidence that permitted Judge Shearin properly to make the findings of fact he made. Fliegel testified that Damazo, president of Willowbrook and Vance, orally employed him in 1966 to sell Riggs Road for $925,000 and Edwards Way for $1,150,000 for an agreed commission of 5%, and never revoked the agency. In January 1967 Mrs. Toth, in response to an advertisement, called Fliegel, who showed her Riggs Road on at least three occasions (in January 1967, the fall of 1967, and in February 1968). Negotiations continued through February 1968. Fliegel introduced Mrs. Toth to Damazo and advised him by letter in March 1967 of her interest in Riggs Road. Mr. Toth, a resident of Falls Church, Virginia, without ever having been told about the properties by his wife, happened, he said, to see Riggs Road and Edwards Way while driving and inquired in December 1967 or January 1968 whether they were for sale. He looked at no other buildings in Maryland. Damazo gave Toth financial data on both properties in January 1968. Thereafter, Toth dealt directly with Damazo and in April 1968 arrived at an oral agreement to buy Riggs Road for $810,000, which was later reduced to $770,000 in a written contract signed by Vance and the Toths on April 30, 1968. The Toths took title in the name of Coronado-Adelphi, Inc. (Coronado), a corporation set up for the purpose. Coronado assumed the first trust, paid $75,000 in cash and gave Vance a second deed of trust in the amount of $128,000. The Toths guaranteed the trusts.

On June 17, 1968, Coronado took title to Edwards Way from Willowbrook for $950,000, giving back a second deed of trust for $192,500. After the sales were consummated, Vance and Willowbrook transferred the second trust notes to Damazo, who owned two-thirds of the stock in each corporation, and Mrs. Damazo, who held one-third.

On March 14, 1968, Wahby, as broker, and Vance and Willowbrook, as owners, executed a thirty-day exclusive agency agreement wherein Wahby promised to list and to try to sell Riggs Road and Edwards Way. The parties agreed, the corporations by Damazo, to extend the agreement on a non-exclusive basis after it expired on April 12. The non-exclusive agency was never revoked. The agreement provided for a commission of 5% on 'the abobve mentioned price, or * * * any other price acceptable * * *.'

On April 21 Wahby advertised a number of properties, including Riggs Road and Edwards Way, in the Washington Post. He received only two or three calls. One was from Toth on April 21 and another from Taylor on April 23. On Sunday, April 21 Toth telephoned Wahby, although he had not called a broker for four or five years. Wahby gave Toth pertinent information about both Riggs Road and Edwards Way, including location, amount of the first trusts and apartment sizes. Toth gave no sign of prior familiarity with either property but asked Wahby to meet him to go over the financial statements. The next day, Monday, Mrs. Toth called to make an appointment. Toth called later the same day to break the engagement, and never called again. For a period of two years in the early 1960s Toth and Taylor had worked side by side at desks eight feet apart as engineers at an engineering company and had visited each other's home. They had renewed their acquaintance in 1965 or 1966. On Tuesday Taylor called Wahby and on April 28 Wahby showed Taylor Riggs Road and Edwards Way.

The next morning Taylor, totally inexperienced in real estate deals and unadvised, told Wahby to draw a contract for Riggs Road for $750,000. When Wahby took Taylor the contract, Taylor told him he had a partner (and on another occasion revealed that the partner resided in Virginia) and retired to call his partner. When he returned, Taylor changed the interest rate on the proposed second trust from 7% to 6% (the rate in the contract Toth signed on April 30). Damazo would not sign for $750,000 and Taylor rejected his counter offer of $780,000; the next day Toth offered Damazo $760,000 and they settled for $770,000. Wahby learned that Toth had bought Riggs Road and called the Toth home. Mrs. Toth told him they were not interested in Riggs Road and later, when advised that Wahby knew they had bought it, said 'talk to our lawyer.' Taylor told Wahby he knew no one named Toth. He told one Kiger, a fellow worker who became an investor in Coronado, that he was first interested in Riggs Road and Edwards Way by Toth.

On May 15, 1968, Coronado was incorporated by Toth, Mrs. Toth and Taylor, who became owners of 90% of its stock. On June 5, 1968, Coronado executed a contract with Willowbrook to buy Edwards Way for $950,000. Taylor provided the $10,000 deposit and the $57,000 cash paid at settlement. His stock purchase in Coronado was contingent on the purchase of Edwards Way being consummated. On June 17, Willowbrook deeded Edwards Way to Coronado. About a year later, Coronado was dissolved, and Edwards Way was transferred to Taylor and his wife (90%) and two investors Taylor had brought in (5% each). Riggs Road went to the Toths.

Judge Shearin did not err in holding that Fliegel was the procuring cause in the case of Riggs Road and in finding, contrary to Fliegel's contention in his cross-appeal, that he was not the procuring cause in the case of Edwards Way. Nor did he err in holding Wahby to have been the procuring cause in the case of Edwards Way. The testimony justified judgments against Vance and Willowbrook for commissions at the rate of 5% of the sales price. Sanders v. Devereux, 231 Md. 224, 189 A.2d 604; Cowal v. Marletta, 216 Md. 222, 139 A.2d 712; Steele v. Seth, 211 Md. 323, 127 A.2d 388; Heslop v. Dieudonne, 209 Md. 201, 120 A.2d 669; Clark v. Banks, 158 Md. 24, 148 A. 238; Zetlin v. Scher, 241 Md. 590, 595, 217 A.2d 266. Also see Leimbach v. Nicholson, 219 Md. 440, 149 A.2d 411.

We are not persuaded that it was either legally permissible or appropriate to hold Damazo personally liable for the commissions. Damazo always used a corporation to hold title to and operate a property he bought. Both Vance and Willowbrook were fully formed and legally existing corporate entities in good standing. Although their capitalizations were small, each corporation owned substantial assets in its own right and each maintained its own financial records. The stock of each was fully issued and separate minutes books were kept. Damazo recognized, respected and used the corporate entities as such. Those who dealt with Damazo knew this and knew that corporations owned the properties. The exclusive listing agreement Wahby obtained was executed for Vance and Willowbrook expressly by Damazo as president and Wahby's subsequent agency was based on an extension of that agreement.

The general rule is that shareholders are not held liable for debts or obligations of the corporation except where it is necessary to prevent fraud or enforce a paramount equity. Brune, Maryland Corporation Law and Practice § 371 (rev. ed. 1953). The fact that Damazo controlled and operated the corporations would not of itself justify piercing the corporate veil or make him liable for that which the corporations owed. Ace Development Co. v Harrison, 196 Md. 357, 367, 76 A.2d 566, 570, held that agents of a corporation are individually liable,

'if they use a corporation for the deliberate purpose of making a contract for it, when at the time they intend to defraud a party thereto, and the contract is merely an avenue on which the fraud operates, * * * (and that) the burden of proof is on the one charging fraud to establish by clear, specific acts, facts that in law constitute fraud.'

See Carozza...