Greenbelt Homes, Inc. v. Nyman Realty, Inc.

• Decision Date: 04 March 1981
• Docket Number: No. 176,176
• Citation: 426 A.2d 394,48 Md.App. 42
• Parties: , 1981-1 Trade Cases P 63,951 GREENBELT HOMES, INC. v. NYMAN REALTY, INC. et al.
• Court: Court of Special Appeals of Maryland

Page 42

48 Md.App. 42

426 A.2d 394, 1981-1 Trade Cases P 63,951

GREENBELT HOMES, INC. v. NYMAN REALTY, INC. et al.

No. 176.

Court of Special Appeals of Maryland.

March 4, 1981.

Albert Ginsberg, Silver Spring, with whom were Elizabeth H. Farquhar and Schneider & Ginsberg, Silver Spring, on brief, for appellant.

Abraham Chasanow, Greenbelt, with whom was William F. Edwards, Greenbelt, on brief, for appellees.

Argued before MORTON, THOMPSON and MacDANIEL, JJ.

THOMPSON, Judge.

I FACTS

Greenbelt Homes, Inc. (GHI), the appellant and cross-appellee, is a cooperative housing development of some 1600 units located in Greenbelt, Maryland. All but a few of the houses were built by the federal government during the 1930's and 1940's; GHI, which is a non-profit, non-stock Maryland corporation, acquired the property and began operating in 1952. GHI retains legal title to the land and buildings, pays the taxes and insurance, and supplies maintenance and various other services. Funds for these services are obtained through monthly operating payments made by each member-owner. Through a mutual ownership contract, which is similar to a proprietary lease, see, Green v. Greenbelt Homes, 232 Md. 496, 194 A.2d 273 (1963), each member-owner of the cooperative acquires from the corporation a right of perpetual use and enjoyment in his or her house. Under the contract, each household is also entitled to one vote in corporate affairs. GHI calls itself a "conversion" co-op and is said to be unique in that co-op members may sell the interest which they hold in their houses at market value to any buyer whom the co-op will approve for membership. The exercise of this right is not without restriction; e. g., GHI has a right of first refusal on all sales and a member is not permitted to sell his interest at a profit until he has lived in the co-op for at least two years. GHI is also a licensed real estate broker and operates a sales office for the listing and sale of GHI houses.

Nyman Realty, Inc. (Nyman), one of the appellees and cross-appellants, is a real estate agency located in Greenbelt and the successor in interest to Greenbelt Realty Company. Although Nyman bought Greenbelt Realty on January 1, 1977, it continued to operate the business under the name "Greenbelt Realty" until January 1, 1978, when the name was changed to "Nyman." Nyman has six offices in addition to the one located in Greenbelt and is a member of both a national and a county listing organization. It deals in a variety of types of properties, including houses located in the GHI cooperative. At trial, the evidence showed that, at least since the early 1970's, Nyman and its predecessor have each year listed and sold more GHI houses than any other single agency.

Eric Wade Barber and Marshal A. Gielen, two of the appellees and cross-appellants, are real estate agents employed by Nyman and member-owners of GHI. Both earn substantial portions of their income from commissions on the sale of GHI houses. At the time of trial, Barber had contracted to sell his co-op house but had not yet settled; Gielen had listed her house for sale but had not yet obtained a buyer.

A GHI member-owner who wishes to sell his interest in his house can do so in one of three ways: (1) he can act as his own agent; (2) he can list with any licensed real estate agency; or (3) he can list with the sales office operated by GHI. Prior to June 1, 1978, upon completion of a sale, the selling member paid GHI an administrative fee of $150 and an inspection fee of $65. These fees were intended to cover GHI's costs in screening the proposed buyer, educating the buyer concerning his rights and obligations as a GHI member, completing the paperwork required to transfer the interest, and conducting a physical inspection of the house. If the selling member listed and sold his house through the GHI sales office, GHI charged a 51/2% commission, approximately $1100 on the average house, but waived the administrative fee.

On June 1, 1978, a reorganization of the GHI sales service, which had been approved by the GHI Board of Directors on January 12, 1978, became effective. This reorganization, which involved expansion of the sales staff, resulted in a significant change in the fees charged members who sold their co-op houses. The $65 inspection fee, previously charged on all sales, was abolished. The 51/2% commission, previously charged those members who sold through the GHI sales office, was also abolished. The $150 administrative fee, previously charged on all sales but waived where GHI was paid a commission, was increased to $550 and charged to all sellers, regardless of whether or not they used the GHI sales service. The services of the sales staff were made available to all sellers without a separate charge. Testimony at trial indicated that the increased administrative fee was intended to cover the costs of all of the services for which the charges had previously been separate, i. e., screening, educating, completing paperwork, inspecting, and maintaining the sales office. GHI arrived at the figure of $550 by adding the costs of providing the services previously covered by the old administrative and inspection fees to the costs of operating the expanded sales office, a total of approximately $110,000 annually, and dividing that total by the number of houses transferred in an average year, approximately 200. Thus, GHI took two separate operations which, prior to the reorganization, were separately funded; merged them; and began levying a single charge which covered the costs of both operations. The principal economic effect of the reorganization was to compel all sellers to pay to support the office, whereas previously only those sellers who utilized its services had had to pay for its support. This created, and was obviously intended to create, an economic incentive for all selling members to list their houses with the GHI sales office.

II PLEADINGS

On May 24, 1978, one week prior to the effective date of the GHI reorganization, Nyman filed a bill of complaint in the Circuit Court for Prince George's County. The bill of complaint was subsequently amended and Barber and Gielen joined in the action as plaintiffs. As amended, the bill alleged that the combination by GHI of its administrative, inspection, and sales services in a single operation and the levying of a single mandatory charge covering the costs of the combined services violated the Maryland Antitrust Act (the Act), Md.Com.Law Code Ann. §§ 11-201 et seq., and was also ultra vires. Nyman, Barber and Gielen claimed that they had lost listings, sales, and commissions as the result of GHI's combination, because selling members, who were compelled to pay for the GHI sales service whether they used it or not, were choosing to list their co-op houses with GHI, rather than with brokers such as Nyman. Pursuant to §§ 11-209(b)(2) and 11-209(b)(4) of the Act, the amended bill sought an injunction, treble damages, costs, and attorney's fees.

III PROCEEDINGS

At trial, the chancellor found that GHI, by its combination of services and fees, had created a tie-in which was unreasonable per se and thus a violation of § 11-204(a)(1) of the Act. ¹ He also found that the imposition of the $550 administrative fee was ultra vires, although he held that the old administrative and inspection fees totaling $215, which were charged prior to the reorganization, were not. Evidence presented at trial showed that, beginning at least five months prior to the effective date of the GHI reorganization, the number of GHI members listing their co-op houses for sale with Nyman had declined, with a corresponding decline in commissions earned by Nyman and its agents; the chancellor found that this decline had been caused by the loss of goodwill which accompanied Nyman's name change on January 1, 1978 and by a lack of available finance money. The chancellor therefore held that Nyman, Barber, and Gielen had failed to prove that they had lost commissions as a result of the tie-in. Barber, who had contracted to sell his co-op house and who had paid GHI the administrative fee of $550, was found to have suffered damages in the amount of $335, that figure representing the difference between the $550 fee charged and the "justified charges" of $215.

On the basis of these findings, the chancellor issued an order dated January 4, 1980, in which he enjoined GHI from charging its members an administrative fee which combined the costs of its sales service with its administration and inspection costs, from offering its sales service to its member-owners on other than an optional basis, and from subsidizing its real estate sales service with funds derived from any mandatory fees charged member-owners. In his order, the chancellor also awarded Barber damages of $1,005, i. e., three times his actual damages of $335, and ordered GHI to segregate the bookkeeping for its sales service from that of its other operations.

Both sides have appealed the chancellor's order. GHI contends that the chancellor's findings that the imposition of the combined fee was a restraint of trade in violation of § 11-204(a)(1) and also ultra vires are not supported by the evidence. Nyman, Barber, and Gielen assert that the chancellor committed error in refusing to award damages for lost commissions; they argue in addition that the chancellor erred in finding that only a portion of the administrative fee was ultra vires ; and he erred in denying attorney's fees.

IV THE LAW

In interpreting the Maryland Antitrust Act, we are to be guided, but not bound, by the construction given the analogous federal statutes by the federal courts. Md.Com.Law Code Ann. § 11-202(a)(2); Quality Discount Tires v. Firestone Tire, 282 Md. 7, 12, 382 A.2d 867 (1978); Cities Service Oil v. Burch, 29 Md.App. 430, 436, 349 A.2d 279 (1975). The analogue under the federal statutes to § 11-204(a)(1) is Section 1 of the Sherman Act, 15 U.S.C....