Holzman v. Fiola Blum, Inc.

Decision Date02 April 1999
Docket NumberNo. 570,570
Citation726 A.2d 818,125 Md. App. 602
PartiesAllen Bruce HOLZMAN, et ux. v. FIOLA BLUM, INC.
CourtCourt of Special Appeals of Maryland

Allan P. Feigelson, Laurel, for Appellant.

Gerson B. Mehlman (Francis X. Leary and Mehlman & Greenblatt, L.L.C., on the brief), Baltimore, for Appellees.

Argued before HARRELL, HOLLANDER, and BYRNES, JJ.

HOLLANDER, Judge.

This appeal arises from an action instituted in the Circuit Court for Baltimore County by Fiola Blum, Inc. ("Blum" or the "Broker"), appellee and cross-appellant, against Allen Bruce Holzman and his wife, Terry Lee Holzman (the "Holzmans" or the "Sellers"), appellants and cross-appellees. Blum sought to recover a real estate broker's commission allegedly owed pursuant to a Listing Agreement executed by the parties for the sale of appellants' residence. Following a bench trial, the court found appellants liable to the Broker for a commission of $37,600. In addition, the court awarded the Broker the sum of $12,408 as a reasonable attorney's fee. Thereafter, pursuant to appellants' motion to alter or amend the judgment, the court reduced the judgment of $50,008.00 by the amount of $21,500, which was equal to the commission paid to the Broker in connection with the subsequent sale of the residence.

On appeal, appellants present the following questions for our review, which we have reformulated:

I. Did the circuit court err in determining that, pursuant to the Agreement, Blum was entitled to a commission even though a contract of sale for the Property did not proceed to settlement?

II. Did the circuit court err in concluding that the contract of sale for the Property, which provided that the buyers were to pay the Broker's commission, did not relieve the Sellers of their obligation to Blum under the Agreement?

III. Did the circuit court err in concluding that the Broker was entitled to a commission when Blum breached its fiduciary duty and the Broker's conduct constituted estoppel?

IV. Did the circuit court err in its award of attorney's fees?

Pertinent to its cross-appeal, Blum asks the following question, which we have also rephrased:

Did the trial court err in reducing the judgment by the amount of the commission earned by the Broker in connection with a subsequent contract of sale for the Property?

For the reasons that follow, we perceive error only with respect to the amount of the attorney's fees awarded to Blum. Therefore, we shall affirm the portion of the judgment concerning the commission, vacate the portion of the judgment regarding the attorney's fees, and remand for further proceedings.

Factual Summary

Appellants were the owners of 12500 Fellowship Court (the "Property"), an exclusive, three-story brick house containing eight bedrooms, nine full baths, three half baths, and a pool, located on several acres of land in an area of Baltimore County known as Worthington Club Estates. Appellants were interested in selling the Property and, on January 23, 1996, they met with Hope Berman, a real estate agent associated with Blum, and Harry Blum, the president of appellee, at the Property. During that visit, appellee, by Mr. Blum, and appellants executed a Listing Agreement (the "Agreement") for the residence, which was effective for a six month term.

The Agreement, a standard form "Exclusive Right to Sell Listing Contract," provided, in pertinent part:

Owner agrees to pay Broker a fee for services rendered in the amount set forth below (the "fee") (a) if during the term of this Contract, or any extension, thereof: (i) Broker produces a customer to purchase the Property at the listing price and on the terms herein or at such other price or on such other terms as shall be accepted by Owner or agreed upon in writing between Owner and Broker (the "authorized price"); or (ii) Owner shall enter into a written agreement to sell, exchange, convey or transfer the Property to any person or entity whether such person or entity shall have been procured by the Broker, by Owner, or by any other person or entity, in which event Owner shall within seventy-two (72) hours thereof furnish Broker a copy of such written agreement procured by anyone other than Broker; or (b) if, during the period of six (6) months following the expiration or termination of this Contract, Owner shall enter into a written agreement to sell, exchange, convey, or transfer the Property to any person or entity which, with the knowledge of Owner or any agent of Owner, inspected or made inquiry about the Property or negotiated to purchase or exchange the Property during the term of this Contract or extension thereof ... except that Owner shall have no obligation to pay the fee to Broker if the Property is sold or exchanged by any other licensed real estate broker following the expiration of this Contract or any extension thereof or following the termination of this Contract as herein provided, unless such termination by Owner shall have been made for the purpose of avoiding the obligation of the Owner to pay the fee to Broker.

* * *

If Broker prevails in any court action brought to obtain payment of the fee, Broker shall also be entitled to recover in such action his/her reasonable attorney's fees and court costs.

The Property was initially listed for sale on January 23, 1996 at a price of $1.95 million. Later, the price was reduced to $1,650,000. Under the Agreement, the Broker's commission was to be calculated in the following way: six percent of the first $300,000 of the selling price, five percent of the second $300,000, and four percent of the balance.

On July 19, 1996, the Agreement was extended until September 30, 1996; the Holzmans, Mr. Blum, and Ms. Berman signed the extension. On August 9, 1996, appellants received a letter of intent from Gil Stern and his wife, Ellen (the "Sterns"), offering $600,000 for the Property. On August 12, 1996, Heros Noravian and his wife, Dr. Emma Zargarian (the "Noravians" or the "Buyers"), submitted a letter of intent, offering a purchase price of $715,000 and a deposit of $10,000.

Appellants negotiated with the Noravians, and appellee then prepared the residential contract of sale ("the Noravian contract"). On August 20, 1996, while appellants "were still in negotiation with the Noravians", the Broker presented appellants with a revised offer from the Sterns in the amount of $850,000. Nevertheless, appellants and the Buyers executed the Noravian contract on August 25, 1996. The record does not reflect why the Holzmans proceeded with the Noravian contract after they learned of the increased offer from the Sterns.

On the advice of their attorney, appellants included a default provision in the Noravian contract which provided that, in the event of a breach by the Sellers, the Buyers' sole remedy would be limited to a refund of their deposit. The Noravian contract also contained a handwritten addendum (the "Addendum") that provided, in part: "2. It is understood and agreed that buyers are to pay [the Broker's] real estate commission fee and also pay all settlement fees...." Because there was no cooperating agent for the Noravian contract, any commission due under the Agreement was payable solely to appellee.

After appellants executed the Noravian contract, they decided to pursue the Sterns' offer, relying on the advice of counsel. Accordingly, on August 26, 1996, just one day after signing the Noravian contract, appellants canceled it. On the same day, appellants notified appellee and Ms. Berman of their decision, via a signed facsimile letter, which provided:

We have decided not to make full settlement of our contract with Emma Zargarian and Hero[s] Noravian (the Buyers) accepted on August 25, 1996, based on the Default paragraph (paragraph number 17).

Please inform the Buyers of this action immediately.

Please return any and all deposit money which the Buyers have forwarded.
The Holzmans also sent a second letter to appellee, by facsimile, on August 26, 1996, which stated:
Base[d] on our letter of August 26, 1996, faxed to you today, please inform all Brokers and Agents that 12500 Fellowship Court is available for sale.

Ms. Berman continued to list the Property for sale after receiving the facsimile letters from appellants.

Thereafter, on October 16, 1996, appellants executed a contract of sale with the Sterns (the "Stern contract"). It contained a provision to pay the real estate commissions to appellee and Long & Foster, the Sterns' real estate agent, calculated in accordance with the terms of the Agreement. Consequently, the commission due under the Stern contract was to be divided evenly between appellee and Long & Foster.

On November 7, 1996, appellee filed a complaint in the circuit court, claiming that appellants defaulted on the Noravian contract and owed the Broker the real estate commission. Appellee alleged that appellants had "failed to perform their obligation to pay the... fee," and breached "the Exclusive Right to Sell listing contract and/or the Residential Contract of Sale."

The matter proceeded to trial on February 10, 1998. At the proceeding, appellee presented testimony from Ms. Berman and Mr. Blum.

Ms. Berman testified that, based on the sales price of $715,000 for the Noravian contract, the Broker's commission was $37,600. She conceded that she "never told" the Holzmans that they were liable for payment of the commission under the Noravian contract. Furthermore, she testified that, in her seven years as a real estate agent, she had never received a commission for a sale that did not proceed to settlement.

In his testimony, Mr. Blum acknowledged:

I had a fiduciary relationship to the Holzmans, my listing contract until that time ran out, I was working for them. We would bring all the offers regardless of whether there was a contract in force or not, we would bring all letters of intent regardless of whether there is a contract or not. That's our job. And my relationship was to do the
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