ZANG v. NRT NEW ENGLAND Inc.

• Decision Date: 14 September 2010
• Docket Number: No. 09-P-864.,09-P-864.
• Citation: 77 Mass.App.Ct. 665,933 N.E.2d 694
• Parties: Jonathan M. ZANG v. NRT NEW ENGLAND INCORPORATED.
• Court: Appeals Court of Massachusetts

77 Mass.App.Ct. 665

933 N.E.2d 694

Jonathan M. ZANG

v.NRT NEW ENGLAND INCORPORATED. ¹

No. 09-P-864.

Appeals Court of Massachusetts,Suffolk.

Argued Jan. 19, 2010.

Decided Sept. 14, 2010.

Edward Foye, Boston, for the plaintiff.

Jessica M. Farrelly, Boston, for the defendant.

Robert S. Kutner, Boston, for Massachusetts Association of Realtors, amicus curiae, submitted a brief.

Present: KATZMANN, GRAINGER, & MEADE, JJ.

KATZMANN, J.

This case arises out of the purchase and sale of a Boston condominium. Asserting claims of breach of fiduciary duty and unfair and deceptive practices in violation of G.L. c. 93A, § 9, the plaintiff-buyer, Jonathan M. Zang, filed a complaint against NRT New England Incorporated doing business as Coldwell Banker Residential Brokerage (Coldwell Banker), contending that it had violated its duties as an escrow agent by refusing to disburse a portion of the buyer's deposit to the buyer's agent and instead paying itself moneys in contravention of the principals' explicit written instructions in the agreement creating the escrows. The buyer appeals from a decision of a Superior Court judge denying his motion for summary judgment and allowing summary judgment in favor of the defendant, Coldwell Banker. We reverse and remand for further proceedings.

Background. Factual history. On January 4, 2006, Neil Bradford (seller) and Coldwell Banker executed an “Exclusive Right to Sell Agreement” (the listing agreement) to sell his condominium on Phillips Street in Beacon Hill (property). The listing agreement required the seller to pay Coldwell Banker “a fee for professional services of 5% of the gross sales price” and authorized Coldwell Banker to “pay all commissions payable no later than the closing date” and “retain any deposits held in escrow and apply said deposits against commission due.” The listing agreement further provided that “Coldwell Banker's usual and customary practice is to compensate cooperating brokers acting as a buyer's agent in the amount of 2.5% of the contract price....” Zang was not a party to that contract, and he would never become a party to that contract. On January 20, 2006, Zang called, had his first direct communication with the seller about the property, and attended an open house two days later. Alan Fincke, a sales associate affiliated with Coldwell Banker's Boston office, was present. On January 25, 2006, after contacting Fincke, Zang again viewed the property and submitted an offer to purchase the property, which was originally listed at $1,349,000, for $1,200,000. Zang provided a $1,000 check to hold the offer, which Coldwell Banker accepted but did not deposit.

After three days, negotiations reached an impasse because Coldwell Banker rejected Zang's request that it reduce its commission in order to close the gap between Zang's final offer and Bradford's counteroffer of $1,225,000. Zang then retained William Wendel of the Real Estate Café as his agent (buyer's agent) to represent him in further negotiations. In exchange for his services, the buyer's agent agreed to be compensated for his services at an hourly rate of one hundred dollars (minimum fee of $3,000) and to rebate to Zang any commission he received from the seller in connection with the purchase of the property.

On January 28, 2006, responding to an offer to purchase the property that had been transmitted to Coldwell Banker by the buyer's agent on behalf of Zang, Coldwell Banker's sales agent Fincke stated in a recorded voicemail message to Zang: “I have no idea what you've shared with [the buyer's agent], but since he is a fellow agent and is presumably expecting to receive a full fifty percent commission for the mere writing of an offer, I thought he should understand that he may have a great deal of difficulty collecting any commission at all from Coldwell Banker.” A few minutes later, Fincke telephoned Zang again and in another recorded voicemail message asked whether “you think that it's really fair that [the buyer's agent] should come in at this late date and capture half of the commission. The listing agent [Coldwell Banker real estate agent Natalia Volkova] will be expecting her half of the commission because she has the relationship with the seller, and she deserves that, and she's marketed the property, and what does Alan [Fincke] get for all of his work? Nothing. But, you know, I guess that's money in your pocket.”

Eventually, the parties reached an agreed-upon sales price of $1,225,000, and they executed a purchase and sale agreement on February 6, 2006. Coldwell Banker did not sign the purchase and sale agreement. Section 7 of the purchase and sale agreement provided, in pertinent part, that Zang would make a deposit of $122,500 ² (ten per cent of the purchase price), with the balance of the full purchase price to be paid at closing. Section 21 provided:

“All deposits made hereunder shall be held in escrow by Coldwell Banker as escrow agent subject to the terms of this agreement and shall be duly accounted for at the time for performance of this agreement. In the event of any disagreement between the parties, the escrow agent may retain all deposits made under this agreement pending written instructions mutually given by the SELLER and the BUYER.”

Section 19 of the purchase and sale agreement (the fee-splitting provision) provided:

“A broker's fee for professional services of 5% of the purchase price (i.e., $61,250.00) is due from the SELLER and is to be split evenly between Coldwell Banker (SELLER'S agent) and Real Estate Café (BUYER'S agent), the Broker(s) herein, and is to be paid at closing from SELLER's proceeds, if and only if closing occurs and deed is recorded.”

In short, the seller's net sales proceeds were to be reduced by $61,250, of which $30,625 was to be paid to the buyer's agent at closing.

On February 6, 2006, Zang delivered a check for $121,500 to Coldwell Banker via the buyer's agent and the seller's agent. One day after the purchase and sale agreement was signed, Coldwell Banker deposited Zang's initial $1,000 deposit check (dated January 28, 2006), and one day later deposited Zang's subsequent check of $121,500. Coldwell Banker's “Escrow Funds Form” indicates that as of February 7, 2006, it held in escrow a total of $122,500 (the deposit), equal to ten percent of the purchase price.

Concerned in the days following the execution of the purchase and sale agreement that Coldwell Banker, through its agents, appeared to indicate its intention to contest the fee-splitting provision, Zang sent a G.L. c. 93A demand letter on March 1, 2006, to Coldwell Banker seeking assurance that the fee-splitting provision would be honored. Coldwell Banker did not respond prior to the closing thirty days later.

On March 31, 2006, the sale closed. The parties had not altered the instruction to Coldwell Banker in the purchase and sale agreement regarding the disbursement of the deposit and, in fact, the HUD-1 settlement statement signed at the closing reflected and reiterated those instructions, mutually instructing Coldwell Banker as escrow agent to disburse $30,625.00 of the seller's sale proceeds to the buyer's agent. Coldwell Banker disbursed a check to the seller in the amount of $61,250, representing fifty percent of the deposit. However, Coldwell Banker retained the other fifty percent and refused to pay two and one-half percent to the buyer's agent.

On August 13, 2007, Zang filed a complaint against Coldwell Banker alleging breach of fiduciary duty and violations of G.L. c. 93A, both derived from Coldwell Banker's refusal to disburse the deposit as instructed in writing by its principals. Coldwell Banker answered and asserted no counterclaims. In August, 2008, Zang moved for summary judgment, and Coldwell Banker cross-moved. On January 28, 2009, after a hearing, the judge denied Zang's motion for summary judgment and allowed Coldwell Banker's motion. The judge announced his decision orally:

“I think that there are two contracts here that each set out obligations. I do not think that ... Zang and Bradford [the seller] had the power to affect a contractual relationship entered into previously between ... Bradford and Coldwell Banker. I think that the principal obligation of a so-called escrow agent under a conventional real estate residential purchase & sale agreement is to distribute money of the buyer only if the real estate closing is, generally speaking, a successful one.

“Coldwell Banker's obligations to the parties, the buyer and the seller, as an escrow agent ... were fully discharged when a deed passed from [the seller] to ... Zang, when ... Zang accepted title, and when Coldwell Banker distributed one-half of the escrowed amount or one-half of the deposit, more accurately speaking, to the seller as seller's proceeds. The other one-half of the deposit was earmarked and always understood to be earmarked as a broker's commission. There, although the parties to the buy/sell may have agreed to share it, as they did, one of the parties to that contract had a previously binding contract not to do so. I don't see any remedy that ... Zang has against Coldwell Banker.”

Zang then moved for reconsideration, which the judge denied. This appeal followed.

Discussion. We review the allowance of a motion for summary judgment de novo. Miller v. Cotter, 448 Mass. 671, 676, 863 N.E.2d 537 (2007). Under the familiar standard, summary judgment is properly granted only when, if the evidence is viewed in the light most favorable to the nonmoving party, “all material facts have been established and the movant is entitled to judgment as a matter of law.” Kitras v. Zoning Administrator of Aquinnah, 453 Mass. 245, 251, 901 N.E.2d 121 (2009), citing Mass.R.Civ.P. 56(c), as amended, 436 Mass. 1404 (2002). “Any doubts as to the existence of a genuine issue of material fact are to be resolved against the party moving for summary judgment.” Ibid.

1. Duties of Coldwell Banker as escrow...