Preview:

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 773 September Term, 2001

WILLIAM CHESLEY v. GOLDSTEIN & BARON, CHARTERED, ET AL.

Eyler, Deborah S., Sharer, Thieme, Raymond G., Jr. (Ret'd, Specially Assigned), JJ. Opinion by Eyler, Deborah S., J.

Filed: August 30, 2002

The Circuit Court for Prince George's County granted summary judgment to Leonard R. Goldstein, Esquire, and his law firm, Goldstein & Baron, Chartered ("G&B"), the appellees, on claims asserted against them by William F. Chesley, the appellant. appeal, Chesley poses one question, which we have rephrased: On Did

the circuit court err in ruling that his claims were barred, as a matter of law, by claim or issue preclusion or by the law of the case doctrine?

FACTS AND PROCEEDINGS
This case has a long and convoluted history. In 1986, Dr.

Ervin Rose decided to sell commercial property ("the Property") he owned in Seabrook, Prince George's County. He entered into a listing agreement with Coldwell Banker Residential Real Estate, Inc. ("Coldwell Banker"), and one of its agents, C. Michael

Parrish, that would give Coldwell Banker a 10% brokerage fee if the Property were sold by March 18, 1987. made efforts to market the Coldwell Banker and Parrish including distributing

Property,

information about it. Chesley, a successful real estate agent and developer in the Seabrook area, was one of the people who received the marketing information. The Property did not sell by March 18, 1987. Thereafter, Rose and Coldwell Banker allegedly entered into an agreement modifying the original listing agreement and extending its expiration date.

Before the new expiration date, and before the Property sold, Rose died. Rose's sister, Rosalind Marsh, was appointed personal representative Goldstein and of G&B his to estate ("the her Estate"). in her role She as retained personal

represent

representative. Coldwell Banker and Marsh did not enter into a new listing agreement for the Property, and Marsh did not sign the listing agreement her brother had entered into with Coldwell Banker. Parrish continued marketing the Property for sale, however. His efforts resulted in two offers to purchase the Property, which were communicated to Marsh; she did not respond to them. In the meantime, Chesley began negotiating with Goldstein, on behalf of Marsh and the Estate, to purchase the Property. When the negotiations culminated in an oral purchase agreement, Goldstein notified Parrish that Marsh had sold the Property. On April 11,

1988, Chesley and Marsh reduced their oral agreement to a written contract of sale. The contract of sale was drafted by Chesley and his lawyer, except for an indemnification clause, which was drafted by

Goldstein.

In that clause, at paragraph 12 of the contract, the

parties agreed that the Estate would not pay any real estate commission in connection with the sale, and payment of any such commission, if required, would be Chesley's sole responsibility. They further agreed that in any claim or action brought by an agent

-2-

or broker to recover a commission, Chesley would hold harmless, defend, and indemnify the Estate, not only for any commission owed by also for all related costs, including attorney's fees incurred in defense. The closing on the sale of the Property to Chesley took place on July 8, 1988. On September 1, 1988, in the Circuit Court for Prince George's County, Coldwell Banker sued the Estate on the listing agreement, claiming it was owed a 10% commission on the sale. Pursuant to the indemnification clause in the contract of sale, Chesley retained G&B to defend the Estate in the Coldwell Banker suit, and agreed to pay the firm's fees. Coldwell Banker's case against the Estate went to trial. At the close of Coldwell Banker's case-in-chief, the court granted judgment in favor of the Estate. The evidence at trial included proof that the alleged modification agreement was a forgery. Coldwell Banker took an appeal, and on October 1, 1992, in an unreported opinion, this Court reversed the judgment and remanded the case for a new trial. After remand, the case was settled. Thereafter, Chesley made some payments toward G&B's attorney's fees in the case, but then stopped paying and refused to pay the balance. On August 4, 1995, in the Circuit Court for Prince George's County, G&B sued Chesley for the fees it claimed he owed for its defense of the Estate in the Coldwell Banker suit, under the

-3-

indemnification clause of the contract of sale (the "original claim"). G&B did not demand a jury trial. Chesley was served with

the complaint, and on November 2, 1995, filed an answer. He did not file a demand for a jury trial then, or within 15 days. On December 5, 1995, Chesley filed a "Counterclaim And Third Party Claim," against G&B (as counterdefendant) and Goldstein (as third-party defendant). At the same time, he filed a demand for

jury trial, as "Defendant, Counter Plaintiff, and Third Party Plaintiff." Chesley's counterclaim and third-party claim sounded

in fraud, negligent misrepresentation, and legal malpractice. Chesley's fraud claim was two-pronged. First, he alleged

that, during the purchase negotiations, Goldstein told him the Estate would not agree to pay any commission or brokerage fee on the sale. In justifiable reliance on that representation, he agreed to include the indemnification clause, undertaking liability for any commission or fee and for the cost of defense in any case for recovery of a commission or fee. Chesley then learned, after the

sale, that Goldstein had petitioned and ultimately had received in the Orphans' Court for Prince George's County a $100,000 commission on the sale. Chesley alleged that that award was a commission on the sale of the Property, and Goldstein's having sought it showed that his statement during the purchase negotiations was a

fraudulent misrepresentation communicated to induce Chesley to agree to the indemnification clause.

-4-

Second, Chesley alleged that because Goldstein and G&B had represented him in the Coldwell Banker suit, from October of 1988, to the Spring of 1993, Goldstein owed him a fiduciary duty to make disclosures about the Property honestly and fully; and that, in violation of that duty, Goldstein had fraudulently concealed

Coldwell Banker's involvement in bringing potential purchasers to the Property. Chesley further alleged that he had been induced to enter into the contract of sale, including the indemnification clause, in justifiable reliance on that allegedly fraudulent

misrepresentation/omission. In his fraud claim, Chesley sought compensatory damages of $150,000, and punitive damages of $1,500,000. The factual allegations supporting Chesley's negligent

misrepresentation claim were the same as those supporting his fraud claim, with one addition. Chesley alleged that it was a conflict of interest for Goldstein and G&B to represent him and the Estate; that they had had a duty to disclose the conflict, but failed to do so; and that while representing him they had been acting out of a primary allegiance to others, namely the Estate and Marsh. Chesley asserted that he had justifiably relied on Goldstein's and G&B's negligent representations and omissions and as a consequence had entered into the contract of sale, including the indemnification clause, without consulting independent counsel. He sought $150,000 in compensatory damages.

-5-

Finally, in his legal malpractice claim, Chesley alleged that Goldstein and G&B had breached their attorney-client relationship with him by 1) failing to disclose "the true nature of the facts and circumstances related to" Coldwell Banker's claim against the Estate; 2) failing to advise that because they were in a conflict of interest position, due to their representation of the Estate, he should engage independent legal counsel; and 3) failing to disclose that Goldstein had received a $100,000 "commission" (i.e., the orphans' court award) from the Estate for the sale of the Property, contrary to the purpose of the indemnity clause. He further

alleged that Goldstein and G&B had charged attorney's fees "which were induced by the fraud and/or negligent misrepresentation by Leonard R. Goldstein to Mr. Chesley, and were otherwise not

necessary, fair and reasonable."

He claimed the same injury as in

the first two counts, and sought $150,000 in compensatory damages. Goldstein and G&B responded to the counterclaim and thirdparty claim with a joint motion to dismiss or for summary judgment, on the ground of limitations, which Chesley opposed. The court granted the joint motion. The court then held a pretrial The

conference and scheduled a trial date for the original claim.

Pre-Trial Conference Report is marked with a check next to "yes" for whether there was a jury demand. After being postponed and rescheduled, trial commenced on December 7, 1998. That day, when it became apparent that the case

-6-

was scheduled to be tried to the court, not by jury, Chesley's lawyer argued that even though summary judgment had been granted on the counterclaim and third-party claim, Chesley still was entitled to a jury trial on the original claim. case proceeded to a court trial. Trial lasted three days. At the close of the evidence and after hearing argument, the court ruled in G&B's favor and awarded $57,767.81 in attorney's fees and interest. The court made The court disagreed and the

detailed factual findings, which we quote in relevant part: The testimony before me, and I find as a fact, is that [the indemnification clause in the April 11, 1988 contract of sale] was the subject of negotiations between Mr. Chesley and Mr. Goldstein on behalf of the estate. I find that the negotiations were arms length negotiations, and further that the estate sought to avoid the risk of any claim for any commission by any broker for the sale of the property. The discussions were specific as to the Coldwell-Banker listing agreement, and the discussions were specific that the estate did not wish to pay any real estate commission to Coldwell-Banker. The defendant, Mr. Chesley, assumed the risk for this commission or any fees to defend any claim for this commission by executing the . . . contract for sale dated April 11, 1988. Settlement on this contract was had on July 8, 1988, and the lawsuit by Coldwell-Banker was filed on September 1, 1988. Upon service on the estate Mr. Goldstein, on behalf of the estate, wrote on September 21, 1988 in Plaintiff's exhibit number seven to Mr. Chesley, informing him that the lawsuit had been filed, that the estate looked to him to indemnify the estate pursuant to paragraph twelve of Plaintiff's exhibit number three. Mr. Goldstein identified two options to Mr. Chesley. Those being Mr. Chesley could pay the attorney's fees for Mr. Goldstein's firm's continued representation of the estate in the lawsuit or Mr. Chesley could seek whatever -7-

counsel he wished to represent the estate in the lawsuit. At that point Mr. Chesley had the option to permit the estate to continue its own defense and to then be subject to . . . any defense costs for the estate and, if entered, any judgment against the estate. He could retain any attorney of his own choosing to defend the estate or he could retain Mr. Goldstein's law firm to continue to defend the estate. I find as a fact that a telephone call between Mr. Chesley and Mr. Goldstein occurred subsequent to Mr. Chesley's receipt of Plaintiff's exhibit number seven. I find that during that call Mr. Chesley acknowledged his duty to defend under the indemnity agreement, which is contained in paragraph number twelve of Plaintiff's exhibit number three. I find that Mr. Goldstein identified his law firm's fee schedule and that Mr. Chesley agreed to pay that fee schedule for Mr. Goldstein's law firm to continue to defend the estate in . . . the suit brought by ColdwellBanker. The lawsuit proceeded ultimately to trial, appeal and settlement. The bills of the law firm of Goldstein and Baron were submitted to Mr. Chesley. Partial payments on those bills were made up to and including August of 1992 . . . . Sometime in March of 1993 Mr. Chesley met with Mr. Parrish . . ., after which he refused to pay any further legal expenses of the law firm of Goldstein and Baron. . . . I find that the fees that were billed [by Goldstein & Baron] were fair and reasonable and necessary for the protection of the estate by the law firm in [the Coldwell-Banker suit]. I find no evidence of fraud in the inducement of . . . the contract of April 11, 1988, nor in the oral contract in September of 1988 or early October of 1988, wherein Mr. Chesley agreed to pay the legal fees for the estate in the law firm's defense of [the Coldwell Banker suit] . . . . Chesley noted an appeal. He posed two questions respecting

the original claim: 1) "Is an attorney who represents an estate and -8-

the personal representative and who has received a commission for sale of real property from the estate to the indemnitor entitled to attorney's fees from the indemnitor, in the absence of full and complete disclosure of the facts and the conflict of interest?"; and 2) "Is an indemnitee entitled to indemnification for the indemnitee's own negligence, in the absence of specific language in the controlling contract?" In a third question, he claimed the

court had erred in granting summary judgment on his counterclaim and third-party claim on the ground of limitations. On May 22, 2000, this Court filed an unreported opinion affirming the judgment in favor of G&B on its fee claim, reversing the summary judgment against Chesley on his counterclaim and thirdparty claim, and remanding the case to the circuit court for further proceedings. We began our discussion of Chesley's first

issue by giving an overview of his main defense to the original claim: [Chesley's] primary defense to G&B's claim for attorney's fees is based upon the principle that a fee agreement between the attorney and a client ordinarily will be set aside if it is shown that a party was represented by an attorney who simultaneously represented adverse interests, whether such interests were those of the attorney or those of other clients, and the attorney either exercised undue influence or perpetrated a fraud, or if the transaction was otherwise unfair. Only full disclosure can prevent the transaction from being set aside. Chesley v. Goldstein & Baron, No. 6227, slip op. at 7 (Md. Ct. Spec. App. July 27, 2000).

-9-

We concluded that Chesley was G&B's client, as a matter of law, and Goldstein and G&B therefore were obligated to disclose "all known information that [was] significant and material to the affairs . . . of the [the fiduciary relationship] . . . ." Chesley, Slip op. at 10 (quoting Homa v. Friendly Mobile Manor, Inc., 93 Md. App. 337, 346-47 (1992), in turn, quoted in, Platinum v. Impala Sales, 283 Md. 296, 324 (1978) (quoting Herring v. Offutt, 266 Md. 593, 597 (1972)). See also Allen v. Steinberg, 244

Md. 119, 128 (1965); Hambleton v. Rhind, 84 Md. 456 (1896). ). We rejected Chesley's contentions that the evidence compelled

a finding of a conflict of interest and of fraudulent inducement, however. With respect to the claimed conflict of interest, we said that, on the uncontested evidence, though Chesley later was a client of Goldstein and G&B, he was not their client when the contract of sale was negotiated; rather, at that time, Goldstein was representing Marsh -- the other party to the negotiation. We concluded that as a matter of law, "there could have been no conflict of interest on Goldstein's part in the arm's length transaction conducted by Chesley as the buyer and Goldstein as attorney for the seller." Chesley, Slip op. at 11.

With respect to the issue of fraudulent inducement to include the indemnification language in the contract of sale by failing to disclose information vital to Chesley's acceptance of that contract provision, we stated:

-10-

[T]he simple response is that the trial court specifically found that there was no fraud and that Goldstein disclosed all pertinent information then available to him. Chesley, Slip op. at 11. We next rejected as legally incorrect Chesley's contention, at trial and on appeal, that Goldstein had received a "commission" on the sale of the Property. We explained that upon petition to the

orphans' court, under Md. Code (1974),

Download Chesley v. Goldstein.pdf

Maryland Law