Proctor v. Holden

540 A.2d 133 (1988)

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Nature of the Case

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Facts

Ps contacted Charlotte Valliant, a real estate agent associated with appellant Freeman & Kagan, Inc. (D), a real estate brokerage. Valliant showed Ps homes. Howard Gillellan had just listed a home with Freeman & Kagan (D) at $169,500. The house was a 'tremendous buy' because it was 'grossly underpriced.' P submitted a contract offer of $170,000 cash, the only contingency being that Deborah Holden (P) be allowed to inspect the property prior to noon the next day. P was told that another full-price contract had been submitted by another client of Freeman & Kagan (D). The listing agent presented both contracts. Gillellan accepted the other contract submitted by Ds. Gillellan accepted Ds' contract, at least in part because of his fear of losing both offers if he waited for Mrs. Holden's (P) inspection and approval of the home. The D was for $169,500 and was subject to a financing contingency. A few months later, Valliant called and informed Ps that they could buy the Gillellan property from Ds for $203,000. Almost immediately D contacted Magnet Mortgages about obtaining a $150,000, 30-year term loan for the property. Ds signed a 24-hour listing agreement with Freeman & Kagan (D). Ps visited the property where they met with Deborah Proctor (D) for the first time. She wanted a closing in 30 days and was not interested in any owner financing. Michael Holden (D) responded that he had already submitted a mortgage application to Magnet Mortgages it would take 60 days. D agreed to a 60 day closing. Valliant prepared a standard fill-in-the-blanks contract then in use by the Talbot County Board of Realtors and $210,000 was inserted in the blank for purchase price. A mortgage contingency clause was completed and the contract also stated: 'Time is of the essence of this agreement.' Ps tendered a $20,000 deposit with their contract, to be held in an interest-bearing account by Freeman & Kagan (D). Ps accepted the contract on July 26, 1985. On August 1, 1985, Magnet Mortgages advised Ds that he would not qualify for a $150,000 30-year loan; and that no lender employing standard FNMA/FHLMC guidelines would qualify Ds for such a loan because of his high debt to earnings ratio. P then submitted a mortgage application to Second National Building & Loan on August 9th, which similarly was rejected on August 12th. P also approached the Talbot Bank for a loan that was rejected by silence. P notified Valliant by letter of his inability to obtain financing and requested the return of his $20,000 deposit. She informed Ps that Ds had agreed to finance the purchase pursuant to the adjustable-rate terms stated in the contract. P rejected this offer and requested a refund of their deposit. Ds refused. Freeman & Kagan (D) did not release the funds, and Ps filed suit against Ds to compel the release of their deposit, and against Freeman & Kagan (D) for breach of fiduciary duty. The court found for Ps and hit Freeman & Kagan (D) for $10,000 in punitive damages. All Ds appealed.