The Bank of New York Mellon, N.A. v. Re/Max Realty One , 91 A.3d 1059 ( 2014 )

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2014 ME 66
Docket: Yor-13-404
Argued: April 9, 2014
Decided: May 8, 2014
Panel: ALEXANDER, SILVER, MEAD, GORMAN, and JABAR, JJ.
THE BANK OF NEW YORK MELLON, N.A.
v.
RE/MAX REALTY ONE
ALEXANDER, J.
[¶1] Re/Max Realty One appeals from the Superior Court’s (York County,
O’Neil, J.) entry of summary judgment in favor of the Bank of New York
Mellon, N.A., on the Bank’s breach of contract claim and on Re/Max’s claim for
contractual indemnification and attorney fees.
[¶2] Re/Max argues that the court erred in granting summary judgment to
the Bank because the unambiguous language of its listing agreement with the Bank
obligated the Bank to divide any forfeited earnest money with Re/Max, including
money the Bank received pursuant to a mediated agreement. Re/Max further
argues that if the judgment in favor of the Bank is vacated and judgment is entered
in its favor, it is entitled to indemnification and attorney fees.
[¶3] Because, under the unambiguous language of the listing agreement,
Re/Max is entitled to half of the forfeited funds the Bank received from the
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defaulting buyer, we vacate the judgment and remand the matter to the Superior
Court to enter a judgment in Re/Max’s favor on the Bank’s breach of contract
claim and to determine whether Re/Max is contractually entitled to indemnification
for costs and attorney fees.
I. CASE HISTORY
[¶4] The facts stated below are based upon the summary judgment record
and are not in dispute. See Dussault v. RRE Coach Lantern Holdings, LLC,
2014 ME 8, ¶ 2, 86 A.3d 52.
[¶5] On March 18, 2011, a Bank representative signed a listing agreement
with Re/Max granting Re/Max the exclusive right to sell a property located in the
town of York for $869,000. The listing agreement provided that Re/Max, referred
to as “the Agency,” was to receive a five-percent commission from the sale of the
property when title to the property passed to the buyer. A forfeiture clause in the
listing agreement provided that “[i]f any earnest money is forfeited by a Buyer, it
shall be distributed one half to Seller, and one half to Agency. In no event shall the
Agency portion exceed the agreed upon commission set forth above.” The listing
agreement also included an indemnification clause in which the Bank agreed to
“hold [the] Agency harmless from any loss or damage that might result from [the]
authorizations provided in the Agreement.”
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[¶6] On the same date that the listing agreement was signed, Re/Max
located a buyer for the property who signed a purchase-and-sale agreement with
the Bank. The buyer paid $86,900 in earnest money, which Re/Max held in
escrow. The purchase-and-sale agreement states that if the buyer defaults on the
agreement, the buyer forfeits any earnest money paid.1 It also provides that if any
dispute arises relating to the purchase-and-sale agreement, the Bank and buyer are
obligated to mediate in accordance with the Maine Residential Real Estate
Mediation Rules.
[¶7] When the buyer later defaulted under the terms of the purchase-and-
sale agreement, the buyer and the Bank each requested that Re/Max release the
entirety of the escrowed earnest money. Re/Max refused, as it was required to do
under the Maine Real Estate Commission Rules, see 6 C.M.R. 02 39 400-3
§ 2(10)(C) (2010), and the default clause in the purchase-and-sale agreement, and
informed the buyer and the Bank that it would not release the funds until it
received either a written agreement between the buyer and the Bank or a court
order.
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The default clause in the purchase-and-sale agreement between the Bank and the buyer provides:
17. DEFAULT: In the event of default by the Buyer, Seller may employ all legal and
equitable remedies, including without limitation, termination of this agreement and
forfeiture by Buyer of the earnest money. . . . Agency acting as escrow agent has the
option to require written releases from both parties prior to disbursing the earnest money
to either Buyer or Seller.
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[¶8] Meanwhile, Re/Max procured a second buyer to purchase the property
from the Bank for the full asking price of $869,000. The sale closed on
August 31, 2011. At that time, Re/Max received a five percent commission, which
it divided with the second buyer’s agent.
[¶9] In December 2011, the Bank and the first buyer participated in
mediation to resolve the dispute over the earnest money. Re/Max was asked to
participate in the mediation but elected not to. After mediation, the Bank and the
first buyer agreed to divide the earnest money between themselves, with $49,500
going to the Bank and $37,400 to the first buyer. Re/Max prepared a form in
which the Bank and the first buyer agreed to the release of the earnest money.
Re/Max sent a check for $37,400 to the first buyer and a check for $24,750 to the
Bank. Re/Max retained the remaining $24,750.
[¶10] The Bank filed a complaint against Re/Max, alleging a breach of the
listing agreement stemming from Re/Max’s retention of $24,750 of the earnest
money.2 Re/Max counterclaimed, asserting a contractual right to indemnification
and attorney fees.3 The Bank and Re/Max each moved for summary judgment on
2
The Bank asserted other claims against Re/Max based on Re/Max’s retention of the earnest money.
However, the court granted summary judgment to Re/Max on those claims and the Bank does not appeal
those decisions.
3
Re/Max asserted a breach of contract claim against the Bank but does not appeal the grant of
summary judgment to the Bank on that claim.
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all claims and, utilizing good practice in summary judgment litigation, stipulated
the facts in lieu of individual statements of material fact.
[¶11] In August 2013, the Superior Court granted summary judgment to the
Bank on its breach of contract claim in the amount of $24,750. The court also
granted the Bank summary judgment on Re/Max’s claim for contractual
indemnification and attorney fees. Re/Max timely appealed. See 14 M.R.S.
§ 1851 (2013); M.R. App. P. 2(b)(3).
II. LEGAL ANALYSIS
[¶12] We review the grant of a summary judgment de novo, Bell v. Dawson,
2013 ME 108, ¶ 15, 82 A.3d 827, and affirm “only if there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law,”
McClare v. Rocha, 2014 ME 4, ¶ 10, 86 A.3d 22. The record in this case reveals
no outstanding issues of material fact as to the Bank’s breach of contract claim,
which is dependent on the construction of the listing agreement.
[¶13] The listing agreement’s provisions are unambiguous. See Coastal
Ventures v. Alsham Plaza, LLC, 2010 ME 63, ¶ 26, 1 A.3d 416 (“[A] contractual
provision is considered ambiguous if it is reasonably possible to give that provision
at least two different meanings.” (alteration in original)). If a contract is
unambiguous, “its construction is . . . a question of law,” Richardson v. Winthrop
Sch. Dep’t, 2009 ME 109, ¶ 9, 983 A.2d 400, and we will “interpret it according to
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the plain meaning of the language used,” Camden Nat’l Bank v. S.S. Navigation
Co., 2010 ME 29, ¶ 16, 991 A.2d 800, “without resort to extrinsic evidence,”
Am. Prot. Ins. Co. v. Acadia Ins. Co., 2003 ME 6, ¶ 11, 814 A.2d 989.
A. Breach of Contract
[¶14] The listing agreement provides that “[i]f any earnest money is
forfeited by a Buyer, it shall be distributed one half to Seller, and one half to
Agency. In no event shall the Agency portion exceed the agreed upon commission
set forth above,” i.e., five percent of the purchase price. When the first buyer
defaulted under the terms of the purchase-and-sale agreement, the Bank became
entitled to the earnest money as liquidated damages, and Re/Max’s interest in the
funds, via the listing agreement, accrued. See Gile v. Albert, 2008 ME 58, ¶ 8,
943 A.2d 599 (stating that in a breach of contract case, the cause of action accrues
when the contract is breached).
[¶15] The Bank asserts that no forfeiture of the earnest money occurred
because the Bank and the first buyer reached an agreement regarding distribution
of the funds held by Re/Max. The term forfeiture, as used in the listing agreement,
is in no way ambiguous. Black’s Law Dictionary defines forfeiture as “[t]he
divestiture of property without compensation” or “[t]he loss of a right, privilege, or
property because of a crime, breach of obligation, or neglect of duty.” Black’s
Law Dictionary 722 (9th ed. 2009). The money at issue here falls within either
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definition. The first buyer breached his obligations under the purchase-and-sale
agreement, and as a result of that breach lost $49,500.
[¶16] At the time the Bank and the first buyer negotiated the mediated
agreement, the Bank had no claim for actual damages or specific performance
against the buyer because the Bank had already conveyed the property to another
buyer for the same contract price. Therefore, the Bank’s sole claim to the earnest
money was based on the forfeiture clause in the purchase-and-sale agreement.
That the Bank later engaged in mediation with the buyer regarding the amount to
be forfeited does not change the character of the funds.
[¶17] The five-percent limitation on the portion of forfeited funds that
Re/Max is entitled to receive appears in the forfeiture clause in the listing
agreement. That clause limits only the amount of forfeited funds that Re/Max may
receive, not the total compensation Re/Max may collect under the listing
agreement. Re/Max’s right to forfeited funds is separate from, and in addition to,
any commission received from the separate sale of the property. To read the
forfeiture provision any other way would result in a windfall to the Bank and
deprive Re/Max of compensation for procuring the first purchase-and-sale
agreement.
[¶18] The Bank’s argument that Re/Max is not entitled to any portion of the
forfeited earnest money because the Bank received the money after the listing
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agreement expired is unpersuasive. Re/Max’s interest in the earnest money
matured when the Bank’s did, that is, when the first buyer defaulted under the
purchase-and-sale agreement. See Gile, 2008 ME 58, ¶ 8, 943 A.2d 599 (stating
that in a breach of contract case, the cause of action accrues when the contract is
breached).
[¶19] Furthermore, the listing agreement was still in force when the Bank
and the buyer reached the mediated agreement. The listing agreement provided
that it would “expire on November 1, 2011, unless if prior to such expiration date
the Seller places the property under any type of contract, in which case this
agreement will expire upon closing, transfer of title and/or termination/expiration
of such contract.” The contract between the Bank and the first buyer was not
terminated until the issue of the earnest money was settled; therefore, the listing
agreement was still in force until “the termination/expiration of such contract.”
[¶20] Finally, contrary to the Bank’s contentions, Re/Max did not waive its
interest in the forfeited funds. A waiver is a “voluntary or intentional
relinquishment of a known right and may be inferred from the acts of the waiving
party.” Blue Star Corp. v. CKF Props., LLC, 2009 ME 101, ¶ 26, 980 A.2d 1270.
None of Re/Max’s actions suggest that it intended to relinquish its interest in the
escrowed earnest money deposit.
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[¶21] Re/Max, not the Bank, is entitled to summary judgment on the Bank’s
breach of contract claim.
B. Contractual Indemnification and Attorney Fees
[¶22] Re/Max also seeks to enforce its contractual right to indemnification
and attorney fees. Because this requires fact-finding as to whether Re/Max
suffered loss or damage resulting from the authorizations stated in the listing
agreement, see Lee v. Scotia Prince Cruises Ltd., 2003 ME 78, ¶ 21, 828 A.2d 210,
the matter must be remanded to the Superior Court for it to decide in the first
instance whether Re/Max is entitled to indemnification and attorney fees under the
listing agreement, and, if so, the amount Re/Max is entitled to.
The entry is:
Judgment vacated. Remanded to the Superior
Court for entry of a judgment in favor of Re/Max
for $24,750, and for further proceedings consistent
with this opinion.
On the briefs:
Elizabeth G. Stouder, Esq., and Joseph L. Cahoon, Jr., Esq.,
Richardson, Whitman, Large & Badger, Portland, for appellant
Re/Max Realty One
Matthew W. Howell, Esq., Clark & Howell, LLC, York, for
appellee Bank of New York Mellon, N.A.
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At oral argument:
Elizabeth G. Stouder, Esq., for appellant Re/Max Realty One
Matthew W. Howell, Esq., for appellee Bank of New York Mellon, N.A.
York County Superior Court docket number CV-2012-59
FOR CLERK REFERENCE ONLY