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Marmac Investment Company, Inc. v. Wolpe

September 21, 2000


Before Wagner, Chief Judge, Ruiz, Associate Judge, and Belson, Senior Judge.

The opinion of the court was delivered by: Belson, Senior Judge

Appeal from the Superior Court of the District of Columbia (Hon. Lee Satterfield, Trial Judge)

Argued October 14, 1999

All of the parties to this litigation are partners in 21st and F Street Associates Limited Partnership, a District of Columbia limited partnership. The appellants, Marmac Investment Company, Inc., and Richardson Beard, plaintiffs in the trial court, are limited and general partners who brought this action against Robert N. Wolpe, the sole managing general partner. They asserted that he breached his fiduciary duties to them by agreeing to pay his affiliated company, Robert N. Wolpe Enterprises, Inc. (Enterprises), in which he and his wife were the principal shareholders, a consulting fee in connection with the sale of realty owned by the partnership. Appellants requested that the court order a return of a pro tanto share of the consulting fee paid to Wolpe and conduct an accounting of all transactions related to the sale of the realty.*fn1 The trial court, sitting without a jury, entered judgment in favor of appellees, defendants in the trial court, finding that appellee Wolpe did not breach the partnership agreement or his fiduciary duties to appellants by agreeing to pay Enterprises a consulting fee for the real estate brokerage and related services it performed for the partnership. We affirm.


We begin by summarizing the facts as found by the trial judge or not disputed by the parties. 21st and F Street Associates Limited Partnership ("the partnership") was created in 1986 pursuant to a partnership agreement which was subsequently amended several times. The primary business of the partnership was the development and leasing of a residential rental building known as "The Dakota," located near George Washington University ("GWU") in Northwest, Washington, D.C.

In the Spring of 1994 it became apparent that refinancing for the Dakota would be necessary, and that each general partner would have to contribute a certain sum of money to bring it about. At that time the general partners unanimously decided that the managing general partner, Wolpe, should attempt to sell the Dakota for a price that would net no less than approximately $200,000 for each of the seven partners in the partnership. After listing with three real estate brokers failed to produce a sale, Wolpe himself contacted the real property manager of GWU regarding the sale of the property. Later, he effected a consulting agreement between the partnership and Enterprises. A copy of the consulting agreement was not sent to the other general partners. Wolpe was authorized by Section 4.02 (b) of the partnership agreement to engage in such self-dealing. This section provides that "the Partnership may contract with any person or entity, including any Affiliate . . . for the performance of any and all services which may be necessary or advisable to carry on the Partnership's business . . . ." The partnership agreement defines "affiliated person" or "affiliate" to include any "Entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with any person referred to in the preceding clauses."

Under the consulting agreement, Enterprises agreed to arrange the sale of the Dakota to GWU and "to take such other action(s) in furtherance thereof, as may be necessary in the Consultant's opinion to attempt to arrange and ultimately consummate any such sale." The agreement provided that as compensation for arranging a successful sale of the Dakota to GWU for a gross sales price of not less than nine million dollars, "the Partnership shall pay Consultant a consulting fee . . . in an amount equal to 3.5% . . ." of the final gross sales price. At the time of the transaction Wolpe's real estate brokerage license had lapsed, and Enterprises had no license.*fn2

Wolpe spoke with all the other general partners about the possible sale of the Dakota to GWU in the Fall of 1994. Wolpe testified that he informed the general partners about the 3.5% consulting fee he arranged with Enterprises. Appellant Beard and the president of Marmac, however, insist that they were never informed about the amount of the fee. The court did not resolve this conflict in the testimony. Another general partner said he could not recall whether Wolpe had discussed the amount of the fee with him. Appellants admit that they were aware that Wolpe intended to receive a fee. Successfully arranging for the sale entailed a large amount of work beyond that required by Wolpe's normal duties as managing partner.

In November 1994, the partnership entered into a contract with GWU to sell the Dakota for $9.6 million. Several weeks before settlement, appellants were given copies of an option agreement entered into between GWU and the partnership, and an agreement of sale. Both agreements referred to a consulting fee to be paid to Enterprises by the partnership out of the sale proceeds, but did not specify the amount of the consulting fee. The option agreement also made reference to the consulting agreement. Appellants did not inquire of Wolpe concerning the amount of the fee at any time before settlement.

Settlement on the sale of the Dakota took place in early 1995. A settlement disbursement sheet was then sent to the general partners; the disbursement sheet indicated that a 3.5% fee, in the amount of $336,000, had been paid to Enterprises. According to appellants, they first became aware of the amount of the commission upon receipt of the settlement disbursement sheet.

Thereafter, appellants Marmac and Beard objected to the amount of the commission.

Consequently, Wolpe distributed a letter to all general partners calling for a vote on the amount of the fee. All six of the general partners completed and returned the ballots. While each partner agreed that Enterprises was entitled to a fee of some amount, there was not unanimous agreement as to the amount. The required majority of the partners (all but appellants) approved the ...

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