Appeals from the Superior Court of the District of Columbia (CAB-8449-08) (Hon. Cheryl M. Long, Trial Judge)
The opinion of the court was delivered by: Beckwith, Associate Judge:
Submitted February 7, 2012
Before OBERLY and BECKWITH, Associate Judges, and REID, Senior Judge.
This case arises from a dispute over a commercial real estate broker‟s commission for months of work negotiating a long-term multi-million-dollar lease agreement between a real estate investment company and the non-profit organization that sought to expand and continue its operations in a large building owned by that company. Though the parties agree that it was standard in the industry for landlords to pay the tenant‟s broker‟s commission fee and that the broker in this case all along expected the landlord to pay the standard 3 percent commission, they disagree about whether the landlord‟s refusal to pay the broker‟s commission was the breach of an implied-in-fact contract or simply the result of the parties‟ failure to agree on a specific commission. Superior Court Judge Cheryl Long concluded that the landlord breached an implied contract and, after a two-day bench trial, awarded the broker damages that amounted to a 3 percent commission on the aggregate value of the ten-year lease. The landlord now challenges the trial court‟s determination that an implied-in-fact contract for brokerage fees existed between the two parties, as well as the court‟s determination that the landlord was responsible for the broker‟s commission under principles of unjust enrichment and equitable estoppel. In a cross-appeal, the broker disputes the trial court‟s damage calculation and seeks prejudgment interest on the sum. Because we agree that an implied-in-fact contract existed between the parties and that the trial court properly calculated the damages, we affirm the judgment of the Superior Court.
Steuart Investment Company, the appellant and cross-appellee in this case, is an established player in the local commercial real estate market and owns, among other real estate assets, the building located at 4646 40th Street, N.W., in Washington, D.C. The Meyer Group, the appellee and cross-appellant, is a commercial real estate broker that, according to the trial testimony of its founder and president, William Meyer, specializes in assisting tenants in "negotiations with either their existing landlord or a future landlord in lease terms that would be both fair market and acceptable to both parties."
In 1998, the Center for Applied Linguistics (CAL) hired The Meyer Group to assist with lease negotiations for the 40th Street property. Another commercial lease broker represented Steuart during these negotiations. On July 14, 1998, Steuart and CAL entered into a ten-year lease with an option to renew for an additional five years. Upon execution of the lease and pursuant to a commission agreement, Steuart paid The Meyer Group a 3 percent commission on the aggregate lease value, which was calculated as the base annual rent multiplied by ten years.According to an expert witness The Meyer Group called at trial-a commercial lease broker who had worked in the District of Columbia‟s commercial lease market for 25 years-such an arrangement is typical, and brokers are compensated by the landlord "99.9" percent of the time. The broker-client relationship between CAL and The Meyer Group ended when CAL took possession of the property.
In 2006, eight years into its ten-year lease, CAL, now running out of room, interviewed several brokers and once again selected The Meyer Group to help it secure space and negotiate a lease for when its existing lease expired. The retainer agreement The Meyer Group and CAL signed in October of 2006 recognized that "the landlord generally assumes responsibility for the commission" and indicated that CAL would "require, as a condition of entering into a lease agreement, that the landlord undertake an obligation to pay a commission (in accordance with typical market rates)" to The Meyer Group.
After assessing its options, CAL decided to stay in the 40th Street property and to negotiate a new ten-year lease with Steuart Investment Company. The Meyer Group first contacted Steuart on January 31, 2007, seeking to confirm that the deadline for exercising the optional five-year lease extension was September 24, 2007.*fn1 On March 13, 2007, The Meyer Group sent Steuart Investment Company a commission letter stating that if a lease between CAL and Steuart were successfully negotiated, Steuart would agree to pay The Meyer Group the industry standard commission for its brokerage services-specifically, a "cash commission in the amount equal to Three Percent (3%) of the gross aggregate rental including any fixed escalations, less any free rent, up to a term of Ten (10) years[.]"
The Meyer Group sent a commission letter to Steuart on at least three occasions, in March, May, and June of 2007. Steuart‟s managers received these letters but never returned countersigned copies. At trial, William Meyer testified that Steuart provided oral assurances that "I‟d get paid, not to worry about it." Steuart‟s representatives disputed that they ever orally agreed to pay a 3 percent commission, but they continued to negotiate the lease throughout the remainder of 2007 and into 2008 knowing that The Meyer Group expected payment. According to William Meyer, these negotiations were unusually difficult because Steuart had not hired its own broker and the managers with whom he was working were not very experienced in handling such matters. Mr. Meyer stated that "[i]t was horrible for me" and that "it was probably three times as much work."
On December 18, 2007, Steuart Investment Company presented a term sheet for a ten-year lease that provided that any commission would be negotiated in a separate agreement. In case the parties could not agree on terms for a ten-year lease, Steuart also mailed a draft term sheet for a five-year renewal of the existing lease. In an email also dated December 18, Guy Steuart III, one of the managers of Steuart Investment Company, informed his brothers Clark and Brad Steuart that "[a]lthough I don‟t say so in the [letter of intent], we will only pay Myers [sic] group a 2.5% commission on the renewal." Steuart never communicated to The Meyer Group this intent not to pay the 3 percent commission it knew The Meyer Group was expecting.
The following month, on January 30, 2008,*fn2 Steuart submitted a revised term sheet providing, among other terms, that The Meyer Group "shall be paid Two percent (2%) of the aggregate lease value of the base lease term (aggregate lease value to include offsets for Leasehold Improvements and Rent Abatements.)" The next day, Guy Steuart III sent another email informing his brothers that he was limiting The Meyer Group‟s commission to 2 percent and predicting that William Meyer "will flip over the commission" but that the parties would then "negotiate how to bridge that gap." The parties continued to exchange draft term sheets, with Steuart Investment Company offering a 2 percent commission on the aggregate value of the base lease term and The Meyer Group insisting on the commission it had all along specified-a 3 percent commission on the aggregate lease value, including rent escalations.
By March 2008, the terms of the new lease between CAL and Steuart had been fully negotiated. The lease that resulted, dated June 19, 2008, substantially modified the 1998 lease,*fn3 and in the view of the trial court, Steuart Investment Company had benefited from The Meyer Group‟s work and professional advice throughout the lengthy negotiation process, which resulted in a favorable long-term lease of Steuart‟s property.
Though the landlord and tenant had a lease, the dispute over the broker‟s commission remained unresolved. The new lease provided that "Landlord and Tenant each warrant to the other that in connection with this Amendment neither has employed or dealt with any broker, agent or finder, other than The Meyer Group, Ltd. (the "Broker")," and that "Landlord acknowledges that it shall pay any commission or fee due to the Broker with respect to this amendment[.]" On May 21, 2008, The Meyer Group sent Steuart Investment Company an invoice for the amount of $191,962.07.*f ...