
USCA1 Opinion

	




          July 31, 1996     United States Court of Appeals                            United States Court of Appeals                                For the First Circuit                                For the First Circuit                                 ____________________          No. 95-2329                           WAINWRIGHT BANK & TRUST COMPANY,                                Defendant, Appellant,                                          v.                              GREGORY W. BOULOS, ET AL.,                          Third Party Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                   [Hon. Steven J. McAuliffe, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                               Torruella, Chief Judge,                                          ___________                           Stahl and Lynch, Circuit Judges.                                            ______________                                 ____________________                                     Errata Sheet                                     Errata Sheet               The  opinion of  this  Court issued  on  July 17,  1996,  is          amended as follows:                    Page 16, line  8, change  second "Boulos"  to                    read "Wainwright"                            United States Court of Appeals                                For the First Circuit                                 ____________________        No. 95-2329                           WAINWRIGHT BANK & TRUST COMPANY,                                Defendant, Appellant,                                          v.                              GREGORY W. BOULOS, ET AL.,                          Third Party Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                   [Hon. Steven J. McAuliffe, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                                Torruella, Chief Judge,                                           ___________                           Stahl and Lynch, Circuit Judges.                                            ______________                                 ____________________            Robert M. Shepard with whom Smith-Weiss and Zall, PC was on brief            _________________           ________________________        for appellants.            Harold J. Friedman with whom Karen Frink Wolf and Friedman &            __________________           ________________     __________        Babcock was on brief for appellees.        _______                                 ____________________                                    July 17, 1996                                 ____________________                      STAHL, Circuit Judge.  Appellant Wainwright Bank                      STAHL, Circuit Judge.                             _____________            and Trust Co. ("Wainwright") retained appellees Gregory W.            Boulos and The Boulos Company (collectively "Boulos")1 as            real estate brokers to sell a distressed property.  Boulos            found a buyer, but the deal fell apart at the closing.  The            prospective buyer sued Wainwright, who counterclaimed;            Wainwright then sued Boulos, who also counterclaimed.  During            the bench trial, Wainwright and the buyer settled, but            Wainwright and Boulos pressed on.  Ultimately, the district            court denied Wainwright's claims that Boulos breached his            duties as a broker, and awarded a $65,460 commission to            Boulos.  Wainwright appeals, and we affirm.                                          I.                                          I.                                          __                                        Facts                                        Facts                                        _____                      We summarize the facts in the light most favorable            to the verdict-winner Boulos, consistent with record support.             Cumpiano v. Banco Santander P.R., 902 F.2d 148, 151 (1st Cir.            ________    ____________________            1994).  Wainwright held a first mortgage on two dormitory-            style apartment buildings adjacent to the University of New            Hampshire in Durham, New Hampshire.  The owner of the            apartments, after defaulting on the mortgage loan, agreed to            allow Wainwright to sell the property in lieu of foreclosure.                                             ____________________            1.  Because there is no need to distinguish Gregory W. Boulos            from The  Boulos Company  (a corporation), for  simplicity we            refer to Boulos as an individual.                                         -2-                                          2            Wainwright retained Boulos, a licensed commercial real estate            broker, to market the property.                      After a number of unsuccessful offers from other            potential buyers and a reduction in the asking price,            Wainwright accepted a $1.25 million offer from Radhey Khanna,            a real estate investor.  Wainwright agreed to finance eighty            percent of both the $1.25 million purchase price and $250,000            of planned improvements to the property.  Khanna subsequently            determined, however, that the property's cash flow was less            robust than advertised, and he withdrew his offer.                      Khanna remained interested, though, and made            several lower offers that were rejected by Wainwright.             Eventually, Wainwright accepted Khanna's offer of $1.1            million.  Boulos, who is not a lawyer, prepared a Purchase            and Sale Agreement ("the P&S") dated August 4, 1994, to            embody the accepted deal.  Boulos included in the P&S certain            language provided by Khanna's lawyer.                      Khanna had earlier learned from Boulos that            Wainwright intended to record the sale on its own books at an            inflated price, higher than the actual price to which Khanna            and Wainwright agreed.  The record suggests that Wainwright            planned to combine the $1.1 million purchase price and the            $250,000 of planned improvements, together comprising            Khanna's "total investment," and record the sale at $1.35            million.  The improvements, however, were to be completed                                         -3-                                          3            after Khanna closed the purchase of the apartments.  The            $250,000 was to be paid to the contractors that completed the            improvements, not to the bank, and thus the cost of the            planned improvements was in no sense part of the bank's            proceeds from the sale.  Khanna indicated that he did not            care what Wainwright did internally as long as it did not            increase his cost of ownership.                       Because Khanna's share of the real estate transfer            taxes might conceivably be increased if the taxing            authorities learned that Wainwright recorded an inflated            purchase price, Khanna, through his attorney, had Boulos add            this term to the contract:  "The transfer tax will be paid            equally by the Buyer & Seller except Seller will pay the            entire transfer tax on the portion of the sale price above            $1,100,000."                        Khanna also wanted to allocate a specific portion            of the purchase price to the furnishings and other personal            property in the apartments, which are depreciated for tax            purposes at a faster rate than the building.  With that            intent, Khanna had Boulos add this term:  "Purchase price of            the property consists of $250,000 in personal property and            the balance in real estate."                      The deal unraveled at the closing.  Although Khanna            had been sent draft closing documents, prepared by            Wainwright's counsel, that indicated a $1.1 million total                                         -4-                                          4            purchase price, at the closing Wainwright insisted that the            actual price was $1.35 million.  Khanna maintained that the            deal was for $1.1 million for the entire property "as is,"            and that the additional $250,000 was for planned improvements            and was not part of the purchase price.  Wainwright has put            forth two rationales for its position that Khanna was to pay            $1.35 million.  Initially, in a letter to Boulos arguing that            no commission was due, Wainwright stated that the purchase            price was Khanna's "total investment" of $1.1 million plus            $250,000 of planned improvements.  Later, Wainwright took the            position that the real property was to be sold for $1.1            million and the personal property for $250,000, relying on            the two paragraphs added by Khanna (one allocating $250,000            to personal property and "the balance" to real estate; the            other making Wainwright pay transfer tax on the portion of            the sale price above $1.1 million).  The parties were unable            to resolve their differences, and this litigation ensued.                                         II.                                         II.                                         ___                                  Prior Proceedings                                  Prior Proceedings                                  _________________                      Khanna filed a petition for specific performance            and money damages in New Hampshire state court.  Wainwright            removed the suit to New Hampshire's federal district court            under diversity jurisdiction.  Wainwright filed a            counterclaim against Khanna, and a third-party complaint            against its broker Boulos, alleging negligence, negligent                                         -5-                                          5            misrepresentation, and breach of contract by Boulos.  In            turn, Boulos counterclaimed against Wainwright, seeking            payment of his commission.                      The case was tried to the bench.  After the close            of evidence, Wainwright agreed to pay Khanna $85,000 to            settle the claims between them.  Boulos and Wainwright            continued to press their third-party claims, and after the            closing arguments, the court orally made the following            findings of fact and rulings of law:  the parties intended a            $1.1 million sale of the real and personal property, with            plans for $250,000 of post-closing improvements; the            testimony of Thomas Zocco, Wainwright's senior vice            president, was not credible, and he and Wainwright could not            have reasonably believed that the price was $1.35 million;            the evidence was insufficient to make out any of Wainwright's            claims against Boulos; and Boulos had earned his commission            by producing a ready, willing, and able buyer.  Accordingly,            the court awarded Boulos $65,460, representing his six            percent commission on the intended purchase price of $1.1            million, with a minor (and undisputed) adjustment.             Wainwright appeals.                                         -6-                                          6                                         III.                                         III.                                         ____                                      Discussion                                      Discussion                                      __________                      Wainwright articulates three issues on appeal, all            governed by New Hampshire law:                       (1) Did Boulos breach his fiduciary duty to his            client, Wainwright, by negligently preparing the P&S            agreement and by failing to provide a copy of an earlier            draft agreement that contained language that might have            avoided Wainwright's confusion?                      (2) Did the district court err in awarding Boulos a            full commission?                      (3) Was the final P&S so vague that there was no            valid contract between the parties?                        We need not address the third "issue" separately;                                    whatever relevance it has is subsumed in the first two            issues.  Whether or not there was a valid P&S contract            between Khanna (the buyer) and Wainwright (the seller) is            only tangentially relevant to this litigation between Boulos            (the broker) and Wainwright (the seller).  Although            Wainwright does not explain exactly why it raises this issue,            we see two relevant aspects.  First, contract validity            reflects on Boulos's performance in preparing the P&S            documents; but that is encompassed in Wainwright's arguments            on breach of fiduciary duty.  Second, the court based its            commission award to Boulos on its finding that there was an                                         -7-                                          7            agreement for the transfer of the property to Khanna at a            price of $1.1 million; we will deal with that finding in our            discussion of the award to Boulos.                      A. Breach of Fiduciary Duty                      ___________________________                      We note at the outset that Wainwright's third-party            complaint against Boulos did not allege any breach of            fiduciary duty, but Boulos apparently has not objected to the            gradual transformation (both at trial and on appeal) of            Wainwright's negligence claim into a breach of fiduciary duty            claim.  Thus, we will hear Wainwright's arguments as            presented.  Wainwright asserts that Boulos breached his            fiduciary duty to Wainwright in two ways:  first, by            negligently preparing the P&S, and, second, by breaching the            duty to present all relevant information to Wainwright.                      We first address the alleged negligent preparation            of the P&S.  The trial court orally ruled on Wainwright's            negligence/breach of fiduciary duty claim against Boulos as            follows:                      I'm not sure what the standard is in                      terms of a real estate broker who's not a                      lawyer drafting a contract for the sale                      of real estate.  Technically I'm not sure                      a real estate broker should be drafting a                      contract for the sale of real estate.                       Certainly not in New Hampshire, I think                      he shouldn't be.  I think that's                      practicing law without a license.  But to                      the extent Mr. Boulos prepared this                      contract and the bank hasn't presented                      evidence regarding the applicable                      standard of care or evidence suggesting                      that he didn't meet that standard of                                         -8-                                          8                      care, I'm inclined to not find a breach                      of any duty.  Certainly I don't find a                      breach of duty of undivided loyalty or                      breach of the agency relationship by Mr.                      Boulos.  There's no evidence to suggest                      that he didn't act completely properly.                       He provided the bank with all relevant                      information.                           I don't think Mr. Zocco                      [Wainwright's senior vice president] can                      reasonably claim to have been confused by                      the proposed sale terms that Mr. Boulos                      transmitted to him from Mr. Khanna.  And                      while this contract certainly isn't                      perfect and could certainly be better,                      it's not inadequate.  And its meaning I                      think is reasonably determined from the                      contract and the evidence presented.                      Earlier, in Wainwright's closing argument, the            district court asked whether Wainwright needed expert            testimony on a broker's standard of care in preparing a P&S            agreement and whether Boulos breached it.  The court's            questioning clearly indicated its belief that expert            testimony was required.  But Wainwright's attorney replied            that the testimony of Boulos -- who had substantial expertise            in his field -- was sufficient to establish the standard of            care, and that the ambiguous contract documents themselves            were sufficient to show a breach of that standard.  The court            never expressly ruled on whether expert testimony was needed.                       On appeal, both parties have assumed that the            district court required expert testimony, even though it only            stated that "the bank has not presented evidence" on the            standard of care or Boulos's breach thereof.  The parties                                         -9-                                          9            exert much effort arguing whether or not an expert was            required.  We need not decide that issue, however.  Viewing            the record independently, and assuming for the sake of            argument that no expert was needed, we hold that Wainwright            nonetheless failed to present sufficient evidence of either            the applicable standard of care or that Boulos breached it.                      Wainwright's burden of proving the standard of care            applicable to the allegedly ambiguous P&S, and a breach            thereof, is difficult -- perhaps impossible -- given the            court's well-supported finding that Wainwright was "planning            on accounting for the sale in some manner other than at the            face value of the contract."  The record does not indicate            whether Zocco and Wainwright hoped to confound its regulators            or effect some other purpose.  It is obvious, though, that            Zocco injected a significant element of confusion and            duplicity into the transaction.  A vague and ambiguous P&S            contract would seem to be exactly what Wainwright wanted,            giving it the "flexibility" to record an inflated price.  The            evidence also showed that Boulos probably understood as much.                       Moreover, the buyer, Khanna, felt compelled to add            language to protect himself from possible tax increases            resulting from Wainwright's strategy, and Wainwright points            to that same language as a primary source of its purported            confusion.  Given the context in which Wainwright asked            Boulos to work, the factfinder must ask:  What is the                                         -10-                                          10            standard of care when the client wants to play games with the            figures?  And is facial ambiguity a breach of the standard            under such circumstances?                      Wainwright asked the district court to rely on the            testimony of Boulos to establish the standard of care.  The            only pertinent testimony he provided was this:                      [Bank's lawyer]:  When you agree to act                      as an agent, do you agree with me that                      you accept certain responsibilities?                      [Boulos]:  Yes.                      . . . .                      [Bank's lawyer]:  And you agree that you                      owe a responsibility to act in a                      professional manner when marketing the                      property?                      [Boulos]:  Correct.                      [Bank's lawyer]:  You have a                      responsibility and obligation to                      communicate all information that you                      learn from prospective purchasers back to                      your client, the seller.                      . . . .                      [Bank's lawyer]:  When you draw up a                      purchase agreement on behalf of a seller                      such as Wainwright, you have a                      responsibility to do that carefully.                      [Boulos]:  Correct.                      [Bank's lawyer]:  To make sure that the                      language in there is precise and reflects                      the agreement of the parties.                      [Boulos]:  That's correct.                                         -11-                                          11            Thus, all the court heard about the standard of care was that            the broker should "communicate all information," "act in a            professional manner," draft the agreement "carefully," and            provide "precise language" that "reflects the agreement of            the parties."                        As the district court ruled, that limited testimony            is insufficient to establish the applicable standard of care            in a complex commercial transaction involving real and            personal property, a financing commitment for both the            purchase and the post-purchase improvement of the property,            and tax consequences that may compel a buyer to allocate the            price in a way that is not necessarily reflective of actual            economic value.  And that testimony is certainly not enough            where the seller has indicated its intent to record a sale            price greater than the actual consideration.  We hold, even            assuming that no expert testimony was necessary, that            Wainwright failed to establish the standard of care owed by            Boulos.  Thus, the district court properly denied            Wainwright's claim that Boulos negligently prepared the P&S            agreement.                      Not only did Wainwright fail to establish the            broker's standard of care in this context, it also failed to            present evidence sufficient to allow a reasonable factfinder            to conclude that Boulos breached any duty.  First, without            evidence of the standard of care, there is no basis upon                                         -12-                                          12            which a factfinder could determine breach.  Moreover, we are            unpersuaded by the argument that the contract itself            indicates a breach of duty.  Wainwright apparently argues            that the preparation of this contract was per se negligent                                                      ___ __            because it was found by the district court to be ambiguous,            requiring extrinsic evidence to interpret the parties' intent            on a fundamental term, the price.  We decline to hold that a            broker who prepares a contract that is facially ambiguous            about the price is necessarily negligent, especially given            the facts and circumstances of this case.                      Wainwright also claims that Boulos breached his            duty to present all relevant information about the            transaction, asserting that Boulos should have sent it an            earlier proposed contract that was never executed by Khanna            because it contained an error in the purchase price.             Specifically, after Wainwright orally accepted Khanna's            second, reduced offer of $1.1 million, Boulos drew up a            purchase and sale agreement and sent it to Khanna.  Boulos            testified that this agreement contained a typographic error,            indicating a purchase price of $1.35 million, mistakenly            reflecting an earlier offer from another prospective            purchaser.  Because of this mistake, Khanna returned the            unexecuted document to Boulos.  Wainwright contends that            certain handwritten notations made by Khanna's attorney on            that unexecuted contract would have alerted Wainwright to                                         -13-                                          13            Khanna's mistaken view of the deal.  The unexecuted contract            included a term stating that the purchase price consisted of            "$250,000 in personal property."  A handwritten notation            added to that term the following:  "and $850,000 for real            estate."  This was a clearer allocation than was included in            the final P&S at issue, which provided that "the purchase            price of the property consists of $250,000 in personal            property and the balance in real estate."                      New Hampshire law imposes a duty on a broker who            has a conflict of interest relating to the transaction to            make a full disclosure of "`all facts which the agent knows            or should know would reasonably affect the principal's            judgment.'"  Reinhold v. Mallery, 599 A.2d 126, 129 (N.H.                         ________    _______            1991) (quoting Restatement (Second) of Agency   390).  In                           ______________________________            this case, there is no allegation whatever that Boulos was            acting for his own account or had any other conflict of            interest.                        The only authority Wainwright presents for its            position states that a broker must disclose "all facts which            are or may be material to the matter . . . or which might            affect the principal's rights and interests or influence his            action."  12 Am. Jur. 2d Brokers   89 (1964), cited in                                     _______              ________            Reinhold, 599 A.2d at 129.  We assume for the sake of            ________            argument that a New Hampshire court would follow that rule            even where the broker has no conflict of interest.                                         -14-                                          14                      The trial court expressly, and supportably, found            that Boulos "provided Wainwright with all relevant            information."  We hold that the judge did not clearly err in            its fact-bound determination that the unexecuted contract was            not relevant.  See Juno SRL v. S/V Endeavour, 58 F.3d 1, 4                           ___ ________    _____________            (1st Cir. 1995) (explaining that clearly erroneous standard            applies to findings of fact, as well as mixed questions of            law and fact, unless the latter are based on mistaken            impression of applicable legal principles).  The district            court's finding that Wainwright had intended to sell all the            real and personal property for $1.1 million was supported by            the evidence.  Thus, Wainwright and Khanna were actually in            agreement about the intended purchase price, and the            unexecuted agreement could not have alerted Wainwright to any            problems or confusion.  Therefore, we agree with the district            court that the unexecuted contract was not relevant to the            transaction, in that it would not have influenced            Wainwright's actions or affected its judgment.                       Accordingly, we affirm the district court's ruling            that Wainwright failed to prove negligence or any other            breach of fiduciary duty on the part of Boulos.                      B. The Award of Commission to Boulos                      ____________________________________                      Wainwright makes two arguments in challenging the            award of a $65,460 commission to Boulos: (1) Boulos must            forfeit his commission because he breached his fiduciary duty                                         -15-                                          15            to his client, Wainwright; and (2) Boulos is entitled to a            commission on the sale of only the real property, and not the            personal property included in the sale.  We also consider            Wainwright's enigmatic argument that there was no valid            purchase and sale agreement, and thus (we assume the argument            goes), there can be no commission award to Boulos.                      We have already rejected Wainwright's claim that            Boulos breached his fiduciary duty to Wainwright, thus            Wainwright's first argument must fail.  The second argument            also fails, because the district court's finding that            Wainwright intended to pay Boulos a commission on the entire            sale of both real and personal property is supported by the            evidence and is not clearly erroneous.  Where a contract is            ambiguous on its face, extrinsic evidence is admissible to            prove the parties' intent, Spectrum Enterprises, Inc. v.                                        __________________________            Helm Corp., 329 A.2d 144, 146-47 (N.H. 1974), and the trier            __________            of fact's determination controls unless clearly erroneous,             Gel Sys., Inc. v. Hyundai Eng'g & Constr. Co., 902 F.2d 1024,            ______________    ___________________________            1027 (1st Cir. 1990).2  Indeed, the record suggests that,                                            ____________________            2.  We  note that Wainwright  could argue, but  did not, that            the court  erroneously considered  extrinsic evidence  of the            parties' intent  regarding the commission,  when the  listing            agreement   between   Wainwright  and   Boulos  unambiguously            specified that the commission was payable on the sale of real            estate, not  personal property.  But  Wainwright never raised            that argument  before the  district court,  and it  cannot be            raised  for the first  time on appeal,  even if  the bank had            attempted to do so.  See Roche v. John Hancock Mut. Life Ins.                                 ___ _____    ___________________________            Co.,  81 F.3d 249, 257  n.6 (1st Cir.  1996) (explaining that            ___            arguments may not be raised for the first time on appeal).                                         -16-                                          16            from the outset, Wainwright intended that Boulos market the            entire property, and because the units were operated as            college dormitories, the furnishings were an integral part of            the property.  There is no evidence of any discussion between            Boulos and Wainwright about allocating the purchase price            between real and personal property, and the evidence            indicates that the allocation was made solely by Khanna based            on tax concerns.                        Finally, Wainwright's argument that there was no            valid agreement between Wainwright and Khanna lacks merit.             Wainwright argues that because the written documents were            ambiguous, there was no "meeting of the minds" and therefore            no valid agreement.  From that premise, Wainwright apparently            wants us to conclude that Boulos should get no commission, or            (somewhat differently) that it is impossible to calculate the            correct commission because the parties never agreed on a firm            sale price.  We reject the premise, however, and therefore            need not address the possible conclusions.  Wainwright's            argument totally ignores the extrinsic evidence that was            presented, which supported the court's finding that            Wainwright and Khanna had indeed intended a sale for $1.1            million.   We see no error -- and certainly no clear error --            in the district court's finding that Wainwright understood            and accepted Khanna's offer of $1.1 million.                                         -17-                                          17                                         IV.                                         IV.                                         ___                                      Conclusion                                      Conclusion                                      __________                        For the foregoing reasons, the decision of the            district court is affirmed.  Costs to the appellee.                              ________                                         -18-                                          18
