Legal Case Studies: January 2021

Writen by Lisa Harms Hartzler |

Published: December 15, 2020 |

Reading Time: 10 min

Lisa Harms HartzlerResearch and analysis by Lisa Harms Hartzler,
Sorling Northrup Attorneys

Court finds broker commission was due when oral contract for sale and termination of listing agreement occurred on the same day

In Salvati v. Deloach Brokerage, Inc., — S.E.2d – (Ct. App. Ga. Oct. 23, 2020), a listing broker was granted summary judgment against the seller of his residence after the seller refused to pay a commission. The seller appealed, arguing that he had unilaterally terminated the exclusive listing agreement with the broker prior to entering into a valid contract with the buyer.

The listing agreement provided that a commission would be owed on any sale or exchange while the agreement was in effect. In the event the agreement was terminated by the seller, a “protected period” would start as of the date of termination. During the protected period, the broker would be owed a commission only if the buyer learned of the property during the term of the agreement as a result of the efforts of the broker. In this case, the seller entered into an oral agreement in the morning with a buyer who was unknown to the broker. He terminated the listing agreement in the afternoon of the same day.

The seller argued first that he did not owe a commission because his oral agreement with the buyer was not legally enforceable until it was reduced to writing. Consequently, he asserted, he had not agreed to an enforceable sale before he terminated the listing agreement. The court found that argument unpersuasive. The Statute of Frauds, which requires an agreement for the sale of property to be in writing in order to be enforceable “applies only to the parties to the agreement.”  As a third party to the oral agreement between the seller and buyer, the broker could rely on that agreement as an event triggering a sales commission.

Second, the seller also argued that it did not matter whether he agreed to sell his property right before or immediately after he terminated the listing agreement because the protected period started on the date that he terminated it. In other words, as of that day the protected period began and the broker was entitled to a commission only if the buyer learned of the property as a result of the broker’s efforts. The court did not buy that argument either. “Where the precise hour when an act is done is material in ascertaining and deterring the relative rights of persons, whenever it becomes important to the ends of justice, the court will consider fractions of a day (i.e., the time) rather than simply the date on which an event occurred.”  The court found that the specific time at which the listing agreement was terminated was material in determining the parties’ rights and avoiding an injustice.

In this case, the seller had clearly entered into an oral contract to sell his property prior to terminating the listing agreement. The court concluded that the broker was entitled to a commission under the terms of the listing agreement.

Property owners cannot dispute ordinance violations on basis of disability without actually requesting an accommodation under ADA or FHAA

In City of Harvard v. Nevitt, 2020 IL App (2d) 191126U, the defendant was fined $1,250 and ordered to pay court costs for maintaining a public nuisance by keeping a dumpster on his residential property in violation of a city ordinance. The defendant asserted that the city should have granted his request for a reasonable accommodation because his wife’s disabilities prevented her from hauling trash cans to the curb.

Title II of the Americans with Disabilities Act (ADA) prohibits public entities from denying public services to, or otherwise discriminating against, persons with qualified disabilities on the basis of their disabilities. It requires public agencies to make “reasonable modifications in policies, practices, or procedures when the modifications are necessary to avoid discrimination.”  Similarly, the Fair Housing Amendments Act (FHAA) makes it unlawful to discriminate against any person in the provision of services or facilities in connection with a dwelling because of a handicap and requires reasonable accommodations. “The reasonable accommodation requirements under both the ADA and the FHAA prohibit the enforcement of zoning ordinances in a way that deprives people with disabilities equal access to housing and requires municipalities to grant variances as necessary.”

To prevail on a reasonable accommodation claim, a party must show four things:  (1) she is a person with a disability under the ADA or FHAA; (2) she requested a reasonable accommodation for the disability; (3) the accommodation was necessary; and (4) the municipality refused to make the accommodation.

At trial, the defendant and his wife testified that they had informed the city’s code enforcement officer, in person and in writing, of their desire to maintain a dumpster as an accommodation for the wife’s disability. The officer testified that the defendant never requested an accommodation for that reason, but had asserted that a dumpster was needed for the wife’s business. Given that the defendant had continued to roll the standard-issue trash bins to the curb in addition to having the dumpster and he could not produce a copy of the written correspondence he claimed to have sent to the code enforcement officer, the trial judge concluded that the officer’s testimony was more credible. He held that the defendant had not actually requested an accommodation and did not, therefore, satisfy that requirement for a claim under the ADA or FHAA.

The appellate court found that the trial judge’s credibility determination was neither arbitrary nor unreasonable and affirmed judgment against the defendant.

Seller was bound under contract even though husband did not sign

In Franklin v. Nanavati, 2020 IL App (2d) 190710, a couple agreed to sell their residence in Highland Park for $652,000. The home was occupied solely by the wife. Although the husband had lived in California for several years, he was the contact person with the brokerage company listing the residence for sale and was involved in determining the listing price. Significant negotiations over the price and closing date occurred among the plaintiffs and defendants. All the parties believed title was held by the wife alone and only she signed the purchase contract offered by the plaintiffs. Shortly thereafter, the husband became dissatisfied with the purchase price and tried to retract the contract.

The husband’s attorney then discovered that during a prior refinancing, the wife had quitclaimed the property from her to her husband and herself as a means of facilitating his participation in obtaining a mortgage. The deed was never recorded. Based on this newly-found information, the husband believed his interest in the property gave him a right to renegotiate the sale. He demanded a higher price of $725,000 and a later closing date. His attorney represented that the wife was willing to convey her interest but the husband would not do so unless the buyers met his demands. No closing occurred.

The plaintiffs sued both the wife and husband for breach of contract and were awarded damages and attorney fees. The defendants appealed. They argued that the real estate contract was invalid because it was not signed by all persons with an interest to be conveyed. The court disagreed.

The core requirements for the formation of a contract are an offer, acceptance, and consideration. As the court explained, the grantor of real estate does not need to have title at the time the contract is made—it is the promise to convey title that is the basis of the contract. Of course, without the consent of all legal owners in the sale of real estate, the buyer cannot demand specific performance if the seller is unable to make good on that promise. Nevertheless, a buyer can sue for damages for breach of contract. Consistent with this rule, a single seller may be bound by accepting an offer to sell more than the interest he or she holds and will be liable for failing to keep that promise to convey good title.

In this case, none of the parties was aware of the wife’s incomplete interest in the property at the time the contract was signed. Therefore, the only contract that they could have formed was one for the entire interest. The wife was, therefore, bound to convey the entire interest and, failing to do so, breached the contract and owed damages to the plaintiffs.

Broker waived right to commission by encouraging seller to negotiate directly with buyer

In George Clift Enterprises, Inc. v. Oshkosh Feedyard Corporation, 366 Neb. 775 (2020), the defendant owner, “Oshkosh,” signed a one-year exclusive listing agreement with the plaintiff real estate broker and its agent, “Bretz,” to sell a feed lot for $4.5 million. The agreement expired on July 15, 2014, and the subsequent protection period expired on September 15. A contract for sale was signed in December. No commission was paid.

The plaintiff broker sued to recover a commission under several theories but the trial court granted summary judgment in favor of the defendant. The plaintiff appealed. Among the various issues analyzed by the appellate court was whether the trial court erred in awarding attorney fees to the defendant because the plaintiff’s suit was frivolous. To rule on that issue, the appellate court reviewed the substance of the broker’s claims under the provisions of the listing agreement. One of those provisions provided that the owner “agrees to refer all prospective buyers to Broker and agrees not to negotiate with such prospective buyers.”  The broker claimed the seller breached its duty to refrain from negotiating with prospective buyers.

In this case, a group of individuals was looking for a feedyard for their dairy heifers. “Betley,” a member of the group, contacted Bretz in April 2014 and indicated his group’s interest. Bretz suggested several feedyards on the market and mentioned Oshkosh, but did not recommend it. At the same time, a friend of another member of the group, “Matzke,” separately recommended Oshkosh and told Matzke to contact its president, “Jessen.”  Jessen gave Betley, Matzke, and a third member, “Braun,” a tour of the feedyard in May 2014. At that time, they made clear to Jessen that they had just started looking at different lots and were in no position to make an offer.

Jessen advised Bretz of his communications with the group regarding a possible sale. Bretz raised no objection. In June, Bretz emailed Braun to recommend a feedyard in Kansas. He also stated:

Regarding the Oshkosh yard, there is nothing that would help more in resolving the owner’s and my challenge over the exclusive listing than getting the yard sold. Please continue forward on that project as long as it is viable to you. The owner and I will deal with the listing agreement.

Braun also said the broker told him to continue discussions about the sale of Oshkosh with Jessen and that the broker and Jessen “would work things out.”  However, the broker and Jessen apparently did not speak about the matter.

In the summer of 2014, the group decided to try to purchase Oshkosh and in August formed an LLC, which included Jessen as a member. A purchase agreement was finalized in December and authorized by the new LLC.

Did Oshkosh violate the listing agreement regarding referring prospective purchasers and not negotiating with them? Obviously not, according to the Nebraska appellate court. “A written contract may be waived in whole or in part, either directly or inferentially, and the waiver may be proved by express declarations manifesting the intent not to claim the advantage, or by so neglecting and failing to act as to induce the belief that it was the intention to waive.”

Because Bretz was clearly aware of Betley, Matzke and Braun “and in fact encouraged them to negotiate directly with Jessen,” the court concluded Bretz waived the seller’s obligation to refrain from negotiating with prospective purchasers. The court found the broker’s claim for breach of contract “so wholly without merit as to be ridiculous.” It agreed with the trial court that this cause of action of the broker’s suit was frivolous and supported awarding attorney fees to the defendant.

About the writer: Lisa Harms Hartzler is Of Counsel at Sorling Northrup Attorneys in Springfield. She graduated from the American University Washington College of Law in 1978 and began her legal career in Chicago. She has provided legal support for the Illinois REALTORS’ local governmental affairs program since she joined Sorling in 2006 and focuses her practice on municipal law, general corporate issues, not-for-profit health care law, and litigation support.

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