Commercial Real Estate Broker’s Judgment Against Property Owner Upheld Where Owner Negotiated Deal Behind Broker’s Back

In AMA v. Kaplan Realty, Inc., 2015 IL App(1st) 143600, the court looked to the common dictionary definitions of “exclusive” and “refer” as they apply to an exclusive real estate listing agreement to find that a commercial real estate broker could recover unpaid commissions from a property owner who negotiated a property sale without the broker’s knowledge.

Here is the relevant chronology: the plaintiff property owner hired the defendant broker to sell a multi-unit apartment building.  The parties signed an exclusive listing agreement running from January 2009 – January 2010 that required the owner to refer all purchase inquiries to the broker and that provided for a 5% commission on the gross sale price from any buyer during the term of the agreement.

About two months before the agreement expired, the owner started dealing directly with a prospective buyer whom the broker had earlier introduced to the owner. The owner and buyer continued to discuss the details of the purchase through the end of the contractual listing period.  Ultimately, some 18 days after the agreement expired, the owner and buyer signed a $6.75M sales contract for the parcel.  After learning of the sale, the broker recorded a lien for 5% of the sale price.

The plaintiff filed a slander of title suit (arguing that the broker lien clouded property title) and the broker filed a breach of contract counterclaim for his 5% commission.

The trial court entered summary judgment for the broker for nearly $500K and the owner appealed.

Affirming, the First District rejected the owner’s argument that since the broker “knew about” the property’s eventual buyer, the owner complied with the listing contract.  The court noted that the contract required the owner to “immediately refer” any prospect who contacted the owner for any reason and there was no exception for prospects known to the broker.

Looking to the Merriam-Webster’s College Dictionary, 11th edition (“MWCD”) “refer” means “to send or direct for treatment, air or information, or decision.”  Under this definition, the owner was obligated to send anyone who contacted the owner about the property to the broker.  MWCD, p. 1045, 11th ed. 2006.

The court also noted that the listing agreement was an exclusive one.  “Exclusive” in the listing contract context denotes “limiting or limited to possession, control or use by a single individual or group.”  MWCD, p. 436 (11th ed. 2006).  Under this definition, the court found that the subject listing agreement gave the broker the sole right to market the property – even to the exclusion of the owner.

Affirming the money judgment for the broker, the court found that the owner’s sustained pattern of excluding the broker from communications with the buyer and failing to apprise the broker of the owner’s contacts with the buyer supported the trial court’s half-million dollar judgment for the broker.

Afterword:

This case represents a straightforward application of contract interpretation principles to merit what the court believes is a fair result for the broker.  The owner’s pattern of bypassing the broker to contact the buyer directly, coupled with the fact that the purchase contract was signed so soon after the listing agreement terminated was a suspicious factor weighing in favor of upholding the money judgment against the owner.

I’m left wondering why the broker didn’t file suit to foreclose his broker’s lien.  As I’ll write in a future post, the Illinois Commercial Real Estate Broker Lien Act, 770 ILCS 15/1 et seq. (“Broker Act”), arms a commercial broker who secures a buyer (or tenant) but isn’t paid with a strong remedy.  The successful Broker Act plaintiff can recover her attorneys’ fees against the owner or buyer, whatever the case may be. 770 ILCS 15/5, 10, 15.

 

Sole Shareholder Of Dissolved Corporation Can Sue Under Nine-Year Old Contract – Eludes Five-Year ‘Survival’ Rule

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Haskins, d/b/a Windows Siding Unlimited, Inc. v. Hogan, 2015 IL App (3d) 140609-U – A Synopsis

In 2003, Plaintiff’s former company entered into a written contract with defendant to install windows on defendant’s home. Defendant failed to pay.

The windows company was administratively dissolved in 2005 by the Illinois Secretary of State.  Seven years later, in 2012, Plaintiff – the sole shareholder of the windows company – assigned the company’s claim against the defendant to himself and sued defendant for breach of contract.

The court granted the defendant’s motion for summary judgment and found that the claim was untimely under Illinois’ five-year survival period for a dissolved corporation’s claims.  Plaintiff appealed.

Reversing the trial court, the appeals court first noted that a dissolved corporation’s assets belong to the former shareholders, subject to the rights of creditors.

Section 12.80 of the Business Corporation Act provides that an administrative dissolution of a company does not take away or effect any civil remedy belonging to the corporation, its directors, or shareholders, for any pre-dissolution claim or liability.

The lone limitation on this rule is that suit must be filed on the pre-dissolution claim within five years of the dissolution date. 805 ILCS 5/12.80.

This five-year “survival period” represents the outer limit for lawsuits by or against dissolved corporations.  The purpose of the five-year survival period is to allow the corporation to wrap up its affairs.  The court clarified that the five-year time span applies both to voluntary and involuntary dissolutions.

There are two exceptions to the five-year rule that allow a shareholder to file suit outside the five-year period.  They are: (1) where the shareholder is a direct beneficiary of the contract; and (2) where the shareholder seeks to recover a fixed, easily calculable sum.  (¶ 17).

To meet the first exception, the shareholder must show the parties manifested an intent to confer a benefit on the third party/shareholder. Here, this first exception didn’t apply since there was nothing in the contract suggesting an intent to benefit the plaintiff individually: the windows contract was clearly between a corporate entity (the windows company) and the defendant.

The second exception did apply, however.  The contract was for a fixed sum – $5,070.  As a result, the court found the 10-year limitations period for breach of written contracts applied (instead of the 5-year survival statute) and the plaintiff’s suit was timely (he sued in 2012 for a 2003 breach – within 10 years.) (¶¶ 17-20); 735 ILCS 5/13-206.

Comments: An interesting application of the five-year corporate survival rule to the small claims context.  It appears to be wrongly decided though.  The plaintiff clearly didn’t establish the first exception to the five-year rule: that he was a third-party beneficiary of the 2003 windows contract.  Since he failed to establish both exceptions, the five-year rule should have applied and time-barred the plaintiff’s claim.

Maybe it’s because the plaintiff was the sole shareholder of the defunct corporation that the court collapsed the two exceptions.  Regardless, it remains to be seen whether this decision is corrected or reversed later on.

Facebook Posts Not Hearsay Where Offered To Show How Ex-Wife Presented Relationship To Others – Illinois Case Note

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Reversing a family law judge’s decision to terminate ex-spousal maintenance, the Second District appeals court in In re Marriage of Miller, 2015 IL App(2d) 140530 delves into the foundation requirements for getting Facebook pages into evidence and again highlights the crucial role social media plays in litigation in this digitally saturated culture.

The trial court granted the ex-husband (“Husband”) motion to terminate maintenance payments to his ex-wife (“Wife”) based on her multiple Facebook posts that she was in a relationship and (presumably) living with another man.  Illinois divorce law posits that maintenance payments must cease when the recipient remarries or cohabitates with another on a continuing basis.

Since the Facebook posts revealed the Wife frequently trumpeting her new relationship, the court found that the policies behind maintenance payments would be compromised by allowing the Wife to continue receiving payments from Husband.

The Wife appealed, arguing that the trial court shouldn’t have allowed her Facebook posts into evidence.

Held: Reversed (but on other grounds).  Wife’s social media posts were properly authenticated, not hearsay and any prejudice to her didn’t substantially outweigh the posts’ probative value.

Rules/reasoning:

– To enter a document into evidence at trial or on summary judgment, the offering party must lay a foundation for it;

– The party offering the document into evidence – including a document to impeach (contradict) a witness on the stand – must authenticate the document through the testimony of a witness who has personal knowledge sufficient to satisfy the court that the document is what the proponent claim it is;

– To lay a foundation for an out-of-court statement (including a document), the party attempting to get the statement into evidence must direct the witness to the time, place, circumstances and substance of the statement;

– Hearsay is a statement, other than made by the declarant while testifying at trial or hearing, offered in evidence to prove the truth of the matter asserted;

– When the making of statement is the significant fact, hearsay isn’t involved (ex: the mere fact that a conversation took place isn’t hearsay);

Here, the court found that the Facebook posts weren’t offered for their truth.  Instead, they were offered to illustrate the way the Wife was portraying her current relationship to others.  The court deemed the posts relevant to the issue of how “public” or “out in the open” the Wife was about the relationship. 

And since the Husband didn’t offer the posts for the truth of their contents (that Wife was in fact living with someone and so disqualified from further maintenance payments) but instead to show the court the manner in which the Wife presented the relationship to others, the court properly allowed the posts into evidence.

The Second District also agreed with the trial court that the posts didn’t unfairly prejudice the Wife.  Indeed, the court characterized the posts as “bland”, “cumulative” and less effective than the parties’ live testimony.

(¶¶ 33-38)

The Wife still won though as the appeals court reversed the trial court’s decision to terminate Husband’s maintenance obligations.  The court found that more evidence was needed on the specifics of the Wife’s existing relationship including whether it was continuing and conjugal enough to constitute a “de facto marriage” (as opposed to a “dating” relationship only) and thus exclude the Wife from further maintenance payments from Husband.

Take-aways:

Hearsay doesn’t apply where out-of-court statement has independent legal significance;

Facebook posts authored by a party to lawsuit will likely get into evidence unless their prejudice outweighs their probative value;

Where social media posts are authored by third parties, it injects another layer of hearsay into the evidence equation and makes it harder to get the posts admitted at trial.