Procuring Cause Real Estate Broker Entitled to Quantum Meruit Commission – IL First Dist.

Halpern v. Titan Commercial, LLC, 2016 IL App (1st) 152129 examines commercial broker’s liens, the procuring cause doctrine and the quantum meruit remedy under Illinois law.

The Plaintiff property buyer sued to remove the defendant’s real estate broker’s lien after plaintiff bought Chicago commercial property from an owner introduced by the broker a few years prior.  Over a two-year span, the broker tried to facilitate plaintiff’s purchase the property by arranging multiple meetings and showings of the site.  The plaintiff ultimately bought the property through a consultant instead of the broker defendant. 

The plaintiff sued to stop the broker from foreclosing its broker’s lien and to quiet title to the parcel.  After the court entered a preliminary injunction for the plaintiff, the broker counterclaimed for breach of contract and quantum meruit.  After a bench trial, the broker was awarded $50,000 on its quantum meruit claim and Plaintiff appealed.

Result: Judgment for broker affirmed.

Rules/reasoning:

The court first upheld the trial court’s denial of the plaintiff’s claims for attorneys’ fees against the broker based on  Section 10(l) of the Commercial Broker’s Lien Act, 770 ILCS 15/1, et seq. (the “Act”).  This Act section provides that a prevailing party can recover its costs and attorneys’ fees.  A prevailing party is one who obtains “some sort of affirmative relief after [trial] on the merits.”

The appeals court held that the plaintiff wasn’t a prevailing party under the Act simply by obtaining a preliminary injunction.  Since the preliminary injunction is, by definition, a temporary (and preliminary) ruling, there was no final disposition of the validity of the defendant’s broker’s lien.

The court then focused on the procuring cause doctrine and related quantum meruit remedy.  Under the procuring cause rule, where a broker’s efforts ultimately result in a sale of property – even if consummated through a different broker – the first broker is the procuring cause and can recover a reasonable commission.

A broker is the procuring cause where he brings a buyer and seller together or is instrumental in the sale’s completion based on the broker’s negotiations or information it supplies. (¶ 18)

A procuring cause broker is entitled to a commission under a quantum meruit theory where a party receives a benefit from the broker’s services that is unjust for that party to retain – even where there’s no express contract between the parties.

Here, the plaintiff only knew of this off-market property based on defendant showing it to her and introducing her to the property owner.  Had it not been for defendant’s actions, plaintiff would have never known about the property.

What About Broker Abandonment?

A defense to a procuring cause claim is where a broker abandons a deal.  To demonstrate broker abandonment, a purchaser must offer evidence of the broker’s discontinuing its services but also the purchaser’s own abandonment of its intent to buy the property.

Here, neither the purchaser nor the broker exhibited an intention to abandon the deal.  The purchaser eventually bought the property and the broker continued trying to arrange plaintiff’s purchase for two-plus years.

The court credited the broker’s evidence as to a reasonable commission based on the property’s $4.2M sale price.  Two experts testified for the broker that a reasonable commission would be between 1% and 6%.  The trial court’s $50,000 award fell well within that range. (¶¶ 22-24)

Afterwords:

1/ Where a broker introduces a plaintiff to property she ultimately buys or the broker’s information is integral to the plaintiff’s eventual purchase, the broker can recover a reasonable commission even where plaintiff uses another broker (or buys it herself). 

2/ Quantum meruit provides a valuable fall-back remedy where there is no express contract between a broker and a buyer.  The broker can recover a reasonable commission (based on expert testimony, probably) so long as it proves the buyer derived a benefit from the broker’s pre-purchase services.

 

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.