Illinois Real Estate Broker Gets Commission Money Judgment Where She Offers Ready, Willing and Able Home Buyer to Owner – IL 2d Dist.

A home seller’s self-styled ‘sarcastic’ emails and change of heart about whether to sell her home wasn’t enough to escape her obligation to pay her real estate broker’s commission, the Illinois Second District recently ruled.

In Clann Dilis, Ltd. v. Kilroy, 2015 IL App (2d) 15-0421-U, an unpublished case, the plaintiff broker and homeowner defendant signed an exclusive listing agreement to sell the defendant’s home that she co-owned with her ex-husband.  The defendant’s divorce case with her ex was pending at the time the parties’ signed the listing agreement.

After some back and forth concerning the sales price, the broker ultimately found a buyer for the home willing to pay what was in the defendant’s price range.  When the defendant rejected the offer, deciding instead to keep the home, the broker sued to recover her contractual commission – 6% of the sale price to the buyer.

After a bench trial, the circuit court entered a money judgment for the plaintiff of about $13K.  The homeowner defendant appealed on the basis that the prospective buyer lacked financial ability to consummate the home purchase.

Held: affirmed

Q: Why?

A: The proposed buyer located by the plaintiff offered $209,000 for the defendant’s home.  This price was within the range previously authorized by the defendant in emails to the broker.  E-mail evidence at trial showed the plaintiff willing to go as low as $199,000 in marketing the property.  The defendant’s husband moved in the divorce case to compel the defendant to accept the offer and the divorce court granted the motion.  Still, the defendant refused to sell; opting instead to buy out her ex-husband’s interest in the property.

Plaintiff then sued the defendant for breach of contract claiming she procured a suitable buyer for the property at a price assented to by the defendant.

Affirming the trial court’s judgment for plaintiff’s 6% commission, the Second District pronounced some key contract law principles that govern a real estate broker’s claim for a commission.

A breach of contract plaintiff must establish (1) the existence of a valid and enforceable contract, (2) performance by the plaintiff, (3) breach of contract by the defendant, and (4) damages resulting from the breach.  Whether a breach has occurred is a question of fact that is left to the trial court’s decision.  A court’s determination that a defendant breached a contract can’t be overturned unless the breach finding is unreasonable, arbitrary or not based on the evidence presented. (¶ 38.)

In the broker commission context, a broker earns her commission where she produces a ready, willing and able buyer.  A buyer is deemed ready, willing and able if he (1) has agreed to buy the property, and (2) has sufficient funds on hand or is able to secure the necessary funds within the time set by the contract.  A buyer lacks sufficient funds if he is depending on third parties to supply the funds and that third party isn’t legally bound to provide the funds to the buyer.

In addition, the sale to the would-be buyer doesn’t have to be consummated for the broker to be entitled to her commission.  As long as the broker introduces a buyer that is able to buy the property on terms specified in a listing agreement, the broker has a right to her commission.  (¶¶ 39, 49-50.)

Here, the trial court found that the buyer located by the plaintiff was a ready, willing and able one.  The court pointed out that the buyer signed a contract to buy the property for $209,000, the buyer had obtained a preapproval letter from a mortgage lender committing to the purchase funds, and the defendant authorized the plaintiff to sell the property for less than $209,000.  Taken together, these factors supported the trial court’s ruling that the broker furnished an acceptable buyer and was entitled to her commission.

Afterwords:

This case’s simple fact pattern provides a clear illustration of the procuring cause doctrine: so long as a real estate broker provides a ready, willing and able buyer, she can recover her commission; even if the sale falls through.

The case also showcases the factors a court looks at when determining whether a given real estate buyer is financially capable of consummating a purchase.

Finally, from the evidence lens, the Kilroy case highlights the importance of e-mail admissions from a party and how they can often make or break a litigant’s case at trial.

 

Trademark Infringement – The Irreparable Harm and Inadequate Remedy at Law Injunction Elements

The Northern District of Illinois recently pronounced the governing standards for injunctive relief in a franchise dispute between rival auto repair shops.

SBA-TLC, LLC v. Merlin Corp., 2015 WL 6955493 (N.D.Ill. 2015) sued its former franchisee for trademark infringement after the franchisee continued using the plaintiff’s signage, logo and design plans after the franchisor declared a default and terminated the franchise.

The court granted the plaintiff’s motion for a preliminary injunction based on the following black-letter basics:

To obtain injunctive relief, the moving party must show (1) he is likely to succeed on the merits, (2) the movant is likely to suffer irreparable harm if an injunction isn’t issued, (3) the balance of harms tips in the movant’s favor, and (4) an injunction is in the public interest.

To win a trademark infringement suit, the plaintiff must show (1) a protectable trademark, and (2) a likelihood of confusion as to the origin of the defendant’s product. In the injunction context, the trademark plaintiff merely has to show a “better than negligible chance of winning on the merits.

The plaintiff here introduced evidence that it properly registered its trademarks and that the defendant continued to use them after plaintiff declared a franchise agreement default. This satisfied the likelihood of success prong.

The court next found the plaintiff satisfied the irreparable harm and inadequate remedy at law injunction elements. Irreparable harm means harm that is not fully compensable (or avoidable) by a final judgment in the plaintiff’s favor.  To show an inadequate remedy at law, the plaintiff doesn’t have to prove that a remedy is entirely worthless.  Instead, the plaintiff needs to show that a money damage award is “seriously deficient.”

Trademark cases especially lend themselves to court findings of irreparable harm and an inadequate remedy at law since it is difficult to monetize the impact trademark infringement has on a given brand. Lost profits and loss of goodwill are factors that signal irreparable harm in trademark disputes. The court further found that since it’s difficult to accurately measure economic damages in trademark cases, an inadequate remedy at law could be presumed.

Finally, the court found that the balance of harms weighed in favor of an injunction. It found the potential harm to plaintiff if an injunction did not issue would be great since the defendant franchisee could continue to use plaintiff’s marks and financially harm the plaintiff. By contrast, harm to the franchisee defendant was relatively minimal since the franchisee could easily be compensated for any lost profits sustained during the period of the injunction.

Take-away:

SBA=TLC provides a succinct summary of governing injunction standards under FRCP 65. The case stands for proposition that the irreparable harm and inadequate remedy at law prongs of injunctive relief are presumed in the trademark infringement context given the intrinsic difficulties in quantifying infringement damages.

 

 

Homeowners’ Operation of Home-Based Daycare Business Doesn’t Violate Restrictive Covenant Requiring Residence Use – IL Third Dist.

The plaintiff homeowner’s association in Neufairfield Homeonwers Ass’n v. Wagner, 2015 IL App (3d) 140775, filed suit against two sets of homeowners claiming they violated restrictive covenants in the development’s declaration by operating daycare businesses from their homes.

The association based their suit on a declaration covenant that required all lots to be used for “Single Family Dwellings.”

The declaration allowed an exception for home-based businesses but only if they were operated in conformance with City ordinances and if there were no vehicles with business markings parked overnight in the development.  A further qualification to the home-based business rule prohibited activities that encouraged customers or members of the public to “frequent” the development.

The association sued when several homeowners complained that the daycare businesses resulted in increased vehicular traffic in the development and was a nuisance to the residents.

The association supported their case with an affidavit from the property manager and a homeowner – both of whom testified that the two daycares resulted in multiple non-residents entering and exiting the subdivision on a daily basis and that several residents had similar complaints.

Affirming summary judgment for the homeowner defendants, the appeals court provides a primer on the enforceability of restrictive covenants and the governing contract interpretation principles affecting them. It wrote:

-Restrictive covenants affecting land rights will be enforced according to their (the covenants) plain and unambiguous language;

–  In interpreting a restrictive covenant, the court’s objective is to give effect to the parties’ actual intent when the covenant was made;

– A condominium declaration is strong evidence of a developer’s intent and it will be construed against the developer where the declaration’s text is unclear;

– Undefined words in a declaration are given their “ordinary and commonly understood meanings” and a court will freely use a dictionary as a resource to decipher a word’s ordinary and popular meaning.

(¶¶ 16-20).

Here, the key declaration word was “frequent” – that is, did the defendants’ daycare businesses result in customers or members of the public “frequenting” the subdivision?

The declaration didn’t define the verb “frequent” but the dictionary did as to do something “habitually” or “persistently.”  Webster’s Third New International Dictionary 909 (1981); (¶ 20).

The plaintiff’s supporting affidavit established that, at most, 7 or 8 cars entered and exited the subdivision on a daily basis – supposedly to patronize the daycare businesses.  The court viewed this amount of traffic wasn’t persistent or habitual enough to meet the dictionary definition of “frequent” under the declaration.

As a result, the association’s declaratory judgment suit failed and the court affirmed summary judgment for the property owners.

Afterwords:

1/ Courts will construe declarations and restrictive covenants as written and will do so under standard contract interpretation rules (e.g. unambiguous language will be construed under plain language test and without resort to outside evidence).

2/ Where a term isn’t defined, a court can look to dictionary to inform a word’s ordinary and popular meaning.

3/ A court will construe a restrictive covenant in favor of free use of residential property and where a declaration specifically allows home-based businesses, a court will scrutinize association attempts to curtail a property owner’s use of his property.