Tag: procuring cause

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 v. Kilroy, 2015 IL App (2d) 15-0421-U, an unpublished case, the plaintiff broker and homeowner defendant signed an exclusive listing agreement to sell the defendant’s home that she co-owned with her ex-husband.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.

 

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.

 

Fired Pittsburgh Law Firm Entitled to Over $500K In Attorneys’ Fees for Pre-Settlement Services (PA Court Rules)

 

A special thanks to Adam Brandolph (Twitter: @brandolph_trib) of the Pittsburgh Tribune-Review for alerting me to this one.

In In re Estate of Schaab, a Pennsylvania court awarded over $500K in legal fees to a law firm that negotiated the settlement of a planned wrongful death suit  on behalf of the parents of a murder victim.  The plaintiffs’ son was a counselor at a Pittsburgh mental hospital and was killed during a patient’s shooting spree in May 2012.

The plaintiffs retained a law firm (the First Firm) under a contingency fee agreement that provided a 35% recovery in the event formal litigation ensued or a 33% recovery if no litigation was filed.  

The First Firm negotiated a $1.5M settlement after mediation with the University of Pittsburgh – the entity that sponsored the psychiatric facility and the plaintiffs’ son’s employer.  The parties documented the $1.5M settlement at the mediation.

After the parties reached the settlement, the First Firm sent a release to the plaintiffs for them to sign.  Before the plaintiffs signed the release, the First Firm agreed to reduce its contingent fee from $500,000 to $350,000 so that the plaintiffs could pay some of the settlement funds to their deceased son’s fiancé. 

The plaintiffs then did an about-face and decided they wanted to sue the shooter’s parents and estate (they previously said they didn’t want to).  The First Firm then referred plaintiffs to their current firm (the “Second Firm”) to sue the shooter’s parents and his estate.  The plaintiffs fired the First Firm and hired the Second Firm.

Plaintiffs finally signed the release in May 2013 – about eight months after the First Firm first presented it to them.  About six months later, plaintiffs received about $1M in settlement funds and the remaining $500,000-plus was put into escrow pending resolution of the fees issue. 

When the Second Firm claimed the right to the entire half a million in fees, the First Firm intervened and claimed the fees belonged to it since the First Firm’s efforts culminated in the $1.5M settlement agreement.

Incredibly, the Second Firm argued that the First Firm wasn’t entitled to any fees since the plaintiffs terminated the First Firm before the settlement was paid.  The Court quickly rejected this argument and held that under Penn. law, where a law firm’s services result in the creation of a fund, that firm is entitled to be paid from the fund. 

Here, the First Firm clearly created the settlement fund in July 2012 when the parties memorialized the $1.5M settlement at mediation.  As a result, it was entitled to a third of the settlement payout  under the contingency fee agreement it reached with the plaintiffs.

The Court held that the Second Firm’s argument that no “recovery” was had while the First Firm was representing the plaintiffs was absurd.  The plaintiffs’ right to receive the funds accrued in July 2012 when the $1.5M settlement agreement was signed. 

The fact that the funds weren’t paid until over a year later was irrelevant.  The plaintiffs received $1.5M from the University based on the skilled services and negotiating acumen of the First Firm. As a result, the Court awarded the First Firm over $500,000 and the remaining funds went to the decedent’s estate.

Afterword: A fair, common sense result.  Where a fired attorney plays a crucial role in consummating a settlement agreement before his termination, he should share in the proceeds; even where the settlement  isn’t paid until after a new lawyer is hired.

 It’s clear the First Firm was the procuring cause of the $1.5M settlement.  The Court properly held that it was unfair to prevent the First Firm from receiving any of the proceeds based solely on the defendant paying the settlement after he fired the First Firm.

See link to opinion here: Judge O’Toole’s Decision