Daily Development for Tuesday, October 5, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

BROKERS; LISTING AGREEMENT; STATUTE OF FRAUDS: Virginia court offers multiple alternatives for broker to escape problem that there is no listing agreement and no stated commission in case involving multimillion dollar property sale.

T.G. Slater & Sons, Inc. v. The Donald P. And Patricia A. Brennan L.L.C., 2004 WL 2190099 (4th Cir. 9/30/04)

Slater, a licensed broker, was leasing some farmland from his neighbor, Mellon. Maureen Brennan occupied other neighboring property, where she pastured horses. Brennan, who apparently did not know Slater prior to these facts, contacted Slater to ask if she could rent some of Slater’s land for pasturing horses. Slater responded that he had no interest in this, but indicated that he believed that the Mellon land, where he was leasing some property, would soon go on the market, and proposed assisting Brennan with the purchase.

Slater alleged that Brennan agreed to retain him to show her the Mellon property, and that he in fact did take her and her mother, Patricia Brennan, onto the property on several occasions. At the Brennans’ request, Slater also prepared comparable sales data and tax lot information concerning other properties in the area. Of course, as an aggressive broker, he also provided, apparently without specific request from the Brennans, a good deal of other data, including aerial photographs, maps, and title information about the property. He had no written agreement with Brennans and in fact, during this time, the Mellon property was not listed for sale.

Ultimately, Brennan father, mother and daughter met with Slater, toured the property, and discussed making an offer. He told them that the local custom was that the buyer’s counsel would draft an agreement, and apparently believed that the Brennans were leaving to consider having such an agreement prepared.

About a week later, the Mellon property was listed on multiple through another broker, as Slater had expected, and Slater contacted the listing broker, who informed him that the listing stated that the Brennans were an excluded party, and no commission would be earned if the Brennans purchased the property. Slater then proceeded, unsuccessfully, to contact the Brennans, and ultimately would up talking to their lawyer. About six weeks after the meeting in Slater’s office with all three Brennans, he received word that his lease was terminating because the Mellon property had been sold, and learned also that the Brennans had bought the property for $3.8 million through a newly formed LLC consisting of the two Brennan parents.

Slater did not take all this news lying down, and sued for a commission, for tortious interference, and tortious conspiracy. The trial court granted summary judgment against Slater because there was no written agreement and because any alleged oral agreement was, in any event, too vague to enforce without any evidence of a stated commission.

The Fourth Circuit Court of Appeals, interpreting Virginia law, reversed, holding that Slater had alleged enough to survive summary judgment on all counts.

First, the court noted that Virginia recognizes the part performance exception to the Statute of Frauds, and that Slater clearly alleged considerable activity on his part in carrying out his side of the alleged contract. In addition, the court concluded that Virginia would recognize quantum meruit claims of a broker who provided services facilitating a sale even without a formal agreement. As to whether the agreement was too vague to be enforced, since there was no provision for a commission, the court stated that the parties might have concluded that the Brennans agreed to a customary commission, and that Slater was free to prove that this was part of the understanding, even though no specific numbers were mentioned.

The fact that the LLC, and not any of the individual Brennans, eventually bought the property, did not concern the court. Slater had alleged that the Brennans were acting as agents for the LLC, which they could do, the court said, even before the LLC was formed. Further, there was adequate evidence alleged of a conspiracy among the Brennans, and possibly others (including the sellers) to cheat Brennan out of his anticipated commission.

Comment 1: The case certainly states some commonly recognized “outs” to a Statute of Frauds problem. There will be a trial. This doesn’t mean the case lays down all that nicely for Slater. Clearly Slater did not represent the seller, as agent or subagent, at the time of the his meetings with the Brennans, and clearly Mellon never agreed to pay a commission to Slater or anyone else if the Brennans purchased the property. Therefore, it would appear that Slater would have to prove that the Brennans had agreed that they would be responsible for paying a commission to Slater if they purchased the property. This may be a difficult undertaking, since it appears in fact that Slater was anticipating himself selling the property through the multiple listing service and co-opping with a listing broker.

Comment 2: Although, in the editor’s view, there may not be evidence of a contract to pay Slater a commission, there does seem to be some evidence that the Brennans, possible conspiring with others, set out to frustrate Slater from earning a commission by facilitating the sale to them. But did Slater have a right to demand that they buy the property through him? Again, so far as the editor can tell, this is true only if the Brennans were bound by a brokerage agreement with Slater. And, as indicated, the editor has difficulty finding that agreement because of lack of specificity as to whether either Mellon or the Brennans ever had a duty to pay Slater a commission.

Comment 3: A number of states now require by statute that a broker undertake to clarify the capacity in which the broker will represent the clients in the first contact with the clients. Clearly, in a case like this, where there was no listing agreement with the seller, a careful broker would be well advised to enter into a buyer’s brokerage agreement with the proposed buyers, providing expressly for a commission, but indicating that the obligation could be satisfied by the broker earning a part of the selling commission from the seller.

Readers are encouraged to respond to or criticize this posting.

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