Daily Development for
Friday, August 29, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

BROKERS; COMMISSION; EXCLUSIVE LISTING: A Seller's quitclaim of her interest in property to another pursuant to a marriage dissolution proceeding which ordered the division of Sellers' assets does not obligate the Sellers to pay a commission to Broker under an exclusive listing.

Foxfield Realty, Inc. v. Kubala, 678 N.E. 2d, 1060 (Ill. App. 2 Dist. 1997).

The contract required Sellers to pay a commission of 6% of the full selling price, including encumbrances, "if any sale or exchange is made by the broker, the seller or anyone else" during the exclusive listing.

One defendant conveyed her interest in the property to the other defendant by quitclaim deed in exchange for consideration in the form of property and an allocation of debt as a result of marital settlement agreement and pursuant to a judgment of dissolution of the defendants' marriage. The plaintiff broker argued that such transfer obligated the defendants to pay the commission on the price listed on the quitclaim deed.

The Appellate Court of Illinois upheld the trial judge who concluded that no commission was triggered under the agreement where one signatory merely transferred her interests to the other. The court looked not only to the words of the exclusive sales contract but to the intent of the parties. In so doing they found that the term "sale" was not ambiguous in its ordinary and natural meaning and clearly did not include the transfer from wife to husband of property formerly held in joint tenancy.

In fact, the original listing was pursuant to an order of the court in the marriage dissolution. The same judge who entered that order heard the broker plaintiff's case here. It is clear that the appeals court, like the trial judge, had little symphathy for the broker's interpretation of the term "sale" in the listing agreement:

"The plaintiff's interpretation of the contract is so unusual that it would have unintended, illogical, absurd, and inequitable results. If the plaintiff intended for these unusual circumstances to obligate the seller to pay a commission, it could easily have included such an express provision in the agreement. . . . We doubt that any rational seller would have agreed to such a provision."

Comment: The basic intent of the exclusive listing agreement is to encourage the broker to devote all effort and attention to the sale of the property with confidence that if the property is sold to anyone, or is taken off the market, the commission is earned. The court acknowledged this, and pointed out that If the parties had obtained a divorce and had taken the property off the market during the listing agreement, then the commission would have been triggered.

But the editor concurs that neither the broker nor the owners should be viewed as contemplating that a mere alteration of the interests of the existing owners would trigger the commission. Although the case involves only a marital dispute, it is authority for other ownership change situations as well.

Here, however, the parties did not take the property off the market. They simply altered their ownership interests in it. Since both had signed the original listing agreement, the listing was still valid and the broker had a continued opportunity to sell.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org

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