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Contract – Real Property – Real Estate Commission – Extension

Stepp v. Owen (Lawyers Weekly No. 11-16-1079, 16 pp.) (Cheri Beasley, J.) Appealed from Transylvania County Superior Court. (Gary Trawick, J.) N.C. App. Unpub. Click here for the full-text opinion.

Holding: Although the plaintiff-real estate agent found a willing buyer during the period of the parties’ exclusive listing agreement, there were several contingencies in the offer that were never fulfilled. Even though the agent kept working with that offeror after the listing agreement expired, there was no evidence that the agent had any contact with the eventual buyer, with whom the defendant-seller contracted more than a year after the listing agreement expired. The agent failed to show she was entitled to a commission.

We affirm the directed verdict for the seller.

Background

By consent order in a separate domestic matter, the defendant and his former wife were to convey certain real and personal marital property to satisfy the defendant’s distributive award. A 45-day “Exclusive Right to Sell Listing Agreement” between the couple as sellers and the plaintiff herein as agent was duly executed on May 16, 2006 and incorporated into the consent order. Paragraph 9 of the agreement set forth a listing price of $5,000,000 and provided that plaintiff would earn 10 percent of the purchase price if the agent procured a buyer, the property was sold during the term of the agreement, or if within 90 days after the expiration of the agreement, the seller sold to a buyer procured by the agent.

Within a month, FN3, LLC made an offer at the listed price, and an “Agreement for Purchase and Sale of Real Property” was executed by the defendant on June 14, 2006.

FN3 agreed to finance $4,950,000, but its lender, by letter dated Nov. 3, 2006, indicated it might lend only the lesser of $4,000,000 or 80 percent of the property’s appraised value. Negotiations thus resumed, and on Jan. 8, 2007, FN3 offered $4,600,000 for the property, contingent on closing on or before May 15, 2007.

On Feb. 22, 2007, however, FN3 requested the return of its earnest money deposit, believing a purchase would not be effectuated by that time. But negotiations continued, and on April 13, 2007, the bank committed to loan FN3 the lesser of $3,350,000 or 75 percent of the re-appraised property value, contingent upon defendant’s continued involvement in management.

FN3 proposed options to meet this proviso, each requiring the defendant to retain an ownership interest. FN3 first offered $4,800,000 for the entire property, with a requirement that the defendant re-purchase a one-third interest. A subsequent offer memorialized in a “Memorandum of Contract” contemplated FN3’s purchase of a two-thirds interest in the property for $3,196,800. While FN3 signed this memorandum on July 26, 2007, the defendant never did.

By separate order, the trial court granted the defendant a 60-day extension from Sept. 24, 2007 to consummate a sale of the property and distribute the agreed-upon sum to defendant’s wife. About one month later, the defendant sold the property after independently negotiating an agreement with Confluence Enterprises, Inc. on Oct. 15 and closing on Oct. 30, 2007.

When the defendant did not pay the plaintiff any commission, plaintiff sued for breach of contract seeking compensation for her brokerage services. Defendant moved for summary judgment as to all claims, and the plaintiff responded with an affidavit and exhibits detailing her efforts at securing a deal with FN3 on behalf of the defendant. At the close of plaintiff’s evidence, the trial court granted the defendant’s motion for directed verdict on the breach of express contract claim. Plaintiff appealed.

Discussion

There is no dispute that a valid contract existed when the plaintiff and defendant entered into the listing agreement, giving the plaintiff the exclusive right to sell the property for 45 days from May 16, 2006 until June 30, 2006. Plaintiff argues that the lack of a closing with FN3 does not negate that the prospective purchaser was a ready, willing, and able one. We agree that closing a transaction is not required but do not glean any evidence from the record that tends to show the plaintiff in fact procured FN3 during the contract term.

While FN3 did agree to purchase the entire property for $5,000,000 during the term of the listing agreement, it could not secure the necessary financing and subsequently began proposing altered terms and additional provisions, several of which were unacceptable to the defendant. Thus, even though FN3’s initial offer resulted in an agreement to sell during the term of the listing agreement, the June 14, 2006 sales contract included several contingencies that never materialized; thus, it cannot be said that the entity was ever ready to purchase the property before the listing agreement lapsed. As such, plaintiff did not procure FN3 during the listing period.

Moreover, the ultimate sale to Confluence did not occur until Oct. 30, 2007, over one year after the listing agreement expired. Nothing suggests that the plaintiff or the defendant ever communicated with Confluence during the term of the listing agreement or within the 90-day protection period.

To the contrary, the only evidence of any contact between the defendant and Confluence prior to the closing is their agreement to sell on Oct. 15, 2007, also more than a year after the listing agreement expired. Thus, no valid contract existed between the parties at any time that the defendant and Confluence communicated or reached an agreement to sell the property, and the listing agreement accordingly affords the plaintiff no relief under the theory of express contract. Furthermore, no extension of the listing agreement was ever executed, and while admitting there was never a written renewal thereof, the plaintiff contends it “was renewed in the eyes of all involved” based on the parties’ conduct.

It is the plaintiff’s position that the listing agreement “was extended and still alive through at least Nov. 23, 2007” and that she earned her fee not only by virtue of the defendant’s sale to Confluence but also through her continued efforts with FN3. It is undisputed that the sale consummated here – that to Confluence – was not to any prospect of the plaintiff’s and was in no way attributable to her efforts.

We do not suggest that the exclusive nature of a listing agreement can never be extended by a principal’s waiver of the contract’s termination date. However, under the facts of this case, where the term was never modified by agreement, either written or oral; any agency relationship following the express term was acknowledged by the parties only insofar as FN3 was concerned. No evidence showed that the plaintiff sought to reach a deal with, or even showed the property to, any other potential buyers or that the defendant asked or expected her to do so. We hold that the plaintiff cannot recover a commission under Paragraph 9(b) of the listing agreement because the circumstances are such that the exclusiveness of the contract ended with its express termination.

Having held that the plaintiff did not procure FN3 as a ready, willing, and able buyer during the term of the listing agreement and assuming, without deciding, that the termination date of the contract was waived for the purpose of reaching a deal with FN3, we find no evidence that the plaintiff ever procured FN3 thereafter. Thus, a directed verdict on the breach of contract claim was proper, as the evidence was insufficient as a matter of law to entitle the plaintiff to recover a commission under either the exclusive right to sell or procuring cause terms of the listing agreement.


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