Drake v. Hosley

Citation. 713 P.2d 1203 (1986)

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Citation713 P.2d 1203 (1986)

Brief Fact Summary.

Plaintiff sued Defendant for a ten percent commission for selling Defendant’s property. The trial court granted Plaintiff’s motion for summary judgment.

Synopsis of Rule of Law.

Traditionally, a broker is entitled to a commission when he finds a buyer willing and able to purchase the property pursuant to the seller’s terms, even if the sale is not completed.

Points of Law - Legal Principles in this Case for Law Students.

In short, in the absence of default by the seller, the broker's right to commission against the seller comes into existence only when his buyer performs in accordance with the contract of sale.

View Full Point of Law

Paul Drake (Defendant) owned property in North Pole, Alaska. He entered into an exclusive listing agreement with the Charles Hosley Company, Realtors (Plaintiff), granting Plaintiff the authority to sell Defendant’s land. Under the terms of the agreement, Plaintiff was entitled to a ten percent commission if: (1) Plaintiff found a buyer willing and able to purchase the land pursuant to terms set by Defendant, or (2) Defendant entered a binding sale during the term set by Defendant. Plaintiff found a group of buyers and entered a purchase and sale agreement on March 23, 1984. The buyers and Defendant signed the agreement, which required closing within ten days of clear title. Defendant and Plaintiff also signed an addendum to the agreement, under which Defendant agreed to pay Plaintiff a commission of ten percent of the purchase price. On April 2 or 3, Plaintiff received a preliminary commitment and report from a title insurance company. The report noted that a judgment awarded to Defendant’s ex-wife was the only encumbrance on the title. Defendant’s attorney, Tom Wickwire, explained that the judgment would be paid with proceeds from the sale. A few days later, Wickwire contacted Plaintiff and stated that Defendant desired to close the sale by April 11. Wickwire had negotiated a reduced settlement with Defendant’s ex-wife that required payment by that date. Wickwire claimed at trial that Plaintiff agreed to close on April 11, but Plaintiff states that he only agreed to close as soon as possible. On April 11, Wickwire contacted Plaintiff again. Plaintiff stated that the buyers could not close that day and that they would not have the down payment before May 1. Wickwire suggested that Defendant stop the sale and, in a letter dated April 11, withdrew Defendant’s offer to sell. On April 12, Defendant sold the land to other buyers. That same day, Plaintiff submitted checks from his buyers for a down payment. Wickwire refused to accept the checks, explaining that Defendant had already sold the land. Plaintiff sued, arguing that he had satisfied the terms of the exclusive listing agreement and that he was entitled to payment of a ten percent commission. The trial court granted summary judgment in Plaintiff’s favor.

Issue.

Whether a broker is entitled to a commission when he finds a buyer willing and able to purchase the property pursuant to the seller’s terms, even if the sale is not completed.

Held.

Yes. The trial court’s ruling is affirmed. Traditionally, a broker is entitled to a commission when he finds a buyer willing and able to purchase the property pursuant to the seller’s terms, even if the sale is not completed.

Discussion.

Alaska law states that a real estate broker earns a commission when he satisfies the terms of a written personal services contract. Traditionally, a broker is entitled to a commission when he finds a buyer willing and able to purchase the property pursuant to the seller’s terms, even if the sale is not completed. Here, Plaintiff fulfilled the terms of the exclusive listing agreement when he found a group of buyers and arranged for Defendant to enter a purchase and sale agreement with them. Therefore, Plaintiff is entitled to his commission. However, Defendant argues that this court should adopt the reasoning in Ellsworth Dobbs, Inc. v. Johnson, 50 NJ 528 (1967). Dobbs stands for the proposition that a broker has not produced a willing and able buyer if the buyer refuses to perform at closing. Furthermore, Dobbs notes that a seller usually intends to pay a broker’s commission from the proceeds of the sale, and that requiring a seller to pay the commission regardless of whether the sale closes is unfair. Dobbs states that, absent default by the seller, the payment of a commission should not be required unless and until the sale is closed. The reasoning in Dobbs is persuasive but is unhelpful to Defendant’s case. Dobbsstill requires payment of a commission where the seller’s conduct has frustrated the sale. Here, it was not the buyers’ conduct that frustrated the sale. Under the terms of the purchase and sale agreement, the sale was to close within ten days of clear title. Plaintiff received a report from the title insurance company on April 2 or 3. Therefore, Plaintiff’s attempt to submit a down payment on April 12 satisfied the ten-day deadline in the agreement. It was Defendant’s conduct in selling the land to another buyer that precluded the closing of the sale. Therefore, Dobbs does not provide Defendant relief. Defendant claims that there is a genuine issue of fact whether Plaintiff agreed to close the sale by April 11 and then refused to perform. However, Plaintiff was not an agent for the buyers and therefore had no authority to modify the obligations of the buyers. Thus, even if Plaintiff agreed to close by April 11, this fact does not preclude summary judgment. In conclusion, under both the traditional rule and the Dobbs rule, Plaintiff is entitled to payment of his commission.