In
September 2010 Buffy Lawrence and Reyna Realty executed a listing agreement.
The listing agreement engaged Reyna for three months to market and sell her property,
in exchange for a 5% commission, to be shared with a cooperating broker if one
was used in the deal by the buyer.
Although the listing term ended
December 31, 2010, Reyna Realty’s broker continued to list the property, post
signage and generally market the property after it expired. Buffy never
objected to these continuing services and efforts.
Reyna Realty received an offer to
purchase the property and assisted Buffy by negotiating a higher purchase
price. The deal was poised to close in March 2011, and the Seller’s Statement
provided for a commission payment to Reyna. Buffy, however, instructed the
title agent to reduce the commission amount by 30%. Reyna rejected this
proposal, so Buffy withdrew her offer and refused to pay Reyna anything.
The purchase and sale funded, and in
October 2011 Reyna Realty sued Buffy Lawrence to recover a real estate
commission. Reyna Realty attached the Purchase and Sale Contract to Reyna’s
lawsuit pleadings, which Contract contained a statement to the effect that “all
obligations of the payment of brokers’ fees are contained in separate written
agreements.”
It was Reyna’s position that
although the stated listing term had indeed expired three months before the
sale date, both the Contract and Settlement Statement contained written
evidence of an extension of the listing at least through the date of sale.
Buffy defended Reyna’s claim by
using a statute of frauds defense. Basically, that defense means that all
commission obligations in the State of Texas must be in writing, signed by the
party obligated to pay it, and no oral or unwritten modifications are typically
allowed.
The trial court awarded Reyna its
commission of $14,440, plus $36,000 in attorney’s fees. Buffy appealed.
The Appellate Court, looking at the
initial Listing Agreement, Purchase and Sale Agreement and Settlement
Statement, concluded that the documents constituted a written extension
agreement and defeated a statute of frauds defense. Similarly, even though the
Seller’s Statement that was eventually signed provided no compensation to Reyna
Realty, it still indicated that Reyna Realty was serving as the broker for the
Seller.
And further, Buffy had willingly
accepted the benefits of the services offered by Reyna Realty, which services
were beneficial to Buffy.
From there it was an easy leap to legal
conclusions of “ratification” and “non-repudiation.”
Judgment for Reyna Realty was
affirmed. Reyna wins; Buffy Lawrence loses. See Lawrence v. The Reyna Realty Group; Cause No. 01-13-00819-CV;
Court of Appeals of Texas, First District, Houston Division; May 15, 2014.
Lessons
learned:
1. Reyna
Realty forgot to get its listing agreement extended, or maybe Reyna made the
request but Buffy Lawrence was unwilling to sign it. Either way, if the listing
agreement had been properly extended then one might assume that a lawsuit would
not have been necessary and Reyna would have been paid in full at closing.
2.
While
this case was ultimately won by the broker, a slight variation in facts would
yield a different result. If the broker’s name was not included in the Purchase
and Sale Agreement, then I suspect Buffy would have prevailed.
3.
Do
not assume that just because you continue working for a principal’s benefit
after the expiration of your contract that you will get paid if your efforts
result in a closing. Get it in writing, *before*
expiration of your agreement.
Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.
In 2009
Shawn and Stephanie Holloway hired Jeremy Williams, a sales agent with Keller
Williams Realty Northeast, to help them sell their existing home and find a new
one. M/M Holloway were shown a home owned by Jennifer Blalock – another sales
agent with Keller Williams Realty NE.
Following intermediary protocol,
Keller Williams Realty NE engaged Tina Martin, also a sales agent with Keller
Williams, to assist Jennifer Blalock. Meanwhile Jeremy Williams continued to
represent M/M Holloway.
A Contract was signed for the
purchase and sale of Blalock’s property. Keller Williams NE was designated as
the broker for both seller and buyers. The Holloways were allowed a 10-day
inspection period, and so they hired Clint Simon (referred to them by Jeremy Williams)
for a termite inspection.
Simon found no visible evidence of
active termite infestation or previous infestation, although Simon did disclose
his finding of evidence of previous treatment for subterranean termites.
M/M Holloway closed the purchase and
soon after closing the Holloways started renovating the property. The
contractors discovered extensive termite damage – substantial enough to cause
the Holloways to move out.
The Holloways filed a lawsuit
against Blalock, Simon and Keller Williams NE. Blalock filed bankruptcy; Simon
paid $200,000 to be released. That left Holloways vs. Keller Williams NE.
The trial jury found liability
against Keller Williams NE based primarily on a theory of failure-to-disclose
under the Texas Deceptive Trade Practices Act. The trial court then converted
the jury’s findings into a Judgment.
Keller Williams NE appealed,
claiming that the evidence was insufficient to support the jury findings. The
point made by Keller Williams NE was that the only means for the jury to find
it liable would have been due to the actions (possible failure to disclose) of
Jennifer Blalock. And – that Jennifer Blalock was not an agent for Keller
Williams NE, because Jennifer Blalock was acting only for herself.
Now of course Jennifer Blalock had
signed an Independent Contractor’s Agreement with Keller Williams NE, to
perform services as a real estate agent. However, in the Holloway deal Blalock
was not acting in an agency capacity but rather as an owner and seller of the
property. As such, the ICA was inapplicable and the actions (inactions) of
Blalock did not bind Keller Williams NE as no principal-agency relationship was
intended by this one, unique transaction.
So the argument went.
The Court of Appeals evaluated
evidence that Blalock’s agent did “very little” and instead Blalock represented
herself, offered the Property for sale herself, negotiated the sale herself,
and sold the Property for her own account.
Thus, no agency relationship existed
between Blalock and Keller Williams NE.
Then the Court turned its attention
to the question of Keller Williams’ knowledge of the existence of unrepaired
termite damage. Again, the evidence did not support the conclusion that Keller
Williams knew of the issue, and failed to disclose.
The trial court’s Judgment was
reversed in favor of the Keller Williams franchisee.
See Flutobo, Inc., dba Keller Williams Realty
Northeast v. Holloway; Nos. 14-12-00104-CV and 14-12-00170-CV, December
16, 2013.
Lessons
learned:
1. If
the non-disclosure is significant enough, there will be a claim. If the claim
is not resolved, there will be a lawsuit. If there is a lawsuit, the only
winners will be the lawyers as attorneys’ fees might eclipse the amount of any
judgment. Particularly if there are appeals.
2. This
case is residential in context. But the same rules regarding disclosure and
intermediary relationships apply to commercial transactions. There is no
difference in Texas law, as TREC makes no distinction between the types of
transactions relative to the disclosures that must be made although the DTPA
applies only to “consumers.”
3. Err
on the side of disclosing too much, after of course you have obtained your
principal’s written authorization. You might need to consider withdrawing if
your principal refuses to furnish that consent. Better a blown commission than
a lawsuit!
Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.
