Can a real estate broker receive a commission for property sold when the real estate commission agreement does not adequately describe the land being sold? READ THIS!!
Burton Creek Development, Ltd. v. Cottrell, Seventh District Court of Appeals (Amarillo), decided December 14, 2016.
Burton Creek (hereafter “landowner”) owned four tracts of land. It placed a sign up saying “shopping center coming soon,” and advised interested persons to call Cottrell (hereafter “broker”), a licensed real estate broker. The broker then began to put the landowner in contact with various potential buyers. In an email, the landowner let the broker know they would pay a 6% commission for any buyer that broker brings to the table that closes on the property in question. The broker finally put the landowner in contact with a representative of Race Trac. The broker was e-mailed in the ongoing negotiations, but they failed. After continued ongoing negotiations without the broker’s involvement, an entity related to Race Trac signed a contract to purchase one of the lots on the property in question. The broker then demanded that he receive his commission of 6%. The landowner did not respond.
The broker filed this lawsuit seeking recovery of the real estate commission. The landowner pled the affirmative defense of a violation of the statute of frauds. The trial court granted summary judgment in favor of the broker, and denied the summary judgment of the landowner based upon the statute of frauds. The court entered judgment in favor of the broker for the real estate commission plus attorney’s fees for having to file suit to collect it. The landowner appealed.
The statute of frauds in the Texas Real Estate Licensing Act (RELA) states that a person may not maintain an action to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought. Texas law has interpreted this provision to require that the written document contain a promise of a definite commission, naming the broker, and identify the property to be conveyed. The party pleading the statute of frauds has the burden of establishing its applicability. Thereafter, the burden shifts to the opposing party (the broker in this case) to establish an exception that would take the agreement out of the statute of frauds. In Texas, partial performance is a well-recognized exception to the statute of frauds. When contracts are partially performed, but don’t meet all the requirements of the statute of frauds, they may still be enforced in equity (fairness) if denial of enforcement would amount to a virtual fraud in the sense that the party acting in reliance on the agreement has suffered a substantial detriment, and for which he has no adequate remedy at law, and that the other party would reap an unearned benefit. Whether a contract comes within the statute of frauds is a question of law for a court to decide, not a question of fact for a jury to decide. When the brokerage commission agreement fails to adequately describe the property that is sold, the doctrine of partial performance may permit enforcement, notwithstanding the statute of frauds, if the broker fully performed; the landowner accepted the broker’s services; the landowner acknowledged its obligation to pay the commission; and all documentary evidence establishes that a commission is due. The question in this case turns on whether the broker provided sufficient affirmative corroboration as to whether there was a brokerage agreement encompassing the property actually sold. Deposition testimony from the case corroborated that the lot sold was part of the larger tract identified in the email chain. The Court stated that the landowner implicitly agreed to pay a commission on a partial tract out of a larger tract based on language in the email chain. The Court stated: “We hold that application of the statute of frauds would work an injustice rather than prevent it because enforcement of the statute would cause [broker], the party acting in reliance on the agreement, to suffer detriment for which he has no adequate remedy, and the landowner would reap an unearned benefit.”
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