A Michigan court has considered whether a real estate broker waived its right to collect a full commission pursuant to a protection clause when one of its salespeople signed an ambiguous purchase agreement.
Michael and Ester Berger ("Sellers") entered into an exclusive listing agreement with Century 21 Associates, Inc. ("Brokerage") for ninety days. The agreement included a protection clause which specified that the Brokerage was entitled to receive a commission if the property was sold 180 days after the expiration of the listing agreement if the sale was to a prospect who was introduced to the property by one of the Brokerage's representatives, unless the Sellers entered into a listing agreement with another broker during the 180 day period.
The listing agreement expired and the Sellers did not list their home with another brokerage. A prospect who was introduced to the Sellers' home by a Brokerage representative made an offer within the period covered by the protection clause and the Sellers accepted the offer. The purchase agreement, signed by the Sellers and the buyer as well as a representative from the Brokerage, stated that "[i]f this is a cooperative sale, $5,000 of total price shall be paid" to the Brokerage. Elsewhere in the agreement, it stated that the "[s]eller further agrees to pay Broker(s) for services rendered a commission as set forth in the listing agreement." Based on the sales price, the commission described in the listing agreement would have been $28,500. A settlement statement indicated that only $5,000 was going to be disbursed to the Brokerage and, at closing, only $5,000 was disbursed to the Brokerage.
The Brokerage brought a lawsuit, seeking payment of the entire commission amount. The trial court ruled in favor of the Sellers. The trial court had based its decision on the fact that the representative for the Brokerage had been the person who wrote "$5,000" in the purchase agreement and the representative had also prepared the settlement statement designating the payment of $5,000 to the Brokerage. The trial court had rejected the Brokerage's argument that the purchase agreement did not designate the $5,000 as a commission and also that the representative had prepared the settlement agreement in that way because that was the only amount that the Sellers were willing to pay to the Brokerage. The Brokerage appealed the trial court's rulings.
The Court of Appeals of Michigan reversed the trial court and sent the case back to the lower court for additional proceedings. Looking at the agreement, the court found that the purchase agreement was ambiguous as to what commission amount the Brokerage was entitled to receive. The purchase agreement did not specifically designate the $5,000 as a commission, and a paragraph immediately following the paragraph with the $5,000 language states that the Sellers owe the commission amount specified in the listing agreement, which the court said could be interpreted as meaning that the Sellers owe $5,000 plus the $28,500 commission. Since the purchase agreement could be interpreted in more than one way, a jury needed to resolve the disputed facts. Thus, the trial court's ruling was reversed and the case was sent back to the trial court.
Century 21 Assoc., Inc. v. Berger, No. 226552, 2002 WL 347837 (Mich. Ct. App. Feb. 26, 2002). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].