A North Carolina court has considered a dispute between two commercial real estate brokers over whether the brokers had an agreement to split a commission received by one of the brokers.
Tom Wood ("Owner") was the owner of an apartment building. In 1997, Michael P. Doyle ("Listing Broker") of Michael P. Doyle, Inc., wrote letters and periodically phoned the Owner to see if he was interested in listing his building for sale with the Listing Broker.
In 2000, the Listing Broker asked William Maxwell ("Maxwell"), an acquaintance as well as licensed real estate broker, if he knew the Owner. When he learned that the two were acquainted, Maxwell testified that the Listing Broker proposed to split any commission he might earn with Maxwell if Maxwell could arrange a meeting with the Owner and also share with the Listing Broker all of his records regarding the Owner's property. Maxwell arranged a meeting with the Owner and the Listing Broker, and he also shared his files related to the Owner with the Listing Broker. Maxwell also obtained some additional information about the Owner’s property and forwarded this information onto the Listing Broker.
At the meeting, the Owner stated that he was not interested in selling his apartment buildings but agreed to consider any offers that were presented to him. Following the meeting, the Listing Broker obtained a signed listing agreement from the Owner. Maxwell was never told about the listing agreement. In 2001, the Owner accepted an offer for the property and the transaction closed. The Listing Broker was paid his commission at the closing and refused to share any portion of the commission with Maxwell. Maxwell filed a lawsuit seeking half of the commission, but the trial court ruled in favor of the Listing Broker. Maxwell appealed.
The Court of Appeals of North Carolina reversed the trial court and remanded the case for further proceedings. The court first considered whether Maxwell had to demonstrate that he was the procuring cause of the sale in order to claim half of the commission. In North Carolina, a licensee is entitled to recover a commission if “any act of the broker in pursuance of his authority to find a purchaser is the initiating act which is the procuring cause of a sale ultimately made by the owner, the owner must pay the broker a commission.”
However, the court determined that the procuring cause rule had no application to this dispute, as the Owner had paid the Listing Broker the agreed-upon commission. Instead, the court stated that general contract law principals applied to this dispute between two brokers on whether the brokers had an agreement to split the commission between them. So, the court stated it needed to consider whether Maxwell had submitted sufficient evidence to demonstrate that there was a valid contract between him and the Listing Broker to split the commission.
Maxwell presented the following evidence in support of his claims. First, he testified that he had entered into an oral contract with the Listing Broker to split any commission if he assisted the Listing Broker in obtaining a listing agreement with the Owner. Second, Maxwell had followed up that conversation with a letter which discussed how the Owner’s property should be priced if a listing agreement was obtained, and the letter concluded by setting forth a commission rate “which [the brokers] would split equally.”
The Listing Broker argued that there was no contract between the parties, as Maxwell had failed to demonstrate that the parties had agreed to a specified time in which the agreement would be performed, a necessary contractual term. Looking at the relevant case law, the court found that courts will provide a “reasonable” time for performance when the agreement fails to specify one. The court stated it needed more evidence on what constituted a "reasonable" time before it could provide such a term, such as evidence as to the custom and practices of the real estate brokerage industry. The court found that Maxwell had performed all of his contractual duties, so if the trial court determined that the sale had occurred within a “reasonable” time frame following the agreement between the two brokers, then Maxwell would be entitled to recover half of the commission. Therefore, the court sent the case back to the trial court for further proceedings.
The court also briefly considered Maxwell’s quantum meruit arguments. Quantum meruit allows a party to recover the value of a benefit conveyed to another when there is no contract. The court ruled that a quantum meruit recovery is not allowed when there is an express contract between the parties, as there was between Maxwell and the Listing Broker. Additionally, the court stated that Maxwell had failed to offer evidence as to the value of the benefit conveyed to the other party. Thus, the court affirmed the trial court’s rejection of the quantum meruit claims.
Maxwell v. Doyle, No. COA03-475, 2004 WL 1091533 (N.C. Ct. App. May 18, 2004). [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].
Editor’s Note: NAR Legal Affairs would like to thank the legal department at the North Carolina Association of REALTORS® and Matt Wall, II of Holt, Longest, Wall & Blaetz, P.L.L.C., for alerting us to this decision.