Ritchie v. Weston, Inc.: Ohio Broker Can Assign Right to Bring Commission Lawsuit
An Ohio court has considered whether a commercial broker could assign its right to bring a commission lawsuit, since Ohio law requires that the party bringing the commission lawsuit must have an Ohio broker's license.
Arnold Ritchie ("Salesperson") was a licensed real estate salesperson who represented licensed real estate broker Grubb & Ellis ("Broker") until 1995. The Broker had as a client Weston, Inc. ("Owner"), who owned a building in an industrial park and agreed to pay the Broker a commission for tenants it obtained for the building, including a commission for lease renewals. In 1987, the Salesperson obtained American Ultra Specialties ("Tenant") as a tenant for the Owner's industrial property. The lease had an initial four-year term, with two three-year renewals and concluding with one five-year term, which would begin in 1997.
In 1995, the Salesperson stopped representing the Broker. As part of the separation agreement, the Broker agreed to give the Salesperson a percentage of the commissions it received from his transactions, including lease renewals. The Tenant's lease expired in 1996, but the Tenant remained on the property. In 1997, the Salesperson began representing the Tenant in its negotiations with the Owner, after giving notice to the Owner that he was now representing the Tenant. At first, the Tenant attempted to purchase the property, but when those negotiations fell apart, the parties began negotiating a lease price for the five-year renewal. At this point, the Owner objected to the Salesperson's involvement in the lease negotiations, and the Salesperson withdrew from the negotiations. The Tenant successfully negotiated a lease renewal. However, when the Salesperson requested his commission pursuant to his separation agreement with the Broker, the Owner refused to pay, arguing that the lease with the Tenant was an entirely new lease and not a renewal of the old lease. The Broker assigned its right to compensation to the Salesperson, and the Salesperson brought a lawsuit against the Owner. The trial court ruled in favor of the Salesperson, and the Owner appealed.
The Court of Appeals of Ohio, Eighth District, Cuyahoga County, affirmed the trial court's ruling. The court first looked at whether the Salesperson could bring a commission lawsuit. Ohio law states that a party seeking to bring a lawsuit to collect compensation from a real estate transaction must be licensed as a real estate broker. The Salesperson was not licensed as a broker, but claimed that he was entitled to the commission because the Broker had assigned its rights to collect the commission. The court found that an assignment of rights in Ohio allows the party receiving the assigned rights to have exactly the same rights as the party who made the assignment. Thus, the court stated that if the Broker could bring a lawsuit to collect the commission, so too could the Salesperson, since the Broker had assigned its right to collect the commission to the Salesperson. Therefore, the court ruled that the Salesperson could bring a lawsuit for the unpaid commission.
The court next considered the Owner's argument that the Salesperson could not recover a commission because he had acted as a dual agent by representing both the Owner and Tenant at various points during the lease negotiations. The court rejected the argument that the Salesperson was a dual agent, but further stated it was irrelevant because the Salesperson had disclosed that it was representing the Tenant to the Owner, which is all that is required of a dual agent under Ohio law. Thus, the court rejected this argument.
Finally, the court considered whether the trial court should have ruled in favor of the Owner on the question of whether the lease constituted an entirely new lease or simply a renewal. Looking at the evidence before the trial court, the appellate court ruled that the trial court's decision was supported by the evidence and thus not subject to reversal. Thus, the court affirmed the trial court's ruling awarding the commission to the Salesperson.
One judge dissented from the majority opinion, arguing that the only person who can bring a commission suit in Ohio is a licensed real estate broker and this right cannot be assigned.
Ritchie v. Weston, Inc., 757 N.E.2d 835 (Ohio Ct. App. 2001).