Powered by Google

Search form

Smith v. Coldwell Banker Commercial N.E.R.A., LLC: No Commission Reduction Required

A Connecticut appellate court has considered whether a seller could demand a refund from a broker because the broker received a commission based on a price which exceeded the actual sale price.

Donna Smith (“Seller”) owned Georgetown Early Learning Center, LLC (“Day Care Center”), a child care facility. The Seller listed the Day Care Center for sale with Coldwell Banker Commercial N.E.R.A. LLC (“Brokerage”), agreeing to pay the Brokerage a percentage of the sale price if the Brokerage procured a buyer for the Day Care Center. The Day Care Center was listed for sale at $350,000.

The Brokerage produced a buyer, Ellen Goldstein (“Buyer”), who agreed to purchase the Day Care Center at the list price. The agreement between the Seller and the Buyer was that the Buyer would give the Seller $100,000 at closing and also a $250,000 note. In addition, there were two conditions which the Buyer needed to satisfy to complete the sale: first, the Buyer needed to assume the Day Care Center’s lease; and second, the Buyer needed to have the Day Care Center’s day care license placed in her name.

The closing proceeded as scheduled, and the Buyer gave the Seller a personal check for $100,000 at the closing and also a note for the remaining balance. The Seller gave the Brokerage its commission check based on the $350,000 sale price.

Following the closing, the Buyer put a “stop payment” order on the $100,000 personal check. The Seller and Buyer then renegotiated the sale price of $165,900, keeping the same contingencies as before and setting a new closing date. The Seller argued that the Brokerage should only receive a commission on the Day Care Center’s actual purchase price, and so demanded a refund on the remaining balance. When the Brokerage refused to refund this amount, the Seller brought a lawsuit against the Brokerage alleging breach of fiduciary duty, breach of contract, and violation of the state’s unfair trade practices act. The trial court ruled in favor of the Brokerage, and the Seller appealed.

The Appellate Court of Connecticut affirmed the trial court. The Seller argued that the trial court had improperly determined that the Brokerage did not owe a refund because the Brokerage was not a party to the renegotiated contract. Instead, the Seller argued that there was no contract between her and the Buyer until all of the contract contingencies were satisfied because only then would the Brokerage have procured a “ready, willing, and able” buyer entitling the Brokerage to a commission.

The court determined that the Brokerage had satisfied the conditions entitling it to a commission. Connecticut law allows a broker to recover a commission if it has met the following conditions: either producing a customer ready, willing, and able to buy on terms acceptable to the seller; or, the broker has brought a buyer and a seller to an enforceable agreement. The listing agreement entitled the Brokerage to a commission upon the close of escrow, and the purchase agreement allowed for payment of the commission upon closing. Since the purchase agreement did not condition payment of the commission upon the Buyer’s satisfaction of contract conditions, the court determined that the Brokerage was entitled to retain the commission because a closing had taken place.

The court also ruled that the Brokerage had earned its commission under Connecticut law because it had produced a “ready, willing, and able” buyer at the list price who entered into an enforceable contract with the Seller. The fact that the Seller chose not to enforce her agreement with the Buyer and also made the decision to accept a personal check instead of cash did not affect the Brokerage’s right to collect a commission because those were choices made by the Seller. Thus, the court affirmed the trial court’s ruling that the Seller was not entitled to a commission refund.

Smith v. Coldwell Banker Commercial N.E.R.A., LLC, 880 A.2d 1012 (Conn. App. Ct. 2005).