Sparks v. Fidelity Nat'l Title Ins. Co.: No Commission for Broker from Sale of Development
A federal appellate court has considered a broker's various attempts to receive compensation from the sale of a parcel of land for which the broker was never able to produce any prospects who entered into a binding purchase agreement with owner.
An undeveloped 235-acre property ("Property) in Edgarton, Massachusetts (on Martha's Vineyard) contained 148 possible residential lots and was owned by a consortium (99 lots were owned by Fidelity National Title Insurance Company ("Bank"), 45 by Nicholas Cambio ("Cambio"), and 4 by a conservation group). Additionally, a previous developer of the property also had a right to approve the minimum price at which the Bank sold any of the lots.
In June 1995, the Bank entered into the first of three listing agreements with Robert Sparks ("Salesperson"). The first agreement was an exclusive right to sell all of the lots in the Property. The listing agreement stated that the Bank "represent[ed] and warrant[ed]" that it owned the entire Property. When the first agreement expired, a second agreement was entered into between the parties. The second agreement contained similar terms as the first agreement but instead listed only fifteen specific lots that the Salesperson could sell, and named a price for twelve of those lots. Upon the expiration of the second listing agreement, a third agreement was entered into by the parties. In addition to listing 23 lots and specifying prices for 21 of those lots, the third agreement also stated that the Salesperson would not receive a commission if the Bank secured a buyer for more than 10% of the Property.
During the term of all three agreements, the Salesperson presented various offers to the Bank but none were accepted by the Bank. Most offers were rejected because of the price or financing contingencies. Only one offer for a model home came close to be being accepted by the Bank, as the Bank found the offered price agreeable but then sought to add two conditions to the sale which caused the deal to collapse.
Following the expiration of the final listing agreement, the Bank sold the entire Property to a developer who was not introduced to the Bank by the Salesperson. The Salesperson brought a lawsuit seeking compensation from the Bank under a variety of legal theories. The trial court ruled in favor of the Bank on all of the Salesperson's allegations, and the Salesperson appealed.
The United States Court of Appeals, First Circuit, affirmed the ruling of the trial court. The court first considered whether the Salesperson had a right to a commission under Massachusetts law. In Massachusetts, a broker is entitled to a commission when three things happen: the broker produces a ready, willing, and able purchaser on the terms outlined by the owner; the purchaser and owner enter into a binding contract; and the transaction closes. The only exception to this rule is if the transaction is not completed because of a wrongful act or interference by a seller. The court found that Massachusetts law did not give the Salesperson a right to a commission and further ruled that the exception did not apply to the Salesperson. The court found that in order for the exception to apply, the Salesperson would need to show that the only reason that a commission was not paid was because of some evasive technique employed by the Bank. Here, the court found that there was no evidence that the Bank had acted in such a manner. Thus, the court affirmed the trial court's ruling that the Salesperson was not entitled to a commission under Massachusetts law.
The court considered the remaining allegations by the Salesperson. The remaining allegations centered on the Bank's representation in the listing agreement that it owned the entire Property, when in reality it only owned 99 of the lots and also needed the approval of a past developer before it could sell the lots. The court found that the Salesperson suffered no harm because of this representation by the Bank, as it did not impact the Salesperson's failure to produce a buyer for any of the Property's lots. The court also ruled that the Bank had no legal obligation to disclose to the Salesperson that it had to obtain the approval of a prior developer before a transaction could close. The court also rejected the Salesperson's allegations under the Massachusetts' consumer fraud legislation, finding that recovery for the type of damages (time spent marketing the property) was not permitted by Massachusetts law, as those costs were what the commission was supposed to cover. Thus, the rulings of the trial court in favor of the Bank were affirmed.
Sparks v. Fidelity Nat'l Title Ins. Co., 294 F.3d 259 (1st Cir. 2002).