A Massachusetts court has considered whether a listing agreement's protection clause allowed a broker to receive a commission when the only contact with the buyer was through the broker's "for sale" sign on the property.
Roger Morris ("Seller") was the trustee of a trust which held a parcel of land containing 13 residential plots in Massachusetts. The Seller, who was engaged in the real estate business in Florida, was attempting to sell the parcels, but as of July 1983 had only sold one. James Crabtree of Upper Cape Realty Corporation ("Brokerage") approached the Seller in August 1983 about listing the property for sale with the Brokerage. The Seller signed a listing agreement with the Brokerage. The listing agreement gave the Brokerage an exclusive right to sell the sell the property for 180 days and thereafter continuing until the agreement was terminated by either party with 30 days written notice. The agreement also contained a clause that if the property was sold following the termination to a buyer whom the Brokerage introduced to the property before the expiration of the listing agreement, the Brokerage was entitled to receive compensation.
Gary Lucier ("Buyer") frequently hunted on or near the Seller's property. In September 1984, the Buyer observed the Brokerage's "for sale" sign on the property. The Buyer and Brokerage had a mutual dislike for each other for reasons not discussed in the decision. Because of his dislike for the Brokerage, the Buyer contacted the Seller directly about purchasing the property. After a series of meetings, the Seller ultimately accepted the Buyer's offer to purchase the property. On December 7th, the Seller realized that he had never terminated the relationship with the Brokerage and so he sent a letter to the Brokerage notifying it that the relationship was terminated in thirty days. On January 21st, the Seller transferred ownership to the Buyer. The Brokerage filed a lawsuit, seeking to collect a commission from the sale of the property. The trial court ruled in favor of the Seller and dismissed the lawsuit. The Brokerage appealed.
The Appeals Court of Massachusetts, Plymouth, reversed the trial court's ruling that the Brokerage was not entitled to receive a commission. The Brokerage first argued that it was entitled to receive a commission because the property was sold prior to the expiration of the listing agreement, as the Buyer had deposited part of the sale price with the Seller prior to the termination of the listing agreement. The court rejected this argument, ruling that the agreement was terminated on January 7th and the actual sale of the property was not complete until January 21st, as the Buyer did not receive title in the property until that date.
The court next considered whether the Brokerage was entitled to a commission, based on the extension, or protection, clause in the listing agreement. The court found that if the Brokerage had "at least some minimal causal connection to the sale," it would be entitled to receive a commission. Further, the court found that a broker is considered to have introduced the buyer and seller if any method used by the broker leads the buyer to the seller. Applying these principles to the facts in this case, the court ruled that the Brokerage was entitled to receive the compensation specified in the listing agreement's extension clause, as the Buyer learned that the property was for sale through the Brokerage's signs on the property. Despite the fact that the Brokerage never had any direct dealings with the Buyer and that the Brokerage had told the Seller that the Buyer was "bad news," the court ruled that the Brokerage "introduced" the Buyer to property through its signs. Thus, the trial court was reversed and the court awarded the Brokerage the commission specified in the listing agreement.
Upper Cape Realty Corp. v. Morris, 756 N.E.2d 1193 (Mass. App. Ct. 2001).