Property II, Pages 673–676

Drake v. Hosley

Supreme Court of Alaska, 1986

Facts:

Plaintiff entered an exclusive listing agreement with defendant realtor company. The agreement entitled defendant to a 10% commission if defendant located a buyer "willing and able to purchase" at plaintiff's terms or if plaintiff entered into a "binding sale" during the term of their agreement.

Defendant found a group of three buyers who were interested in the property. Plaintiff then signed a purchase and sale agreement with them, which provided that closing would occur "within 10 days of clear title" and "ASAP." A typed addendum signed by both parties stated that plaintiff agreed to pay defendant a 10% commission for this sale.

On April 3, defendant learned that plaintiff's ex-wife had a judgment for plaintiff's ex-wife encumbering the title. Plaintiff said that he would pay this off with the closing money, but that he needed payment by April 11 to get a discount. There is a dispute as to whether defendant promised plaintiff's lawyer, Wickwire, that the buyers would close before April 11. This deadline was extended until the end of the month, but defendant informed Wickwire that the buyers would not have the money before May.

Plaintiff then mailed a letter to defendant on April 11, withdrawing his offer to sell, and he sold the property through another broker the next day. The same day that he sold the property through another broker, defendant went to Wickwire with the buyer's down payment to close the sale. Wickwire informed defendant that another buyer had already purchased the property, as defendant did not receive plaintiff's letter until April 18.

Defendant then filed a complaint, alleging that he had fulfilled the terms of the agreement and was entitled to commission payment.

Procedural History:

Trial court granted defendant's motion for summary judgment and denied plaintiff's.

Issue:

Was defendant entitled to a commission when plaintiff sold to another buyer?

Rules:

  • LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 675, Top

    The traditional rule followed by a majority of jurisdictions is that a broker is entitled to a commission when he produces a buyer ready, willing and able to purchase the property on the seller's terms, even if the sale is not completed.

  • The minority says that "a real estate broker does not earn a commission unless the contract of sale is performed." "[I]t emphasizes that a broker has not produced a ready, willing and able buyer if the buyer refuses or is unable to perform at closing." It also says that "public policy requires the courts to read into every brokerage agreement or contract of sale a requirement that barring default by the seller, commissions shall not be deemed earned against him unless the contract of sale is performed."

Reasoning:

Defendant was not acting for the buyers and so could not modify their contract to require that the buyers close before a certain date. Defendant received a report on the title on April 3, so the buyers' down payment on April 12 was within 10 days. Defendant then found a buyer that who was ready and willing within 10 days of clear title.

Holding:

Defendant was entitled to his commission. Affirmed.

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