Appellate Court Agrees that Broker Does Not Earn Commission Where Offer is Not "Acceptable To Owner"

February 29, 2012

James-Manning.jpgPerhaps because of the down economy, several attorneys at Reid & Hellyer have noticed an increase in the number of civil cases that seem to lack merit. In one such case, Reid & Hellyer’s clients found themselves as the defendants in such a suit, which was recently decided in favor of the firm’s clients by two courts in Riverside, California, as seen in The Press-Enterprise.

workingmasthead.jpgIn that case, an owner of land had a listing agreement with the listing broker for “$17 million cash or such other price and terms acceptable to Owner.”  The latter part of that clause is standard in most listing agreements. 

A buyer’s broker submitted an offer to purchase the land for $17 million, along with some other terms, including the right to back out after the due diligence period, making the offer conditional, not the unconditional offer to buy for $17 million cash requested by the agreement.  The owner rejected that offer, countering with a higher sales price.

The buyer’s broker sued, arguing that his $17 million offer entitled him to a commission of $340,000 under the terms of the agreement, despite the fact that the offer was not “acceptable to Owner.”  He argued that the word “or” separated the $17 million from the entire remainder of that sentence, meaning that “acceptable to Owner” only applied to the words “such other price and terms” acceptable to the owner.

Both the Riverside County Superior Court and the Fourth District Court of Appeal agreed with Reid & Hellyer that the clause was an invitation for a buyer's broker to submit offers which could be accepted or rejected by the owner.  Only if the owner accepted an offer would a commission be owed.

The appellate court opinion in RealPRO, Inc. v. Smith Residiual Company, LLC. et al. (Feb. 28, 2012, E052369) __ Cal.App.4th __, has been certified for publication by the California Court of Appeal, Fourth District, Division Two. Attorneys Jim Manning, Steve Lee and Jenna Acuff of Reid & Hellyer represented the prevailing parties.

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