Opinion
C.A. No. 01C-10-011 JTV
Submitted: August 7, 2002
Decided: November 27, 2002
Upon Consideration of Plaintiff's For Summary Judgment DENIED
Upon Consideration of Defendant's For Summary Judgment DENIED
David J. Weidman, Esq., Wilmington, Delaware. Attorney for Plaintiff. Constantine F. Malmberg, III, Esq., Dover, Delaware. Attorney for Defendants.
ORDER
Upon consideration of the parties' cross-motions for summary judgment and the record of the case, it appears that:
1. The plaintiff, Chabbott Petrosky Commercial Realtors, Ltd., ("Chabbott Realtors") is a realty company having its principle office in Dover, Delaware. The defendants, Robert J. Peterson and Bonnie S. Peterson, are the owners of a commercial property at 677 N. DuPont Highway, Dover, Delaware. On June 20, 2000 the defendants entered into a written, exclusive listing agreement with the plaintiff for the sale of their property. The listing price was $750,000. The term of the listing was ninety days. The realtor's commission was to be five per cent of the sale price. On August 15, 2000 a potential buyer, Delaware Food Ventures, Inc., made an offer, through Chabbott Realtors, to buy the property for $665,000. The defendants counter offered at $700,000. The exact sequence of events which immediately followed the making of the counteroffer is not entirely clear from the record, but it is clear that negotiations for a sale of the property were abandoned and the parties entered into a lease instead. On August 29 the defendants and Delaware Food Ventures, Inc. signed a memorandum confirming the essential terms of a twenty year lease with two five year renewal options, and on October 31 the parties executed a formal lease agreement. The rent was $70,000 per year for each of the first five years with that amount increasing throughout the duration of the lease after each five-year interval.
2. The plaintiff has filed this suit claiming that it is entitled to a realtor's commission for securing the long term lease. The defendants deny that they are obligated to pay any commission for the lease of the premises and have filed a motion for summary judgment, contending that they agreed to pay a commission only if the property was sold, not leased. They also contend that Delaware Real Estate Commission Regulation 7.1.1 ("the regulation") requires that all real estate listing agreements must be in writing and that the written listing agreement which they signed provides for a commission only in the event of a sale of the premises. The absence of a written listing agreement entitling the plaintiff to a commission in the event the premises were leased, they contend, is fatal to the plaintiff's claim.
3. In response, the plaintiff contends that the original written listing agreement satisfied the regulation requirement that listing agreements be in writing. It contends that a subsequent oral or implied modification of a written listing need not be in writing. It further contends that when the decision was made that Delaware Food Ventures, Inc. would lease the property, rather than buy it, the parties agreed that the defendants would pay a commission of $35,000. The defendants contend, however, that an alleged verbal agreement for payment of a commission which varies from the terms of a written listing agreement is not enforceable.
4. The plaintiff has also filed a motion for summary judgment. It contends that the defendants specifically agreed to pay a commission of $35,000 in consideration of the plaintiff's efforts in obtaining Delaware Food Ventures, Inc. as a long term lessee of the premises. It contends that this agreement was made during a discussion between the defendants and George Chabbott, the realtor involved, on August 29, the same day that the defendants and Delaware Food Ventures, Inc. agreed to enter into a lease instead of a sale. It contends that the only point not agreed upon was whether the commission would be paid in one lump sum or paid over time. The defendants, in addition to relying upon the contentions set forth above concerning the requirement that a listing agreement be in writing, contend that there never was any meeting of the minds as to the payment of a commission. They also contend that the discussion which the parties had on August 29 is not admissible under Rule 408 of the Delaware Rules of Evidence, which relates to offers in compromise.
5. Summary judgment should be rendered if the record shows that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. The facts must be viewed in the light most favorable to the non-moving party. Summary judgment may not be granted if the record indicates that a material fact is in dispute, or if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of the law to the circumstances. However, when the facts permit a reasonable person to draw but one inference, the question becomes one for decision as a matter of law.
Super.Ct.Civ.R. 56(c).
Guy v. Judicial Nominating Comm'n, 659 A.2d 777, 780 (Del.Super. 1995); Figgs v. Bellevue Holding Co., 652 A.2d 1084, 1087 (Del.Super. 1994).
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
Wooten v. Kiger, 226 A.2d 238 (Del. 1967).
6. Delaware Real Estate Commission Regulation 7.1.1 provides:
Listing Agreements for the rental, sale, lease or exchange of real property, whether exclusive, co-exclusive or open shall be in writing and shall be signed by the seller or owner.
The purpose of the requirement that all listings be in writing is "to protect the public by establishing fair dealings between the parties, standardizing the procedures and practices in the real estate business and by preventing fraud." The Court will not enforce an oral listing agreement.
Hursey Porter Associates v. Bounds, 1994 Del. Super. LEXIS 583, at *22-23 (Del.Super. 1994); Century 21 Schaeffer Associates Realtors, Inc. v. Elsmere Realty Company, 1999 Del. Super. LEXIS 169, at *8 (Del.Super. 1999).
Eastern Commercial Realty Corp. v. Fusco, 654 A.2d 833 (Del. 1995).
7. It does not necessarily follow, however, that parties to a written listing agreement cannot alter the terms of that agreement by words or conduct. In Hursey Porter Associates v. Bounds this Court found that an oral or implied agreement to extend the term of a written listing beyond its written expiration date was enforceable. Four factors, in particular, persuaded the Court that the oral extension of the listing agreement should be enforced in that case: (1) the regulation does not specifically require that modifications of a written listing agreement must be in writing; (2) the real estate broker in that case did comply with the regulation by preparing and entering into an original, written listing; (3) the broker partially performed the listing agreement by producing a prospective purchaser during the term of the agreement; and (4) the prospective purchaser was the one who ultimately bought the property.
1994 Del. Super. LEXIS 583.
8. The defendants recognize that Hursey enforced an oral or implied extension of a written listing agreement, but argue that Hursey should be construed narrowly since it involved only an extension of the length of a listing agreement. In this case, they argue, the plaintiff's claim involves important substantive terms, such as how a commission will be computed, the terms upon which it is to be paid, what adjustment, if any, should be made in the event the tenant defaults early in the lease, and the like. The purpose of the requirement of a writing, they argue, is to prevent disputes over material terms of this nature.
9. After considering the facts in the light most favorable to the plaintiff, however, I am not persuaded that the plaintiff failed to comply with Regulation 7.1.1, or that the commission claimed here is based upon an unenforceable oral listing agreement. As in Hursey, the realtor in this case did comply with the Commission regulation by entering into a written listing agreement on June 20, 2000. The plaintiff did produce a potential buyer within the term of the listing contract. Although that potential buyer did not purchase the property, it did enter into a long term lease of the premises. On the same day that the defendants signed a memorandum agreeing to the lease of premises, they and the realtor discussed the commission. There is evidence that the defendants and the realtor agreed on a commission of $35,000, which is five percent of the defendants' $700,000 counteroffer. There is evidence that the agreement was reached after the realtor reviewed with the defendants a comparison of the rate schedule for commissions where properties are leased. The formal written lease which the defendants signed on October 31, 2000 appears to contain an acknowledgment by them that a commission was owed to the plaintiff. The pertinent section reads as follows:
Each party hereby represents and warrants to the other than, in connection with the lease of the Premises hereunder, the party so representing and warranting has not dealt with any real estate broker, agent or finder, and there is no other commission, charge or other compensation due on account thereof except for Chabbott Petrosky Commercial Realtors, Inc. in cooperation with Diamond State Management, Inc., to be compensated pursuant to a separate written agreement between Landlord and such broker. . . .
Finally, the Commission's regulation does not expressly require that an express or implied modification of a written listing agreement, even a substantive one, be reduced to writing and signed. My conclusion is that when the evidence is viewed in the light most favorable to the plaintiff, the Commission regulation does not bar the plaintiff's claim. Stella v. Wilmington Savings Fund Society, Amato Stella Assoc. v. Florida North Investments, and Century 21 Schaeffer Associates Realtors, Inc. v. Elsmere Realty Company, which have also addressed aspects of Regulation 7.1.1, are distinguishable from this case, the first two because the listing agreements in those cases were purely verbal, and the third because the seller had not signed any written listing agreement.
1993 Del. Super. LEXIS 134 (Del.Super. 1993).
678 F. Supp. 445 (D.Del. 1988).
1999 Del. Super. LEXIS 169.
10. The plaintiff's motion for summary judgment is based upon a contention that it is undisputed that the defendants agreed to pay a commission of $35,000. However, the defendants deny that they agreed to pay a commission. While the record indicates that there may have been a tentative meeting of the minds on a figure of $35,000, no agreement was reached as to how or when this amount would be paid. When the evidence is viewed in the light most favorable to the defendants, one can infer that there was no final agreement on payment of a commission. A question of fact exists as to whether the defendants agreed to pay a commission. Therefore, the plaintiff's motion for summary judgment must be denied as well.
11. The defendants' Rule 408 objection is overruled. The discussion on August 29 is part of the operative facts upon which the plaintiff bases its claim. Negotiations, in and of themselves, are not offers in compromise. To the extent that the objection may go to offers in compromise which may have been made later, an appropriate objection may be made at trial.
12. The parties cross-motions for summary judgment are denied.
IT IS SO ORDERED.