Title: Petrosky v. Peterson
Citation: N/A
Docket Number: 479, 2003
State: Delaware
Issuer: Delaware Supreme Court
Date: September 28, 2004

Designated pursuant to Art. IV, §12 of the Delaware Constitution and Supreme Court Rules
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2 and 4.
Designated pursuant to Art. IV, §38 of the Delaware Constitution and Supreme Court Rules
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2 and 4.
IN THE SUPREME COURT OF THE STATE OF DELAWARE
CHABBOTT PETROSKY,
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COMMERCIAL REALTORS, LTD.,§
No. 479, 2003
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Plaintiff Below,
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Appellant,
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v.
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Court Below: Superior Court
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of the State of Delaware
ROBERT J. PETERSON and
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in and for Kent County
BONNIE S. PETERSON,
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C.A. No. 01C-10-011
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Defendants Below,
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Appellees.
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Submitted: July 21, 2004
Decided: September 28, 2004
Before HOLLAND, BERGER and JACOBS, Justices, PARSONS, Vice
Chancellor,  and HARTNETT, Justice (Retired), constituting the Court en Banc.
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Upon appeal from the Superior Court.  REVERSED and REMANDED.
Margaret R. Cooper, Esquire, of Hudson, Jones, Jaywork & Fisher, Georgetown,
Delaware, for Appellant.
Constantine F. Malmberg, III, Esquire, and Ronald G. Poliquin, Esquire, of Young &
Malmberg, P.A., Dover, Delaware, for Appellees.
BERGER, Justice:
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In this appeal, we consider whether a real estate broker should be compensated
for services performed in obtaining a long-term lease when the broker’s listing
agreement addressed only a sale of the property in question.  The Superior Court held
that, because a Delaware Real Estate Commission regulation requires all listing
agreements to be in writing, the broker could not recover under a claim that the parties
orally modified the agreement, or quantum meruit.  We  disagree.  Under the facts of
this case, where the long-term lease expressly recognizes the broker’s entitlement to
compensation, we hold that the broker may maintain an action based on quantum
meruit.
Factual and Procedural Background
Robert and Bonnie Peterson own a commercial property in Dover, Delaware.
George Chabbott, of Chabbott Petrosky Commercial Realtors, Ltd., approached the
Petersons to discuss the sale of their property.  Chabbott indicated that he had a
prospective buyer, and the Petersons entered into a 90-day exclusive listing agreement
on June 20, 2000.  The agreement provided that the property  would be offered for
sale at a price of $750,000 and that Chabbott would be paid a commission of five
percent of the sale price.
On August 15, 2000, Delaware Food Ventures, Inc. made an offer to purchase
the property for $665,000.  The Petersons made a counter-offer of $700,000, and the
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parties thereafter negotiated a long-term lease instead of a sale. The  lease, executed
on October 31, 2000, is for a 20 year term with two five-year renewal options.  The
rent is set at $70,000 per year for the first five years with incremental increases every
five years thereafter.  Paragraph 21.7 of the lease provides that there is no
commission, charge or other compensation due to any broker, except for Chabbott.
In August 2000, after the parties had executed a letter of intent for the lease,
Chabbott discussed his commission with the Petersons.  Chabbott testified that he
agreed to accept five percent of the Petersons’ $700,000 counter offer ($35,000),
which was considerably less than the standard commission for a long-term lease.  The
Petersons did not agree to that amount as a lump sum payment.  They proposed five
annual payments of $7,000 each, but their counter-offer was rejected.  Chabbott
continued to maintain the escrow account through which rent payments were made,
but the parties never settled their differences as to the commission.  
Chabbott filed this action in October 2001.  The Superior Court did not make
any factual findings as to whether the parties reached any oral agreements for the
payment of a commission.  Rather, it held that, since there was no written agreement
for the lease of the property, no commission could be recovered under a contract
theory or under quantum meruit.  The trial court did find, however, that Chabbott
 24 Del.C.§2929.
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 654 A.2d 833 (Del. 1995).
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performed compensable services in managing the escrow account and negotiating the
terms of the lease.  The court awarded Chabbott a total of $5,583.33 for those services.
Discussion
 The Delaware Real Estate Commission regulates the licensing and conduct of
real estate brokers.  Its “primary purpose ... is to protect the general public, especially
those persons who are direct recipients of services regulated by this chapter from
unsafe practices, and from occupational practices which tend to reduce competition
or fix the price of services rendered.”   Commission Rule 7.1.1 provides that, “[l]isting
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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.”
In Eastern Commercial Realty Corp. v. Fusco,  this Court held that an oral
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listing agreement is unenforceable because it violates Rule 7.1.1 and the public policy
underlying the rule.  The Court explained that, “oral listing agreements can be an
unsafe practice and the requirement that listing agreements be in writing helps to
Id. at 835.
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Construction Systems Group, Inc. v. Council of Sea Colony, Phase I, 1995 WL 622421 (Del.
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Supr.)
678 F.Supp. 445 (D.Del. 1988)
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Id. at 449.
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foster fair dealings between parties, standardize real estate practice, prevent fraud and
avoid litigation.”   
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In Fusco, the broker did not seek recovery under quantum meruit, a quasi-
contract claim that allows a party to recover the reasonable value of his or her services
if: (i) the party performed the services with the expectation that the recipient would
pay for them; and (ii) the recipient should have known that the party expected to be
paid.   Other courts, however, have considered whether a quantum meruit claim may
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be maintained in the absence of a written listing agreement.  In Amato & Stella
Assocs., Inc. v. Florida North Investments, Ltd.,  for example, a federal court held that
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there could be no recovery under quantum meruit.  The court reasoned that,
“[a]llowing the plaintiff to recover for services rendered, despite non-compliance with
[the written listing agreement regulation], would significantly undercut the purpose
and intent of the regulation.”  
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1994 WL 762670 (Del. Super.)
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In Hursey Porter & Assoc. v. Bounds,  by contrast,  the Superior Court held that
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a broker could recover under quantum meruit.  The court found that Amato, and other
similar decisions, were distinguishable because in Porter, the broker complied with
the writing requirement at the outset, and produced a buyer before the written
agreement expired.  Given those facts, the Porter court found that it would not
undercut the purpose of the Commission’s regulation to allow recovery under
quantum meruit.     
    For similar reasons, we conclude that Chabbott may recover under quantum
meruit notwithstanding that there was no written listing agreement for the transaction
that was consummated – a long-term lease.   First, Chabbott did not ignore the written
listing agreement requirement.  He obtained a properly executed written listing
agreement.  Second, Chabbott procured the prospective “buyer” during the term of the
agreement.  Third, after the nature of the transaction shifted, the lease –  another
writing –  expressly acknowledged that a commission was due to Chabbott.  Finally,
the trial court found as a fact that Chabbott performed services in procuring the tenant
and negotiating the terms of the lease. Under these circumstances, it would not
undercut the policy embodied in Rule 7.1.1 to allow recovery for the reasonable value
of services rendered.
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Conclusion
Based on the foregoing, the judgment of the Superior Court is reversed and this
matter is remanded for further action consistent with this opinion.  Jurisdiction is not
retained.