Opinion ID: 2083919
Heading Depth: 1
Heading Rank: 4

Heading: Procuring Cause

Text: In Spring Co. v. Holle, 248 Minn. 51, 55, 78 N.W.2d 315, 318 (1956), we recognized that a broker has a right to a commission when the broker has been the procuring cause for the sale, even though the sale is completed after the listing agreement has terminated and the commission had not been earned prior to termination. [6] As stated in Olson, this rule is based on the contract principle that no one can avail himself of the nonperformance of a condition precedent who has himself occasioned its nonperformance. 252 Minn. at 343, 90 N.W.2d at 200. As applied here, this rule would lead to the conclusion that, because the termination of Rosenberg by Marketing caused the nonperformance of the closing, which was the only remaining condition for Rosenberg to earn commissions, Marketing cannot rely on the failure of that condition and is liable for commissions on all sales for which Rosenberg was the procuring cause. This conclusion brings us to the question of whether the common law remedy for a real estate broker who was the procuring cause of a sale has been abrogated by section 82.195, and replaced with the statutory override remedy. Generally, statutes in derogation of the common law are to be strictly construed. Shaw Acquisition Co. v. Bank of Elk River, 639 N.W.2d 873, 877 (Minn.2002); Bloom v. Am. Express Co., 222 Minn. 249, 253, 23 N.W.2d 570, 573 (1946). See also 73 Am.Jur.2d Statutes § 191 (2001) [I]t is not presumed that the legislature intended to abrogate or modify a rule of the common law on the subject any further than that which is expressly declared or clearly indicated.). In addition, statutes that are in derogation of an equitable remedy are likewise to be strictly construed so as not to supplant[ ], impair[ ] or restrict[] equity's normal function as an aid to complete justice. Swogger v. Taylor, 243 Minn. 458, 465, 68 N.W.2d 376, 382 (1955). See also In re Lakeland Dev. Corp., 277 Minn. 432, 442, 152 N.W.2d 758, 765 (1967)). One proposed interpretation of section 82.195 is that it provides an alternative remedy, allowing brokers to establish a right to commissions even where they were not the procuring cause, but then limits access to that more liberal remedy by requiring that the listing agreement include the precise terms, and that the broker take the precise actions, specified in section 82.195. This interpretation is consistent with the permissive nature of section 82.195, which does not mandate override clauses, but only describes what such clauses must contain if they are included. This interpretation is also supported by the fact that the override remedy is much broader than the procuring cause remedy. For the procuring cause remedy, there must be evidence that [the broker] originated a course of events which without a break in their continuity created a cause of which the sale was the result. It is not enough that his services merely contributed to the result. They must be the producing and effective means thereof. Spring Co., 248 Minn. at 56, 78 N.W.2d at 318. The standard override clause, on the other hand, can preserve the right to a commission for the sale to any person who merely contacted the broker or who showed an interest in the property during the term of the listing. Minn.Stat. § 82.195, subd. 5 (2002). A second proposed interpretation of section 82.195 is that it so comprehensively addresses the subject of the effect of the termination of a listing agreement on a broker's right to commissions that the statutory override remedy was intended to be exclusive. In Lynn Beechler Realty Co. v. Warnygora, 396 N.W.2d 717, 720 (Minn.App.1986), the court of appeals held that the administrative rule that preceded section 82.195, and authorized an override remedy, superceded the procuring cause principles recognized in Spring Co. The court of appeals held that the failure of the broker to provide a protective customer list within 72 hours after the expiration of the listing agreement precluded the broker's claim for any commission. Lynn Beechler Realty Co., 396 N.W.2d at 720. The court did not explain why the requirements of the rule regarding override clauses (now section 82.195) abrogated the procuring cause remedy, except to say that Spring Co. preceded the rule. Lynn Beechler Realty Co., 396 N.W.2d at 720. There are several factors that weigh against the conclusion that the override remedy authorized by section 82.195 was intended to be exclusive, and these factors suggest that the court of appeals decision in Lynn Beechler Realty Co. was not correct. First, section 82.195 makes no explicit reference to the procuring cause remedy and does not state that the override remedy displaces any other remedies that might be available at common law. In many instances where the legislature has intended to replace a common law remedy with a statutory one, it has done so expressly. [7] Here, the legislature did not include any language in chapter 82 to expressly abrogate or modify any common law remedies. Second, and more importantly, the legislature expressly disclaimed any intent to abrogate the common law in the Scope and Effect section of chapter 82. When chapter 82 was first enacted, the legislature described the scope and effect of the chapter as follows: The requirement for disclosure of agency relationships set forth in this chapter are intended only to establish a minimum standard for regulatory purposes, and are not intended to abrogate common law.  Act of May 20, 1993, ch. 309, § 9, 1993 Minn. Laws 1794, 1801 (emphasis added). In 1994, this scope and effect language was amended, but the amendment reinforced the idea that the statute did not replace the common law, providing: Disclosures made in accordance with the requirements for disclosure of agency relationships set forth in this chapter are sufficient to satisfy common law disclosure requirements. Minn.Stat. § 82.197, subd. 3 (2002). Thus, the initial version of section 82.197 expressly disclaimed any intent to abrogate the common law and the amended version expressly recognized that common law requirements continue to exist and are not replaced by the statute. Third, we have been reluctant to imply an intent to abrogate a common law right where the statute does not do so expressly. This is particularly true with respect to equitable principles and remedies. Thus, in Swogger, 243 Minn. at 464, 68 N.W.2d at 382, we said that equity functions as a supplement to the rest of the law where its remedies are inadequate to do complete justice. We held that in the absence of express language or necessary implication, the partition statute, which had modified the procedures for partition actions be interpreted as restricting the court's equitable jurisdiction to consider other plans where necessary to provide complete justice. Id. at 464-65, 68 N.W.2d at 382. We said: Statutory enactments, even though they provide new procedures to enforce pre-existing rights at law and in equity, are to be read in harmony with the existing body of law, inclusive of existing equitable principles, unless an intention to change or repeal it is apparent. Id. at 465, 68 N.W.2d at 382. Similarly, we have said that even though the statutes governing the dissolution of a corporation prescribed specific procedures and grounds for dissolution, the statute should not be construed as eliminating the court's pre-existing powers in equity. Lakeland Dev. Corp., 277 Minn. at 441, 152 N.W.2d at 764-65. Thus we recognized that the court's authority by statute to dissolve a corporation was an alternative remedy that did not eliminate the court's general equitable power to do so. As applied here, all would likely agree that the strict application of section 82.195 to deprive Rosenberg of any recovery of compensation for extensive work that produced significant benefit to Marketing would not do complete equity. Fourth, as noted earlier, the permissive language of section 82.195 does not suggest an intention of exclusion. The statute does not require that an override clause be included in a listing agreement but treats it as optional-if applicable. Moreover, the only language that could be construed as restricting civil actions on a listing agreement is subdivision 4, which is narrowly limited to proscribe that Licensees shall not seek to enforce an override clause unless   . Minn.Stat. § 82.195, subd. 4(a) (2002). Rosenberg does not seek to enforce an override clause in this action and thus does not violate the statute's only proscription. The dissent's reliance on subdivision 2(5) of section 82.195 is misplaced. The requirement in that subdivision that all listing agreements contain a clear statement explaining the events or conditions that will entitle a broker to a commission addresses the question of when commissions are contractually earned. As we discussed earlier, the July Agreement did explain how commissions were to be contractually earned, and we have concluded that because Rosenberg did not earn any further commissions under the July Agreement, he had no contract remedy. But the procuring cause doctrine is an equitable remedy that is only available where there is no contract remedy; that is, where commissions were not contractually earned at the time of termination. We do not read subdivision 2(5) (or any other statute of frauds provision, for that matter) as requiring that a party seeking an extra-contractual, equitable remedy must first show that the contract expressly gave notice that the equitable remedy might be available. Weighing all of these considerations, we conclude that the override remedy provided in section 82.195 was intended to provide an alternative to, but not to abrogate, the court's equitable authority to use the procuring cause remedy where necessary to do complete equity. [8] A similar conclusion was reached by the Colorado Court of Appeals in Telluride Real Estate Co. v. Penthouse Affiliates, LLC, 996 P.2d 151, 154 (Colo.App.1999). The court rejected the argument that a statute regulating the relationships between real estate brokers and sellers was intended to supplant existing common law, holding that the statute did not eliminate the common law procuring cause remedy. Because genuine issues of material fact exist with respect to Rosenberg's procuring cause claims, we reverse the grant of summary judgment for Marketing and remand for trial of those claims.
Our reversal of summary judgment for Marketing necessitates a review of Rosenberg's claim against Renovations. Rosenberg contends that the district court erred in dismissing all claims against Renovations because Marketing was acting as an agent for Renovations and he should be able to pursue both corporations. Marketing argues that the district court correctly dismissed Renovations as a party because Renovations was not a party in the listing agreement. Marketing also argues that Marketing was not an agent for Renovations because Renovations did not have continuous control over Marketing. The court of appeals did not address the agency issue because it held that there was no valid claim against Marketing and, thus, there could be no valid claim against Renovations. Rosenberg, 2003 WL 21694604, at . But, because we reverse the decision of the court of appeals on the procuring cause claim against Marketing, the issue of whether Rosenberg has stated a valid claim against Renovations takes on renewed significance. Rosenberg argues that the rules of civil procedure do not authorize the dismissal of a party merely on grounds that the party is not necessary. It is true that the district court's use of the word necessary was a misnomer. The concept of a necessary party only arises where a party is not joined and that party's presence in the action is necessary to the ability of the court to grant complete relief or avoid inconsistent obligations. Minn. R. Civ. P. 19.01. A plaintiff has the right to join a person against whom the plaintiff can state a claim, even though the joinder of that person is not technically necessary but only permissive. Minn. R. Civ. P. 20.01. The question is whether Rosenberg has stated a claim against Renovations, which turns on the question whether Renovations should be considered a party, albeit unnamed, to the July Agreement. According to the Restatement, a disclosed principal is subject to liability upon an authorized contract in writing    although it purports to be the contract of the agent, unless the principal is excluded as a party by the terms of the instrument or by the agreement of the parties. Restatement (Second) of Agency § 149 (1958). The comments state: The fact that the principal's name is not in the instrument and that there is no appearance of agency upon the writing is some evidence that the parties intended that the agent alone was to be liable. However, it is not sufficient evidence to rebut the inference that a disclosed or partially disclosed principal is a party to a contract made by his agent. Upon the question whether or not, under the circumstances, the third person accepted the credit of the agent only, the written memorandum binding the agent is not conclusive evidence, unless by its specific terms the principal is excluded as a party. Id. at cmt. a. The same rule applies to undisclosed principals: [a]n undisclosed principal is bound by contracts and conveyances made on his account by an agent acting within his authority. Id. at § 186. And the rule is not changed by the fact the contract must be in writing. Id. at §§ 153 and 193. Section 82.195 recognizes the possibility that a listing agreement may be signed by an agent by stating that a listing agreement may be signed either by the owner or another person authorized to offer the property for sale. Minn.Stat. § 82.195, subd. 1 (2002). Evidence supporting the view that Renovations was intended to be a party to the July Agreement includes the fact that commission payments to Rosenberg were made by Renovations, not Marketing; the Reservation Agreements identify Renovations as Seller and Rosenberg's company, Shelter Consultants, as Seller's agent; and the New Construction Purchase Agreements likewise list Rosenberg as Seller's Agent. Further, the May 1997 Agreement between Renovations and Marketing has a provision for subcontracts which authorized Marketing to provide services to Renovations through subcontractors, subject to approval by Renovations. Because the district court did not address these agency issues and dismissed Renovations on an inappropriate ground, Rosenberg was not given a full opportunity to present a record on these agency issues. The record that does exist is sufficient to preclude dismissal of Renovations under either Minn. R. Civ. P. 12 or 56. We reverse the summary judgment dismissing Rosenberg's claims against Renovations.
Finally, Rosenberg argues that the district court erred in denying his motion to amend his complaint to include a claim for breach of a joint venture. A party may amend its complaint after a responsive pleading is served only by leave of the court. Minn. R. Civ. P. 15.01. We have stated that the amendment of pleadings should be liberally allowed unless the adverse party would be prejudiced. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993). But we have cautioned that the court should deny a motion to amend a complaint where the proposed claim could not withstand summary judgment. M.H. v. Caritas Family Services, 488 N.W.2d 282, 290 (Minn.1992). Under Minnesota law, four requirements must be met in order to create a joint venture. These four requirements are (1) contribution by all parties, (2) joint proprietorship and control, (3) sharing of profits but not necessarily of losses, and (4) a contract. Delgado v. Lohmar, 289 N.W.2d 479, 482 n. 2 (Minn.1979) (citing Treichel v. Adams, 280 Minn. 132, 158 N.W.2d 263 (1968); Rehnberg v. Minnesota Homes, Inc., 236 Minn. 230, 52 N.W.2d 454 (1952)). Although it appears that Rosenberg may have participated in the initial stages of the development, he provides no evidence that he had joint proprietorship or control or that he was to share in the profits of the development. To the contrary, the listing agreement states that Rosenberg was employed as a salesperson for specified commissions. And the parties' conduct under the listing agreement demonstrates that they regarded Rosenberg as a commission agent, not a joint venturer. We conclude that the district court did not abuse its discretion when it denied Rosenberg's motion to amend because the claim of a joint venture would not survive a summary judgment motion. Affirmed in part, reversed in part and remanded. ANDERSON, Russell A. (dissenting). Because the majority ignores both the intent of the legislature and our long-standing precedent, I respectfully dissent. Chapter 82 of the Minnesota Statutes is a comprehensive and mandatory statutory scheme for the regulation of real estate brokers and salespersons. [1] No person is to act as a real estate broker, salesperson, or real estate closing agent unless licensed. Minn.Stat. § 82.19, subd. 1 (2002). In fact, we have made clear that an unlicensed real estate broker may not maintain an action for the collection of a commission. Relocation Realty Services Corp. v. Carlson Companies, Inc., 264 N.W.2d 643, 645 (Minn.1978); accord Dellwood Enter., Inc. v. Pac. Am. Real Estate Fund, 505 F.Supp. 187, 189 (D.Minn.) , aff'd, 653 F.2d 350 (8th Cir.1981). In addition to requiring a license to maintain an action such as this, brokers, such as Rosenberg, are required to obtain a signed listing agreement that includes, among other things, a clear statement explaining the events or conditions that will entitle a broker to a commission. Minn.Stat. § 82.195, subd. 2(5) (2002). A broker shall not seek to enforce an override clause unless a protective list has been furnished to the seller within 72 hours after the expiration of the listing agreement. Minn.Stat. § 82.195, subd. 4 (2002). See also Douglas v. Schuette, 607 N.W.2d 142, 145 (Minn.App.2000) ; Lynn Beechler Realty Co. v. Warnygora, 396 N.W.2d 717, 720 (Minn.App.1986). The length of the override provision may not extend more than 6 months beyond the expiration of the listing agreement and, with exception not applicable here, a broker shall not include in a listing agreement a holdover clause, automatic extension, or any similar provision   . Minn.Stat. § 82.195, subd. 3 (2002). The majority apparently believes that beneath these clear and comprehensive statutory requirements and prohibitions is a surviving common law equitable remedy which allows a broker to recover a commission when the broker is the procuring cause of a sale completed after termination of the listing agreement. In my view, the majority has read into this listing agreement a similar provision to an override clause that the legislature has clearly prohibited. See Minn.Stat. § 82.195, subd. 3. The listing agreement that Rosenberg seeks to enforce has no override clause that would allow, upon proper notice, recovery of commissions after termination of the listing agreement. The common law principle relied upon by the majority is nowhere referenced in the listing agreement, which, according to statute, must contain a clear statement explaining the events or conditions that will entitle a broker to a commission. Minn.Stat. § 82.195, subd. 2(5). When the legislature provides that events or conditions that will entitle a broker to a commission must be explained in a clear statement in the listing agreement, I would conclude that a common law claim, neither mentioned nor explained by a clear statement in a listing agreement, is barred. The majority relies on a specific (and since amended) section of chapter 82 for the proposition that the legislature intended no portion of chapter 82 to abrogate the common law. The section cited by the majority, however, Minn.Stat. § 82.197, subd. 3 (2002), by its very terms applied only to the requirements for disclosure of agency relationships set forth in this chapter. (Emphasis added.) Because the dispute before us does not involve the disclosure of an agency relationship, but rather the adequacy of the listing agreement, Minn.Stat. § 82.197 is wholly irrelevant. By his own admittance, Rosenberg, a licensed real estate broker with over 20 years of experience, failed to comply with the express statutory provisions that would allow entitlement to a commission after termination of the listing agreement. See Marks v. Walter G. McCarty Corp., 33 Cal.2d 814, 205 P.2d 1025, 1030 (1949) (The plaintiff [a licensed real estate broker], a man of experience in this line of business, knew how to protect himself in the transaction but failed to do so.). I would not enforce a remedy that the legislature has prohibited. I respectfully dissent. BLATZ, C.J. (dissenting).