Opinion ID: 2974001
Heading Depth: 2
Heading Rank: 2

Heading: Contractual Commission

Text: Plaintiffs claim that there were two contractual commission agreements with Forestland–one oral and one written. The district court assumed the existence of a contract. For the reasons discussed below, we conclude that neither constituted a contract. -4-
Plaintiffs argue that the oral commission agreement, standing alone, is sufficient to impose liability on Forestland for the payment of a commission. Tennessee recognizes oral contracts to pay commissions as valid, binding, and enforceable in Tennessee. Parks v. Morris, 914 S.W.2d 545, 547 (Tenn. Ct. App. 1995).1 “While oral contracts are enforceable, persons seeking to enforce them must demonstrate (1) that the parties mutually assented to the terms of the contract and (2) that these terms are sufficiently definite to be enforceable.” Burton v. Warren Farmers Coop., 129 S.W.3d 513, 521 (Tenn. Ct. App. 2002). The oral contract “must establish its essential terms by clear, cogent, and convincing evidence.” Parks, 914 S.W.2d at 547. “The mutual assent need not be manifested in writing. It may be manifested, in whole or in part, by the parties’ spoken words or by their actions or inactions.” Burton, 129 S.W.3d at 521. At the same time, however, “in Tennessee a broker’s contract for sale of real estate may be oral but, by analogy, the same quantum of proof necessary to establish a trust in real estate by parole evidence is necessary to prove an oral contract between a principal and a broker for the sale of real estate and that the contract must be proven by clear, cogent and convincing evidence though the evidence need not be uncontradicted.” Parks, 914 S.W.2d at 547-48 (quoting Alexander v. C.C. Powell Realty Co., 535 S.W.2d 154, 157-58 (Tenn. Ct. App. 1975)). Plaintiffs claim the mutual assent was manifested by the actions taken by both parties subsequent to the agreement between Spurling and Forestland, as reflected by (1) Spurling’s actions in providing tract-specific materials to Forestland only after reaching an agreement with Forestland; (2) Forestland’s actions in drafting the letter of introduction of Forestland to Faust at Spurling’s 1 This Court has jurisdiction pursuant to 28 U.S.C. § 1332, diversity of citizenship. The parties agree that Tennessee law applies. -5- instruction; and (3) Forestland’s conduct in negotiating with Faust and closing on the transaction. We conclude that none of these actions manifests a mutual assent between the parties to a commission agreement. First, Spurling’s market activity began long before the identification of Forestland as a potential buyer. Although not his agent, Spurling obtained from Faust topographical maps and certain other documents, including the booklet regarding ERLC, as well as a timber cruise. Furthermore, the record reflects that Spurling created a set of maps that were provided to approximately fifty people (real estate agents and prospective buyers) before even learning about Forestland. These “advertising” documents appear to be the same ones provided to Massengale, thereby calling into serious question any claim that such were created specifically at the behest of Massengale as part of any agency between Spurling and Massengale or Forestland. In its motion for summary judgment, Defendants asserted, without contradiction, that they knew of the property prior to any introduction by Spurling. Specifically, Massengale testified in his affidavit that he first learned of the Property and Faust’s interest in selling it in 1993 from Tommy Thompson, and that after Spurling contacted him in 1995, he called Thompson to confirm that it was the same tract. Thus, Plaintiffs have not established any quid pro quo for a reasonable commission fee. The second factor, like the first, may be consistent with, but does not per se, establish a contractual agreement. This is equally true as to the third factor. The mere fact that Forestland actually purchased the Property two years later does not necessarily establish that Spurling and Forestland ever had a contract, written or oral. The undisputed facts show that Forestland negotiated the deal through another broker, Dillon Read, after Forestland was contacted by Dillon Read nearly two years after Spurling was informed that the property was no longer for sale. Nor do Plaintiffs allege or offer -6- proof that Faust and Forestland carried on continuous negotiations during this period of time. In short, these facts do not provide “clear, cogent, and convincing evidence” of mutual assent to an oral commission agreement. Parks, 914 S.W.2d at 547-48. Spurling’s reliance on Parks is misplaced. There, the Tennessee Court of Appeals held that the plaintiff-broker’s testimony, along with his actions in marketing the property, as well as the corroborating testimony of another real estate broker who attended a meeting and witnessed the oral agreement, was sufficient to prove the existence of an oral contract. Id. at 548. Furthermore, the defendant-buyer admitted that he had made an agreement with the broker, and admitted that he would owe a commission if an acceptable offer had closed within ninety days. Id. In this case there is no eyewitness testimony and Forestland does not admit to any contract. Plaintiffs also argue that the June 9 Dutrow letter provides “even clearer” evidence of the existence of a commission agreement between Forestland and Spurling. As will be discussed in detail below, the Dutrow Letter makes clear that Dutrow was careful not to create any agency until after Forestland had conducted “an initial, cursory investigation … to assess the probability that the property would satisfy [its] financial and forestland criteria” and after “sitting down with [Matheson] and determining an appropriate fee arrangement.” (Dutrow Letter, J.A. p. 41). In sum, these facts do not provide clear evidence that the parties mutually assented to the terms of the oral contract and that the terms were sufficiently definite to be enforceable. Plaintiffs have failed to allege sufficient facts to survive a motion for summary judgment.
Alternatively, Plaintiffs maintain that even if the alleged oral agreement between Spurling and Forestland is discounted, the June 9 Dutrow Letter constitutes an offer to pay a commission, -7- which Spurling accepted. We hold that the Dutrow letter did not create a contract, and that the district court therefore erred in assuming that a written contract existed. In Tennessee, it is well established . . . that a contract can be expressed, implied, written, or oral, but an enforceable contract must, among other elements, result from a meeting of the minds and must be sufficiently definite to be enforced. The contemplated mutual assent and meeting of the minds cannot be accomplished by the unilateral action of one party nor can it be accomplished by an ambiguous course of dealing between the two parties from which differing inferences regarding continuation or modification of the original contract might reasonably be drawn. In addition, a mere expression of intent or a general willingness to do something does not amount to an “offer.” Jamestowne on Signal, Inc. v. First Fed. Sav. & Loan Ass’n, 807 S.W.2d 559, 565 (Tenn. Ct. App. 1990) (internal citations omitted). At least three clear provisions of the Dutrow Letter indicate its tentative, rather than conclusive, nature. First, “[f]urther interest . . . would be dependent on an initial, cursory investigation . . . to assess the probability that the property would satisfy [the] financial and forestland criteria.” Second, while Forestland “recognize[d] certain advantages of pursuing [its] interest through [Matheson]” it also indicated that would conduct “an initial investigation to determine if there [was] substantive interest in pursuing purchasing of the property” after which it “would look forward to sitting down with [Matheson] and determining an appropriate fee arrangement.” In addition, the language makes clear the “anticipat[ion] [of] paying a reasonable commission provided that the land transaction between The Forestland Group and the Faust family is satisfactorily concluded.” While this language states Forestland’s general willingness to continue preliminary communications with Plaintiffs, perhaps leading to a commission agreement, it is precatory and did not confer acceptance. It is clear from the Dutrow Letter as a whole that while there may have been a “general willingness” to continue to communicate about a possible agency relationship, there was no current intent to recognize Matheson and/or Plaintiffs as Forestland’s -8- agent without further negotiations. In short, the June 9 letter does not establish Forestland’s commitment to pay a commission. Further, the June 16 letter requesting that Massengale “clarify in writing” the definition of a “reasonable commission fee” completely undermines Spurling’s assertion that any agreement–oral or written–involving the material terms of an agency agreement had been reached. See Jamestowne, 807 S.W.2d at 564 (quoting RESTATEMENT (Second) Contracts § 33)) (“The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.”) Accordingly, although for different reasons, the district court did not err in granting summary judgment for Defendants. Because the Dutrow letter was not a valid, binding written contract, but merely Forestland’s general willingness to continue preliminary negotiations with Plaintiffs, it did not amount to a binding contract. By the same token, it did not provide parole evidence of a valid, binding, oral agreement.