Opinion ID: 2814794
Heading Depth: 2
Heading Rank: 2

Heading: Listing Contract Principles

Text: ¶99 There are two lines of cases that run on somewhat parallel, but different, tracks when the right to a commission is alleged to arise out of a real estate listing contract. One line of cases conditions the right to a commission on the broker procuring a purchaser who is ready, willing, and able to purchase upon the terms specified by the owner in the brokerage contract. Grinde v. Chipman, 175 Wis. 376, 377, 185 N.W. 288 (1921). Able includes the purchaser's financial ability to proceed. Peter M. Chalik & Assocs. v. Hermes, 56 Wis. 2d 151, 160, 201 N.W.2d 514 (1972). We have reasoned that: Generally speaking, a purchaser is financially ready and able to buy: (1) If he has the needed cash in hand, or (2) if he is personally possessed of assets——which in part may consist of the property to be purchased——and a credit rating which enable him with reasonable certainty to command the requisite funds at the required time, or (3) if he has definitely arranged to raise the necessary money——or as much thereof as he is unable to supply personally—— by obtaining a binding commitment for a loan to him for that purpose by a financially able third party, irrespective of whether such loan be secured in part by the property to be purchased. Id. at 162 (internal quotation marks and citation omitted). ¶100 Therefore, not just any purchaser who signs an offer to purchase on terms acceptable to the seller will fulfill the criteria necessary for a broker to earn a commission. Stated 2 No. 2013AP1532.pdr otherwise, when a purchaser is unable to perform financially, the seller has a defense to payment of a commission. Id. at 162-63. ¶101 The other line of cases is cited in the majority opinion. Those cases generally conclude that the right to a commission turns on whether the realtor provided a party who entered into a binding contract to purchase the real estate. For example, in Wauwatosa Realty Co. v. Paar, 274 Wis. 7, 79 N.W.2d 125 (1956), we upheld the right to a commission for the broker even though the sale of the real estate never closed. We reasoned that: The right of a broker to compensation accrues on completion of negotiations and on a meeting of the minds of the principal and the customer procured by the broker; but, unless provided otherwise in the contract of employment, it is not dependent on the final consummation of the transaction or the performance of the agreement entered into between the principal and the customer. Id. at 14-15. ¶102 The above quote from Wauwatosa Realty is interesting because we began our discussion in Wauwatosa Realty by saying that, [t]he question involved on this appeal is whether the plaintiff real-estate broker procured a purchaser ready, willing, and able to purchase the defendants' real estate pursuant to the terms of its listing contract so as to entitle the plaintiff to a broker's commission. Id. at 10. However, we never assessed whether the purchaser had the financial ability to complete the purchase contract. 3 No. 2013AP1532.pdr ¶103 In Kruger v. Wesner, 274 Wis. 40, 79 N.W.2d 354 (1956), where no sale occurred, we concluded that the realtor was due a commission, and we opined that: It may be generally stated that when a real- estate broker procures a purchaser who is accepted by the owner, and a valid contract is drawn up between them, the commission for finding such purchaser is earned, although the purchaser later defaults for no known reason . . .; or because the purchaser deliberately refuses to consummate the contract . . .; or because of financial inability of purchaser to comply with the contract. Id. at 44 (emphasis added). ¶104 The emphasized part of the above quote is a significant departure from the line of cases that requires a purchaser to be financially able to complete the sale before a commission is due the broker. See, e.g., Chalik, 56 Wis. 2d at 163. Yet, in Kruger, we gave no indication that we were intent on changing prior law. Rather, Kruger appears to be an extension of Wauwatosa Realty upon which Kruger says that it relies.2 Kruger, 274 Wis. at 44. ¶105 In Winston v. Minkin, 63 Wis. 2d 46, 216 N.W.2d 38 (1974), we set out the dispositive issue as, [w]hether the plaintiff procured a buyer ready, willing and able to purchase upon the terms specified by the owner in the listing contract or acceptable to him. Id. at 49. However, once again, notwithstanding our statement of the issue, we reasoned that 2 I note that Justice Steinle wrote both the opinion in Wauwatosa Realty Co. v. Paar, 274 Wis. 7, 79 N.W.2d 125 (1956) and the opinion in Kruger v. Wesner, 274 Wis. 40, 79 N.W.2d 354 (1956). 4 No. 2013AP1532.pdr when a real estate broker procures a purchaser and a valid and enforceable contract is entered into between them the commission for procuring a purchaser is earned, even though the purchaser may later default. Id. at 51. Accordingly, we followed the change noted above in Kruger, even though we continued to give lip service to the ready, willing and able language of the earlier cases. Stated otherwise, Winston continued to shift the responsibility to investigate the financial ability of the proposed purchaser from the broker to the seller. ¶106 Why did we make this change? It appears that in Kruger, we concluded that the seller had a reasonable opportunity to investigate the purchaser's financial ability to proceed, and if the seller needed additional assurances of the purchaser being able to close on the sale, it was the seller's obligation to obtain whatever assurances he needed before entering into a binding contract with him. See Kruger, 274 Wis. at 45. ¶107 Imposing the responsibility to investigate the financial ability of a proposed purchaser onto a sophisticated seller may have been a sufficient reason for this shift of responsibility from the broker to the seller. However, I have grave doubts that this shift in responsibility is fair to the unsophisticated seller of real estate, who signs a standard form listing contract believing he or she will pay any commission due under the listing contract from the proceeds of a sale that the broker facilitates. 5 No. 2013AP1532.pdr