Court Opinion

ID: 1043787
Source: CourtListenerOpinion
Date Created: 2013-10-08 00:26:18.379159+00
Date Added: 2024-06-11T11:52:01.349989
License: Public Domain

2011 VT 29

Lang McLaughry
Spera Real Estate, LLC v. Hinsdale (2010-103)
 
2011 VT 29
 
[Filed 07-Apr-2011]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to
notify the Reporter of Decisions, Vermont Supreme Court, 109
State Street, Montpelier, Vermont 05609-0801 of any errors in order that
corrections may be made before this opinion goes to press.
 
 

2011 VT 29

 

No. 2010-103

 

Lang McLaughry
Spera Real Estate, LLC 

Supreme Court

 

 

 

On Appeal from

     v.

Chittenden Superior Court

 

 

 

 

Clark W. Hinsdale, III, and
  Suzanne G. Hinsdale

October Term, 2010

 

 

 

 

Helen
  M. Toor, J.

 

Ross A. Feldmann
of Gravel & Shea, Burlington, for Plaintiff-Appellee/Cross-Appellant.
 
James W. Runcie of Ouimette
& Runcie, Vergennes, for Defendants-Appellants.
 
 
PRESENT:  Reiber*,
C.J., Dooley, Johnson, Skoglund and Burgess, JJ.
 
 
¶ 1.            
DOOLEY, J.   Clark W. Hinsdale, III, and Suzanne G.
Hinsdale appeal from the trial court’s summary judgment decision in favor of
Lang McLaughry Spera Real
Estate, LLC (Lang), in this contract dispute.  The Hinsdales
argue that they did not agree to pay Lang a commission on the sale of their
berry farm business and business-related personal property items, in addition
to a commission on the sale of their real property.  They also assert that
Lang violated the Vermont Real Estate Commission rules and committed numerous
acts of consumer fraud.  Lang cross-appeals, challenging
the court’s award of attorney’s fees.  We reverse and remand the
court’s decision regarding Lang’s commission and the court’s award of attorney’s
fees.  We affirm the court’s judgment on the remaining claims.  
¶ 2.            
The Hinsdales owned a fifty-six-acre parcel of
land in Charlotte, Vermont, which contained a two-family residence and berry
fields.  They sold their berries commercially under the business name “The
Charlotte Berry Farm,” an unincorporated sole proprietership. 
In 2007, the Hinsdales entered into an “Exclusive
Right to Market Property Agreement” with Lang.  The listing agreement
described the property by its street address only.  The property was
listed at $1,250,000, and the Hinsdales agreed to pay
Lang a commission of 6% of the “sale price.”  In November 2007, the Hinsdales and a buyer entered into a purchase and sale
agreement, which stated the total purchase price as $900,000.  A
December 2007 addendum broke down the total purchase price as follows:
$725,000—81% of the price—for real estate; $100,000 for the business known as
the “Berry Farm and Farm Stand;” and $75,000 for the business machinery,
equipment, tools, fixtures, inventory and supplies.  
¶ 3.            
At closing, Lang mistakenly calculated its commission as 5% of $900,000,
or $45,000.  The Hinsdales paid this amount, but
refused to pay the remaining 1%, or $9000, after Lang found the mistake and
requested the funds.  The Hinsdales maintained
that the listing agreement covered the sale of only their real estate, and not
the sale of their business or business-related personal property.  Since
only 81% of the price was allocated to the real estate, and the Hinsdales had already paid 84% of the commission claimed by
Lang, they argued that they had already paid more than was owed.  Lang
then sued the Hinsdales, seeking the remaining
commission amount.  The Hinsdales filed
counterclaims, alleging that Lang breached the listing agreement, violated the
Real Estate Commission Rules, and engaged in numerous acts of consumer
fraud.  The Hinsdales also raised Lang’s alleged
violation of the Vermont Real Estate Commission Rules as an affirmative defense
to Lang’s collection action.  
¶ 4.            
The parties filed cross-motions for summary judgment, and in a December
2009 order, the court granted summary judgment to Lang.  The court found
the following facts to be undisputed.  As noted above, the parties’
listing agreement described the property by its street address only. 
Lang’s analysis showed that the best way to market the property was as a
country estate.  The Hinsdales hoped that the
buyer would continue the berry farm business, but this was not a condition of sale. 
In addition to the listing agreement, Lang contemporaneously prepared two
multiple-listing-service (MLS) information sheets.  These documents did
not state that any equipment would be included as part of the property,
although they described the property as a berry farm with various outbuildings
and business opportunities.  In mid-July 2007, Lang asked the Hinsdales what equipment might be included in the
transaction, and the Hinsdales responded that it was
negotiable.  Clark Hinsdale stated his expectation that all of the Berry
Farm specific supplies—such as scales, irrigation equipment, planters, rototillers, sprayers, and several tractors—would stay with
the property.  The Hinsdales also provided Lang
with financial information about the business.  The court found that Lang
used all of this information to sell the property.  
¶ 5.            
Lang also prepared marketing brochures for the property, which referred
to the property as the “Charlotte Berry Farm.”  The brochures stated that
the “Farm” consisted of “a farmstand-store, farm
outbuildings and infrastructure, a 2-family log home, 2 ponds
with an irrigation system, and approximately 56 acres with amazing
views.”  They indicated that the “land produces blueberries, raspberries
and strawberries in abundance,” and referenced other possibilities for
expansion such as a Christmas tree farm and cross-country skiing trails. 
The brochures provided that financial information was available to qualified
buyers upon inspection of the property.  
¶ 6.            
Lang secured a buyer for the property, and a purchase and sale agreement
was executed in November 2007.  The agreement stated that the equipment in
the farm stand and the equipment listed in an attachment to the agreement would
be transferred with the real property.  The agreement included a
handwritten provision that, “buyer and seller to review + clarify all items +
questions as per addendum (to follow) from Randy Amis, atty—to
be in agreement w/ both parties.”  The parties then executed a December 2007
addendum, which imposed additional obligations upon the Hinsdales
and allocated the purchase price between the real property, business, and
equipment as set forth above.  
¶ 7.            
With these facts in mind, the court examined the terms of the parties’
agreement.  Both parties argued that the term “sales prices” was
unambiguous.  According to the Hinsdales, the
term referred only to the $725,000 allotted to the real property in the
December addendum.  Lang maintained that the term referred to the total
price listed on the purchase and sale agreement.  Looking to the plain
language of the contract and the MLS forms, the court agreed with Lang. 
The court found that the circumstances surrounding the execution of the listing
agreement reinforced its view that Lang had used its expertise to sell the
“Charlotte Berry Farm,” including the real estate, business, and equipment, and
that this was the parties’ intent from the outset.  The court thus
concluded that the Hinsdales owed Lang $9000 under
the contract.
¶ 8.            
The court next considered the Hinsdales’
arguments regarding the Vermont Real Estate Commission Rules.  The Hinsdales asserted that there was no written agreement
covering the business or the equipment, and thus, Lang could not collect a
commission, either in part or at all, on the sale of that property.  See
Vermont Real Estate Commission Rule 4.12(c) (“A brokerage firm may only receive
the compensation provided in . . . a written agreement signed by the firm and
its client” and “shall not collect any compensation for brokerage services
except as provided by these rules”).[1] 
They also argued that Lang had not included a clear description of the property
in its listing agreement in violation of Rule 4.8(a)(2)
(listing agreement must contain a “clear description of the property and its
location”).  
¶ 9.            
The court rejected these arguments.  As an initial matter, it
observed that the Hinsdales failed to clarify how
rules governing real estate transactions could be interpreted to apply to and
require written agreements concerning the sale of the business and equipment as
part of a real estate transaction.  Even if the rules were applicable, the
court found this case distinguishable from those where there were no written
agreements whatsoever and thus a “total deficiency” in meeting a rule’s
requirements.  It explained that the parties here had used a form
agreement created by the Vermont Association of Realtors, and while the
business and equipment were not mentioned specifically, the agreement itself
did not undermine the purpose of the rules, which was “to establish fair
dealings between parties, standardize the procedure and practices in the real
estate business and to prevent fraud.”  Green
Mountain Realty, Inc. v. Fish, 133 Vt. 296, 299, 336 A.2d 187, 189 (1975).
¶ 10.         As to
Rule 4.8(a)(2), the court found that the listing
agreement made clear that a 6% commission would be paid on the sales price,
which was initially set at $1,250,000.  It concluded that the marketing of
the property and the discussions between the parties regarding the Hinsdales’ business and equipment demonstrated that Lang
was selling the property as a working farm.  Ultimately, the court found,
Lang did procure the sale of the property as a whole, and even if the
description of the property did not meet the requirements of the rule, this
technical violation did not make it unfair for Lang to collect a commission on
the sale.  The court also granted summary judgment to Lang on the Hinsdales’ consumer fraud claims, discussed in additional
detail below.  Based on its decision, the court awarded $29,333.03 in
attorney’s fees and expenses to Lang as the “prevailing party” pursuant to a
provision in the parties’ listing agreement.  This appeal and cross-appeal
followed.  
¶ 11.         We
review the court’s summary judgment decision de novo, applying the same
standard as the trial court.  Richart
v. Jackson, 171 Vt. 94, 97, 758 A.2d 319, 321 (2000); see V.R.C.P. 56(c)(3) (stating that summary judgment appropriate where no
genuine issue as to any material fact and any party entitled to judgment as a
matter of law).  We begin with the Hinsdales’
arguments concerning the Vermont Real Estate Commission Rules because we find
resolution of this argument dispositive.  For purposes of this analysis,
we assume, as the trial court found, that the listing agreement between Lang
and the Hinsdales gave Lang authority to sell the
Charlotte Berry Farm business, including all personal property.  As
discussed below, we conclude that Lang’s noncompliance with the rules requires
the denial of Lang’s collection claim.
¶ 12.         Real
estate brokers and salespersons are regulated by statute.  See 26 V.S.A.
§§ 2211-2299.  The regulatory authority is the Vermont Real Estate
Commission, which is authorized to adopt rules “necessary for the performance
of its duties.”  Id. § 2252(a).  The
real estate rules were adopted “to protect the public,” MacDonald v.
Roderick, 158 Vt. 1, 6, 603 A.2d 369, 372 (1992), and they “have the force
and effect of law.”  Fish, 133 Vt. at 298-99, 336
A.2d at 189.  Violation of the rules is unprofessional
conduct.  See 3 V.S.A. § 129(a)(3).  The
rules require that services for a seller be delivered pursuant to “a written
listing or seller service” agreement.  Vermont Real
Estate Commission Rule 4.7(a).  We have recognized that
listing agreements “ordinarily must comport with the duly adopted rules of the
Vermont Real Estate Commission.”  Moses v. Gagne,
140 Vt. 43, 48, 433 A.2d 315, 318 (1981).  In this case, Lang
relies on its written listing agreement to recover a commission for the
combined sale of real, business, and personal property.  According to
Lang, the agreement covered a “farm business,” and the description of the
property by its street address sufficed to show that the agreement encompassed
the sale of real property, personal property, and a business.  As to the
real estate rules, Lang maintains that they are concerned solely with real
estate and there is no dispute that the actual real estate was adequately
described here.  
¶ 13.         We do
not read the Commission rules so narrowly.  Lang alleges that it marketed
the real property, the business and the personal property as one. 
Irrespective of the coverage of the personal property, the transaction falls
within the scope of the laws governing real estate brokers and salespersons
because it involves the sale of real estate.  See 26 V.S.A.
§ 2211(a)(4)(G) (defining term “real estate broker” to include one who
“assists or directs in the procuring of prospects, calculated to result in the
sale or exchange of real estate or any interest therein”).  The Vermont
Real Estate Commission Rules require that the listing agreement contain a
“clear description” of the property covered by it.  Rule 4.8(a)(2).  In this case the “property” is both real and
personal as the court found.  
¶ 14.         We
recognize that Lang could sell the business goodwill and personal property
without a real estate broker’s license, or pursuant to a separate contract, and
nothing in the statutory requirements or the rules states that they apply to
sales of personal property.  Lang chose, however, to use one listing
agreement to cover both the real and personal property.  Thus, the issue
here involves the clarity of that one listing agreement that primarily covers
real property.  Under the consumer protection rationale of the rules, we
find it impossible to separate the additional aspects of the contract between
the broker and client from the real estate transaction.  We particularly
find difficult Lang’s argument that, irrespective of the differences over the
scope of the transaction, the contract necessarily includes the real estate and
so there is no disagreement over that aspect.  
¶ 15.         Many
of the terms of the listing agreement depend significantly on what property is
covered by the agreement.  For example, the agreement requires the
property owner to pay a commission if the broker “presents an offer at or above
the price stated herein.”  Whether this term is met depends upon the
property covered by the offer.  Similarly, the owner is required by the
exclusive listing agreement to direct “all inquiries
concerning this Property” to the broker.  Whether this term would
require referral of buyer interest in, for example, a tractor,
depends on whether the tractor is within the covered property. 
¶ 16.         Although
we have not addressed whether the Vermont Real Estate Commission Rules extend
to all aspects of a real estate transaction, including those involving personal
property, other courts have decided comparable questions, and their rulings and
rationale support application of the Commission rules here.  Cases where a
broker is disciplined for unprofessional conduct as a result of professional
activity that does not involve exclusively the sale of real estate provide a
source of guidance.  In Hart v. Colorado Real Estate Commission,
the commission disciplined a real estate salesperson for misrepresentations
made in connection with a bridge loan the salesperson obtained for a seller who
had listed property with the salesperson and was purchasing other
property.  702 P.2d 763 (Colo. App. 1985). 
The salesperson argued that the bridge loan transaction was unregulated and, as
a result, the discipline was beyond the commission’s jurisdiction.  The
court rejected this argument reasoning that, “Hart’s promise to obtain the loan
was an integral part of the real estate transaction with the [clients]” and
that the “[c]ommission may discipline real estate
agents for related activities which do not require a license.”  Id. at 765.  
¶ 17.         A
similar rationale was employed in Rogers v. Division of Real Estate,
where a real estate broker was employed to find a house for a client with the
additional challenge that certain personal property of the client had to be
converted into cash to pay the down payment on the new house.  790 P.2d 102 (Utah Ct. App. 1990).  The alleged
misconduct related to the broker’s sale of the personal property, and the
broker argued that the personal property sales were unregulated and could not
be the subject of discipline.  The court rejected the argument, upholding
the real estate commission’s conclusion that the broker was acting as a real
estate agent for the client over the entire period during which the broker sold
the personal property: “Although the agreement between [the client and the
broker] involved an unconventional means to find a home for [the client], the
Commission’s conclusion that [the broker] was acting as a real estate agent for
[the client], and was thus subject to the rules of the Division, does not
exceed the bounds of reasonableness and rationality.”  Id.
at 107.  The discipline cases support the Hinsdales’
view that the violation of the Commission rule with respect to business and
personal property is nonetheless unprofessional conduct. 
¶ 18.         Another
related situation arises where a business broker sells a business, but the
overall transaction includes some real estate and the broker is not licensed to
sell real estate.  This situation occurs under law, applicable in
virtually all jurisdictions, that denies a commission on a sale by an
unlicensed broker.  The commonly litigated issue is whether the broker is
denied a commission solely on the real estate component of the sale or on the
other components as well.[2] 
As here, the broker argues that it should be able to obtain a commission on the
personal property aspect of the sale because that part is unregulated and not
subject to the jurisdiction of the regulatory authority.
¶ 19.         The
majority rule is that the broker is denied a commission for all aspects of the
combined sale of the real estate and the business even though the real estate
is only a small component of the property being sold.  See Lockridge v. Hale, 764 S.W.2d 84, 87 (Ky. Ct.
App. 1989) (collecting cases following majority rule); B. Burke, Law of Real
Estate Brokers § 18.01, at 18-8 (3d ed. 2010) (majority rule is also called the
Pennsylvania rule).  It has been adopted by our sister court in New
Hampshire.  See Blackthorne Grp.,
Inc. v. Pines of Newmarket, Inc., 848 A.2d 725,
731 (N.H. 2004).  The New Hampshire Supreme Court decision specifically
concluded that denial of a commission for all property was consistent with the
language of the governing statute.  See id. 
¶ 20.         A
strong minority rule is that the broker may not obtain any commission unless
the sale of the real property was merely incidental to the overall business sale.[3]  See, e.g., Bus. Brokerage Ctr. v. Dixon, 874 S.W.2d 1, 6 (Tenn. 1994); Thomas v. Daubs, 684 N.E.2d 1011, 1014 (Ill.
App. Ct. 1997).  Both the majority and minority rule
depend upon the rationale that the court views the transaction as a whole and
the sale could not have gone through without the real estate component.  Thomas, 684 N.E.2d at 1014; Dubois v. Kepchar,
889 F. Supp. 1095, 1104 (N.D. Ind. 1995).  Both the majority and
minority rule determining the commission remedy for unlicensed brokers reject
Lang’s argument that there should be no remedy with respect to the unregulated
portion of a real estate transaction.
¶ 21.         We
conclude that Lang violated Real Estate Commission Rule 4.8(2) by failing to
include a “clear description of the property” in the listing agreement. 
In reaching this conclusion, we interpret the “property” to include all
property, real or personal, included in the listing agreement.  Lang
failed to describe the business and personal property that it had the exclusive
right to sell.
¶ 22.          Having
decided that Lang violated the rule, we must decide what remedy, if any, flows
to the Hinsdales from this violation.  The Real
Estate Commission Rules “reflect a public policy that may be used as a defense
against a broker’s enforcement of the listing agreement.”  MacDonald,
158 Vt. at 7, 603 A.2d at 372.  We
reached this conclusion after weighing the factors set forth in the Restatement
(Second) of Contracts regarding the unenforceability of certain promises on
public policy grounds.  These factors include: the strength of the policy
at issue; the likelihood that a refusal to enforce would further that policy;
the seriousness of any misconduct involved and the extent to which it was deliberate;
and the directness of the connection between that misconduct and the term of
the contract to be enforced.  Id. (citation omitted).  We
found this approach consistent with our case law.  Id. (citing My
Sister’s Place v. City of Burlington, 139 Vt. 602, 613-14, 433 A.2d 275,
282 (1981) (“A contract whose formation or performance is illegal may be held
void and unenforceable, but misconduct unrelated to the claim to which it is
asserted as a defense will not invoke the doctrine” (citation omitted)).  After
weighing the considerations above, we held that “a violation of the rules of
the Real Estate Commission with respect to the form or content of a listing
agreement will bar recovery of a commission only if the violation somehow
taints the agreement or makes its enforcement unfair.”  MacDonald,
158 Vt. at 7, 603 A.2d at 373.  
¶ 23.         In MacDonald,
we found the violations at issue insufficient to meet this standard.  The
plaintiffs there complained of technical noncompliance with the rules, such as
the broker’s failure to use the precise words “exclusive right to sell” in the
header of the listing agreement.  158 Vt. at 5, 603 A.2d
at 371.  The plaintiffs also argued that the broker failed to
modify the listing agreement to reflect the modified termination date, although there was no dispute that the broker secured
a purchaser within the appropriate period.  In rejecting these arguments,
we emphasized that there must be a nexus between the asserted violation of the
rules and the dispute between the parties, and there must be prejudice from the
violation as well.  
¶ 24.         By
contrast, we held in Bensen v. Gall
that a broker was not entitled to a commission for the sale of real property
when he did not have a written listing agreement.  158 Vt. 106, 112, 605
A.2d 841, 844 (1992); see Fish, 133 Vt. at 299, 336 A.2d at 189-90
(reaching similar conclusion); see also Currier v. Letourneau, 135 Vt.
196, 200, 373 A.2d 521, 525 (1977) (concluding that where listing agreement did
not contain signature of one of the owners of property to be sold and showed
broker’s commission in flat dollar amount rather than in percentage figure,
agreement violated rules and broker could not recover damages for owners’
alleged breach of contract for sale of real property); but see Littlefield
v. Lamphere, 139 Vt. 77, 79, 422 A.2d 929, 931
(1980) (distinguishing Currier, and finding listing agreement complete
and proper under rule and binding on husband, who had signed listing agreement expressly
warranting that he was the owner of record of the property, even though the
property was jointly owned with his wife).  We have recognized that this
particular violation of the rules will always result in a tainted or
unenforceable agreement because “the requirement of a writing
ensures that the parties are fully aware of the terms of an agreement.”  MacDonald,
158 Vt. at 7, 603 A.2d at 373.  
¶ 25.         As
stated in Gall, it is critical that parties memorialize the precise
terms of their agreement before any real-estate services are performed, rather
than attempting to work out the details at a later stage when the bargaining
position of the parties may have changed.  “This standardization of
procedure ensures that consumers of broker services are fully informed and are
treated fairly.”  Gall, 158 Vt. at 112, 605 A.2d
at 844.  To serve this goal, we found it fair to have the broker
bear the risk of his or her failure to obtain a written listing agreement, and
to apply “a prophylactic rule under which a broker without a written listing
agreement cannot recover a commission.”  Id.; Currier, 135
Vt. at 200, 373 A.2d at 525 (stating that the law on the question is
“unequivocal; a duly executed listing agreement is the sole vehicle upon which
a broker can predicate recovery of any commission”).  
¶ 26.         The
concerns that drove our decision in Gall are similarly implicated
here.  The parties agreed that Lang would act as the real estate agent
“for the listing, marketing and sale of the Property described in this
Agreement.”  Lang claims that it was hired to sell a “farm business,” but
the only description of the property provided in the agreement is the street
address of the real estate.  If Lang believed or intended that this
agreement also cover the listing, marketing, and sale of the Hinsdales’ business and business-related personal property,
it had the burden of stating so expressly.  There is a strong public
policy underlying the writing requirement set forth in the rules, and we
further that policy by refusing to allow Lang to collect a commission on the
sale of the business portion of the transaction here.  See Restatement
(Second) of Contracts § 178(3)(a), (b) (1981) (identifying such factors as
significant in determining whether promise should not be enforced on public
policy grounds).  To hold otherwise would undermine the goals of
forthrightness and consumer protection served by the rules.  Equally as
important, there is an obvious and close connection between the violation and
prejudice to the Hinsdales, another important factor
in weighing whether public policy should act to bar enforcement of a particular
agreement.  See id. § 178(3)(d). 
Indeed, the lack of clarity led to this dispute.  See Gall, 158 Vt.
at 112, 605 A.2d at 844 (wisdom of rule requiring written agreement illustrated
by case in which dispute was “apparently caused, at least in part, by the
absence of clear terms of agreement between the parties at the outset”).  
¶ 27.         Thus,
looking to the factors set forth in the Restatement and relied upon in MacDonald,
we conclude that, given the absence of any specific agreement regarding the
sale of the Hinsdales’ business and business-related
property, it would be unfair, inconsistent with the rules, and contrary to
public policy, to allow Lang to recover a commission on this part of the
transaction.  See Rule 4.12(c)(1) (broker can only receive “the
compensation provided in . . . a written agreement signed by the firm and its
client”); see also Jipac v. Silas, 174
Vt. 57, 60-61, 800 A.2d 1092, 1095-96 (2002) (similarly weighing criteria set
forth in Restatement in determining appropriate remedy for illegal conduct of
contracting party); cf. Geffen v. Moss, 125 Cal. Rptr.
687, 693 (Cal. Ct. App. 1975) (invalidating and holding unenforceable that
portion of sales contract that purported to convey goodwill of law practice,
where such transaction was contrary to public policy set forth in rules of
professional conduct).  In other words, the undisputed facts support the
application of the Hinsdales’ affirmative defense to
defeat Lang’s collection action.  See MacDonald, 158 Vt. at 7, 603
A.2d at 373 (violation of real estate rules will bar recovery of commission
where violation taints agreement or makes enforcement unfair).  
¶ 28.         The Hinsdales argue that the remedy should go beyond denial of
an additional commission on the business and personal property and should
require Lang to return the commission paid on the real estate.[4]  This argument is inconsistent with
the “usual remedy for an illegal or unenforceable contract,” which “is to leave
the parties as the court finds them at the time the illegality is
discovered.”  Jipac, 174 Vt. at 61-62, 800 A.2d at 1096.  Lang’s violation was in not including
the business and personal property in the property description in the listing
agreement.  We conclude that the appropriate remedy is to deny it a
commission on the omitted property, to the extent that commission has never
been paid.  That remedy is sufficient to enforce the policy behind the
rule and respond to the harm caused to the Hinsdales.
¶ 29.         Because
we base our conclusion on the violation of the Real Estate Commission Rules, we
find it unnecessary to reach the Hinsdales’ remaining
contract arguments.  Even if we were to find the listing agreement to be
ambiguous, or to unambiguously include only the real property, the remedy would
be the same.  
¶ 30.         Given
our conclusion, we also reverse the attorney’s fee award.  The listing
agreement provides that “[i]n the event of any
litigation or lawsuit between Owner and Listing Agency arising out of or
relating to this Agreement, the prevailing party will be entitled to the costs
and expenses thereof, including reasonable attorney’s fees.”  The trial
court’s award of fees to Lang was based on the judgment for Lang on the merits,
a judgment we have reversed so that Lang is not the prevailing party in seeking
the remainder of its broker’s commission.
¶ 31.         It is
a closer question whether the Hinsdales have become
the prevailing party.  They have prevailed on some of the remedies that
they sought.  The determination of which party, if any, is a prevailing
party and entitled to an award of attorney’s fees is entrusted first and foremost
to the discretion of the trial court.  See Burton v. Jeremiah Beach
Parker Restoration & Constr. Mgmt. Corp., 2010 VT 55, ¶ 8, __ Vt. __, 6
A.3d 38 (stating that “identifying which . . . of the parties substantially
prevailed .  . . falls within the trial court’s discretion” (quotation
omitted)); see also Fletcher Hill, Inc. v. Crosbie,
2005 VT 1, ¶ 3, 178 Vt. 77, 872 A.2d 292 (stating that we review trial court’s
ruling on attorney’s fees for abuse of discretion).  We remand for the
court to determine whether the Hinsdales are entitled
to attorney’s fees under the listing agreement, and if so, the amount of such
fees.
¶ 32.         We
turn next to the Hinsdales’ consumer fraud claims,
all of which we find without merit.  Vermont’s Consumer Fraud Act (CFA)
prohibits “unfair or deceptive acts or practices in commerce.”  9 V.S.A. § 2453(a).  To prevail on a CFA claim, one
must show that: (1) there was a representation, practice, or omission likely to
mislead the consumer; (2) the consumer interpreted the message reasonably under
the circumstances; and (3) the misleading effects were “material, that is,
likely to affect the consumer’s conduct or decision with regard to a
product.”  Greene v. Stevens Gas Serv., 2004 VT 67, ¶ 15, 177 Vt.
90, 858 A.2d 238 (quotation omitted).  We evaluate these elements under an
objective standard.  Jordan v. Nissan N. Am., Inc.,
2004 VT 27, ¶ 5, 176 Vt. 465, 853 A.2d 40.  In an action for
damages as a result of consumer fraud, the consumer must also demonstrate that
he or she “sustain[ed] damages or injury as a result
of any false or fraudulent representations or practices” of the violator. 
9 V.S.A. § 2461(b); Greene, 2004 VT 67, ¶ 13.
¶ 33.         The Hinsdales first argue that Lang misrepresented to them how
it would allocate its commission in the event that the sale was procured by a
buyer broker.  According to Clark Hinsdale’s deposition, he was told that
the commission would be split 50/50 between Lang and any buyer broker. 
The listing agreement stated that the commission would be 6% “of the amount of
the sale price.”  It authorized Lang to enter into agreements with other
“brokers, salespersons or brokerage firms” to assist in marketing the property,
but the compensation for that work would be established in Lang’s “sole
discretion.”  In fact, the multiple listing description,
from Vermont Real Estate Information Network, Inc., showed both a broker agent
and a buyer agent commission of 2.5%.  It is unclear whether Clark
Hinsdale read the multiple listing description sheet. 
He learned that a buyer agent would receive 2.5% only after the closing had
occurred.  The distribution of the commission was never actually
determined because Lang procured the buyer.  Clark Hinsdale testified that
the commission split was important to him because a lower commission percentage
for the buyer broker could discourage some brokers from showing the property to
their clients.  The Hinsdales maintain that the
court erred by looking to the terms of the listing agreement in reaching its
conclusion, rather than focusing on whether Lang made a material and misleading
statement.  
¶ 34.         We
find no error, although we affirm on a basis different from that adopted by the
trial court.  As stated above, the standards for consumer fraud are objective
to be judged from the standard of a reasonable consumer.  The Hinsdales’
claim, as they responded to the summary judgment
motion, is based entirely on the deposition testimony of Clark
Hinsdale, who was formerly a real estate broker himself.  He
testified that the commission split
between the seller’s and buyer’s agent was “something
that I took away from my
years in the real estate business as being important.”  He
explained that
a seller’s agent might give lower priority to selling a property
with a 2.5%
commission, the commission percentage specified on the MLS information,
than to
one that would earn a 3% commission or more.  
¶ 35.         The Hinsdales failed to show that any alleged
“misrepresentation” was material to the reasonable consumer or that there was
any damage or injury attributable to the representation that the commission
would be split equally.  Although Clark Hinsdale testified that he was
upset with the commission split, there is no indication that the commission
split affected the Hinsdale’s decision to retain Lang.  In fact, the
evidence was that they listed their property with Lang based on their
friendship with one of Lang’s employees.  Obviously, giving a greater
percentage of the commission to Lang increased its incentive to market the property
aggressively, on the theory espoused by Clark Hinsdale.  There is no
evidence that a reasonable seller of a small business would conclude that the
greater incentive for the buyer broker was more important than a greater
incentive for a seller broker.  There was no evidence that the commission
split affected the price for which the business was sold.  We cannot
conclude that the Hinsdales put forward enough
evidence to show a genuine issue of material fact on this claim of consumer
fraud. 
¶ 36.            
The Hinsdales next argue that the listing
agreement falsely represented that Lang would mediate any dispute related to
the listing agreement.  The Hinsdales
acknowledge that Lang agreed to attend a mediation session, but they assert
that Lang made clear that it had no intention of mediating in good faith. 
As the trial court found, the parties’ agreement stated that Lang “recommended”
mediation.  Such a recommendation, as the court concluded, was not likely
to mislead a reasonable consumer into believing that mediation was guaranteed,
and the Hinsdales’ interpretation that they had a
right to mediation was unreasonable as a matter of law.  The Hinsdales raise no compelling argument to the
contrary.  
¶ 37.            
We similarly reject the Hinsdales’ assertion
that Lang had a “practice” of claiming a commission on property not included in
a listing agreement, and that this practice violates the CFA.  The Hinsdales offered no evidence that Lang engages in such
practice.  Their citation of a conditional statement made by Lang’s
president does not suffice.  The fact that this listing agreement was not
as specific as it should have been does not alone demonstrate consumer
fraud.  
¶ 38.            
Finally, the Hinsdales assert that Lang
engaged in unfair and deceptive acts in trying to collect the claimed
commission shortfall.  According to Clark Hinsdale, Lang’s president told
him that any shortfall in the total commission would come out of the share of
the Hinsdales’ friend and Lang employee, Kathy
Hale.  Hinsdale clarified that Lang’s president did not specify that all
of the shortfall would come from Ms. Hale’s share.  The Hinsdales maintain that this was an unfair, coercive, and
deceptive threat in an attempt to collect a debt.  The trial court
dismissed this claim because the events occurred after the transaction and
could not have affected the Hinsdales’ decision to
enter into it.  The court also noted that the alleged statement did not
cause any injury to the Hinsdales because they
refused to pay despite the statement.  The Hinsdales
argue that the statement represented an unfair debt collection practice
prohibited by 9 V.S.A. § 2453(a) so the timing of the statement is not
determinative.  However, to collect damages from the unlawful act, they
still had to show that they sustained “damages or injury” as a result of the
violation of § 2453(a).  See 9 V.S.A. § 2461(b).  The undisputed
facts show that they failed to do so.  
The judgment for plaintiff,
Lang McLaughry Spera Real
Estate, LLC, is reversed.  The claim of defendants, Clark and Suzanne
Hinsdale, for attorney’s fees is remanded for consideration consistent with
this decision.  The remainder of the superior court’s decision is affirmed.
 
 

 

 

FOR THE COURT:

 

 

 

 

 

 

 

 

 

 

 

Associate
  Justice

 

*  Chief Justice Reiber sat for oral argument but did not participate in
this decision.

[1] 
We apply the rules that were effective April 1, 2002.  The rules have
since been revised, effective April 15, 2008.  The language in former rule
4.12(c) is now found in Rule 4.13(c); the language in Rule 4.8(a)(2) is now found in Rule 4.9(a)(2).  

[2] 
This issue arises, as it is arising here, in states that have no separate
regulatory scheme for brokers of businesses.  The ideal solution would be
for the Legislature to specify the responsibilities of brokers of businesses
and all their components.  

[3] 
There is another minority alternative which has apparently been adopted in
three states, led by New Jersey.  See Kazmer-Standish
Consultants, Inc. v. Schoeffel Instruments Corp.,
445 A.2d 1149, 1152 (N.J. 1982); Turnpike Motors, Inc. v. Newbury Grp.,
Inc., 528 N.E.2d 1176, 1178 (Mass. 1988); Roberts v. Gaskins, 486
S.E.2d 771, 777 (S.C. Ct. App. 1997).  Under this alternative, the
unlicensed broker can obtain a commission on the personal property portion of
the sale if the price can be apportioned between the personal and real
property.  We acknowledge that this rule would support Lang’s position in
this case, but it has been adopted by only a very small minority of
jurisdictions.

[4]
 We acknowledge that the commission Lang has collected is slightly more
than that attributable to the real estate.  We conclude that the return of
this small amount should be denied under the rationale in the text.