Court Opinion

ID: 8915193
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:43:13.596861+00
Date Added: 2024-06-11T17:08:54.821256
License: Public Domain

ROSENN, Circuit Judge,
concurring.
I agree with the majority that the contract between the owners and Holiday Homes of St. John, Inc. (Holiday) does not entitle Holiday to a sales commission in the event that the owners procured the buyer. I reach that result, however, through a somewhat different line of reasoning predicated upon the strong dependency of the Virgin Islands legal system on the rules expressed in the Restatements of the American Law Institute.
A.
The Virgin Islands Code establishes a hierarchy of sources of law for the Islands:
The rules of the common law, as expressed in the restatements of the law approved by the American Law Institute, and to the extent not so expressed, as generally understood and applied in the United States, shall be the rules of decision in the courts of the Virgin Islands in cases to which they apply, in the absence of local laws to the contrary.
V.I.Code tit. 1, § 4 (1957) (emphasis added). Thus, in the absence of Virgin Islands precedents or statutes to the contrary, courts are directed initially to the appropriate Restatement to ascertain the rules of decision to be applied in cases governed by Virgin Islands law. See Co-Build Companies, Inc. v. Virgin Islands Refinery Corp., 570 F.2d 492, 494 (3d Cir. 1978). Only where neither Virgin Islands decisional law nor the Restatements provide guidance should a court applying Virgin Islands law turn to established American common law principles.
Because there appears to be no relevant Virgin Islands precedent for the instant case, the Restatement (Second) of Agency (1958) provides the initial framework of our analysis. Section 448 of the Restatement sets out the general rule that an agent whose compensation is conditional upon his accomplishment of a specified result is entitled to the agreed compensation only if he is the effective cause accomplishing the result. Comment b to section 448 qualifies the general rule by identifying two exceptions to the principle that an agent must himself cause an event to occur in order to be entitled to compensation:
If the principal appoints the agent to an “exclusive agency” or grants him an exclusive right to sell, and thereafter in the *1188first case the result is accomplished by another agent, or in the second case even by the principal himself, the agent is entitled to damages under the rules stated in the Comment on section 449.
Restatement (Second) of Agency § 448 comment b (1958). Despite the majority’s conclusion to the contrary, the phrase “exclusive right to sell” is not, in light of the Restatement, inherently ambiguous. Under the Restatement, the granting to an agent of an exclusive right to sell a parcel of property entitles the agent to some form of damages in the event that the principal, rather than the agent, sells the property.1
That the concept of an exclusive right of sale is a well-defined legal principle does not, however, end our inquiry. For the Restatement also specifies that the mere inclusion of a phrase of art in an agency agreement does not perforce establish the unqualified right to compensation that attaches to an agent who has been given an exclusive right to sell. Comment c to section 449 of the Restatement provides in pertinent part, “The use of the words ‘exclusive agency’ or ‘exclusive sale’ is not conclusive but, as in other cases involving interpretation, all the circumstances must be considered.” Thus, whether the owner is precluded personally from selling his own property must depend upon more than the simple use of the phrase of art; account must also be taken of the intent of the parties as revealed by the contract’s entire language. This Comment is the only indication which the Restatement provides regarding the requisite formalities for establishing an exclusive agency or an exclusive right of sale. It is therefore appropriate at this juncture to turn to the decisional law of the United States for further guidance concerning the circumstances under which reference to exclusive sale in an agreement will be adequate to establish an exclusive right to sell in the agent — a right which precludes the owner from selling. A review of the body of decisional law reveals that courts have fashioned a rule of construction which disfavors preclusion of an owner’s right to sell unless it is clear that this was the parties’ intention.
B.
In an overwhelming majority of cases involving the nature of the agency created under a brokerage agreement between an owner and a real estate agent, courts have required the agreement to expressly and unambiguously provide that the owner has agreed to pay his agent’s commission even if the owner himself sells the property before they have recognized the creation of an exclusive right of sale.2 “Only in this way can the often unwary and unsophisticated property owner be divested of his inherent right to sell land which he still owns.” Bourgoin v. Fortier, 310 A.2d 618, 620 (Me. 1973). Although courts have acknowledged that the phrase “exclusive right of sale” imports a specific type of agency, they have generally refused to give such language a *1189rigid construction empowering the agent to sell to the exclusion of the owner merely because the phrase was incorporated in the brokerage agreement. Thus, agreements that provide that a broker has an exclusive right to sell but fail to expressly negative the owner’s power of sale have been declared ambiguous and construed against the broker where elsewhere the agreement also provided that the broker was obligated to find a purchaser before he was entitled to his commission. See, e.g., Nicholas v. Bursley, 119 So.2d 722 (Fla.Dist.Ct.App.1960); Foltz v. Begnoche, 222 Kan. 383, 565 P.2d 592 (1977); cf. Bourgoin v. Fortier, supra, 310 A.2d 618 (use of phrase “exclusive listing” (synonymous with exclusive agency) in title of brokerage agreement created inconsistency with use of phrase “exclusive right of sale or exchange” in body of agreement).3 Agreements held to create an exclusive right of sale almost invariably expressly provide that the commission is payable in the event of sale by the owner, the broker, or anyone else.4
The rationale for this de facto rule of construction disfavoring the recognition of exclusive rights of sale unless the agreement otherwise expressly negatives the owner’s right of sale is suggested in Foltz v. Begnoche, 222 Kan. 383, 565 P.2d 592 (1977).
[W]e are persuaded that an “exclusive right to sell,” by its very nature, should be created only by clear and unambiguous language. The owner of property frequently unfamiliar with the terminology of brokerage transactions should not be held to give up his right to sell his own property, unless the broker’s contract in some way or other imposes liability upon the owner for payment of a commission in the event of a sale by the owner, either expressly or by the grant to the broker of such exclusive right as the court may deem necessarily implies such liability.
Id. at 388, 565 P.2d at 597.
C.
The instant case presents two factors which might militate against applying this rule of construction to the agreement before us and reading the brokerage agreement, as the majority do, as establishing only an exclusive agency. First, although the agreement does not contain language to the effect that sale by anyone, including the owners, will result in liability for commissions, the words “Exclusive Right to Sell” are highlighted as terms having some special significance.5 In agreements in which the phrase was found inadequate to establish an exclusive right of sale, it was sometimes simply incorporated in such a way as not to call attention to itself.6 Second, the *1190cases often involve sales of residential property by unsophisticated owners. In the present case, in contrast, the owners were represented by counsel in a significant commercial transaction.
Nonetheless, I am persuaded that the contract before us does not establish an exclusive right of sale. Even if we were to conclude that the owners should be charged with knowledge of the meaning of the phrase exclusive right of sale,7 I believe that despite the use of the phrase “Exclusive Right of Sale basis” the contract remained ambiguous and, as such, should be construed against its drafter, Holiday. As the majority point out, a separate paragraph of the agreement provides:
In the event the REALTOR named procures a prospect, ready, willing and able to purchase the said real estate during the period of this agency or any extension or renewal thereof, for the price and terms stated in the property description, or for any other price and terms acceptable to the Owner, the Realtor’s sale commission shall be deemed to have been earned and I agree to pay the said Realtor, at closing, an amount equal to 6% of the gross selling price as the Realtor’s commission earned and due. (Emphasis added.)
As I read the quoted language, the latter part states that the Owner agrees to pay a commission of 6% of the gross selling price when the commission is deemed to have been earned; the former part states that the commission is deemed to have been earned in the event that Holiday Homes procured a ready, willing, and able prospect. Because this language is in conflict with an exclusive right of sale, I would resolve the conflict not, as the district court did, in favor of the realtor but rather, as the majority do, in favor of the owners and against the drafter of the agreement. Accord Nicholas v. Bursley, 119 So.2d 722 (Fla. Dist.Ct.App.1960); Foltz v. Begnoche, 222 Kan. 383, 565 P.2d 592 (1977).
I therefore concur.

. Comment d to § 449 indicates that damages for breach of an exclusive right to sell are normally calculated as the agreed upon commission. The promise which has been breached in most cases is the promise to provide the commissions. Alternatively, the agreement may be interpreted as embodying only a promise that the principal will not accomplish the result himself. The damages to which an agent is entitled for breach of this second promise is the amount promised for performance, diminished by any expense he would have had in accomplishing the result, and he is entitled to this only if he can show that there is a probability that he would have accomplished the result.

, See, e.g., Community Cablecasting Corp. v. Daniels & Assocs., 215 So.2d 17 (Fla.Dist.Ct. App.1968); Rubin v. Beville, 132 So.2d 783 (Fla.Dist.Ct.App. 1961); Nicholas v. Bursley, 119 So.2d 722 (Fla.Dist.Ct.App.1960); Bolger v. Danley Lumber Co., 77 Ill.App.3d 207, 32 Ill. Dec. 685, 395 N.E.2d 1066 (1979); Brown v. Miller, 45 Ill.App.3d 970, 4 Ill.Dec. 649, 360 N.E.2d 585 (1977); Stromberg v. Crowl, 257 Iowa 348, 132 N.W.2d 462 (1965); Foltz v. Begnoche, 222 Kan. 383, 565 P.2d 592 (1977); Bourgoin v. Fortier, 310 A.2d 618 (Me. 1973); De Boer v. Geib, 255 Mich. 542, 238 N.W. 226 (1931); Peeler Ins. & Realty Inc. v. Harmon, 20 N.C.App. 39, 200 S.E.2d 443 (1973); American Property Servs., Inc. v. Barringer, 256 N.W.2d 887 (S.D.1977). See generally Annot., 88 A.L. R.2d 936 (1963). Contra, Covino v. Pfeffer, 160 Conn. 212, 276 A.2d 895 (1970).

. Stromberg v. Crowl, 257 Iowa 348, 132 N.W.2d 462 (1965), presents a more extreme example of the unwillingness of a court to uphold an exclusive right of sale in the absence of explicit language in the agreement setting forth the nature of that agency. In Stromberg the brokerage agreement before the court included the following provisions
In consideration of your agreement to use your efforts to find a purchaser, I hereby grant you the exclusive right for 90 days from date hereof to sell the above described property.... If said property is sold before the termination of this agreement, I agree to pay you a commission of 5 per cent on the selling price.
Id. at 349, 132 N.W.2d at 463. Relying on earlier decisions which had held that the owner’s right to sell his own property is an implied condition of every contract of agency, the court held that “the listing contract involved here ... does not by clear and unequivocal language negative plaintiffs’ right to sell the farm themselves without liability to defendant for a commission.” Id. at 352, 132 N.W.2d at 464.

. See, e.g., Rubin v. Beville, 132 So.2d 783 (Fla. Dist.Ct.App.1961); Bolger v. Danley Lumber Co., 77 Ill.App.3d 207, 32 Ill.Dec. 685, 395 N.E.2d 1066 (1979); Brown v. Miller, 45 Ill. App.3d 970, 4 Ill.Dec. 649, 360 N.E.2d 585 (1977); De Boer v. Geib, 255 Mich. 542, 238 N.W. 226 (1931); Peeler Ins. & Realty, Inc. v. Harmon, 20 N.C.App. 39, 200 S.E.2d 443 (1973); American Property Servs., Inc. v. Barringer, 256 N.W.2d 887 (S.D.1977).

. The agreement provides that Holiday is to render its services “under the terms stated herein on an Exclusive Right to Sell bassis [sic].”

. For example, the agreement before the court in Foltz v. Begnoche, supra, provided in relevant part:
the undersigned owner hereby gives your agency the exclusive right until Feb. 16, 1975 *1190from date hereof, to sell [the property] for the sum of $32,000 and upon the following terms: ...
222 Kan. at 384, 565 P.2d at 594. In other agreements that have been held to establish only an exclusive agency, however, the phrase has been given more prominence. See, e.g., Bourgoin v. Fortier, 310 A.2d 618, 619 (Me. 1973) (“the undersigned, as owner, gives the above named agent the exclusive right of sale or exchange to said property at the price and on the terms herein stated”)

. The majority conclude that “the bare fact that the owners had retained the services of an attorney” does not support an inference that they were familiar with the term’s meaning as used by realtors. Majority opinion, at p. 1185 n.8. The attorney testified that he did not understand the contract to mean that it barred the owner from selling his property. It is enough, however, that the owners should reasonably have known, through their attorney, the meaning of the phrase for them to be bound by that meaning. See 3 A. Corbin, Contracts § 538 at 73 (1960). The district court made no finding as to whether use of the phrase was common enough so that an attorney in the Virgin Islands should have been aware of its meaning.