Court Opinion

ID: 4235972
Source: CourtListenerOpinion
Date Created: 2018-01-11 17:04:31.25341+00
Date Added: 2024-06-11T14:42:53.501244
License: Public Domain

NOTICE: NOT FOR OFFICIAL PUBLICATION.
    UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                    AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

                                       IN THE
                ARIZONA COURT OF APPEALS
                                   DIVISION ONE

    D/AQ CORPORATION, dba DAUM COMMERCIAL REAL ESTATE
              SERVICES1, a California Corporation,
                       Plaintiff/Appellee,

                                           v.

                     INTRAVEST 2851 KATHLEEN LLC, an
                       Arizona limited liability company,
                             Defendant/Appellant.

                                No. 1 CA-CV 16-0620
                                  FILED 1-11-2018

              Appeal from the Superior Court in Maricopa County
                             No. CV2014-014493
                  The Honorable Randall H. Warner, Judge
                   The Honorable Douglas Gerlach, Judge

                         REVERSED AND REMANDED

                                      COUNSEL

Bourque Law Firm, PC, Phoenix
By Arthur J. Bourque
Counsel for Defendant/Appellant

1       On the court's own motion, the caption is hereby amended as
reflected in this decision and shall be used on all further documents filed in
this appeal.
Tiffany & Bosco, Phoenix
By Robert D. Mitchell, Sarah K. Deutsch, Amy D. Sells
Counsel for Plaintiff/Appellee

                      MEMORANDUM DECISION

Presiding Judge Michael J. Brown delivered the decision of the Court, in
which Judge Jennifer B. Campbell and Judge Jennifer M. Perkins joined.

B R O W N, Judge:

¶1           Intravest 2851 Kathleen, LLC ("Kathleen") appeals the
superior court's judgment entered in favor of D/AQ Corporation, dba
DAUM Commercial Real Estate Services ("DAUM"), following a jury
verdict awarding damages on DAUM's claim for breach of contract.
Kathleen argues the court erred as a matter of law in finding that the
agreement at issue was not subject to statutory requirements governing
compensation for real estate brokerage services. For the following reasons,
we reverse and remand.

           FACTUAL AND PROCEDURAL BACKGROUND

¶2            Kathleen showed interest in purchasing commercial real
estate ("the Property") from Climatec, Inc./JVK Holdings, LLC ("Seller"),
which had listed the Property with DAUM, a real estate broker. The listing
agreement provided that DAUM was to receive 2% of the selling price as a
brokerage commission for sale of the Property. Robert Lundstedt, a real
estate salesperson, handled the listing for DAUM and served as dual agent
for Seller and Kathleen in connection with the transaction.

¶3             Several weeks prior to closing, Kathleen informed Lundstedt
it intended to sell the Property after acquiring it. Following additional
discussion between Lundstedt and Mason Cave, one of Kathleen's
managers, they entered into a listing agreement giving DAUM exclusive
authorization to lease or sell the Property on behalf of Kathleen once it had
acquired title.

¶4           Shortly thereafter, Seller became concerned that Kathleen did
not have sufficient funds to pay for closing costs and demanded that
DAUM reduce its commission from 2% to 1.5%. After further discussion,
Lundstedt emailed Cave the following proposal:

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      I'm preparing my broker for the meeting with [Seller] today.
      I told my broker that if [Seller] reduces our fee to 1.5 %, that
      you guys will make up the difference of .5 % at the close of
      escrow, per my discussions with [your business partner] this
      weekend. Can you confirm this, for my broker, before our
      meeting with [Seller] (11am), please?

Cave's reply email stated: "Confirmed. We make up fee of 0.5% when we
sell the property." For ease of reference, we refer to this email exchange
hereinafter as the "Agreement."

¶5            The transaction between Seller and Kathleen closed in
September 2012, with a purchase price of $19,058,823. DAUM was paid
$274,632.34 from Seller's proceeds as a 1.5% commission.

¶6            In August 2014, Kathleen sold the property; DAUM
represented Kathleen, and a different broker represented the buyer. The
brokers received a combined commission of 4% of the $21,600,000 purchase
price. Although a dispute arose prior to closing between Kathleen and
DAUM as to how the commission would be divided between the brokers,
the relevant point here is that Kathleen refused to authorize the title
company to pay DAUM the additional 0.5% (approximately $95,000)
commission contemplated by the Agreement.

¶7            DAUM filed a complaint for breach of contract alleging that
Kathleen agreed in writing to "make up for the commission reduction" in
the 2012 transaction by paying the $95,000 when the Property was sold in
the 2014 transaction. Kathleen moved for summary judgment, asserting the
Agreement was not enforceable because it failed to meet the statutory
requirements governing real estate employment agreements and the statute
of frauds pursuant to Arizona Revised Statutes ("A.R.S.") sections 32-
2151.02 and 44-101(7), respectively. In denying the motion, the superior
court found that Kathleen's agreement to "make up" the 0.5% difference did
not constitute a real estate employment agreement as contemplated by
A.R.S. § 32-2151.02 nor was it subject to the statute of frauds, A.R.S. § 44-
101(7).

¶8          At trial, Kathleen unsuccessfully moved for judgment as a
matter of law, again asserting lack of compliance with statutory
requirements governing a broker's right to collect a commission. The
motion was denied. The superior court declined to instruct the jury on
whether the Agreement satisfied the statutory requirements. The jury
awarded damages to DAUM in the amount of $95,290, and the court

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awarded attorneys' fees to DAUM pursuant to A.R.S. § 12-341.01(A). After
entry of judgment, the court denied Kathleen's renewed motion for
judgment as a matter of law, and this timely appeal followed.

                                DISCUSSION

¶9            The issue before us is whether the superior court erred in
determining that the Agreement was not subject to statutory requirements
that govern real estate commission agreements. In reviewing the court's
ruling, "we view the evidence and all reasonable inferences therefrom in the
light most favorable to the party opposing the motion." Aegis of Ariz., L.L.C.
v. Town of Marana, 206 Ariz. 557, 567, ¶ 34 (App. 2003). We review de novo
the court's grant or denial of a motion for judgment as a matter of law. Id.

¶10             "Arizona places 'strict requirements' on real estate
professionals who seek to recover commissions." Young v. Rose, 230 Ariz.
433, 436, ¶ 13 (App. 2012). As relevant here, the statute of frauds provides
that "an agreement authorizing or employing an agent or broker to purchase or sell
real property, or mines, for compensation or a commission" shall not "be brought
in any court . . . unless the promise or agreement upon which the action is
brought, or some memorandum thereof, is in writing and signed by the
party to be charged, or by some person by him thereunto lawfully
authorized." A.R.S. § 44-101(7) (emphasis added). A.R.S. § 32-2151.02
establishes the requirements for a real estate employment agreement,
which is defined as "a written agreement by which a real estate broker is
entitled to compensation for services rendered pursuant to § 44-101,
paragraph 7." A.R.S. § 32-2151.02(E) (emphasis added).

¶11          Given these statutory requirements, "a real estate agent may
sue to recover compensation due under a real estate employment
agreement only if there is a written agreement that complies with both
A.R.S. §§ 44–101(7) and 32–2151.02(A)." Young, 230 Ariz. at 437, ¶ 24
(emphasis added).

¶12             DAUM argues that the Agreement did not "authorize or
employ" DAUM to purchase or sell real property for a commission, but was
merely an agreement to make up the 0.5% difference that was necessary to
facilitate closing the deal. According to DAUM, there was "already a valid,
enforceable real estate employment agreement" for the 2% commission and
the Agreement was an entirely new agreement. We conclude that DAUM
reads the statutes too narrowly; a broker (including a salesperson) who
seeks "compensation for services" arising from the purchase or sale of real

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estate must comply with the requirements for a real estate employment
agreement set forth in A.R.S. § 32–2151.02(A).

¶13           DAUM represented the Seller and Kathleen during the first
transaction. As provided in its listing agreement with DAUM, Seller was
responsible for the payment of all of DAUM's 2% commission. After Seller
pressured DAUM to reduce its commission, the structure of the
commission changed because Seller was only willing to pay 1.5%. DAUM
and Kathleen then entered the Agreement, which provided that Kathleen
would "make up the difference" by paying the 0.5% commission upon
resale of the property. Regardless of how the Agreement is labeled, or
when the commission was to be paid, the undisputed evidence shows that
the Agreement was entered to compensate DAUM for the services it
provided in connection with Kathleen's purchase of the Property.

¶14           Lundstedt testified that before closing, Seller told him there
was not enough money to cover the closing and suggested that DAUM
reduce its commission. Lundstedt then told one of Kathleen's members,
"I’m getting squeezed by the seller on the commission and, basically it stems
from you guys aren’t -- you don’t have the ability to put -- you know, put
up enough money." Kathleen then agreed to pay the 0.5% commission.
Lunstedt confirmed at trial that he was "providing brokerage services" for
Kathleen in the first transaction, and that DAUM "wanted to be paid for
those services."

¶15            "Compensation" is defined as "any fee, commission, salary,
money or other valuable consideration for services rendered or to be
rendered as well as the promise of consideration whether contingent or
not." A.R.S. § 32-2101(16). It is undisputed that DAUM performed services
throughout the transaction for both parties. Until the Agreement was
entered, the compensation for such services was to be paid from Seller's
side of the ledger; after the Agreement, part of the compensation for
services switched to Kathleen's side. Whether DAUM had already entered
into a real estate employment agreement with Seller is irrelevant—nothing
in the statutory provisions limits a broker from entering into only one
agreement. Stated differently, simply because DAUM signed a listing
agreement with Seller did not excuse DAUM from complying with the
statutory requirements governing agreements for compensation of services.
As the broker that provided brokerage services to Kathleen for
compensation, DAUM was required to ensure that the Agreement
complied with A.R.S. § 32-2151.02(A).

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¶16            To be enforceable, a real estate employment agreement must
(1) "[b]e written in clear and unambiguous language," (2) "[f]ully set forth
all material terms, including the terms of broker compensation," (3) "[h]ave
a definite duration or expiration date, showing dates of inception and
expiration," and (4) "[b]e signed by all parties to the agreement." A.R.S.
§ 32-2151.02(A)(1)-(4).

¶17           Assuming that DAUM could establish that it complied with
requirements 1, 2, and 4 of § 31-2151.02(A), the Agreement is unenforceable
because it does not have a definite duration or expiration date. Although a
reasonable time for performance of a contract may generally be implied,
Zancanaro v. Cross, 85 Ariz. 394, 398 (1959), the same principle does not
apply here because our legislature has placed strict requirements on real
estate professionals who seek to recover commissions, Young, 230 Ariz. at
436, ¶ 13. Thus, real estate employment agreements must contain a definite
duration or expiration date. See Red Carpet-Barry & Assocs. v. Apex Assocs.,
130 Ariz. 302, 305 (App. 1981) (concluding that an alleged "finder's fee
contract" was a "listing agreement," and thus broker could not "avoid the
necessity of a written listing agreement with a definite expiration date").
The Agreement provided that the commission would be paid when the
property was re-sold by Kathleen. When that would occur, however, was
uncertain at best.

¶18            DAUM cites cases from other jurisdictions for the proposition
that an ascertainable event is of sufficiently certain duration even though
there is uncertainty of when the event will occur. See Overman v. Fluor
Constructors, Inc., 797 F.2d 217 (5th Cir. 1986); Aaland v. Lake Region Grain
Coop., Devils Lake, N.D., 511 N.W.2d 244 (N.D. 1994); H.L. Miller Mach. Tools,
Inc. v. Acroloc Inc., 679 F. Supp. 824 (C.D. Ill. 1988); Rooney v. Tyson, 697
N.E.2d 571 (N.Y. 1998). These cases are not persuasive, as none of them
involve real estate commissions, much less the type of stringent statutory
requirements applicable in Arizona. The Agreement's duration was
indefinite and therefore fails to satisfy the requirements of a real estate
employment agreement.

¶19           Although denial of the 0.5% real estate commission under
these circumstances may seem harsh, real estate brokers are presumed to
know the law. See Young, 230 Ariz. at 437, ¶ 24 (citing Gray v. Kohlhase, 18
Ariz. App. 368, 371 (1972)). Accordingly, because the Agreement does not
comply with Arizona's strict requirements for real estate employment
agreements, it is unenforceable. See Young, 230 Ariz. at 436, ¶ 18 (rejecting
the "contention that non-compliance with A.R.S. § 32–2151.02(A)(4) merely
provides a basis for regulatory action against a licensed real estate

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professional, but poses no impediment to a civil action for unpaid
commissions"). Kathleen is therefore entitled to judgment as a matter of
law.2

¶20           Kathleen requests attorneys' fees pursuant to A.R.S.
§ 12-341.01, which allows us to award fees to the prevailing party. In our
discretion, we deny the request. As the prevailing party, however,
Kathleen may recover costs incurred on appeal upon compliance with
Arizona Rule of Civil Appellate Procedure 21.

                             CONCLUSION

¶21         We reverse the superior court's judgment in favor of DAUM
and remand for entry of judgment in favor of Kathleen.

                        AMY M. WOOD • Clerk of the Court
                        FILED: AA

2     Given our conclusion that DAUM is not entitled to collect the 0.5%
commission, we need not address Kathleen's arguments that the court erred
in denying several proposed jury instructions.

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