808 F.2d 178 (1st Cir. 1987), 86-1343, Bennett v. McCabe

Docket Nº:86-1343.
Citation:808 F.2d 178
Party Name:John E. BENNETT, d/b/a Bennett Realty, etc., Plaintiff, Appellant, v. James P. McCABE and John M. Zitaglio, Defendants, Appellees.
Case Date:January 09, 1987
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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Page 178

808 F.2d 178 (1st Cir. 1987)

John E. BENNETT, d/b/a Bennett Realty, etc., Plaintiff, Appellant,

v.

James P. McCABE and John M. Zitaglio, Defendants, Appellees.

No. 86-1343.

United States Court of Appeals, First Circuit

January 9, 1987

Argued Oct. 8, 1986.

Page 179

Alan B. Rubenstein with whom Rackemann, Sawyer & Brewster, was on brief, for plaintiff, appellant.

Barry C. Klickstein, with whom Donna Lannon and Forman, Roberts, Klickstein & Levy, were on brief, for defendants, appellees.

Before COFFIN, BREYER and TORRUELLA, Circuit Judges.

COFFIN, Circuit Judge.

In this case we are called upon to determine whether Massachusetts law permits a broker to recover a commission when he provides a ready, willing, and able purchaser for a commercial property, but the transaction fails due to an unknown defect in the seller's title. Appellant, a real estate broker, filed this diversity action against the sellers of a motel seeking to recover his commission, but the court below held that neither Massachusetts common law nor the express contract entered into by the parties supported his claim. Appellant now seeks review of the district court's order granting the sellers' motion for summary judgment and denying his own cross-motion for summary judgment. We reverse.

I. Factual Setting.

The facts of this case are not in dispute. Appellant John E. Bennett is a licensed Massachusetts real estate broker who conducts his brokerage business under the name of Bennett Realty. Appellees James P. McCabe and John M. Zitaglio ("sellers") are the owners of "Ye Old Whaler," a summer motel located in Provincetown. During 1984, pursuant to an informal agreement with the sellers, Bennett succeeded in locating a purchaser for the motel. The sellers accepted the purchaser's $400,000 offer and the two parties entered into a binding purchase and sale agreement on May 15, 1984. In accordance with the terms of the agreement, the purchaser paid a ten percent deposit ($40,000), to be held by Bennett, and the closing was scheduled for June 1, 1984.

A defect in the sellers' title, however, prevented the parties from consummating the transaction. 1 The closing was initially postponed until July 1, 1984, but the sellers were unable to remedy the defect in their title even given this additional time. Recognizing their inability to perform, the sellers instructed Bennett to return the purchaser's deposit. Bennett returned the deposit and then commenced this action in federal district court on July 23, 1984. He claims that, despite the failure of the transaction, he is nevertheless entitled to his six percent commission ($24,000) because only the sellers' inability to convey good title prevented the deal from closing.

It is undisputed that Massachusetts law governs this case and that there are no genuine issues of material fact precluding summary judgment. Furthermore, both parties agree that neither of the sellers had any knowledge of the title defect at the time they entered the agreement to sell the property. Finally, the sellers have admitted that the purchaser located by Bennett was at all times ready, willing, and able to perform and that the sole reason for the failure of the transaction was their own inability to convey good title. Consequently, the only issue we must decide is whether, as a matter of law, Bennett is entitled

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to receive his six percent broker's commission. 2

II. Common Law Right To Commission.

In Tristram's Landing, Inc. v. Wait, 367 Mass. 622, 327 N.E.2d 727 (1975), the Massachusetts Supreme Judicial Court adopted the rule originally announced by the Supreme Court of New Jersey in Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 236 A.2d 843 (1967):

When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract. If the contract is not consummated because of lack of financial ability of the buyer to perform or because of any other default of his ... there is no right to commission against the seller. On the other hand, if the failure of completion of the contract results from the wrongful act or interference of the seller, the broker's claim is valid and must be paid.

Tristram's Landing, 367 Mass. at 629, 327 N.E.2d at 731 (quoting Ellsworth Dobbs, 50 N.J. at 551, 236 A.2d at 855). Relying upon Tristram's Landing, the sellers argue, and the court below held, that Bennett is not entitled to his commission because the failure to complete the contract did not result from conduct on the part of the sellers that amounted to a "wrongful act or interference." Our analysis of the Tristram's Landing decision, the authority on which it relies, and the policy it serves, however, convinces us that Massachusetts law does not restrict a broker's entitlement to receive a commission on a failed transaction only to those cases where a seller's default involves affirmative conduct rising to the level of a wrongful act or interference.

Before we embark upon an analysis of Tristram's Landing and its effect on Massachusetts law, we note that the basic question of whether a broker should receive a commission when a transaction fails due to an unknown title defect is not an issue of first impression in Massachusetts. It is undisputed that, prior to Tristram's Landing, a seller had to pay a broker's...

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