Akers v. James T. Barnes of Washington, D.C., Inc., 811139

• Citation: 315 S.E.2d 199,227 Va. 367
• Decision Date: 27 April 1984
• Docket Number: No. 811139,811139
• Court: Virginia Supreme Court
• Parties: Robert W. AKERS, et al. v. JAMES T. BARNES OF WASHINGTON, D.C., INC. Record

Page 199

315 S.E.2d 199

227 Va. 367

Robert W. AKERS, et al. v. JAMES T. BARNES OF WASHINGTON, D.C., INC.

Record No. 811139.

Supreme Court of Virginia.

April 27, 1984.

Walter H. Hylton, III, Arlington (Bean, Kinney, Korman & Hylton, Arlington, on brief), for appellants.

Gary W. Swindell, Arlington (Repetti, Murphy & Evans, P.C., on brief), for appellee.

Before CARRICO, C.J., COCHRAN, POFF, COMPTON, STEPHENSON and THOMAS, JJ., and GORDON, Retired Justice.

THOMAS, Justice.

The basic issue in this appeal is whether the trial court erred in concluding that a permanent loan commitment, secured by a broker, was in substantial compliance with the terms of the brokerage agreement under which the broker was operating. Appellants contend that the commitment deviated from the brokerage agreement in two significant respects. We agree. Therefore, we will reverse the decision of the trial court and enter final judgment for appellants.

The brokerage agreement in question was entered into between Robert W. Akers and C. Gordon Zeeman as "Owner" and James T. Barnes of Washington, D.C., Inc. (Barnes), as "Broker." Akers and Zeeman sought permanent financing for a ten-unit condominium development. The agreement gave Barnes the exclusive right to obtain a commitment "according to the general terms specified in paragraph 2." The agreement went on to specify conditions related to Barnes' earning its commission:

If a commitment is obtained substantially in accordance with the terms contained in paragraph 2 of this agreement ... or, if the Broker locates a lender ready, willing and able to make such a commitment ... the Broker will be entitled to, and Owner agrees to pay, a commission in an amount equivalent to 1% of the amount of the loan.

....

The Broker's commission shall be deemed earned, and due and payable upon issuance of the commitment.

(Emphasis added.) The italicized language lies at the heart of this case and directs our attention to paragraph 2 of the agreement.

Paragraph 2 set forth the terms of the agreement. The terms included the following: type of loan, amount, interest rate, term of loan, commitment fees, term of commitment, and guarantees. With regard to the interest rate it stated, in pertinent part, as follows:

Permanent loans at the higher of 2% above the gross FHLMC 60 day auction rate, 30 days prior to closing or the lender's prevailing commercial mortgage rate.

In essence, the interest term called for a free floating interest rate, one able to move up or down with the market. Moreover, though paragraph 2 is silent as to any presale requirements, it was established by parole evidence, with no objection from Akers and Zeeman, that Barnes was authorized to "bring back" a commitment containing a presale requirement of a maximum of 50% of the condominium units to be offered for sale.

Barnes secured an oral commitment for permanent financing which, among other things, required 65% presales of the condominium units and provided for an interest rate of 2% above the average weighted gross FHLMC ^* 60-day auction rate at the time of settlement of each individual unit, with a floor of 14%. If these two provisions are in substantial compliance with the brokerage agreement, then Barnes is entitled to its commission. If not, Barnes gets no commission and must return a $10,000 good faith deposit made by Akers and Zeeman when the brokerage agreement was signed.

In resolving this case, we must first determine what is meant by "substantial compliance." Although it does not appear that the Court has heretofore defined this phrase, one of the cases cited by Akers and Zeeman is instructive with regard to the meaning of the phrase. In Hummer v. Engeman, 206 Va. 102, 141 S.E.2d 716 (1965), a real estate broker contended that he was entitled to a commission on a sale of realty for securing a buyer whose offer was rejected by the seller. The seller contended, among other things, that the offer from the buyer secured by the complaining broker deviated from the terms of the listing. The Court compared the offer to the listing in two respects. First, it noted that whereas the offer provided for "a release of 40 acres to be selected by the purchaser in consideration of the cash down payment and additional acreage to be released at $1,200 per acre," the listing "did not provide for any release of land." Id. at 107, 141 S.E.2d at 720. Second, the Court noted that whereas the offer provided for payment of the first installment on or before four years from settlement, the listing provided that interest only was to be paid annually for the first 3 years and that payments curtailing the note were to be made beginning with the fourth year after settlement and continuing through the tenth year after settlement. Id. at 107-108, 141 S.E.2d at 720. The Court concluded that the offer "did not conform to the material terms of the listing." Id. at 108, 141 S.E.2d at 720. We held that the broker was not entitled to a commission, reversed the trial court, and entered final judgment for the seller. Id. at 108-109, 141 S.E.2d at 720.

Hummer suggests that the materiality of the difference between the commitment and the brokerage agreement, in this appeal, is pertinent to the question of substantial compliance. In essence, a minor, trivial difference can be tolerated whereas a material difference cannot. In this...