Eastern Commercial Realty Corp. v. Fusco

• Decision Date: 06 December 1994
• Docket Number: 1994,No. 43,43
• Citation: 654 A.2d 833
• Court: United States State Supreme Court of Delaware
• Parties: EASTERN COMMERCIAL REALTY CORP.; M. Alan Fineberg; Bariglio & Associates; and Anthony Bariglio, Plaintiffs Below, Appellants, v. Anthony N. FUSCO, Catherine A. Fusco; Fusco Enterprises; Franklin Realty Co., Inc.; Shopping Center Associates, L.P.; and Frank J. Vassallo, III, Defendants Below, Appellees. . Submitted:

Page 833

654 A.2d 833

EASTERN COMMERCIAL REALTY CORP.; M. Alan Fineberg Bariglio & Associates; and Anthony Bariglio Plaintiffs Below, Appellants, v. Anthony N. FUSCO, Catherine A. Fusco; Fusco Enterprises Franklin Realty Co., Inc.; Shopping Center Associates, L.P.; and Frank J Vassallo, III, Defendants Below, Appellees.

No. 43, 1994.

Supreme Court of Delaware.

Submitted: Dec. 6, 1994.

Decided: March 3, 1995.

Upon appeal from the Superior Court. AFFIRMED.

David S. Lank of Theisen, Lank, Mulford & Goldberg, P.A., Wilmington, for plaintiffs-appellants.

Francis S. Babiarz of Biggs & Battaglia, Wilmington, for defendants-appellees.

Before VEASEY, C.J., WALSH and HARTNETT, JJ.

HARTNETT, Justice.

In this appeal we affirm the Superior Court's holding that Regulation IX.A of the Delaware Real Estate Commission bars any recovery for a payment based on an oral agreement to pay a commission or finder's fee in connection with a real estate transaction. We also affirm the Superior Court's refusal to permit an amendment to the complaint to assert a belated claim of fraud.

I.

On August 17, 1993, the Superior Court granted the motion for summary judgment of the Defendants-Below, but gave plaintiffs leave to seek to amend the complaint. On November 9, 1993, the Superior Court denied the motion to amend the complaint and dismissed the suit. We affirm both Orders of the Superior Court.

Plaintiffs claim that during June of 1983, plaintiff, M. Alan Fineberg, an employee and the sole shareholder of plaintiff, Eastern Commercial Realty Corp., and the defendants entered into an oral agreement as part of the settlement of a then pending law suit. Allegedly, the defendants orally agreed that plaintiffs would receive (in addition to certain other benefits) a sum of money equal to ten percent of the rents arising from any future lease for any Bradlees store erected on any lands owned by defendant, Anthony N. Fusco ("Fusco"). The plaintiffs, agreeing to share in the claimed commission, filed suit for $1,688,454.40. No claim based on quantum meruit was asserted.

Defendants denied all the allegations in the complaint and moved to dismiss the law suit arguing that enforcement of the alleged oral contract was barred by Regulation IX.A promulgated by the Delaware Real Estate Commission.

The Superior Court granted defendants' motion for summary judgment, holding that any claim of plaintiffs based on an oral agreement was barred because oral real estate listing agreements are barred under Regulation IX.A. Plaintiffs then sought to amend the complaint to assert a claim of fraud. The Superior Court denied that motion and dismissed the suit. This appeal followed.

II.

Regulation IX promulgated by the Delaware Real Estate Commission provides in pertinent part:

IX. BUSINESS TRANSACTIONS AND PRACTICES

A. Written Listing Agreements

Listing Agreements for the rental, sale, lease or exchange of real property, whether exclusive, co-exclusive or open shall be in writing and shall be signed by the seller or owner.

B. Copy of Agreements

Every party to a listing agreement, agreement of purchase and sale, or lease shall be furnished with an executed copy of such contract or contracts. It shall be the responsibility of the licensee to deliver an executed copy of agreements to the principals within a reasonable length of time after execution.

The Regulation was adopted pursuant to 24 Del.C. Ch. 29 that states in pertinent parts:

§ 2928. Objectives of Commission.

The primary objective of the Real Estate Commission, to which all other objectives and purposes are secondary, is to protect the general public, especially those persons who are direct recipients of services regulated by this chapter[,] from unsafe practices, and from occupational practices which tend to reduce competition or fix the price of services rendered. The secondary objectives of the Commission are to maintain and establish minimum standards of licensee competency, and establish and maintain certain standards in the delivery of services to the public.

§ 2905. Powers and duties of the Commission.

The Commission may:

(1) Adopt and revise such rules and regulations not inconsistent with the law as may be necessary to enable it to carry into effect this chapter; * * *.

III.

As a matter of law, the Superior Court found that Regulation IX was validly adopted. It also found, based on the undisputed facts, that defendants' purported oral agreement to pay plaintiffs a fee based on a percentage of the rent to be received by Fusco if he leased any of his lands for use as a Bradlees store, was a listing agreement as that term is used in Regulation IX.A. Because the listing agreement was not in writing as required by Regulation IX.A, the Superior Court held that it cannot be enforced. We agree.

The standard of appellate review of the granting of summary judgment is de novo. Arnold v. Society for Savings Bancorp, Inc., Del.Supr., 650 A.2d 1270, 1276 (1994); Merrill v. Crothall-American, Inc., Del.Supr., 606 A.2d 96, 100 (1992); Bershad v. Curtiss-Wright Corp., Del.Supr., 535 A.2d 840, 844 (1987).

IV.

We first examine the Superior Court's determination that Regulation IX.A was validly adopted.

In enacting 24 Del.C. § 2928, the Delaware General Assembly stated that its objective in creating the Delaware Real Estate Commission was to protect the general public from unsafe practices in real estate transactions. In order to further this objective the Real Estate Commission was granted the authority to "[a]dopt and revise such rules and regulations not inconsistent with the law as may be necessary to enable it to carry into effect this chapter." 24 Del.C. § 2905(1). Pursuant to its statutory mandate, the Real Estate Commission adopted Regulation IX.A.

As this Court made clear in Atlantis I Condominium Ass'n v. Bryson, Del.Supr., 403 A.2d 711, 713 (1979), a broad grant of authority by the General Assembly to an administrative agency is to "be construed so as to permit the fullest accomplishment of the legislative intent", and the administrative agency is deemed to be given all the "power that is reasonably necessary to execute that ... authority." See also Dept. of Correction v. Worsham, Del.Supr., 638 A.2d 1104, 1107 (1994) (quoting Atlantis I ).

As 24 Del.C. § 2928 provides, the primary objective of the Commission is to protect the general public from unsafe practices. The goal of Section 2928 is promoted by the requirement in Regulation IX.A that listing agreements be in writing because use of oral listing agreements can be an unsafe practice and the requirement that listing agreements be in writing helps to foster fair dealings between parties, standardize real estate practice, prevent fraud and avoid litigation. Amato & Stella Assoc's v. Florida North Investments, D.Del., 678 F.Supp. 445 (1988) (citing Green Mountain Realty v. Fish, 133 Vt. 296, 336 A.2d 187, 189 (1975)); Stella v. Wilmington Savings Fund Soc., Del.Super., C.A. 91C-11-31, Goldstein, J., 1993 WL 138697 (March 30, 1993).

We therefore hold that the adoption of Regulation IX.A, requiring all listing agreements be in writing, falls within the authority granted to the Commission by 24 Del.C. § 2905(1) and is valid.

V.

We next address the question of whether Regulation IX.A, in addition to requiring that listing agreements be in writing, prohibits the enforcement of an oral listing agreement.

Courts in other jurisdictions have come to varying conclusions as to the effect of provisions similar to Regulation IX.A. The better reasoned cases hold, as we do today, that refusing to enforce oral listing agreements serves the public policy underlying their prohibition. Amato & Stella, 678 F.Supp. at 448; Green Mountain Realty v. Fish, 133 Vt. 296, 336 A.2d 187 (1975); Red Carpet-Barry & Assoc. v. Apex Assoc., 130 Ariz. 302, 635 P.2d 1224, 1226 (1981) (holding that "[the] purpose of these statutes is to regulate the conduct of real estate activities so the public may be protected"); Milholin v. Vorhies, Iowa Supr., 320 N.W.2d 552, 554 (1982); Machan Hampshire Properties v. Western Real Estate & Dev., Utah Ct.App., 779 P.2d 230, 234 (1989). While other courts have determined that administrative action against the broker is a sufficient remedy for a violation of a regulation analogous to Regulation IX.A, and have permitted the enforcement of prohibited oral listing agreements, we find those cases not to be persuasive. See Coldwell Bankers-Gordon Co. Realtors v. Roling, Mo.Ct.App., 703 S.W.2d 572 (1986); Finlay Commercial Real Estate v. Paino, 133 N.H. 4, 573 A.2d 125, 128 (1990); United Farm Agency v. Malanuk, 284 S.C. 382, 325 S.E.2d 544, 545 (1985). Our holding is consistent with the legislative intent embodied in 24 Del.C. § 2928 and the purpose of Regulation IX.A, and, therefore, we agree with the Superior Court that Regulation IX.A renders oral listing agreements unenforceable.

VI.

Notwithstanding the prohibition imposed by Regulation IX.A on oral listing agreements, plaintiffs argue that the agreement that they seek to enforce is not subject to Regulation IX.A because it is a finder's fee agreement, not a listing agreement.

If there is any difference between a finder's fee agreement and a listing agreement, it is that, generally, a finder's fee is earned by someone other than a broker. Baldwin v. Grymes, 232 Md. 470, 194 A.2d 285, 287 (1963). Here, however, plaintiff, Anthony Bariglio, is and was a licensed...