First Federal Sav. Bank of Indiana v. Galvin

• Decision Date: 12 July 1993
• Docket Number: No. 45A05-9206-CV-198,45A05-9206-CV-198
• Citation: 616 N.E.2d 1048
• Parties: FIRST FEDERAL SAVINGS BANK OF INDIANA and Frank E. Pavlic, Appellants-Defendants, v. Frank GALVIN, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 1048

616 N.E.2d 1048

FIRST FEDERAL SAVINGS BANK OF INDIANA and Frank E. Pavlic Appellants-Defendants, v. Frank GALVIN, Appellee-Plaintiff.

No. 45A05-9206-CV-198.

Court of Appeals of Indiana Fifth District.

July 12, 1993.

Transfer Denied Oct. 1, 1993.

R. Brian Woodward, Anderson, Tauber & Woodward, P.C., Merrillville, for appellants-defendants.

Robert E. Stochel, Hoffman & Stochel, Crown Point, for appellee-plaintiff.

BARTEAU, Judge.

Frank Galvin sued First Federal Savings Bank of Indiana to recover a commission First Federal had agreed to pay him for finding a buyer for a strip mall owned by First Federal. A jury awarded Galvin compensatory damages of $74,067 and punitive damages of $33,900. First Federal appeals, raising five issues which we consolidate as:

1. Whether the trial court erred in denying First Federal's motion for judgment on the evidence because the evidence showed that Galvin violated the Real Estate Licensing Act and thus was not entitled to a commission;

2. Whether the trial court erred in denying First Federal's motion for judgment on the evidence because the evidence showed that the parties did not have a written agreement to pay Galvin a commission;

3. Whether the trial court erred in allowing evidence of Galvin's termination from employment by First Federal to support an award of punitive damages because Galvin was an employee-at-will; and

4. Whether First Federal is entitled to a new trial because the trial court erroneously instructed the jury.

FACTS

Frank Pavlic, president of First Federal, and Galvin had been long-time friends when Pavlic agreed to pay a commission of seven percent (7%) to Galvin if Galvin found a purchaser for Sheffield Commons, a strip mall First Federal acquired through foreclosure. Galvin and Pavlic never signed a written commission agreement. Galvin eventually found a purchaser for Sheffield Commons, but First Federal would not pay him the seven percent (7%) commission. First Federal offered to pay Galvin a five percent (5%) commission which Galvin refused, insisting on the seven percent (7%) commission already agreed to by First Federal. Galvin is not a licensed real estate broker.

Pavlic approached Galvin about finding a buyer for Sheffield Commons in 1987. The initial asking price for the mall was $1,400,000, but this was reduced to $1,200,000 shortly after Galvin became involved. Also, First Federal was only interested in a cash deal. In April or May, 1988, Galvin became employed by First Federal as a mortgage loan originator. In connection with this, he was expected to wrap up his own outside business dealings within a few months. He was, however, expected to continue his efforts to find a buyer for Sheffield Commons. Greg Jordan, First Federal's general counsel, asked Galvin to give him a listing of all properties Galvin was attempting to sell for the bank and to tell him the agreed upon compensation. Galvin sent Jordan a letter stating that Pavlic had agreed to pay him a seven percent (7%) commission for selling Sheffield Commons.

Around the same time Galvin became employed full-time by First Federal, he contacted Thomas Schmal, a representative of the eventual buyer of Sheffield Commons. Schmal presented an initial verbal offer to Galvin of $750,000 but the bank refused that offer. On July 12, 1988, First Federal, through its Senior Loan Committee, authorized Pavlic to accept any cash offer for Sheffield Commons in the amount of $800,000 or more. Minutes from a July 19 meeting indicate that while it was initially approved to pay Galvin a seven percent (7%) finder's fee if Sheffield Commons was sold for $1,200,000, the finder's fee if the purchase price was less than $1,200,000 would be three and one-half percent (3 1/2%). After further conversations with Galvin during the next few months, Schmal presented an offer dated September 6, 1988, to purchase Sheffield Commons for $850,000. This offer was accepted by First Federal and Schmal then began negotiating directly with Greg Jordan. Prior to this time, Schmal was dealing directly with Galvin, who was conveying information between Schmal and First Federal and generally facilitating the negotiating process.

Other facts will be provided as necessary.

MOTION FOR JUDGMENT ON THE EVIDENCE

First Federal claims that the trial court erroneously denied its motion for judgment on the evidence at the close of Galvin's case and again at the close of the evidence. On appeal, we use the same standard of review as the trial court in determining the propriety of a judgment on the evidence. Dahlin v. Amoco Oil Corp. (1991), Ind.App., 567 N.E.2d 806, 810, trans. denied. When the trial court considers a motion for judgment on the evidence, it must view the evidence in a light most favorable to the non-moving party. Judgment may be entered only if there is no substantial evidence or reasonable inference to be drawn therefrom to support an essential element of the claim. Id.; Sipes v. Osmose Wood Preserving Co. (1989), Ind., 546 N.E.2d 1223, 1224.

First Federal argues that the evidence does not support the verdict in favor of Galvin for two reasons: (1) The agreement to pay Galvin a commission is void because the evidence shows that he was not a licensed real estate broker; and (2) Galvin cannot recover a commission because the agreement was not in writing. We will address these two grounds separately.

Real Estate Licensing Act

First Federal points to Indiana Code 25-34.1-3-2 in support of its claim that the agreement to pay Galvin a commission is void. That statute provides:

no person shall, for consideration, sell, buy, trade, exchange, option, lease, rent, manage, list, or appraise real estate or negotiate or offer to perform any of those acts in Indiana or with respect to real estate situated in Indiana, without a license.

In addition, I.C. 25-34.1-6-2 states:

(a) A person who performs the acts of a salesperson without a salesperson license [or] performs the acts of a broker without a broker license[,] ... commits a Class B infraction.... (b) In all actions for the collection of a fee or other compensation for performing acts regulated by this article, it must be alleged and proved that, at the time the cause of action arose, the party seeking relief was not in violation of this section.

Thus, under I.C. 25-34.1-6-2, in order to prevail on a claim for a commission, the plaintiff must prove that he or she was a licensed real estate salesperson or broker, if the plaintiff performed the acts of a salesperson or broker. "Broker" is defined as: "... a person who, for consideration, sells, buys, trades, exchanges, options, leases, rents, manages, lists, or appraises real estate or negotiates or offers to perform any of those acts." I.C. 25-34.1-1-2. "Salesperson" is similarly defined as: "... an individual, other than a broker, who, for consideration and in association with and under the auspices of a broker, sells, buys, trades, exchanges, options, leases, rents, manages, or lists real estate or offers to perform any of those acts." Id. The activities prohibited by I.C. 25-34.1-3-2 without a license are the activities of a broker or salesperson as defined in I.C. 25-34.1-1-2.

A contract made in violation of a statute is void. Hoffman v. Dunn (1986), Ind.App., 496 N.E.2d 818. In Hoffman, a listing agreement, including an agreement to pay a commission, was not enforced by the court because one of the partners of the real estate company acting as a broker was not a licensed real estate broker. Because not all of the partners were licensed brokers, the contract to perform broker services for a commission violated the statute and the contract was void. It is clear that if Galvin's activities concerning the sale of Sheffield Commons included any of the acts described in I.C. 25-34.2-3-2 he is not entitled to recover a commission because he is not licensed.

To determine whether Galvin's activities fall within the statute, such that he acted as a real estate broker or salesperson, we begin by looking at the language of the statute. The activities one must be licensed to perform in order to receive a commission are: selling, buying, trading, exchanging, optioning, leasing, renting, managing, listing, or appraising real estate, or negotiating any of those acts or offering to perform any of those acts. I.C. 25-34.1-3-2; I.C. 25-34.1-1-2 (our emphasis). First Federal argues that Galvin's activities are covered by the statute because he participated in negotiating the sale of Sheffield Commons by finding the purchaser and bringing the parties to agreeable terms. Galvin claims that the statute does not apply to him because he merely acted as a "finder" by putting First Federal in contact with a purchaser, but remained uninvolved in the negotiations.

Whether a mere "finder" is subject to the licensing requirements of the present statute is a question of first impression in Indiana. A previous statute defining "real estate broker" was applied to finders in Folsom v. Callen (1956), 126 Ind.App. 201, 131 N.E.2d 328. The court concluded the plaintiff was a real estate broker and subject to licensing requirements where the plaintiff and his salesman "procured prospects, two of whom became ultimate purchasers; and that through the assistance of appellant and his salesman, the transaction was closed and the contract signed by [defendant] and the purchasers." 131 N.E.2d at 330. The court based its decision on the fact that the transaction, while primarily the sale of an ongoing business concern, also included the leasing of the real estate upon which the hotel building was located. Whether the plaintiff had done more than merely "find" the purchaser was not at issue because the language of the statute defining "real estate broker" included the phrase "procuring of prospects". Id. (quoting Burns Ann. St. 63-2422 (1951 Replacement)).

In determining whether Galvin, if he was a mere "finder," is subject to the current st...