Furr v. Fonville Morisey Realty, Inc.

• Decision Date: 18 August 1998
• Docket Number: No. COA97-865.,COA97-865.
• Citation: 130 NC App. 541,503 S.E.2d 401
• Parties: Eugene R. FURR, Plaintiff, v. FONVILLE MORISEY REALTY, INC., Koeppel Tener Riguardi, Inc., and Regency Park Corporation, Defendants.
• Court: North Carolina Court of Appeals

503 S.E.2d 401

130 NC App. 541

Eugene R. FURR, Plaintiff, v. FONVILLE MORISEY REALTY, INC., Koeppel Tener Riguardi, Inc., and Regency Park Corporation, Defendants.

No. COA97-865.

Court of Appeals of North Carolina.

August 18, 1998.

Kirk, Kirk, Gwynn & Howell, L.L.P. by Joseph T. Howell, Wendell, for plaintiff-appellant.

Womble, Carlyle, Sandridge & Rice, P.L.L.C. by Pressly M. Millen, Elizabeth L. Riley and Elizabeth J. Hallyburton, Raleigh, for defendant-appellant Regency Park Corporation. Manning, Fulton & Skinner, P.A. by Charles E. Nichols, Jr., Raleigh, for defendant-appellee Fonville Morisey Realty, Inc.

Bode, Call & Stroupe, L.L.P. by V. Lane Wharton, Jr., Robert V. Bode, S. Todd Hemphill and Audrey L. Cooper, Raleigh, for defendant-appellee Koeppel Tener Riguardi, Inc.

Attorney General Michael F. Easley by Special Deputy Attorney General Thomas R. Miller, and Blackwell M. Brogden, Jr., Chief Deputy Legal Counsel, for North Carolina Real Estate Commission, amicus curiae.

JOHN C. MARTIN, Judge.

Plaintiff brought this action alleging claims against defendant Fonville Morisey Realty, Inc. ("Fonville Morisey") for breach of contract, recovery in quantum meruit, and wrongful discharge from employment; he alleged an additional claim for unfair and deceptive practices in violation of G.S. § 75-1.1 et seq. against all three defendants. Each defendant filed answer; defendants Fonville Morisey and Koeppel Tener Riguardi, Inc. ("KTR") asserted cross claims against defendant Regency Park Corporation ("Regency Park") for real estate commissions allegedly due under the terms of a commission agreement, and Regency Park asserted cross claims against Fonville Morisey and KTR for indemnity for the cost of defending plaintiff's suit. Plaintiff appeals from separate orders granting summary judgment in favor of all defendants; defendant Regency Park appeals from orders granting summary judgment in favor of defendants Fonville Morisey and KTR on their cross claims and dismissing its cross claim.

The procedural and evidentiary record in this case is voluminous; it will be summarized only to the extent necessary to a discussion of the various issues raised by these appeals. Plaintiff is a real estate broker licensed in North Carolina and, in the fall of 1990, was affiliated with defendant Fonville Morisey in its commercial leasing division. Plaintiff's agreement with Fonville Morisey provided that he was to receive 50% of commissions paid to Fonville Morisey for sales or leases of property initiated by him. In November 1990, acting upon information provided him by Fonville Morisey, plaintiff contacted Seer Technologies, a software firm located in New York which was considering relocating, and arranged to show Seer representatives lease space available in the Raleigh area. Plaintiff showed SEER's representatives several potential lease spaces at that time, including property owned by defendant Regency Park in Cary.

After this initial meeting, both Seer and KTR, a New York commercial real-estate firm, notified plaintiff that KTR was Seer's real estate broker and would be assisting Seer in selecting a site. KTR advised plaintiff that it expected to be involved in, and share in the commission for, any Seer transaction in North Carolina and that Fonville Morisey would be the local broker if a Raleigh/Durham site were selected. KTR's representatives accompanied Seer representatives and plaintiff on subsequent visits to potential lease sites.

KTR sent a proposed "co-brokerage agreement" to Fonville on 25 February 1991. Plaintiff advised his superiors at Fonville Morisey that he was of the opinion the division of a commission with KTR would be unlawful unless KTR was licensed in North Carolina, and returned the agreement to KTR with an addendum requiring that KTR provide Fonville Morisey with a copy of any reciprocity agreement allowing KTR to broker real estate in North Carolina. Upon KTR's objection to the requirement, plaintiff's superior at Fonville Morisey became involved in the negotiations with KTR and subsequently executed the co-brokerage agreement on behalf of Fonville Morisey, without the inclusion of the reciprocity requirement, on 12 April 1991.

Seer executed a lease agreement with Regency Park dated 30 July 1991, yielding a commission to the brokers of $34,557.30. Pursuant to an agreement between Regency Park, Fonville and KTR, Regency Park agreed to pay "one full commission" to Fonville Morisey and KTR for the initial lease and to pay additional commissions for future "renewals, extensions and expansions" by Seer in Regency Park. In addition, the lease between Seer and Regency Park required that Regency Park pay commissions to Fonville and KTR pursuant to the terms of the commission agreement. Regency Park paid the commission due on the initial lease; plaintiff received 50% of Fonville Morisey's share, 25% of the total commission.

APPEAL OF DEFENDANT REGENCY PARK

A.

Regency Park first argues the trial court erred in granting summary judgment in favor of KTR and Fonville on their crossclaims seeking commission payments. Regency Park asserts that, despite its agreement with KTR and Fonville, additional commission payments are not owed KTR because it is an unlicensed broker and is therefore not entitled to commissions; it contends Fonville Morisey cannot recover because its contract with KTR was "permeated with illegality" since KTR was not licensed in North Carolina. We disagree.

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." Thompson v. Three Guys Furniture Co., 122 N.C. App. 340, 344, 469 S.E.2d 583, 585 (1996) (quoting N.C. Gen.Stat. § 1A-1, Rule 56(c)). The party moving for summary judgment has the burden of "positively and clearly showing that there is no genuine issue as to any material fact and that he or she is entitled to judgment as a matter of law." James v. Clark, 118 N.C.App. 178, 180, 454 S.E.2d 826, 828, disc. review denied, 340 N.C. 359, 458 S.E.2d 187 (1995).

Generally, contracts which are illegal are unenforceable. Marriott Financial Services v. Capitol Funds, Inc., 288 N.C. 122, 217 S.E.2d 551 (1975). However, illegality is a defense to the enforcement of an otherwise binding, voluntary contract in violation of a statute only where the party seeking to void the contract is a victim of the substantive evil the legislature sought to prevent. See id. at 128, 217 S.E.2d at 556. Courts will not extend the terms of a penal statute to avoid a contract unless such a result was within the intent of the legislature in enacting the statute. Id. at 129, 217 S.E.2d at 556.

G.S. § 93A-1 provides:

... it shall be unlawful for any person, ... corporation ... in this State to act as a real estate broker or real estate salesman, or directly or indirectly to engage or assume to engage in the business of real estate broker or real estate salesman or to advertise or hold himself or themselves out as engaging in or conducting such business without first obtaining a license issued by the North Carolina Real Estate Commission... under the provisions of this Chapter.

The purpose of this act is to "protect sellers, purchasers, lessors and lessees of real property from fraudulent or incompetent brokers and salesmen." McArver v. Gerukos, 265 N.C. 413, 416, 144 S.E.2d 277, 280 (1965). "It must be construed with a regard to the evil which it is intended to suppress," and as a criminal offense, this act must be strictly construed so as not to extend it to activities and transactions not intended by the Legislature to be included. Id. at 416-17, 144 S.E.2d at 280.

To determine whether avoidance of the commission contract was within the intent of the legislature in enacting G.S. Chapter 93A, we must consider how the law functions to protect the public from fraud and abuse. Real estate law and administrative regulations are highly complex and vary widely from state to state. Because of the usual size and complicated nature of real estate transactions, where there are wide disparities of knowledge between the buyer/lessee, seller/lessor and broker, the legislature has committed those transactions to the rigorous oversight and regulation of the Real Estate Commission. The Commission's primary means of injecting its authority is through the presence of a broker licensed by and accountable to the Commission, who is required to follow regulations and guidelines designed to protect the interests of the parties involved in the transaction, as well as the broker's own interests. The system works well to ensure that transactions are completed in accordance with North Carolina law. However, when, as happens with increasing frequency in our state, the buyer/lessee is an out-of-state investor or corporation with complex interests and concerns best known to its regular brokers in its home state, the interests of the parties are better served if the out-of-state party is allowed to rely on the combined efforts of a local broker and a broker familiar with its particular situation. The North Carolina broker can then make certain that the guidelines, regulations and laws of this State are observed while the out-of-state broker can advise the foreign investor on matters critical to its overall interests. In such an arrangement, the North Carolina licensed broker will be legally and professionally responsible for the acts of the cooperating out-of-state broker as well as for its own acts in the venture. Such an arrangement seems to us to be clearly in line with the legislative intent embodied in Chapter 93A of the General Statutes; indeed, the complete exclusion of its regular broker from a transaction may well render the foreign buyer/lessee more vulnerable to fraud.

As the Court of Appeals of...