J.C. Nichols Co. v. Osborn

• Decision Date: 23 June 1998
• Docket Number: No. 97-2138-JWL.,97-2138-JWL.
• Citation: J.C. Nichols Co. v. Osborn, 12 F.Supp.2d 1196 (D. Kan. 1998)
• Parties: J.C. NICHOLS COMPANY, Plaintiff, v. James and Sheryl OSBORN, Jr., Defendants.
• Court: U.S. District Court — District of Kansas

12 F.Supp.2d 1196

J.C. NICHOLS COMPANY, Plaintiff, v. James and Sheryl OSBORN, Jr., Defendants.

No. 97-2138-JWL.

United States District Court, D. Kansas.

June 23, 1998.

Douglas J. Schmidt, Linda I.T. Zabriskie, Blackwell, Sanders, Peper, Martin, LLP, Daniel M. Dibble, Timothy K. McNamara, David T.M. Powell, Lathrop & Gage L.C., Kansas City, MO, for Plaintiff.

Lee M. Smithyman, David J. Roberts, Smithyman & Zakoura, Chtd., Overland Park, KS, for Defendants.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

In this diversity action, plaintiff real estate company has sued defendants for breach of contract to recover commissions on the sale of defendants' property. The matter is presently before the court on defendants' motion for summary judgment (Doc. 40). Because plaintiff may be entitled to recover the commissions as a result of defendants' breach of the contract's referral provision, the court denies the motion.

I. Facts¹

In 1995, defendants James and Sheryl Osborn owned two parcels of land, comprising 612 and 160 acres, in Johnson County, Kansas.² On November 2, 1995, defendants signed a contract with real estate broker Sandy Spalitto, who was acting on behalf of her employer, plaintiff J.C. Nichols Company, regarding the sale of the two parcels by defendants.³ The contract, which was titled "Exclusive Right to Sell Agreement," stated in pertinent part as follows:

In consideration of the efforts of the J.C. Nichols Company (the "broker") to find a purchaser for the property at [two parcels described here], the owner (whether one or more) hereby appoints the broker as agent with exclusive and irrevocable right to sell and for the purpose of finding buyers, for a period of 180 days from date hereof, at a sales price of $7500 per acre firm, or with owner's consent, oral or written, for a lesser sum or on other terms.

The parties further agree as follows:

1. Broker shall make an earnest effort to sell the property on the terms stated herein until such property is sold or this agreement expires, and owner shall refer any offer or inquiry which he may receive during the term of this agreement to the broker.

2. If a prospective Buyer, ready and willing to purchase the property pursuant hereto, or such other terms as owner shall accept, is found during the time this agreement is in full force, or if within 120 days after the termination date hereof the property is sold to anyone to whom it was shown by the broker, the owner shall pay to the broker a fee of 6% of the sales price as a commission.

The 180-day term of the agreement expired on April 30, 1996.

During the agency period, Ms. Spalitto showed the two parcels to a total of three people. One person submitted offers on the 160-acre parcel at a price of $5,500 per acre, to which defendants did not respond.

On April 28, 1996, developer Darol Rodrock telephoned defendant James Osborn. According to the deposition testimony of Mr Osborn, Mr. Rodrock stated that he had heard that Mr. Osborn had some property for sale. Mr. Osborn responded that if Mr. Rodrock meant the 160-acre parcel, he would have to speak with Ms. Spalitto.⁴ Mr. Rodrock then stated that he was interested not in the 160-acre parcel, but in the 612-acre parcel. Mr. Osborn indicated that, although the parcel was not listed, he would consider selling it. Mr. Rodrock then stated that he would like to show the parcel to his wife and that, if she liked it, they might be interested in purchasing it. Mr. Osborn did not inform Ms. Spalitto of this conversation or Mr. Rodrock's interest in the 612-acre parcel.

On April 30, 1996, Mr. Rodrock telephoned Mr. Osborn to inform him that he and his wife were interested in purchasing the property. No price or terms were discussed, but the parties agreed to meet to discuss the purchase. On May 8, 1996, Mr. Osborn, Mr. Rodrock, and their attorneys met to begin negotiating the terms of the sale.

On May 8 or 11, 1996, Ms. Spalitto first learned that Mr. Rodrock was negotiating to purchase the 612-acre parcel. According to Ms. Spalitto's testimony, she then contacted Mr. Rodrock and told him about the 160-acre parcel. Mr. Rodrock stated that he had not been aware of the smaller parcel, but that he was not interested in the 160 acres because he could only afford to buy the 612-acre parcel.

Later in May, Mr. Rodrock unexpectedly received some proceeds from another real estate sale, and he determined that he could then purchase the 160-acre parcel as well. Mr. Rodrock informed defendants that he would purchase the bigger parcel only if the smaller parcel were sold to him as well. On May 25, 1996, Mr. Rodrock and defendants executed contracts for the sale of the two parcels, at prices of $8,072 per acre for a total of $4,940,000 on the 612-acre parcel, and $6,500 per acre for a total of $1,040,000 on the 160-acre parcel. Closings on the real estate occurred on January 3, 1997.

On May 21, 1996, plaintiff sent letters to defendants and Mr. Rodrock demanding payment of the commissions on the two parcels. In response to those letters, defendants and Mr. Rodrock agreed in their sale contracts that if plaintiff were due commissions, Mr. Rodrock would have insisted on receiving one-half of those commissions under the co-operative broker rules of the Johnson County Board of Realtors. In the contracts, Mr. Rodrock also assigned his interest in those commissions to defendants.

Defendants now seek summary judgment with respect to plaintiff's claims for commissions on the sale of both parcels. Defendants argue that plaintiff has not met the contract's requirements for recovery of a commission.

II. Summary Judgment Standard

When considering a motion for summary judgment, the court must examine all of the evidence in the light most favorable to the nonmoving party. Jones v. Unisys Corp., 54 F.3d 624, 628 (10th Cir.1995). A moving party that also bears the burden of proof at trial is entitled to summary judgment only when the evidence indicates that no genuine issue of material fact exists. Fed.R.Civ.P. 56(c); Anglemyer v. Hamilton County Hosp., 58 F.3d 533, 536 (10th Cir.1995). If the moving party does not bear the burden of proof at trial, it must show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Once the movant meets these requirements, the burden shifts to the party resisting the motion to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmovant may not merely rest on the pleadings to meet this burden. Id. Genuine factual issues must exist that "can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. at 250, 106 S.Ct. 2505. Summary judgment is not a "disfavored procedural shortcut;" rather, it is an important procedure "designed to secure the just speedy and inexpensive determination of every action." Celotex, 477 U.S. at 327, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 1).

III. Discussion

A. Failure to Procure Sales

Defendants first argue that plaintiff is not entitled to any commission because its agent did not procure the sale. The court agrees that there is no evidence that Ms. Spalitto procured the sale of either parcel to Mr. Rodrock. Nevertheless, the court does not agree that plaintiff's recovery is therefore barred under the contract at issue, and thus summary judgment is not appropriate on this basis.

A real estate broker's entitlement to a commission depends on its contract. Harrin v. Brown Realty Co., 226 Kan. 453, 459, 602 P.2d 79 (1979). As a general rule, a broker must be the "efficient and procuring cause" of the consummated transaction in order to earn its commission. Winkelman v. Allen, 214 Kan. 22, 29, 519 P.2d 1377 (1974). That rule does not apply in the case of an exclusive right to sell agreement, however. See Foltz v. Begnoche, 222 Kan. 383, 385-89, 565 P.2d 592 (1977).

In Foltz, the Kansas Supreme Court distinguished between an agreement granting a broker an "exclusive agency" and one granting an "exclusive right to sell:"

An "exclusive agency" agreement listing real property for sale does not permit an owner to list his property with other brokers during the contractual term, but this does not prevent the owner from selling to a buyer procured on his own, unless the broker has procured a purchaser able and willing to buy prior to such time. The only effect of such a contract is to prevent the owner from placing the property in the hands of another agent. An "exclusive right to sell" agreement listing real property for sale forbids the owner from selling his property either by himself, or through another broker, without liability while the property is listed with the original broker.

Id. at 385-86, 565 P.2d 592. Defendants argue that the contract here granted plaintiff only an exclusive agency and so permitted them to sell the property themselves without liability to plaintiff. Plaintiff argues that the parties executed an exclusive right to sell agreement and that therefore its failure to procure the sales of defendants' parcels does not deprive it of its right to commissions on those sales.

In Foltz, the supreme court held that the agreement before it in that case was not an exclusive right to sell agreement. Id. at 388, 565 P.2d 592. First, the agreement was titled "Exclusive Listing Agreement;" the court noted that, although not controlling, the title of the agreement is important. Id. at 387, 565 P.2d 592. Second, although the agreement granted the broker the "exclusive right" to sell the property, "use of the phrase `exclusive right,' standing alone, should not be determinative in creating an `exclusive right to sell.'" Id. Third, the provision allowing a commission upon sale made "by you [the broker]" contemplated a sale by the owner...