Letsos v. Century 21-New West Realty

• Citation: 285 Ill.App.3d 1056,221 Ill.Dec. 310,675 N.E.2d 217
• Decision Date: 27 December 1996
• Docket Number: No. 1-96-0075,1-96-0075
• Parties: , 221 Ill.Dec. 310 Andrew LETSOS, Plaintiff-Appellant, v. CENTURY 21-NEW WEST REALTY, and Alex Brusha, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 217

675 N.E.2d 217

285 Ill.App.3d 1056, 221 Ill.Dec. 310

Andrew LETSOS, Plaintiff-Appellant, v. CENTURY 21-NEW WEST REALTY, and Alex Brusha, Defendants-Appellees.

No. 1-96-0075.

Appellate Court of Illinois,

First District, Fifth Division.

Dec. 27, 1996.

Robert A. Habib, Chicago, for Plaintiff-Appellant.

Sharon A. Wildey, Chicago, for Defendant-Appellee, Alex Brusha.

Hinshaw & Culbertson, Chicago (D. Kendall Griffith, Adria East Mossing, and Christine L. Olson, of counsel), for Defendant-Appellee, Century 21-New West Realty.

Presiding Justice HARTMAN delivered the opinion of the court:

Plaintiff, Andrew Letsos, contracted to sell property to his real estate broker, defendant Alex Brusha, after listing the property for sale with Brusha for one and one-half years without success. After executing the contract, but before closing, Brusha found a buyer for himself and resold the property for a profit. Letsos sued Brusha and Brusha's alleged employer, defendant Century 21-New West Realty (Century 21). The circuit court granted summary judgment in favor of both defendants. Letsos alleges both defendants breached their fiduciary duties to him by failing to disclose that they had found a buyer, and that Century 21 is vicariously liable for Brusha's actions.

The issues identified by Letsos for appeal include whether (1) a real estate brokerage company, and a real estate salesman who works for the company, owed a fiduciary duty to the owner of real property after the expiration of a listing agreement between the parties; (2) a principal-agency relationship existed between the real estate brokerage company and the real estate salesman, rendering the company vicariously liable for the acts of the salesman; and (3) the company and the salesman breached a fiduciary duty to the owner when the salesman purchased property from the owner and immediately resold it for a profit, without telling the owner before the closing that he had found a willing buyer.

The facts of this case, construed most favorably to Letsos, and most strictly against Brusha and Century 21 (Gatlin v. Ruder, 137 Ill.2d 284, 293, 148 Ill.Dec. 188, 560 N.E.2d 586 (1990)), are set forth in the following paragraphs.

On June 15, 1990, Letsos, who owned several parcels of property, entered into a three-month listing agreement with New West Associates, Inc. (New West), giving New West exclusive authority, over a three-month period, to sell Letsos' property located at 931 South Bell Street (Bell property) for $229,000, for which Letsos agreed to pay a six percent commission. After the listing agreement expired, Letsos entered into another contract with New West, which by then had been renamed New West Realty, Inc., doing business as Century 21-New West Realty.

Each time the listing agreement expired, Letsos signed a new agreement with Century 21. Between June 15, 1990, and September 16, 1992, Letsos entered into eight consecutive listing agreements for the Bell property and, when Century 21 could not find a buyer the asking price was lowered several times. In the final listing agreement, signed on September 16, 1992, Letsos set the asking price at $129,000.

Letsos' contact person at Century 21 was Brusha, a real estate salesman licensed by the State of Illinois who worked for New West and Century 21 since 1988. An employment contract Brusha signed with Century 21 outlined his obligations as a salesperson. An extensive rider to the contract stated that Brusha would be considered an independent contractor. It also provided that Brusha would receive a commission when Brusha closed a sale of property. All commissions would be payable to Century 21, which would keep a portion of the commissions Brusha earned. Brusha would be compensated only from the commissions earned from selling property, but did not receive a salary. Century 21 also allowed Brusha to use its office space and a telephone free of charge. Century 21 would not monitor Brusha's daily activities or require him to work a specific number of hours.

Letsos first spoke with Brusha in the summer of 1990, after calling a telephone number he saw on a sign in the front of a Century 21 office. He met with Brusha to see if Brusha could help him sell some property he owned. They walked through several buildings owned by Letsos and calculated selling prices. Letsos showed Brusha the Bell property, which consisted of a two-flat that Letsos recently finished renovating. Brusha agreed to try to find a buyer, and a listing agreement was executed.

Brusha had exclusive authority to sell Letsos' Bell property pursuant to the multiple listing agreements in effect from 1990 to 1992. Each time a listing agreement expired, Brusha assured Letsos that he found a potential buyer, and convinced him to sign a new agreement. The last listing agreement expired on December 15, 1992. Letsos could not remember whether Brusha asked him to sign a new agreement, but planned to sign another contract with Brusha and expected Brusha to continue to act as his representative with regard to the Bell property. Brusha acknowledged that he continued to serve as Letsos' broker after the listing agreement expired.

Soon after the expiration of the last agreement, Brusha sold another parcel of property owned by Letsos. At the closing of that sale, Brusha spoke with Letsos, offering to buy the Bell property for himself for $88,000. Brusha previously had mentioned purchasing the property during casual conversations and believed the Bell property had not been sold because it "didn't show well": the exterior needed to be landscaped and the tenants did not keep their apartments clean. Letsos claimed Brusha told him that after buying the Bell property, he would spend a year fixing it up, and would then sell the property. Brusha acknowledged only that he told Letsos he planned to resell the property after purchasing it.

On March 9, 1993, Letsos and Brusha signed a contract for the sale of the Bell property to Brusha for $92,000, with the closing to take place in two months. The agreement named Century 21 as the listing broker, to whom Letsos would pay a commission that equalled five percent of the purchase price, or $4,600. Brusha would receive a portion of this commission. Century 21 also acted as the escrow agent, holding the initial earnest money paid by Brusha.

Some time in March 1993, Brusha met Anthony Hernandez through another broker. In May, Brusha and Hernandez contracted for the sale and purchase of the Bell property for $115,000. Brusha was required to obtain title to the property before July 27, 1993 and to make small improvements to the property, which cost several hundred dollars. Brusha denied meeting Hernandez before he signed the March 9, 1993 contract with Letsos.

Letsos and Brusha scheduled their closing for May 10. Brusha delayed the closing several times; according to Letsos, Brusha said he needed more time to obtain a bank loan for the purchase. The closing between Letsos and Brusha finally occurred in mid-July, 1993. Letsos then left for a vacation in Greece. After the closing, Letsos' real estate attorney called Brusha, asking him for money owed Letsos. Brusha told the attorney he was reselling the property. The Brusha-Hernandez "Hernandez closing took place on August 2, 1993, which Letsos' attorney attended.

When he returned from Greece and was told about the subsequent sale to Hernandez, Letsos filed a complaint against Brusha and Century 21, alleging that both defendants breached fiduciary duties owed him by failing to disclose the Brusha sale to Hernandez, and seeking $30,000 in compensatory damages and $50,000 in punitive damages. Century 21 unsuccessfully moved to dismiss the complaint, claiming it owed no fiduciary duty toward Letsos because the listing agreement expired before the parties entered into a contract for the sale of the Bell property. Century 21 and Brusha then filed separate answers to the complaint.

Letsos moved for partial summary judgment, asserting that no party disputed the relevant facts, which showed that Brusha never told Letsos he found a buyer for the property and entered into a second contract for the sale of the property. Letsos alleged that each defendant owed him a fiduciary duty, and requested the court to rule as a matter of law that defendants breached this duty by failing to disclose material information.

In response, Century 21 argued that it was not a party to the real estate contract between Brusha and Letsos, did not profit from the sale, did not breach any fiduciary duty because the listing agreement expired, and because the doctrine of equitable conversion gave Brusha equitable title to the property when the parties signed the contract on March 9. In addition, Century 21 brought a cross-motion for summary judgment, asserting that for the reasons stated in its response, the court should rule as a matter of law that Century 21 could not be liable. Alternatively, Century 21 contended that if Brusha were found liable to Letsos, Brusha worked as an independent contractor, and Century 21 therefore should not be liable for his actions. Century 21 later filed a separate motion for summary judgment, where it stated identical allegations.

Brusha also filed a response to Letsos' summary judgment motion. Brusha asserted that Letsos could not prove Hernandez was a prospective buyer before the parties signed the purchase agreement, pointing to his uncontested deposition testimony that he met Hernandez after signing the contract with Letsos. He asserts that he had no duty to disclose information he received after signing the real estate sales contract but before the closing took place.

Letsos twice amended his complaint. Count one of the second amended complaint, filed after his motion for partial summary judgment, alleged that Brusha owed Letsos a fiduciary duty as his broker, which was breached by failing to disclose to Letsos that he found a buyer. Count two...