Marcus & Millichap Real Estate Inv. Brokerage Co. v. Weiss

• Decision Date: 07 June 1994
• Docket Number: No. 93-15217,93-15217
• Citation: 26 F.3d 131
• Parties: NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. MARCUS & MILLICHAP REAL ESTATE INVESTMENT BROKERAGE COMPANY, Plaintiff-Appellant, v. Robert A. WEISS, Gwynneth Weiss, and Frank Gagliardi, Trustee for the Weiss Charitable Remainder Unitrust, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 131

26 F.3d 131

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

MARCUS & MILLICHAP REAL ESTATE INVESTMENT BROKERAGE COMPANY, Plaintiff-Appellant, v. Robert A. WEISS, Gwynneth Weiss, and Frank Gagliardi,

Trustee for the Weiss Charitable Remainder

Unitrust, Defendants-Appellees.

No. 93-15217.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 14, 1994.

Decided June 7, 1994.

Before GOODWIN, NORRIS, and O'SCANNLAIN, Circuit Judges.

MEMORANDUM ^*

Marcus & Millichap, a real estate brokerage firm based in California, sued to recover a commission allegedly owed it by Robert and Gwynneth Weiss, owners of an apartment complex in Nevada. The district court found that Nevada law governed the parties' agreement, and held that Marcus & Millichap failed to establish that it produced a ready, willing, and able buyer. In the alternative, the court held that Marcus & Millichap was barred from recovering its commission under Nevada law. The court also awarded attorneys' fees and costs to the Weisses. Marcus & Millichap appeals the district court's judgment. We affirm.

I. Ready, Willing, and Able Buyer.

Under Nevada law, a real estate broker must produce a buyer who is ready, willing, and able to purchase the property upon the terms prescribed by the seller before the broker is entitled to a commission. Estate of Greenberg v. Skurski, 602 P.2d 178, 180 (Nev.1979). In recovering a commission that was denied her by the seller, a broker has the burden of establishing that she submitted an offer that substantially complied with the terms of the listing agreement and that was rejected by the seller in bad faith. Reese v. Utter, 551 P.2d 1099, 1100 (Nev.1976).

Nevada state courts have not yet spoken on the evidentiary burden necessary to show the financial ability of a prospective purchaser. The parties briefed the issue under California law, and the district court found that the result would be the same under Nevada law. Generally, a broker attempting to show the financial ability of a prospective purchaser need not prove that the purchaser actually had enough cash on hand to buy the property. Pellaton v. Brunski, 69 Cal.App. 301, 304 (1924); see also Joiner v. Lockhart, 350 So.2d 199, 201 (La.Ct.App.), writ denied, 352 So.2d 240 (La.1977). However, the broker must show that the purchaser's assets, weighed against her liabilities, were sufficient to allow her to obtain the financing necessary to purchase the property. Pellaton, 69 Cal.App. at 304 (buyer need only show ability "to command the necessary funds to close the deal within the time required."); Russell v. Ramm, 200 Cal. 348, 351-53 (1927) (evidence that prospective purchasers owned considerable property and had significant sums of money in the bank was sufficient to show financial ability).

The only evidence Marcus & Millichap offered regarding the extent of Maimon's assets was excluded as hearsay. In addition, Marcus & Millichap did not subpoena Maimon to testify, instead relying on the testimony of its brokers regarding Maimon's general reputation in the real estate business.

While some cases hold that the testimony of the prospective buyer alone is sufficient to show financial ability, others hold that more is required. Compare Mengel v. Lawrence, 276 A.D. 180 (N.Y.App.Div.1949) (purchaser's testimony that he had the ability to purchase property was believed by jury and upheld on appeal) with Taibi v. American Banknote Co., 135 A.D.2d 810 (N.Y.App.Div.), appeal denied, 528 N.E.2d 521 (N.Y.1987) (affidavit by prospective purchaser asserting his financial ability was insufficient where not accompanied by financial statements substantiating claim). A California state court has held that a broker met its burden of proving that it had produced an able buyer by submitting the buyer's declaration, in addition to a declaration of the broker's attorney who had knowledge of the buyer's financial ability to purchase the property in question. Steve Schmidt & Co. v. Berry, 183 Cal.App.3d 1299, 1307 (1986). However, Marcus & Millichap did not brief (and we have not found) any authority holding that third party testimony alone is sufficient to show the financial ability of the purchaser. ¹ See generally Randy R. Koenders, Annotation, What Constitutes Financial Ability to Perform within Rule Entitling Broker to Commission for Producing Ready, Willing, and Able Purchaser of Real Property, 87 A.L.R. 4th 11 (1991).

Evidence was also presented during the trial that another person, Jack Gindi, intended to invest in the Weiss property with David Maimon. Although Marcus & Millichap presented testimony regarding the close business relationship that existed between Maimon and Gindi, it did not offer any evidence that Jack Gindi was legally bound to lend Maimon the money necessary to purchase the Weiss property. "A proposed purchaser cannot be said to be able to purchase when he is dependent upon third parties, who are in no way bound to furnish the funds with which to make the purchase." Coger v. Wiltsey, 117 Cal.App. 652, 659 (1931); see also 87 A.L.R. 4th at 76-80.

The case law indicates that Marcus & Millichap failed to present evidence sufficient to establish as a matter of law Maimon's financial ability to purchase the Weiss property. Therefore, we need not reach the other substantive issues raised by Marcus & Millichap on appeal. ²

II. Attorneys' Fees.

Pursuant to paragraph eleven of the Marcus & Millichap representation agreement, the district court awarded $270,000 in attorneys' fees and $7,160 in costs to the Weisses as the prevailing party in the litigation. Paragraph eleven provides that "[i]n any litigation ... which may arise between the parties hereto, the prevailing party shall be entitled to recover its costs, including ... reasonable attorneys' fees ..." Marcus & Millichap contests this award, arguing that, because it prevailed on all of the Weisses' counterclaims, neither party can be considered the prevailing party.

The Ninth Circuit has held that attorneys' fees awards are generally reviewed for an abuse of discretion, but whether a district court applied the correct legal standard to the fee request is reviewed de novo. United States v. Callahan, 884 F.2d 1180, 1184-85 (9th Cir.1989), cert. denied, 493 U.S. 1094 (1990).

Under Nevada law, a court may award attorneys' fees pursuant to a contract. Dep't of Human Resources v. Fowler, 858 P.2d 375, 376 (Nev.1993). Nevada courts have held that "a plaintiff may be considered the prevailing party for attorney fee purposes if it succeeds on any significant issue in litigation which achieves some of the benefit it sought in bringing the suit." Women's Fed. Sav. & Loan Ass'n v. Nevada Nat'l Bank, 623 F.Supp. 469, 470 (D.Nev.1985); see also Chowdry v. NLVH, Inc., 851 P.2d 459, 464 (Nev.1993). Here, the district court found the Weisses "to be the prevailing party under Nevada law as they prevailed on the most significant and primary issue in the case, specifically the issue of whether plaintiff was entitled to a real estate brokerage commission."

The amount of fees awarded, $270,000, was $100,000 less than requested by the Weisses. In determining the fee award, the district court considered seven of the twelve factors listed by the Kerr test, which was adopted by...