Prime Income Asset Mgmt., Inc. v. Marcus & Millichap Real Estate Inv. Servs. of Tex., Inc.

• Court: Texas Court of Appeals
• Writing for the Court: Jim Sharp Justice
• Decision Date: 30 December 2014
• Docket Number: NO. 01-13-00020-CV,01-13-00020-CV
• Citation: Prime Income Asset Mgmt., Inc. v. Marcus & Millichap Real Estate Inv. Servs. of Tex., Inc., NO. 01-13-00020-CV (Tex. App. Dec 30, 2014)
• Parties: PRIME INCOME ASSET MANAGEMENT, INC. AND PRIME INCOME ASSET MANAGEMENT, LLC, Appellants v. MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES OF TEXAS, INC., Appellee

PRIME INCOME ASSET MANAGEMENT, INC.AND PRIME INCOME ASSET MANAGEMENT, LLC, Appellants v. MARCUS & MILLICHAP REAL ESTATE INVESTMENTSERVICES OF TEXAS, INC., Appellee

NO. 01-13-00020-CV

Court of Appeals For The First District of Texas

December 30, 2014

On Appeal from the County Court at Law No. 3 Galveston County, Texas

Trial Court Case No. CV0065437

MEMORANDUM OPINION

Appellants, Prime Income Asset Management, Inc. ("Prime, Inc.") and Prime Income Asset Management, LLC ("Prime, LLC") (collectively "the Prime Companies"), challenge the trial court's amended final judgment, entered after ajury trial, in favor of appellee, Marcus & Millichap Real Estate Investment Services of Texas, Inc. ("Marcus & Millichap"), in its suit against the Prime Companies for breach of a broker's fee contract in connection with the sale of real property in Galveston County (the "Fee Agreement"). In five issues, the Prime Companies challenge the legal sufficiency of the evidence supporting the jury's verdict, and the trial court's award of attorney's fees to Marcus & Millichap, denial of attorney's fees to Prime, LLC, and denial of the Prime Companies' motion to transfer venue. We affirm.

Background

Shortly after Hurricane Ike made landfall along the upper Texas Gulf Coast, Jeffrey Fript, a licensed real estate agent with the brokerage firm of Marcus & Millichap, received a telephone call from John Petricca, who Fript understood was representing a company called "Odyssey Residential." Petricca told Fript that he was looking for apartments that had been damaged during the hurricane and needed repair. After calling property owners he knew and searching industry databases, Fript found three properties located in Galveston County that he thought met the criteria, including the property at issue in this case, Marina Landing Resort. Using these specialized databases, Fript identified "Prime Income Asset Management" as the seller and Mark Nardizzi as the contact person for all three properties.

Fript called Nardizzi, who confirmed that "Prime Income Asset Management" owned all three properties. Fript told Nardizzi that he had another party, who was represented by another broker and interested in possibly buying the properties, if Nardizzi was interested in selling them. After Nardizzi confirmed that the properties were damaged and for sale, Fript passed the relevant information along to Petricca.

Fript also talked to Nardizzi about a fee for facilitating the deal. Nardizzi offered a fee of one-half percent of the sales price, and although it was "extremely low" compared to the commissions Fript normally received, he agreed to Nardizzi's offer because he understood that he would not have to do much more than what he had already done—find the properties and put together the deal for Nardizzi. Fript then drafted the Fee Agreement on Marcus & Millichap letterhead and sent it to Nardizzi for his signature.

The Fee Agreement identified Marcus & Millichap as the "Buyer's Broker" and "Prime Income Asset Management" as the "Listing Broker." Under the express terms of the agreement, "Prime Income Asset Management" agreed that if "Odyssey Residential and/or Assigns represented by John Petricca—Dallas, TX" purchased the Marina Landing Resort, "Prime Income Asset Management" would pay Marcus & Millichap a commission at closing equal to ".50% (One-HalfPercent) of Sales Price." Nardizzi signed the Fee Agreement on behalf of "Listing Broker: Prime Income Asset Management."

At the time the Fee Agreement was executed, there were two separate legal entities with "Prime Income Asset Management" as part of their name: Prime, Inc. and Prime, LLC. Prime, LLC is a wholly-owned subsidiary of Prime, Inc. Fript testified that when he searched for "Prime Income Asset Management" on the Texas Real Estate Commission's website, he learned that "Prime Income Asset Management" was licensed as a "corporation broker." During the trial, Steven Shelley, a vice president of Prime, Inc. and Prime, LLC, confirmed that Prime, Inc. was a licensed real estate broker and Prime, LLC was not.

The original purchase and sale contract for Marina Landing Resort, which was admitted into evidence, identifies Marina Landing, LP, as the seller, and "ORH Acquisitions II, LLC" as the purchaser, and references Fript and Marcus & Millichap's one-half percent commission. This agreement, however, was amended numerous times before the sale closed a year and a half later. The final purchase and sale agreement omitted any reference to Fript and Marcus & Millichap's one-half percent commission, and indicated that "ORH Acquisitions II, LLC" had assigned the contract to "Chicory Court I, LP." When asked if the reference to "Odyssey Residential" in the Fee Agreement referred to "Odyssey Residential Holdings, LP," Fript testified that he did not remember but believed that it didbecause he understood that there was only one "Odyssey Residential." James Fisher, formerly the Vice President of Development for Odyssey Residential Holdings, LP, testified that "ORH Acquisitions II, LLC" is an affiliate that Odyssey Residential Holdings, LP uses routinely to contract for and acquire properties.

When the sale of the Marina Landing Resort closed and Marcus & Millichap was not paid a commission, Marcus & Millichap filed suit against Prime, Inc. and Prime, LLC in Galveston County for breach of the Fee Agreement. In addition to a general denial, the Prime Companies asserted affirmative defenses, including the statute of frauds in the Real Estate License Act ("RELA"). See TEX. OCC. CODE §1101.806(c) (West 2012).¹

After finding that Prime, Inc. (1) entered into the Fee Agreement with Marcus & Millichap, and (2) "fail[ed] to comply with the Fee Agreement," the jury awarded damages to Marcus & Millichap in the amount of the commission due under the Fee Agreement: $68,500. The jury also found that Prime, LLC was not a party to the Fee Agreement. In accord with the jury's verdict, the trial court signed an amended final judgment for Marcus & Millichap against Prime, Inc. for $68,500in damages, $17,060 in attorneys' fees, plus appellate attorneys' fees, post-judgment interest and costs. The trial court also entered a take-nothing judgment in favor of Prime, LLC, but denied it costs against Marcus & Millichap on the grounds that Prime, LLC had unreasonably increased the costs of litigation in the case.

Both Prime, Inc. and Prime, LLC appeal the trial court's amended final judgment. Specifically, Prime, Inc. argues that (1) Marcus & Millichap failed to present legally sufficient evidence establishing that the Fee Agreement met the statute of frauds requirements of RELA, (2) even if the Fee Agreement complied with the statute of frauds, Marcus & Millichap failed to present legally sufficient evidence establishing that the Fee Agreement's conditions precedent had been satisfied, and (3) because the award of attorney's fees to Marcus & Millichap was based solely on its breach of contract claim, that award should also be reversed. Prime, LLC argues that the record does not support the trial court's denial of costs to Prime, LLC on the grounds that it unreasonably increased the costs of litigation in this case. Finally, Prime, Inc. and Prime, LLC argue that the trial court erred in denying their motion to transfer venue.

Statute of Frauds

Prime, Inc.'s first issue contends that the evidence is legally insufficient to establish that the Fee Agreement meets RELA's statute of frauds requirement asset forth in section 11.01806(c). TEX. OCC. CODE ANN. § 1101.806(c).

Section 1101.806(c) prohibits a person from maintaining an action in Texas to recover a commission for the sale or purchase of real estate "unless the promise or agreement upon which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document." Id. Strict compliance with this provision is required if a real estate broker or salesperson seeks a judicial recovery of fees. Henry S. Miller Co. v. Treo Enters., 585 S.W.2d 674, 676 (Tex. 1979). The purpose of the provision is to eliminate or reduce fraud that might be occasioned on the public by unlicensed, unscrupulous, or unqualified persons. Id. at 675-76. A broker must plead and prove that his or her claim for a commission for the sale of a particular property is based on an instrument in writing within contemplation of section 1101.806(c) even if the defendant does not specifically plead the statute of frauds as an affirmative defense. See Bayer v. McDade, 610 S.W.2d 171, 172 (Tex. Civ. App.—Houston [1st Dist.] 1980, writ ref'd n.r.e.) (stating "a broker seeking to recover a commission under [RELA] must prove a valid written agreement describing the land, even though the owner does not specifically plead the statute of frauds as an affirmative defense"); see also TEX. OCC. CODE ANN. § 1101.806(c).

Whether a contract is barred by the statute of frauds is a question of law for the court to decide. Fuqua v. Oncor Elec. Delivery Co., 315 S.W.3d 552, 555 (Tex. App.—Eastland 2010, pet. denied); see, e.g., Pickett v. Bishop, 148 Tex. 207, 223 S.W.2d 222, 223 (Tex. 1949) (stating courts interpreting RELA's statute of frauds may looks to cases interpreting general statute of frauds for guidance). Courts applying section 1101.806(c) have interpreted the requirements as follows:

To comply with [section 1101.806(c)], an agreement or memorandum must: (1) be in writing and must be signed by the person to be charged with the commission; (2) promise that a definite commission will be paid, or must refer to a written commission schedule; (3) state the name of the broker to whom the commission is to be paid; and (4) either itself or by reference to some other existing writing, identify with reasonable certainty the land to be conveyed.

Litton Loan Servicing, LP v. Manning, 366 S.W.3d 837 (Tex. App.—Dallas 2012, pet. denied); Neary v....