Ralph E. Koressel Premier Elec. v. Forster

• Decision Date: 08 December 2005
• Docket Number: No. 87A01-0412-CV-549.,87A01-0412-CV-549.
• Citation: 838 N.E.2d 1037
• Parties: RALPH E. KORESSEL PREMIER ELECTRIC, INC., Appellants-Defendants, v. RANDALL O. FORSTER, Appellee-Plaintiff.
• Court: Indiana Supreme Court

838 N.E.2d 1037

RALPH E. KORESSEL PREMIER ELECTRIC, INC., Appellants-Defendants, v. RANDALL O. FORSTER, Appellee-Plaintiff.

No. 87A01-0412-CV-549.

Court of Appeals of Indiana.

December 8, 2005.

COPYRIGHT MATERIAL OMITTED

Leslie C. Shively, Shively & Associates, Evansville, for Appellants.

Warren C. Mathies, Long & Mathies Law Firm, P.C., Boonville, for Appellee.

OPINION

DARDEN, Judge.

STATEMENT OF THE CASE

Ralph E. Koressel and Premier Electric, Inc. appeal the trial court's judgment in favor of Randall O. Forster.

We affirm.

ISSUES

1. Whether the trial court's judgment is void as inconsistent with the pleadings.

2. Whether the evidence supports the findings and the findings support the judgment.

3. Whether the minimum commission constitutes an unenforceable penalty.

FACTS

Ralph E. Koressel ("Ralph") owned Premier Electric, Inc. ("Premier") (collectively, Ralph and Premier shall be referred to as "Koressel"). Randall O. Forster ("Forster") was a business broker and also "d[id] commercial real estate." (Forster's App. 18). On or about January 13, 1999, Ralph and Forster entered into a Standard Listing Agreement (the "Listing Agreement"), whereby Ralph granted Forster the exclusive right to sell Premier for one year. The Listing Agreement read as follows:

In consideration of the mutual covenants in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. Seller hereby grants to Broker the EXCLUSIVE RIGHT TO SELL and authority to act as agent to arrange the sale of the Business or part thereof described as follows:

A. Name: Premier Electric, Inc.

. . . .

E. Assets Included in Sale: all assets tangible and intangible owned by the Seller and used in the day-to-day operation of the business; including, but not limited to, inventory, equipment, fixtures, vehicles (except personal vehicle), records, files, furniture, acquired contracts, trade names & marks or rights, etc. Other than items specifically listed on an "Excluded Items" list

. . . .

G. Real Estate Included in Sale: None

H. Sale Price: $2,500,000

. . . .

2. Seller hereby grants the EXCLUSIVE RIGHT TO SELL to Broker for a primary period of ONE (1) year from the date of this Agreement. After the primary period, this Agreement shall continue until terminated by operation of law or upon TEN (10) days written notice to termination delivered by ONE (1) party to the other. If not otherwise terminated, this Agreement shall terminate on Feb. 1, 2000.

3. If the Seller effects the sale of a Related Business during the existence of this Agreement or within TWO (2) years after the termination of this Agreement and such sale is made to any purchaser or prospective purchaser with whom Broker or any cooperating Broker had any contact regarding the sale of the Business during the existence of this Agreement, Broker shall be entitled to a commission on the sale in accordance with Paragraph 10 hereof (The term "Related Business" shall mean and include any property and/or business that is directly related to the Business described above, e.g., real estate or other property connected with the Business, etc., and that is owned in whole or part by the same persons or legal entities that own the Business. "Related Business" shall also mean and include other businesses and/or other locations if such other businesses and/or locations are engaged in the same general business activities as the Business described above.)

. . . .

9. Upon the execution of this Agreement, Seller shall pay to Broker a non refundable [sic] retainer in the amount of $0. In the event a commission is earned and payable upon the occurrence of any event as described in Paragraph 11 of this Agreement, the retainer shall be applied as a credit to such commission. If no commission is due to or earned by Broker, then Broker shall keep the retainer as compensation for services hereunder. However, in the event a commission is due or earned by Broker hereunder, neither the retainer, nor the retention thereof by Broker, will be considered liquidated damages, payment, waiver, estoppel, accord and satisfaction, release or other discharge of Seller's obligation to pay the commission otherwise due to or earned by Broker hereunder.

10. For services rendered by Broker under this Agreement, Seller shall pay to Broker a commission in cash to a certain percent or percentage of the Sale Price of said Business or Related Business, such percentage of the Sale Price to be on a scale as follows:

A. Six (6%) percent

B. In no event shall the commission payable to Broker be less than $50,000 (minimum commission).

11. The commission described in Paragraph 10 shall be earned by and payable to Broker, in cash, upon the occurrence of any of the following events:

A. The sale of the Business during the existence of this Agreement.

B. The sale of the Business at any time within two (2) years after the termination of this Agreement, if such sale is made to any purchaser or prospective purchaser with whom the Broker (or any cooperating broker), Seller, or any agent or employee of Seller had any contact regarding same during the existence of this Agreement.

C. Broker obtains an offer to purchase the Business upon terms and conditions specified in Paragraph 1 or upon other terms and conditions acceptable to Seller from a ready, willing and able prospective purchaser.

D. Seller accepts in writing an offer from a prospective purchaser and Seller then fails to complete the sale of the Business.

E. Seller violates the terms of this Agreement and/or breaches any material warranty or representation made herein, or withdraws the Business from the market and/or otherwise attempts to terminate this Agreement prior to its expiration date.

F. The sale of a Related Business as described in Paragraph 3.

12. The term "sale" is defined as any transfer, conveyance, merger, consolidation, exchange, creation of partnership, indenture or disposition of the Business, including, without limitation, the sale, consignment, assignment, lease or hypothecation of the Business or a Related Business, its capital stock, assets, or any portion thereof (other than in the ordinary course of business), or the employment of a prospective purchaser introduced to Seller by Broker.

13. The term "Sale Price" shall mean any and all amounts of money or other consideration paid or conveyed to Seller, or for Seller's benefit, or paid or conveyed by a purchaser in connection with the sale of the assets or capital stock of the Business or a Related Business. . . . In addition, Sale Price shall specifically include any and all payments made or to be made by a purchaser that are contingent upon future events . . . .

(Forster's App. 1-2) (emphasis in original). Forster then gathered information regarding Premier and prepared a prospectus for potential buyers.

Brent Smith heard that Premier was for sale, and in June of 1999, he contacted Ralph and expressed interest in purchasing Premier. Ralph referred Smith to Forster. On June 10, 1999, Smith entered into a confidentiality agreement, and Forster provided Smith with a copy of the prospectus.

On July 2, 1999, Forster met with Smith and an officer from Old National Bank to discuss financing the purchase of Premier. Some time at the end of August of 1999, Ralph and Smith had a meeting, during which Ralph agreed to sell Premier to Smith for $2,000,000. On September 13, 1999, Smith, Ralph, Forster, and Ralph's accountant, Malcolm Neel, met to discuss financing. On October 1, 1999, Civitas Bank offered a loan commitment to Smith for the purchase of Premier. Smith, Ralph, Forster, and Neel met again on October 2, 1999, to further discuss the sale of Premier. They then met with Cass Wilson, Smith's attorney, who drew up a rough draft of a purchase agreement.

On October 13, 1999, Forster met with Ralph and Smith. Ralph notified Forster that he did not intend to pay Forster any commission on the sale of Premier because he felt that Forster had not "done any work, enough to justify it . . . ." (Tr. 25). Forster informed Ralph that he was due a commission pursuant to the Listing Agreement. Ralph then told Forster that he would pay him the minimum commission of $50,000. Forster advised Ralph that he would contact his attorney. Shortly after the October 13 meeting, Forster received a letter from Ralph's attorney, informing him that he was being terminated because he did not have a real estate license.

On November 1, 1999, Ralph entered into a purchase and sale agreement (the "Purchase Agreement") with Smith and Smith's wife, Sarah. Pursuant to the Purchase Agreement, Ralph agreed to sell to the Smiths certain assets of Premier in exchange for a purchase price of two million dollars ($2,000,000). Ralph also agreed to "convey enough cash and good collectable accounts receivable as of the Closing Date, to equal Five Hundred Thousand Dollars ($500,000.00)." (Forster's App. 4). The Purchase Agreement also provided as follows:

2. Lease of Real Estate. At the Closing the Purchaser and Koressel agree to enter into a Lease Agreement for a period of ten (10) years for an initial rent of Two Thousand Dollars ($2,000.00) per month. The rental amount shall be adjusted annually by the Consumer Price Index, not to exceed five percent (5%) per year. After five (5) years either party shall have the right to terminate the lease after giving six (6) months prior written notice. The lease shall be a triple net lease. The remainder of the terms and conditions of the Lease Agreement shall be agreed to by both parties.

. . . .

5. Purchase Price/Payment/Allocation. The purchase price to be paid Seller for all of the Assets to be transferred to Purchaser hereunder shall be Two Million Dollars ($2,000,000.00), hereinafter referred to as the "Purchase Price." Purchaser shall pay the Purchase Price to Seller as follows:

. . . . (...