Rosenberg v. Heritage Renovations, LLC

• Decision Date: 29 July 2004
• Docket Number: No. C7-03-94.,C7-03-94.
• Citation: 685 N.W.2d 320
• Parties: Gary ROSENBERG dba Shelter Consultants, Appellant, v. HERITAGE RENOVATIONS, LLC, and Heritage Marketing, LLC, Respondents.
• Court: Minnesota Supreme Court

685 N.W.2d 320

Gary ROSENBERG dba Shelter Consultants, Appellant, v. HERITAGE RENOVATIONS, LLC, and Heritage Marketing, LLC, Respondents.

No. C7-03-94.

Supreme Court of Minnesota.

July 29, 2004.

Rehearing Denied August 20, 2004.

Heard, considered, and decided by the court en banc.

OPINION

HANSON, Justice.

Appellant Gary Rosenberg, a licensed real estate broker, seeks review of a grant of summary judgment dismissing his claim for commissions on condominium sales that closed after his listing agreement was terminated. The main questions presented are whether Rosenberg's agreement with respondent Heritage Marketing LLC ("Marketing") was terminable-at-will and, if so, whether Rosenberg was due any commissions on purchase agreements or reservation agreements that he obtained before termination but that closed after termination. Inherent in the latter question is the issue whether Minn.Stat. § 82.195 (2002), which regulates the content of real estate listing agreements, should be construed to abrogate a broker's equitable remedy to recover a commission as a procuring cause of a sale that is completed after the listing agreement is terminated. We affirm in part, reverse in part and remand to the district court.

In 1996, Dan Hunt and Arnie Gregory met with Rosenberg to discuss the marketing and sale of approximately 350 individual condominium units in a real estate development that was to be constructed in four phases over several years. In April of 1997, Hunt and Gregory entered into an agreement with Timothy Burnham (doing business as Builders Alliance), as project and sales manager, and Rosenberg (doing business as Shelter Consultants), as sales person.¹ The April agreement contemplated that Hunt, Gregory and Burnham would form a new corporation that would be the party to the agreement with Rosenberg. In fact, while Gregory signed individually, Hunt signed as "Chief Manager, Heritage Marketing, LLC."

Gregory and Hunt subsequently formed two corporations, respondent Heritage Renovations, LLC ("Renovations"), to be the owner and developer of the project, and Marketing, to provide marketing and sales services to Renovations. The April agreement was then replaced in July 1997 by a new agreement that was signed by Gregory and Hunt on behalf of Marketing (hereafter the "July Agreement"). The July Agreement describes Rosenberg's role under the heading "Sales Person Proposal." It states that Rosenberg will receive commissions of "2.5% on coop sales and 3.5% on in house sales" and that Rosenberg will receive a draw against commissions of $3,000 per month together with an advance of $1,500 per unit at the time that each purchase agreement was approved. The July Agreement does not explicitly state a date for its expiration, but does state that Rosenberg is "to work the model sales center hours throughout the time frame of the project."

Under a section entitled "Advance Payment to Shelter Consultants [Rosenberg]," the July Agreement provides:

BUILDING 1, 23 UNITS

$1,500 TO BE PAID TO SHELTER CONSULTANTS AT TIME OF APPROVED P.A. BALANCE OF COMMISSION DUE AT CLOSING LESS ANY ACCUMULATED DRAW.

BUILDING 2 AND ALL OTHERS

$500 TO BE PAID TO SHELTER CONSULTANTS AT TIME OF APPROVED P.A. AND ADDITIONAL $1,000 TO BE PAID AT THE TIME OF 50% PRESALE IN EACH BUILDING BALANCE OF COMMISSION TO BE PAID AT CLOSING LESS ANY ACCUMULATED DRAW.

IF A SALE CANCELS MONEY ADVANCED WILL BE CREDITED AGAINST NEXT NEW SALE OR SHELTER CONSULTANTS WOULD PAY BACK THE $1,500.

Rosenberg sold units for phases 1 and 2 from July 1997 through 2000. In September 2000, Rosenberg also began to sell units for phase 3. On February 14, 2001, Marketing sent Rosenberg a fax effectively terminating his services and instructing him to stop selling units on Marketing's behalf. Rosenberg claims that he had almost 40 purchasers under contract at the time of his termination; 18 as purchase agreements and 20 as reservation agreements. He claims that he is entitled to receive commissions on sales to these purchasers even though the sales were not closed until after his termination. Rosenberg agrees that he has been paid his full commission on all sales that closed before his termination.

Renovations and Marketing moved for summary judgment, arguing that the July Agreement was invalid because it did not include all of the terms required for a "Listing Agreement" under Minn.Stat. § 82.195 (2002). The district court denied Marketing's motion, determining that the July Agreement was valid because it satisfied the critical requirements of the statute and Marketing had waived the right to object to its deficiencies by operating under the Agreement for several years. The court further determined that the Agreement was terminable at will, but that issues of fact were still present as to what Rosenberg was owed. The court dismissed Renovations as an unnecessary party because it was not named in the July Agreement.

After continued discovery, Rosenberg moved to amend his complaint to include a claim that the arrangement between the parties was actually a joint venture. Marketing renewed its motion for summary judgment. The district court denied Rosenberg's motion to amend and granted Marketing's motion for summary judgment, determining that Rosenberg had been lawfully terminated and that he had been paid all commissions due to him through his termination date. The court concluded that Rosenberg's failure to include an "override clause" in the July Agreement, as authorized by Minn.Stat. § 82.195, precluded any claim for commissions on sales that closed after his termination date.²

The court of appeals affirmed, concluding that (1) the July Agreement did not create a joint venture and (2) summary judgment was appropriate because the July Agreement was terminable at will and Rosenberg had been paid all of the commissions due at the time of termination. Rosenberg v. Heritage Renovations, LLC, No. C7-03-94, 2003 WL 21694604 at *2-4 (Minn.App. July 22, 2003) (unpublished opinion). We granted review.

On an appeal from summary judgment, we must determine whether (1) there exist any genuine issues of material fact, and (2) whether the district court correctly applied the law. Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 345 (Minn.2003). We view the evidence in a light most favorable to the nonmoving party. Id. The construction of a contract, unless ambiguous, is a question of law, as is the construction of a statute. Id. at 346. Questions of law are reviewed by this court de novo. Id. at 345.

I.

Marketing argues that the July Agreement is void, and Rosenberg's action cannot be brought, because the July Agreement does not contain all of the "contents" of a listing agreement that are specified in Minn.Stat. § 82.195, subd. 2 (2002). As relevant here, the required "contents" include:

All listing agreements must be in writing and must include:

(1) a definite expiration date;

(2) a description of the real property involved;

(3) the list price and any terms required by the seller;

(4) the amount of any compensation or commission or the basis for computing the commission;

(5) a clear statement explaining the events or conditions that will entitle a broker to a commission;

(6) information regarding an override clause, if applicable, including a statement to the effect that the override clause will not be effective unless the licensee supplies the seller with a protective list within 72 hours after the expiration of the listing agreement;

* * * * * *

(10) for residential listings, a notice stating that after the expiration of the listing agreement, the seller will not be obligated to pay the licensee a fee or commission if the seller has executed another valid listing agreement pursuant to which the seller is obligated to pay a fee or commission to another licensee for the sale, lease, or exchange of the real property in question. This notice may be used in the listing agreement for any other type of real estate.

Id. Marketing argues that the July Agreement is deficient in that, among other things, it failed to include "a definite expiration date" or "information regarding an override clause."

Rosenberg argues that the only statutory section relevant to this action is Minn. Stat. § 82.33 (2002). That section specifically addresses "Civil Actions" for the "collection of compensation" by a "duly licensed real estate broker" and is in the form of a statute of frauds; that is, it states "No person shall bring or maintain any action" for commissions unless he was a duly licensed real estate broker at the time the cause of action arose and "there is a written agreement with the person required to be licensed." Minn.Stat. § 82.33, subds. 1 & 2 (2002). Rosenberg argues that he was duly licensed and the July Agreement satisfied the requirement for a writing.

The district court determined that section 82.195 applied but ruled that the July Agreement was valid because it substantially complied with section 82.195 and Marketing had waived any deficiencies by its course of conduct.

Substantial Compliance

In Rueben v. Gibbs, 297 Minn. 321, 322-23, 210 N.W.2d 857, 858 (1973), we addressed a previous statutory requirement that a listing agreement be in writing before the real estate broker can maintain an action for a commission. There, the broker had written an informal sales agreement after the seller had signed a purchase agreement with the buyer. Id. at 322-23, 210 N.W.2d at 858. We observed that there were no rules or statutes defining the contents of a listing agreement. Id. at 323, 210 N.W.2d at 858. We concluded that the informal sales agreement substantially complied with the statute because it described the commission and provided an authorization to sell. Id., 210 N.W.2d at 858.

After Rueben, the Minnesota Commerce Department promulgated a rule that delineated the requirements for a listing agreement.³ This rule was substantially similar to and was later codified in Minn.Stat. §...