Rotemi Realty, Inc. v. Act Realty Co., Inc.

• Decision Date: 13 September 2005
• Docket Number: No. SC04-210.,SC04-210.
• Citation: 911 So.2d 1181
• Parties: ROTEMI REALTY, INC., et al., Petitioners, v. ACT REALTY COMPANY, INC., Respondent.
• Court: Florida Supreme Court

911 So.2d 1181

ROTEMI REALTY, INC., et al., Petitioners, v. ACT REALTY COMPANY, INC., Respondent.

No. SC04-210.

Supreme Court of Florida.

July 7, 2005.

Rehearing Denied September 13, 2005.

Sheldon R. Rosenthal of the Law Offices of Sheldon R. Rosenthal, Miami, FL, for Petitioners.

Silvia M. Gonzalez of Silvia M. Gonzalez, P.A., Miami, FL, for Respondent.

Melinda L. McNichols, Miami, FL, for Amicus Curiae The School Board of Miami-Dade County, Florida.

Henry T. Sorensen, II of Brokers Legal Group, P.A., Palm Harbor, FL, for Amicus Curiae Cres Commercial Real Estate of Tampa Bay, Inc.

CANTERO, J.

We consider whether the common practice of paying real estate commissions contingent on consummation of the sale violates the public policy of this state when applied to a purchase or sale by the government. In the decision we review, the Third District Court of Appeal invalidated such an arrangement, concluding that "contracts which provide for contingency awards for securing public monies are against public policy." Act Realty Co. v. Rotemi Realty, Inc., 863 So.2d 334, 336 (Fla. 3d DCA 2003) (citing City of Hialeah Gardens v. John L. Adams & Co., 599 So.2d 1322 (Fla. 3d DCA), review denied, 613 So.2d 5 (Fla.1992)). This holding expressly and directly conflicts with our decision in Robert & Co. v. Mortland, 160 Fla. 125, 33 So.2d 732 (1948), where we announced that as a "general rule" contingency fee contracts involving government procurement violate public policy only if shown to involve "favors or corrupt means." Id. at 734. We have jurisdiction to resolve the conflict. Art. V, § 3(b)(3), Fla. Const.; Rotemi Realty, Inc. v. Act Realty Co., 880 So.2d 1212 (Fla.2004) (granting review). For the reasons explained below, we reaffirm the general rule we announced more than fifty years ago and apply it to real estate brokerage commissions. We hold, first, that the brokerage agreement in this case complies with Florida public policy; and second, that competent, substantial evidence supports the trial court's ruling that the brokers were a procuring cause of the sale and therefore are entitled to their commission.

I. FACTS

Toward the end of 1998, Maria Martin-Hidalgo, a real estate broker, met with the real estate director of the Miami-Dade County School District, which was looking for property to construct a new high school. She tried to interest the director in a twenty-acre tract one of her clients owned, but he rejected it as too small. He did, however, express interest in two other properties shown on a map on his wall. The first was a U-shaped, fifty-acre tract controlled by attorney Michael Cease. Recently, Cease had informed the School District that the property was available. The second property, which Cease also had mentioned, consisted of a ten-acre tract sandwiched inside the U-shaped one. This smaller property was owned by the respondent, Act Realty. The director informed Martin-Hidalgo that, although the District could build a high school on Cease's fifty acres, it would be interested in acquiring the additional ten as well.

After meeting with the director, Martin-Hidalgo contacted another broker, Jose Perez-Urrutia of Rotemi Realty. Perez-Urrutia had previously dealt with and claimed to be "good friends" with the individuals who controlled both properties. Together these brokers, whose companies are the petitioners in this case, met with the owner of Act Realty and entered into a written brokerage agreement. The agreement provided that if the brokers procured a sale of Act Realty's property to the School District within a specified period they would receive a commission "equal to the amount of the sales proceeds due the owner at closing that is over $1,000,000." Martin-Hidalgo faxed to the School District a separate letter authorizing the brokers to negotiate the sale.

The brokers then attempted to sell the ten-acre tract to the School District. Martin-Hidalgo spoke repeatedly with the District's real estate director and also discussed the property with its appraisers. The first offer went through her. At the recommendation of the other broker, Perez-Urrutia, Act Realty conducted the remainder of the price negotiations jointly with Cease, who controlled the fifty-acre parcel. Perez-Urrutia claims that he was responsible for maintaining the relationship between the two sellers.

Even before the brokers became involved, however, the School District already had an interest in the two adjacent properties. According to Kathryn Wilbur, the School District's director of government affairs and land use policy and acquisitions, those properties represented "the only site within the area" that was suitable for a new high school. A memorandum issued by Wilbur, and later approved by the regional superintendent, stated that the School District wished to acquire Cease's fifty acres and "would also prefer that the middle 10 acres be acquired, if possible." In fact, the School District ordered an appraisal of the properties two days before the brokers approached Act Realty.

The School District eventually purchased both properties at a uniform rate per acre. The selling price for the ten-acre parcel was $1,164,650.50. Before the closing, the brokers were informed that Cease had paid a lobbyist to persuade school board members to approve the transaction. Although the brokers claimed not to have known about the lobbyist, they agreed to use $20,000 of their commission to pay the lobbyist (the lobbyist's fee, which was not contingent on a sale, is not at issue here). After subtracting the $20,000, the proceeds from the sale of Act Realty's property still exceeded the $1 million mark by $144,650.50. The brokers claimed they were entitled to this amount as a commission. Act Realty contested their claim. The escrow agent therefore filed an interpleader action. The brokers and Act Realty filed cross-complaints, and eventually the trial court conducted a non-jury trial.

At trial, Act Realty argued that the brokers were not the procuring cause of the sale and thus were not entitled to a commission. The trial court disagreed and entered judgment for the brokers. In its order, the trial court explained that the brokers "clearly established that they were the procuring cause of the sale and brought the parties together resulting in the sale of the real property." According to the court, the brokers "proved that they initiated the negotiations, took affirmative action to bring the buyer and seller together, and that the transaction was closed and they were entitled to the agreed commission."

On appeal, the Third District reversed and remanded. Act Realty Co., 863 So.2d at 338. The district court concluded that the brokerage agreement between Act Realty and the brokers was "void and unenforceable because contracts which provide for contingency awards for securing public monies are against public policy." Id. at 336 (citing Hialeah Gardens, 599 So.2d at 1323-24). According to the district court, "this agreement undoubtedly created a situation in which there was a possibility for the use of `sinister and corrupt means' in order (1) to influence the School Board to purchase this particular property from Act Realty, and (2) for the brokers to earn the highest possible commission by obtaining as high a price as possible." Id. at 337 (quoting Hialeah Gardens, 599 So.2d at 1323 (quoting Wechsler v. Novak, 157 Fla. 703, 26 So.2d 884, 885 (1946))). The district court ordered that the money in escrow be returned to the School District, so as to prevent Act Realty from "benefit[ting] via a windfall from the illegal contract." Id. at 338, 26 So.2d 884.

Judge Cope dissented. Id. at 338, 26 So.2d 884 (Cope, J., dissenting). He faulted the majority for failing to distinguish Robert & Co., in which we held: "We understand the general rule to be that an employment in which compensation is contingent on success in securing contracts from public officials is not illegal on its face. It must be shown that it was induced by favors or corrupt means." 33 So.2d at 734. Judge Cope noted that at trial "no one alleged—much less proved—that there were any corrupt means involved in this land sale at all." Act Realty, 863 So.2d at 342 (Cope, J., dissenting). Thus, he argued, there was no basis for invalidating the brokerage agreement. Id. at 343.

II. ANALYSIS

The brokers now ask us to review the district court's ruling, which expressly and directly conflicts with our decision in Robert & Co.¹ Act Realty in turn asks us to review the trial court's ruling that the brokers were the procuring cause of the sale. We address each issue in turn.

A. Was the Brokerage Agreement Legal?

The district court concluded that "contracts which provide for contingency awards for securing public monies are against public policy." Act Realty, 863 So.2d at 336 (citing Hialeah Gardens, 599 So.2d at 1323-24). This holding conflicts with Robert & Co., where we announced that as a "general rule" such contracts violate public policy only if shown to involve "favors or corrupt means." 33 So.2d at 734. Because no showing of corruption has been made or even attempted in this case, to approve the district court's decision we would have to recede from Robert & Co. We decline to do so. To the contrary, we conclude that, at least as applied to real estate brokerage agreements, which have traditionally provided for fees contingent on the consummation of a sale, the general rule applied in Robert & Co. remains valid.

In Robert & Co., the plaintiff agreed to assist the defendant in securing an engineering contract with the City of Tampa. 33 So.2d at 732. After obtaining the contract, the defendant refused to compensate the plaintiff for services rendered. Id. at 733. The plaintiff brought suit, seeking a reasonable fee. The defendant argued that their agreement was unenforceable because (1) the engineering contract was with a public agency, and the compensation for plaintiff's...