Schlossman & Gunkelman, Inc. v. Tallman

• Decision Date: 19 May 1999
• Docket Number: No. 980133,980133
• Citation: 593 N.W.2d 374
• Parties: SCHLOSSMAN & GUNKELMAN, INC., Plaintiff and Appellee, v. Robert TALLMAN and Vincent Murphy, individually and doing business as M & T Investment Company, Defendants and Appellants. and Monte Kjos, individually and doing business as Kjos Investments, Defendant and Appellee.
• Court: North Dakota Supreme Court

Page 374

593 N.W.2d 374

1999 ND 89

SCHLOSSMAN & GUNKELMAN, INC., Plaintiff and Appellee, v. Robert TALLMAN and Vincent Murphy, individually and doing

business as M & T Investment Company, Defendants

and Appellants.

and

Monte Kjos, individually and doing business as Kjos

Investments, Defendant and Appellee.

No. 980133.

Supreme Court of North Dakota.

May 19, 1999.

Steven A. Johnson, Vogel, Weir, Bye, Hunke & McCormick, Ltd., Fargo, ND, for plaintiff and appellee.

Stephen W. Plambeck, Nilles, Hansen & Davies, Ltd., Fargo, ND, for defendants and appellants.

Bruce H. Carlson, McNair, Larson & Carlson, Ltd., Fargo, ND, for defendant and appellee. Submitted on brief.

VANDE WALLE, Chief Justice.

¶1 Robert Tallman and Vincent Murphy, individually and doing business as M & T Investment Company, appealed from a judgment awarding Schlossman & Gunkelman, Inc., a $103,432.21 commission, plus interest and costs, under a listing agreement for the Village Square Office and Warehouse in Fargo. We hold the trial court erred in ruling two letters written by Tallman were not offers of compromise under N.D.R.Evid. 408 and admitting them into evidence in the jury trial. We reverse and remand for further proceedings.

I

¶2 M & T is a partnership which owns commercial real estate, and, as relevant to this case, owned Village Square. Schlossman is a real estate firm engaged in selling and leasing commercial real estate. Michael Beaton is a real estate agent and part owner of Schlossman. Monte Kjos, doing business as Kjos Investments, is also a real estate agent. The ultimate issue in this case involves the agents' right to commissions under listing agreements for Village Square.

¶3 On May 31, 1991, M & T and Schlossman, through Beaton, entered a written contract in which M & T agreed to employ Schlossman "exclusively" to rent, lease and sell Village Square from June 1, 1991, through May 31, 1993. The agreement required M & T to pay Schlossman a six percent commission for the sale or lease of the property if Schlossman found a buyer or tenant ready willing and able to buy or lease it during the period of the agreement or any renewal. In early June 1993, M & T and Schlossman executed a written extension of the listing agreement "in its entirety" through May 31, 1995.

¶4 On June 24, 1993, however, M & T and Kjos executed a written contract in which M & T agreed to "exclusively employ" Kjos to sell Village Square. M & T extended Kjos's listing through April 1994, when it expired. According to Kjos, in March 1995, he talked with Murphy about relisting the property, and Murphy told Kjos that Schlossman's listing would expire on March 31, 1995. Kjos subsequently learned Schlossman's listing expired on May 31, 1995, and in June 1995, M & T and Kjos entered a written contract in which M & T again agreed to "exclusively employ" Kjos to sell Village Square. Meanwhile, on August 15, 1995, M & T and Schlossman entered another written extension of their June 1, 1991 listing agreement "in its entirety" through May 31, 1997.

¶5 In late 1995, Kjos procured a buyer for Village Square. Beaton claimed he did not learn about Kjos's involvement with Village Square until December 20, 1995, when Beaton sent Tallman a fax updating Tallman on Beaton's efforts to sell the property, and Tallman responded that Kjos had procured a buyer for the property. M & T sold Village Square to Kjos's buyer for $1,200,000 on December 29, 1995, and paid Kjos a $52,000 commission.

¶6 M & T refused to pay Schlossman a commission for the sale of Village Square. Schlossman sued M & T for a six percent commission for the sale and a six percent commission from lease payments made to M & T by DakTech, a Village Square tenant. Schlossman also sued Kjos for tortious interference with contract. M & T counterclaimed against Schlossman for breach of an agreement to manage Village Square, and cross-claimed against Kjos for breach of a fiduciary duty.

¶7 The trial court decided the listing agreements were ambiguous and, among other things, instructed the jury to decide whether the agents had exclusive listing agreements for Village Square. The jury returned a special verdict finding: (1) both Schlossman and Kjos had "exclusive" listing agreements to sell Village Square; (2) Schlossman substantially performed its obligations under its listing agreement and was entitled to recover $23,300 for the sale of Village Square; (3) Schlossman was entitled to recover $10,366 as a commission from DakTech's lease payments; (4) Schlossman did not enter a management agreement with M & T for Village Square; and (5) Kjos did not intentionally interfere with Schlossman's contract with M & T, or breach a fiduciary duty to M & T.

¶8 The trial court granted Schlossman judgment as a matter of law, concluding M & T was liable to Schlossman for $72,000, which represented a six percent commission from the sale of Village Square, and $31,434.21, which represented a six percent commission from DakTech's lease payments. The court denied M & T's motions for judgment as a matter of law, or for a new trial. A judgment awarding Schlossman the six percent commissions, plus interest and costs, was entered.

II

¶9 M & T argues two letters written by Tallman were offers of settlement under N.D.R.Evid. 408, and the trial court erred in admitting them into evidence.

A

¶10 Tallman's first letter, dated December 20, 1995, responded to Beaton's update about his efforts to sell Village Square. Tallman's letter informed Beaton that Kjos had sold the property and said, in part:

As for any commission due you on this matter, the mistake of having two listings was mine. I don't believe that [Kjos] owes you any commissions, but this will be up to you and [Kjos]. I will personally pay you for any out of pocket expenses.

[Murphy] and I have given you considerable business in the past and hope to do so in the future. We trust that you will take this into consideration in this matter.

¶11 Tallman's second letter, dated January 16, 1996, responded to a letter from Schlossman's attorney and provided, in part:

Mr. Murphy and I (at my request from Mr. Murphy) engaged Mr. Beaton to rent and to try to sell the Village Square Building ... back in May of 1991.

Two years went by with no action at all....

After two years of no activity we informed Mr. Beaton that we were going to try another realtor. At his request, we advised Mr. Beaton that he could continue to work on the property but would not under any circumstance have a[n] exclusive listing.

At that time we got Mr. Kjos into the act. We informed Mr. Kjos that he also did not have an exclusive listing and that we would consider any offer brought to us by either him or Mr. Beaton. Both Mr. Beaton and Mr. Kjos were and always have been fully aware of this condition and continued to work under this condition.

Another two years went by and in late November Mr. Kjos brought us an offer at our set price. It turned out that satisfactory financial arrangements could be made and we accepted the offer and sold the building in December of 1995.

....

On 1/4/96 I called Mr. Beaton on the phone and told him that I would personally give him a check for $3,000 (plus an[y] out of pocket expenses for signs, etc.). Mr. Murphy was and is very much against this. Mr. Beaton told me on the phone that he would consider this offer and call me back. No call has been received and now we have your letter.

As Mr. Murphy points out, Mr. Beaton has nothing coming. In four years he brought us no prospects. He has been fully aware of two people working on the property for over two years.

As I pointed out previously, I've known Mr. Beaton since he was a boy and made him the $3,000 offer to reasonably pay him for whatever time he might have spent on this matter; which can't have been much as no offers or prospects ever surfaced.

¶12 The trial court denied M & T's pretrial motion in limine to exclude the two letters, ruling they were not offers of settlement under N.D.R.Evid. 408. The court indicated it would consider redacting two paragraphs from the January 16, 1996 letter in which Tallman offered to pay Beaton $3,000, but deferred ruling on those redactions until that letter was offered into evidence. At trial, during direct examination of Beaton, the court admitted into evidence Tallman's December 20, 1995 letter, ruling it was not an offer of settlement under N.D.R.Evid. 408 and its prejudicial effect did not outweigh its probative value under N.D.R.Evid. 403. The court, however, redacted Tallman's statement "I will personally pay you for any out of pocket expenses," and also asked the parties to redact the two paragraphs in the January 1996 letter regarding Tallman's $3,000 offer to Beaton. Those two paragraphs were not redacted, and the court subsequently admitted the entire January 1996 letter into evidence during cross-examination of Tallman.

¶13 M & T argues both letters were offers of settlement, and they were improperly used to prove liability under N.D.R.Evid. 408. M & T argues the trial court's refusal to exclude those letters "crippled" its case from the outset. Schlossman and Kjos argue Tallman's December 20, 1995 letter was not an offer of settlement under N.D.R.Evid. 408, because there was not a "disputed" claim between the parties when it was sent. They also argue the court properly admitted both letters for "another purpose" under N.D.R.Evid. 408--to impeach M & T's evidence that it was dissatisfied with Schlossman's services and neither Schlossman nor Kjos had an "exclusive" listing agreement, and to impeach Tallman's testimony that he understood there was no such thing as an "exclusive" listing agreement and any real estate agent could sell listed property.

B

¶14 Rule 408, N.D.R.Evid., provides:

Evidence of (1) furnishing, offering, or promising to furnish, or (2) accepting, offering, or promising to accept, a valuable consideration in compromising or attempting to compromise a claim...