Southpace Properties, Inc. v. Acquisition Group

Citation5 F.3d 500
Decision Date25 October 1993
Docket NumberNo. 92-6965,92-6965
PartiesSOUTHPACE PROPERTIES, INC., Plaintiff-Appellant, Cross-Appellee, v. ACQUISITION GROUP, The, a General Partnership; Robert B. Chambers, individually and as General Partner of The Acquisition Group, a General Partnership; Chris T. Turner, individually, and as General Partner of The Acquisition Group, a General Partnership; W. Fletcher Steele, individually, and as General Partner of The Acquisition Group, a General Partnership; Frank B. Myers, Jr., individually, and as General Partner of The Acquisition Group, a General Partnership; Robert N. Wesley, individually and as General Partner ofThe Acquisition Group, a General Partnership; Claiborne G. Thomasson, individually and as General Partner of The Acquisition Group, a General Partnership, Defendants-Appellees, Cross-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)

Richard F. Ogle, David O. Upshaw, Birmingham, AL, for plaintiff-appellant.

Phillip J. Carroll, III, Birmingham, AL, for defendants-appellees.

Appeals from the United States District Court for the Northern District of Alabama.

Before FAY and HATCHETT, Circuit Judges, and JOHNSON, Senior Circuit Judge.

HATCHETT, Circuit Judge:

Pursuant to Alabama law, we affirm the district court's rulings: (1) that the conveyance of real property from its owner to a partnership in which the owner had an interest did not constitute a sale or exchange as contemplated in a real estate listing agreement; and (2) that a clause in the agreement constitutes a penalty under Alabama law.

I. FACTS

On January 24, 1990, Southpace, an Alabama corporation, and Acquisition Group (AG) entered into an "Exclusive Listing Agreement" involving thirty-one acres of a golf driving range, located in Shelby County, Alabama. The Listing Agreement provided:

(1) Exclusive right to sell or exchange.

In consideration of the promise of the Broker to list in its efforts to sell or exchange the Property of the Owner, the Owner hereby grants the Broker the sole and exclusive right to offer for sale or exchange and to sell or exchange such property through its efforts for a purchase price of not less than $1,600,000.

(2) Duration of the agreement.

(a) This agreement shall remain in force for a period of 180 days from the date specified above. In the event a portion of the Property is sold or exchanged, this Exclusive Listing Agreement shall remain in force with respect to the remaining Property for an additional period of one year following the date of each such sale or exchange.

(b) During the term specified above, this Agreement shall be irrevocable.

(c) During the term of this Agreement, the Owner shall have no right to withdraw the Property from sale or exchange or otherwise prevent the Broker from selling or exchanging the Property. In the event the Owner attempts to withdraw the Property from sale or exchange or otherwise prevents Broker from selling or exchanging the Property, the Broker shall be entitled to its commission in full.

....

(6) Commission.

If the Property is sold or exchanged through the efforts of the Broker or if the Broker locates a prospect ready, willing, and able to purchase or exchange for the Property, or in the event that the Property is sold or exchanged while this Agreement is in force, by the Owner or anyone else, the Broker will be entitled to a commission in the amount equal to the following: six percent (6%) of the gross sales price. In the event of any material breach of this Agreement by the Owner, Broker shall be entitled to recover its commission together with a reasonable attorneys fee and any other costs and expenses relating to or arising from such breach.

After the parties executed the Listing Agreement, James Jackson, a Southpace broker, attempted to sell the property and received offers of less than the listed price from the "Stephens Group." In February, 1990, the Stephens Group contacted AG regarding the sale of the property. Although the parties were unable to agree on an acceptable price, the Stephens Group made an offer to purchase of $1.1 million.

In May, 1990, the Stephens Group and AG formed a limited partnership under the laws of Arkansas for the purpose of operating the golfing facility. Under the limited partnership agreement, Family Golf and Recreation Management, Inc., a corporate entity of the Stephens Group, was designated the general partner, and Family Golf and Recreation Management of America, Inc., another corporate entity of the Stephens Group, and AG were named limited partners. The two corporate entities agreed to contribute the money to the partnership to operate the facility, and AG agreed to contribute the real property. Thus, in May, 1990, AG conveyed title to the property to the newly formed partnership with a warranty deed.

At the time of the conveyance, a first mortgage encumbered the property in the principal amount of $800,000. The conveyance of the property was subject to the existing mortgage. The partnership did not assume the mortgage. In exchange for the conveyance, the partnership agreed to issue to AG a promissory note in the amount of $128,571, which was subject to reduction through capital contributions made from the two corporate entities and amounts otherwise due the partnership under the promissory note. The partnership credited AG's capital account with $130,000, which the parties agreed was the value of the property transferred for the purpose of the partnership's books and records. As a limited partner, AG received a thirty percent share in the partnership and the right to thirty percent of any profits or losses it might generate.

Notwithstanding the above transfer, AG argued that it instructed Jackson to continue his efforts to market the property, claiming that the partnership would have been interested, at least through the end of June, 1990, in any offer to purchase the property for $1.6 million. Jackson, however, testified that after May 31, 1990, he stopped trying to sell the property because he felt that "the property had already been sold." No one offered to buy the property for the asking price of $1.6 million.

On March 5, 1990, Jackson sent a letter to Fletcher Steele of AG regarding the property stating:

In consideration of the set of unusual circumstances related to the interest of this prospect whom I introduced to you on February 25, 1990, Southpace Properties is agreeable to a flat fee of $50,000 should a contract be fully executed on or before March 15, 1990.

In subsequent letters from Jackson to Steele dated March 29, 1990, and April 24, 1990, Jackson indicated that Southpace would expect full payment of the six percent commission based on the sale to the Stephens Group. Thereafter, AG offered to pay Southpace a $15,000 fee. In a letter dated May 10, 1990, Jackson, on behalf of Southpace, rejected the offer based on the terms of the Listing Agreement and Southpace's belief that it had "delivered a ready, willing, and able buyer."

II. PROCEDURAL HISTORY

Southpace, appellant and cross-appellee, filed this lawsuit on July 11, 1990, in the Circuit Court of Jefferson County, Alabama. Originally, the complaint alleged a single count for breach of contract. On August 30, 1990, AG, appellee and cross-appellant, filed a notice of removal to federal court based on diversity jurisdiction. On September 13, 1990, Southpace filed a motion to remand the case to state court, which the district court denied.

On September 18, 1990, AG filed its original answer, followed by a January 11, 1991, amended answer, indicating that defendants Chris Turner and Robert Chambers were no longer partners in AG, and that AG had entered into a joint venture or partnership with respect to the property at issue. On October 2, 1991, AG filed a motion for summary judgment. On November 22, 1991, Southpace filed an amended complaint, alleging a claim based on quantum meruit. On December 31, 1991, AG answered the amended complaint.

The district court partially granted AG's motion for summary judgment, finding that AG's conveyance of the property to the partnership did not constitute a "sale or exchange" as contemplated under the Listing Agreement. The district court, however, found that in conveying the property to the partnership, AG withdrew the property from the market in breach of the Listing Agreement. The district court, however, denied recovery to Southpace of the $96,000 commission; instead, it informed Southpace that it may recover damages, excluding the $96,000 commission, based on theories of breach of contract or quantum meruit. In an order dated September 18, 1992, the district court awarded Southpace $35,400 based on Jackson's reasonable hourly rate of $100 times the 354 hours Jackson devoted to rendering services under the Listing Agreement. Southpace has brought this appeal, and AG has cross-appealed.

III. CONTENTIONS

Southpace contends that the district court properly found that AG breached the Listing Agreement, but erred in failing to award it a broker's commission and a reasonable attorney's fee. AG contends that the district court erroneously determined that it breached the Listing Agreement when it conveyed the property as part of a joint venture. AG, however, contends that the district court properly declined to award Southpace a broker's commission and an attorney's fee.

IV. ISSUES

We must determine whether the district court properly found that AG breached the Listing Agreement. If so, we must determine whether Southpace was entitled to a commission and a reasonable attorney's fee.

V. STANDARD OF REVIEW

On appeal, we review de novo a district court's grant of summary judgment, viewing the evidence in the light most favorable to the nonmoving party. Key West Harbour v. City of Key West, Florida, 987 F.2d 723, 726 (11th Cir.1993).

VI. DISCUSSION
A. Breach of Contract

Our first inquiry is whether AG breached the Listing Agreement. AG argues that the district court's...

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