Stewart v. Sisson, 04-1323.

• Decision Date: 24 March 2006
• Docket Number: No. 04-1323.,04-1323.
• Citation: 711 N.W.2d 713
• Parties: Larry STEWART d/b/a Larry Stewart Realty, Appellant, v. Jeffrey P. SISSON, Appellee.
• Court: Iowa Supreme Court

Page 713

711 N.W.2d 713

Larry STEWART d/b/a Larry Stewart Realty, Appellant, v. Jeffrey P. SISSON, Appellee.

No. 04-1323.

Supreme Court of Iowa.

March 24, 2006.

Judith M. O'Donohoe of Elwood, O'Donohoe, Stochl, Braun & Churbuck, Charles City, attorney for appellant.

Joel J. Yunek of Yunek Isaacson, P.L.C., Mason City, attorney for appellee.

CADY, Justice.

In this appeal, we must decide whether an oral agreement between a property owner and a real estate broker for the broker to procure a buyer for the property without listing it constitutes a "listing agreement" within the meaning of a real estate commission rule requiring such agreements to be in writing. We conclude such an agreement is not a "listing agreement" and, therefore, reverse the judgment of the district court and remand for further proceedings.

I. Background Facts and Proceedings

Jeffrey Sisson owned a sports bar and restaurant in Charles City. In early 1999, he contacted Larry Stewart about selling the restaurant. Stewart is a licensed real estate broker in Charles City. According to the facts accepted for the purpose of summary adjudication, Sisson told Stewart he wanted a sales price around $615,000, and he would pay him ten percent of the sales price if he found a buyer. However, Sisson did not want Stewart to list the property because he thought he would lose sales and value from the business if the public were aware it was for sale. Stewart agreed to find a buyer, but the parties never reduced the agreement to writing.

Stewart began looking for a buyer for the property. One person he contacted was Michael Walter, who Stewart thought would be interested in the business. Stewart obtained financial information about the business from Sisson and told Sisson he intended to disclose it to Walter. Stewart required Walter to sign an agreement to keep the information confidential and to prevent him from negotiating directly with Sisson.

On November 13, 2001, Sisson sold the business to Walter without notifying or involving Stewart. Stewart subsequently learned about the sale and wrote Sisson to inquire about his commission. Sisson replied and asked Stewart for written documentation to verify the agreement. Stewart could not provide a writing, and further efforts to resolve the dispute failed.

Stewart filed an action against Sisson for breach of contract in March 2002. Sisson responded by filing a motion to dismiss. He claimed Iowa Administrative Code rule 193E-1.23 [now rule 193E-11.1] barred Stewart's claim. See Iowa Admin. Code r. 193E-1.23 (1997) ("All listing agreements shall be in writing, properly identifying the property and containing all of the terms and conditions under which the property is to be sold, including the price, the commission to be paid, the signatures of all parties concerned and a definite expiration date."). Stewart resisted the motion and filed an amended petition, adding claims of fraudulent misrepresentation, reckless misrepresentation, breach of implied contract, and unjust enrichment. The district court dismissed the breach-of-contract claim in the original petition, as well as the additional claims in the amended petition.

Stewart appealed. We transferred the case to the court of appeals. The court of appeals reversed the district court and remanded the case for further proceedings. Without explanation, the court of appeals concluded "the district court was in error to grant defendant's motion to dismiss plaintiff's claims."

After remand, Sisson filed an answer to Stewart's amended petition and denied most of the allegations. Sisson then filed a motion for summary judgment. He again claimed rule 193E-1.23 barred Stewart's claims.¹ Stewart resisted the motion. He claimed his agreement with Sisson was not subject to the writing requirement of the rule because it was not a "listing agreement," and in any event, the rule was invalid and unconstitutional.

The district court granted summary judgment in favor of Sisson. It held that the oral agreement between Stewart and Sisson was subject to the writing requirement of the rule. In addition, the court held the rule was not unconstitutional. Finally, the court concluded Stewart was not permitted to recover under any theory because the purpose of the rule would be defeated. Stewart appealed.

II. Standard of Review

We review rulings granting summary judgment for correction of errors at law. Otterberg v. Farm Bureau Mut. Ins. Co., 696 N.W.2d 24, 27 (Iowa 2005) (citing In re Estate of Graham, 690 N.W.2d 66, 69-70 (Iowa 2004)).

A motion for summary judgment should only be granted if, viewing the evidence in the light most favorable to the nonmoving party, "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

Id. (quoting Iowa R. Civ. P. 1.981(3); citing Wernimont v. Wernimont, 686 N.W.2d 186, 189 (Iowa 2004)).

III. Discussion

The premise for the district court's decision was that the agreement between Stewart and Sisson was a "listing agreement" under rule 193E-1.23. We have previously held that this administrative rule makes oral listing agreements unenforceable upon proper objection. Hubbell Commercial Brokers, L.C. v. Fountain Three, 652 N.W.2d 151, 156 (Iowa 2002) (citing Milholin v. Vorhies, 320 N.W.2d 552, 554 (Iowa 1982)). The district court considered the motion for summary judgment as an objection and relied upon this authority to dismiss the contract claim, as well as all other companion claims. See Maynes Real Estate v. McPherron, 353 N.W.2d 425, 426-27 (Iowa 1984) (holding brokers cannot recover for quantum meruit under properly-objected-to oral listing agreement; reasoning "the legislative intent underlying section 1.23 was to forbid any recovery by a broker or sales agent under an oral agreement" (emphasis added)). But see Restatement (Second) of Torts § 530 cmt. c, at 64-65 (1977) (stating misrepresentation claims are still viable when contract and quasi-contract claims fail due to the lack of a writing); W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 109, 764 & n. 7 (5th ed.1984) (opining that rules barring recovery on oral contracts should not also bar tort claim of misrepresentation because "the policy which invalidates the promise is not directed at cases of dishonesty in making it"). Thus, we must decide if the district court properly applied the law. See Westfield Ins. Cos. v. Econ. Fire & Cas. Co., 623 N.W.2d 871, 876 (Iowa 2001) (stating when we review for correction of errors at law, "we determine whether the district court correctly applied the law" to the undisputed facts).

Rule 193E-1.23, entitled "Listings," is an administrative rule promulgated by the Iowa Real Estate Commission pursuant to its rulemaking authority under Iowa Code section 543B.9 (1999). "[R]ules properly adopted by the commission have the force of a statute." Hubbell Commercial Brokers, L.C., 652 N.W.2d at 155 (citing Milholin, 320 N.W.2d at 553). In construing an administrative rule, "[a]s with a statute, we seek to ascertain and give effect to the intent of the drafters" and "construe it liberally `to promote its objects and assist the parties in obtaining justice.'" Rodgers v. Baughman, 342 N.W.2d 801, 805 (Iowa 1983) (quoting Iowa Code § 4.2 (1983)).

Rule 193E-1.23 provides:

All listing agreements shall be in writing, properly identifying the property and containing all of the terms and conditions under which the property is to be sold, including the price, the commission to be paid, the signatures of all parties concerned and a definite expiration date. It shall contain no provision requiring a party signing the listing to notify the broker of the listing party's intention to cancel the listing after such definite expiration date. An exclusive agency or exclusive right to sell listing shall clearly indicate that it is such an agreement. A legible copy of every written listing agreement or other written authorization shall be given to the owner of the property by a licensee as soon as reasonably practical after the signature of the owner is obtained.

Iowa Admin. Code r. 193E-1.23. Thus, at least with respect to "listing agreements," the rule changes the common law, which recognized the enforceability of oral brokerage agreements. Maynes Real Estate, Inc., 353 N.W.2d at 426 (citing McHugh v. Johnson, 268 N.W.2d 225, 227 (Iowa 1978)). We have said that rule 193E-1.23 "is analogous to the statute of frauds applicable to contracts." Hubbell Commercial Brokers, L.C., 652 N.W.2d at 156 (citing Milholin, 320 N.W.2d at 554); see also Rodgers, 342 N.W.2d at 805 ("[L]ike a statute of frauds the rule is intended to be available as a shield and not a sword." (citing Warder & Lee Elevator, Inc. v. Britten, 274 N.W.2d 339, 342 (Iowa 1979))). "The rule essentially means that a broker must normally comply with the requirements of the rule to recover a commission. The rule both protects the public and provides guidance for brokers in their business dealings with the public." Hubbell Commercial Brokers, L.C., 652 N.W.2d at 156 (citing Milholin, 320 N.W.2d at 554).

In Hubbell, we observed that "[t]he term `listing agreement' is not a defined phrase under chapter 543B or the commission rules." Id. We did not define the term, but concluded that it did not encompass agreements between brokers. Id. at 157. We also noted:

The language of the rule as a whole is consistent with the common definition of a listing agreement as "[a]n agreement between a property owner and an agent, whereby the agent agrees to try to secure a buyer or tenant for a specific property at a certain price and terms in return for a fee or commission."

Id. (quoting Black's Law Dictionary 943 (7th ed.1999)).

The primary, and dispositive, issue presented on appeal is whether an agreement to...