Scott v. Five Star

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE R. DALE SCOTT, an individual, ) ) Plaintiff/Appellant, ) ) v. ) ) FIVE STAR DEVELOPMENT, INC., an ) entity of unknown origin; FIVE ) STAR DEVELOPMENT RESORT COM) MUNITIES, LLC, an Arizona limited ) Liability company; JERRY C. AYOUB,) and CLAUDIA AYOUB, husband and ) wife, and DAVID SCHMID and ) PATRICIA SCHMID, husband and wife,) ) Defendants/Appellees.) __________________________________) 1 CA-CV 10-0139 DIVISION ONE FILED: 02/15/11 RUTH WILLINGHAM, ACTING CLERK BY: DLL DEPARTMENT A MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2007-052288 The Honorable Eddward P. Ballinger, Judge AFFIRMED Treon, Aguirre, Newman & Norris, P.A. by Richard T. Treon Meghann L. St. Thomas Attorneys for Plaintiff/Appellant Phoenix Mariscal, Weeks, McIntyre & Friedlander, P.C. by Scott A. Holcomb Stephen E. Richman Attorneys for Defendant/Appellee Phoenix H A L L, Judge ¶1 This is a real estate commission case. R. Dale Scott (Scott) appeals from a grant of summary judgment in favor of Five Star Development, Inc. and Five Star Development Resort Communities, L.L.C. (collectively individual defendants. Five Star), and certain Finding no genuine issue of fact or legal error, we affirm the judgment. FACTS AND PROCEDURAL BACKGROUND I. Scott s Background ¶2 Scott is a real estate salesperson. He held a license to sell real estate at all relevant times except for the period from July 31, 2006 to February 15, 2007. estate broker is Loma Realty, Inc. Scott s employing real (Loma Realty), and Jim Sparling (Sparling) is Loma Realty s designated broker. ¶3 Scott also operates Scott Hospitality, L.L.C. (Scott Hospitality), an Arizona limited liability company unrelated to Loma Realty, which is involved in hotel management and what Scott classifies as non-real estate deals. Sparling has no involvement with Scott Hospitality. ¶4 This lawsuit arises out of Scott s efforts to collect, in his own name, a $2,685,000 commission from Five Star based upon Scott s assistance with its purchase and development of Maricopa County real property 2 on the northeast corner of Mockingbird Lane and Lincoln Drive in Scottsdale and Paradise Valley (the Property). II. Scott s Communications With Five Star ¶5 Marriott International, Inc. (Marriott) solicited a request for proposal from several developers concerning a Ritz Carlton Hotel and residential project for the Property.1 Scott alerted Five Star about the opportunity, and encouraged David Schmid (Schmid), Five Star Development s vice president of development, to pursue the acquisition and development of the Property. Between September 2005 and March 2006, Scott kept Schmid abreast of developments via phone and e-mail. Marriott and Five Star engaged in negotiations concerning the Property between March 12 and May 8, 2006. ¶6 On May 6, 2006, Scott sent an e-mail to Schmid with an electronic Scott Hospitality card attached. The message appended an agreement confirming an agency relationship and a fee proposal for a three percent commission for Five Star s approval and execution. paper required. Schmid answered: Fee is fine. No Scott concedes that none of the e-mails he exchanged with Schmid referenced Loma Realty. 1 Five Star had made an offer to buy the Property from its previous owner, Sinclair Oil Co. (Sinclair), in 2004, but then rejected Sinclair s counter offer. RC Paradise Valley, a subsidiary of Marriott International, Inc., ultimately obtained the Property from Sinclair by special warranty deed dated June 27, 2005. 3 ¶7 On May 9, 2006, Schmid wrote to Marriott s broker, Arthur Petersen, concerning Five Star s interest in purchasing the Property and assuming the development project. ensued between that date and September Negotiations 2006, participating or receiving copies of e-mails. with Scott Five Star also transmitted a letter of interest dated August 22, 2006, to Joy Berry (Berry), Marriot s senior vice president of real estate development, requesting a ninety-day due diligence period and a closing in December 2006. ¶8 Meanwhile, Loma Realty s broker s license expired on July 31, 2006. As a result, Scott s became severed on that date as well. salesperson s license Scott did not reattach his license to a licensed broker until February 15, 2007. ¶9 On September 5, 2006, Schmid sent Scott a newspaper article quoting Berry as stating that Marriott was shopping for a master developer for its Ritz Carlton project. Scott responded with an e-mail encouraging Schmid to keep the faith and stating: I would really like to have a a form of fee agreement executed. ¶10 Five Star then provided the Agency Agreement between Scott Hospitality and Five Star and signed by Five Star Development President Jerry Ayoub (Ayoub). Scott testified that he rejected the Agency Agreement because it 4 contained no definite termination date and at that point [t]here was no agreement. ¶11 Scott returned the Agency Agreement to Schmid in a revised form, including handwritten edits deleting the reference to Scott Hospitality, deleting the termination clause, and inserting Loma Realty LLC Jim Sparling, Designated Broker as the contracting party and Scott as the Five Star Development s exclusive agent. This document, attached to Scott s e-mail, was the first communication in which any reference to Loma Realty appeared.2 Ultimately, Scott agreed with Five Star s statement that [t]here is no written agreement between Loma Realty and any of the Defendants. ¶12 Scott s employment agreement with Loma Realty required him to present all agreements to Loma Realty for review before they are consummated initials. and to obtain Sparling s approval and Sparling testified that Scott never presented any documents concerning Five Star to him at any time. III. Five Star Purchases The Property ¶13 On September 8, 2006, the parties learned that Duke Development Property. had been Immediately awarded the thereafter, project however, contract another for the entity acquired Duke and canceled the contract. 2 At about this time, Schmid learned that Scott s license had been severed from Loma Realty. Schmid did not recall discussing the issue with Scott between that time and January 2007. 5 ¶14 Five Star Development Resort Communities, L.L.C. and RC Paradise renewed negotiations for the sale of the Property between September 2006 and February 2007. contract between February 12 and 14, They executed a sale 2007, and RC Paradise conveyed the Property to Five Star by special warranty deed dated May 18, 2007. Paragraph 14.1 of the Purchase and Sale Agreement provides: The fees of any procuring broker engaged by Purchaser will be paid by Purchaser under a separate agreement. Except for such procuring broker (and Art Petersen and Joseph Pellillo, whose fees, if any, will be paid by the procuring broker); each of the Parties represents to the other Parties that it has dealt with no broker . . . . IV. This Litigation ¶15 During a February 14, Scott a $1 million commission. 2007 meeting, Ayoub offered Scott refused the offer and insisted on a 3 percent commission. Ayoub then asked Scott if he was aware of a problem with his license. ¶16 Court Scott filed a complaint in Maricopa County Superior alleging covenant of breach good of faith contract, and fair breach dealing, of the and implied promissory estoppel, and naming the following defendants in addition to Five Star: Ayoub, Claudia Ayoub, Schmid, and Patricia Schmid (collectively the unsuccessful motion Individual to Defendants). dismiss, 6 Five Star Following deposed Scott an and Sparling and filed two motions for summary judgment based upon: (1) the lack of a signed commission agreement between Five Star and a licensed real estate broker, and (2) the severance of Scott s real estate license for more than six months when he purportedly was earning a commission from Five Star. In response, Scott argued that (1) Schmid s printed name on the May 6, 2006 e-mail satisfied the statute of frauds, (2) the defendants had prevented him from complying with the statute of frauds in the traditional way, (3) an assignment by Sparling of a commission to Scott satisfied the statutes on brokerage commissions, and (4) Scott s license was active at all relevant times. ¶17 After complete briefing and oral argument, the superior court granted summary judgment to Five Star because it found there was no written document signed on behalf of Defendant Five Star Development, Inc. that evidenced entitlement to the real estate commission Plaintiff claims he is due. court then concluded that the alternative summary The judgment motion based upon license severance was moot. ¶18 On December 10, 2009, the superior court entered final judgment in favor of Five Star and the Individual Defendants, which included an $2811.55 in costs. award of $50,000 in This appeal followed. 7 attorneys fees and DISCUSSION I. As A Matter Of Law, There Is No Enforceable Real Estate Commission Agreement. ¶19 A superior court may grant summary judgment if there is no genuine issue as to any material fact and [] the moving party is entitled to a judgment as a matter of law. Civ. P. 56(c)(1). Ariz. R. In reviewing a grant of summary judgment, this court determines de novo whether any genuine issues of fact exist and whether the superior court properly applied the law. Tierra Ranchos Homeowners Ass n v. Kitchukov, 216 Ariz. 195, 199, ¶ 15, 165 P.3d 173, 177 (App. 2007). reasonable favorable entered. inferences to the from party those against facts whom We view the facts and in the summary light most judgment was Ruelas v. Staff Builders Pers. Servs., Inc., 199 Ariz. 344, 345, ¶ 2, 18 P.3d 138, 139 (App. 2001). We will uphold the superior court s decision if it is correct for any reason. Am. Family Mut. Ins. Co. v. Cont l Cas. Co., 200 Ariz. 119, 121, ¶ 9, 23 P.3d 664, 666 (App. 2001). ¶20 Arizona s Scott argues statute of that frauds, the superior A.R.S. § court 44-101 (2003), provides in relevant part: No action shall be brought in any court in the following cases unless the promise or agreement upon which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged, or by 8 misapplied which some person authorized: by him thereunto lawfully * * * * 7. Upon an agreement authorizing or employing an agent or broker to purchase or sell real property, or mines, for compensation or a commission. In Arizona, this statute of frauds requirement for brokerage contracts has been strictly enforced. Butterfield v. MacKenzie, 37 Ariz. 227, 229, 292 P. 1097, 1097-98 (1930) (holding that neither part performance nor complete performance will remove an oral contract for brokerage commissions from the statute of fraud s requirements); Olson v. Neale, 116 Ariz. 522, 524, 570 P.2d 209, 211 (App. 1977) (stating that Arizona law does not recognize the applicability of the estoppel doctrine to a real estate listing agreement). ¶21 Scott focuses his attack on the court s finding that, notwithstanding the evidence, there signed on behalf of Five Star. was no written document The key evidence is the May 6, 2006 e-mail between Scott and Schmid concerning a three percent commission for Scott s role in positioning Five Star to buy and develop the Property. fine. Schmid s e-mail response states: No paper required. authorities have recognized Scott that binding. 9 an points out electronic that Fee is diverse signature is ¶22 the A document is signed when a person employs any of known modes of impressing a name on paper including writing, printing, lithographing, or other such mode, provided that same is done with the intention of signing. Bishop v. Norell, 88 Ariz. 148, 151, 353 P.2d 1022, 1025 (1960) (holding that party s typed name on a listing agreement qualified as a sufficient signature and the party to be bound so conceded); see generally Restatement (Second) of Contracts § 134 (1981) (defining a signature as any symbol made or adopted with an intention . . . to authenticate the writing as that of the signer. ); cf. Haywood Sec., Inc. v. Ehrlich, 214 Ariz. 114, 116-17, ¶¶ 11-15, 149 P.3d 738, 740-41 (2007) (holding that a judgment is appealable when the superior court judge signs it with an electronic signature). ¶23 Scott argues that recognizing Schmid s e-mail to be a signature under the statute of frauds is consistent with the Uniform Electronic Transactions Act, codified at A.R.S. §§ 447001 to -7051 (2003 & Supp. 2010). In the context of e-mail, a header displaying the sender s name may be authenticated and adopted as the sender s own writing when the author hits the send button. Int l Casings Group, Inc. v. Premium Standard Farms, Inc., 358 F.Supp.2d 863, 872-73 (W.D. Mo. 2005) (finding the Uniform Commercial Code definition of signed satisfied by this means). 10 ¶24 Treating Schmid s e-mail as a signed memorandum presupposes that the parties agreed to conduct the transaction by electronic means, an issue to be determined from the context and surrounding circumstances, including the parties conduct. A.R.S. § 44-7005(B) (2003). A person may be deemed to have consented to electronic communications via ongoing participation in such communications, Int l Casings, 358 F.Supp.2d at 875, or by primary use of that medium. Crestwood Shops, L.L.C. v. Hilkene, 197 S.W.3d 641, 653 (Mo. Ct. App. 2006).3 ¶25 In this case, the parties initially corresponded by e- mail, but then began to exchange draft written agreements for traditional signature after Scott told Schmid in September 2006, I would really like to have a fee agreement executed. 3 We are not persuaded by Five Star and the Individual Defendants belated and conclusory argument that Schmid s signature did not meet the secure electronic signature requirements of A.R.S. § 44-7031 (2003). The statute requires evidence that the electronic signature was: 1. [u]nique to the person using it[;] 2. [c]apable of verification[;] 3. [u]nder the sole control of the person using it[; and] 4. [l]inked to the electronic record to which it relates in such a manner that if the record were changed the electronic signature would be invalidated. Id. Substantially similar language appears in the Arizona Department of Real Estate s Substantive Policy Statement on Electronic Signatures. As Scott points out, the foundational integrity of the emails is established by the fact that they speak to the same subject and are responsive to each other. At no time have the defendants attempted to argue that Schmid was not using a unique signature under his sole control, or that he was unauthorized to sign on behalf of Five Star Development. Viewing the facts and reasonable inferences in the light most favorable to Scott, we reject the argument. 11 Assuming, without deciding, that the parties consented to treat the May 8, 2006 e-mail as containing a signature by Schmid complying with the statute of frauds, Scott s claim still fails as a matter of law. The undisputed facts establish that: (1) there was no commission agreement satisfying the requirements of A.R.S. § 32-2151.02 (2008); and (2) the purported commission agreement is not enforceable. A. ¶26 The Purported Agreement Fails To Comply With A.R.S. § 32-2151.02(A). The May 8, 2006 e-mail must satisfy not only the statute of frauds requirements, but also the following elements of an enforceable brokerage commission agreement: All real estate employment agreements shall: 1. Be written language. in 2. Fully set forth including the compensation. 3. Have a definite duration or expiration date, showing dates of inception and expiration. 4. Be signed agreement. by A.R.S. § 32-2151.02(A)(1-4). clear and unambiguous all material terms of all parties terms, broker to the Such an agreement is not required for a licensee to represent a party in a transaction. 32-2151.02(D). A.R.S. § Nevertheless, it is the required means by which a real estate broker is entitled to compensation for services 12 rendered pursuant 2151.02(E). to § 44-101, paragraph 7. A.R.S. § 32- Scott implicitly acknowledged that the May 6, 2006 e-mail was not a commission agreement by later stating that he would really like to have a fee agreement executed. ¶27 On September 6, 2008, Scott and Schmid exchanged a draft agreement via e-mail, which Ayoub signed with a handwritten signature in his capacity as president of Five Star Development. Scott rejected the agreement and sent it back with proposed modifications deleting the termination date paragraph and identifying the broker as Loma Realty and himself as Five Star s exclusive negotiate a agent. termination Scott date testified and, that ultimately, they there did was not no agreement.4 ¶28 not Five Star, the Individual Defendants, and Scott did sign any contract proposals produced thereafter. Accordingly, the facts establish that the documents exchanged by the parties did not contain an agreed upon termination date nor was the document executed by all parties to the agreement. The documents therefore A.R.S. § 32-2151.02(A). fail to satisfy the requirements Id. of Scott s testimony and e-mail confirm that the parties had not reached an agreement. Scott s recovery is barred as a matter of law. 4 Accordingly, See id. Because Scott has abandoned the assignment argument on appeal, we do not address Five Star and the Individual Defendants arguments pertaining to that issue. 13 ¶29 Scott agreement from attempts the to cobble exchange of together e-mails an and enforceable edited contract drafts, and on appeal contends that they create an implied-infact contract. Assuming that Scott has not already waived this argument, he fails satisfies the clear A.R.S. 32-2151.02(A)(1), § termination date. to explain and how this unambiguous especially alleged terms with contract requirement respect to of the Scott posits a factually wistful but legally unsupportable scenario in which the prior terms that were agreed upon or were part of their negotiations rematerialized and carried forward once the Duke Development deal fell through and Five Star again began to pursue the Property. ¶30 own More importantly, Scott s theory is at odds with his deposition admissions that, as recently as September 6, 2006, there was no agreement between the parties and there never was an agreement between the parties and Loma Realty. We therefore reject the argument.5 B. ¶31 The Purported Agreement Is Not Enforceable Even if Scott s e-mails constituted a written agreement, his claims would still fail as a matter of law. Both Ninth Circuit and Arizona cases hold that the alleged contract is unenforceable. 5 Nor does Scott explain how he can enforce the agreement against the Individual Defendants. 14 ¶32 In In re Kun, James Hodge, a real estate salesperson, arranged the sale of three apartments and one hotel to Paul Kun. 868 F.2d 1069, 1069 (9th Cir. 1989). Like Scott, Hodge was not a real estate broker, and had transferred his sales license to AAA at the time he assisted Kun with the last two sales. 1069-70. Id. at A written agreement between Hodge and Kun provided for a three percent commission to the Broker on any sale. Id. at 1070. ¶33 After Kun filed a bankruptcy petition, Hodge submitted an amended proof of claim in an effort to recover the three percent commission. Id. Applying Arizona law, both the Bankruptcy Appeals Panel and the Ninth Circuit Court of Appeals held that the commission agreement Arizona s real estate statutes. ¶34 was unenforceable under Id. at 1070-71, 1073. The Ninth Circuit relied on A.R.S. § 32-2155 (1989), which then provided: A broker shall employ and pay only legally licensed salesmen and a salesman shall accept employment and compensation as such only from legally licensed brokers. at 1070-71. Id. Based on that statute, the court concluded that a real estate salesman may receive commissions only from brokers, id. at 1070, and consequently the contract was unenforceable. Id. at 1073. ¶35 Similarly, we held that a real estate salesperson could not look to the title company for commissions allegedly 15 due to her in Sherman v. First American Title Insurance Co., 201 Ariz. 564, 38 P.3d 1229 (App. 2002). The court explained that Arizona law permits only a real estate broker to directly earn a commission from a real estate transaction. 38 P.3d at 1233. Id. at 568, ¶ 8, In addition to In re Kun and A.R.S. § 32- 2155(A), the court relied upon the definition of a real estate broker in former A.R.S. § 32-2101(46) [now A.R.S. § 32-2101(48) (Supp. 2010)] as a person, other than a salesperson, who, for another and for compensation, transactions. Id. suspension revocation or Moreover, of engages Arizona a in law real estate authorizes salesperson s license the for accepting compensation from any person other than the licensed broker to whom the licensee is licensed. Id. (quoting A.R.S. § 32-2153(A)(7) (2002)). ¶36 It makes no difference whether or not the party promising to pay the commission is a sophisticated investor. The Arizona statutes are intended to furnish protection to the public by strict . . . requirements. In re Kun, 868 F.2d at 1071 (quoting Schlicht v. Curtin, 117 Ariz. 30, 32, 570 P.2d 801, 803 (App. 1977)).6 6 Scott already conceded in the superior court: Scott does not dispute that the legal right to collect the commission belongs to the broker under A.R.S. § 32[-]2101 and that he can only accept commission only from the licensed broker under A.R.S. § 32-2155. Scott takes no issue with the law that provides that Scott could not sue Five Star as a real estate salesperson 16 ¶37 Accordingly, enforcing his these alleged authorities contract against Individual Defendants as a matter of law. preclude Five Scott Star See id. and from the This holding obviates the need to consider whether A.R.S. § 32-2130(G) (Supp. 2010) precludes Scott s recovery because Scott s license was severed during part of the relevant time frame. II. Attorneys Fees ¶38 Scott requests that we vacate the superior court s attorneys fee award to Five Star and the Individual Defendants pursuant to A.R.S. § 12-341.01(A) (2003). The statute grants courts the discretion to award reasonable attorneys fees to the successful party in any contested contract, express or implied. Id. action arising out of We review the application of the attorneys fee statute to this case de novo. Ariz. Tile, L.L.C. v. Berger, 223 Ariz. 491, 498-99, ¶ 35, 224 P.3d 988, 995-96 (App. 2010). If fees are available under the statute, we review the award for an abuse of discretion. Id. at 498, ¶ 35, 224 P.3d at 995. ¶39 Star Scott contends that, in the event of reversal, Five and prevailing the Individual party. Defendants Because we would affirm no the longer be the judgment, the . . . . Clearly . . . if the commission was paid, it would be paid to Loma. 17 defendants remain the successful parties for purposes of the statute. CONCLUSION ¶40 We affirm the grant of summary judgment. In addition, we award reasonable attorneys fees on appeal to Five Star and the Individual Defendants pursuant to A.R.S. § 12-341.01(A). This award is conditioned upon the parties compliance with Rule 21(c) of the Arizona Rules of Civil Appellate Procedure. Finally, we award the defendants their costs pursuant to A.R.S. § 12-341 (2003). _/s/______________________________ PHILIP HALL, Presiding Judge CONCURRING: _/s/_______________________________ JON W. THOMPSON, Judge _/s/_______________________________ LAWRENCE F. WINTHROP, Judge 18

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