Owen Wagener & Co. v. U. S. Bank

Fourth Division
June 30, 1998

No. 1-97-3988

OWEN WAGENER & CO., an Illinois ) APPEAL FROM THE
Corporation, ) CIRCUIT COURT OF
) COOK COUNTY.
Plaintiff-Appellant, )
)
v. )
)
U.S. BANK, a banking corporation, ) HONORABLE
) LEE PRESTON,
Defendant-Appellee. ) JUDGE PRESIDING.

JUSTICE WOLFSON delivered the opinion of the court:

Real estate brokers earn commissions by bringing together a
willing buyer and a willing seller. But there is more to it than
that, as this case demonstrates.
Owen Wagener & Co. (Wagener) appeals the trial court's
dismissal of its third amended complaint against U.S. Bank (the
Bank) with prejudice under section 2-615 of the Civil Practice
Law. Wagener contends it sufficiently pleaded claims for breach
of express contract, breach of implied contract, and quantum
meruit. We affirm the trial court.
FACTS
Lewis Kaplan (Kaplan) owned commercial property in the
Village of Crestwood. Kaplan fell behind on his mortgage with
U.S. Bank, and the Bank initiated foreclosure proceedings.
Kaplan decided to sell his property and signed a listing
agreement with Wagener, a brokerage firm, on June 29, 1994.
Under this listing agreement, Kaplan agreed to pay Wagener 6% of
the sales price if Wagener found a buyer for the property. (The
record does not contain a copy of the listing agreement.)
Wagener found Roderick and Judith Johnson (the Johnsons),
who expressed interest in buying the property. The Johnsons
began negotiations with Kaplan. On December 9, 1994, they
entered into a contract to buy Kaplan's property.
This contract provided: "Seller [Kaplan] agrees to pay a
broker's commission to [Wagener] in the amount set forth in the
broker's listing contract or as follows: per separate agreement."
The contract included a rider, which provided:
"Purchaser [the Johnsons] acknowledges that this
Agreement is expressly subject to the approval of U.S.
Bank. If U.S. Bank does not approve this transaction
on or before April 14, 1995, this Agreement shall
automatically become null and void and the Earnest
Money together with all interest thereon shall be
returned to Purchaser."
Kaplan signed this contract on March 28, 1995.
On March 17, 1995, Edward Freud, an attorney for U.S. Bank,
wrote a letter to Kaplan's attorney. After mentioning he
received a copy of the contract, Freud wrote:
"[A]ssuming the buyer and seller agree upon a sales
price, which they apparently have not yet done, U.S.
Bank will agree to allow the property to be sold and
its [mortgage] lien released only if Mr. Kaplan and his
partners have a cashiers check at the closing
sufficient to pay the remaining amounts due and owing
the Bank after application of the net proceeds of
sale."
Freud also expressed some concern over other lease
provisions and noted the Bank would "hold off on the foreclosure"
for only 45 days after execution of the contract.
Kaplan attempted to renegotiate Wagener's commission, hoping
to increase the sale proceeds, in that way decreasing the amount
he would owe after closing. These negotiations failed, and on
May 17, 1995, Freud wrote another letter to Kaplan's attorney:
"It *** is transparent [sic] to me at this juncture
that the funds required to satisfy the shortfall at
closing will not be available, and it has therefore
been determined to proceed with the foreclosure action.
***
You may also want to advise the buyer that the Bank
will shortly be the owner of the property, and in all
likelihood it can be purchased from the Bank."
In August 1995, U.S. Bank obtained title to the property.
On January 18, 1996, the Johnsons bought the property directly
from the Bank, depriving Wagener of its commission. Wagener
filed a complaint against the Bank.
After several initial pleading attempts, Wagener filed its
third amended complaint. This complaint included a prefatory
"STATEMENT OF FACTS," which summarized the parties' dispute.
Wagener alleged it had a commission agreement with Kaplan; this
agreement was incorporated into the December 9, 1994, contract
between Kaplan and the Johnsons. Wagener acknowledged the
contract between Kaplan and the Johnsons was specifically
contingent on U.S. Bank's approval, but alleged the Bank
"ratified and approved" the contract, including Wagener's
commission, in Freud's March 17, 1995, letter.
Wagener also alleged the Bank knew "Wagener procured the
Johnson's [sic] and expected to be paid a commission" because the
Bank had reviewed the December 9, 1994, contract. After stating
the Bank, "knowing that Wagener had a listing agreement with
Kaplan," had requested information about the Johnsons, Wagener
conceded, "At or about that same time the Johnson's [sic]
contacted [Wagener] and requested to be put in contact with U.S.
Bank."
Count I, entitled "BREACH OF CONTRACT," alleged in part:
"The actions of U.S. BANK in approving the
contract for sale of the Premises and approving
[Wagener's] commission constitute a ratification and
express contract agreeing to pay Wagener a commission
of 6% of the sales price.
***
U.S. BANK breached its agreement to pay [Wagener]
its commission when it sold the Premises to the
Johnson's [sic] on January 18, 1996, but failed to pay
[Wagener] its commission ***."
Count II, entitled "CONTRACT IMPLIED IN FACT," alleged in
part:
"[Wagener], through its professional efforts,
procured a ready, willing and able purchaser of the
premises in the form of the Johnson's [sic] and
participated in negotiations and performed services in
order to bring the sale to fruition.
*** By its conduct of contacting Wagener to locate
the Johnson's [sic] and selling the premises to the
Johnson's [sic], knowing that they were procured by
Wagener and that Wagener expected to be paid, the U.S.
Bank impliedly contracted to pay [Wagener] a commission
***.
*** U.S. BANK received the benefit of [Wagener's]
services with full knowledge of [Wagener's] involvement
in the transaction.
*** U.S. BANK breached its implied contract with
[Wagener] to pay a commission *** upon the closing of
the sale to the Johnson's [sic]."
Count III, entitled "QUANTUM MERUIT," alleged in part:
"*** U.S. Bank, by selling the premises to the
Johnson's [sic], received the benefits of Wagener's
efforts in procuring the Johnson's [sic].
*** U.S. Bank would be unjustly enriched by
receiving the benefits of Wagener's efforts without
paying a reasonable and customary commission ***."
On September 26, 1997, the trial court dismissed Wagener's
third amended complaint with prejudice for failure to state a
cause of action under section 2-615(a). See 735 ILCS 5/2-615(a)
(West 1992). This appeal followed.
DECISION
First, we address a procedural issue before proceeding to
the merits of Wagener's appeal.
U.S. Bank contends the appendix to Wagener's brief contains
three letters which were not exhibits to Wagener's third amended
complaint. More importantly, these letters (appendix exhibits A-
24, A-25, and A-26) do not appear in the trial court record
before this court. "*** [D]ocuments *** which are not a part of
the trial court record and were not considered by the trial
court, will not be considered on appeal." Meyerson v. Software
Club of America, Inc., 142 Ill. App. 3d 87, 91, 491 N.E.2d 150
(1986). This court will not consider these letters.
A motion to dismiss under section 2-615(a) of the Civil
Practice Law "*** tests the legal sufficiency of a pleading and a
court must accept all well-pleaded facts as true." Doe v.
Calumet City, 161 Ill. 2d 374, 381, 641 N.E.2d 498 (1994). On
appeal, the standard of review for a section 2-615 dismissal is
de novo. Hough v. Kalousek, 279 Ill. App. 3d 855, 665 N.E.2d 433
(1996).
A broker is an agent who agrees to act for a principal in a
transaction, and the employment contract between the broker and
the principal determines the broker's commission. Bennett &
Kahnweiler Associates v. Ratner, 133 Ill. App. 3d 316, 319, 478 N.E.2d 1138 (1985). "Generally, a broker is entitled to a
commission if he is the procuring cause of a consummated real
estate transaction which he was employed to negotiate."
(Emphasis added.) Stone v. Brown, 162 Ill. App. 3d 405, 409, 515 N.E.2d 384 (1987).
This employment contract does not have to be in writing. In
re Estate of Vallerius, 253 Ill. App. 3d 226, 230, 624 N.E.2d 459
(1993). The parties may create such an employment relationship
by written instrument, by oral agreement, or by implication from
their conduct. Arthur Rubloff & Co. v. Drovers National Bank, 80
Ill. App. 3d 867, 871, 400 N.E.2d 614 (1980); Dickerson Realtors,
Inc. v. Frewert, 16 Ill. App. 3d 1060, 1063, 307 N.E.2d 445
(1974). In short, a broker can recover on an express written
contract, an express oral contract, or an implied contract.
Additionally, a broker can recover on a quasi-contract under
the doctrine of quantum meruit "*** where he fails to establish
the express contract but does show that services were rendered."
Stephen L. Winternitz, Inc. v. National Bank of Monmouth, 289
Ill. App. 3d 753, 759, 683 N.E.2d 492 (1997); Nardi & Co. v.
Allabastro, 20 Ill. App. 3d 323, 327, 314 N.E.2d 367 (1974).
With this background, we examine each count of Wagener's
third amended complaint in turn.
1. "BREACH OF CONTRACT"
On its breach of express contract claim, Wagener was
required to allege: (1) the existence of a contract with U.S.
Bank; (2) U.S. Bank's breach of the contract; (3) Wagener's
performance under the contract; and (4) damages resulting from
the breach. Klem v. Mann, 279 Ill. App. 3d 735, 740-41, 665 N.E.2d 514 (1996).
Although Wagener alleges the existence of an express
brokerage contract with U.S. Bank, other contrary allegations
indicate "Wagener had a listing agreement with Kaplan ***." U.S.
Bank simply held the mortgage to Kaplan's property and had no
employment relationship with Wagener.
Wagener seeks to circumvent this problem by contending U.S.
Bank ratified the December 9, 1994 contract between Kaplan and
the Johnsons, including Wagener's commission.
"An alleged principal may become liable to
compensate the broker for his unauthorized acts by
subsequent ratification of the broker's acts.
[Citation.] However, it is axiomatic that ratification
does not result from the affirmance of a transaction
with a third person unless the one acting as agent
purported to be acting for the ratifier." Daley v.
G'Sell, 102 Ill. App. 3d 548, 552, 430 N.E.2d 556
(1981).
The party seeking ratification must allege the essential
elements of a ratification. Arthur Rubloff & Co. v. Drovers
National Bank, 80 Ill. App. 3d at 872. These elements include:
(1) timely knowledge on the part of the alleged principal (U.S.
Bank) that the broker (Wagener) was participating in the
transaction and assuming to act for the principal; and (2) some
act which indicates the principal's acceptance of the broker as
its agent. Arthur Rubloff & Co. v. Drovers National Bank, 80
Ill. App. 3d at 872.
Wagener did not allege U.S. Bank knew Wagener acted as the
Bank's broker when it found the Johnsons. Instead, Wagener
alleged it had a listing agreement only with Kaplan. Further,
Wagener did not allege the Bank accepted Wagener as its broker.
The supposed ratification by the Bank never occurred.
Wagener alleged Freud's March 17, 1995, letter "ratified and
approved" the December 9, 1994, contract, but the letter
indicates differently. Freud wrote:
"U.S. Bank will agree to allow the property to be sold
and its lien released only if Mr. Kaplan and his
partners have a cashiers check at the closing
sufficient to pay the remaining amounts due and owing
to the Bank after application of the net proceeds of
sale."
Freud also wrote:
"*** the Bank would hold off on its foreclosure if it
were provided with information demonstrating the
[Johnsons'] financial strength, and an otherwise firm
contract for the sale of the property subject only to
the usual commercial contingencies."
In this letter, U.S. Bank actually withheld its approval
pending receipt of money from Kaplan, financial documentation
from the Johnsons, and an executed contract. The record does not
indicate these events occurred. Wagener's allegations do not
accurately reflect Freud's letter. See Panorama of Homes, Inc.
v. Catholic Foreign Mission Society, Inc., 84 Ill. App. 3d 142,
145, 404 N.E.2d 1104 (1980)(allegations which conflict with
exhibits to a complaint are controlled by such exhibits).
Wagener did not have an express brokerage contract, and the
trial court correctly dismissed Count I.
2. "CONTRACT IMPLIED IN FACT"
On its breach of implied contract claim, Wagener was
required to allege the elements of an express contract and
conduct by U.S. Bank indicative of such an agreement.
"A contract implied in fact is an actual contract;
the only difference between an express contract
and a contract implied in fact is that in the former
the parties arrive at their agreement by words, either
written or oral, while in the latter their agreement is
arrived at by a consideration of their acts and conduct."
Barry Mogul & Associates, Inc. v. Terrestris Development
Co., 267 Ill. App. 3d 742, 750, 643 N.E.2d 245 (1994).
See also Century 21 Castles by King, Ltd. v. First National Bank
of Western Springs, 170 Ill. App. 3d 544, 548, 524 N.E.2d 1222
(1989); Heavey v. Ehret, 166 Ill. App. 3d 347, 354, 519 N.E.2d 996 (1988).
"Where a real estate broker shows that he has been
instrumental in bringing parties together and the
transaction is consummated, he is to be regarded as the
procuring cause of the sale and entitled to his
commission. [Citation.] It is sufficient if the sale
is effected through the efforts of the broker or
through information provided by him." Dross v. Kirk, 8
Ill. App. 2d 536, 540-41, 132 N.E.2d 49 (1956).
Illinois courts have relied on the procuring-cause approach
"*** to imply a contract between the broker and seller if the
broker found a purchaser who was ready, willing and able to
perform." (Emphasis in original.) Arthur Rubloff & Co. v. Comco
Corp., 63 Ill. App. 3d 362, 368, 380 N.E.2d 15 (1978). However,
in the context of implied brokerage contracts, the alleged
principal must say or do something which shows it accepted the
broker as its agent. Arthur Rubloff & Co. v. Drovers National
Bank, 80 Ill. App. 3d at 873.
Wagener made the bare allegation that U.S. Bank contacted
Wagener for information about the Johnsons, "knowing that they
were procured by Wagener and that Wagener expected to be paid,"
thus impliedly employing Wagener as a broker. Wagener may have
procured the Johnsons, but for Kaplan, not U.S. Bank.
Wagener and the Bank did not have an implied brokerage
contract. The trial court correctly dismissed count II.
3. "QUANTUM MERUIT"
Finally, on its quantum meruit claim, Wagener was required
to allege: (1) it performed a service to benefit U.S. Bank; (2)
it performed this service non-gratuitously; (3) U.S. Bank
accepted this service; and (4) no contract existed to prescribe
payment of this service. Rohter v. Passarella, 246 Ill. App. 3d
860, 617 N.E.2d 46 (1993); Village of Clarendon Hills v. Mulder,
278 Ill. App. 3d 727, 663 N.E.2d 435 (1996); see First National
Bank of Springfield v. Malpractice Research, Inc., 179 Ill. 2d 353, 365, 688 N.E.2d 1179 (1997).
The basis for quantum meruit recovery is equitable: "***
receipt by a defendant from a plaintiff of a benefit which is
unjust for him to retain without paying for it." Romanek-Golub
v. Anvan Hotel Corp., 168 Ill. App. 3d 1031, 1041, 522 N.E.2d 1341 (1988); Edens View Realty & Investment, Inc. v. Heritage
Enterprises, Inc., 87 Ill. App. 3d 480, 486, 408 N.E.2d 1069
(1980); Arthur Rubloff & Co. v. Drovers National Bank, 80 Ill.
App. 3d at 875; Bau v. Sobut, 50 Ill. App. 3d 732, 738, 365 N.E.2d 724 (1977).
In Panorama of Homes, Lewis University entered into a
written listing agreement with Sheridan, a real estate broker.
Under the agreement, Sheridan would receive a commission for
helping the University obtain a buyer for certain property. The
University owned part of this property and held a right of first
refusal over the remainder, which was owned by the Catholic
Foreign Mission Society (CFMS). Meanwhile, Sheridan entered into
an agreement with a cooperating broker, Panorama, to split any
commission if Panorama obtained a buyer for the property.
Panorama found potential buyers, but could not complete a sales
contract. CFMS then sold the property directly to the potential
buyers without paying Panorama's commission.
The court observed:
"[Panorama's] chief allegation appears to be that CFMS
knew [Panorama's] past services pursuant to the Lewis-
Sheridan listing agreement, and since this resulted in
a benefit to CFMS, it should compensate [Panorama]."
Panorama of Homes, 84 Ill. App. 3d at 149.
The court held Panorama's complaint failed to state a
quantum meruit claim against CFMS. Panorama of Homes, 84 Ill.
App. 3d at 148. The court reasoned Panorama had a brokerage
contract with Lewis University, not CFMS, and had no expectation
of receiving its commission from CFMS. Panorama of Homes, 84
Ill. App. 3d at 148. The court further reasoned CFMS had never
accepted Panorama as its broker. Panorama of Homes, 84 Ill. App.
3d at 148.
In Daley, G'Sell entered into an oral agreement with Daley,
a real estate broker. Under the agreement, Daley would receive a
commission for helping G'Sell obtain certain property. Daley
performed extensive services for G'Sell and negotiated a sales
contract for the property with its owner Weinstein. After a fire
damaged the property, Weinstein misrepresented to Daley the
property was no longer on the market. Several months later,
G'Sell and his business partners purchased the property directly
from Weinstein without paying Daley's commission.
After discussing quasi-contract law, the court held Daley
could not allege a quantum meruit claim against G'Sell's
partners. Daley, 102 Ill. App. 3d at 551. The court reasoned
the partners were not parties to the brokerage contract between
Daley and G'Sell, and thus Daley had no expectation of receiving
its commission from them. Daley, 102 Ill. App. 3d at 552.
The brokers in Panorama of Homes and Daley did not have
brokerage contracts with their alleged principals; these
principals were third-parties to the brokerage contracts.
Similarly, Wagener did not have a brokerage contract with its
alleged principal, U.S. Bank. Wagener had a listing agreement
only with Kaplan. Wagener had no expectation of receiving its
commission on the December 9, 1994 contract from the Bank.
Although Wagener alleged it expected to receive a commission
from the December 9, 1994, contract, Wagener does not allege in
count III it gave information about the Johnsons to U.S. Bank
non-gratuitously, expecting a commission for giving the Bank an
address and a phone number. Wagener merely alleged it "was
instrumental in bringing the parties together ***." Wagener did
not allege it expected the Bank to pay for the information about
the Johnsons. Wagener did not allege this expectation arose from
the Bank's request for information, rather than the December 9,
1994, contract.
There is surface attraction to Wagener's unjust enrichment
contention. He did find the buyers. The Bank sold the property
to the Johnsons without having to pay a commission. But the
decisions compel us to hold that Wagener did not plead a quantum
meruit claim against the Bank. The trial court correctly
dismissed count III.
CONCLUSION
We agree with the trial court's conclusion that Wagener
failed to allege a cause of action in any of its three counts,
dismissing the case with prejudice after the plaintiff made four
attempts at filing a viable action. The ruling granting the
defendant's motion to dismiss with prejudice is affirmed.
AFFIRMED.
CERDA, P.J. and SOUTH, J., concur.