Bensen v. Gall

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 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
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                                 No. 90-466

 Hal Bensen                                   Supreme Court

                                              On Appeal from
      v.                                      Chittenden Superior Court

 John D. Gall and the Estate of               December Term, 1991
 Arthur W. Mason

 John P. Meaker, J.

 Christopher D. Ekman of Heilmann, Ekman & Associates, Inc., Burlington,
   for plaintiff-appellant

 John J. Boylan, Burlington, for defendant-appellee Gall

 Keith J. Kasper of McNamara, Fitzpatrick, McCormick & Mertz, Burlington,
   for defendant-appellee Estate of Mason

 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.

      DOOLEY, J.   This is the second time that the events giving rise to
 this controversy have been before the Court.  In Colony Park Assoc. v. Gall,
 154 Vt. 1, 572 A.2d 891 (1990), we affirmed an award of specific performance
 of a contract for the sale of land by defendants to Colony Park Associates
 (Colony Park).  Plaintiff, a real estate broker, brought this action seeking
 a commission for the sale.  The trial court granted summary judgment to
 defendants because plaintiff did not have a written listing agreement as
 required by Rule 2.11 of the Vermont Real Estate Commission.  On appeal,
 plaintiff argues that language in the contract of sale met the requirement
 of the rule, that events in the specific performance trial collaterally
 estopped defendants from denying their obligation to pay the commission, and
 that denial of a commission will unjustly enrich defendants.  We affirm.
      By letter dated December 7, 1984, defendant Gall authorized plaintiff
 to sell the property  There was no written listing agreement.  Colony Park
 became interested in the property and, on May 31, 1985, submitted to
 defendants a letter of intent detailing the terms on which they would
 purchase.  This led to an August 20, 1985 contract of sale prepared on
 plaintiff's standard form.  The following words were above defendants'
         percent (10%) of Selling price (excluding the $18,000.
         payable to Arthur W. Mason for foundation, etc.)

 Defendants refused to pay the commission and refused to close.  Plaintiff
 sued for the commission.
      The superior court dismissed the action because plaintiff failed to
 obtain a written listing agreement as required by Rule 2.11(2) of the
 Vermont Real Estate Commission. (FN1) In relevant part, the rule provides:
 (2)  Before showing real estate for sale, lease or rent,
 you must have executed a written contract with the
 seller listing said real estate for sale, lease or rent,
 or the express permission of the broker who has such a
 listing agreement.  A listing agreement shall contain:
                (a) Identification of the type of listing agreement
              in bold face type stating either:  NONEXCLUSIVE
              LEASE OR RENT.
                (b) Clear property description and location.
                (c) All terms and conditions of sale, lease or
                (d) The agreement date and specific expiration date
              not to exceed twelve (12) months from the date of
              agreement.  A listing agreement cannot contain any
              provision for automatic extension or renewal beyond
              the expiration date.
                (e) A statement of the amount of commission to be
              paid the broker, clearly stated in the listing
                (f) The signatures of all parties to the listing
              . . . .

              (4) Copies of all listing . . . contracts executed
              by a broker shall be given to all parties involved
              at the time of the execution.

 In response to plaintiff's argument that the contract for sale of the
 property met the requirements of the rule, the court held that it did not
 contain all the items required by the rule and that a purchase-and-sale
 contract could not cure deficiencies in a listing agreement.  The court also
 denied relief based on equitable estoppel and collateral estoppel.
      We recently summarized the law with respect to listing agreements and
 the requirements of the rules of the Real Estate Commission in MacDonald v.
 Roderick, 3 Vt. L.W. 23, 25 (Jan. 3, 1992).  Drawing on our case law and the
 effect of public policy requirements on the enforceability of contracts as
 set forth in { 179(a) of the Restatement (Second) of Contracts, we stated:
         [A] violation of the rules of the Real Estate Commission
         with respect to the form or content of a listing
         agreement will bar recovery of a commission only if the
         violation somehow taints the agreement or makes its
         enforcement unfair.  That taint will always be found
         where the agreement is oral because the requirement of a
         writing ensures that the parties are fully aware of the
         terms of the agreement.  When, as here, the claim is
         that the violation occurred because of failure to use
         required language or because of the omission or
         misstatement of a required term, there will be no effect
         on the broker's right to recover a commission unless the
         violation makes recovery unfair in the particular case
         before the court.

 MacDonald, 3 Vt. L.W. at 25.  The trial court here correctly denied
 plaintiff a commission because he failed to have a written listing
 agreement, unless there is a reason to except this case from the general
 rule.  Plaintiff argues three such reasons.
      The first is that enforcement of the rule gives defendants a windfall,
 because the undisputed evidence shows that they retained plaintiff and he
 produced a ready, willing and able buyer who paid defendants a purchase
 price above that sought by them.  Plaintiff argues that under theories of
 unjust enrichment and equitable estoppel defendants should be required to
 pay the commission.
      It is clear that defendants retained the entire proceeds of the sale
 free of plaintiff's commission, even though plaintiff's work procured the
 sale.  This is the necessary consequence of enforcing the Real Estate
 Commission rule by denying a commission when the broker fails to comply with
 it.  To allow plaintiff to prevail on this argument would eliminate the
 enforcement mechanism for the rule.  In cases from other jurisdictions on
 which plaintiff relies, the courts have held that violation of a statute or
 rule requiring a listing agreement to be in writing is not a defense to a
 broker's action for a commission.  See Coldwell Bankers-Gordon Co. Realtors
 v. Roling, 703 S.W.2d 572, 576 (Mo. App. 1986); Finlay Commercial Real
 Estate, Inc. v. Paino, 133 N.H. 4, 10, 573 A.2d 125, 128 (N.H. 1990).  In
 jurisdictions such as ours, where violation of the rule or statute
 requiring a written listing agreement is a defense to the claim for a
 commission, the defense cannot be avoided on unjust enrichment or equitable
 estoppel theories.  See Currie v. Marano, 13 Conn. App. 527, 531-32, 537 A.2d 1036, 1038-39 (1988); Maynes Real Estate, Inc. v. McPherron, 353 N.W.2d 425, 427-28 (Iowa 1984); Heyman v. Adeack Realty Co., 102 R.I. ___,
 ___, 228 A.2d 578, 581-82 (1967).  These cases are consistent with the
 contract principles on which we relied in fashioning our enforcement rules,
 see MacDonald, 3 Vt. L.W. at 25, because the broker is primarily blameworthy
 for the violation of the rule.  See J. Calamari & J. Perillo, Contracts {
 22-7, at 900-01 (3d ed. 1987).  We cannot allow the relief plaintiff seeks
 when to do so would wholly undermine the enforcement of the rule.
      Plaintiff's second argument is that the lack of a written listing
 agreement is cured by the provisions of the purchase-and-sale contract.  If
 the purpose of the commission rule were solely to serve as the equivalent of
 a statute of frauds, this argument would prevail.  See 12 V.S.A. { 181
 (statute of frauds fulfilled if contract or "some memorandum or note thereof
 is in writing, signed by the party to be charged therewith").  The purchase-
 and-sale contract was signed by defendants and contained the essential
 terms of the commission contract.
      The purpose of the commission rule, however, is broader.  It is
 intended "for the protection of the public to establish fair dealings
 between parties, standardize the procedure and practices in the real estate
 business and to prevent fraud."  Green Mountain Realty v. Fish, 133 Vt. 296,
 299, 336 A.2d 187, 189 (1975).  The rule regulates listing agreements, as
 opposed to purchase-and-sale contracts or agreements to pay a commission.  A
 listing agreement precedes the broker's services which are rendered pursuant
 to the agreement.  We cannot view the purchase-and-sale contract as a
 listing agreement.  See Howland v. Schweir, 7 Conn. App. 709, 714, 510 A.2d 215, 218 (1986) (services must be rendered pursuant to a listing agreement);
 Del Greco Realty Co. v. Lamoureuk, 39 Conn. Supp. 95, ___, 489 A.2d 1232, 1233 (1983) (listing agreement must "precipitate the services").
      This is more than a distinction of form.  See Green Mountain Realty,
 133 Vt. at 299, 336 A.2d  at 189-90 (the "only legitimate evidence" of a
 contract between broker and seller is a "listing agreement containing all
 the ingredients expressly mandated by law").  The rule requires that the
 broker and seller agree on the terms under which services are rendered
 before the services commence, and that they sign a written document
 specifying the terms of that agreement, and each receive copies of the
 agreement.  This standardization of procedure ensures that consumers of
 broker services are fully informed and are treated fairly.
      The language of the purchase-and-sale contract on which plaintiff
 relies is largely "boilerplate" on plaintiff's standard form.  Were we to
 hold that this language could be enforced without a written listing
 agreement, we would eliminate a major incentive for plaintiff to comply with
 the rule.  Dispensing with the absolute requirement that parties work out
 the terms of a commission agreement at the onset of their relationship would
 permit the details to be worked out, instead, at the time of the sale of the
 property.   This would be the case even though the bargaining positions of
 the broker and sellers may have changed significantly.  The wisdom of the
 rule is apparent in the present case, in which the dispute was apparently
 caused, at least in part, by the absence of clear terms of agreement between
 the parties at the outset.  See Green Mountain Realty, 133 Vt. at 299, 336 A.2d  at 189 (wisdom of rule made apparent by changing relationship of broker
 and seller).
      We conclude that as in other consumer protection situations, the
 circumstances call for the enforcement of a prophylactic rule under which a
 broker without a written listing agreement cannot recover a commission.  See
 Currier v. Letourneau, 135 Vt. 196, 200, 373 A.2d 521, 525 (1977) (the law
 on the question is "unequivocal; a duly executed listing agreement is the
 sole vehicle upon which a broker can predicate recovery of any commission").
 Licensed brokers are able to conform to this rule, and it is fair that they
 bear the risk of failure to obtain a written listing agreement.  See
 Thornton Real Estate, Inc. v. Lobdell, 184 Conn. 228, 230-31, 439 A.2d 946,
 948 (1981) (brokers who fail to follow statutory requirement of a written
 listing agreement "do so at their peril").  Because we decide that the
 purchase-and-sale contract cannot serve as a listing agreement to comply
 with Rule 2.11, we do not address the trial court's conclusion that the
 language of the purchase-and-sale contract was inadequate because it did not
 cover all the terms specified in the rule.
      Plaintiff's final argument is that defendants are collaterally estopped
 from denying the existence of a valid and binding listing agreement.  This
 claim was presented to the trial court based, in part, on a finding of fact
 and a conclusion of law of the trial court in the specific performance suit
 between the purchaser, Colony Park, and the sellers, defendants in this
 action.  The court found that defendants listed the property with plaintiff
 on December 7, 1984.  The conclusion responded to defendants' argument that
 specific performance should be denied because the broker, plaintiff here,
 agreed without informing defendants to split his commission with a partner
 in Colony Park, who was also a broker.  The court held that the commission
 arrangement had no effect on the availability of specific performance and
 added: "[Defendants] owed the agreed commission to Bensen: he was entitled
 to the full amount based on his having procured a willing buyer for the
 accepted purchase price."  Plaintiff argued that the finding that there was
 a listing and the conclusion that defendants owed the commission were
 binding on them and determined this litigation.
      Collateral estoppel, or issue preclusion,  applies only if the
 following criteria are met:
         (1) preclusion is asserted against one who was a party
         or in privity with a party in the earlier action; (2)
         the issue was resolved by a final judgment on the
         merits; (3) the issue is the same as the one raised in
         the later action; (4) there was a full and fair
         opportunity to litigate the issue in the earlier action;
         and (5) applying preclusion in the later action is fair.

 Trepanier v. Getting Organized, Inc., 155 Vt. 259, 265, 583 A.2d 583, 587
 (1990).  Even if we assume that the issue of the plaintiff's entitlement to
 the commission was raised in the specific performance action, see Berisha
 v. Hardy, 144 Vt. 136, 138, 474 A.2d 90, 91 (1984) (collateral estoppel
 applies to issues "'necessarily and essentially determined'" in the earlier
 proceeding, quoting Land Investment, Inc. v. Battleground Assoc., 138 Vt.
 316, 326, 415 A.2d 753, 759 (1980)), there was not a full and fair oppor-
 tunity to litigate it, and it would be unfair to apply preclusion here.
 The obligation to pay a commission, and the presence of an enforceable
 listing agreement, were peripheral to the issues in the specific performance
 action.  To have required defendants to fully litigate the issues presented
 here in the earlier action would have created a largely irrelevant sideshow
 of proportions equal to the main action for no apparent purpose.
      On appeal, plaintiff has shifted the focus of the collateral estoppel
 claim to positions defendants took during the trial of the earlier case and
 the court's statement, in response to evidentiary exceptions, that it would
 "assume that the execution of the Deposit Receipt and Sales Agreement by
 Mason . . . is a listing agreement."  In support of this argument, plaintiff
 has provided us with excerpts from the transcript of the trial in the
 specific performance litigation that plaintiff did not bring before the
 trial court in this case.  We conclude that plaintiff has failed to preserve
 this claim below and is precluded from raising it here for the first time.
 MacDonald, 3 Vt. L.W. at 24.

                                         FOR THE COURT:

                                         Associate Justice

 FN1.    As the rule has been amended, it has had different numbers while
 retaining the same substance for the purpose of this appeal.  Originally, it
 was Rule 16.  See Green Mountain Realty, Inc. v. Fish, 133 Vt. 296, 298, 336 A.2d 187, ___ (1975).  The version cited by the trial court and quoted here
 as 2.11 is as it was amended in 1979.  Now it is Rule 26.  See MacDonald v.
 Roderick, 3 Vt. L.W. 23, 24 (Jan. 3, 1992).