Opinion
Case No. 3:01-CV-0938-M
July 9, 2002
MEMORANDUM ORDER AND OPINION
Before the Court is Defendant's Motion for Summary Judgment, filed March 20, 2002, in which Defendant seeks summary judgment that it did not expressly and specifically assume the commission agreement at issue, as required by the Texas Real Estate License Act. For the reasons stated below, summary judgment in favor of Defendant is granted. Defendant did not expressly assume the commission agreement (which was embodied in the Exclusive Listing Agreement ("ELA")) between Plaintiff and Defendant's assignor on the warehouse property at issue, and is not liable for the claimed commissions under a theory of equitable estoppel.
ISSUE STATEMENT
Plaintiff Harry B. Lucas Co. ("Lucas") seeks to recover a commission on a lease procured for a warehouse located in East Dallas (the "Warehouse"), now owned by Defendant Grand Dallas Warehouse, L.L.C. ("Grand Dallas"). The issues presented in this case can be distilled to the following:
(1) Whether Grand Dallas expressly and specifically assumed the commission obligation owed to Lucas?, and
(2) Whether, if an express assumption cannot be found, Grand Dallas's conduct estops it from arguing it has no duty to pay Lucas commissions from the Buell Door Company lease?
APPLICABLE LEGAL DOCUMENTS
Exclusive Listing Agreement: On February 1, 1989, Lucas and City Warehouse, the former owner of the Warehouse which sold it to Grand Dallas, entered into an ELA for the Warehouse. The ELA set forth a schedule for the payment of commissions to Lucas in connection with leases Lucas procured for the Warehouse. Under the ELA, Lucas is entitled to a commission for any renewals, expansions, or extensions of leases originally initiated by Lucas of four and one-half percent of the gross rental. That commission is payable one-half upon the execution of the lease, and one-half upon occupancy by the tenant. Alternatively, the owner can elect to pay the renewal commission over the term of the lease at a commission rate of six percent of the gross rentals.
Buell Door Lease: On October 8, 1990, City Warehouse and Buell Door Company entered into a ten-year lease contract. The lease contains a reference to Lucas as the real estate broker to receive payment of the brokerage commission under the lease, but does not mention commission payments for renewals.
Assignment and Assumption of Leases Agreement ("Assignment Agreement"): This is the agreement executed on June 10, 1997 between Grand Dallas and City Warehouse in connection with the purchase of the Warehouse.
FACTUAL PREDICATE
In 1990, Lucas procured Buell Door Company as a new tenant for the Warehouse. Subsequent to the Buell Door lease in 1990, City Warehouse paid Lucas a monthly commission of six percent of gross rentals received on that lease. On June 10, 1997, Grand Dallas purchased the Warehouse property from City Warehouse. In connection with the purchase, Grand Dallas executed the Assignment Agreement. Grand Dallas continued to pay Lucas its monthly commission from the Buell Door lease for the forty months remaining on the ten-year term of the original lease.In October 1999, one year before the expiration of the original lease, the Buell Door lease was re-negotiated and renewed for a period of five years. Lucas did not participate in negotiations for the renewal. Commission payments to Lucas from Grand Dallas ceased from the end of the ten-year term forward, and a new broker, FultsOncor, has apparently been paid commissions by Grand Dallas during the renewal term. Lucas claims that the amount of commissions owed to it by Grand Dallas for the renewal lease total $153,443.02.
STANDARD OF REVIEW
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and record evidence show that no genuine issue of material fact exists and that, as a matter of law, the movant is entitled to judgment. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Only disputes about those facts will preclude the granting of summary judgment. Id. In a motion for summary judgment, the burden is on the movant to prove that no genuine issue of material fact exists. Latimer v. Smithkline French Lab., 919 F.2d 301, 303 (5th Cir. 1990).
In order to resist summary judgment, the non-moving party must make a positive showing that a genuine dispute of material fact exists. Anderson, 477 U.S. 242 at 250. The record before the court must be considered in the light most favorable to the opposing party. Harrison v. Byrd, 765 F.2d 501 (5th Cir. 1985). However, bare allegations in briefs and pleadings are insufficient to withstand summary judgment. Alizadeh v. Safety Stores, Inc., 802 F.2d 111, 113 (5th Cir. 1986).
ANALYSIS
Grand Dallas argues that because Lucas cannot produce a writing that expressly and specifically obligates it to pay Lucas a commission, Lucas's claim is barred by the Texas Real Estate License Act ("RELA"). Grand Dallas further contends that under Texas law, conduct cannot circumvent the RELA's requirement that a commission agreement be in a writing expressly and specifically creating an assumption by the party to be charged. Although Lucas unsuccessfully moved for summary judgment on October 10, 2001, it now argues in its Response that it "is entitled to summary judgment but at a minimum, Lucas has raised several fact issues, and accordingly [Grand Dallas's] summary judgment must be denied." It further contends that Grand Dallas assumed the obligation to pay Lucas's leasing commissions under the Exclusive Listing Agreement, and that Grand Dallas is estopped from disputing its payment of commissions to Lucas by making forty consecutive monthly commission payments to Lucas before contesting its obligation.
On January 22, 2002, Judge Kendall denied Plaintiff's Motion for Summary Judgment.
Pl.'s Resp. at 2. Related to this point is Lucas's request for a FED. R. CIV. P. 56(f) continuance to conduct further discovery, if the Court is inclined to grant summary judgment in favor of Grand Dallas. Specifically, Lucas states that: "[s]uch discovery will include (i) seeking full discovery from [Grand Dallas] in order to prove that [Grand Dallas] assumed the Exclusive Listing Agreement and to further prove Lucas Company's allegations of estoppel, waiver, ratification and assumption by conduct; (ii) taking [Grand Dallas'] and City Warehouse's depositions and requesting documents in order to prove the intent of the parties when the Assignment of Leases was executed, among other things; and (iii) pursuing all other discovery necessary to Grand Dallas Warehouse's defense of this case." Pl.'s Resp. at 15. Although new counsel was substituted on March 20, 2002, a binding Scheduling Order was entered in this case on September 27, 2001, in which the discovery deadline of April 19, 2002 and the dispositive motion deadline of March 20, 2002, were clearly set forth. To date, Grand Dallas contends that Lucas has "wholly failed to conduct any discovery" since the case was filed more than one year ago. Plaintiff's Request for a Rule 56(f) continuance is denied. Lucas admits that the contractual provisions at issue in this case are unambiguous. Pl.'s Resp. at 8 (emphasis added). Interpretation of unambiguous provisions is left for the Court to resolve as a matter of law. City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968); Frady v. May, 23 S.W.3d 558, 564 (Tex.App.-Fort Worth 2000, pet. denied) (where the court can properly give a contract a certain or definite meaning, it is unambiguous, and its construction is a question of law for the court alone).
A. RELA
Section 20(b) of the RELA requires a written commission agreement in order for a broker to recover commissions on a real estate transaction. In relevant part, the RELA § 20(b), incorporates a statute of frauds requirement:
TEX. REV. CIV. STAT. ANN. art. 6573a § 20(b) (Vernon Supp. 2001).
An action may not be brought in a court in this state for the recovery of a commission for the sale or purchase of real estate unless the promise or agreement on which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged or signed by a person lawfully authorized by the party to sign it.
Id.
"Real estate," under the Act, includes leaseholds. The purpose of the RELA is to eliminate or reduce potential fraud by "unlicensed, unscrupulous, or unqualified persons." It is intended to guarantee the fidelity and honesty of real estate sellers. Grand Dallas does not dispute that the ELA satisfies the RELA requirements; instead, it contests its liability thereunder.
Texas Builders v. Keller, 928 S.W.2d 479, 481 (Tex. 1996).
Henry S. Miller Co. v. Treo Enters., 585 S.W.2d 674, 675-76 (Tex. 1979).
State v. Pace, 640 S.W.2d 432, 433 (Tex.App.-Beaumont 1982), aff'd, 650 S.W.2d 64 (Tex. 1983).
B. Assumption of Commission Obligation
The ELA specifically states that the 4.5% commission rate applies to renewals, expansions, and extensions of leases initiated by Lucas. Thus, if Grand Dallas assumed the ELA, the five-year renewal/extension of the Buell Door lease is covered, and Grand Dallas is liable to Lucas. However, although Grand Dallas acknowledges it expressly and specifically assumed the Buell Door lease, which contains no similar language covering renewals, it contends it did not expressly and specifically assume the ELA.
The relevant part of the Assignment Agreement states:
It is understood and agreed that by Assignee's execution hereof, Assignee hereby assumes and agrees to pay and perform all of the terms, covenants, conditions and obligations of [City Warehouse] or owner of the Premises under or with respect to the Property arising or accruing on or after the date hereof, and agrees to indemnify and hold [City Warehouse] harmless from and against any claims, costs or liabilities in connection therewith arising or accruing on or after the date hereof.
Pl.'s App. at 54 (emphasis added).
This clause is referred to by the parties as the General Assignment of Obligations Clause. In the Assignment of Leases Clause of the Assignment Agreement, it was further provided that:
[City Warehouse] . . . hereby GRANTS, TRANSFERS and ASSIGNS to [Grand Dallas] all of [City Warehouse's] right, title and interest in and to (i) any and all leases, franchises, licenses, occupancy agreements, or other agreements (hereinafter called the "Leases," whether one or more), demising space in or otherwise relating to the improvements now existing on the [Warehouse] property . . . .
Id. at 53 (emphasis added). The Court notes that the commercial real property is defined in the Assignment of Leases as the "Premises," while the term the "Property" is defined to refer to the Leases and the corresponding security deposits that were assigned to Grand Dallas Warehouse.
Moreover, on June 23, 1997, a few weeks after Grand Dallas purchased the Warehouse, Ali R. Aghassibake, the Project Manager for Grand Dallas, sent a letter to Lucas, stating that:
The change in ownership occurred on June 10, 1997, and consequently the commission payment for the month of June will be prorated and will be paid 9 days by City Warehouse and 21 days by Grand Dallas Warehouse.
Pl.'s App. at 8. This letter alone cannot satisfy the requirements of RELA. Texas courts have required satisfaction of a four-part test to find a writing supporting a broker's claim for a commission to be valid: (1) the writing must be signed by the person to be charged; (2) it must contain a promise that a definite commission be paid or refer to a written commission schedule; (3) it must state the name of the broker to whom the commission is to be paid; and (4) it must identify with reasonable certainty the land to be conveyed. LA N Interests v. Fish, 864 S.W.2d 745, 749-50 (Tex.App.-Houston [14th Dist.] 1993, no writ); Moser Co. v. Awalt Indus. Properties, Inc., 584 S.W.2d 902, 906 (Tex.Civ.App.-Amarillo 1979, no writ). The essential elements of a commission agreement cannot be supplied by parol evidence. Boyert v. Tauber, 843 S.W.2d 60, 62 (Tex. 1992) ("outside brokers" in a contract was not sufficient under RELA to identify the broker to the commission contract).
The June 23 letter described the property by address, a representative of Grand Dallas signed it, it refers to the commission for the month of June 1997, and the letter was sent to Lucas, the broker. However, it does not specifically reference the ELA, the only document referring to commission payments to Lucas in the event of a renewal. The Court concludes it does not obligate Grand Dallas for a renewal commission.
The Texas Supreme Court has made clear that under RELA a purchaser is not liable for commission payments to brokers unless the purchaser "expressly assume[s] such liability." Absent clear and express language regarding the assumption of City Warehouse's obligation on renewals, the Court will thus not assume the existence of such an obligation.
Regency Advantage Ltd. v. Bingo Idea-Watauga Inc., 936 S.W.2d 275, 278 (Tex. 1996).
Id. at 278; Blasser v. Cass, 314 S.W.2d 807, 809 (Tex. 1958) (stating that a grantee must have "specifically assumed and agreed to carry out and perform" under a commission agreement and finding grantee not liable for commissions where he took the land "subject to the leases on the property" even though the leases expressly entitled the broker to renewal commissions); Lone Star Gas Co. v. Mexia Oil Gas, Inc., 833 S.W.2d 199, 201 (Tex.App.-Dallas 1992, no writ) ("The acceptance of an assignment `subject to' a specified claim of a third person is not an implied promise by the assignee to pay that claim. There must be some express promissory words, or words of `assumption' on the part of the assignee"); Hall v. Arnett, 31 S.W.2d 506, 508 (Tex.Civ.App.-Amarillo 1929, writ dism'd); Potts v. Burkett, 278 S.W. 471, 473 (Tex.Civ.App.-Eastland 1926, no writ) (holding that the assignee of a contract is not bound for the performance of the contract's obligations unless they are expressly assumed by the assignee).
In Regency Advantage v. Bingo Idea-Watauga Inc., the assignee expressly excepted any liability for lease commissions. However, the Supreme Court stated that this kind of express exception was not necessary; without an express written assumption of the commission that satisfies the writing requirement of the RELA, the assignee has no liability. To the extent Lucas reads Regency Advantage as requiring an assignee to expressly except or disclaim liability for brokerage commissions in order to avoid liability, the Court rejects this interpretation. Neither the Regency Advantage opinion nor the RELA support this argument. For Grand Dallas to be liable for the disputed renewal commissions, a specific agreement to same must be evidenced.
In Pham v. Rayburn Tucker Co., an unpublished Texas opinion proffered by Lucas, the Dallas Court of Appeals held an assignee purchaser of a commercial building liable to the broker for commissions on an outstanding lease, but not the co-defendant assignee interest holders. Although the case has no precedential value and should not have been cited by Lucas, it does not prove Lucas's point. The assignment stated that the purchaser "assume[d] and agree[d] to perform from this date forward all of Seller's covenants and obligations contained in the Tenant Leases and the Service Contracts." The lease in question provided that the landlord was to pay the brokerage fee. Under those facts, the court stated that "[b]ecause [the assignee purchaser] assumed all of the seller's obligations," he was liable to the broker for the disputed commission. In contrast, the assignee interest holders, who were generally assigned interests in the existing leases under an assignment of leases contract, were not liable to the broker for the claimed commissions. The general assignment stated that "[a]ssignee[s] hereby expressly assume and agree to perform and carry out the terms of the Leases as Lessor[s] thereunder and agree that from this day forward Assignee[s] shall be liable to each individual Lessee for (i) obligations of Lessor under each Lease . . . ." As stated by the court, the assumption "[wa]s specific to only responsibilities to lessees, not brokers." Thus, the assignee purchaser was the only party to have executed a document specific enough to assume the responsibility for paying the leasing commissions.
No. 05-2019, 2000 WL 225630, *1 (Tex.App.-Dallas 2000, no pet).
The Court notes that under Texas Rule of Appellate Procedure 47.7, unpublished opinions "have no precedential value and must not be cited as authority by counsel or by a court."
Id. at *2.
Id. at *3.
Id.
Here, unlike Regency, Grand Dallas did not expressly except any obligation for lease brokerage commissions. Indeed, it is undisputed that subsequent to the prorated June commission, Grand Dallas made thirty-nine monthly commission payments to Lucas. Further, prior to the Eleventh Amendment, which renewed the Buell Door lease for a five-year term, several amendments to the lease expanded the lease premises and generated more rent for Grand Dallas, and thus more commission to Lucas. Moreover, on June 1, 2000, after Grand Dallas was made aware that Buell Door had contacted FultsOncor regarding the negotiation of the lease renewal, Grand Dallas notified Buell Door, by letter, that it planned to pay only one commission: "[Grand Dallas] would also like to take this opportunity to clarify Grand Dallas Warehouse's position on the lease commission issue. As we have stated from the beginning of our negotiations, Grand Dallas Warehouse will pay one commission upon full execution of the renewal." However, while this conduct may demonstrate conscious awareness of an obligation to Lucas, the conduct relates to the ten-year lease, not to the renewal, and, as stated by the Texas Supreme Court, conduct alone does not allow circumvention of the RELA's writing requirements.
Pl.'s App. at 55.
If the ten-year commission were the disputed commission before the Court, the result here would likely be different. Here, however, Grand Dallas paid commissions to Lucas throughout the ten-year term. The sole issue is Grand Dallas's responsibility to pay commissions on the renewal. Nothing in the Buell Door lease or the Assignment Agreement provides a link to the ELA's obligation to pay commissions on renewals. The Buell Door lease, assumed by Grand Dallas under the Assignment Agreement, references Lucas's commission on the Buell Door ten-year lease at paragraph 7 to Exhibit A of the lease:
7. Broker. The parties hereto acknowledge that Harry B. Lucas Company acted as real estate broker in this transaction, that there are no other broker commissions payable and that Landlord shall be responsible for payment of the brokerage commission to Harry B. Lucas Company.
Pl.'s App. at 17 (emphasis added).
No similar language is found in the five-year renewal, appended as the Eleventh Amendment to the Buell Door lease. Nor does the Buell Door lease, or the five-year renewal, reference the ELA. The Assignment Agreement before the Court only obligated Grand Dallas to perform duties under the Buell Door lease agreement, not the ELA. No language in the Assignment Agreement expressly binds Grand Dallas to the ELA, which is the only document referring to commissions for lease renewals on leases initiated by Lucas. Lucas's portrayal of the ELA as only setting forth the payment method and calculations is misleading. It is the only document that expressly covers renewal commissions to Lucas on the Buell Door lease. The necessary express contractual nexus between Grand Dallas and that obligation is noticeably absent from this case. The general obligations assumed by Grand Dallas are simply not specific enough to satisfy the particularity requirements of the RELA.
C. Estoppel
Lucas argues that Grand Dallas is estopped from asserting that it has no obligation to pay a commission on the Buell Door lease because of its conduct in making forty monthly payments to Lucas under the ten-year lease contract, including increases due to amendments to the Buell Door lease. Grand Dallas counters that it has not paid any commission under the renewal contract, and that Texas law does not allow either payment or conduct to circumvent the RELA's requirement that a commission agreement be in a writing, expressly and specifically assumed by the party to be charged.
In Trammel Crow No. 60 v. Harkinson, the plaintiff broker located commercial property for the defendants, who represented that they would pay plaintiff a 4.5% cash commission on a lease initiated for the site. Defendants subsequently sent plaintiff an unsigned commission agreement, which was signed and returned by the plaintiff. Defendants did not sign the agreement. After plaintiff closed a seven million dollar lease on the property, the defendants agreed to pay him a commission of $30,000 rather than the 4.5% amount, of $346,500. Plaintiff rejected that offer and sued, arguing that the defendants were estopped by their conduct and by plaintiff's reliance on their representations from enforcing the RELA requirements. After stating that "[w]e consistently have refused to erode section 20(b) [of the RELA] with the same exceptions as may render oral contracts within the general statute of frauds enforceable," the Texas Supreme Court reaffirmed its previous holding that the theory of quantum meruit would in effect "render the statute requiring a commission agreement a nullity," and concluded that application of the doctrine of part performance to commission situations would "be in direct opposition to the expressed will of the Legislature." In concluding, the Court commented:
944 S.W.2d 631, 637 (Tex. 1997).
Id. (quoting Landis v. W.H. Fuqua, Inc., 159 S.W.2d 228 (Tex.Civ.App.-Amarillo 1942, writ ref'd)).
Id. (quoting Boyert v. Tauber, 834 S.W.2d 60 (Tex. 1992)).
"While sympathetic to [plaintiff's] claims, those sympathies do not permit us to ignore the Legislature's unequivocal expression of intent set out in section 20(b) [of the RELA]. The Legislature is quite explicit: a broker may not recover a commission unless the commission agreement is in writing and signed by the party to be charged."
Id. at 635.
In McConnell v. Columbia Co., the plaintiff broker procured a lessee for the defendant owner of an office building, after being promised the regular real estate commission approved by the Houston Real Estate Board. Defendant thereafter sent plaintiff a check for initiating the lease of 4,500 square feet, then executed a lease with the procured lessee for 19,365 square feet. The plaintiff brought suit for a commission on the full square footage, arguing that because defendant issued the commission check, it recognized and acknowledged the existence of the agreement and perpetrated a fraud on plaintiff by failing to pay the full commission. The court disagreed, stating that the RELA "is to be construed literally," and that "evidence of an executed contract or of services performed is not admissible to sustain a suit for brokerage commissions." Texas law has consistently rejected a marriage between the estoppel doctrines relied on by Lucas and the RELA's strict writing requirement. The law does not support an equitable exception to the RELA provision.
326 S.W.2d 20, 22 (Tex.Civ.App.-Fort Worth 1959, writ ref'd n.r.e.).
Id. at 23. See also McKellar v. Marsac, 778 S.W.2d 573 (Tex.App. — Houston [1st Dist.] 1989, no writ) ("our courts have consistently denied recovery of compensation due for rendition of services governed by [the RELA] where a contract in writing has not been executed by the party to be charged."). In addition to the strict guidelines within which courts must approach the writing requirements of the RELA, it should be noted that estoppel cannot be invoked for any purpose other than preserving rights which had previously been acquired. Plainly, Grand Dallas's conduct, correspondence, and commission payments under the ten-year lease cannot estop it from arguing that the RELA requirements control the Court's determination of whether Lucas is owed commissions under the Buell Door lease renewal. See Schmidt v. Matise, 747 S.W.2d 883, 887 (Tex.App.-Dallas, 1988, no writ) (stating that "it is well-settled that estoppel cannot be invoked to nullify a mandatory restriction," like the "licensing requirement of RELA").
CONCLUSION
Neither the Buell Door lease nor the Assignment Agreement expressly mention the ELA or any contract controlling commissions on renewal leases. The General Assignment of Obligations Clause and the Assignment of Leases Clause found in the Assignment Agreement are not specific enough to bind Grand Dallas to the ELA. Further, while the Assignment Agreement bound Grand Dallas to commission payments on the Buell Door ten-year lease contract, this language does not control the renewal situation before the Court, nor can an equitable estoppel theory save Lucas's claim for commissions from summary dismissal. Summary judgment in favor of Grand Dallas is GRANTED.
SO ORDERED.