Legal Case Studies: January 2022
Masiello Real Estate, Inc. v. Mateo, No. 2020257 (Oct. 15, 2021, S. Ct. Vermont), involved a multi-year sequence of listing agreements that ultimately failed to provide a commission to the plaintiff Broker.
The facts of the case
Defendant Seller in this case owned a 276-acre property in Vermont. Beginning in 2013, Seller agreed to an exclusive listing agreement with Broker with a $435,000 asking price, a $25,000 commission and a one-year “tail” that compelled seller to pay the commission if, within twelve months of the agreement’s expiration, seller sold the property and Broker was the procuring cause. Broker listed the property on several real estate websites.
During the first listing agreement, Broker showed the property several times and received one offer below the asking price, which Seller rejected. They entered into a second agreement in February 2014 with the same terms and one-year tail. Broker did not show the property at all during this period and the agreement expired on January 1, 2015.
In August, 2015, a Massachusetts couple (Mateo and Nelson) contacted Broker expressing interest in buying a property for $250,000 or less. Broker showed them several properties. Nelson recalled seeing the Seller’s property on a website and asked Broker about it. Broker contacted Seller, who agreed to a third listing agreement with a short term of August 25 to September 30, and a one-year tail. Broker showed the property to Mateo. She made no offer and the third listing agreement expired.
Broker contacted Mateo in November 2015 and February 2016. Both times, Mateo said she was not ready to move forward and needed to sell her existing house.
In June of 2016, Mateo wanted to see the Seller’s property again. Broker contacted Seller for a fourth listing agreement but Seller declined, saying he was no longer motivated to sell and would not sign a listing agreement; however, he “will honor you getting paid as a buyer broker, not a selling broker.” Broker replied that he could not flip fiduciary duties and offered to proceed with negotiations for the original asking price. Seller agreed to consider an offer but would not sign anything but a sales contract. Mateo visited the property but did not make an offer.
In August of 2016, Mateo sent another broker a list of properties she wanted to see while Nelson, having obtained Seller’s contact information from a neighbor, contacted Seller directly. During August and September, Nelson and Seller negotiated a price but no offer was made.
The tail of the third listing agreement between Broker and Seller expired on September 30, 2016.
Between September and November, Mateo and Nelson looked at other properties and made an unsuccessful offer on one. In November, Mateo and Nelson renewed contact directly with Seller, who sold the property to them on January 20, 2017. Broker sued the Seller for a commission, asserting breach of contract and other legal theories.
The court’s analysis
The court reviewed Broker’s breach of contract claim in two parts—whether Broker was the procuring cause of the sale and whether Seller had been obligated to refer to Broker Nelson’s direct inquiries to Seller during the last tail period.
To be entitled to a commission under Vermont law, a broker must show that he or she procured a purchaser ready, willing, and able to purchase at the price and upon the terms prescribed by the seller. A broker must show more than an “incidental relationship to the resulting sale” and that the broker’s “efforts dominated the transaction.”
In this case, the court held that Broker was clearly not the procuring cause of the sale under this standard. Although Broker did advertise the property, showed it to Mateo, and emailed her several times, he was unable to deliver an offer from her. Even the direct negotiations between Nelson and Seller between August and September 2016 did not conclude with an agreement on price or an offer. Both Nelson and Mateo were actively looking at other properties with another broker from September to November and actually made an offer on one. It was not until a further wave of direct negotiations between Seller and the couple starting in November 2016 (after the last tail had expired) that the property was ultimately sold in January 2017.
The bottom line was that the court appeared to think that there were too many waves of negotiation during which Mateo and Nelson were not prepared to proceed, whether the price was too high or they needed to sell their current home first, followed by successive breaks. The court was not prepared to say that, under the facts, the Broker “procured a purchaser ready, willing and able to purchase at the price and upon the terms prescribed by the seller” or that Broker’s efforts dominated the transaction.
On the second issue, the court found that Seller was not obligated to tell Broker about Nelson’s direct inquiry in August, 2016, prior to the expiration of the last tail. The third listing agreement provided that Seller agreed “to direct all inquiries concerning this property from whatever source to [Broker] during the period of this Agreement.” Broker argued that “period” must include the tail. The court disagreed. Whether called “term” or “period,” the meaning was clear that Seller’s obligation to refer inquiries was limited to the short term of the third listing agreement, which had expired a year earlier in 2015. It did not include the tail.
The court reasoned that such an interpretation made sense because after the third listing agreement expired, Seller was free to enter into an exclusive agreement with a different broker. If the obligation to refer inquiries to Broker continued through the third listing agreement’s tail, Seller would then have had simultaneous obligations to refer all inquiries to both Broker and the subsequent broker, an anomalous result. The court said, “the tail was intended to compensate broker for his actions during the contract period in procuring a sale that arises after the term of the contract, not that seller was barred from engaging other brokers or buyers after the contract term.” Because the first direct email from Nelson was in August, 2016 (outside the term of the third listing agreement), Seller had no obligation to direct the inquiry to Broker.
The court affirmed judgment in favor of the Seller on the Broker’s breach of contract claim.