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A Florida appellate court has considered whether a broker could recover a commission from the sale of land to a school district.
Maria Martin-Hidalgo ("Broker"), a licensed real estate broker, attended a meeting with the director of the Miami-Dade County school district’s real estate department ("School District") to see if the School District would be interested in purchasing a 20 acre parcel of land she was marketing for sale. While the School District was not interested in the parcel offered by the Broker, the parties did discuss the School District's interest in purchasing a 60 acre site ("Site") located elsewhere in the county for the building of a high school. The Site consisted of a 50 acre parcel and a 10 acre parcel.
Following the meeting, the Broker decided to investigate the availability of the Site parcels. She contacted Jose Perez-Urrutia of Rotemi Realty ("Perez-Urrutia") because she knew he was familiar with real estate in that part of the county. Perez-Urrutia stated that he knew the 50 acre parcel was owned by Michael Cease ("Cease") and the 10 acre parcel was owned by the Act Realty Company ("Seller").
The Broker and Perez-Urrutia met with the Seller to try to convince it to list the 10 acre parcel with them so they could try to persuade the School District to purchase its parcel along with the 50 acre parcel. The Seller agreed, and stated it would take the first $1 million from the sale of the parcel with the brokers receiving a commission for any amount over the $1 million sale price. The Seller put the listing agreement in writing (with a listing price of $1.2 million), and then wrote a letter authorizing the brokers to represent the Seller in its negotiations with the School District.
Eventually, the School District agreed to buy the Seller's parcel along with the 50 acre parcel. The School District would pay a uniform price per acre for the Site, and so the sale price for the Seller's parcel was $1,164,650. The transaction was approved by the School Board. When the Seller refused to pay the commission, the Broker and Perez-Urrutia filed a lawsuit seeking payment of the commission. Following a bench trial, the trial court awarded the commission and the Seller appealed.
The District Court of Appeal of Florida, Third District, reversed the trial court's ruling. The court based its decision on a Florida case from another appellate court, which forbade the awarding of contingency fees for the obtaining of public financing because it is against the state's public policy. The earlier decision had reached this conclusion because it found that such contracts "suggest the use of sinister and corrupt means for the accomplishment of the ends desired." The test for courts to evaluate contingency contracts involving public financing is to determine whether the contract in question has "a tendency toward such an evil."
Looking at the commission agreement, the court found that the agreement created the possibility for use of "sinister and corrupt means", as the brokers were rewarded for obtaining as high a price as possible for the property since they were to receive the entire amount above $1 million. Finding the commission agreement had a "tendency toward such an evil" like corruption and therefore violated the state's public policy, the court reversed the trial court. In addition, the court awarded the commission amount to the School Board, finding that the Seller should also not benefit from an illegal contract. The court also refused to award the brokers a fee for the time spent negotiating the sale, finding that because the agreement violated public policy, the brokers were not entitled to make such a recovery. Thus, the trial court was reversed and the commission was awarded to the School Board.
One of the judges in the three-judge panel wrote a lengthy dissent to the court's decision. The dissent argued that no one had ever claimed in this case that the brokers had used illegal means to obtain School Board approval nor was there any evidence before the trial court on this issue. The court further found that a Florida Supreme Court decision supported the award of a commission to the brokers, as that case had stated that contingency contracts involving public financing were only void when there is a showing of illegal conduct. The dissent argued that the other judges had ignored this case in reaching their conclusion to reverse the trial court.
Act Realty Co., Inc., v. Rotemi Realty, Inc., No. 3D02-1707, 2003 WL 21976079 (Fla. Dist. Ct. App. Aug. 20, 2003). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].