Ann Taylor REALTORS®, Inc. v. Sporup: Broker Awarded Entire Deferred Commission

A Tennessee appellate court has evaluated a real estate professional’s lawsuit seeking to collect the full amount of a deferred commission that the seller refused to pay because of the buyer’s default.

John and Dyanne Storup (“Sellers”) owned a car wash that they listed for sale with real estate broker Ann Taylor (“Broker”) of Ann Taylor REALTORS®, Inc. (“Brokerage”). The listing agreement stated that the Sellers were responsible for all of the Brokerage’s collection costs, including attorney’s fees, if the Sellers did not pay the Brokerage its full commission.

An individual agreed to purchase the property and, as an accommodation to the Sellers, the Brokerage agreed to defer a portion of its commission to be paid over a three-year period. The Broker memorialized the terms of the agreement in a handwritten document signed by both parties, and this was followed by a promissory note. In the promissory note, the Sellers agreed to make 36 payments to the Brokerage of the principal plus interest.

The buyer defaulted on the purchase money mortgage, and the Seller withheld the commission payments to the Brokerage. The Brokerage filed a lawsuit seeking to enforce the terms of the promissory note. The Sellers argued that the Broker had agreed that the commission payments were conditioned upon the Sellers receiving payments from the buyer, but the Brokerage had failed to include these items in the agreements it had prepared and so the Sellers filed a counterclaim against the Brokerage. The trial court ruled in favor of the Brokerage, and ordered the Sellers to pay the Brokerage the full commission amount, interest, and attorney’s fees. The Sellers appealed.

The Court of Appeals of Tennessee affirmed the ruling of the trial court. The Sellers argued that the Broker had breached her fiduciary duty by having the attorney draft a promissory note that favored the Brokerage and also caused the Sellers to be personally liable for the commission payments, rather than the corporate entity that had owned the car wash. The Broker denied that she had agreed to condition her commission payments on the buyer making payments to the Sellers.

The court ruled that the evidence supported the trial court’s ruling in favor of the Brokerage. First, the plain language of both agreements supported the Broker’s account: the Sellers had two opportunities to object to the agreement as drafted and instead signed both agreements without expressing dissatisfaction in either instance. The court further found it not plausible that experienced businesspeople did not read or object to the agreement if they found the terms objectionable.

The court also determined that the Brokerage had no obligation to defer its commission, as the Brokerage had satisfied the terms of the listing agreement and so could have received the full commission amount at the closing. Thus, the Broker’s agreement to defer the commission payment as an accommodation to her client did not affect her right to receive the entire commission amount.

Finally, the court disagreed that the Broker had inappropriately made the Sellers personally liable for the commission payments, rather than the corporation that had owned the car wash. The listing agreement between the parties had been made in an individual capacity, with one of the Sellers representing himself as being the owner of the car wash. The Broker also testified that she believed the Sellers personally owned the property, not through a corporation. The court again ruled that the evidence supported the trial court’s conclusion that the Broker had acted honestly in drafting the promissory note and so did not breach her fiduciary duty. Therefore, the court affirmed the ruling in favor of the Brokerage for the full commission amount, attorney’s fees, and interest.

Ann Taylor REALTORS®, Inc. v. Sporup, W2010-00188-COAR3CV, 2010 WL 4939967 (Tenn. Ct. App. Dec. 3, 2010). [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].

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