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Idaho’s highest court has considered whether a broker could claim unpaid commissions when listing agreements failed to contain a complete legal description of the properties.
Tricia Callies (“Broker”), owner of Complete Property Management, Inc. (“Brokerage”), entered into two listing agreements with George O’Neal (“Owner”), owner of Charter Builders, Inc. The listing agreements were for two development projects that the Owner was undertaking.
The Owner’s development projects were still undefined at the time the listing agreements were executed and so the agreements did not have legal descriptions for each individual property, instead simply referencing the development’s name and “addendum #1”. Although the addendum was not attached at the time of execution, the Broker claimed that the plat and the individual legal property descriptions were added at a later date when the parties extended the listing agreements. The Owner and Broker used this same process to develop and sell properties in previous developments.
The parties operated under the listing agreements for approximately 18 months, during which time the Broker marketed the units in the development, held earnest money for the Owner, and brokered a number of sales. In the beginning, the Owner paid the Broker commissions from the sales pursuant to the listing agreements. However, the Owner eventually began contesting the Broker’s right to a commission because the listing agreements did not contain an accurate legal description for the individual units being sold.
The Broker filed a lawsuit against the Owner seeking unpaid commission payments. The Owner responded with a counterclaim seeking a declaration that the listing agreements were invalid. The trial court ruled that because the listing agreements did not contain legal descriptions for the properties being sold, the listing agreements did not comply with Idaho law and so were unenforceable. The court entered judgment in favor of the Owner, and the Broker appealed.
The Supreme Court of the State of Idaho reversed the lower court and sent the case back to the trial court for further proceedings. The court looked at the two statutes in question. Section 9-503 establishes the requirement of a writing containing a legal description of the property for the transfer of an interest in real property. Section 9-508 establishes the requirement of a written agreement for a real estate broker seeking to collect a commission from the transfer of an interest in real property. While court cases have established that a description of the property is required for a broker to enforce a commission agreement, the question before the court was the type of property description required by Idaho law for real estate brokerage agreements.
The court found that Idaho case law allowed for the more lenient property description in listing agreements found in Section 9-508, rather than the required “legal” description found in Section 9-503. While earlier decisions had required an enforceable legal description in all listing agreements, this requirement changed over the years such that the property description in a listing agreement is “sufficient where it is shown that that there is no misunderstanding between the property owner and broker as to the property to be offered for sale”. So long as the description allowed the broker to know which property the owner was offering to prospective buyers, the court determined that the description satisfied the requirements for a written brokerage agreement.
Despite the earlier case law decisions, the Owner argued that the legislature had overruled these decisions in 2000 when it enacted a statute requiring that all brokerage agreements have a “legally enforceable description of the property”. The court rejected this argument, finding that the legislature had in fact codified the earlier court decisions with this language by not requiring precise property descriptions within listing agreements. Further, there was no indication that the legislature intended to overrule the earlier court decisions. Since the court found the statute consistent with the standard applied by courts related to Section 9-508, the court reversed the trial court’s reliance on Section 9-503 in voiding the listing agreements and sent the case back to the lower court for further proceedings.
Callies v. O’Neal, No. 34968, 2009 WL 1929326 (Idaho July 7, 2009). [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].
Editor's Note: NAR provided legal support to the Broker and Brokerage, per the recommendation of NAR's Legal Action Committee.