Chabbott Petrosky, Commercial REALTORS®, Inc., v. Peterson: Quantum Meruit Recovery Possible When No Written Agreement

Delaware's highest court has considered whether a listing broker could receive payment when a lease transaction occurred, rather than the sale contemplated by the listing agreement.

Robert and Bonnie Peterson ("Owners") listed a commercial property they owned for sale with George Chabbott of Chabbott Petrosky Commercial REALTORS®, Inc. ("Brokerage") after the Brokerage informed the Owners that it had had an interested buyer for the Owners' property. The Brokerage introduced Delaware Food Ventures, Inc. ("Tenant") to the Owners. The Tenant’s first offer was substantially lower than the list price, and eventually the parties entered into a long term lease for the property. While the Brokerage maintained an escrow account for the rents collected and discussed a commission with the Owners, no agreement was ever reached on a commission amount.

The Brokerage filed a lawsuit against the Owners, seeking payment of a commission from the lease transaction. The trial court determined that since there was no written agreement entitling the Brokerage to a commission from a lease transaction (the listing agreement only covered the sale of the property), the Brokerage was not entitled to a commission under either a contract theory or a quantum meruit recovery. The Brokerage appealed.

The Supreme Court of Delaware reversed the trial court and sent the case back to the lower court for additional proceedings. The rules of the Delaware Real Estate Commission ("Commission") require that "[l]isting agreements for the rental, sale, lease [of property]…shall be in writing and shall be signed by the seller or owner." Therefore, consistent with the Commission's rules as well as with past judicial decisions, attempts to enforce an oral listing agreement will be rejected as against the rules and public policy.

However, the court found that the Brokerage was also seeking recovery under a quantum meruit theory and the trial court had not considered this theory. Quantum meruit is a quasi-contractual theory that allows a party to recover the value of services rendered if the services were performed in expectation of receiving payment and the recipient of the services should have known that the other party expected to be paid. Delaware courts have allowed a broker to recover under a quantum meruit theory when these requirements have been met.

Under the facts of this case, the court ruled that the Brokerage had a strong argument for a quantum meruit recovery. First, the Brokerage had not ignored the requirement of a written agreement, as the Brokerage had obtained a signed listing agreement addressing the sale of the property. Second, the Brokerage had obtained the party who entered into the lease transaction with the Owners. Finally, the Owners had orally acknowledged that the Brokerage was entitled to some form of a commission from the transaction. Thus, the court sent the case back to the trial court for further consideration of the Brokerage's quantum meruit claims.

Chabbott Petrosky, Commercial REALTORS®, Inc., v. Peterson, 859 A.2d 77 (Del. 2004).