Commercial Broker Keeps Commission

Read the full decision: Berardine v. Weiner

Pennsylvania federal court rules that the broker’s alleged agreement to reduce his commission was never incorporated into the purchase agreement and so the buyer could not claim a portion of the broker’s commission.

In 2015, a mother and her son (“Buyers”) began looking to purchase a commercial property in Center City, Philadelphia.  The Buyers retained a commercial broker (“Broker”) to assist in their search, and he located an office building that interested the Buyers which was listed for $5.5 million.  After the Buyers made an offer below the list price, the seller countered with a $6 million offer and said the offer would expire in 24 hours.

Angered by the seller’s price increase, the Buyers accused the Broker of not representing them properly during negotiations and asked the Broker to reduce his commission by half.  The Broker negotiated a slightly higher commission, and the Buyers and the Broker agreed that the Broker would give nearly half of his commission to the Buyers at closing.  The commission agreement was never reduced to a writing.  The Buyers then accepted the Sellers offer to purchase the property at $6 million.

As the closing neared, the transaction settlement sheet was circulated amongst the parties.  The Buyers noticed that the Broker’s commission sharing arrangement was not noted on the settlement sheet and so told the Broker that the sheet needed to be revised.  The Broker ignored this request as well as subsequent requests.  Three days before closing, the Broker told the Buyer that he was not going to honor the commission reduction agreement.  The closing occurred as scheduled and the Broker received the full commission amount.

Following the closing, the Buyers filed a lawsuit against the Broker seeking the portion of the commission that the Broker had agreed to rebate to them.  The Broker moved to dismiss the lawsuit.

The United States District Court for the Eastern District of Pennsylvania dismissed the Buyer’s lawsuit.  Among other things, the Broker argued that the parol evidence rule barred the Buyer’s claims.  The parol evidence rule bars pre-contractual agreements when these agreements are not incorporated into the final agreement, unless one of the exceptions to the rule is successfully demonstrated.

The court agreed that the parol evidence rule barred the Buyers’ lawsuit.  The Broker argued that the sale agreement barred the oral agreement to split the commission with the Buyers, as the sale agreement directed payment of the entire commission to the Broker.  The Buyers argued that the commission rebate was a separate agreement and so not barred by the parol evidence rule.  The court determined that since the Broker’s agreement to reduce the commission was integral to their decision to enter the transaction, the Buyers should have insisted the commission rebate be included in the purchase agreement.  Since the agreement was not included, the parol evidence rule barred the Buyers from raising this argument and so the court dismissed the Buyers’ lawsuit.

Berardine v. Weiner, No. CV 16-864, 2016 WL 3997244 (E.D. Pa. July 26, 2016).  [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.]