Harry B. Lucas Co. v. Grand Dallas Warehouse: Explicit Agreement Obligating Buyer to Pay Commission Is Required for Broker's Commission Claims

A federal court in Texas has considered whether a purchaser who assumed a lease and its duty to pay a broker's commission also assumed the obligation to pay the broker a commission upon renewal of the lease.

Harry B. Lucas Company ("Brokerage") entered into an "exclusive listing agreement" ("Listing Agreement") with City Warehouse ("Seller") for warehouse space owned by the Seller. The Listing Agreement provided the payment method for the Brokerage's commission, and also stated that the Brokerage would receive a commission for all lease renewals.

In 1990, the Brokerage obtained Buell Door Company ("Tenant") as a tenant for the Seller's warehouse ("Lease"). The Lease was for a ten-year period and referenced the Brokerage as entitled to receive a commission payment under the Lease, but did not mention renewals.

In 1997, the Seller sold the warehouse to Grand Dallas Warehouse, LLC ("Buyer"). The Buyer assumed the Lease for the Seller's warehouse. The Buyer continued paying the Brokerage a commission pursuant to the Lease. A year prior to the expiration of the Lease, the Tenant signed a lease renewal with the Buyer. The Buyer stopped paying the Brokerage a commission once the Lease expired, refusing to pay the Brokerage a commission for the renewal. The Brokerage filed a lawsuit, seeking payment of a commission for the renewal. Both parties filed motions seeking judgment in their favor.

The United States District Court, Northern District of Texas, ruled that the Buyer did not owe the Brokerage a commission for the Tenant's lease renewal. The Buyer argued to the court that the Texas license law required that all commission agreements be reduced to writing, and no action can be brought for a commission unless there is a written commission agreement. The Brokerage argued that the Buyer had assumed the Listing Agreement, and thus was obligated to pay a commission for renewals.

Looking at all of the documents in question, the court found that the Buyer had only assumed the Lease and not the Listing Agreement. The assignment agreement stated that the Buyer assumed "any and all leases, franchises, licenses, occupancy agreements, or other agreements", and further provided that the Buyer agreed "to pay and perform all terms, covenants, conditions and obligations" of the Seller. The court found that in order for a purchaser to be obligated to pay a commission, the purchaser must "expressly assume such liability." The court found that nowhere had the Buyer expressly assumed the Listing Agreement and its obligations to pay a commission for renewals. Since the Lease did not contain any language about commission payments to the Brokerage for a renewal, the court ruled that the Buyer had no obligation to pay the Brokerage a commission for the renewal. Therefore, the court determined that there was no agreement which explicitly required the Buyer to pay a commission to the Brokerage and so entered judgment in favor of the Buyer on the Brokerage's commission lawsuit.

The Brokerage's final argument was that the Buyer could not contest its obligation to pay the Brokerage a commission for the renewal because it had already made forty commission payments to the Brokerage. The court rejected this argument, finding that none of those commission payments were made pursuant to the renewal, and further that Texas law requires that any commission agreement be reduced to writing. Since there was no written commission agreement for the renewal between the Buyer and the Brokerage, the court rejected this argument as well. Thus, the court entered judgment in favor of the Buyer.

Harry B. Lucas Co. v. Grand Dallas Warehouse, No. 3:01-CV-0938-M, 2002 WL 1489504 (N.D. Tex. July 9 2002). [Note: This opinion was not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]

Advertisement

The CIPS Designation

The CIPS designation provides NAR members with the knowledge, research, network, and tools to globalize their business.