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A Missouri court has considered whether a real estate broker was entitled to commission amount set forth in the listing agreement or the lower amount which was paid to her pursuant to the transaction's closing documents.
Robert Sheppard ("Owner") and his siblings each had homes on various parts of a large parcel of land that they collectively owned. Vivian Kuchner ("Broker") was a neighbor to the Sheppard family for over 30 years and she developed a very close relationship with the family, being named as a trust beneficiary in some members of the Sheppard family's trusts, including the Owner's trust.
In 1979, the Broker received her real estate salesperson license and later received her broker's license in 1983. In 1987, the Owner entered into an exclusive listing agreement with the Broker for the sale of the family's properties at a price of $10 per square foot, or a total price of over $4,000,000. The listing agreement also specified that the Broker would receive a commission of 10% of the purchase price. The agreement was renewed every year from 1987-1996, although the square footage price was reduced over the years to $8 per square foot. The commission amount remained unchanged. A number of offers were submitted over the years for the Owner's property but none of the earlier proposed transactions closed for a variety of reasons.
In November 1996, the Owner entered into a sales contract for the family property. The Broker played no role in the negotiations and the sale price was significantly below that set forth in the listing agreement- around $3 per square foot. The purchase agreement also specified that the Broker would receive a 6% commission. Prior to closing, the Broker alleged that the Owner told her he would pay her the full 10% within a year from the closing. The Owner denied ever making such statements. The transaction closed, and the Broker received a 6% commission. After a year passed without any further payment by the Owner, the Broker filed a lawsuit against the Owner for the remainder of the commission set forth in the listing agreement. A jury returned a verdict in favor of the Broker, and the Owner appealed.
The Missouri Court of Appeals, Eastern Division, reversed the trial court. The Owner challenged the jury verdict on the grounds that the Broker's claims conflicted with the rules of the Missouri Real Estate Commission ("Regulations") and thus the jury verdict should be set aside for violating public policy. Specifically, the Regulations require that listing agreements must be in writing, contain all the terms and conditions of the agreement, and must be signed by the parties. The Regulations also require that a broker must give a seller a complete, accurate, and detailed closing statement which shows all material aspects of the transaction, and the broker is also responsible for reviewing the closing statement to verify its accuracy. Since the Broker did not meet the terms of the Regulations because nowhere was this post-closing payment to the Broker described, the Owner argued that the jury award to the Broker violated public policy.
Looking and the Regulations and also the legislative rationale behind the creation of such rules, the court ruled that the Broker was not entitled to recover additional commission amounts. The legislative purpose behind Missouri's real estate licensee laws is to protect the public against fraud and incompetence in real estate transactions and the Regulations attempt to carry out that purpose by requiring that all aspects of the transaction be well documented and reviewed by both parties. Here, the Broker claimed that there was an oral agreement for her to receive the higher commission found in the listing agreement, but none of the closing documents reflected this fact. Since the Broker failed to comply with the Regulations, the court ruled that the jury verdict violated public policy, and thus the court reversed the trial court's award to the Broker.
Kuchner v. Sheppard, 92 S.W.3d 160 (Mo. Ct. App. 2002).