Share
A Minnesota appellate court has ruled on whether a buyer's representative could challenge the findings of a REALTOR® arbitration proceeding.
Nancy Ulwelling ("Listing Broker") listed a home for sale in the Austin Multiple Listing Service ("MLS"). The Listing Broker offered to pay a specified commission amount to any member of the MLS who produced a buyer for the property. Tammara Lawhead of Tammy Lawhead Homes, Inc., ("Buyer's Representative") produced a buyer for the property. The buyer's offer was subject to the buyer's obtaining financing. After the offer was made, the Listing Broker informed the Buyer's Representative that the sellers had defaulted on their mortgage, and so the mortgage lender had taken possession of the property and would have to accept the buyer's offer. The bank accepted the buyer's offer and a date for closing was set by the parties. However, the buyer was unable to arrange financing by the scheduled closing date and so the sale did not proceed.
Following the planned closing date, the Listing Broker told the Buyer's Representative that she and another party were considering buying the property and renting it to the buyer until the buyer was able to complete the purchase of the property. The Listing Broker asked the Buyer's Representative whether she would be interested in purchasing the property and selling it to the buyer. When the Buyer's Representative responded that she was not interested, the Listing Broker informed her that she would not receive a commission if the Listing Broker purchased the property. Eventually, the Listing Broker purchased the property and rented it to the buyer until the buyer obtained financing, at which time the property was sold to the buyer. The Buyer's Representative attempted to collect her commission, but the Listing Broker refused to pay. Since both parties were REALTORS®, the dispute was submitted to binding arbitration before the Austin Board of REALTORS® ("Board"). The Board's arbitration panel considered whether the Buyer's Representative was the procuring cause of the sale and determined that she was not, denying the Buyer's Representative her commission. The Buyer's Representative filed a lawsuit challenging the decision of the arbitration panel, and the trial court upheld the Board's arbitration decision by dismissing the lawsuit. The Buyer's Representative appealed.
The Minnesota Court of Appeals affirmed the ruling of the trial court. In Minnesota, an arbitrator is the "final judge of both law and fact and the arbitrator's conclusions of law and findings of fact are binding, even if erroneous." To challenge a dismissal by a trial court, the court stated that the Buyer's Representative must demonstrate that she made allegations in her lawsuit which meet the minimum requirements for stating a valid claim. The Buyer's Representative had alleged in her lawsuit that she was now bringing claims for breach of contract, wrongful interference with contract relations, and fraud, arguing that the arbitration panel had only considered the issue of procuring cause and so the Buyer's Representative had been unable to make these arguments earlier. The court rejected the Buyer's Representative's arguments because, in order to consider whether the Buyer's Representative could recover under any of those causes of action, the court would still need to determine that she was the procuring cause of the sale. The court then reviewed each of the individual claims made by the Buyer's Representative. The Buyer's Representative argued that she was entitled to a commission pursuant to the offer made by the Listing Broker in the MLS listing. The court rejected this argument, since, as the arbitrator had determined, the Buyer's Representative did not produce an actual buyer for the property. The court also rejected the wrongful interference with a contract claims, as the contract in question was between the Listing Broker and the Buyer's Representative and the court stated that a party cannot interfere with its own contract. Finally, the court dismissed the fraud claims, as the procurement issue was decided by the arbitration panel and those findings are binding on subsequent courts. Thus, the court ruled the trial court had properly dismissed the lawsuit brought by the Buyer's Representative.
The Buyer's Representative also sought vacation of the arbitration award. In Minnesota, a court may vacate an arbitration award in very limited circumstances specified by a state statute. Some examples of when a court may vacate an arbitration award are if the award was obtained by "fraud or other undue means" or if "[t]he arbitrators exceeded their powers." The Buyer's Representative argued that the Listing Broker had failed to disclose that she was active in the Board's arbitration process, sometimes serving as an arbitrator. The court rejected this argument, citing evidence that the Board's procedural review tribunal had considered this and rejected the argument because the Listing Broker actually served on the Board's Professional Standards Committee, and that fact did not need to be disclosed to the other party. The procedural review tribunal had also found that no other partiality or misconduct had occurred. Since the Buyer's Representative did not allege any other facts to support her challenge to the rulings of the procedural review tribunal, the court affirmed its rulings. Thus, the court affirmed the rulings of the trial court upholding the REALTOR® arbitration process.
Lawhead v. Ulwelling, Hollerud & Schulz, No. C7-00-1425, 2001 WL 96159 (Minn. Ct. App. Feb. 6, 2001). [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's Legal Action Committee and the Minnesota Association of REALTORS® contributed financial support to the successful defense of the REALTOR® arbitration proceeding.