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A Georgia appellate court has considered whether a broker was entitled to recover a commission when there was no written brokerage agreement between the seller and the broker.
The Eastern Airline Pension Fund ("Fund") owned a 130-acre parcel of land which it retained Stanley B. Ashley, Jr. of Ben Carter Holdings, Inc. ("Listing Broker") to list for sale. The Listing Broker was contacted by Lifestyle Family, L.P. and Mansour Properties, LLC ("Lifestyle") about purchasing the property. Meanwhile, the Listing Broker received an inquiry from David Thomas of Southeastern Partners, Inc. ("Buyer's Representative") that he had a client, Unisource Worldwide, Inc. ("Unisource"), who was interested in purchasing a 30 acre tract of the property.
Since the Fund was only interested in selling the entire parcel, the Fund only negotiated with Lifestyle and eventually the parties entered into an agreement to sell the entire property to Lifestyle. Prior to the closing, the Listing Broker advised Lifestyle of Unisource's interest in the 30 acre tract, and representatives of Lifestyle instructed the Listing Broker to obtain an offer from Unisource. The Buyer's Representative submitted an offer ("Offer") to the Listing Broker, with the Offer stating that the seller would owe both the brokers' commissions at a specified rate. The Listing Broker forwarded the Offer to Lifestyle, and arranged a meeting between Lifestyle and Unisource. No agreement was reached during this meeting.
Following the closing, Lifestyle contacted Unisource to have further discussions about Unisource's interest in the property. At the meeting, the Listing Broker was not present and a representative of Lifestyle told the Buyer's Representative that the Listing Broker did not represent them and they did not intend to pay him a commission if a sale resulted from their negotiations. Lifestyle presented its counteroffer to Unisource, which included paying a much smaller commission amount to the Buyer's Representative than had been listed in the offer. The Buyer's Representative wrote a letter to Lifestyle memorializing the discussions, and also stated that he was going to inform the Listing Broker that he was working with Lifestyle and that the Buyer's Representative would pay the Listing Broker a referral fee. The Listing Broker then contacted Lifestyle about the commission issue, but nothing resulted from this conversation.
Unisource entered into an agreement to purchase the 30 acre tract of land from Lifestyle. Prior to the signing of the contract, the Buyer's Representative and Lifestyle reached an agreement on a commission amount that the Buyer's Representative would receive. The transaction closed, following which the Buyer's Representative executed a "waiver of liens." The title company placed the amount of the Buyer's Representative commission plus additional funds into escrow until the commission issue with the Listing Broker could be resolved. When the settlement negotiations failed, the title company turned the funds over to the trial court for resolution. The trial court awarded the Buyer's Representative its agreed-upon commission amount, while a jury awarded the Listing Broker half of the commission amount set forth in the Offer, finding Lifestyle breached its contract to pay a commission to the Listing Broker based on the terms of the Offer. Lifestyle appealed.
The Court of Appeals of Georgia reversed the jury verdict and sent the case back to the trial court. The court first considered Lifestyle's challenge to the jury verdict that it never agreed to the commission terms contained in the Offer and thus did not have a contract with the Listing Broker. First, the court stated that Georgia law does permit oral contracts for brokerage commissions. However, the court also found that there was no "meeting of the minds" between the Listing Broker and Lifestyle on the commission amount that the Listing Broker was to receive. Even though the parties did have extensive negotiations on the amount of the Listing Broker's commission, the parties never established an agreement for a specific amount. Since the commission amount is the essential element of a brokerage contract, the court ruled that no contract had been formed between the parties. Thus, the court ruled it was improper for the jury to award breach of contract damages to the Listing Broker, as the parties had never reached an agreement on the terms of the contract.
Next, the court considered whether the Listing Broker was barred from a quantum meruit recovery, or receiving compensation for the value of the services provided to Lifestyle. Lifestyle argued that Georgia statutes setting forth the requirements for a brokerage contract had eliminated the common, or judge-made, law on when a broker could receive a commission. The court rejected Lifestyle's argument, finding that unless a statute manifests its intent to overrule the common law, courts should not assume the statute is intended to eliminate the common law. Since the statute on brokerage contracts did not manifest an intent to overrule the common law, the court ruled that the broker could make a common law recovery for quantum meruit if he could show that he was the procuring cause of the sale.
Georgia case law defines procuring cause as the broker who shows "that negotiations for the sale were set on foot through his efforts, that he performed every service required by his employment which it was possible to perform, and that the failure on his part to personally consummate the trade was due" to interference by the party being sued for a commission. The court found that this standard still was relevant and also found that the Listing Broker had a strong argument that he was procuring cause of the sale, based on letters written by Lifestyle. Therefore, the court sent the case back to the trial court for further proceedings to consider whether the Listing Broker was the procuring cause of the sale and so entitled to a quantum meruit recovery.
The court rejected Lifestyle's argument that the Listing Broker had acted as a dual agent, finding that he had never acted on both sides of either of the transactions. The court also rejected Lifestyle’s challenge to the award to the Buyer's Representative. Lifestyle argued that the Buyer's Representative was supposed to pay the Listing Broker out of his commission, and thus it was improper for the Buyer's Representative to receive the entire amount of that commission. The court disagreed and ruled that the trial court's award was proper, as the jury had resolved all of the fact issues surrounding the parties' relationship against Liefstyle. Thus, the award to the Buyer's Representative was affirmed but the commission award to the Listing Broker was reversed and sent back to the trial court for further proceedings.
Lifestyle Family, L.P., v. Lawyers Title Ins. Corp., 568 S.E.2d 171 (Ga. Ct. App. 2002).