Turnpike Motors, Inc. v. Newbury Group, Inc.
Turnpike Motors, Inc. v. Newbury Group, Inc.
Opinion of the Court
We conclude first that, on the sale of a business, a person not licensed as a real estate broker may recover an agreed-upon commission on the sale price of the personal property even if that person may not recover a commission on the sale price of the real estate. We next decide that the sellers were not entitled to summary judgment on the broker’s claim that the sellers were estopped to deny the broker a commission on the sale price of the entire business. The broker claimed that the sellers told it that they planned to sell corporate stock, rather than assets, and that the broker would not need a real estate license. We accept that the sellers would have owed the full commission of ten per cent, based on written commission agreements, if corporate stock (and not assets) had been sold.
This case involves the sale of two automobile dealerships, one in Boston and one in Cambridge. The assets to be sold included, in each instance, an interest in real estate and both tangible and intangible personal property. The sellers commenced this action in May, 1984, seeking to enjoin the broker from interfering with the sale of the two dealerships pursuant to purchase and sale agreements entered into in March and April of 1984, respectively, and seeking a declaration that, under G. L. c. 112, § 87RR (1986 ed.), the broker was not entitled to any commission on either sale. The sellers obtained a preliminary injunction barring the broker from interfering with the sales. Somewhat later, a judge of the Superior Court allowed the sellers’ motion for summary judgment, ruling that because the broker was not licensed as a real estate broker it could not recover “a commission for the sale of properties involving real estate.”
The sellers argue that G. L. c. 112, §§ 87PP and 87RR (1986 ed.), each of which was inserted by St. 1957, c. 726, § 2, bar the broker from recovering any commissions in this case. Section 87RR provides that one who acts as a real estate broker “directly or indirectly, either temporarily or as an incident to any other transaction, or otherwise” must be licensed and that no one shall recover in any action “for compensation for services as a [real estate] broker within the commonwealth unless he was a duly licensed broker at the time services were performed.” There is no doubt that the commission agreements on which the broker relies contemplate the payment of commissions on the sale of interests in real estate. For the purpose of this case, we accept the sellers’ argument that the broker’s efforts in seeking to sell the real estate interests made it a real estate broker for the purposes of § 87RR and that § 87RR bars the broker from recovering on the sale price of interests in real estate.
This is not a case in which whatever illegality there may have been in the broker’s failure to be licensed as a real estate broker should taint the broker’s claim to a commission on the sale of the personal property. The broker’s omission was relatively minor in view of the fact that it could have easily obtained a license because one of the officers was an attorney. See G. L. c. 112, § 87SS (1986 ed.). The broker’s omission had no bearing on performance of the contract, and, if collection of the entire commission is barred, the forfeiture by the broker and windfall to the sellers would be substantial. These are relevant factors in considering the consequences that should attach to nonlicensure. See Town Planning & Eng’g Assocs. v. Amesbury Speciality Co., 369 Mass. 737, 745 (1976).
2. We come then to the broker’s claim that the sellers should be estopped to deny the broker’s right to recover a full commission. The broker’s claim is based on its assertion that, when it told a representative of the sellers that it was not a real estate
If the facts are as the broker claims, the sellers would be estopped to deny the broker a full commission. There is, of course, the question whether the broker reasonably relied on the sellers’ representations. See O’Blenes v. Zoning Bd. of Appeals of Lynn, 397 Mass. 555, 558 (1986), and. cases cited. But we cannot fairly say that, as a matter of law, on the broker’s evidence, the broker’s reliance was unreasonable. Our unwillingness to permit § 87RR to bar full recovery of a commission if the broker reasonably relied on the sellers’ representations (that the sales would be of corporate stock and that obtaining a real estate broker’s license would be unnecessary) is consistent with our view of other statutory provisions in similar circumstances. Thus, in certain circumstances, one who has caused a plaintiff to delay in bringing an action is estopped to rely on the statute of limitations to bar recovery. See LaBonte v. New York, N.H. & H, R.R., 341 Mass. 127, 131 (1960); MacKeen v. Kasinskas, 333 Mass. 695, 698 (1956).
The broker’s estoppel claim depends, of course, on its right to collect a full commission if the sales had been of corporate stock. Section 87QQ makes § 87RR inapplicable to one who buys, sells, or otherwise deals in stock. Thus § 87RR’s restriction on an unlicensed broker’s right to recover a commission on the sale of real estate is inapplicable.to an unlicensed business broker’s claim for a commission on the sale of stock in a corporation owning an interest in land (as almost all operating corporations must). We observed earlier (see n.5) that the provision in § 87QQ concerning the inapplicability of a § 87RR to sales of stock may have been intended to make clear that for the purposes of obtaining a commission the sale of any or all of the stock in a corporation is not a sale of an interest in land.
So ordered.
This language might be read as leaving unanswered the question of the broker’s right to a commission on the sale of personal property. Summary judgment was entered for the sellers, however, on their complaint which sought to bar the recovery of any commission.
Section 87PP defines a “[rjeal estate broker” as “any person who for another person and for a fee . . . assists or directs in the procuring of prospects or the negotiation or completion of any agreement or transaction which results or is intended to result in the sale, exchange, purchase, leasing or renting of any real estate . . . .”
The argument that a full commission is collectible would rely on implications that the Legislature did not intend § 87RR licensure requirements to apply to the sale of a business, a situation in which the seller is typically more sophisticated than is a homeowner. The argument that § 87RR is inapplicable would point (a) to the Legislature’s separate treatment of business brokers (see G. L. c. 259, § 7 [1986 ed.], requiring enforceable commission agreements of business brokers to be in writing and signed) and (b) to G. L. c. 112, § 87QQ (1986 ed.) which states that § 87RR does not apply to a person dealing in stock and thus suggests that the sale of a business, or at least of a corporation or its assets, is not within the scope of § 87RR. See Morad, v. Haddad, 329 Mass. 730, 735 (1953), treating the sale of the stock of a corporation as the same in legal effect as the sale of
The contrary argument would point to § 87RR as showing that a broker is still acting as a real estate broker as to the sale of the real estate when personal property also is involved in the sale. See Business Brokers Int’l Corp. v. Roderick, 24 Mass. App. Ct. 957, 958 (1987), which in dicta states that § 87RR bars collection of a commission by an unlicensed broker who sold a business even if the real estate component was only incidental to the sale. The Roderick opinion did not consider the difference between a commission on the real estate and one on the personal estate, and we do not regard its dicta as commenting on an unlicensed broker’s right to a commission on the sale price of personal property.
In one sale, the real estate and personal property were subject to separate purchase agreements (and had separate purchasers). In the other, the purchase and sale agreement clearly identified the means for determining the sale price for the personal property, and it is not clear that any value was assigned to the sellers’ transfer of its rights under its lease (which contained an option to purchase the business premises).
We note that in the latter purchase and sale agreement, the seller agreed that at the closing it would pay the broker the full amount of the commission due it “for its services in connection with this transaction.”
In other jurisdictions, courts have reached different conclusions as the right of an unlicensed broker to a commission on the sale of a business. Under the so-called New York rule, an unlicensed person who acts as a broker in the sale of a going business (stock or assets) may recover a commission on the entire transaction unless the sale of real estate is the dominant aspect of the transaction. See Weingast v. Rialto Pastry Shop, Inc., 243 N.Y. 113 (1926); Meyer v. Jova Brick Works, Inc., 38 A.D.2d 615, 616-617 (N.Y. 1971). In a similar situation, New Jersey allows a business broker to recover a commission for the sale of personal property if the personalty can be separately valued, without regard to its value relative to the realty. See Kazmer-Standish Consultants, Inc. v. Schoejfel Instru
Dissenting Opinion
(dissenting). This case presents the issue whether the defendants, not licensed as real estate brokers, may recover commissions for brokering two transactions. One of the transactions is the sale of an automobile dealership in Cambridge (Agreement I), and the other is the sale of an automobile dealership in Boston (Agreement II). The parties to Agreement I are the plaintiffs Gene’s Foreign Car Service, Inc., Eugene F. Looney, John A. Ryan, and James B. Ryan, as sellers, and Nai Nan Ko, as buyer. Agreement I provides for the sale of certain tangible and intangible personal property. It also provides that, at the closing, the individual plaintiffs and the buyer will execute and deliver a lease and option to purchase agreement in specified form covering the real estate on which the dealership is located. The individual plaintiffs are the sole owners of that real estate. Paragraph 7 (c) of Agreement I expressly conditions the buyer’s obligation to consummate the transaction on the individual plaintiffs’ compliance with their promise to deliver the lease and option agreement.
The parties to Agreement II are the plaintiff, Turnpike Motors, Inc., as seller, and HLT, Inc., as buyer. Both parties’ obligations are expressly conditioned on the seller and the buyer’s nominee, on or before the closing date, having executed an irrevocable purchase and sale agreement for the real estate on which the dealership is located. A second condition precedent to the buyer’s obligation is the delivery of the individual plaintiffs to the buyer’s nominee of an option entitling the nominee to purchase an apartment building which is adjacent to the locus of the dealership and is owned solely by the individual plaintiffs. It is perfectly clear from the agreements that each transaction is indivisible, that is, there was no deal without the transfer of real estate.
The court sweeps all of this aside by declaring, ante at 295, that, “[i]n selling the personal property of the dealerships, the broker was not acting as a real estate broker.” The court’s assertion is plainly wrong. In selling the personal property of the dealerships, the defendants were indeed acting as real estate
In support of its holding, the court states that any illegality on the part of the defendants was minor, and that a holding barring recovery would result in a substantial windfall to the plaintiffs. The court characterizes these factors as relevant to any consideration of the consequences that should attach to nonlicensure, ante at 295, citing Town Planning & Eng’g Assocs. v. Amesbury Specialty Co., 369 Mass. 737, 745 (1976). Those factors are not relevant to the present case because it is not for the court to say what the consequences of nonlicensure should be. The Legislature has spoken to that. Surely, the court is not free to ignore statutorily provided consequences of statutory violations. Town Planning & Eng’g Assocs. v. Amesbury Specialty Co., supra, does not say otherwise. In that case, the court held that the fact that the person in charge of the plaintiff corporation was not a “professional engineer . . . holding a certificate of registration,” as required by G. L. c. 112, § 81R (/), did not prevent the corporation from recovering for engineering services it had performed. The court reasoned as follows: “If there was a violation here, it was punishable as a misdemeanor under the statute. Violation of the statute, aimed in part at least at enhancing public safety, should not be condoned. But we have to ask whether a consequence, beyond the one prescribed by statute, should attach . . . .”Id. at 745 (emphasis added) (footnote omitted). In afoot-
The court does not stop with the conclusion that the defendants are entitled to go to trial on the question of their right to a commission based on the price of the personal property. Rather, the court concludes that the defendants are entitled to go to trial also on the question whether the plaintiffs are estop-ped from relying on the statute to bar recovery of a commission based on the price not only of the personal property to be sold but of the real estate to be sold or leased as well. In my view, the application of estoppel principles is entirely inappropriate.
The defendants say that the plaintiffs misled them by representing that no real estate broker’s license would be necessary because the deals would be structured as sales of corporate stock, and thus real estate would not be involved. As the court recognizes, ante at 296, reasonable reliance is essential to estoppel. O’Blenes v. Zoning Bd. of Appeals of Lynn, 397 Mass. 555, 558 (1986). It seems clear.that the defendants, as a matter of law, could not reasonably have relied on the plaintiffs’ alleged representations that the defendants would not require real estate brokers’ licenses because of the form of the contemplated transactions. With respect to the Cambridge dealership, the corporate dealer does not own the real estate to be sold. The real estate belongs to the individual plaintiffs, and therefore no transfer of corporate stock would shift control of the real estate to the buyer. The transaction, therefore, clearly depends on a sale or lease of real estate, and the defendants could not reasonably have relied on advice that no broker’s license would be required. Similarly, Agreement II, relative to the Boston dealership, was contingent on the delivery by the individual plaintiffs to the buyer of an option to purchase real estate belonging only to those plaintiffs. A sale of corporate stock would not have shifted control of that real estate to the buyer.
My conclusion that the defendants’ position would not have been advanced by the dealership sales being structured as sales of corporate stock does not conflict, it seems to me, with the exception to § 87RR found in § 87QQ. Section 87QQ provides that § 87RR shall not apply to “a person buying, selling or otherwise dealing in any stock, bond or other security. . . .” For the purposes of the real estate broker’s licensing statute, a sale of all the stock in a corporation with real estate holdings must be treated not as a stock deal but rather as a sale of all the corporation’s assets, as in Morad, supra. Section 87QQ
I make one last observation with respect to estoppel. It is, of course, true that a defendant may be found to have waived or be estopped to rely on a statute of limitations defense. A party for whose benefit a statute has been enacted, such as a defendant in a civil case, may relinquish that benefit. It cannot rightly be said, however, that G. L. c. 112, §§ 87PP and RR, were enacted for the sole benefit of sellers of real estate. The court should not permit the public interest sought to be advanced by §§ 87PP and RR to be relinquished or thwarted by representations made by sellers to unlicensed brokers of real estate.
I would remand this case to the Superior Court for the entry of a declaration that the defendant brokers are not entitled to commissions.
Reference
- Full Case Name
- Turnpike Motors, Inc., & Others vs. Newbury Group, Inc., & Another
- Cited By
- 14 cases
- Status
- Published