Statutory Interpretation – Real Estate Broker Commission

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WI Supreme Court

Case Name: Mark McNally v. Capital Cartage, Inc.  

Case No.: 2018 WI 46

Focus: Statutory Interpretation – Real Estate Broker Commission

The petitioner, Capital Cartage, Inc. (Capital Cartage), seeks review of an unpublished decision of the court of appeals affirming the circuit court’s determination that real estate broker Mark McNally (McNally) is entitled to a commission pursuant to the listing contract between the parties. Contrary to the court of appeals’ determination, Capital Cartage asserts that McNally is not entitled to a commission because the offer to purchase McNally procured contains substantial variances from the seller’s terms as set forth in the listing contract.

Specifically, Capital Cartage argues that three terms in the offer to purchase constitute substantial variances from the listing contract. Among these is a dispositive condition that Mary Hermanson, one of Capital Cartage’s owners, continue to work for the business without pay for an undetermined period of time following the sale.

Capital Cartage further asserts that the court of appeals erroneously interpreted Libowitz v. Lake Nursing Home, Inc., 35 Wis. 2d 74, 150 N.W.2d 439 (1967). It alleges that Libowitz did not, as the court of appeals concluded, alter the standard for determining whether a substantial variance exists as set forth by Kleven v. Cities Serv. Oil Co., 22 Wis. 2d 437, 126 N.W.2d 64 (1964). Therefore, it contends that McNally is not entitled to a commission because he did not procure an offer to purchase “at the price and on substantially the terms set forth” in the listing contract.

We conclude first that Kleven remains the law of this state with regard to determining whether a substantial variance exists between a listing contract and an offer to purchase. Although a term of the offer to purchase that is directly in conflict with the listing contract is a substantial variance, it is not the sole manner in which substantial variance may be shown. Kleven offered direct contradiction as an example, not as a limitation.

Applying this standard, we conclude that in the context of the sale of a business with real estate where the sale did not go through, the condition in the offer to purchase that Mary Hermanson continue to work for Capital Cartage without pay constitutes a substantial variance from the listing contract as a matter of law. Consequently, we determine that McNally did not procure an offer to purchase “at the price and on substantially the terms set forth” in the listing contract and therefore is not entitled to a commission. Accordingly, we reverse the court of appeals.

Reversed

Concur:

Dissent: ZIEGLER, J., dissents (opinion filed).

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.