Trammell Crow Co. No. 60 v. Harkinson

944 S.W.2d 631, 1997 WL 126862

• Court: Texas Supreme Court
• Decided: June 6, 1997
• Docket: 95-1255
• Status: Published

Opinions

ENOCH, Justice,

delivered the opinion of the Court, in which HECHT, CORNYN, SPECTOR, OWEN and BAKER, Justices, join.

The issue in this case is whether a real estate broker’s claims for tortious interference with contract and prospective business relations and civil conspiracy to tortiously interfere are barred under the Texas Real Estate License Act absent a signed written commission agreement. The court of appeals held these claims were not barred. 915 S.W.2d 28. Because we conclude that the broker’s claims for tortious interference and civil conspiracy are in essence claims to recover a commission in violation of section 20(b) of the Real Estate License Act, Tex. Rev.Civ. Stat. Ann. art. 6573a (Vernon Supp. 1997), we reverse that part of the judgment of the court of appeals and render judgment that the broker take nothing on these claims.

Patterson/McLaine Group, Inc., authorized William Jefferson Harkinson, a licensed real estate broker, to act as its exclusive representative in locating rental space for Hunt Products Company, Inc. The exclusive representation agreement between Patterson/McLaine and Harkinson expressly provided that Harkinson “will look solely to the landlord/owner for his fee....” Harkinson found suitable space on LaReunion Parkway in Dallas. The property was owned by Trammell Crow No. 60 (Crow 60) and Petula Associates, Ltd., a joint venture. Trammell Crow Dallas Industrial (Crow Industrial) managed the property.

Upon finding the property, Harkinson began negotiating his commission and a lease with Richard Strader of Crow Industrial. Strader told Harkinson that the owners of the property would pay a % percent cash commission to an outside broker who brought in a tenant for the space. Strader sent Harkinson an unsigned commission agreement providing for a 4Jé percent upfront cash commission or a commission of 6 percent of each month’s rental over the life of the lease. Harkinson redrafted the commission agreement making various changes in its terms, including providing for only a 4Jé percent up-front cash commission. He signed the revised agreement and returned it to Strader to be signed by the owners. Neither the owners nor their agent ever signed any commission agreement with Harkinson.

Harkinson negotiated a lease for over $7,000,000. Seeking to reduce its rental obligation, Dan Patterson of Patterson/McLaine, without Harkinson’s knowledge, agreed with the owners that they would pay Harkinson a commission of $30,000, considerably less than the $346,500 Harkinson would have received if he were paid a 4% percent commission. Harkinson refused the $30,000 commission and sued Crow 60, Petula, Crow Industrial, Strader and his immediate supervisor, Thomas Lieser, Petula’s parent corporation, Principal Mutual Life Insurance Company and its agent, Douglas D. Achtemeier (collectively, the Crow defendants), and Patterson/McLaine, Dan Patterson, and Hunt Products Company, Inc. (collectively, the Hunt defendants) for the loss of his commission. Harkinson alleged fraud, breach of contract, breach of the duty of good faith and fair dealing, tortious interference with contract and prospective business relations, and civil conspiracy.

All defendants moved for summary judgment, asserting that, absent a written commission agreement, Harkinson’s claims were barred by section 20(b) of the Texas Real Estate License Act (RELA). Tex.Rev.Civ. Stat. Ann. art. 6573a, § 20(b). The trial court granted summary judgment for the defendants on all claims. The court of appeals reversed the summary judgment on Harkinson’s tortious interference and civil conspiracy claims, concluding that although Harkinson lacked an enforceable commission agreement, that uneforceability was not a defense to tortious interference. 915 S.W.2d at 33. For the reasons stated below, we conclude that Harkinson’s tortious interference and civil conspiracy claims are precluded under section 20(b) of RELA

I

Section 20(b) of RELA specifically provides:

An action may not be brought in a court in this state for the recovery of a commission for the sale or purchase of real estate unless the promise or agreement on which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged or signed by a person lawfully authorized by him to sign it.

Tex.Rev.Civ. Stat. Ann. art. 6573a, § 200)).

Harkinson does not have a signed written commission agreement from anyone. He has two agreements, neither of which comport with section 20(b). He has a written exclusive representation agreement with the Hunt defendants. That agreement, though signed and in writing, simply is not a commission agreement. To the contrary, the exclusive representation agreement provides only that Harkinson must negotiate whatever commission he is to receive, if any, with the prospective lessor. Harkinson also has an oral promise from the owners to pay him a 4 Jé percent up-front commission. This agreement, though a commission agreement, is neither written nor signed by the party to be charged, the owners. Section 20(b) precludes enforcement of either of these contracts to recover a commission.

Given that his contract actions are barred by section 20(b), Harkinson asserts that section 20(b) does not preclude his tortious interference claims for two reasons. First, he asserts that his claims are not for the recovery of a commission, but for tort damages resulting from the tortious interference with his oral commission agreement and the exclusive representation agreement. Second, section 20(b) does not bar his claims, Harkinson contends, because of our decision in Clements v. Withers, 437 S.W.2d 818 (Tex.1969). In Clements, we stated that although a written commission agreement was unenforceable under section 20(b), its uneforceability did not give third parties the right to interfere with the performance of oral contracts. 437 S.W.2d at 821. We find neither proposition persuasive.

A

Harkinson’s claims, though couched in terms of a tort, are for the recovery of a real estate commission. Cf. Southwestern Bell Telephone Co. v. DeLanney, 809 S.W.2d 493, 494-95 (Tex.1991)(considering contract and tort liabilities arising from the same conduct and injury). For each cause of action stated in his petition, Harkinson alleges that the defendants’ conduct damaged him in the amount of at least $346,500, the amount of his commission had the owners paid a 4Jé percent up-front cash commission. Harkinson’s pleadings belie his arguments in this Court that his claims are not for the recovery of his commission.

Beyond the damages allegations, an examination of Harkinson’s tortious interference claims reveals the fallacy of his contention that he is seeking anything other than his lost commission.

The Oral Commission Agreement

Harkinson alleges that the Hunt defendants interfered with his oral commission agreement by knowingly and intentionally inducing Crow 60 and Petula to breach the oral commission agreement. Alternatively, Harkinson alleges that the Hunt defendants tortiously interfered with Harkinson’s prospective business relation with Crow 60 and Petula by inducing the owners not to execute Harkinson’s commission agreement. The allegation here is that but for the Hunt defendants’ conduct, Harkinson would have been paid his 4/6 percent commission. These claims unquestionably seek recovery of a real estate commission.

The Exclusive Representation Agreement

Harkinson’s claim for tortious interference with his exclusive representation agreement raises a more difficult question. Nevertheless, we conclude that this claim is nothing more than an indirect attempt to recover on his oral commission agreement.

Harkinson alleges that the Crow defendants interfered with his opportunity to be the exclusive representative to negotiate lease terms on behalf of Hunt Products. He alleges that the Crow defendants induced Patterson/MeLaine to negotiate behind his back a lease that reduced the amount of his commission. The exclusive representation agreement, however, does not require the Hunt defendants, or any party, to pay Har-kinson a commission. Accordingly, the Crow defendants’ actions did not as a matter of law interfere with any contractual right to a commission.

As we read Harkinson’s claim, he asserts that had the Crow defendants not interfered with his exclusive representation agreement, he would have been paid his commission as the exclusive representative negotiating a lease for Hunt Products. Harkinson cannot make out a claim for tortious interference by bootstrapping his unenforceable oral commission agreement onto his exclusive representation agreement. He cannot do indirectly what the law says he cannot do directly.

The most that can be said of Harkinson’s claim for tortious interference with the exclusive representation agreement is that the Crow defendants deprived Harkinson of the opportunity to act as the exclusive representative for negotiating lease terms on behalf of Hunt Products. But even this claim is illusory and wholly derivative of his unenforceable oral commission agreement. The loss of the opportunity to negotiate exclusively on behalf of Hunt Products in this instance translates only into the loss of the expectancy of receiving a commission at the end of the lease negotiations. The Legislature, in section 20(b), has nullified any such expectancy unless the broker has a signed written commission agreement. We hold that Harkinson’s claim for tortious interference with his exclusive representation agreement is in essence a claim to recover a commission in violation of section 20(b). Harkinson relies on LA&N Interests, Inc. v. Fish, 864 S.W.2d 745 (Tex.App. — Houston [14th Dist.] 1993, no writ), in which, on similar facts, the court of appeals reversed summary judgment on a broker’s claim for tortious interference with an exclusive representation agreement. For the reasons we have just expressed, we conclude that section 20(b) precludes such claims. We disapprove of LA & N to the extent that it holds otherwise and permits a claim on these facts for tortious interference with the exclusive representation agreement.

Harkinson’s claims for tortious interference with both his oral commission and exclusive representation agreements seek recovery of a real estate commission, either directly or indirectly, upon an oral commission agreement. His claims are barred by section 20(b) of RELA unless saved by some other law.

B

Harkinson argues that our decision in Clements, 437 S.W.2d at 820-21, is that other law that preserves his claims. We disagree.

In Clements, a broker had a written exclusive listing agreement signed by the landowner; the broker was to find a buyer and the landowner was to pay a commission upon the sale of the land. 437 S.W.2d at 820. The buyers induced the seller to sell the land to them without paying the broker’s commission. The broker sued the buyers for tor-tious interference with the exclusive listing agreement. Id. As a defense, the buyers asserted that the broker’s claims were barred because the exclusive listing agreement was unenforceable under the predecessor to section 20(b). Id. There, the contract was unenforceable because the written agreement did not provide sufficient means of identifying the particular land with reasonable certainty. Id. Although unenforceable for this defect as between the broker and the seller, we said that the contract’s uneforcea-bility “does not give third parties the right to interfere with the performance of oral contracts.” Id. We upheld the judgment against the buyers for tortious interference. Id. at 822.

Our decision in Clements derived, at least in part, from a subtle but critical factual distinction. In Clements, the landowner and the broker had a commission agreement evidenced in writing and signed by the party to be charged. Id. at 820. That writing violated the predecessor to section 20(b) not because the commission agreement was unwritten and unsigned, but because the writing lacked an adequate property description required by the general statute of frauds and the statute of conveyances. Id. This type of technical deficiency in a writing is different than a total absence of any signed writing.

We said in Clements that the written commission agreement, though unenforceable for failure to satisfy the statute of frauds and statute of conveyances, was not void or illegal, nor against public policy. Id. at 821. When, as in this case, there is no signed written commission agreement in the first place, public policy as expressed in section 20(b) precludes any action to recover a commission, whether sounding in tort or in contract. Tex.Rev.Civ. Stat. Ann. art. 6573a, § 20(b); see also Travel Masters, Inc. v. Star Tours, Inc., 827 S.W.2d 830, 833 (Tex.l991)(contract unenforceable on grounds of public policy cannot form the basis of an action for tortious interference.)

We also said in Clements that “to prevent fraud by those who would misrepresent verbal promises, the statutes require written proof in certain cases before performance can be enforced in the courts.” 437 S.W.2d at 821. Unlike the present case, the promise enforced in Clements was not oral and therefore was not subject to misrepresentation. The commission to be paid was spelled out in a signed writing. Harkinson’s claims against the Hunt and Crow defendants necessarily entail proof of an oral commission agreement between Harkinson and the Crow defendants. The obligation to pay and the amount of that commission are subject to misrepresentation, precisely the evil the Legislature intended to eliminate in section 20(b).

Our holding in Clements should be limited to its facts. While sympathetic to Harkin-son’s claims, those sympathies do not permit us to ignore the Legislature’s unequivocal expression of intent set out in section 20(b). The Legislature was quite explicit: a broker may not recover a commission unless the commission agreement is in writing and signed by the party to be charged. Tex.Rev. Civ. Stat. Ann. art. 6573a, § 20(b). Were we to expand Clements to cases where there is no signed written commission agreement in the first place, we would by judicial fiat eviscerate section 20(b). We decline to extend Clements to the tortious interference claims of a broker who asserts his or her claim for a commission absent a signed written commission agreement.

We hold that Harkinson’s claims for tor-tious interference with contract and prospective business relations are precluded by section 20(b) of RELA Because section 20(b) bars Harkinson’s tortious interference claims, his claims for conspiracy to commit tortious interference likewise fail. See Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex.1983). The trial court properly rendered summary judgment against Harkinson on his tortious interference and conspiracy claims.

II

In his cross-application, Harkinson argues that the court of appeals erred in affirming summary judgment on his promissory estop-pel claim. Harkinson contends that the Crow defendants may not rely on and benefit from section 20(b) as a defense because Strader repeatedly promised Harkinson that the owners would sign the commission agreement and Harkinson relied on these promises. Harkinson relies on our decision in “Moore” Burger, Inc. v. Phillips Petroleum Co., 492 S.W.2d 934, 937-38 (Tex.1972), where we recognized the doctrine of promissory estoppel as an exception to the statute of frauds.

In “Moore” Burger, a tenant was induced to refrain from bidding on the purchase of certain property by individuals who promised to lease the property to the tenant if they purchased the property. The tenant signed an agreement to lease and a lease, but the purchasers of the property never did, though they had promised to do so. Instead, the purchasers sold the property to a third party, who refused to honor the lease. We held that summary judgment for the purchasers was improper because the evidence raised a fact issue as to whether enforcement of the statute of frauds would itself plainly amount to a fraud. Id. at 938.

“Moore” Burger is not dispositive. “Moore” Burger considered the application of promissory estoppel against the general statute of frauds, now Tex Bus. & Com.Code § 26.01, not section 20(b) of RELA. We consistently have refused to erode section 20(b) with the same exceptions as may render oral contracts within the general statute of frauds enforceable. In Landis v. W.H. Fuqua, Inc., 159 S.W.2d 228 (Tex.Civ.App.— Amarillo 1942, writ ref d), the plaintiffs sued to recover a commission on an oral contract, asserting that they should recover the commission, despite the statute’s writing requirement, on a theory of quantum meruit. We rejected the plaintiffs’ contentions, concluding that to permit recovery of a commission on a theory of quantum meruit would in effect render the statute requiring a written commission agreement a nullity. Landis, 159 S.W.2d at 230-31. Quoting from other authority, we said:

From its very nature a claim for commission cannot be made until earned. The sale is made, or the agent procures the purchaser ready and able to buy, and not until then does the right to the commission accrue. It accrues by virtue of a contract express or implied. But the statute says that no such contract shall be valid unless in writing. To hold that performance takes a claim of this character out of operation of the statute would, in our opinion, leave nothing for the statute to operate on.

Id. at 231 (citing Weatherhead v. Cooney, 32 Idaho 127, 180 P. 760, 761 (1919)).

We reached the same conclusion more recently in Boyert v. Tauber, 834 S.W.2d 60 (Tex.1992). There, a broker sued to recover a commission on a written agreement that did not identify the broker with the specificity section 20(b) requires. We held that the doctrine of partial performance would not render the agreement enforceable. Id. at 63-64. To hold otherwise would be in direct opposition to the expressed will of the Legislature and would unduly expose the public to fraudulent claims for commissions. Id. at 64.

Following Boyert and Landis, we decline to hold the doctrine of promissory estoppel is an exception to section 20(b) of RELA. Promissory estoppel generally is a defensive doctrine in that it estops a promisor from denying the enforceability of the promise. Wheeler v. White, 398 S.W.2d 93, 96 (Tex.1965). It may apply when there is a promise that the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, and does induce such action or forbearance, if injustice can be avoided only by enforcement of the promise. “Moore” Burger, 492 S.W.2d at 937 (citing Restatement (Second) of ContRacts § 90 (1979)).

As a licensed real estate broker, Harkin-son cannot act or forbear from acting in reliance on anything less than a signed written commission agreement. When a broker does so and relies on a promise to sign a written agreement that would satisfy section 20(b), the broker inevitably does so at his or her own peril. Section 20(b) is clear and unequivocal, and the courts have been strict in adhering to its requirements. We continue that adherence today.

* * * * *

The trial court properly rendered summary judgment that Harkinson take nothing. We reverse that part of the court of appeals’ judgment reversing summary judgment on Harkinson’s tortious interference and civil conspiracy claims and render judgment that Harkinson take nothing from the Crow defendants and Dan Patterson. We affirm the remainder of the court of appeals’ judgment. As neither Hunt Products Company, Inc. nor Patterson/McLaine Group perfected an appeal in this Court, the court of appeals’ judgment is final as to these parties.

GONZALEZ, J., filed an opinion concurring in part and dissenting in part, in which PHILLIPS, C.J., and ABBOTT, J., join.