Turnpike Motors, Inc. v. Newbury Group, Inc.

528 N.E.2d 1176, 403 Mass. 291

• Court: Massachusetts Supreme Judicial Court
• Decided: October 6, 1988
• Status: Published

Opinions

Wilkins, J.

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.”³ The broker has appealed arguing that entry of summary judgment for the sellers was error. We transferred the appeal here.

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.⁴ Because before us the broker rests its claim to a commission on the sale price of the real estate solely on a theory of estoppel, we need not decide whether, in the normal course, a broker must be licensed if he is to receive a commission on the full sale price of a business when the assets include an interest in real estate.⁵

1. The broker argues that it is at least entitled to a commission on the sale prices of the personal property involved in each transaction. There is no difficulty in determining those sale prices. ⁶ The broker’s argument is that, even if the statute bars it from collecting a commission on the real estate, it is entitled to recover a commission on the personal property. In deciding this issue we receive little assistance from other jurisdictions because of the differences in the applicable statutes, the peculiar facts of given cases, and the lack of uniformity of the results.⁷

In selling the personal property of the dealerships, the broker was not acting as a real estate broker. Section 87RR forbids the collection by one without a license of a fee for services as a real estate broker, that is, for services in selling an interest in real estate. The fact that a sale of real estate is only an incidental part of some other transaction does not matter under § 87RR. An unlicensed broker still is not entitled to collect a commission on the real estate. But § 87RR does not bar the collection of a commission on the sale of personal property. The broker was entitled to go to trial on the question whether it was entitled to a commission on the sale price of the personal property.

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 broker, the sellers’ representative answered that the absence of a license would not be a problem. The broker claims that the sellers agreed that the sales of the two businesses would be in the form of sales of corporate stock. It further claims that it easily could have obtained, as it now has, a real estate broker’s license if it had known one would be needed and that the sellers restructured the sales as sales of assets rather than of stock for the purpose of defeating the broker’s commissions.

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.

3. The summary judgment for the plaintiff sellers is vacated, and the case is remanded to the Superior Court for further consideration.

So ordered.

3 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.

4 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 . . . .”

5 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 all its assets. It is perhaps not a coincidence that when the statutes concerning the registration of real estate brokers and salesman were adopted four years after the Morad opinion (see St. 1957, c. 726, § 2), the provision concerning the inapplicability of § 87RR to stock transactions was included, a provision not commonly found in such licensure statutes in other jurisdictions.

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.

6 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.”

7 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 Instrumerits Corp., 89 N.J. 286, 293-294 (1982). In deciding that case as it did, the New Jersey court abandoned a rule that denied any commission to an unlicensed broker in the sale of a business. See Kenney v. Paterson Milk & Cream Co., 110 N.J.L. 141 (1933). The former New Jersey rule may be the majority rule in this country (see Moody v. Hurricane Creek Lumber Co., 290 Or. 729, 738 [1981]; Annot., 82 A.L.R.3d 1139 [1978]), but the count is obscured by the fact that many States, unlike Massachusetts, expressly include the sale of a business within the statutory definition of a broker’s activities that must be licensed (see statutes cited in Kazmer-Standish Consultants, Inc. v. Schoeffel Instruments Co., supra at 291 n.l).