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Grommet v. Newman

December 10, 2009

DEAN GROMMET, MALINDA GROMMET, HUSBAND AND WIFE, AND MICHELLE COSTI, APPELLANTS (DEFENDANTS),
v.
BLAIR NEWMAN, D/B/A NEWMAN REALTY, APPELLEE (PLAINTIFF).
BLAIR NEWMAN, D/B/A NEWMAN REALTY, APPELLANT (PLAINTIFF),
v.
DEAN GROMMET, MALINDA GROMMET, HUSBAND AND WIFE, AND MICHELLE COSTI, APPELLEES (DEFENDANTS).



Appeal from the District Court of Platte County The Honorable John C. Brooks, Judge.

The opinion of the court was delivered by: Hill, Justice.

Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.

[¶1] Blair Newman, dba Newman Realty (Newman), initiated this litigation by filing his complaint in the district court on June 19, 2006. Newman asserted that he was owed a real estate commission by Dean Grommet [Grommet], in accordance with the terms of a real estate listing agreement between them.*fn1 Newman also sought an award of attorney's fees from Grommet as provided for in the listing agreement, if he was successful in his action. It enhances the clarity of our opinion to note at this juncture that the real estate sale at issue here affected a large ranch property owned by Grommet, and that the Wyoming National Guard (WNG) was the purchaser. That ranch was contiguous with existing WNG properties near Guernsey.

[¶2] On April 8, 2008, the district court entered its judgment awarding Newman damages in the amount of $537,000.00, plus prejudgment interest of 7% per annum from July 10, 2006, until the judgment was entered, as well as post judgment interest of 10% per annum from the date the judgment was entered until it was paid in full. The district court declined to award attorney's fees in Newman's favor. In Case No. S-08-0148, we will affirm the district court's judgment with respect to the damages awarded to Newman. In Case No. S-08-0149, we reverse the district court's judgment insofar as it declined to award attorney's fees to Newman and we remand to the district court with directions that it award reasonable attorney's fees to Newman in accordance with the contract.

ISSUES

[¶3] In Case No. S-08-0148, Grommet raises these issues:

A. Whether the district court erred when it found that [Grommet] acted in bad faith toward [Newman] where [Grommet] acted in full accordance with the parties' real estate contract.

B. Whether the district court denied [Grommet] procedural due process when it imposed liability for breach of the implied covenant of good faith and fair dealing after ruling, during trial, that this case was not being tried on the covenant of good faith and fair dealing.

C. Whether the district court erred when it ruled that the parties' real estate contract was not void and unenforceable for [Newman's] failure to provide and obtain the statutory brokerage disclosures.

D. Whether [Newman] committed fraud on [Grommet] and the Wyoming Real Estate Commission with his redacted 2003 disclosure statement.

E. Whether the district court erred when it failed to award [Grommet] any damages for [Newman's] wrongful filing of a Lis Pendens against [Grommet's] ranch.

F. Whether the district court erred in finding that [Newman] did not breach his fiduciary duties to [Grommet] where, as here, the undisputed evidence showed otherwise.

G. Whether the district court erred when it rejected [Grommet's] counterclaims, and whether [Grommet is] lawfully entitled to compensatory damages and [his] attorney's fees under the real estate contract and the common law.

Newman essentially conforms his statement of the issues to that articulated by Grommet for this appeal.

[¶4] In his reply brief, [Grommet] asserted that these new issues were raised by Newman in his brief for this case:

A. Newman makes numerous misrepresentations and material omissions in his brief which must be corrected to avoid injustice.

B. Newman's misstatements, in his brief, as to the reasons he failed to obtain a signed brokerage disclosure from [Grommet] in August 2005, warrant reversal and entry of judgment for [Grommet].

C. Sellers who honor the terms of their express contracts do not act in bad faith.

1. [Grommet was] permitted and authorized by [his] CONTRACT with Newman to hire subsequent brokers after expiration of Newman's listing period.

2. Newman cannot link [Grommet's] alleged prevention of Newman's performance to any of the proscribed conduct in Havens.*fn2

3. Newman did not prove he was "plainly or evidently approaching success in his undertaking" when Grommet terminated Newman's services in late March 2006.

4. [Grommet's] desire to realize $8.5 [million] for [his] property -- instead of $7.7 [million] -- after Newman's listing period expired is never bad faith.

5. The district court's finding of bad faith imposes liability in the absence of any objective standard, or criteria, of bad faith.

D. None of the evidence supports a finding of an implied, extended contract after the 2/12/06 expiration of Newman's listing period.

E. The general and special Statutes of Fraud bar any commission for Newman.

F. Newman's receipt of [Grommet's] 3/25/06 letter on 3/30/06 does not affect or invalidate the 3/29/06 listing agreement of Brockman and [Grommet].

G. The district court's revival of Newman's bad faith claim at trial, and the district court's imposition of bad faith liability under Scherer*fn3 following trial, violated [Grommet's] right to due process.

H. Newman's other misstatements must be corrected.

[¶5] We will set out the issues in case No. S-08-0149 in a separate section of this opinion.

FACTS AND PROCEEDINGS

[¶6] At the outset we note that Grommet's appeal hinges on his contention that the district court resolved the issues in this case on "perceived equities," rather than the four corners of the governing contract. He also contends that the district court erred in applying this Court's decision in Scherer Construction, LLC v. Hedquist Construction, Inc., 2001 WY 23, 18 P.3d 645 (Wyo. 2001) rather than Havens v. Irvine, 61 Wyo. 309, 157 P.2d 570 (Wyo. 1945).

[¶7] Newman was a real estate broker who operated his principal office in Goshen County. He sold real estate throughout Wyoming, including Platte County. Grommet owned real estate near Guernsey known as the Gray Rocks Ranch. In 1992, Grommet purchased the Gray Rocks Ranch for approximately $1,050,000.00, with Newman acting as the listing agent. Grommet listed that ranch for sale with Newman as the real estate broker (who was working for Garver Realty at that time) in 1998, for $4.9 million at a commission of 8%. Portions of the ranch were sold and various land purchases and trades were made in the intervening years which enlarged the ranch and made it contiguous to Camp Guernsey. Grommet worked with Newman in approximately 21 real estate transactions over the years. The ranch was taken off the market for a time, but Grommet again listed the ranch with Newman in December of 2003, by way of an exclusive listing contract that was to run through December of 2005. The listing price was $7.3 million for the ranch as a whole, but if the ranch were sold in two distinct parcels, the total would be $7.7 million. The final listing agreement between these parties supplanted that mentioned immediately above and was dated August 12, 2005, and was to expire on February 12, 2006. That contract set a price of $7.7 million for the entire ranch. Newman's commission was to be 6%, and he was to receive a $75,000 bonus if he sold the ranch for a full-price offer.

[¶8] The evidence was that Newman advertised the ranch extensively and spent considerable money doing so. He contacted persons, entities, and other brokers. He showed the property on multiple occasions. Newman also distributed and otherwise made available literature regarding the ranch.

[¶9] In the fall of 2004, Colonel Steve Mount of the Wyoming National Guard saw some of Newman's advertising literature regarding the Gray Rocks Ranch. Colonel Mount was immediately interested in the property since the property was adjacent to the WNG's existing lands and WNG wanted to expand Camp Guernsey. At that time, the asking price was $7.3 million. Newman showed the property to several members of the WNG. Major General Ed Wright, the Adjutant General of the Wyoming National Guard, met with the military affairs committee of the Wyoming State Legislature regarding funding to purchase the ranch. In July of 2005, a story appeared in the Casper Star Tribune that stated that the WNG wanted an appropriation of $8 million, which was to be used, in part to purchase the Gray Rocks Ranch. The WNG's intent and ability to purchase the ranch was contingent upon the legislature's appropriating the funds and the WNG obtaining an appraisal at least equal to the eventual purchase price. On August 12, 2005, when it became known that the WNG was seeking an $8 million appropriation, Grommet had Newman write a letter to the WNG stating that the new listing price was $7.7 million for the entire ranch. On September 22, 2005, WNG wrote back and stated that it was very interested in purchasing the property, but it had to wait for an appropriation from the legislature.

[¶10] On September 27, 2005, General Wright met with Grommet and he expressed his interest in buying the property at $7.7 million. Grommet expressed his interest in selling the property to the WNG. From Grommet's point of view, a sale to the WNG would keep the property from being subdivided and allow him to lease the ranch back.

[¶11] The WNG hired two appraisers to evaluate the ranch. Both appraisers were certified appraisers in the state of Wyoming. Jim Hastings appraised the Gray Rocks Ranch at $7.5 million, while John Pexton appraised the ranch at $7.95 million. Both appraisals were submitted on November 16, 2005. On November 19, 2005, another article appeared in the Casper Star Tribune that indicated the governor had put $10 million into his budget for the purchase of the Gray Rocks Ranch, as well as other properties. Between November of 2005 and February of 2006, Newman had numerous contacts with Grommet, the WNG, and others to facilitate the sale of the ranch.

[¶12] In mid-February 2006, the listing agreement between Grommet and Newman expired. There had been attempts to enter into another written listing agreement, but Grommet and Newman were not able to meet and sign a new agreement. However, in its findings the district court concluded that the listing agreement was extended orally in that Grommet was giving directions to Newman to continue his efforts to aid the WNG in getting funding to purchase the ranch. Furthermore, Newman was in contact with the WNG, legislators, and the governor on multiple occasions in order to get the legislature to approve an appropriation to purchase the Gray Rocks Ranch.

[¶13] On March 30, 2006, Newman received Grommet's letter terminating himas the listing broker. The district court found that the timing of that letter indicated that Grommet believed that Newman had continued working for him after expiration of the written listing contract.

[¶14] On March 9, 2006, the Wyoming Legislature approved $10 million for the purchase of land to expand Camp Guernsey. It was noted in the National Guard newspaper that $7.7 million of the funds was to purchase the Gray Rocks Ranch. General Wright testified that it was the WNG's intent to purchase the ranch. He further testified that the WNG had become a willing purchaser at that time and that the purchase of the ranch was imminent. As soon as the legislature approved funding, Jack Studley, WNG land agent, began preparing a purchase-offer contract. All WNG witnesses who testified indicated that once the legislature had approved funding, the purchase of the ranch was essentially a "done deal." On March 13, 2006, General Wright called Grommet and told him that funding had been approved.

[¶15] The district court specifically found that once Grommet knew that the WNG had been appropriated $10 million, he decided to raise the asking price for the ranch. Sometime in mid to late March, Grommet met with Bob Brockman, who is a real estate broker/appraiser. On March 27, 2006, Grommet advised the WNG that Brockman would be the new listing agent/broker for the Gray Rocks Ranch. On March 29, 2006, Grommet listed the ranch with Brockman's business, Keyhole Land Co., and Ranch Marketing Associates (RMA). This agreement provided for a 4% real estate commission. Brockman and RMA entered into an agreement between themselves on March 29, 2006, that provided that if the WNG bought the property, the two brokers would split the fee. However, if a buyer other than the WNG bought the ranch, the selling broker (RMA or Brockman) would get 75% of the commission and the other would get 25%. These circumstances motivated the district court to conclude that the contract between Grommet and Brockman, et al., clearly supposed that the WNG was already a more than just "likely" purchaser. On March 30, 2006, Brockman advised the WNG that the purchase price of the property was now $8.5 million.

[¶16] The district court further found that on March 30, 2006, Newman received a letter from Grommet advising him that his services were no longer needed, but further advising him that he could still be a selling agent. The district court found that Newman believed, and rightly so, that after his long relationship with Grommet that he could not be a selling agent due to a conflict of interest. At about the same time, Brockman prepared a document identified as Exhibit 40. He termed it a critique, but the district court found it was an appraisal review prepared for the WNG. The document was a review of the Hastings and Pexton appraisals previously described herein. Exhibit 40 points to errors in, or otherwise updates, the previous appraisals and then supports a current price of $8.5 million for the ranch. Brockman testified that Exhibit 40 was not an appraisal review. However, the district court found that the expert testimony given by Mr. Hastings, Ms. Weppner, and Mr. Frascona all were to the effect that Exhibit 40 was an appraisal review, and that a reading of Exhibit 40 could lead to no other conclusion. Exhibit 40 was provided to Pexton. At the request of the WNG, he updated his appraisal and on April 11, 2006, he rendered a new opinion valuing the Gray Rocks Ranch at $8.62 million. The WNG signed a purchase agreement on April 12, 2006, for $8.5 million less than two weeks after Newman was terminated. The sale closed on July 10, 2006. Brockman and RMA each received a commission of $170,000 for a total of $340,000.

The Contract

[¶17] With respect to the language of the contract that is most directly pertinent to the issues raised in this appeal, the district court made these findings. The district court first noted that there was a dispute about which of the contracts between Newman and Grommet was in force at the times crucial to the outcome of this case. Grommet contends that the August 2005 through February 2006 listing contract was invalid because it contained no brokerage disclosure statement. The listing agreement of $7.3 million, which was to run from December of 2003 through December of 2005, contained the brokerage disclosure statement as required under Wyo. Stat. Ann. § 33-28-306 (LexisNexis 2009).*fn4 That statute requires a broker to set forth in detail the different brokerage relationships and the duties of a broker with respect to such relationships. This must be done prior to entering into any written contract between broker and seller. The failure to do so renders the listing agreement invalid pursuant to statute.

[¶18] In August of 2005, the previous listing agreement was replaced with another contract raising the price for the entire ranch to $7.7 million. That listing agreement did not contain a brokerage disclosure statement. Grommet contended that since no disclosure was obtained for the August 2005 listing agreement, it was therefore invalid. The district court did not agree with that reasoning because the December 2003 through December 2005 agreement did have a brokerage disclosure signed by Grommet, who clearly was acting on behalf of all sellers. The evidence was overwhelming, in the district court's view, that Grommet was completely in charge of negotiations and was acting on behalf of his wife and sister. Furthermore, the August 2005 listing agreement interrupted the December 2003 agreement and was in fact an extension of the original agreement with an increased sales price of $7.7 million. The district court concluded it would place form over substance to require yet another identical disclosure form and thereby invalidate the August 2005 listing agreement. This Court held in Roney v. B.B.C. Corp., 2004 WY 113, ¶ 27, 98 P.3d 196, 204 (Wyo. 2004) that Wyoming does not favor the forfeiture of contract rights. Here Newman made a disclosure pursuant to § 33-28-306 at the time the 2003 listing went into effect. The district court believed, as do we, that such disclosure was sufficient enough so as to fully advise Grommet, and so as to comply with the statute. Furthermore, it also concluded, without reservation, that Grommet understood all of the agency relationships as well as those other matters required to be disclosed. Thus, the 2005 extension was valid.

[¶19] The second issue the district court addressed was whether there was or could be an oral extension of the listing contract after it expired on February 12, 2006. Clearly, a listing agreement may be extended orally or by conduct. McCartney v. Malm, 627 P.2d 1014, 1018-19 (Wyo. 1981). Here it is evident that the listing was extended orally and by conduct until March 30, 2006. Grommet directed Newman to lobby on his behalf for the legislative appropriation. Grommet, by correspondence, knew that Newman was continuing to talk to the WNG and the governor and other elected officials. Finally, on March 25, 2006, the letter to Newman terminating his services clearly indicated Grommet's knowledge that Newman was still working for him. In early February, Grommet had apparently asked Newman to get with him to formally extend the listing. All of the facts in this case point clearly and convincingly to the conclusion that Newman was working for Grommet with Grommet's knowledge and consent until Newman's discharge. On the basis of these circumstances the district court concluded that the August 2005 listing agreement was orally extended until March 30, 2006, the date on which Newman received Grommet's termination letter.

[¶20] Both the 2003 and 2005 agreements contain the following language at sections IV D 3 through IV D 4.

IV. BROKER COMPENSATION. . . . .

D. Seller shall pay Broker the compensation provided by Section IV B hereof within seven (7) days of the date written demand is mailed by Broker to Seller upon the occurrence of any of the following events: . . . .

3. If the subject property or any part thereof is sold, exchanged, leased or optioned, or if any other transaction occurs which causes an effectivechange of ownership of such property from Seller to a third party within 180 days after the expiration of this Contract, to or with any person, firm, corporation or other entity or anyone acting for such person, firm, corporation or other entity to whom the property was introduced by Seller, Broker or any of Broker's Salespeople or by any other person, and whose name was disclosed by Broker to Seller prior to expiration or by written notice, deposited in the U.S. Mail, certified mail, return receipt requested and postage prepaid, before midnight of the seventh day following the date of the termination of this Contract, exclusive of the date of termination. A written offer to purchase this property submitted to Seller during the term of this Contract shall constitute the notice required by this subparagraph without further notice to Seller.

4. In the event that a commission is earned for the lease, sale or exchange of this property by another Wyoming licensed real estate broker with whom Seller lists the property at any time after termination of this Contract, the protection stated in Section IV D 3 above shall be waived so that Seller is not liable for dual commissions." [Emphasis supplied.]

[¶21] Newman contended that he is due the commission for the sale since the word "earned" in paragraph IV D 4 means procuring cause of the sale. The district court concluded that his position was supported by his own testimony, that of his experts, Mr. Frascona and Ms. Weppner, as well as that of Grommet's witnesses, Brockman and Pearson, from their prior deposition testimony. Newman asserted he was the procuring cause of this sale and that Brockman did not earn a commission. Grommet's position is that the word "earned" means only that a subsequent broker did whatever he is required to do under his contract to earn a commission. The underlying purpose of Section IV D 4 is clear on its face. It is designed to prevent the seller from being required to pay two commissions. Given that purpose, the district court concluded "earned" does not mean procuring cause. Rather, he determined it meant that the subsequent broker did what that broker must do to be entitled to a commission. Here the commission was paid to Brockman and to RMA. That commission was due pursuant to the terms of Grommet's listing agreement with Brockman and RMA. To rule otherwise would be to invite lawsuits every time there was a subsequent broker. That could not possibly have been the intention of the Wyoming Association of Realtors when they prepared the agreements in question. The issue of procuring cause typically arises where there are not direct contracts with the seller on the listing side, but rather conflicts between the brokers on the selling side of the real estate transaction. Where there is a contract, the contract must be the determining factor in most cases. See Wanger v. Havey, 393 S.2d 874 (Louisiana 1981).

[¶22] The district court's discussion continued: Newman contended that Brockman did not earn his commission as a realtor but rather acted as an appraiser only. Brockman's activity as an appraiser, it is alleged, was a conflict of interest in his activity as a real estate broker, therefore precluding a fee as a broker. The district court found that Brockman's work in Exhibit 40 was an appraisal review. It comments on and criticizes the Hastings and Pexton appraisals. It was done to justify a higher appraisal. Brockman was a certified appraiser. The intent of the document was to persuade the WNG that the existing appraisals were not sufficient. This simply is an appraisal review done by an appraiser. This may have been a conflict of interest on the part of Brockman. It may have been a violation of his rules and guidelines as an appraiser, but the district court concluded that Grommet had not pointed to legal authority or arguments that would mandate that Brockman forfeit his real estate fee for that reason.

Bad Faith

[¶23] Once again we track the findings of the district court. Newman alternatively alleged that Grommet acted in bad faith and that he is therefore responsible to pay his commission regardless of the listing agreement. Newman relies on the case Havens, supra, 157 P.2d 570. In that case Havens sued Irvine, a property owner, for a commission. Havens had introduced Irvine to a buyer. After negotiations stalled and the passage of some several months, Irvine cancelled the listing agreement and the next day sold the property to that prospective buyer. The district court found in favor of Havens. The judgment was reversed on appeal, because the Wyoming Supreme Court held that there was no bad faith. While Havens had introduced Irvine to the eventual buyer, negotiations had stalled and Havens had really done very little in the succeeding months to earn a commission. The Supreme Court held that:

'Bad faith' in respect to the right of a broker to his commission has been said to arise where the owner revokes the broker's authority, or makes the sale through other means, when the broker has performed all he has undertaken or is plainly or evidently approaching success in his undertaking, or where a sale is made behind the broker's back.

Havens, 157 P.2d at 573. Newman asserted that this language entitled him to his commission based on the facts of this case. On the other hand, Grommet contended that he did nothing more than exercise his contractual rights under a ...


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