FILED
15-0292
10/26/2015 5:00:42 PM
tex-7546688
SUPREME COURT OF TEXAS
BLAKE A. HAWTHORNE, CLERK
NO. 15-0292
In the
SUPREME COURT OF TEXAS
TFO REALTY, LLC,
Petitioner,
V.
PHILIP S. SMITH
Respondent.
RESPONDENT’S BRIEF ON THE MERITS
Clint Schumacher
Texas Bar No. 24002914
Locke Lord LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
(214) 740-8587 – Telephone
(214) 740-8800 – Facsimile
jschumacher@lockelord.com
TABLE OF CONTENTS
TABLE OF CONTENTS............................................................................................i
STATEMENT OF JURISDICTION..........................................................................1
ISSUE PRESENTED.................................................................................................1
STATEMENT OF FACTS ........................................................................................1
A. The Parties’ Contract.............................................................................2
B. The Sale to The City of Dallas ..............................................................3
SUMMARY OF THE ARGUMENT ........................................................................6
ARGUMENT .............................................................................................................7
A. The Plain Language of The Contract ....................................................7
B. The Sale to The City of Dallas ..............................................................9
C. Submitted to the City of Dallas ...........................................................18
CONCLUSION........................................................................................................20
CERTIFICATE OF COMPLIANCE.......................................................................22
CERTIFICATE OF SERVICE ................................................................................23
i
INDEX OF AUTHORITIES
Page(s)
CASES
Burch v. City of San Antonio,
518 S.W.2d 540 (Tex. 1975) ................................................................................9
Canales v. Laughlin,
214 W.W.2d 451 (Tex. 1948).............................................................................19
City of Carrollton v. Singer,
232 S.W.3d 790 (Tex. App.—Fort Worth 2007, pet. denied)......................11, 12
Coker v. Coker,
650 S.W.2d 391 (Tex. 1983) ................................................................................7
Garrison v. City of New York,
88 U.S. 196 (1874)..............................................................................................15
Kohl v. United States,
91 U.S. 367 (1875)..............................................................................................15
Lundstrom, Inc. v. Nikkei Concerns, Inc.,
758 P.2d 561 (Wash. App. 1988) .................................................................13, 14
Mealey v. Orlich,
585 P.2d 1233 (Ariz. 1978) ................................................................................14
Preston v. Carnation Co.,
Cal. Rptr. 240 (Cal. App. 1961)..........................................................................15
Republic Nat’l Life Ins. Co. v. Spillars,
368 S.W.2d 92 (Tex. 1963)...................................................................................8
Sonday v. Dave Kohel Agency, Inc.,
718 N.W.2d 631 (Wis. 2006)..............................................................................16
Tyler v. Seiler,
136 N.Y.S. 394 (N.Y. Sup. 1912).......................................................................15
ii
Valence Operating Co. v. Dorsett,
164 S.W.3d 656 (Tex. 2005) ....................................................................7, 18, 19
Wilson v. Frederick R. Ross Inv. Co.,
180 P.2d 226 (Colo. 1947)..................................................................................15
CONSTITUTION AND STATUTES
Burke, Law of Real Estate Brokers, 2d ed. §3.3 (1992 & Supp. 2007) ..................16
Dallas City Charter............................................................................................passim
Dallas City Charter Chapter II, Section 1(46) ...........................................................9
Dallas City Charter Chapter III, Section 1...........................................................9, 19
Texas Local Government Code §251.001 ...............................................................11
TEX. LOC. GOV’T CODE §251.001(a) ...................................................................9, 18
TEX. LOC. GOV’T CODE §273.001........................................................................9, 11
Texas Local Government Code sections 251.001(a) and 271.001 ..........................12
Vendor and Purchaser Risk Act (Tex. Prop. Code §5.007).....................................17
iii
STATEMENT OF JURISDICTION
Jurisdiction in the Supreme Court is not proper. This case involves
construction and application of a contract. The pertinent principles of law relied
upon by the decision of the trial court and the Dallas Court of Appeals do not
conflict with any other opinion in this State and the opinion is neither erroneous
nor of significant jurisprudential value to the State of Texas. This case does not
warrant this Court’s attention.
ISSUE PRESENTED
Petitioner seeks to transmute this case into a question of whether any real
property purchase by a governmental entity is a condemnation. Although the
answer to that question is no, this is not the true issue presented by the case. This
case involves construction and application of a contract. Both the trial court and
the Dallas Court of Appeals correctly analyzed and applied the contract.
STATEMENT OF FACTS
The material and operative facts are undisputed. Petitioner’s statement of
facts is accurate.1 There are some additional facts in the record that further support
the trial court’s judgment. There are also some factual assertions in the
1
Mr. Smith notes that Petitioner, TFO Realty, included many of the parties’ legal arguments in
the statement of facts (pages 5-6 of Petitioner’s Brief on the Merits). These were, of course,
arguments made by the parties and not operative facts. Nonetheless, the contentions as stated
by Petitioner appear to be accurate, save one. Petitioner writes that Mr. Smith argued that the
“transfer” of the subject property from TFO Realty to the City of Dallas was “in essence as
‘sale.’” Mr. Smith contends that the “transfer” was a sale (not essentially a sale). It was
negotiated, it was consensual, and it was transferred by deed. It was a sale.
1
Petitioner’s “Argument” section with which Respondent Mr. Smith disagrees.
Those will be addressed in the following Statement of Facts.
A. The Parties’ Contract
Petitioner describes the Exclusive Listing Agreement in its Statement of
Facts. It can be found in the record at pages 107-112 of the Clerk’s Record (“CR”)
and attached hereto as Appendix 1. The term of the Exclusive Listing Agreement
was extended on several occasions. The last extension was dated December 23,
2009, and extended the term of the Exclusive Listing Agreement and the
authorizations given to Mr. Smith thereunder through December 31, 2010. The
final extension to the Exclusive Listing Agreement can be found at CR 113-114.
Paragraph 4 of the Exclusive Listing Agreement provides that, during the term of
the Agreement, “all inquiries and offerings received by Owner with respect to the
Premises, regardless of the source of such inquiries or offerings, and all
negotiations shall be conducted solely by Agent or under Agent’s direction . . . .”
CR 107-108 (emphasis added).
Paragraph 5 of the Exclusive Listing Agreement provides that “[i]n the event
that . . . (ii) at any time after the expiration or termination of this agreement a sale
of all or any portion of the Premises, upon any terms acceptable to Owner, shall be
made with any purchaser to whom the Premises were submitted by Agent, or by
Owner, or by any other person during the term of this agreement; then, and in
2
either such event, Owner agrees to pay Agent one (1) full commission computed
and payable in accordance with the applicable annexed Schedule.” CR 108
(emphasis added).
The Exclusive Listing Agreement contained a Schedule that provides that
the sales commission is to be five percent of the total sales price. The Schedule
further provides, in paragraph 2, that the “commission shall be earned, due and
paid in full at the time of the closing or transfer of title to the property . . . .” CR
111.
B. The Sale to The City of Dallas
Within the term of the Exclusive Listing Agreement (on April 16, 2010), Mr.
Todd Wright, a member of the Real Estate group for the City of Dallas, called Mr.
Smith (whose sign was on the Premises) to inquire about the sales price for the
Premises. CR 35 (Affidavit of Mr. Smith ¶4). Mr. Smith promptly reported that
inquiry to Ms. Owen by email the same day. Id.; see also CR 122 (Deposition of
Todd Wright, p. 12, l. 9 – p. 13, l. 13). Mr. Wright assumed (correctly) that Mr.
Smith was a broker for the Premises due to seeing his sign on the Premises. CR
126 (Deposition of Todd Wright, p. 43, l. 25 – p. 44, l. 6); CR 122 (Deposition of
Todd Wright p. 12, l. 18 – p. 13, l. 13).
By July 2010, the City of Dallas had decided that it wished to acquire a
portion of the Premises for a drainage project. At no time, however, was the use of
3
eminent domain approved to acquire any part of the Premises. Supplemental
Clerk’s Record (“SCR”) 36, 37 (Deposition of Todd Wright, p. 18, l. 14 – p. 22, l.
24). The acquisition by the City was, in their words, “amicable.” SCR 36, 37
(Deposition of Todd Wright, p. 20, l. 25 – p. 22, l. 8) and CR 81.
Mr. Wright, on behalf of the City, wrote a letter to TFO Realty on July 27,
2010. CR 63. In the letter, Mr. Wright indicated that the City of Dallas was
proceeding with the acquisition of land necessary for a drainage project and that a
portion of the Premises “will be needed for the project” (emphasis added). The
City indicated that it was going to have the property appraised, surveyed, and
inspected by an environmental firm. Through the last part of 2010, the City’s due
diligence process continued. CR 123 (Deposition of Todd Wright, p. 15, l. 23 – p.
17, l. 13).
When the Exclusive Listing Agreement expired at the end of 2010, Mr.
Smith inquired about extending the agreement as they had done over the course of
the previous nine years. With the City having expressed its intention to acquire a
portion of the Premises and in the midst of its continued due diligence, Ms. Owen
now refused to sign another extension. CR 36 (Mr. Smith Affidavit ¶6).
By September 2011, TFO Realty and the City had agreed upon terms for the
sale of a portion of the Premises. The transaction was approved by the Dallas City
Council on October 26, 2011. CR 88-96 (certified copy of an October 26, 2011
4
Resolution of the Dallas City Council). The sales price was $3,338,680.00. CR 82-
87 (certified copy of Warranty Deed). This was a materially higher price than the
price initially offered by the City. CR 37. (Deposition of Todd Wright, p. 37, l. 4-
20; City’s initial offer was “2 million and some-odd dollars”). TFO Realty
transferred title to most of “Tract 2” (as described in the Exclusive Listing
Agreement) to the City of Dallas by Special Warranty Deed dated November 30,
2011. Id. TFO Realty received the negotiated purchase price from the City. CR
51 (Deposition of Todd Wright, p. 30, l. 6 – p. 31, l. 25). This transaction closed at
the title company. CR 51 (Deposition of Todd Wright, p. 30, ll. 10-12).
The property that the City of Dallas acquired is a portion of the property that
is the subject of the Exclusive Listing Agreement. CR 36 (Mr. Smith’s Affidavit
¶7); CR 48 (Deposition of Todd Wright, p. 7, l. 24 – p. 8, l. 18). Nonetheless,
despite repeated demands for payment and despite Mr. Smith’s many years of
effort to market and sell the subject property, TFO Realty refused to pay Mr. Smith
the commission due under the Exclusive Listing Agreement. CR 36 (Mr. Smith’s
Affidavit ¶7).
In its “Argument” section, Petitioner asserts that the summary judgment
evidence established that the City of Dallas would have condemned the Petitioner’s
property if no agreement had been reached. Petitioner’s Brief on the Merits, p. 15.
This is incorrect. As the section cited by Petitioner shows, if TFO had refused to
5
sell the property to the City, the City’s representative, Mr. Wright, would have had
to: (i) confirm with the project engineer that they were willing to use the
condemnation power; (ii) “gone through the necessary traps”; and (iii) forwarded
the file to the City attorney’s office. CR 51 (Deposition of Todd Wright, p. 32, l.
21 - p. 33, l. 10); see also SCR 42-43 (Deposition of Todd Wright, p., 45, l. 1 – p.
48, l. 3). None of this happened, because Petitioner agreed (after having the
property on the market for 10 years) to voluntarily sell to the City. There is no
summary judgment evidence as to what might have happened or whether the
Dallas City Council would have chosen to exercise the City’s condemnation power
if Petitioner had not sold.
SUMMARY OF THE ARGUMENT
The trial court’s judgment and the Court of Appeals’ opinion enforces the
plain language of the parties’ contract. The parties’ agreement is broadly worded
with regard to when a commission is earned. TFO Realty agreed to pay Mr. Smith
a commission upon the sale of all or any part of the subject property. TFO Realty
agreed to pay a commission if the premises were submitted by Mr. Smith, by itself
(TFO Realty), or “by any other person.” All inquiries and offerings were to be
referred to Mr. Smith “regardless of the source.” The City of Dallas acquired the
property by deed in an “amicable” transaction. The City Council never authorized
the use of the City’s eminent domain power to acquire the subject tract. The
6
subject transaction was a sale and a commission was earned under the plain
language of the parties’ contract. TFO invites this Court to rewrite the parties’
contract, to rewrite the Texas Local Government Code, to rewrite the Dallas City
Charter, and to rewrite the City of Dallas Ordinance approving the purchase of this
property. The Court should decline TFO’s invitation.
ARGUMENT
A. The Plain Language of The Contract
The construction of an unambiguous contract is a matter of law for the court.
E.g., Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). When the matter can be
resolved by proper construction of an unambiguous document, rendition of
summary judgment is appropriate. See, e.g., id. Neither party claims that the
Exclusive Listing Agreement is ambiguous.
The primary concern of the court is to ascertain and give effect to the
intentions of the parties as expressed in the instrument. E.g., Valence Operating
Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005) (emphasis added). To achieve
this objective, the court should examine and consider the entire writing in an effort
to harmonize and give effect to all the provisions of the contract so that none will
be rendered meaningless. Id. Contract terms are given their plain, ordinary, and
generally accepted meanings unless the contract itself shows them to be used in a
technical or different sense. Id. When the language is plain, the contract must be
7
enforced as written. E.g., Republic Nat’l Life Ins. Co. v. Spillars, 368 S.W.2d 92,
94 (Tex. 1963) (emphasis added).
The operative provisions of the subject contract are clear and plain. In the
initial paragraph, TFO Realty “appoint[ed]” Mr. Smith to act as the “sole and
exclusive agent” to sell the subject property. TFO Realty “grant[ed]” Mr. Smith
the “exclusive right” to sell the subject property. In paragraph 4 of the Agreement,
TFO Realty agreed to refer “all inquiries and offerings received by [TFO Realty]
with respect to the Premises, regardless of the source of such inquiries or
offerings” to Mr. Smith as their agent. (emphasis added). In paragraph 5 of the
Agreement, TFO Realty agreed that “[i]n the event that . . . (ii) at any time after the
expiration or termination of this agreement a sale of all or any portion of the
Premises, upon any terms acceptable to [TFO Realty], shall be made with any
purchaser to whom the Premises were submitted by [Mr. Smith], or by [TFO
Realty], or by any other person during the term of this agreement; then, and in
either such event, [TFO Realty] agrees to pay to [Mr. Smith] one (1) full
commission computed and payable in accordance with the applicable annexed
Schedule.” (emphasis added). The plain language of the contract is broadly
worded to provide Mr. Smith with a commission “for any purchaser” (which would
include governmental entities) regardless of how the purchaser is introduced to the
property.
8
Further, the Schedule attached to the Exclusive Listing Agreement provides
that the “commission shall be earned, due and paid in full at the time of the closing
or transfer of title to the property . . . .” CR 111 (emphasis added). The TFO
Realty-City of Dallas transaction closed at the title company. CR 51 (Deposition
of Todd Wright, p. 30, ll. 10-12). However, even if title were transferred
differently, the parties’ agreement provides that a commission is still earned. The
parties’ clear intent was to broadly define events that would earn a commission.
B. The Sale to The City of Dallas
Municipalities, such as the City of Dallas, have the authority to “acquire
property . . . by gift, dedication, or purchase, with or without condemnation.” TEX.
LOC. GOV’T CODE §273.001. The City of Dallas, as a home rule city, has its own
Charter. Therein, in Chapter II, Section 1(6), the City has the power to “acquire
property . . . by purchase, gift, devise, lease, or condemnation . . .” (emphasis
added); see also Dallas City Charter Chapter II, Section 1(46) (pertaining to
acquisition for utilities and containing similar language). The cited portions of the
Dallas City Charter are attached in Appendix 2.
The City of Dallas exercises its powers through the City Council. Dallas
City Charter Chapter III, Section 1. Thus, before the condemnation power can be
exercised, it must be authorized by the Dallas City Council. Id.; TEX. LOC. GOV’T
CODE §251.001(a); see also Burch v. City of San Antonio, 518 S.W.2d 540, 542-43
9
(Tex. 1975) (holding that only the city council of San Antonio could exercise that
city’s power of eminent domain).
Here, it is undisputed that the City acquired the property by deed. CR 65-70.
The exercise of the condemnation power was never authorized by the Dallas City
Council. Unsurprisingly, a condemnation case was also never filed. The subject
acquisition was a purchase, not a condemnation. A contemporaneous writing by
the City of Dallas real estate group member in charge of the acquisition wrote: “I
am acquiring [the subject property] amicably.” CR 81. The Resolution passed by
the City Council provided: “That the City Manager, and/or the City Manager’s
designees, is hereby authorized and directed to consummate and accept the
purchase, grant, and conveyance to CITY of the PROPERTY INTEREST in and
to the PROPERTY pursuant to the conveyancing instrument [attached].” CR 74
(Resolution of October 26, 2011, Section 3) (emphasis added). Under the various
ways in which the City of Dallas can acquire property, this was a purchase, not a
condemnation.
Now, taking the facts of this sale to the plain language of the Exclusive
Listing Agreement, it is clear that this is a “sale” of a “portion of the Premises” on
“terms acceptable to Owner” by “any purchaser.”
TFO Realty’s argument that their agreement to sell the subject property to
the City of Dallas was a taking under eminent domain is legally and factually
10
inaccurate. To accept TFO Realty’s position, the plain language of the Dallas City
Charter providing that there are different ways in which the City may acquire
property (“by purchase, gift, devise, lease, or condemnation”) must be ignored.
Instead, TFO Realty argues that anytime the City of Dallas acquires property it is
by condemnation. TFO Realty’s argument ignores the plain language of Texas
Local Government Code §273.001 (municipalities may acquire property “by gift,
dedication, or purchase, with or without condemnation”). TFO Realty’s argument
also ignores the requirements of the Dallas City Charter and Texas Local
Government Code §251.001 that the Dallas City Council must approve the use of
the City’s eminent domain power.
TFO Realty’s argument further ignores the plain language of the parties’
agreement, the Exclusive Listing Agreement. Mr. Smith had an exclusive right to
sell the property. All inquiries and offerings were to be referred to him regardless
of source. A commission was earned on a sale to any purchaser. The parties
could have agreed that sales to entities with eminent domain power would not
result in a commission being due, but they did not make that agreement. They
agreed that sales to any purchaser would earn a commission. Now that a
commission has been earned, TFO Realty seeks to rewrite the agreement.
TFO Realty’s reliance on City of Carrollton v. Singer is misplaced. The Fort
Worth Court of Appeals in Singer was faced with the question of whether the City
11
of Carrollton was immune to a claim that it had failed to fulfill its obligations
under a land sale contract. The holding of the Court is on page 800 of the opinion
where the Court writes: “we hold that the agreement between the City and the
Singers was a settlement of an eminent domain proceeding in which the Singers
would have a claim against the City for adequate compensation for the City’s
acquisition of their property, and for which the City would not be immune.” City
of Carrollton v. Singer, 232 S.W.3d 790, 800 (Tex. App.—Fort Worth 2007, pet.
denied). The Singer opinion does not bear upon the contractual language of the
parties in this case. The Singer opinion does not stand for the proposition that the
consensual transaction between the City of Dallas and TFO Realty was not a sale.
The Singer opinion does not abrogate Texas Local Government Code sections
251.001(a) and 273.001 and the Dallas City Charter making clear that the City can
acquire property by purchase or by condemnation. Further, the Singer opinion
does not stand for the proposition that the City of Dallas is not within the circle of
entities described by the “any purchaser” language used in the parties’ Exclusive
Listing Agreement. Further yet, in Singer, the land owner pleads and the court
calls the agreement in that case a “settlement agreement.” It contained obligations
of the City of Carrollton beyond just paying money. The agreement in that case
stands in contrast to the current matter where the transferring instrument is a
standard deed. It contains no obligations to be undertaken by the City of Dallas (it
12
is premised on the purchase price having already been conveyed) and, in fact, is
not even signed by the City of Dallas. The subject transaction falls squarely within
the circumstance in which TFO Realty and Mr. Smith agreed a commission would
be due. Singer is an immunity case and its result is driven by the policies
applicable to application of governmental immunity. As the Court points out in its
rationale for its opinion, if immunity applied to the City of Carrollton’s purchase,
the door is open for governmental entities to avoid paying compensation for
property by entering into purchase agreements, refusing to pay, and then claiming
immunity. Id. at 800. This is obviously an unwanted result. Also, this rationale
has zero applicability to the present dispute.
TFO Realty next seeks to avoid the plain language of the parties’ contract by
citing extensively to the Washington Court of Appeals case of Lundstrom, Inc. v.
Nikkei Concerns, Inc., 758 P.2d 561 (Wash. App. 1988). However, Lundstrom, a
case with key factual differences from the present case, does nothing to alter the
plain language of the parties’ agreement or Texas statutory law permitting the City
of Dallas to act as a purchaser without using its eminent domain power. The key
factual distinctions are these:
• The parties’ contract in Lundstrom was a “producing cause” contract
where the agent had to “produce a party who is ready, willing, and
able to purchase …” (emphasis added). The contract at issue in this
13
case provides that Mr. Smith is entitled to a commission if a sale is
“made with any purchaser to whom the Premises were submitted by
Agent, or by Owner, or by any other person …” (emphasis added).
• In Lundstrom, the condemning authority filed condemnation
proceedings. Here, no proceedings were filed and the Dallas City
Council never authorized the use of the eminent domain power.
• In Lundstrom, the property transferred by a “Stipulation, Judgment,
and Decree of Appropriation.” Here, the property transferred by
Deed.
• In Lundstrom, the Court held that the parties’ agreement was “silent
about a condemnation and should be construed against the drafter,
Lundstrom.” Here, the parties’ agreement is not silent – it provides
that a commission is earned on a sale to “any purchaser.”
TFO Realty also relies on the Arizona case of Mealey v. Orlich, 585 P.2d
1233 (Ariz. 1978). In Mealey, the broker admitted that the language of his contract
would not cover a “condemnation sale.” 585 P.2d at 1234. That is not the case
here. The contract between TFO Realty and Mr. Smith applies to “any purchaser.”
TFO Realty also cites a California case, Preston v. Carnation Co., where the
property was conveyed by agreement after a condemnation case was filed and,
further, where the broker failed to show that he had procured a “ready, willing, and
14
able” purchaser (a requirement of the brokerage contract at issue in that case)
during the term of the broker’s contract. 16 Cal. Rptr. 240, 242-43 (Cal. App.
1961). The Preston case is distinguishable not only because a condemnation
action was filed, but also because the broker agreement at issue differed materially
from the one before this Court.
The instrument of transfer in the Colorado case of Wilson v. Frederick R.
Ross Inv. Co., 180 P.2d 226 (Colo. 1947) is not identified in the opinion, although
it is clear that the federal government took possession of property for a military
arms plant and that a condemnation case was filed after the property was occupied
by the government’s contractor. 180 P.2d at 226. For this reason, the case is
distinguishable from the present case as the seller had its property taken. It did not
consensually sell to the government. However, the opinion in Wilson is
noteworthy when it cites to U.S. Supreme Court opinions and opinions of other
state courts that make clear that there is a distinction between a sale to a
government entity and a condemnation by a government entity. Id. at 256-57
(citing Kohl v. United States, 91 U.S. 367, 374 (1875); Garrison v. City of New
York, 88 U.S. 196, 204 (1874); Tyler v. Seiler, 136 N.Y.S. 394, 395 (N.Y. Sup.
1912)).
There are several jurisdictions that conclude that a condemnation by a
governmental entity is a “sale” and does earn a broker commission when it fits
15
within the language of the broker’s contract. See, e.g., Sonday v. Dave Kohel
Agency, Inc., 718 N.W.2d 631 (Wis. 2006). A catalog of decisions from other
jurisdictions that reach the same resulted is also included in the Sonday case at
pages 642-44 of that opinion. However, this Court does not need to reach a
decision about whether a condemnation is a sale and, indeed, this is the wrong case
in which to reach that decision. Here, no condemnation occurred. This is why
TFO Realty’s merits argument (as well as its argument as to why this Court should
take jurisdiction over this case) fails. The argument is premised upon the fallacy
that the subject property was condemned. It was not. It was sold, and it was sold
by deed. It closed at a title company. It plainly fits within the language of the
parties’ Exclusive Listing Agreement of when a commission is earned.
TFO Realty’s reliance on the LAW OF REAL ESTATE BROKERS also falls flat.
The treatise does not, as TFO Realty claims, conclude that it is incumbent for a
broker “to expressly include a taking under eminent domain as a sale.” TFO
Realty’s Brief on the Merits p. 25 (emphasis in brief). Rather, the LAW OF REAL
ESTATE BROKERS catalogs cases noting that, when “a listed property is
condemned,” the seller may have a defense that the broker was not a producing
cause of the sale. BURKE, LAW OF REAL ESTATE BROKERS 2d ed. §3.3 at 3.37-.38
(1992 & Supp. 2007). In the contract before the court, however, Mr. Smith need
not have been a producing cause of the sale. The parties could have chosen to
16
include such a requirement in their agreement. They did not. Rather, the parties’
contract makes Mr. Smith the “sole and exclusive agent” and provides that he
earns a commission if a purchaser buys the property to whom the property was
submitted by “Agent, by Owner, or by any other person.” The LAW OF REAL
ESTATE BROKERS does not support re-writing the parties’ contract.
Similarly, there is nothing in the Vendor and Purchaser Risk Act (TEX.
PROP. CODE §5.007) that bears upon the issues before the Court. The Vendor and
Purchaser Risk Act simply allocates risk between the vendor and purchaser if a
condemnation interferes with passage of title between vendor and purchaser. It
does not speak to the situation at bar and certainly does not rewrite the parties’
agreement.
The entirety of TFO Realty’s argument is premised on an assumption that
the City of Dallas would have authorized condemnation of the subject tract if TFO
Realty had not agreed to voluntarily sell. The assumption is flawed. If the City
could not reach terms with a buyer who had a “For Sale” sign in their front yard (as
TFO Realty did when the City called), no one knows whether the Dallas City
Council would have authorized the use of eminent domain to acquire the tract.
Indeed, the City’s agent, Mr. Wright, testified that he would have had to have
obtained the consent of the project engineer to even use condemnation. CR 51
(Deposition of Todd Wright, p. 32, l. 21 - p. 33, l. 10); see also SCR 42-43
17
(Deposition of Todd Wright, p., 45, l. 1 – p. 48, l. 3). Of course, the Dallas City
Council would have also had to approve the use of condemnation. Dallas City
Charter Chapter III, Section 1; TEX. LOC. GOV’T CODE §251.001(a). This never
happened.
Further, even if TFO Realty had refused to sell, and even if the City had
decided to exercise its eminent domain authority, the City could have also decided
to take an easement under the property for the drainage project (instead of buying
the property in fee simple). The bottom line is that no one knows what the City
may have decided to do if the City and TFO Realty had not reached an agreement,
because there was a voluntary sale and the City never had to make the decision
about whether or how to use its condemnation power. Put simply, the City falls in
the category of “any purchaser” and the transaction between the City and TFO
Realty was a “sale.”
C. Submitted to the City of Dallas
The Exclusive Listing Agreement provides that a commission is due for a sale
occurring after the term of the agreement that is “made with any purchaser to whom the
Premises were submitted by Agent, or by Owner, or by any other person . . . .” CR 108,
¶5. The term submitted is not defined in the Exclusive Listing Agreement. Thus, it is
appropriate to apply its plain, ordinary, and generally accepted meaning. Valence
Operating, 164 S.W.3d at 662. As the Dallas Court of Appeals noted in its Memorandum
Opinion, an applicable definition is: “to send or commit for consideration, study, or
18
decision: refer.” WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 2277 (1981).
This provision is, of course, to be read in conjunction with the entirety of the agreement
to harmonize the parties’ intent. Valence Operating, 164 S.W.3d at 662.
The undisputed facts are that, during the term of the Exclusive Listing Agreement,
the City of Dallas’ agent, Mr. Wright, saw Mr. Smith’s sign on the property and made
inquiry. CR 35 (Affidavit of Mr. Smith ¶4). Mr. Smith promptly reported that inquiry to
Ms. Owen by email the same day. Id. Mr. Wright, on behalf of the City, also wrote a
letter to TFO Realty on July 27, 2010. CR 63. In that letter, Mr. Wright indicated that
the City would be proceeding with acquisition of land for the drainage project and that a
portion of the Premises would be needed. Id. Also, during 2010, the City had the subject
property appraised. CR 35-36 (Deposition of Todd Wright p. 17, l. 15 – p. 18, l. 3).
Mr. Wright, though an agent of the City of Dallas, is not the City of Dallas itself.
Mr. Wright was not the buying party. The City of Dallas was the buying party, and the
City acted through its City Council to approve the purchase of property from TFO Realty.
CR 88-96; see also Dallas City Charter Chapter III, Section 1 (all powers granted to City
are exercised through City Council); see c.f. Canales v. Laughlin, 214 S.W.2d 451, 456
(Tex. 1948) (holding that even individual members of a governing body can not bind the
body politic; it must be the governing body acting as a body).
The subject property was submitted to the City of Dallas in at least three ways
during the term of the Exclusive Listing Agreement: (i) Mr. Wright saw Mr. Smith’s
sign and then called Mr. Smith to make inquiry about the property; (ii) Mr. Wright wrote
a letter expressing the City’s interest in the property; and (iii) the City’s appraiser
19
prepared an appraisal report of the property. This process is like numerous other real
estate deals. A potential buyer starts looking for property and is made aware of a
property through marketing material (here, a real estate sign) or otherwise. The potential
buyer makes contact with the broker. The potential buyer later expresses further interest
in buying the property (here, via letter from Mr. Wright) and does due diligence on the
property. The process in this transaction plainly falls within the scope of the parties’
agreement about when a commission would be earned.
TFO Realty’s argument, one cannot submit property to itself, completely ignores
the clear intent of the parties as expressed in the Exclusive Listing Agreement – to
broadly define the circumstance under which the real estate broker would earn a
commission. Here, the property could be submitted “by any other person” and the
commission would still be earned. The parties’ intent to broadly define the submission
process is patent. TFO Realty continues to try to interject a “procuring cause” provision
into the Exclusive Listing Agreement that simply does not exist (and, in fact, is contrary
to the clear and expressed intent of the agreement). Further, TFO Realty’s argument adds
a phrase to the contract that is not there: namely, that a buyer cannot submit property to
itself. The property was submitted to the City of Dallas by, at least, Mr. Smith, Mr.
Wright, and the City of Dallas’ appraiser.
CONCLUSION
For the foregoing reasons, there is no good reason for this Court to grant
review of this case of contract interpretation. Not only is there no conflict among
the courts of appeals requiring correction, the trial court’s and the Dallas Court of
20
Appeals’ contract interpretation is correct. Respondent Mr. Smith prays that the
Court deny TFO Realty’s Petition for Review.
21
Respectfully submitted,
Locke Lord LLP
/s/ Clint Schumacher
Clint Schumacher
Texas Bar No. 24002914
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
(214) 740-8587 – Telephone
(214) 740-8800 – Facsimile
jschumacher@lockelord.com
ATTORNEYS FOR RESPONDENT
PHILIP S. SMITH
CERTIFICATE OF COMPLIANCE
I certify, pursuant to Tex. R. App. P. 9.4(i)(3), that this Respondent’s Brief
on the Merits contains 5,072 words, according to the word count feature of
Microsoft Word, excluding those items properly excluded under Tex. R. App. P.
9.4(i)(1).
/s/ Clint Schumacher
Clint Schumacher
22
CERTIFICATE OF SERVICE
I hereby certify that on October 26, 2015, a true and correct copy of the
foregoing Respondent’s Brief on the Merits has been sent to the Court and to
counsel via electronic filing per local Rule 3.A.a., and has been sent via certified
mail, return receipt requested, to counsel of record as follows:
B. Prater Monning III
Wynne & Wynne
137 W. James St.
Wills Point, TX 75169
/s/ Clint Schumacher
Clint Schumacher
23
APPENDIX 1
EXCLUSIVE LISTING AGREEMENT
December 11, 2001
Philip S. Smith
Philip S. Smith & Co.
1901 N. Akard
Dallas, Texas 75201
Re: Approximately 1.34 acres of land, comprised of two tracts, Tract 1 being a
ground lease with Comerica Bank of approximately 23,000 square feet,
and Tract 2 being the adjacent undeveloped parcel, containing
approximately 35,503 square feet, further described on the attached
Exhibit "A", and referenced in this agreement as, ("the Premises").
Dear Phil:
TFO Realty, LLC, a Texas limited liability company (hereinafter "Owner'') hereby
appoints Philip S. Smith (hereinafter referred to as "Agent") as Owner's sole and
exclusive agent and grant to Philip S. Smith the exclusive right to sell all or any
portion of the Premises.
· Agent's appointment as sole and exclusive agent shall be upon the following
terms and conditions:
1. The term of this agreement shall commence on the date hereof and continue
in effect until December 31, 2002.
2. Agent agrees that it will enlist its best efforts to secure a satisfactory
purchaser(s) for the Premises and if Agent deems it necessary, will also
solicit the cooperation of other licensed rear estate brokers.
3. If it is mutually deemed desirable, Agent shall advertise the Premises or
portions thereof, prepare signs, site plans, plats, marketing materials and
brochures, aerials, web sites and/or other forms of advertising, subject to
Owner's approval and at our expense. All advertising whether prepared or
issued by Agent or by Owner shall identify Philip S. Smith as exclusive Agent
for the Premises.
4. During the term of this agreement, Owner will refer to Agent all inquiries and
offerings received by Owner with respect to the Premises, regardless of the
source of such in uiries or offerings, and all negotiations shal I be conducted
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solely by Agent or under Agent's direction, subject to Owner's review and
final approval.
5. In the event that: (i) at any time during the term of this agreement a sale
and/or joint venture of all or any portion of the Premises, upon any terms
acceptable to Owner, shall be made with any purchaser, or developer in the
event of a joint venture, who was procured by Agent, or by Owner, or by any
other person; or (ii) at any time after the expiration or termination of this
agreement a sale of all or any portion of the Premises, upon any terms
acceptable to Owner, shall be made with any purchaser to whom the
Premises were submitted by Agent, or by Owner, or by any other person
during the term of this agreement; then, and in either such event, Owner
agrees to pay to Agent one (1) full commission computed and payable in
accordance with the applicable annexed Schedule. All such commissions
shall be payable to Philip S. Smith. Periodically during the term of this
agreement and immediately upon termination of the agreement, Agent shall
furnish Owner with a written listing of all potential purchasers, developers or
others to whom Agent has shown the Premises.
6. If a licensed real estate broker other than Agent is the effective procuring
cause of any sale covered by this agreement, Agent shall use its best efforts
to have such other broker agree to be paid a fee by their client and if not,
then to accept, as its compensation an equitable portion of the commission
payable to Agent pursuant to this agreement, and if such other broker so
agrees, Owner will pay to Agent the commission set forth above out of which
Agent will pay to such other broker its agreed upon share and retain the
balance of the commission as Agent's compensation. In no event shall Agent
be liable for the failure to obtain such other broker's agreement to accept, as
its compensation, an equitable portion of the commission payable to Agent
hereunder.
7. (a) Owner acknowledges that Agent may represent potential Tenants or
Purchasers and Owner hereby consents to such intermediary representation.
As a real estate broker who acts as an intermediary in a transaction, Agent (i)
shall treat all parties honestly; (ii) may not disclose that the Owner or
Landlord will accept a price or lease consideration less than the asking price
or lease consideration unless authorized in writing to do so by the Owner or
Landlord; (iii) may not disclose that the buyer or tenant will pay a price or
lease consideration great~r than the price or lease consideration submitted
unless authorized in writing to do so by the buyer or tenant; and (iv) may not
disclose any confidential information or any information that a party
specifically instructs Agent in writing not to disclose unless authorized in
writing to disclose the information or required to do so by the Texas Real
I
Estate Act or by a court order or if the information materially relates to the
\.•.•. , _.J condition of the property.
Page 108
(b) The parties hereto acknowledge that Agent may represent other owners
of property located in an area bounded by Leonard Street, Colby Street,
Maple-Routh Connection and Woodall Rodgers Freeway and that such
representation may result in Agent having a conflict of interests with respect
to its representation of multiple owners. If Agent represents such owners,
Agent agrees to enter into agency agreements identical to this agreement
with such other owners and to fully disclose Agent's representation Of Owner
and any other such owners in the aforementioned area. Further, Agent
agrees to disclose to Owner any purchase or joint venture offers received by
such other owners during the term of this agreement. Agent may also
disclose to such other owners any purchase or joint venture offers received
by Owner during the term of this agreement. The parties hereto agree to use
good faith efforts to resolve any conflicts of interest, which may arise as a
result of Agent representing Owner and any such other owners of property in
the aforementioned area.
8. Owner hereby confirms to you the information appearing on the Property
Information Report annexed hereto.
9. This agency shall be binding upon the parties hereto, their respective
successors and assigns.
If the foregoing acciJratefy sets forth our agreement, please sign and return the
enclosed copies of this letter.
Very truly yours,
By: cu.
Traci F. Owen, ol
5949 Sherry Lane
Suite 1025, LB - 180
Dallas, Texas 75225
AGREED AND ACCEPTED:
PHILl£T~
By:
Date: //7'"~?.
•"---·· Attachment
Page 109
-
PROPERTY INFORMATION REPORT
This Property Information Report is attached to and made a part of the
Agreement, dated as of December 11, 2001, between Phillip S. Smith, Agent
and TFO Realty, LLC, Owner, relating to certain real estate commonly known as
the a 1.34 acres tract of land, further described in Exhibit A, ("the Premises").
Owner hereby advises Agent as follows with respect to its knowledge of the
presence of the substances and/or items listed below in, on or about the
Property.
No Knowledge Not Present Present Location
Owner agrees to disclose to Agent and all prospective purchasers all information
in its possession regarding the presence at the Property of the substances or
items listed above, to make available to Agent and all prospective purchasers all
inspection reports pertaining to the presence of such substances or items and
that Agent is hereby authorized to disclose to any prospective tenants or
purchasers any information regarding the presence.of such substances or items.
Page 110
..
,,,·····.
SCHEDULE OF COMMISSIONS
1. RATES
Five percent (5%) of the total sales price, or in the event of a joint venture, then five
percent (5%) of the land value or equity contributed to a joint venture.
2. TIME OF PAYMENT
The commission shall be earned, due and paid in full at the time of the closing or
transfer of title to the property, except, in the case of an installment purchase contract,
in which case, the commission shalt be earned, due and paid in full at the time of the
execution and delivery of the installment purchase contract by and between the seller
and the purchaser.
3. COMPUTATION OFTHE SALES PRICE
The Commission shall be computed in accordance with the above rate based upon the
total sales price, which shall include any mortgages, loans or other obligations of the
seller which may be assumed by the purchaser or which the purchaser takes title
"subject to any purchase money loans or mortgages taken back by the seller, the
0
,
sales price of any fixtures or other personal property sold by separate agreement
between the seller and the purchaser as part of the overall sale of real property, and
the current market value of any other real or personal property transferred from the
purchaser to the seller.
4. MISCELLANEOUS
The terms "Seller" and "Purchaser" shall be deemed to include any subsidiaries,
affiliates, successors, assigns and nominees of same.
In the event either party shall commence litigation against the other party to enforce its
rights under this agreement and/or schedule, the party prevailing in such litigation shall
be entitled to recover .from the other party its reasonable attorney's fees and
disbursements thereby incurred.
Seller's initials
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Page 111
EXHIBIT "A"
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