A note to the drafters of Wisconsin’s single-party listing contract: It’s time to redefine what triggers the payment of a commission under the contract after a recent decision of Wisconsin’s supreme court in Ash Park, LLC v. Alexander & Bishop, Ltd, 2015 WI 65, where the court permitted a broker to collect its commission, despite never having delivered a viable buyer.
Ash Park is no stranger to the appellate courts in Wisconsin. The case first wound its way through the courts over five years ago when the buyer, Alexander & Bishop, failed to perform on a contract to purchase a vacant parcel of land for $6.3 million from the seller, Ash Park. The supreme court’s first foray into the dispute, Ash Park, LLC v. Alexander & Bishop, Ltd., 2010 WI 44, affirmed the award of specific performance in favor of Ash Park.
Specific performance is an extraordinary remedy, but, if the buyer doesn’t have the cash, which was the case with Alexander & Bishop here, it’s also a toothless remedy. The third branch might have a considerable number of powers, but printing money still wasn’t one of them when we last checked.
Ultimately the parties settled for $1.5 million, covering Ash Park’s cost of holding the property during the litigation and its cost of securing the award. The messy ordeal appeared to be at an end.
But not so fast. Enter the deal’s broker, arguing that Ash Park and Alexander & Bishop had an “enforceable contract” by virtue of the order for specific performance, which would entitle it to a 6% commission under its listing agreement with Ash Park, or $378,000 (which is 6% of $6.3 million). Never mind that the order wasn’t worth (to Ash Park) the paper that it was written on.
The circuit court granted Ash Park’s summary-judgment motion, for it wasn’t about to create what it viewed as a windfall for the broker, who, to its thinking, hadn’t produced anything of value. “The reality of it is the realtor brought to these sellers a buyer who couldn’t afford to buy the property. . . . In the end this contract was not enforceable in fact.”
But the court of appeals reversed, and the supreme court affirmed that decision, reasoning that the order for specific performance had created an “enforceable contract,” according to the plain and ordinary meaning of the term, regardless of whether the contract could be enforced in fact. The contract’s enforceability turned solely on whether there was a legal remedy available to enforce the breach. There was. End of story.
The inequity of Ash Park’s having to pay for a contract on which it didn’t profit hadn’t gone unnoticed, however. In her opinion for the court, Justice Abrahamson described the result to Ash Park as “harsh” and noted that the language of the listing agreement could be changed, perhaps by conditioning the payment of the commission on closing and the passage of title.
That change should prevent this sort of result from recurring, though obviously it places additional risk on the broker. And some brokers might argue that the decision to accept the offer (and in effect the creditworthiness of the buyer) rests with the seller, so that this change unfairly shifts responsibility to the broker. But, in our view, Justice Abrahamson’s suggestion is a good one, for ultimately it better aligns the interests of agent and principal.