So. My 50th Counsel’s Corner article. Seems appropriate that this article should be about that which is nearest and dearest to the hearts of my readers . . . commissions!
James Murphy was licensed as a Texas
real estate broker. He sued Reed Williams (not a licensee) for a brokerage
commission regarding the sale of five tracts of property in the Frisco Medical
Murphy was working with the Sellers
in 2010 to secure financing for their Frisco Medical Center properties. When
Murphy learned that the Sellers might consider marketing the properties, he
approached Jim Williams to request authority to serve as their broker.
Williams was a Vice President of the general partner entity of the various
Sellers. Jim Williams (Reed’s father) was the President of one of the Sellers,
and was the individual who initially discussed an exclusive listing agreement
Murphy was given limited authority
to market the properties, but only to one prospect. Either that prospect or an
affiliate of the prospect then contacted Healthcare Realty Trust to present the
purchase opportunity. Healthcare was not approved as a prospective buyer, and James
Murphy had no authority to consent to the delivery of information from the
prospect or affiliate to Healthcare.
Evidently Healthcare then approached
representatives of the Sellers directly including Reed Williams, and the target
parcels were sold to Healthcare at the end of 2010. For $133 million. Since no
commissions were paid to James Murphy, Murphy sued Reed Williams and others for
various claims including tortious interference with contract or contractual
Murphy likely felt that he prepared or delivered the information and materials
that ultimately found their way to the purchaser, and at least in part may have
induced the purchaser to close the deal. And consequently, absent Murphy’s
actions, the target properties may not have been sold.
Collin County trial court, concluding that Williams had the better case,
entered a Judgment for the Reed Williams. James Murphy appealed.
On appeal Murphy contended that Reed
Williams acted as an unlicensed broker and interfered with Murphy’s expectation
to receive a commission. Reed Williams defended the claim by stating that his limited
actions in the deal did not constitute brokerage activities.
The first part of Texas law
regarding brokerage is clear. A person may not recover a commission unless that
person is a licensed broker, the agreement is in writing and the agreement is signed
by the person obligated to make the payment.
The second part of Texas law is more
obscure. Brokers are allowed by law to sue each other for “. . . interference
with business relationships.” See Texas Occupations Code 1101.806(a)(2): http://law.onecle.com/texas/occupations/1101.806.00.html.
The facts in this case establish
that Reed Williams was not acting as a broker. Even James Murphy admitted as
much in his pleadings. As such, the Court of Appeals had little trouble finding
that Murphy was not entitled to a judgment against Reed Williams.
And why did this case get my
attention? Because James Murphy and his lawyers cleverly used an obscure
portion of Texas law and coupled it with a novel theory that one does not have
to hold a brokerage license in Texas
to act as a broker. As by analogy one
does not have to hold a driver’s permit to drive an 18-wheel truck, or hold a
pilot’s license to fly a helicopter.
All of those actions require
licenses and permits to do them lawfully, but even without a license or permit
one who is flying a plane is still, well, flying the plane.
So, Murphy and his lawyer
constructed an argument that if Williams’ actions constituted brokerage, then
his license status was irrelevant and Murphy should be able to sue one who acts
as a broker (licensed or not) and interferes with business relationships. That,
so the argument goes, was the purpose of Section 1101.806(a)(2).
Regardless of licensure status,
James Murphy was unable to show that Reed Williams was acting as a broker. So,
the Court of Appeals did not need to delve further. Judgment affirmed for Reed
Williams. See Murphy v. Williams;
Cause No. 05-12-1730-CV; Court of Appeals of Texas, Fifth District, Dallas
Division; May 5, 2014.
This case may be appealed to the
Supreme Court of Texas. Stay tuned.
Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.