An owner of a liquor store and owner of the property, the real estate, on which the liquor store sat, hired a broker to help with the sale of the store and the real estate. The broker helped put together a deal where the buyer bought the store and got an option to buy the land 2 years after the sale of the store.
The broker worked out a deal with seller that broker would get a commission on the later sale, if the sale ultimately went through.
So it seems that buyer created a new entity to buy the property and then seller argued that he did not sell the property to buyer so he did not owe the broker the commission.
The Hennepin County District Court interpreted the broker’s commission agreement quite literally and, on a close and literal reading, dismissed the broker’s claim to the commission. Seller did not, after all, sell the property to the buyer, but to a different entity. It’s just that the different entity was simply a new business entity set up by the same person. This week the Minnesota Court of Appeals reversed dismissal of the broker’s complaint.
Article I, paragraph 1, of the option agreement states that [Buyer] had ‘the exclusive right and privilege of purchasing’ the property for a two-year period. In light of this provision, [Broker] may seek to establish that another company could not have purchased the property during the two-year option period, which might cause a fact-finder to infer that [Buyer] purchased the property. In addition, article II, paragraph 2(a), of the option agreement recognizes that [Buyer] ‘may utilize a separate legal entity to purchase the Property.’ In light of this provision, [Broker] may introduce evidence that both [Seller] and [Buyer] understood that [Buyer] was purchasing the property, despite the presence of another business entity, which might allow a fact-finder to infer that, notwithstanding the role of Spirits 1, [Buyer] purchased the property.
Thus held the Minnesota Court of Appeals in a decision that, in my view, bars what appears to have been a slippery shell game to escape seller’s obligation to pay a broker’s commission. I think the Court of Appeals got it right.