A SUMMARY OF ARIZONA COURT CASES
CONCERNING BROKERAGE COMMISSIONS

Much of the law governing brokerage commissions has been created by our higher courts, the Arizona Court of Appeals and the Arizona Supreme Court. The following compilation is a list of the vast majority of these court cases, and a brief summary of the holding of each case. Please keep in mind that the description below is quite general, and that each case is dependant upon the specific facts or circumstances of that case. Therefore, if you have a legal dispute concerning one of the issues below, it is advisable that you to read the reported decisions carefully prior to relying on those cases.

I. Commission Agreement Requirements Under the Commissioner's Rules

Red Carpet-Barry & Associates, Inc. v. Apex Associates, Inc., 130 Ariz. 302, 635 P.2d 1224 (App. 1981) (Commissioner's Rules have force and effect of law and broker is not entitled to commission where listing agreement violates Commissioner's Rule because it has no definite expiration date).

Leo Eisenberg & Co. v. Payson, 152 Ariz. 390, 732 P.2d 1128 (App.1987) (Commissioner's Rules' requirements for a listing agreement do not apply to an agreement to pay the broker for services previously rendered).

Olson v. Neale, 116 Ariz. 522, 570 P.2d 209 (App. 1977) (A written listing agreement is required for a broker to recover a commission).

II. Commission Agreement Requirements Under the Statute of Frauds

Realty Exchange Corporation v. Cadillac Land and Development Company, 13 Ariz. App. 232, 475 P.2d 522 (App. 1970) (Escrow instructions signed by the seller satisfied the statute of frauds).

Broadway Realty & Trust, Inc. v. Gould, 136 Ariz. 236, 665 P.2d 580 (App. 1983) (Written contract to pay real estate commission at "the going rate in the area" was not sufficient to satisfy the statute of frauds).

Nowell v. Andrew Wright Enterprises, Inc., 143 Ariz. 79, 691 P.2d 1107 (App. 1984) (The phrase "Call Lister" did not describe the property with reasonable certainty in the listing agreement to satisfy the statute of frauds).

Gray v. Kohlhase, 18 Ariz.App. 368, 502 P.2d 169 (App. 1972) (Writing which did not specify commission failed to satisfy the statute of frauds; a real estate broker is presumed to know that an oral contract for brokerage services is invalid and cannot claim that the seller should be estopped from using the statute of frauds as a defense by reason of the seller's refusal to comply with an oral promise to pay a commission).

Patton v. Paradise Hills Shopping Center, Inc., 4 Ariz. App. 11, 417 P.2d 382 (1966) (The statute of frauds applies to a commission agreement to sell an existing leasehold interest).

Coldwell Banker & Company Real Estate Brokers v. Potthoff, 12 Ariz. App. 525, 472 P.2d 948 (App. 1970) (The Statute of frauds does not apply to a real estate commission agreement to lease real property rather than to sell real property).

Bush v. Mattingly, 62 Ariz. 483, 158 P.2d 665 (1945) (The Statute of frauds does not apply to an agreement between a real estate broker and his salesperson).

Natter v. Bechtel, 6 Ariz. App. 501, 433 P.2d 993 (App. 1967) (The Statute of frauds does not apply to an oral contract between brokers to divide a commission).

III. When Does the Broker Earn a Commission

Lockett v. Drake, 43 Ariz. 357, 31 P.2d 499 (1934) (Unless the seller and broker agree otherwise, the broker earns its commission when the buyer and seller execute a non-contingent purchase contract, it is immaterial that the buyer and seller mutually rescind the contract or that one of the parties defaults and the sale does not close).

Demand v. Foley, 11 Ariz.App. 267, 463 P.2d 851 (App. 1970) (The buyer's default under an executed purchase contract does not limit the broker's right to a commission).

Bass Investment Co. v. Banner Realty, Inc., 103 Ariz. 75, 436 P.2d 894 (1968) (The broker's right to a commission is not defeated by the seller's refusal or inability to honor the purchase contract).

Rosebery v. Heckler, 84 Ariz. 247, 326 P.2d 365 (1958) (The broker was not entitled to a commission where the broker had a listing which required the broker to procure a buyer on terms satisfactory to the seller, and the seller merely orally accepted terms of a proposed purchase contract, which deviated from the listing).

Campbell v. Mahany, 127 Ariz. 332, 620 P.2d 711 (App. 1980) (Broker earns a commission once the purchase contract is signed, even if the parties mutually rescind the purchase contract).

Arthur v. Chilleen, 103 Ariz. 133, 437 P.2d 925 (1968) (Where prior to closing a third party sued the seller to rescind the previous transfer to the seller for lack of consideration, the broker was still due a commission from the seller).

IV. Procuring Cause

Puente v. Lee, 103 Ariz. 534, 447 P.2d 51 (1968) (A broker who is the procuring cause under a listing agreement is entitled to a commission).

Clark v. Ellsworth, 66 Ariz. 119, 184 P.2d 821 (1947) ("Procuring cause"defines a cause originating a series of events which, without a break in their continuity results in the accomplishment of the prime objective of the employment of the broker--producing a purchaser ready, willing and able to buy real estate on the owner's terms).

Manning v. Blackwelder, 146 Ariz. 411, 706 P.2d 737 (App. 1985) (The listing broker has earned a commission even if the seller must file a lawsuit to force the buyer to complete the sale).

Mohamed v. Robbins, 23 Ariz.App. 195, 531 P.2d 928 (App. 1975) (The fact that the broker took no part in the final negotiations did not negate the broker's claim for a commission).

Hyde Park-Lake, Inc. v. Tucson Realty & Trust Company, 18 Ariz.App. 140, 500 P.2d 1128 (App. 1972) (Broker who had exclusive listing did not need to demonstrate that it was the "procuring cause" of a sale when the listing provided for payment of a commission in the event of a sale within 90 days after expiration of the listing to any person shown the property during the term of the listing).

V. Seller By-passing the Broker

Nichols v. McClure, 23 Ariz. 27, 201 P. 95 (1921) (The seller is not allowed to intentionally by-pass the broker to avoid paying a commission).

Fornara v. Wolpe, 26 Ariz. 383, 226 P. 203 (1924) (The broker who procures a buyer is entitled to a commission even though the owners themselves consummated the deal).

Browser v. Sandige, 74 Ariz. 397, 250 P.2d 589 (1952) (The broker with a non-exclusive listing was held to be the procuring cause and was thus entitled to a commission even though the seller consummated the sale directly with the buyer after the listing expired).

VI. Exclusive Listings

J.D. Land Co. v. Killian, 158 Ariz. 210, 762 P.2d 124 (App. 1988) (The broker with an exclusive listing was entitled to the full commission where the sellers executed a purchase contract before the listing expired, even though the broker did not procure the buyers and the sale closed six months after the listing expired).

Larson-Hegstrom & Associates, Inc. v. Jeffries, 145 Ariz. 329, 701 P.2d 587 (App. 1985) (The court held that a seller's transfer of the property within the exclusive listing period constitutes a "withdrawal of property," which entitles the broker to the commission).

VII. Commission Contingent Upon Payment of Purchase Price by Buyer

Donaldson v. LeNore, 112 Ariz. 199, 540 P.2d 671 (1975) (Where the broker did not have a separate commission agreement and relied solely on the purchase contract and escrow instructions, and the payment of such purchase contract and escrow instructions was contingent upon the buyer making payments, the broker was not entitled to real estate commission where the buyer defaulted).

Maslin v. Rucker, 7 Ariz. 257, 438 P.2d 326 (App. 1968) (The sellers were not obligated to pay a commission where the buyers failed to make a payment, because the court determined that the agreement between the seller and the broker was contingent upon the buyer's payments).

Maricopa Realty & Trust Company v. VRD Farms, Inc. , 10 Ariz. App. 524, 460 P.2d 195 (App. 1969) (The parties may prescribe that the brokerage commission be conditioned on the seller's receipt of cash from the buyer; Note: a portion of this case, which held that a broker who relies solely on a purchase contract or escrow instructions to support a claim for a commission loses that commission if the contract is canceled or if the buyer refuses to perform, was apparently overruled by the Arizona Supreme Court in Donaldson v. LeNore.)

Realty Associates of Sedona v. Valley National Bank, 153 Ariz. 514, 738 P.2d 1121 (App. 1986) (The broker was entitled to a commission from the seller where the buyer may have defaulted on the terms of the purchase contract, even though the purchase contract provided that the brokerage commission was "payable in cash at close of escrow"; the court held that such a provision did not create a condition to the seller's obligation to pay the broker's commission and did not alter the terms of the listing agreement).

VIII. Contingencies in Purchase Contract

Management Clearing, Inc. v. Vance, 106 Ariz. 95, 471 P.2d 707 (1970) (A broker is not entitled to a commission where the prospective buyer's offer stated it was "subject to an inspection and approval" of the premise's interiors).

Trimmer v. Ludtke, 105 Ariz. 260, 462 P.2d 809 (1969) (Where the purchase contract was executed providing that the property was to be "subject to new mortgage to buyer's satisfaction", the broker had not earned his commission by the presentation of such a buyer).

Diamond v. Haydis, 88 Ariz. 326, 356 P.2d 643 (1960) (A broker was not entitled to a commission for the sale property where the terms of the sale were conditioned upon events never occurring, including the purchase of the seller's note for cash by a third party).

Blaine v. Stinger, 79 Ariz. 376, 290 P.2d 732 (1955) (A broker was not entitled to a commission where the seller had two weeks to investigate the buyer's financial condition, or where the sale was conditioned upon the transfer of a liquor license which was never transferred).

Nationwide Resources Corp. v. Ngai, 129 Ariz. 226, 630 P.2d 49 (App. 1981) (The broker is not entitled to a commission where purchase contract contains a contingency which is unmet).

Barrett v. Duzan, 114 Ariz. 137, 559 P.2d 693 (App. 1976) (Where the owner exclusive listing, the broker is entitled to the commission where he only procures the buyer, however, if that buyer executes a purchase contract contingent upon the buyer's refinancing a loan, the broker has not earned a commission).

IX. Defect in Seller's Title as Defense to Payment of Commission

Sligh v. Watson, 69 Ariz. 373, 214 P.2d 123 (1950) (If the broker knows at the time of making the listing agreement that the owner has title defects, the broker is not entitled to recover a commission if the sale fails due to such defects, unless the parties agree that the owner must perfect his title).

Bradley v. Westerfield, 1 Ariz.App. 319, 402 P.2d 577 (App. 1965) (The broker is entitled to a commission even though the sale is not consummated because of a defect in the seller's title).

X. Triple Damages

Sanborn v. Brooker & Wake Property Management, Inc., 178 Ariz. 425, 874 P.2d 982 (App. 1994) (A real estate salesperson is entitled to treble damages when her employer wrongfully withholds her real estate sales commissions. Note: This is the first reported decision in Arizona to hold that a real estate licensee is entitled to recover triple damages under Arizona's wrongful withholding of wages statute, A.R.S. § 23-355).

XI. Co-Brokerage Agreements

Rogus v. Lords, 166 Ariz. 600, 804 P.2d 133 (App. 1991) (The REALTOR® Code of Ethics did not create any contractual relationship between two brokers for which a selling broker could maintain a breach of contract action against a listing broker).

XII. License Required

Cambridge Co. v. Arizona Lawn Sprinklers, 166 Ariz. 269, 801 P.2d 504 (App. 1990) (A broker is not required to be licensed as a real estate broker in order to sell a business, unless a lease or some transfer of real property is involved in the sale of the business; the fact that the transaction might have included a transfer of a real property leasehold interest does not cause the unlicensed broker to lose its fee where the transaction documents involving the broker do not contain any transfer of a leasehold interest).

XIII. Breach of Fiduciary Duty as Owner's Defense to Payment of a Commission

Coldwell Banker Commercial Group, Inc. v. Camelback Office Park, 156 Ariz. 226, 751 P.2d 542 (1988) (A broker who breaches its fiduciary duty to its principal is not entitled to a commission).

Ornamental and Structural Steel, Inc. v. BBG, Inc., 20 Ariz.App 16, 509 P.2d 1053 (1973) (A broker who has a fiduciary relationship with the seller and does not disclose a fee-splitting agreement, will forfeit his right to a commission).

XIV. Equitable Assignment of Funds

Webster v. US Life Title Co., 123 Ariz, 130, 598 P.2d 108 (App. 1979) (Where the buyer and the seller execute escrow instructions when the broker was to be paid from funds deposited in escrow, the broker was deemed to have an irrevocable "equitable assignment" of the funds, and the seller's creditor could not later garnish the commission funds).

XV. Payment of Commission to Out of State Brokers

Bustrum v. Gardner, 154 Ariz. 409, 743 P.2d 5 (App. 1987) (An out-of-state broker is entitled to compensation from an Arizona broker).

Adams Realty Corp. v. Realty Center Investments, 149 Ariz. 405, 719 P.2d 291 (App. 1986) (A real estate broker licensed only in California was legally entitled to share a commission with an Arizona broker even though the commission was earned in Arizona, and furthermore, the escrow agent was permitted to pay an out-of-state broker pursuant to A.R.S. §32-2155).

XVI. Unauthorized Practice of Law

Morley v. J. Pagel Realty and Ins., 27 Ariz.App. 62, 550 P.2d 1104 (1976) (This case somewhat defines the unauthorized practice of law as it relates to the real estate broker).

XVII. Broker's services are Personal Services

Phoenix Title and Trust Co. v. Grimes, 101 Ariz. 182, 416 P.2d 979 (1966) (A listing agreement is a contract for personal services, which are generally discharged by the death of the broker. Note: In this case, because the deceased broker held an interest in the subject land, he was deemed to be an agent "coupled with an interest," and thus, the agency agreement did not terminate upon his death).