Drake v. Hosley
713 P.2d 1203 (1986)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A real estate broker earns a commission when they procure a buyer who signs a binding contract of sale, and the sale fails to close due to the seller's own default or frustrating conduct, even under the modern rule that typically conditions the commission on the consummation of the sale.
Facts:
- On March 5, 1984, Paul Drake signed an exclusive listing agreement with The Charles Hosley Company, Realtors (Hosley), agreeing to pay a 10% commission if Hosley found a buyer or if Drake entered a binding sale.
- On March 23, 1984, Hosley procured a group of buyers who signed a purchase agreement with Drake. The agreement stipulated that closing would occur 'within 10 days of clear title'.
- On April 3, 1984, Hosley received a preliminary title report, triggering the ten-day period for closing.
- A few days later, Drake's attorney, Tom Wickwire, informed Hosley that Drake wanted to close by April 11 to satisfy a separate financial obligation, a date earlier than required by the contract.
- On April 11, Hosley communicated that the buyers could not close that day but would be ready before the contractual deadline. Wickwire then sent a letter stating Drake's offer to sell was withdrawn.
- On April 12, Drake sold the property to a different buyer through another broker.
- Also on April 12, within the contractual ten-day closing period, Hosley tendered checks for the down payment on behalf of the original buyers, which Drake's attorney refused.
Procedural Posture:
- Charles Hosley filed a complaint against Paul Drake in the Alaska Superior Court (trial court) to recover a real estate commission.
- Both parties filed cross-motions for summary judgment.
- The trial court granted summary judgment in favor of Hosley and denied Drake's motion.
- Drake, as the appellant, appealed the summary judgment to the Supreme Court of Alaska.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a real estate broker earn a commission when a binding purchase agreement is executed, but the sale is not consummated because the seller sells the property to a third party before the original buyers' contractual deadline to close has passed?
Opinions:
Majority - Moore, Justice
Yes. A real estate broker is entitled to a commission if the seller's improper or frustrating conduct prevents the completion of the sale. While the court adopted the modern rule from Ellsworth Dobbs, Inc. v. Johnson, which generally requires a sale to be consummated for a commission to be earned, that rule contains a critical exception for seller default. Here, the buyers were performing according to the contract, which allowed them ten days from receipt of the title report to close. By demanding an earlier closing date and selling the property to a third party on April 12—within the original buyers' performance period—Drake, the seller, was the party who defaulted and prevented the sale. Because the failure to close was caused by the seller's own frustrating conduct, the broker, Hosley, had fulfilled his obligations and is entitled to the commission.
Analysis:
This decision formally adopts the influential 'Dobbs rule' in Alaska, shifting the default risk of a buyer's non-performance from the seller to the broker. However, the court's application of the rule's exception is the key takeaway. It clarifies that the seller cannot use this rule as a shield to escape a commission by unilaterally backing out of a valid agreement. The ruling establishes that a seller's 'frustrating conduct,' such as selling to another party before the original buyer's time to perform has expired, constitutes a default that triggers the broker's right to a commission, thereby protecting brokers who have fully performed their duties.
Unlock the full brief for Drake v. Hosley