Frady v. May
2000 WL 1029174, 23 S.W.3d 558 (2000)
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Rule of Law:
A real estate broker who is the procuring cause of a sale is entitled to a commission if a sale is ultimately consummated between the seller and the buyer found by the broker, even if the initial earnest money contract expires and the parties execute a new contract on substantially similar terms without the broker.
Facts:
- E.N. Frady and Marsha Frady had an oral agreement with Bart May, a real estate broker, to help sell their farm after a written listing agreement expired.
- May procured a buyer, Bert Nichols, who entered into a written earnest money contract with the Fradys on May 30, 1997.
- This first contract contained a provision requiring the Fradys to pay May a six percent commission 'on closing of this sale.'
- The contract was contingent on Nichols assuming an existing note, but this condition was not met, and the sale did not close by the specified August 1, 1997 deadline.
- On September 15, 1997, the Fradys and Nichols signed a second earnest money contract for the same price but with slightly different terms and no provision for May's commission.
- Without May's knowledge, the Fradys and Nichols mutually released the escrow deposit from the first contract.
- The sale of the farm from the Fradys to Nichols closed under the terms of the second contract on October 23, 1997.
Procedural Posture:
- Bart May sued E.N. Frady and Marsha Frady in a Texas trial court to recover a real estate commission.
- Following a bench trial, the trial court found in favor of May and entered a judgment ordering the Fradys to pay the commission.
- The trial court issued findings of fact and conclusions of law, which included a finding that the Fradys and the buyer moved the closing to a different county to defeat May's right to his commission.
- The Fradys, as appellants, appealed the trial court's judgment to the Court of Appeals, Second District of Texas, with May as the appellee.
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Issue:
Does a real estate broker lose the right to a commission when the initial earnest money contract containing the commission agreement expires, but the seller and buyer later execute a new contract on similar terms and complete the sale?
Opinions:
Majority - Justice David L. Richards
No. A broker's right to a commission is not defeated simply because the original sales contract expires and the parties later close the deal under a new contract. The court reasoned that a broker earns a commission upon procuring a ready, willing, and able buyer, and the seller cannot deprive the broker of this earned commission by taking the negotiations into their own hands and finalizing the sale on similar terms. The court interpreted the phrase 'on closing of this sale' in the commission agreement to refer to the actual conveyance of the property, not closing under the specific, initial earnest money contract. Because May was the procuring cause of the sale that ultimately occurred between the Fradys and Nichols, his right to the commission was established and could not be circumvented by the parties creating a new contract to exclude him.
Analysis:
This decision reinforces the 'procuring cause' doctrine in Texas real estate law, protecting brokers from sellers and buyers colluding to avoid paying a commission. It clarifies that standard commission language tied to 'the closing of this sale' is not contingent on the closing occurring under the exact contract the broker negotiated. The ruling establishes that as long as the broker's efforts lead directly to the eventual sale between the parties on substantially similar terms, the commission is earned. This precedent makes it more difficult for parties to a real estate transaction to use the expiration of an initial contract as a loophole to exclude the broker who brought them together.
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