G C Timmis & Co. v. Guardian Alarm Co.
468 Mich. 416, 662 N.W.2d 710 (2003)
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Rule of Law:
Michigan's Real Estate Brokers Act (REBA) applies only to transactions involving an interest in real estate. The statutory requirement for a license to broker the sale of a 'business, business opportunity, or the goodwill of an existing business' is limited to situations where an interest in real estate is part of the transaction.
Facts:
- Plaintiff, a registered investment advisor but not a licensed real estate broker, approached defendant, a security-systems company, to discuss assisting with acquisitions.
- The parties allegedly entered into an oral contract stating that plaintiff would receive a 'success fee' for any company it contacted on defendant's behalf that defendant subsequently purchased.
- Plaintiff introduced defendant to MetroCell, a subsidiary of Rao Corporation.
- Following the introduction, defendant purchased the alarm contracts and customer base of MetroCell, a transaction that did not appear to involve any real estate.
- When plaintiff sought its success fee for the introduction, defendant refused to pay.
Procedural Posture:
- Plaintiff sued defendant in a Michigan trial court for an unpaid success fee.
- Defendant filed a motion for summary disposition, arguing the claim was barred by REBA because plaintiff was an unlicensed broker.
- The trial court denied defendant's motion, finding a genuine issue of material fact regarding whether plaintiff had participated in negotiations.
- Defendant appealed to the Michigan Court of Appeals.
- The Court of Appeals (appellate court) reversed the trial court, holding that plaintiff's actions as a 'finder' fell under REBA and required a license.
- Plaintiff (as appellant) was granted leave to appeal to the Supreme Court of Michigan.
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Issue:
Does Michigan's Real Estate Brokers Act (REBA), which requires a license for one who 'negotiates the purchase or sale ... of a business, business opportunity, or the goodwill of an existing business for others,' apply to transactions that do not involve the sale or purchase of real estate?
Opinions:
Majority - Markman, J.
No. The licensing requirements of Michigan's Real Estate Brokers Act (REBA) for brokering a 'business, business opportunity, or the goodwill of an existing business' apply only when the transaction involves real estate. Applying the doctrine of noscitur a sociis ('a word is known by the company it keeps'), the court reasoned that the phrase in question must be read in the context of the entire statute, which is titled the 'real estate brokers act' and overwhelmingly deals with real estate. Nearly every other clause in the statutory definition of 'real estate broker' and the associated licensing requirements explicitly mention 'real estate.' Therefore, the legislature intended the act to regulate only transactions involving real property. The court also clarified that merely 'finding' a buyer or seller is not sufficient to require a license; the statute requires active 'selling,' 'buying,' or 'negotiating' of a transaction.
Dissenting - Young, J.
Yes. The plain language of REBA unambiguously applies to the brokerage of any 'business, business opportunity, or the goodwill of an existing business,' regardless of whether real estate is involved. The majority improperly uses canons of statutory construction to create ambiguity where none exists and to avoid what it perceives as an odd policy result. The statutory history confirms this plain reading: the legislature took the definition of a 'business chance broker'—which historically covered all business sales—and incorporated it verbatim into the definition of a 'real estate broker.' This shows an intent to transfer the entire function, not to limit it to real estate contexts. It is the legislature's role, not the court's, to amend the statute if it produces an undesirable result in the modern economy.
Analysis:
This decision significantly narrows the scope of Michigan's Real Estate Brokers Act, clarifying that business brokers, M&A advisors, and investment bankers do not need a real estate license to collect commissions on transactions that do not involve the transfer of an interest in real property. By overturning precedent that applied REBA more broadly to 'finders' in any business sale, the ruling provides greater legal certainty for intermediaries in non-real estate business deals. The case solidifies a contextual approach to statutory interpretation, emphasizing that individual phrases must be read in harmony with the entire statutory scheme rather than in isolation.
