Statute of Frauds
July 7, 2017
Partner, Jaburg & Wilk
Any real estate broker knows that in order to be legally entitled to be paid a commission, there needs to be an agreement in writing, signed by the owner of the property. The name of the law that requires such a writing is the “Statute of Frauds,” so named because the existence of the writing avoids any “fraud” on the part of a broker in claiming a commission to which the broker may not be entitled. But what happens if there are six owners of the property, and only one of the six signs the listing agreement?
This question was recently addressed in the California case of Jacobs v. Locatelli, decided by the California Court of Appeal in February of this year. In that case, the listing agreement was signed by Jacobs, the broker, but only John Locatelli, as Trustee of the John B. Locatelli Trust, one of six owners, signed as an owner, even though the listing agreement had signature lines for each of the other five owners. After Jacobs had found a buyer for the property, the owners entered into an agreement to sell to the buyer without paying a commission to Jacobs. When Jacobs sued to enforce his listing agreement and collect a commission, the owners asserted the Statute of Frauds as a defense, on the basis that only one of the six of them had signed the listing agreement.
In rejecting the Statute of Frauds argument as an outright bar to the claim being asserted, the Court of Appeals ruled that even though only Locatelli had signed the listing agreement, it was possible that there was a separate agreement between Locatelli and the other five owners, which authorized Locatelli to sign the listing agreement on behalf of all of the owners, in which case the requirements of the Statute of Frauds could be met. The reason that the requirements “could” be met, and opposed to “would” met, is because in situations, such as listing agreements, where the Statute of Frauds requires that the agreement be in writing, the “equal dignities rules” further requires that any separate agreement allowing one party to sign on behalf of others must itself be in writing. The Appellate Court then left it to the trial court to determine whether there was such a separate written agreement between the owners, and whether, when signing the listing agreement, Locatelli was intending to sign only on behalf of his trust, or whether he was intending to sign on behalf of all six owners.
The practical advice to take away from this case is to be certain, as a listing broker, to verify the names of all of the owners of the property being listed, and to procure the signatures of every one of them on the listing agreement. If one of the owners claims to be signing the listing agreement on behalf of one or more other owners, then be certain to obtain a copy of the written agreement giving the signing owner such authority, and make it clear that such owner is, in fact, signing on behalf of both himself and the others, pursuant to such written authority