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U.L. Coleman Co., Ltd. v. Gosslee

Court of Appeals of Louisiana, Second Circuit

November 3, 2017

U.L. COLEMAN COMPANY, LTD Plaintiff-Appellant

         Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 480, 581 Honorable Michael Pitman, Judge.

          McMICHAEL, MEDLIN, D'ANNA, WEDGEWORTH & LAFARGUE, LLC By: James C. McMichael, Jr. Anna Brown Priestley Counsel for Appellant.

          STROUD, CARMOUCHE & BUCKLE, P.L.L.C. By: Nichole M. Buckle, Counsel for Appellee.

          BLEICH, ARHAM & WARNER, L.L.C. By: Vicki C. Warner.

          Before BROWN, WILLIAMS, MOORE, STONE, and BLEICH (Pro Tempore), JJ.

          MOORE, J.

         Both sides appeal aspects of judgments that divided, between a real estate broker and its former agent, real estate sale commissions on two large sales, awarded the former agent lease commissions, and assessed penalty wages and an attorney fee against the broker. For the reasons expressed, we affirm in part, reverse in part, and render.


         U.L. Coleman Co. ("ULCC") is a real estate broker in Shreveport with a large business in commercial sales, leases and property management. In July 1994, it hired Keitha Gosslee as a leasing agent and sales associate. ULCC designated her as an employee and paid her a monthly salary (initially $2, 000) plus commissions on her leases and sales. Apparently, Ms. Gosslee was an energetic and successful agent, although ULCC's principal, Linc Coleman ("Coleman"), felt she was always angling for higher salary and bigger commissions.

         They signed an employment agreement, December 1, 1995, which divided all commissions according to an attached schedule and recited that lease commissions were either paid monthly over the term of the lease or up front (most were monthly). Ms. Gosslee's lease commission was 37½%; in October 1997, ULCC increased this to 47¼%. By letter agreement in December 1999, ULCC added a 15% bonus commission if she exceeded a sale and lease volume of $137, 500 in a given year; she exceeded the threshold every year and qualified for the bonus. None of these agreements included a covenant not to compete.

         On August 22, 1997, Tom Bradshaw, a developer for Walgreens, called ULCC and came in to discuss his company's plans to expand to north Louisiana and east Texas. This was an enormous deal, as Walgreens was looking to build perhaps 10 stores in the area. Coleman chose Ms. Gosslee to join the meeting, and they persuaded Bradshaw to sign an exclusive representation agreement with ULCC to identify and develop locations for new Walgreens stores. This agreement had a stated a term of one year, but Coleman testified he considered it to be in force as long as ULCC was still providing services to Bradshaw. Coleman gave Ms. Gosslee the assignment, and she dove in energetically, as it was a career project.

         Of relevance to this case, she worked to get suitable sites at the intersections of Pines Road and W. 70th St., in Shreveport; Shed Road at Airline Dr., in Bossier City; and Lamy Lane and Louisville Ave., in Monroe. Through July 23, 2001, she negotiated Bradshaw's purchase of five sites for new Walgreens locations. She and Coleman testified that in these transactions, the sale commission was divided 62½% to ULCC and 32½% to Ms. Gosslee.[1]

         In July 2001, Ms. Gosslee resigned from ULCC. She left because she felt Coleman had reneged on a lucrative commission involving the Chase Bank building. Coincidentally, she had just obtained her own real estate broker's license, and could open her own real estate company.

         Before leaving ULCC, Ms. Gosslee made a list of pending projects, including the Shed Rd. Walgreens. Coleman agreed she could complete these deals on ULCC's behalf. She closed on Shed Road in December 2001, at a price of $1.325 million, subject to a 5% commission, or $66, 250, of which she remitted to ULCC only 47½%, feeling she was entitled to the 15% bonus for exceeding her threshold. She also had three pending commercial leases generating monthly lease commissions. Sometime after her departure, Coleman and his staff discovered that she had carried off a number of active files, including Walgreens files.

         After leaving ULCC, Ms. Gosslee formed her own company, Keitha Gosslee & Associates ("KGA"). On August 21, 2001, she signed an exclusive representation agreement with Bradshaw for the Walgreens account. She then got back to work on the Pines Road and Lamy Lane projects. She closed a sale on Pines Road in November 2002, at a sale price of $1.16 million and 6% commission, and retained the whole commission, or $69, 600. She closed a sale on Lamy Lane in May 2004, at a sale price of $1.225 million and 6.857% commission, and retained the whole commission, $84, 000. There was much testimony regarding what (if anything) ULCC did to work these sales after Ms. Gosslee left.


         ULCC filed this petition in November 2003 demanding the return of all active files Ms. Gosslee had taken from the office in 2001. It also alleged that ULCC was entitled to a share of the commission she earned on any Walgreens file that she closed after she left. By subsequent brief, ULCC argued that Ms. Gosslee wrongly withheld sale commissions of $105, 937, and conceded that it (ULCC) had withheld her lease commissions of $27, 875. It demanded the balance, $78, 062.

         Ms. Gosslee filed a denial, asserting that she and ULCC had no noncompetition agreement. She also reconvened, alleging that she was entitled to lease commissions that ULCC had either not paid at all, or had paid without the 15% bonus commission to which she was entitled. She also alleged that commissions are deemed to be "wages" under the Payment of Employees Law, La. R.S. 23:631-634, and ULCC's failure to remit them entitled her to the unpaid wages, 90 days' wages as a penalty, and reasonable attorney fees. By subsequent brief, she claimed she was due salary and commissions of $48, 377, with penalty wages to be calculated.

         The matter languished in discovery for several years. Trial began over two days in June 2012, before Judge Leon Emanuel. Over the first day, and half of the second, Coleman offered his interpretation of Ms. Gosslee's commission scheme and of the relationship with Bradshaw after Ms. Gosslee left ULCC. On the second day, Bradshaw testified, out of order, saying that after Ms. Gosslee left ULCC, he never heard another word out of Coleman or anybody else at ULCC. He bluntly described his exclusive representation agreement with ULCC as "dead" before he signed with KGA.

         The trial recessed until June 26, but another (unspecified) delay intervened, and then Judge Emanuel retired (in December 2013). The trial finally resumed in April 2015, when it was heard over two days by Judge Mike Pitman, who stated for the record that he had read the transcript from 2012. The parties announced that in the interim, an important witness, Bradshaw, had died, and the court would have to rely on the transcript of his earlier testimony.

         ULCC called its controller, David Lester, to describe in detail the different ways the company treated commissions for sales and for leases of managed and nonmanaged properties. ULCC spent some time trying to qualify a Benjamin Dowis III as an expert in real estate broker-agent relations, but the court refused to accept him.

         Ms. Gosslee called Daniel Hutchinson, one of the owners of the Pines Road property. He admitted that in 2000, Ms. Gosslee had negotiated with him and his co-owner about buying their old Goodyear store, but the co-owner refused to sell at Bradshaw's price. By late fall 2001, however, Ms. Gosslee contacted them again about the same property, but this time she said Bradshaw would pay a $50, 000 relocation fee, with an extra $50, 000 on the purchase price; remarkably, the co-owner agreed, and the deal closed in November 2002. Hutchinson admitted that Ms. Gosslee had identified the property, negotiated and reached a purchase price before July 2001, but he felt that she had closed the deal on KGA's behalf, not ULCC's.

         Ms. Gosslee then testified, giving her understanding of ULCC's commission structure. When she left, she was earning a commission of 31½% on nonmanaged and 47¼% on managed lease properties; however, after she left, ULCC paid her only 31½%, on all leases, including managed ones. She gave her account of the Pines Road deal, largely agreeing with Hutchinson. On the Lamy Lane deal, she testified that she had identified the southwest corner of the intersection and negotiated, unsuccessfully, with the owners in 2000. After she left ULCC, she identified the northeast corner and negotiated with those owners, closing the deal in May 2004. She felt she did not owe ULCC any portion of the commission on either of these deals. On cross-examination, she described in great detail the three commercial leases on which she had been receiving monthly commissions when she left ULCC. She felt that by securing those tenants and getting them to sign leases, she had earned her full commission, and it should not be reduced simply because she was now off ULCC's payroll.

         On rebuttal, Coleman described the culture and history of his company, largely repeating his testimony from 2012. He insisted that after Ms. Gosslee left, he still considered Bradshaw to be "his" client, but was "not sure" if he even talked to him until long after he signed with KGA. Also, Coleman strongly felt that only a "licensed employee" was entitled to receive the 15% bonus commission; after Ms. Gosslee left, he had every right to quit paying it. He also admitted "crediting" some of her lease commissions against the sale commissions he felt she owed ULCC for Pines Road and Lamy Lane.


         The court rendered an opinion in September 2015, finding: (1) ULCC was the "procuring cause" of the Pines Road deal and thus entitled to a portion of that commission; (2) ULCC was not the procuring cause of the Lamy Lane deal, and thus not entitled to a portion of that commission; (3) Ms. Gosslee was entitled to the 15% bonus on lease commissions withheld by ULCC from August to December 2001 (as well as a 15% bonus on the Shed Road deal); (4) she was not entitled to "higher commissions" for managed properties; and (5) she was not entitled to future renewal commissions. The court asked for supplemental briefs regarding quantum.

         In February 2016, the court issued a supplemental opinion and rendered a judgment awarding Ms. Gosslee (1) unpaid lease commissions of $27, 875, plus judicial interest from the date each commission was earned; (2) unpaid bonus commission of $3, 653, plus interest from the date it was earned; (3) penalty wages of $64, 336, plus interest from date of judicial demand; and (4) an attorney fee of $16, 084, plus interest from date of judicial demand.

         By final judgment, April 2016, the court incorporated the prior judgment and awarded ULCC 62½% of the commission received by Ms. Gosslee on Pine Road, or $43, 500, with interest from date of judgment.

         ULCC appealed, raising five assignments of error. Ms. Gosslee answered the appeal, raising seven.


         Procuring Cause - Lamy Lane and Pines Road

         By its first assignment of error, ULCC urges that it was the procuring cause of the Lamy Lane deal, and should get a share ($52, 500) of Ms. Gosslee's commission; by her second assignment, Ms. Gosslee responds that the court correctly analyzed Lamy Lane. By her first assignment, Ms. Gosslee urges the court erred in awarding ULCC a portion ($43, 500) of her commission on Pines Road; by reply brief, ULCC submits the court correctly analyzed Pines Road. Both sides concede the issue is factual and governed by manifest error.

         Because ULCC had no contract with the buyer or the seller, the issue in these sales is "procuring cause."[2] A realtor is entitled to a commission when he is a third-party beneficiary to a valid contract between a seller and a buyer. Creely v. Leisure Living Inc., 437 So.2d 816 (La. 1983). A realtor can win a commission dispute if he is the procuring cause of the sale, or if the principal would otherwise enjoy an unjust enrichment at the broker's expense. Id. The concept is applied even where the term of the broker's listing agreement has expired. TEC Realtors Inc. v. D & L Fairway Prop. Mgmt. LLC, 2009-2145 (La.App. 1 Cir. 7/9/10), 42 So.3d 1116, writ denied, 2010-1841 (La. 10/29/10), 48 So.3d 1092. Procuring cause is defined as follows:

A cause originating or setting in motion a series of events which, without break in their continuity, result in the accomplishment of the prime object of the employment of the broker, which may variously be a sale or exchange of the principal's property, an ultimate agreement between the principal and a prospective contracting party, or the procurement of a purchaser who is ready, willing and able to buy on the principal's terms. Sleet v. Harding, 383 So.2d 122 at 124 (La.App. 3 Cir. 1980); Cramer v. Guercio, 331 So.2d 550 at 552 (La.App. 1 Cir. 1976); Sleet v. Williams, 291 So.2d 495 at 498 (La.App. 3 Cir. 1974).

Creely v. Leisure Living, supra; TEC Realtors v. D & L Fairway, supra.

         The courts look to various factors to determine whether a broker has or has not been the procuring cause of a sale: whether the prospect who ultimately purchased the property knew about the property before being contacted by the broker; the relative success or failure of the negotiations conducted by the broker, including the continuity or discontinuity of the original and final negotiations, the length of time elapsing between the broker's negotiations and the final sales agreement; and the development of a new, different, or independent motive for the prospect to purchase; whether or not the broker abandoned efforts to negotiate the transaction with a particular prospect; and, finally, the good or bad faith of the principal and the broker. Farnsworth Samuel Ltd. v. Grant, 470 So.2d 253 (La.App. 4 Cir. 1985), citing Lora C. Sykora, "The Law of Real Estate Brokerage Contracts: The Broker's Commission, " 41 La. L. Rev. 857 (1981).

         We have closely examined the record evidence and find no manifest error in the district court's ruling as to Lamy Lane. ULCC correctly shows that it paid her monthly salary while Ms. Gosslee identified the intersection of Lamy Lane and Louisville Ave. as a potential Walgreens location, it paid a landman to find the owners, and Ms. Gosslee negotiated with them to buy the southwest corner. However, one of the owners was unwilling to break a sublease on the property, and negotiations ended sometime in 2000. Ms. Gosslee then identified the northeast corner as a potential location in February 2002, some seven months after she left ULCC. At this time, she found the owners, engaged them in fairly long negotiations, and closed a sale in May 2004. There is not one ...

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