Focus Point Properties, LLC v. Cleo Johnson – 6/19/2014

June 23, 2014

Arizona Court of Appeals Division One Holds That (1) an Individual Who Signs a Real Estate Contract on Behalf of a Trust Is Not Personally Liable for Breaching the Contract, and (2) a Claim for a Real Estate Commission Requires a Valid License at the Time of the Transaction, but Other Factors Concerning Qualification for a License May Not Be Considered.

A trustee signed a real estate sales contract on behalf of a trust.  The real estate agent sued both the trust and the trustee after the real estate commission went unpaid.  A jury found both the trust and the trustee liable for breach contract.  The Court of Appeals Division One reversed, holding that the trustee could not be liable.

The Court of Appeals explained that by its own terms the contract existed only between the real estate agent and the owner.  In this case, the trust owned the property.  Although the trustee signed the contract, he did so only on behalf of the trust.  The Court of Appeals also emphasized that the suit was based upon only one signature and the same signature cannot support a claim against both the trust and the trustee.

In addition, the trust and trustee argued that the agent could not bring an action for a real estate commission under A.R.S. § 32-2152(A) because the agent was not qualified to have a real estate license.  That statute creates a cause of action for an unpaid commission owed to “a qualified licensed broker or salesperson at the time the claim arose.”  Here, there was no dispute that the plaintiff had a license at the time the claim arose.  The agent, however, had been on a provisional license because he had failed to disclose DUI convictions.  While he had a provisional license, he failed to disclose yet another DUI conviction.  The agent later surrendered his license.  The trust and trustee argued that he was not qualified to have a license at the time.

The Court of Appeals held that the court should only determine whether the agent had a current license.  The Real Estate Commissioner is responsible for deciding whether to suspend or revoke a license; questions surrounding the agent’s license are collateral to a dispute over payment of the commission.

Judge Cattani authored the opinion; Judges Downie and Brown concurred.